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Old 06-08-2015, 09:05 AM   #21
Recycles dryer sheets
Join Date: Oct 2011
Posts: 422
I find myself balancing a few conflicting thoughts:

1) Markets are at all time highs so everyone is rich, ergo everyone thinks they're a genius at investing and can predict stuff. In this mode, people tend to predict continued genius investing and wealth creation. That is usually the time to buckle up and brace for impact.

2) "This time is different" is a great reminder that its never really different and it all usually comes out in the wash if you just leave it alone. That said, the central banks intervention is unprecedented and SHOULD pave the way for some nasty, equally unprecedented whip-saws in terms of inflation and a hair raising correction in bonds on scales we've never seen in modern, western economies.

3) That hair raising bond correction could come right as boomers retirement hits full force with all of them having been told to "move to bonds for safety" by their FAs or having it done automatically by target date funds. This could put increased political pressure on the already criminally under-funded retirement liability of all sorts...pressuring the govt to just print money to "fund' these unfunded liabilities. Someone has to pay the piper here...boomers with reduced retirement lifestyles, X/Y/Millenials funding their parents directly or through the govt, or inflation producing money printing...there is no free lunch and all options have real impacts.

So to me, the question is: is it really different this time or is just another "this time is different" moment?

That said, to ArtTinkerers' post, I'm a huge believer in the creative power of people. So long as we leave most incentives in places for people to work and better themselves, things will heal over time and we'll move on to worrying about the next crisis-to-end-all-crises.

Luck is when Preparation meets Opportunity.
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Old 06-08-2015, 04:42 PM   #22
Recycles dryer sheets
Join Date: May 2014
Location: Yuma AZ
Posts: 270
Follow On Opinion:

Re capital gain investments (speculations) where one is seeking a price increase, one is only sustainably rich if one can, when “dollars” are needed, find someone else to buy at an increased price. If/when new money flowing into to such markets slows or stops, let alone people in any significant numbers want “out of the market”, what happens?

In the market overall, is there any connection between reality of productivity / profitability of stocks, and the price?

In the 1920’s, supposedly a lot of people bought stocks on margin, or with loans against their other property, and lost big time when the market went down.

Further opinion, the IRA / 401k etc. accounts, as set up by the custodians, essentially funneled funds into the stock market, vs main street. With broader vision custodians, the money could have also been invested in local business, rental homes, a broad variety of equity and cash flow assets, BUT the bulk of custodians selected by employers had / have limited opportunities for the cash to go to.

Regarding bonds, or other fixed interest rate vehicles, remember that when the interest rates rise, the sale value of the instrument falls.

There is indeed a significant chance that we have a large mess about to hit the fan. There are a lot of “prepper” discussion boards out there for those who may feel insecure about the stability of their national currency, economy, etc.

Or, keep at “business as usual”.

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