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Old 02-09-2012, 10:46 PM   #21
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How did rich landowner invested in the Russian farm land do in 1919 or China farm land in 1949 do? By 1946 there was so much famine in Russia one million people died. How does that compare to the people who owned gold and was able to take their wealth with them out of the country? Between 1949 and 1953 it is estimated one million "evil" landowners in China were executed. Most of the gold of China ended in Taiwan, where people with gold fled to in 1949. per Wiki"When the KMT government fled to Taiwan it brought millions of taels of gold and the foreign currency reserve of mainland China to the island, which, according to the KMT stabilized prices and reduced hyperinflation.[73] Perhaps more importantly, as part of its retreat to Taiwan, the KMT brought the intellectual and business elites from mainland China.

I believe in the value of stocks, but making one self ignorant of the value and utility of gold in very bad times and placing faith in pieces of paper can be made to look equally foolish to comparing gold to a giant lump in the corner. Working with someone whose mother and father bought freedom from Vietnam for their son though the use of the family's gold savings put a definite real world example to me on the potential uses of gold in very hard time.
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Old 02-09-2012, 11:07 PM   #22
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If I had net worth of 50 billion dollars I might feel the same way he does. If his portfolio drops 50% in a week or two he still has 25B. I'm eating Alpo.
Not if your portfolio throws off adequate income. Not withdrawals, which are not income in my view, but actual payments that get put into your brokerage account.

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Old 02-09-2012, 11:34 PM   #23
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WB says some good stuff. This is partially what I was getting at a few years ago when my signature was "Cash is overvalued, too".
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Old 02-10-2012, 06:11 AM   #24
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XOM has been very good to my family.
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Old 02-10-2012, 08:36 AM   #25
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It"s dangerous for me to listen to financial noise,reguardless of who it comes from.Years ago I once listened to a well respected mutual fund manager who gave all the great reasons to invest in Japan.I don"t have to tell you how that worked out.
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Old 02-10-2012, 08:49 AM   #26
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I have great respect for Warren Buffet. Nonetheless, he is much more concerned with business risk, while my concern is portfolio sustainability, so I find his view interesting but not useful. Just because equities may prove to hold value better than Treasuries does not make them good investments right now. Just because a turd doesn't smell so bad does not make it tastier or any more fit for consumption.
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Old 02-10-2012, 09:12 AM   #27
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If I had net worth of 50 billion dollars I might feel the same way he does. If his portfolio drops 50% in a week or two he still has 25B. I'm eating Alpo.

What You would be eating Alpo if HIS portfolio dropped 50%


Just having a bit of fun....
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Old 02-10-2012, 09:15 AM   #28
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+1 but only to my mom...
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Old 02-10-2012, 09:17 AM   #29
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There are several things to keep in mind:

1. Buffet is only looking at the long term. From his perspective, that is the only view that matters. For retirees with less than a 30 year time frame and living off their investments, long-term purchasing power is probably half the view. This is a good warning for not-that-old folks holding very high allocations in bonds IMO.

2. I don't sweat the currency stuff too much, as my expenses are also denominated in $$. I do however have some international exposure via equities and a small percentage of international bonds.

3. Gold? I don't hold any. Never could bring myself to buy any. Maybe I just remember gold's horrible performance during my younger years. And if I don't physically possess it, I don't see the point during political crisis/war periods anyway. Where would I escape to? Mexico?

I doubt I would ever be that comfortable holding much less than 50% in equities for the longevity issues, but I prefer to hedge my bets for the shorter term issues .

I know there are issues with bonds right now. I fully expect to see a 5% or maybe even a 10% haircut on my bond holdings in the next 5 or 10 years as interest rates "normalize". I'm OK with that, as I expect to be able to replenish from my equity funds over time to rebuild the bond portion. And who knows - we might still end up with a super long period with low interest rates and no "normalization". We just don't know.

Best just to stay diversified across several asset classes and not too highly concentrated in any one. IMO this is the best way to handle both the short term and long term issues.

Audrey
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Old 02-10-2012, 09:20 AM   #30
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I think that there is a difference between keeping some gold as a fail safe emergency safety net and keeping a large chunk of your portfolio in it as an investment.

In the situations you are describing, having some physical gold is very useful, but having 10% of your investments in GLD doesn't give that same utility.

I think it is important that people understand that gold is a store of value, but it isn't an investment. It may gain or lose market value through speculation, but it doesn't add to its intrinsic value over time as a good company does.

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How did rich landowner invested in the Russian farm land do in 1919 or China farm land in 1949 do? By 1946 there was so much famine in Russia one million people died. How does that compare to the people who owned gold and was able to take their wealth with them out of the country? Between 1949 and 1953 it is estimated one million "evil" landowners in China were executed. Most of the gold of China ended in Taiwan, where people with gold fled to in 1949. per Wiki"When the KMT government fled to Taiwan it brought millions of taels of gold and the foreign currency reserve of mainland China to the island, which, according to the KMT stabilized prices and reduced hyperinflation.[73] Perhaps more importantly, as part of its retreat to Taiwan, the KMT brought the intellectual and business elites from mainland China.

I believe in the value of stocks, but making one self ignorant of the value and utility of gold in very bad times and placing faith in pieces of paper can be made to look equally foolish to comparing gold to a giant lump in the corner. Working with someone whose mother and father bought freedom from Vietnam for their son though the use of the family's gold savings put a definite real world example to me on the potential uses of gold in very hard time.
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Old 02-10-2012, 09:30 AM   #31
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Just because a turd doesn't smell so bad does not make it tastier or any more fit for consumption.
Or is it that many asset classes stink so bad that compared to those, equities smell like roses?

That said, I will never go 100% equities, though one poster seems to do well doing exactly that. I always like to have quite a bit of cash sloshing around, and yes, I count my I-bonds (9% of PF) as cash.
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Old 02-10-2012, 09:50 AM   #32
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Or is it that many asset classes stink so bad that compared to those, equities smell like roses? .
Exactly
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Old 02-10-2012, 10:15 AM   #33
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I have great respect for Warren Buffet. Nonetheless, he is much more concerned with business risk, while my concern is portfolio sustainability, so I find his view interesting but not useful. Just because equities may prove to hold value better than Treasuries does not make them good investments right now. Just because a turd doesn't smell so bad does not make it tastier or any more fit for consumption.
+1 , now does anyone think if you asked Warren, given his article, whether the average investors should sell their Bonds/FI and move entirely to equity, what do you think he would say?
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Old 02-10-2012, 10:58 AM   #34
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This board responds to disturbances from outside just like an automobile shock absorber responds to a bump in the road. The non-compliant idea comes along. If small it is simply ignored, but if from a highly respected, highly successful investor, it is just explained away by posts on why the differeing opinion doesan't matter, is wrong, or does not apply. Or last but not least, I'm sticking with Firecalc and my allocation! Very shortly, it's steady as she goes. Unless of course there is a scary event right in front of our eyes in the markets.

There is a lot more social psychology to learn here than money management.

Ha
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Old 02-10-2012, 11:15 AM   #35
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There is a lot more social psychology to learn here than money management.

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Old 02-10-2012, 11:44 AM   #36
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I know there are issues with bonds right now. I fully expect to see a 5% or maybe even a 10% haircut on my bond holdings in the next 5 or 10 years as interest rates "normalize". I'm OK with that, as I expect to be able to replenish from my equity funds over time to rebuild the bond portion. And who knows - we might still end up with a super long period with low interest rates and no "normalization". We just don't know.
If that's the extent of the downside, I can certainly live with that risk. And that's presumably based on normal historic interest rates and bond yields. I realize if we have hyperinflation and Carter era interest rates, it will be a lot worse...but that's not what I'm going to plan on.
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Old 02-10-2012, 11:45 AM   #37
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Seriously, an interesting article. Realistically, not changing our conversative asset allocation for it.
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Old 02-10-2012, 11:46 AM   #38
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Ain't it the truth. For every post.
Touché!
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Old 02-10-2012, 01:20 PM   #39
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Warren Buffett: Why stocks beat gold and bonds - The Term Sheet: Fortune's deals blog Term Sheet
Our working level for liquidity is $20 billion; $10 billion is our absolute minimum.

After extensive analysis of my personal situation, I have decided that my working level for liquidity multiple year emergency fund can be less than $10 billion. However, after satisfying my personal liquidity level cash and short-term bond allocation, and after purchasing my corporate headquarters house, I have decided to continue investing the remaining 60% of my liquid portfolio in equities via broad index funds.
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Old 02-10-2012, 01:33 PM   #40
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For what it's worth, there's a recent book out that said that "Buffet invests like a girl".

Synopsis: Women are more level-headed than men, and make better investors!

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