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Chips off the table
Old 10-23-2009, 11:09 AM   #1
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Chips off the table

Hi all,
I am 56 and retired 9 years ago. Since retiring, I have been a huge proponant of Bogle and Vanguard and have done well. However, IMO, things have changed a LOT with the new administration in power and I have decided I no longer need nor want to take risks in the US stock market.

That said, there are still issues if inflation, deflation, devaluation of the dollar and debasemnent. I want to do more than hold my money in cash - especially the US dollar.

I've come up with some ideas - a mix of metals, emerging market fund, foreign currencies (including CDs and savings accounts), foreign stock fund(s), global bonds (including emerging markets).......I'd like to include TIPS, but can't due to the way inflation numbers are fooled with.

I'm interested to know if there are others out there that are thinking through the same things that I am. I'm running along the lines of the Harry Browne Permanant Portfolio but with the agenda of this administration thrown in.

Comments?
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Old 10-23-2009, 11:44 AM   #2
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Wow. If the dollar ends up gaining strength against other currencies, you will be screwed! I'm a big fan of a broadly diversified global portfolio that doesn't overweight too much in one particular category. Best of luck though with your strategy!
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Old 10-23-2009, 12:00 PM   #3
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If the US dollar continues to devalue and I am in all or mostly US dollar, I'm screwed. And, with several different currencies (I will continue to hold some in dollars) I will be broadly diversified.
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Old 10-23-2009, 12:07 PM   #4
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I guess what I'm getting at is this: if you live in the US and don't want to leave, your future here involves paying most of your expenses in US dollars. If you hold none, and the dollar gains in strength, you will be cashing in foreign denominated assets and getting less in US dollars. As long as you remain in the US, you know you will be paying for things denominated in USD.
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Old 10-23-2009, 12:22 PM   #5
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I'll keep about 2 years living expenses in US dollars at least, plus my rental income is in US Dollars, which is what I use to pay expenses.

I suspect the USD will continue to decline so I have to act on that.
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Old 10-23-2009, 12:28 PM   #6
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Originally Posted by Repairmanjack View Post
I'll keep about 2 years living expenses in US dollars at least, plus my rental income is in US Dollars, which is what I use to pay expenses.
Ok. Based just on your first post, I thought you were moving basically all of your income producing assets to foreign denominated assets/investments.
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Old 10-24-2009, 09:07 PM   #7
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metals, emerging market fund, foreign currencies (including CDs and savings accounts), foreign stock fund(s), global bonds (including emerging markets)..

Those assets may carry significant risks. Be certain you understand the risk of metals, foreign currency, and emerging markets.
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Yes, there are risks....
Old 10-24-2009, 10:28 PM   #8
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Yes, there are risks....

But I have to think that leaving all our money is a savings account in US dollars is also a risk.

It comes to this: We have enough money that I no longer think we have to take the risk in the stock market - and I'm considering the risk this administration poses to our economy as a great risk. However, should I simply leave this money in US Dollars, which I think will continue to devalue? Should I leave it all in a savings account? I then run the risk of inflation, deflation, debasement, devalue of the dollar (anything else)? So, I am trying to come up with an asset allocation where I lose the least. I know there is risk in everything. There's no way around that. I am looking for people that may be in the same boat that we are in and would like to hear their comments and discuss this situation.
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Old 10-24-2009, 10:58 PM   #9
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Quote:
Originally Posted by Repairmanjack View Post
we have enough money that I no longer think we have to take the risk in the stock market
Then don't.

Some folks have managed with just CD's (note need a big stash to make this last)

No boglehead would advocate abandoning US stocks for metals emerging etc...

Ability need and willingness to take risk and as you said there is risk in everything. So it appears we are back to diversification.

As for the administration, well the country is 233 years old I'm sure we can survive 3 more years of this. Greatest country in the history of the world and if we don't have the fastest growth rate we will at least be on the short list of good places to invest.

I am concerned still working and still accumulating. I am so concerned I have moved to 60/40 stocks/bonds I have a goal of making all bonds individual TIPS and am moving toward that. Stocks are about 55% US 45% INTl.

If you are more concerned than me reducing stocks down to 25% might be a plan. Using some international is good but many countries have bigger problems than we do. Some commodities can be helpful but I don't use them anymore as I think simple, low cost and historical returns suggest they are not needed. Don't think I've ever written this before but purchasing an immediate annuity from a top notch issuer (think vanguard etc.) may fit your risk profile.
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Old 10-24-2009, 10:58 PM   #10
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I share your concern about the US, but my crystal ball is cracked. Things go wonky overseas, too. I am 50/50 US/non-US equities. 50/50 has a good long-term record according to several sources with data to back them up. It has worked well for us and I will stick with it.

The only commodity I have specifically is oil and gas/energy and I have that 50/50 too (BP and Chevron and a little Spectra Energy). (I work in the business and this is my major deviation from Vanguard index funds.) These days I like stuff that pays dividends. Gold doesn't. The record shows that it doesn't protect against inflation, by the way, but oil will.

Don't write off the US too quickly. It is still a huge financial, industrial and creative powerhouse and the world's biggest market. A lot of other countries wish they had our problems.
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Darryl, you ignore
Old 10-24-2009, 11:24 PM   #11
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Darryl, you ignore

the devaluation of the US Dollar, IMO. Especially with an annuity.

I am not talking about putting a major part of my portfolio into metals or foreign stocks. And, with cap and trade, card check, health care, the Climate Change Treaty, etc, etc - I think this country has very hard times ahead. I'm no longer willing to risk my money here. I hope I'm making a mistake.

Ed, I have lost confidence in the US. We're #6 on the economic freedom index and falling. New Zealand, Australia (ahead of us) and Canada are moving towards more economic freedom. They are currencies that I hold now. Wish I could use Vanguard to hold them.

I agree with you - oil is on my list. Buying gold at the all time high goes against my grain. I am determined to hold to my fundamental principles (ie: Bogle) but I cannot trust our stock market or dollar any longer. I am very sad about this.
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Old 10-25-2009, 09:36 AM   #12
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...I cannot trust our stock market or dollar any longer. I am very sad about this.
We never could. That is why we diversify and why I am 50/50 international.

Just remember, everywhere else has rascals and confidence men and kleptocracy governments, too. I work in Canada and I don't think I would commit more than a little of my capital here. This place is much flakier than the US of A.

Investment sometimes reminds me of the Three Law of Thermodynamics:
1) You can't win.
2) You can't break even.
and
3) You can't get out of the game.
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Old 10-28-2009, 03:45 PM   #13
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There is substantial evidence that US economic and military power is waning, and that the greenback will continue to decline against many/most other major currencies. Assuming that it is, and will remain, "(the) greatest country in the history of the world" isn't much help.

That said, Ed is correct that none of us has a crystal ball, and in the short term it is certainly possible that the dollar may start to appreciate. FUEGO makes a good point, too.

As your rental income is in USD, it sounds like your diversification project makes sense.

If you're not already familiar with it, you might enjoy Empire of Debt: The Rise Of An Epic Financial Crisis (2005). I am not a big Bill Bonner fan, but it is an interesting read.
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