New Harbor: Now is the Time for Discipline in Protecting Wealth

The stock market has been on an upward streak for the past two years, with the Dow and S&P near their all-time highs. Recently, though, they've shown signs of topping. And certainly, the macroeconomic risks loom larger than ever. Where are equity prices most likely to go from here?

Interest rates on bonds have nearly doubled off of their historic lows from a year ago. That puts downward pressure on bond market prices, as well as a tremendous number of other important asset classes, like housing. Where are interest rates most likely to move next?

For these (and other) reasons, the current environment is extremely challenging for investors. The pick-a-sector-and-then-buy-and-hold strategy that has worked well for many of the past several decades is no longer prudent. Investing in today's markets requires more fundamental analysis at the individual company level, as well as a willingness to defensively build up "dry powder" reserves to deploy if indeed (as we expect) a major downward market correction brings assets prices down to much lower levels.

In this week's podcast, Chris talks with the team at New Harbor Financial about the current outlook for the market and what they think investors should be prioritizing:

It is clear that after five to six years of intervention here, the results that we are so somewhat sought and promised are not being delivered. We are having pathetic rebounds and job recoveries and GDP growth. The evidence speaks for itself.

The reality is that most folks forget that the stock market is a forward-looking machine, if you will. Let’s not forget the stock market began rallying back 2009. We have had a pretty long rally here. And for folks to now be saying if the economy starts to get better, that means the stock market will go higher, a lot of that possible future improvement is already more than priced into the gains and the stock market over the last several years since the 2009 low.

Most folks fail to realize that to stock market usually rebounds when economic news is getting worse, not when it is getting better. We think that story is more than played out to an excessive level. Even with the improvements in the economy, we are likely to see a major pullback in the stock market.

And the ten-year note, the world watches the yield on the ten-year U.S. Treasury bond. It really drives the interest rates on so many very important vehicles, not the least of which is home mortgages. Last year, in roughly August of last year, the ten-year bond yield bottomed out at 1.39%, about 1.4%. And most recently, as I look at it right now, it’s at 2.8%. So that is an increase. It is really almost a doubling, actually, if you look at it that way. It really literally is a doubling from about 1.4% to 2.8%, or to put it another way, an increase of 1.4%.

This has had the effect of driving mortgage rates up over a point. Average mortgage rates now are up around 4.6%. They were in the mid 3%’s not too long ago, maybe about six months ago. As interest rates rise, it essentially is toxic for the economy and the stock market, because business owners and consumers are less likely to borrow and reinvest. Homeowners are less likely to borrow and build that addition or move to a bigger home. Companies are less likely to borrow and finance the purchases of other companies, even investing in new plants and equipment. So, it’s just something that everyone is watching. It is something that we are watching closely. Frankly, it is one of the hostile syndromes that John Hussman – another person that we admire and read quite closely. He has a site, – he talks about a toxic syndrome, a more dangerous syndrome in the stock market, and one of those is interest rates rising quickly over the past six-month period. That’s exactly what we are seeing.

This is a huge warning flag. The other day Bill Gross said we have got no one to sell to but ourselves. All assets are inflated. So, certainly it has got us very, very cautious and very defensive.

At this time, New Harbor urges the discipline to be defensive:

Over the next couple of years, returns are likely to be negative in the stock market. It is a very challenging time, to say the least. A very challenging time for us as money managers to continue to do what we think is the right thing. We would urge people that are listening to this podcast: you really have to avoid the urge to make decisions just for the sake of doing something. Everyone wants to do something. They always want their money to be working for them. They want to be in this stock or that stock or that bond or this commodity future.

Sometimes – especially in an era like now where all assets pretty much have been moving in tandem and they are all priced off a risk free rate of 0%, so they are priced to return very poorly at present times because the risk premium has been stripped away from them – you really need to just think about sitting in cash or allocating a good portion of your portfolio to cash. Cash really, truly, is king sometimes. It is an investment decision to sit in cash. If you do not have some cash, you are not going to have the ability to buy at better valuations. Most of your long-term success as an investor – and this applies to money managers who have been hired to invest money for people – is going to be dictated by how well you stick to your discipline and where you deploy money and where valuations are at. So, you really have to think about patience, and that is a hard thing to do.

We as money managers are sitting on a very large amount of cash, in some portfolios over 50% cash. That is really something that not many money managers like to do. That is not something that many retail investors like to do. But money managers have something called ‘career risk’ where they are constantly having to make sure they are staying ahead of or keeping up with the various indices. They are really afraid to hold onto cash, because holding a large cash position is precisely what threatens their livelihood more than anything. Clients do not sit with a money manager that is holding cash. And, invariably, if you sit on cash, you are going to be early, like we are this year. You are going to be early, and you are going to miss a little bit of a run up. But it is really the only way that we know to produce above-average returns over the long-term. You have to be early. It is better to be early than even a little bit late. We have heard you say that often. Especially when the market reaches extremes, you have to be preemptive.

I talked a little bit earlier about the low-volatility environment. We are not predicting this is going to happen or happen right away, but we could very well have a sharp drop like we did in October of 1987. There is no way to get out of the way of something like that unless you are preemptive and hold a large cash position. So we would urge people to really think about holding a core position in cash and waiting to deploy those assets at a better time.

If after listening to this podcast, you find yourself interested in connecting with Bill, Mike, John, and the rest of their team to learn more about their advisory services, please use the form here to do so.

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It should go without saying: this discussion should not be construed as individual financial advice by those listening to it. The content should be taken as informational and educational in nature only. Investment advice must be tailored to your specific personal situation (which Chris and his guests are obviously unaware of) and should be obtained directly from a financial adviser you trust. Before acting on any of the statements made in this podcast, we advise you do just that.

Click the play button below to listen to Chris' interview with New Harbor Financial (43m:29s):

This is a companion discussion topic for the original entry at

I was going to make a joke about investing in oil fracking. But it would neither be funny nor wise.
My attention was drawn to a comment that companies (or economic entities) are showing record yield. I conclude that this was where the money printed is appearing. If this money escapes into the wild then all our money is going to become diluted.

So. What to do? I will keep enough folding stuff on hand, then invest in my preps, invest in my business venture and then consider buying a piece of the gold mine up the road.

Gold looms esoteric in my mind. There is too much reliance on it's historical role.

With the collapse of western civilization and the results of  Limits to Growth curves I look askance at anything hypothetical. 

Thanks a lot fellas for showing me your models of reality.

I understand the large chance of downside risk in either bonds or stocks at this point so the logic of holding a large cash position, despite likely negative real returns, seems sensible while awaiting better re-entry points into the markets in the future.
However, in the age of the universal 'bail in' model of bank recapitalization (ala Cyprus), how does one safely hold cash? Do we put it under our mattresses or risk it in the next MF Global brokerage scandal or diversify the cash holdings in other ways to try to keep the risks to that asset class reduced?


The Shah gives us another good reason to stay out of the Market.
Goldman's computers had a whoopsie moment and lost $100 000 000.

Chump change really, but worth reading about to understand what the Left Brain hath wraught.


Mark, I would like to express what I have done with my cash to keep it out of the system, perhaps benefit from an income tax perspective and have it at the ready when needed or wanting to put it back to work.
I will keep it brief and allow others to chime in with how they keep cash out of the system but also ways they protect it.

I have prepaid my property taxes. I have large stores of fuels that will be used up as a set amount can be determined, and I can use discounts that I know are available to me of anywhere between $.40 and $.80 cents a gallon up to 35 gallons and potentially 70 gallons a month. I know I will need goods and services and will look to pre-pay for these services in advance. For instance, I may pay in advance for oil changes and other services with reputable companies here in my community where I have been intimately involved with these Folks over many years. Often getting a 10% discount just for paying in cash.

These are just a few ways and I have many more that I use to manage my cash, get a bang for my buck in the process and in no way reflects all the little things I can do with cash in the short term to keep my cash out of harms way and actually make a buck as holding more fuel clearly indicates.

I would really be interested in ways some of you Folks manage your affairs out to no more than 6 months to keep yourselves ready to deploy cash and actually get a return on your cash while keeping it safe.

Lastly, I do keep a fair amount of cash on hand, and while a risk I feel I can defend it rather well.


i think any day is a good day to show some disipline.
work --the best way to increase wealth that i have found.

buying "stuff" the best way to lose wealth.

i see things as so complex and fraudulent right now, that the concept of safety is not in this why look for it? i'm not a big risk taker.

i let go of the idea to accumulate alot of paper wealth after the dot com crash. i switched to concept of having a low cost lifestyle, one that needed very little cash.

i have tried to set up a home that is extrememly inexpensive to live in. i've spend the lions share of my wealth:  building , buying and owning outright my grounds, tools, energy, entertainment, food, heat.etc…

property taxes around $200/month and maybe $100/mo for beer!

i easily can live under $500/mo.right now.

i like small bills(under $20's)(which must be kep tin an airtight/watertight container…us bills disintegrate over time if not protected). i built a vault when i built the house. it doubles as a tornado shelter and root cellar.

gold is valued in dollars and dollars are valued in what? debt? that's too crazy for me to think safety.

I've had 90% of my investments in cash since the beginning of April. I haven't thought twice about it. I will wait this experiment out for awhile. What is difficult for me to understand is that this experiment of QE is something different from our past economic models, so it is seems equally difficult to me to understand how to apply the economic models from the past to  this situation. Maybe it will play out in relation to existing models, maybe not? Maybe the top of the market will come soon, maybe it will come in a year or two?
It appears to me that the level of planning that exists (ed) in the vertical integration of the industrial corporation is being applied with steroids to our monetary policy, hence, the intentional elimination and controlling of market forces in the interest of planning and power is first an foremost.  Coercing manager's cash positions to seek higher risk shifts individual's savings to corporate coffers and I'm sure the intention is to push up corporate savings for capital formation. But corporations are not investing, rather they are letting the money pool, waiting for things to shake out, or worse just pocketing it through accounting tricks. This only puts more pressure on the Fed in the interest of planning to stimulate more, and around we go.

What a predicament! Our system has always punished individual savers in the interest of corporate investment. In the eyes of "system," we as individuals are consumers first, savers last. The paradox is that if we consume more, savings is increased…or so the theory goes. Hmmm, should we be having a different conversation? Maybe this paradox isn't a fact when the markets begin to hit real limits of resources?

Having cash in and out of the house seems like a good idea. Having some investment in PM also seems like a good idea in respect to how the markets work. They are a couple ways for us as individuals to plan, as the Fed does, to minimize or eliminate the market forces on your own wealth/power.

Enjoyed the podcast. Thanks.

A very good point! We should live as simply as possible. I just looked at my retirement investment portfolio (my husband's is mostly in cash, but some company stock.) Mine is in:

  • things to lower energy costs (insulation, clothesline, woodstove, efficient appliances, smaller car & less driving, CFL bulbs, solar hot water...)
  • things to lower utility & food bills (well, garden, canning, cooking from scratch)
  • things to lower healthcare bills (exercise, healthy food, enough sleep, mold control, natural remedies)
  • things to enjoy without going broke (musical instruments, printed books, friends)
  • and tools to maintain all of the above.
Those are my "investments".

Sustainable living cuts your cost of living pretty well, in my experience. It also increases your enjoyment and health. I was out of debt before I "invested" in any of this, Moving to an cheaper state and into a shared living space also helped my "portfolio."

Yeah, I have a few bucks in an IRA, but that's not my primary investment vehicle. Not even close.

My wife and i began our journey over 20 years, initially to reduce our carbon footprint and lower energy lifestyle.  We were pleasantly surprised that we saw no appreciable deterioration in our lifestyle. 
Fast forward 15 years and we have ramped up our transition considerably.  Bought a small farm, built a strawbale house and got completely out of the market. We're meeting very cool people on the way.  

Despite all of the foresight and sense of urgency, we keep getting surprised at how hard it is for us to let go of the old paradigm.  We need to constantly remind ourselves why we're doing what we're doing and not to procrastinate!  PP,  Post Carbon Institute and The Oil Drum have all be consistant sources of inspiration. 

Carpe Diem!!

That is downright inspiring. I've been dreaming of building a straw bale house for years! My biggest problem is figuring out where I can locate it and when I can start it as life has me in a holding pattern in the wrong location for the next few years. We once had the right property but health and job crises landed us here, with a good job and health again but not in the right location for long-term planning. For now, we are trying to feed our daughter's dreams for the future before pursuing our own while prepping in place as best we can.

Following on Bob's ideas of prepaid expenses, we invest locally through a CSA to keep the veggies coming throughout the season and augment our modest garden.

I'm pursuing Wendy's investment strategy too though I am lagging badly on #3 of her list…




Thanks Wendy, for another inspiring and down-to-earth post.  I appreciate your lovely contributions.  I am inspired by your list, and I need to work on doing a better job with healthy food, as well as a few of the others.   I currently drink two cups of coffee a day, so this week, I'll shoot for one, and eventually try to move over to black or green tea. My wife and I don't own land, so we can't to a lot of the things on your list yet, but we did harvest some linden tree flowers this year, to use for linden tea, and we're going to try to do more of this next year.Cheers,

things to lower energy costs:
solar panels that run a solar freezer(to store garden food not canned or dried), solar refridgerator(to keep that beer cold), solar fans, solar heat(my winter heat bills average $35/mo in michigan) 2 solar battery banks that can run my natural gas furnace or computer or anything else. 7 full cords of split red oak firewood , that an 85 yr old farmer gave me as a thank you for sharing my garden veggies with him. an outdoor kitchen area with wood brick oven, fire pit with cast iron cooking, i can cook with propane, charcoal, wood, or solar.

a 1000sq/ft house(with 1000 sq/ft walk out basement) with 6 in walls : R 25 walls, R40 attic insulation, with 25% windows on the south wall.

i use one of those $2.50 reflective camping blankets on the large window in the summer and it saves 20% of my cooling costs.

things to lower food bills and utilities…

trading with neighbors who have bees, chickens, cows, welders , large tractors—  things i don't have.

a 12 x 20 ft greenhouse that grows food, mostly salad every month but jan and feb.

dehydrator(i'm working on building a solar one now that i have the concepts forming)

an auillary shallow well, as i don't have the deep well solarized yet.

believe it or not, i'm on a bus route between a farming town and a larger city.tho for now my pickup is handy…(and costs around $500/month so my largest cost, that no longer is so necessary now that most things are in place) indespensible during the building years. trying to use the cheap energy while i had it to get things done.

things for healthy living

ditto wendy and i walk 3 mile /day 5x week on top of all the garden and yard maintainence, wood splitting etc chores. i took an hour nap for the first time the other day…wonderful!

music makes any heart sing, just sitting under the pergola in the outdoor kitchen(which has solar powered cd player), and looking out over the land and watching the deer romp, the sandhill cranes fly over head,the red wing black birds settling in the cattails for the night, and lets not forget star gazing…it's dark enough where i live to stargaze…the milkyway just mesmorizes me especially in sept

lastly a fire…either a campfire, or a woodstove at night when i am usually so tired all i want to do is sit and enjoy the stillness and the graditude of another day of life given and well lived.

it took me 7 years to build all this, 99% by my self. it can be done. i started when i was 53.


i have a 100 x 100 ft garden with massive compost pile. i use no chemicals, sprays --nothing but the compost which is made from wood chips, leaves and grass clippings. i do add rock phosphate some years and i rotate the area used and let some sit fallow for a year.

It took me 7 years to build all this, 99% by my self. it can be done. i started when i was 53.
Ferralhen, what you have acccomplished is truly inspiring.  I would love to see your place and learn what has worked for you and what has not. Yours is a perfect example of 'doing the next thing' as that's how such a well-outfitted place gets that way; someone just did the next thing. We just had national PBS come by and do some filming (it was Paul Solman, the economics corrrespondent) and were proud to be able to show our place which is both beautiful and functional.  I imagine they came with the idea that we were going to be slightly deranged doomsday preppers and left with a bunch of footage that did not support that projection. When directly asked if we were doomsday preppers, I simply said, I do not live in isolation waiting for some future event.  I live today, as happily and completely as I can, with a strong bias towards surrounding myself with beauty and healthy practices while engaging deeply with my local community.  If I get to do things I love each day, save money, eat more healthily, sleep well, and happen to have things in place that make me more resilient in case the future turns out to be less forgiving and abundant than current life provides, then how is this anything other than completely sane and rational?

Your progress is pretty inspirational for those of us who actually take the preparation ethic seriously. My biggest problem, one which you have apparently solved, is how to create enough compost.  I can always use way more than I have.  Perhaps you could give us a bit of a tutorial on how to create and maintain a "massive"compost pile.



Wow, Ferralhen, just wow.
Ditto on the compost explanation per Doug.

…since you have come to our community I have felt happier when reading you, and I am always happy. Pretty cool gift and breath of fresh air you are.BOB

Feralhen may have more details, but may I jump in here and suggest some sources for making compost:

  • food scraps from your own as well as commercial or school kitchens or produce departments. This includes pure waste streams like coffee grounds, but also those you may need to sort (those that contain meat or other waste).

  • animal wastes and their bedding. Even chickens or rabbits from a smallholding can add valuable material.

  • fall leaves, grass clippings, etc.

  • garden waste. A hot compost pile will destroy pests and disease, so it is OK to put in garden refuse, such as chopped tomato stems, etc. if you manage your pile to heat up.

  • municipal yard waste. Some municipalities may provide composted leaves, yard waste.

  • tree care companies many times will deposit chipped wood for free at your location.

-spoiled hay, animal feed from the farm store.

Just beware the persistent herbicides ( as they can damage your property for years. If in doubt, use the bean bioassay before adding unknown material to your garden soil (

I'm 54 and I'm ceratinly no wilting flower but I wouldn't even  consider attemping what you have achieved all by yourself. You've got it all together. You've give me inspiration and courage.You live in an area that's sunny almost year round.  I have considered solar freezer ,fridge etc but up north  my  boyfriend said it's not possible.  He says the best way to produce electriciy on demand would be to buy a piece of land wirth a small river that has a 5 meter grade. Hydro power on a small scale. We're still looking at our options.