Customer Reviews

The Alpha Strategy: The Ultimate Plan of Financial Self-Defense

5 star:		(6)
4 star:		(1)
3 star:		(2)
2 star:		(0)
1 star:		(0)

 

 

Part I of this book should be required reading to graduate high school. If everyone read and understood this, the world would be much more prosperous and we would all lead richer and fuller lives. Part I is a primer on the economy, the history of money, the federal reserve, and how our government reaches deeper and deeper into our pockets with every passing year.

The remainder of the book goes into what we can do about it - how we can hope to hold on to what we have worked so hard to accumulate. This part is interesting, informative and useful. But Part I is an outstanding education on the way money works, or should work, and how inflation serves to devalue money at the hands of the federal government we elect and trust (to our financial demise). It also reveals how traditional assets (stocks bonds, etc) fail to preserve value over any extended period of time.

The "Alpha" strategy is the "first" line of defense we have against the hand of big brother. The logical extreme of this strategy would be to buy everything we need to live on for the rest of our lives in today's dollars and stockpile it all. Since not everything has a sufficient shelf life, the book offers the best compromise. This strategy may seem possibly a bit extreme but it is interesting and thought provoking none-the-less. Still, the idea is to try to stockpile the things of value, the tangible assets, in order to best preserve against the ravages of inflation resulting from the blatant and unbridled printing of money by the federal government. A must read.

The book is divided into two halves. The first teaches the reader about inflation, the money supply and the workings of the Federal Reserve System. The second half encourages the reader to employ a stockpiling strategy. The first half of the book is truly outstanding and is a MUST read for anyone seeking to understand investing. I strongly recommend the first 100 pages to everyone with money on their mind. I found the stockpiling strategy to be less useful.

The message of this book (what Pugsley calls "The Alpha Strategy"), put simply, is to avoid holding assets in the form of non-redeemable paper money. The work begins with an explanation of why this is necessary, and then moves on to accomplishing it.

First, Pugsley explains basic economics, starting with the premise that individuals work in order to improve their standard of living. With clear examples, he explains the danger of inflation (calling it "the most deadly of economic evils") and the roles that fractional-reserve banking and the Federal Reserve play in our economy.

Pugsley also argues that all government intervention into the economy causes capital to be misallocated and productivity to drop. He condemns all of it--anti-trust laws, professional licenses, subsidies, minimum wage laws, tariffs, and labor laws--but doesn't blame the government. He points out that such laws are passed because small groups of vocal constituents act in their own short-term best interest and lobby for government intervention to protect themselves from competition in the free market. The result, according to Pugsley, is that everyone else is "plundered," because they are forced by the government to pay higher prices than they otherwise would.

Arguing that conventional methods of storing wealth (stocks, bonds, etc.) simply result in more losses due to taxes, inflation, and speculation, Pugsley moves on to the subject of protecting oneself from the forces that diminish wealth. He recommends that you move your paper money into four categories of products, in the following order: education, tools, consumable products, and raw materials.

Pugsley briefly touches on education, arguing that a career makes one more productive and therefore wealthier in the long run. The tools required for that trade are also essential, and thus should be purchased. Much of the rest of the book is spent on discussing the best consumer products to store for long-term inflation protection, with recommendations that you store multiple year supplies of items you regularly use that have long shelf lives. Finally, for those with paper money still remaining, he recommends purchasing raw materials, such as industrial metals, as an inflation hedge.

Overall, this is an excellent work, with exceptionally clear explanations of economic principles. The talk about stockpiling at the end is also helpful for those new to the concept, but I'm concerned that he overestimates its value by not fully accounting for the cost of storage space. Well worth reading by anyone interested in long-term investing, even given the fact that it was published over 25 years ago.

The Alpha Strategy is, without a doubt, the best explanation of the Federal Reserve System and the perils of fractional-reserve banking ever put on paper. This accounts for the first 50 pages of the book; the next 70 serve as a great primer on free-market economics in general. Doug Casey (of LewRockwell.com) is quoted on the back of the book calling author John Pugsley maybe "the greatest living free-market writer" -- keep in mind, this is when Murray Rothbard was still alive! And based on the skill with which Pugsley explains supposedly "difficult" concepts, I'm inclined to agree with Casey's assessment. I only wonder why Pugsley didn't go on to write more books.

The second half of The Alpha Strategy might be the reason: like Ron Paul in Gold, Peace, and Prosperity and Gary North in How You Can Profit From the Coming Price Controls, Pugsley ended up being wrong with his dire economic predictions for the 1980s. This is understandable: no one could have possibly foreseen Paul Volcker's tight monetary policy. However, all of the same factors that led Pugsley, Paul, and North to project the implosion of the dollar and U.S. economy in 1980 are present once again, only this time, we have a much larger debt, much bigger entitlement deficits, currency competition in the form of the euro, industrial competition from China, overextended military, much greater debasement of our currency, and a president and Federal Reserve Chairman who absolutely WILL NOT do what Volcker did. Thus, The Alpha Strategy is even more timely reading today than when it was written. Pugsley's predictions were not "wrong," they were just about 30 years too early.

The second half of the book is a stylistic departure, as noted in the three-star review here. But the strategy for preserving wealth and beating inflation is ingenious, foolproof, and... so obvious I can't believe I didn't think of it myself. A quote at the opening of the Second Part says it best: "The best solution is the simplest solution, and the simplest solution is the easiest to overlook."

Essentially, Pugsley's alpha strategy calls for people to invest in future consumption now: stock up on soup and underwear while the price is lower than it will be later due to inflation. In doing so, you may get an immediate profit (savings) by buying in bulk; you will most certainly receive a tax-free gain on the inflationary difference between what you pay now and what you would pay in the future; you'll save yourself time; and -- although this is just a fringe benefit -- you'll insulate yourself against job loss, depression, and/or chaos.

Even before stocking up on consumables, Pugsley says individuals should "invest in production" -- i.e., the education, tools, and materials needed to increase your income. I think it might be a little late in the game for this, as we are closer to the edge today than we were in 1981. I'd put consumables first on the list. Regardless, once you invest your maximum in production and run out of room to store consumables, Pugsley says then and only then should you buy items for later exchange. Chief among them in Pugsley's view are industrial and precious metals. As for stocks and other paper investments, Pugsley says to avoid them... sort of ironic since he now offers a stock-picking service.

I've read most of the works by Rothbard, everything by Ron Paul, and many other books from authors associated with the Mises Institute. I'd say, without a doubt, that the first 120 pages of The Alpha Strategy are the best introduction to free-market economics I've ever read. The second half of the book is the soundest investment strategy I've ever encountered, with a few differences of opinion (which Pugsley says are natural). Finally, the last chapter of the book offers a political strategy of sorts -- or more accurately, an anti-political strategy: Instead of writing to your congressman (who doesn't care) to oppose a subsidy bill, write to the beneficiaries of the subsidy and threaten to boycott. Contact union members when opposing a new labor law; complain to your local banker about Fed policy; and inform your friends, family, and neighbors about "the sting," as Pugsley calls it. We can't win a free society by "throwing out the bad guys" -- Pugsley likens this to throwing out your neighbor's goats when he steals your cabbage to feed them... your neighbor will just get new goats! Similarly, the ruling class will just get new politicians -- it's happened before.

I have tried to plug this book as much as I can on online forums and in daily life. It is no longer in print, though I was able to buy a used copy through Amazon very inexpensively. Alternatively, it is available for free online in PDF format. Read it and live it!

This book was written in1980, but seems very relevant to today. The explanations of how the economy works were very helpful and understandable. But when he came to the solution, stockpiling, It didn't seem to be very doable for many people. As the author points out, you need plenty of space to do this. Imagine stockpiling enough toilet tissue to last for several years. People do a bit of this anyway, when there is a sale. He also mentions buying enough underwear to last for several years, but I have read that , even if not worn, elastic in underwear will break down in time. As to buying futures in metals,his second strategy, it may work for some people, but not me. It is interesting to read about this when what we are hearing these days is to declutter and get rid of anything you are not using. Quite at odds with this Author's thoughts.

So, I would recommend this book from the point of view of understanding the economics, but I was disappointed in the solution. What did I expect? I don't know!

The first half of this book should be read by every person in the country. He does a real nice job of explaining federal debt and how we place value on things.

The second half of the book seemed a little over the top to me though. It sounds good to stockpile loads and loads of goods as tangible wealth, but it really is out of reach of most people.

This book explains how parts of the economic system and finance really work. It points out the flaws in messing with capitalism.
If you really want to understand how economys' work, then you must read this book. The second half of the book teaches you a strategy of how to preserve your wealth, and store it and be prepared and self reliant. This book was written decades ago with predictions of what was to come, and now this book fits perfect as it has all passed as he said. The idea of storing away hard assets is very much alive and talked about today more than ever. The author was wise before his time.
Goood easy read.

First of all, to the reviewer who writes 'inflation was killed by the Fed' - actually inflation wasn't killed by the Fed (been shopping for food, gas, heating oil, and other necessities?). In fact 1) the Fed creates inflation by continuing to print fiat currency with no end in sight and 2) government inflation statistics fail to include key commodities required by everyone for survival including fuel and food whose costs have been rising steadily for many years.

For example, the cost of wheat in 2008 was about $3.15 a bushel. August of 2010 => nearly $7 a bushel. And this in a time when .gov claims there is little or no inflation! If you had stockpiled buckets of wheat for your 1-year food supply (and you better have a one-year food supply!) you would have over a 100% return on your wheat investment. That is a better return than the stock market and precious metals. Looks like major inflation to me.

By having bought wheat at $3.15 you have in effect preserved your wealth. Wheat stores for 20 years easily, and making your own bread from your own wheat is very enjoyable, healthy, and cost effective. Had you put your 2008 money in the bank, that same 2008 money would only buy less than half as much bread in 2010!

In effect, if you had banked your 2008 money you lost more than half its value in wheat by 2010.
If you had bought wheat in 2008, the value of your wheat more than doubled by 2010.
Beautiful!

Now extrapolate that to as many items you use as possible (AND get bulk purchase discounts). Rather than bank your money, purchase 20 pairs of pants, 20 shoes, 100 pairs of socks, 6 sets of tires for your new car, etc. This stockpile is TRUE wealth, protected against inflation and taxes. Wealth that you can draw upon as needed in future years.

This book contains great advice - not only do you protect your wealth by stocking up on items you use anyway, you will be well positioned should a natural or man-made disaster occur such as economic collapse (very possible), debasement of the currency (happening now), local war or civil unrest, large scale natural disaster, etc.

The first half or so is a very fascinating instruction on how our money system works. It was very interesting learning what actually causes inflation, and what inflation actually is. It's not a good thing, but not exactly the boogieman I thought of when I was a child and people talked about it. Very good.

The second half of the book is a very clear product of the time this was written, and seems bizarre and impractical. The basic message: hoard everything you can. When inflation was in the double digits as at the time, this probably seemed to make sense, but he goes as far as recommending buying a second card and putting it up on blocks, because you'll need a new one in five years. All to avoid inflation.

Well, as it turned out, inflation was killed by the Fed soon after this book was released, so that advice would have been pretty bad.