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June 2, 2009  

Issue 48  -  Bug Out Plan

This week I'm going to write about my plan for a DEFCON 5 type emergency.  This would mean that it was unsafe or unwise to stay in your present residence.  This could be due to nuclear attack, biological attack, riots or anything in that vein.  Most people would be completely flat footed in this scenario and would likely flounder around and scoop things into the van or truck for as long as they had and then leave.  This will most likely lead to mistakes in items taken and not taken.  I've thought about this for a few weeks and after searching various sites have come up with some rough guidelines.  (a good portion of this comes from www.captaindaves.com)

The first part of this problem is when do I leave?  This is a personal decision and everyone must make it for themselves.  I would definitely leave if there was chemical attack.  You may decide to wait and see if it blows your direction.  For sake of argument, I'll assume you have determined it prudent to leave.  There are then three things that must be determined:

1.  Where to go.

2.  How to get there.

3.  What to bring.

That's all there is to it.  Each of these issues does have some complications so let's go through them.

Where to go

I think this is the hardest part of the equation.  This will also depend on the nature of the emergency.  Going to a relative may not be feasible if they are also in an unsafe area.  How long could you stay there?  Will they be able to handle you with no preparation and possible chaos?  Where you go should be less than 1 tank of gas away with HEAVY traffic.  This reduces your options to about 150 miles.  (This is also a good reason to keep your gas tank filled.  A siphon would also be nice to take fuel out of your second or third vehicle)  I'm not inclined to have a real safe house at this time.  That may change, but for now I don't want another house or even a cabin to worry about.  I have purchased a high quality tent that has springs and can be set up VERY quickly.  It runs about $500.  This will provide me a place that is at least dry if no other option presents itself.  Ideally, a relative or hotel could be found.

How to get there

The only feasible escape method in the Northern Virginia area is a vehicle.  I will be taking a four wheel drive Ford as it could drive on off roads.  It also has plenty of room for stuff you would take.  Once you have decided where you are going, it would be prudent to print out a map (GPS system may not be working, and would obviously be used if possible) with the quickest route and an alternative route.  The alternative route will be slower but it may be much less crowded.  In addition, the faster you can get started, the more of a head start you will have on neighbors.  This could save hours of time.  Remember it is far easier to drive back home if the emergency peters out than to decide too late to leave and see the roads look like the aftermath of Katrina.  

What do you Take?

This will also vary for everyone but these are the basics:

Must Haves

1. At least $500-1000 in cash, including plenty of small bills for incidentals and change for phone calls. (When the power is out, many stores can't use their cash registers and insist on either exact change or to the closest dollar.)
 
2.  I'm taking my gold and at least some of my silver which is in "junk" silver form.  These are small and could be used for transactions.
3.  Spare or duplicate credit cards with plenty of credit available. A bank card for local and national ATMs. (This assumes the electricity is not out.) A few spare checks and anything that could be used for ID if you do not have your wallet with you. A duplicate driver's license. A spare set of keys, including car, house, safe-house/survival retreat, storage facility, safe deposit box, etc. 

4.  A change of clothes, preferably durable heavy-weight clothes that can stand up to abuse. A season-appropriate jacket and other outer gear, such as gloves and hat. Clothes suitable for layering (T-shirt, flannel shirt, etc.). A pair of old, comfortable, already-broken-in shoes that still have some good miles left in them. A couple pairs of extra socks and at least one change of underwear. 

5.  At least a quart of water per person. Juice boxes or pouches. A few MREs or other easily transportable food items, including some quick snack foods.

6.  Prescription or over-the-counter drugs you rely on.

7.  A spare pare of eyeglasses (perhaps your old prescription) and/or contacts and solutions.

8.  A basic first aid kit, including bandages, an ace-type bandage, aspirin or other analgesic, first-aid cream, alcohol pads, etc. A more advanced kit, would included sutures, antibiotics, pain killers, etc.

9.  A phone book listing all important numbers, including friends, family, neighbors, work, school, doctor, insurance, etc.

10.  A cellular phone and/or CB radio and/or shortwave radio.

11.  A good work knife and/or Swiss army-type knife.

12.  A way to start a fire.

13.  A basic pistol, such as a revolver chambered for .357 or .38 special, and at least 50 rounds of ammunition. (obviously a very personal decision for this item)

That is about it.  The biggest decision is when to leave.  The stuff to take should be co-located to ensure a speedy departure.  The faster you get moving the better.  Think of it like leaving with 5:00 to go in the game.  In a couple weeks I will write up a plan for living off the grid for longer than 1 month.

Economic State

To finish up this week I have a few random thoughts that further emphasize the weakness of the economy and stock market.  First up the stock market.  The stock market is much weaker than it appears.  Investor Intelligence has the lowest amount of bears since October 2007 when the S&P 500 was at 1300.  This means that people are overwhelmingly bullish.  The green shoots talk and presidential propaganda are having their desired effect.  I maintain this is to move the stock from the strong hands to the weak hands.  (if you don't know who the weak hands are, it's you)  With so few bears the next break down in stocks will probably be violent.  Lighten up your stock exposure if you want to be safe. 

Take a look at this from Monty High:

"There are two measures of Earnings. Reported Earnings (GAAP earnings) and Operating Earnings. Reported earnings includes one time write-offs, while operating earnings do not. Officially, there was only one type of earnings measure before 1984 - Reported Earnings, but to the delight of the CFOs and CEOs of the world, it became acceptable practice to base the Price to Earnings (P/E) ratio on operating earnings. This way you could exclude extraordinary events and smooth out your bottom line. This is a rational methodology when one time charges are truly one time charges (Good Will write off or Lawsuit settlement etc.)
Well.... the difference between these two measures was pennies early on.... but looking closely at the 2008 results reported earnings are an eye popping 70% less than operating earnings!!! They are using this difference to obfuscate a P/E ratio of over 60 !!!! I cannot think of stronger proof of the PPT in action. When you consider that FASB accounting rule changes that allowed mark to fantasy and permitted billions of make-believe earnings vs. losses to be included for the banks- you start to get a glimpse the illusion that is being spun."

Do you see how these guys work?  Constantly changing the rules to suit their needs.  If they need earnings higher and the economy is going to tank, than change the definition of earnings.  Here's another way they cheat from GATA:  

"U.S. durable goods orders rise 1.9 pct in April

WASHINGTON, May 28 (Reuters) - New orders for long-lasting U.S. manufactured goods rose more than expected in April, posting their biggest gain in 16 months, according to government data on Thursday that suggested the recession was winding down.

April's 1.9 percent increase was the biggest percentage advance since December 2007, when orders rose 4.1 percent, the Commerce Department said.

However, March orders were revised sharply lower, falling 2.1 percent from the previously reported 0.8 percent decline.

Analysts polled by Reuters had expected overall new orders to rise 0.4 percent in April, and orders excluding transportation to ease 0.3 percent.

New orders excluding transportation climbed 0.8 percent in April after declining 2.7 percent in March, boosted by orders for communications equipment, machinery and fabricated metal products.

However, there were some dark spots in the report. Civilian aircraft and parts tumbled 6.8 percent after surging 7.5 percent in March.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5 percent in April. The prior month was revised to show a 1.4 percent decline, previously reported as a 0.4 percent gain.

Dave from Denver…
Durable goods data clarified:
To begin with, the Commerce Dept reported durable goods orders to be up 1.9% for April. What they buried in the report was that the March number was revised down from the originally reported -.8% to -2.1%. That alone makes the April number look less impressive, as the "gain" comes from a reduced level the previous month. More interestingly, and I can guarantee you that CNBC will not mention this, nor will your daily newspaper report this tomorrow moring, Year over Year, April durable goods orders DECLINED A STAGGERING 26.6%. Take that into account the next time you read about green shoots."

Lies, lies, lies.  The previous month revisions, which never get any press are almost always used to "fix" the numbers that are being reported.  The government can fudge things in the current "headline" month and then correct it in following months.  From the quote the April number was up 1.9% but subtracting the revision from March brings it down to only .6% growth.  Not that impressive is it?  How about the housing market.  It's getting much better, right?  From Reuters:


"***1 in 8 US homeowners late paying or in foreclosure

NEW YORK, May 28 (Reuters) - One out of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process, in a crisis that will persist for at least another year until unemployment peaks, the Mortgage Bankers Association said on Thursday.

U.S. unemployment in April reached its highest rate in more than a quarter century and is still rising, helping propel mortgage delinquencies and foreclosures to record highs.

Such economic conditions drove up foreclosures of prime fixed-rate mortgages, which represented the largest share of new foreclosures for the first time since the rapid growth and the ensuing collapse of the subprime loan market.

"We clearly haven't hit the top yet in terms of delinquencies or the bottom of the housing market," Jay Brinkmann, the group's chief economist, said in an interview."

That means on a street with 24 houses, 3 are in big trouble.  I know several of these people and they are hurting.  The idea that the economy is going to get better while the housing market has 12.5% in severe financial distress is ludicrous.  We can't get a sustainable rebound in the economy until the housing market gets it's footing.  We are not even close.  Here is an update on one of my favorite charts with mortgage resets.  From Agora Financial:
 
 

What you can see if you compare it to the old chart on the chart page, is that the trouble has moved further out into the future.  I have been telling people that 2012 is the year to wait for to get back into the housing market, but it looks like that has slipped to 2013.  Another one from GATA about the housing "recovery": 


"Dave from Denver on the real deal…
More fantasy housing numbers and prior revisions
New home sales were reported to be up .3% in April, HOWEVER, March numbers were revised from +.6% to -3%. That's a huge revision. No doubt the lowered sales number for March helped the April number look positive, albeit well below expectations. MOREOVER, new home sales plunged 34% compared with a year ago. See any green shoots? Prices continue to plunge.
More disturbing yet, Americans fell behind on their mortgages and foreclosures hit a record pace in the 4th quarter. Mortgage delinquencies hit 7.9% of all loans, the highest level since 1972. Prime delinquencies are now higher than subprime delinquencies. This statistic should completely terrify everyone, as the prime mortgage market is 10x the size of the subprime/alt-a market."

So we had a revision of -3.6%?  How can they be off that far?  They can't.  It's a fabrication.  Numbers are now used to control the media and the populace.  It's that simple.  Ignore these numbers.  Don't make any investment decisions based on these numbers as that is a fool's game.  Things are NOT getting better in any substantial way.  I still see the economy and stock market taking a very large hit in the second half of the year.  Stock buyers beware.  Have a great week!

TRADING NOTE

Well I finally pulled the trigger on my options for DBA.  Remember DBA is an agriculture ETF which tracks the prices of corn, soy, wheat and sugar.  I bought Call options expiring in Jan 2010 with a strike price of $35.  At present DBA is selling a about $28.  My options cost me $.60 per share.  To purchase these I sold half of my SSRI which was up about 70% from my purchase price.  This is NOT trading advice.  Please do your own research as this is a VERY risky trade.