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

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 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 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.