Terrified. Begging for help - Income/Investing

[pb4uski]

I disagree, and think DM19, you are right to worry. America has traditionally funded its overspending by selling bonds to foreigners. Over the past 12 months this has all but dried up (95% reduction), so the Fed is 'printing' up the money to buy them. Effectively, America is overspending, and printing the money to do so, reducing the value of the rest of the world's dollar holding.

As a foreigner reading a US based forum, I see a fairly certain outcome. It won't be upto America to determine how this turns out. Tapering / debt ceilings etc are all pretty irrelevant. When the rest of the world no longer needs dollars to trade (which is rapidly becoming a reality), and the US continues to devalue everyone else's dollar holding, the dollars will come home. The bonds will be sold, and the only buyer is the US government.

Devalued dollar, inflation, massive local social liabilities. Collapsing economy. The cause of 2008/9 still exists in the system. Only now its worse. I'm not in the guns and bunker brigade, but America has had it's day. I'd be looking to structure your monies accordingly.

While I respect your right to disagree, I think you're wrong and your prediction of economic Armageddon for the US is paranoid thinking.

What is the alternative to the US for global investors? The only possible alternative that I see is China, and global investors are not likely to be willing to invest in a communist country with opaque financial disclosures.

 

[haha]

What is the alternative to the US for global investors?

IMO, you are setting your limits too narrowly.

IMO the US is cooked, unless we show political judgment and will way beyond what has been possible for at least 50 years. When something is failing, you don't have to visualize what the replacement might be. One tends to be found. Many people around the world will celebrate this fall, at least until whatever comes next is found to be be a bit less yielding.

Ha

 

[pb4uski]

I agree with you somewhat in that I am also not keen on the current path of the US, particularly the lack of political courage and partisan rancor and I agree that unless some fundamental changes are made soon to spending, taxes, entitlement programs and the like that the US is on a perilous path of decline. However, what could prolong the decline is the lack of a decent alternative as a world economic power. While there are arguably some countries in much better financial and political shape, they lack the mass and scale to become the world's economic leader.

 

[travelover]

I don't think that this tin foil hat talk helps the OP's concern for his family's long term welfare. That's not to say that you shouldn't bat it out in another thread.

 

[brewer12345]

I don't think that this tin foil hat talk helps the OP's concern for his family's long term welfare. That's not to say that you shouldn't bat it out in another thread.

I am just amazed that it took this long for the tinfoil brigade (2nd Reynolds division) to show up given OP's state of mind and "investment" proclivities.

 

[pb4uski]

I don't think that this tin foil hat talk helps the OP's concern for his family's long term welfare. That's not to say that you shouldn't bat it out in another thread.

I am just amazed that it took this long for the tinfoil brigade (2nd Reynolds division) to show up given OP's state of mind and "investment" proclivities.

+1 I had never heard that term before but I think I know what you are talking about. Is it sort of glass half empty taken to an exponential extreme?

 

[brewer12345]

+1 I had never heard that term before but I think I know what you are talking about. Is it sort of glass half empty taken to an exponential extreme?

I don't swing that way, so I find it hard to get into the tinfoil state of mind. Soem of them seem to have mixed up far-whatever politics with a poor grasp pf macroeconomics/ow the real world works. Some of them seem to have been irreparably scarred by the whole world going pear-shaped in the last 5 years. Others just some a little "tetched in the head" to me, but what do I know?

 

[FinanceDude]

IMO, you are setting your limits too narrowly.

IMO the US is cooked, unless we show political judgment and will way beyond what has been possible for at least 50 years. When something is failing, you don't have to visualize what the replacement might be. One tends to be found. Many people around the world will celebrate this fall, at least until whatever comes next is found to be be a bit less yielding.

Ha

+1. I think another poster has a sig on here that goes something like: "The USA always does the right thing, after all the other solutions or exhausted", or something like that.........

 

[DevonMiles19]

TinFoil

It all depends on somebody's definition of tinfoil.

Ok, the guy living in a dug-in-hole in some mountain, stocked up on bullets and armageddon literature, correlating every little world event to armageddon I would label as tinfoil.

But in 2005, 2006, or 2007, if people were taking to the airwaves saying 'your Financial System is gonna collapse and your banks are about to be Socialized'....I wonder, would we have listened? OR would we have been upset that someone is offering unorthodox words that aren't as fun as watching these yum-yums on CNBC talk about "secular bull rally" and "intrinsic value" and "strong buy" "conviction buy" "table pounding revolution" where all the Real Players make trillions, and the idiot investor class is reduced to shreds where the next say Mr and Mrs Jones get on their favorite blog and congratulate each other saying "good, I needed the tax loss".

I think the USA is in for an adjustment, for sure. I think the next 100 years will be crappier than the previous 100 for sure. Poverty will be very visible in thought-to-be affluent suburbs. Family dysfunction will increase entitlement demand and decrease pool of skilled workers. Balkanization amongst our citizens will be more visible, in a pseudo 3rd world way. Forced and coaxed euthenasia for people will be the norm. BUT I think we'll be okay for the following reasons:

1.)We're so ahead of our best competitors.

2.)We've yet to unlock our domestic energy arsenal. Cheaper energy will counter inflation elsewhere, and will beckon manufacturing to return to America somewhat.

3.)Our competitors have HUGE problems, starting with demographics whereas we will have a healthy birth-rate and on our worst day, zillions of people still wish to emigrate here. (Of course, we'll keep out the skilled and the educated ones and let them go to New Zealand but at least our population isn't in decline) Russia, China, India, Brazil, Europe all have their gifts, but they have such self-made restraints and problems holding them back for generations to come.

Either way I wish the powers that be would just get it over with. I'd like to know, systemically where things stand.

 

[brewer12345]

It all depends on somebody's definition of tinfoil.

Ok, the guy living in a dug-in-hole in some mountain, stocked up on bullets and armageddon literature, correlating every little world event to armageddon I would label as tinfoil.

But in 2005, 2006, or 2007, if people were taking to the airwaves saying 'your Financial System is gonna collapse and your banks are about to be Socialized'....I wonder, would we have listened? OR would we have been upset that someone is offering unorthodox words that aren't as fun as watching these yum-yums on CNBC talk about "secular bull rally" and "intrinsic value" and "strong buy" "conviction buy" "table pounding revolution" where all the Real Players make trillions, and the idiot investor class is reduced to shreds where the next say Mr and Mrs Jones get on their favorite blog and congratulate each other saying "good, I needed the tax loss".

I think the USA is in for an adjustment, for sure. I think the next 100 years will be crappier than the previous 100 for sure. Poverty will be very visible in thought-to-be affluent suburbs. Family dysfunction will increase entitlement demand and decrease pool of skilled workers. Balkanization amongst our citizens will be more visible, in a pseudo 3rd world way. Forced and coaxed euthenasia for people will be the norm. BUT I think we'll be okay for the following reasons:

1.)We're so ahead of our best competitors.

2.)We've yet to unlock our domestic energy arsenal. Cheaper energy will counter inflation elsewhere, and will beckon manufacturing to return to America somewhat.

3.)Our competitors have HUGE problems, starting with demographics whereas we will have a healthy birth-rate and on our worst day, zillions of people still wish to emigrate here. (Of course, we'll keep out the skilled and the educated ones and let them go to New Zealand but at least our population isn't in decline) Russia, China, India, Brazil, Europe all have their gifts, but they have such self-made restraints and problems holding them back for generations to come.

Either way I wish the powers that be would just get it over with. I'd like to know, systemically where things stand.

Um, WTF? I cannot even guess at what you are hinting at.

I think we all learned some important lessons in risk management through the unfortunate events of the last several years. I know I did. I am a much better risk manager now than I was then. But I also recognize that it is easy to take this too far and hurt yourself badly. Look at all the people who sold into the plunge and have remained largely on the sidelines as the economy and the equity market recovered: they have done themselves permanent major damage they are unlikely to ever recover from. Look at the poor sods who cling to a crappy, underemploying job because they are terrified to jump: same thing. In the meantime, I see a greatly deleveraged US consumer, a declining US deficit and % of GDP spent on gubmint, Europe exiting recession, China making a transition it badly needs, and so on. I see lots of reasons for optimism, although I will for sure continue to manage risk as best I am able.

It might interest you to know that despite my optimism I keep a large wad of FDIC insured instruments around, have lines of credit set up and untapped, keep a cache of potable water/MREs/shotshell/whatnot around the house, and know what direction I would haul ass in if the commode hits the windmill. I do all this because it costs very little and because it ameiorates some nasty (but unlikely) tail events, I sleep etter at night and feel like I can afford to take more judicious risks. I also don't spend time dwelling on downside scenarios.

 

[DevonMiles19]

Wasn't hinting anything.

Just stating my reasons as to why, despite the problems, I think the USA will be okay in the end.

 

[DevonMiles19]

Um, WTF? I cannot even guess at what you are hinting at.

I think we all learned some important lessons in risk management through the unfortunate events of the last several years. I know I did. I am a much better risk manager now than I was then. But I also recognize that it is easy to take this too far and hurt yourself badly. Look at all the people who sold into the plunge and have remained largely on the sidelines as the economy and the equity market recovered: they have done themselves permanent major damage they are unlikely to ever recover from. Look at the poor sods who cling to a crappy, underemploying job because they are terrified to jump: same thing. In the meantime, I see a greatly deleveraged US consumer, a declining US deficit and % of GDP spent on gubmint, Europe exiting recession, China making a transition it badly needs, and so on. I see lots of reasons for optimism, although I will for sure continue to manage risk as best I am able.

It might interest you to know that despite my optimism I keep a large wad of FDIC insured instruments around, have lines of credit set up and untapped, keep a cache of potable water/MREs/shotshell/whatnot around the house, and know what direction I would haul ass in if the commode hits the windmill. I do all this because it costs very little and because it ameiorates some nasty (but unlikely) tail events, I sleep etter at night and feel like I can afford to take more judicious risks. I also don't spend time dwelling on downside scenarios.

I know what you mean. I was one of the morons who sold stock during the stock-plunge and today I grimace at how much better off I'd be if I had jsut held on, and even bought more.

I'm glad to hear you are optimistic about Europe. Long term, so am I but short term, I wonder how much they can recover with their stubbornly high jobless numbers.

FWIW your emergency stuff is better than mine. I have a month of bottled water and Bush's Baked Beans and some hershey bars. One more thing I gotta do better at.

 

[haha]

I don't swing that way, so I find it hard to get into the tinfoil state of mind. Soem of them seem to have mixed up far-whatever politics with a poor grasp pf macroeconomics/ow the real world works. Some of them seem to have been irreparably scarred by the whole world going pear-shaped in the last 5 years. Others just some a little "tetched in the head" to me, but what do I know?

Well, since I just posted a negative longer term outlook for the US, I assume I am included in this grouping of yours.

I think it is just a handy way to shut up less forward people, and not particularly helpful. I may be right or wrong in the fullness of time, but I do not fit any of the negative descriptors you have used, not do I wear a tinfoil hat. My opinion is about the economic and to a smaller extent geopolitical position of the US in the longer term. I am not making a stock market guess. I would say that something is certainly making the current "recovery" extremely weak. You may have other theories, but mine is that some very deep long term conditions have changed, likely most prominent are the cost of oil and globalization.

I think trading stocks is quite separate from long term economics, though one does have to keep an eye out. Today, everyone is a speculator, and most are not very well suited to this role.

I think it may be a long time before we get a solid decade of 3.xx compounded real GDP growth.

Ha

 

[Meadbh]

I know what you mean. I was one of the morons who sold stock during the stock-plunge and today I grimace at how much better off I'd be if I had jsut held on, and even bought more.

So you panicked, eh? That doesn't surprise me, given your current panic about your health. The same advice is relevant for both situations. Get the data, evaluate them rationally, don't make it worse, and hang in there. In most cases, this too shall pass.

BTW I am a doctor (not a nephrologist) and I bought equities in 2008.

 

[DevonMiles19]

1.)An economic meltdown not seen in a generation or 2.


2.)A possible death sentence.

Yep, I plead guilty to panicking in both situations and I fully agree that getting all the facts before acting is the way to go. Luckily during the meltdown I was not a big investor as I didn't trust or understand the stock markets. Also my primary source of income was a small business that required cash to operate because competitors of mine were losing credit lines. So I did panic, sell "stocks" in companies I really have no true idea about, and protected the mothership. Luckily I didn't have to lay off one employee or outsource anything.

On #2 I am working on getting the true picture, believe me. But I cant help but start to think and prepare for the worst.

 

[brewer12345]

Well, since I just posted a negative longer term outlook for the US, I assume I am included in this grouping of yours.

I think it is just a handy way to shut up less forward people, and not particularly helpful. I may be right or wrong in the fullness of time, but I do not fit any of the negative descriptors you have used, not do I wear a tinfoil hat. My opinion is about the economic and to a smaller extent geopolitical position of the US in the longer term. I am not making a stock market guess. I would say that something is certainly making the current "recovery" extremely weak. You may have other theories, but mine is that some very deep long term conditions have changed, likely most prominent are the cost of oil and globalization.

I think trading stocks is quite separate from long term economics, though one does have to keep an eye out. Today, everyone is a speculator, and most are not very well suited to this role.

I think it may be a long time before we get a solid decade of 3.xx compounded real GDP growth.

Ha

I would not put you in the tinfoil category, Ha. You have reasoned, well thought out arguments for your views- the true tinfoilers never do. You actually reference data, know something about macroeconomics, and will discuss this stuff in a rational manner. None of that is tinfoil.

I will admit that I do not entirely know why the recovery has been relatively weak and it doesn't give me a lot of warm fuzzies. I suspect that it stems from some deep damage being done, the cumulative effect of demographic changes, the consumer (and now the gubmint) needing to deleverage, and the more interconnected nature of the global economy (hard for the US to grow like crazy when Europe is in recession and the BRICs are decelerating). Realistically, we will never really know the reasons and we will know what comes next only by living through it.

More to the point, what has been the impact of your views on your investment portfolio?

 

[FinanceDude]

I think we all learned some important lessons in risk management through the unfortunate events of the last several years. I know I did. I am a much better risk manager now than I was then. But I also recognize that it is easy to take this too far and hurt yourself badly. Look at all the people who sold into the plunge and have remained largely on the sidelines as the economy and the equity market recovered: they have done themselves permanent major damage they are unlikely to ever recover from. Look at the poor sods who cling to a crappy, underemploying job because they are terrified to jump: same thing. In the meantime, I see a greatly deleveraged US consumer, a declining US deficit and % of GDP spent on gubmint, Europe exiting recession, China making a transition it badly needs, and so on. I see lots of reasons for optimism, although I will for sure continue to manage risk as best I am able.

How about national debt now at $17 trillion and counting? Is that a meaningless number??

I guess I don't see all the rosy economic news that is out there...........

 

[FinanceDude]

Well, since I just posted a negative longer term outlook for the US, I assume I am included in this grouping of yours.

I think it is just a handy way to shut up less forward people, and not particularly helpful. I may be right or wrong in the fullness of time, but I do not fit any of the negative descriptors you have used, not do I wear a tinfoil hat. My opinion is about the economic and to a smaller extent geopolitical position of the US in the longer term. I am not making a stock market guess. I would say that something is certainly making the current "recovery" extremely weak. You may have other theories, but mine is that some very deep long term conditions have changed, likely most prominent are the cost of oil and globalization.

I think trading stocks is quite separate from long term economics, though one does have to keep an eye out. Today, everyone is a speculator, and most are not very well suited to this role.

I think it may be a long time before we get a solid decade of 3.xx compounded real GDP growth.
Ha

We don't always agree, but your analysis is spot on. When the printing presses at the Fed break, we'll see how this "great recovery" ends up..........

 

[HFWR]

I've gotten somewhat better at "risk management" myself, though I haven't really shot for the moon since the dotbomb years...

As for why the economy is tepid, the blame falls pretty squarely on the ijits in DC (of all stripes), but we're growing in the low-to-mid twos despite all that nonsense. As Brewer noted, corporate and consumer leverage is down, and balance sheets are better, corporations are rolling in cash, Europe is s-l-o-w-l-y recovering, and China and India are trying to turn their peoples into a couple of billion good little consumers.

Lots of headwinds, and boogeymen behind every bush, but, in the US specifically, we are growing while other countries are demographically stagnant. We attract the most talented to our universities, and many stay because of our freedoms, our talent and capital pool, and our entrepreneurial opportunities, not really available in much of the rest of the world.

So, I wear both rose-colored glasses AND a tinfoil hat, just in case...

 

[FinanceDude]

As for why the economy is tepid, the blame falls pretty squarely on the ijits in DC (of all stripes), but we're growing in the low-to-mid twos despite all that nonsense. As Brewer noted, corporate and consumer leverage is down, and balance sheets are better, corporations are rolling in cash, Europe is s-l-o-w-l-y recovering, and China and India are trying to turn their peoples into a couple of billion good little consumers.

Big companies are hoarding money to be sure, and are using it to buy back stock and the like. However, I am not seeing a rush of NEW caital investment projects from the big companies. The regulatory environment is viewed as quite ominous by many corporations.......they seem to be taking a 'wait and see" approach........

 

[brewer12345]

Big companies are hoarding money to be sure, and are using it to buy back stock and the like. However, I am not seeing a rush of NEW caital investment projects from the big companies. The regulatory environment is viewed as quite ominous by many corporations.......they seem to be taking a 'wait and see" approach........

Large corporations are, in general, run by people who try to maximize return on capital. If the returns they believe are available are not greater than the cost of equity capital, they will buy back stock. Either that means that the returns available are not high, or the equity market is undervalued, or both.

 

[HFWR]

Big companies are hoarding money to be sure, and are using it to buy back stock and the like.

And, certainly, if they can't or won't utilize all that cash, they should buy back stock or institute/raise a/the dividend, so that shareholders who can/will utilize it can do so.

 

[haha]

More to the point, what has been the impact of your views on your investment portfolio?

Not a huge amount, for reasons that I have already mentioned. But coming out of the 2009 bottom I was 90%+ in stocks, and now I am ~60%.

I really do not like how things look to me, but I like even less to try to make a public case for my view.

I think everyone should do whatever they wish, for whatever their reasons might be. Once you have set limits on what you think may be going on, the rest is rhetorical skill. Knowing where to set the limits is the important thing.

Ha

 

[brewer12345]

Not a huge amount, for reasons that I have already mentioned. But coming out of the 2009 bottom I was 90%+ in stocks, and now I am ~60%.

I really do not like how things look to me, but I like even less to try to make a public case for my view.

I think everyone should do whatever they wish, for whatever their reasons might be. Once you have set limits on what you think may be going on, the rest is rhetorical skill. Knowing where to set the limits is the important thing.

Ha

Spoken like a veteran of many pointless internet [-]shouting matches[/-] discussions.

When you reduce equity exposure, do you just hold cash or do you put the money in something else?

Oddly enough, we have followed a similar path on equity allocation.

 

[Animorph]

It seemed fairly reasonable to me (in 2007) that if you are spending more than you make, both governmentally (deficits) and privately (we had an aggregate negative savings rate for a while, before the housing crisis), the economy is going to be somewhat overheated. Then you start winding down that spending, both government and private, and start paying off some of the debt (privately at least). Start paying down debt and now you're spending less than you could sustainably manage. The economy has to go from overheated to somewhat cool. It will stay that way as long as we are paying off debt. If that ever ends, or if we just give up on it, then spending can go back up to "normal" and the economy will pick up a bit again. We might be there with private debt, but government debt still has a way to go. And there or not, we're all comparing current conditions to pre-2007 conditions, when everyone was spending like crazy. "Normal" should be somewhere in the middle, which isn't going to look much like a recovery until we've been there for a while. This was not a normal business cycle recovery and will take plenty of time to work out.