Uncertain Future

[oldtrig]

Good timing, how did you do during the previous 23 years?

I am still here. I just never invested in stocks. I have quite a few friends who have and many are sad now. One real good friend lost $200,000 in the market and I dare not mention the stock market to him. I know, many people have got rich investing in stocks. Timing is everything and I kind of seem what was coming in the middle of 2007. Kind of like telling if you have a full house of two pair when playing poker. I call it gut feeling.

I know I am not the smartest person when it comes to investing money but I do consider myself a good money manager. In 1990 I bought $100,000 worth of US treasuries that came due in 1997. I had the checks sent to me. I took those checks and sent my Son to college (Auburn University) and never once touched my $100,000. I guess you can say the government sent my Son to college. I wish those rates were available today.

The CD's are not all the net worth I have. I also own real-estate and a little gold, some guns and lots of ammo. I just try to stay healthy and if I had to look at a stock ticker everyday my blood pressure would rise

oldtrig

 

[73ss454]

I have heard that statement for 25 years yet I am still in pretty good shape. I invested $300,000.00 in 2007 yielding 5% for 5 years. I split these up in mine and DW names. When they mature in 2012 I will be 65 and start SS. I have never invested anything in the market other than my state retirement and I have no say on that.

If you are living off your State retirement and not taking 4% of your own money then it doesn't matter. If you had to roll those CD's over at this point you wouldn't be covering inflation with the rates available. Your life, your money, do what ever floats your boat.

 

[kumquat]

In 1990 I bought $100,000 worth of US treasuries that came due in 1997. I had the checks sent to me. I took those checks and sent my Son to college (Auburn University) and never once touched my $100,000.

Did that turn into 300K in 2007? Sounds like you spent the interest? Where was the money from 1997 until 2007?

I invested $300,000.00 in 2007 yielding 5% for 5 years.

Where did that money come from? Is there more to this story?

 

[oldtrig]

What, am I on the witness stand ?/ Did that turn into 300K in 2007. NO

I only made a statement about Cd's and it looks as some here take offense in that.
And for your information the money was earned . I did not know I had to tell where I got it. Gezzzzz
I never said I was living off State retirement. Go back and read again. For your information I still work. I have since 1964 but I plan on retiring in 2012.
Sure I spent the interest on the $100,000. I paid for 4 years of college with the interest. I would think that was a good way but maybe some here think that was dumb. I guess I should have borrowed the money.
oldtrig

 

[harley]

What, am I on the witness stand ?/
I only made a statement about Cd's and it looks as some here take offense in that.
And for your information the money was earned . I did not know I had to tell where I got it. Gezzzzz
I never said I was living off State retirement. Go back and read again. For your information I still work. I have since 1964 but I plan on retiring in 2012.
Sure I spent the interest on the $100,000. I paid for 4 years of college with the interest. I would think that was a good way but maybe some here think that was dumb. I guess I should have borrowed the money.
oldtrig

I'm not sure about others, but I interpreted the questions as curiosity as to how you were retired without being in the market at all. I certainly was curious about it. Obviously from this post there's a lot more going on (like not being retired ) so your situation doesn't apply to mine. I personally would love to find a way to be retired, not in the market at all, able to live on a 4% SWR, preferrably without having to be a [-]slumlord[/-] landlord in the process. Oh well, my search for safety continues.

 

[Zathras]

oldtrig, I think you misunderstand.
People want to know how the investment plan you used works.
That is why you have questions about the fund and if they were coming from the capital/interest gains or, as is the case as you stated, additional inflow of money from working.
If you have a large enough stockpile, CD ladders work great. Bonds can work great too IF they are paying out an interest rate high enough above inflation.
Again, I think both of these play roles in a good diversified portfolio. As do stocks

 

[kumquat]

What, am I on the witness stand ?/ Did that turn into 300K in 2007. NO

You're not on the stand and IANAL (love to use that phrase).

You suggested that for 25 years you'd stayed out of the market and put 300K into CD's in 2007. When I asked about the previous 23 years, you mentioned $100k in 1990 and spending the interest. I saw this as suggesting you put $100K into CDs in 1990, spent the interest and had $300K to put into CDs in 2007.

OK, me wrong. I thought it was an answer to the question I asked. Silly me.

 

[73ss454]

oldtrig, report back once you retire and are living off 4% SWR of your CD's. Your going to need a lot of them. (heh) Many of the folks on this forum are living off of there assets with no pensions or SS.

 

[Hamlet]

If you are expecting those outcomes, I don't think cash is where you want to be. Your cash will be losing value as inflation eats it away. Yes, you will probably be able to then get higher interest rates later, but not before inflation has eaten away a good chunk of your earnings power.

My advice for that environment--

Buy Coke. Inflation won't damage Coke's business. They will just raise prices to match.

Likewise, I suspect that McDonald's, Walmart, General Mills, and Proctor and Gamble will be able to raise prices to match inflation. If they can't, then we almost can't have meaningful inflation, since the stuff we need to buy isn't going up in price.

Many of these companies are also strongly international. That will help with the falling dollar.

I think your outcome is widely expected by the investing population.

That is why stocks have been going up.

Buying dips in the market seems like gambling and doesn't appeal to me--I prefer to stay out of the stock market altogether.

There's never been a time when the future was certain, but when you're facing retirement certain assumptions have to be made. The future certainly seems more uncertain now than it has in the past when it was clear the bull market was unsustainable ("if something can't go up forever, it won't.")

So I'm assuming the following will happen:

1. Higher inflation
2. Higher taxes
3. Higher interest rates

I'd be interested if anyone shares my view that keeping cash for the next couple years might be a good strategy. I've done well in gold and am willing to cash in, wait, and then buy government bonds at some point in the future. I don't have a good feeling about the typical asset allocation model which requires that one put money in stock index funds and bonds... at least right now.

Thanks

 

[Culture]

Samclem, it was much easier to foresee economic trends than to buy and sell specific stocks. I don't follow the stock market, but I do follow macroeconomic trends.

I am going to have to go with ultimo here. Marco-economic trends are sometimes discernible. While I certainly did not call it on the nose, the dot-com tech bubble, REIT bubble and housing bubble were clear as a bell to me in advance. What I missed on both the dot-com and housing bubbles was how much they would affect the broader market. I sold 50% of my REIT holding about two month prior to the peak. Market timing? I call it tilting my allocation. After all, I kept 50%.

 

[semtex]

sigh, first time, i have 30% cash. Same time, i am looking at some Gold junior. Gold price is telling us something very ugly may happen. Maybe US, more possible JP.

 

[Zathras]

How do you interpret what the gold price is 'telling you' though?
Is it telling you that it is going to crash soon as it is at a decade long high (or multi year, or something of that sort)?
Or is it telling you that you should buy a bunch of it because it is still only at half of what it went for in the 70's (inflation adjusted)?
And no matter what it does, there will be people (I am NOT suggesting you are one of those) that will use whatever gold does to say "It was sooooo obvious"

 

[NW-Bound]

I am one who believes in equities, but take no offense at people who tout the safety of CD, or Treasuries. Some people simply cannot stomach the risks and fluctuations of the market.

The truth of the matter is that although we all try to practice "buy low/sell high" by rebalancing, we all have different trigger points, different strategies, different allocations of various sectors. Our investment returns vary quite a bit, though we strive to practice the same principle. There never was any guarantee, was there?

Some people want some certainty and stability in life. Heck, many of us hang on to jobs that we hate, in order to get that 401k match or that pension. Very few took the step to try to strike out on their own, like I did (and I have financial scars to show for it ).

So, if someone is satisfied with a safer investment in order to preserve his principal, it is his choice to do so. I have some relatives like that. I leave them alone.

 

[oldtrig]

oldtrig, report back once you retire and are living off 4% SWR of your CD's. Your going to need a lot of them. (heh) Many of the folks on this forum are living off of there assets with no pensions or SS.

That may be a long time from now.
When I do decide to retire I have this
SS
State Retirement
CD's
Rent from commercial property
Rent from other property
Work part time if able
As I said, I have never been and never will be in the stock market and that has worked for me.
Buying stocks work for some people and I applaud them. It just is not my way.

 

[Gone4Good]

Gold price is telling us something very ugly may happen.

The only thing gold is telling us is that people love to chase the latest, greatest, can't miss, investment of a lifetime.

 

[oldtrig]

All workers and retiree's might want to read this. The US could be in serious trouble (which I think we already are ) A real good read. Gold may just be something to buy.
The 'Real' Jobless Rate: 17.5% of Workers are Unemployed - Economy * US * News * Story - CNBC.com

 

[73ss454]

That's it, I'm staking out my spot under the local overpass this weekend.

 

[Zathras]

This isn't anything new.
The 'Real' jobless rate has always been higher than the reported rate.
The US has been in trouble for the better part of a decade.
Yet I don't think it is so bad that you should abondon diversification and buy a bunch of gold.

 

[jdw_fire]

How do you interpret what the gold price is 'telling you' though?
Is it telling you that it is going to crash soon as it is at a decade long high (or multi year, or something of that sort)?
Or is it telling you that you should buy a bunch of it because it is still only at half of what it went for in the 70's (inflation adjusted)?

well with nations back in a buying mode (after years of selling) it seems to be saying something about the worlds desire to hold US dollars (or maybe any fiat currancy) or dollar denominated loans.

The only thing gold is telling us is that people love to chase the latest, greatest, can't miss, investment of a lifetime.

o really, do u know actually know alot of people buying gold? i dont. so i dont think it is to the point of "the latest, greatest,..."

Yet I don't think it is so bad that you should abondon diversification and buy a bunch of gold.

you dont have to "abondon diversification" to "buy a bunch of gold", just adjust your asset allocation

 

[samclem]

you dont have to "abondon diversification" to "buy a bunch of gold", just adjust your asset allocation

You never know what some folks will do.

Originally posted by ultimo I've had a large percentage of my savings in gold and gold funds since 2001, and the rest in foreign currencies.

 

[traineeinvestor]

I have been listening to predictions of financial doomsday since I was a child in the 1970s.

Since then I have lived through:

- the 1987 sharemarket crash (the local market fell by more than 50% and ushered in a recesssion which lasted 5 years)

- the Asian crisis (which saw local property prices fall by more than 60% over a six year period)

- SARS (when people were making comparisons with the Spanish Influenza outbreak)

In other countries people could probably add the tech boom and bust.

My PC survived the millenium bug with no noticable effects.

I'm sure the world economy will continue to experience booms and busts in the future as it has since recorded history began. How long and how deep the current recession will go - I have no idea. Parts of the world are running unsustainable deficits, are heavily indebted and are likely to face rising taxes, rising inflation and falling currencies. A number of other countires are doing much better by many measures. While decoupling is probably not a reality, the degree of correlation between economies appears to be less strong than it once was.

The best protection through all of these economic cycles has been enough cash flow from employment and investments to meet my consumption needs, to meet my debt repayment obligations and to take advantage of attractively priced assets when they become available. So long as I am not forced to be a seller of assets in bad times, I will do ok.

During each of the bull and bear markets there has been a steady stream of predictions - both bullish and bearish. The more extreme to market movement the more extreme the predictions. These days I manage to ignore most of them. I particularly try to filter out predictions which are essentially statements that recent trends will continue or that we are experiencing a bubble.

I try to just focus on accumulating assets which produce cash flow - mostly property and equities which have the potential to grow over time. I keep a small proportion of assets in bonds and commodities - largely for the diversification benefit. (As an aside, I freely admit that not buying gold was a bad call - congratulations to those who got it right.)

I'm sure the value of my investments will fluctuate - both up and down. While nothing is certain except, death, taxes and volatility, I am more confident and sleep better with a portfolio of assets which is diversified and which generates cash flow than I would be if I had a large proportion of my money in an asset class that produced no cash flow and had limited practical uses.

 

[TargaDave]

Very well said JDW_Fire.

Here is an interesting commentary on hedge fund manager Paul Tudor Jones and his current outlook on gold as well as other asset classes. He is definitely not a traditional gold bug but has turned bullish on the metal even at current prices. Towards the bottom of the link is Jones' latest hedge fund letter and at the end of it is his outlook on gold. If nothing else an interesting macroeconomic viewpoint from someone managing an $11B fund.

Paul Tudor Jones Favors Gold & Curve Flatteners (Investor Letter) ~ market folly

 

[ultimo]

What gold is telling us is that there's no faith in dollar strength and that it's likely to go lower. People (and central banks) don't hedge like this without a reason.

By the way, for all those who've participated in this discussion (and thanks to all!), I did find the Societe Generale Report:

Societe Generale - How to Prepare Yourself for a Global Economic Collapse | The Economic Populist

 

[ultimo]

Yet I don't think it is so bad that you should abondon diversification and buy a bunch of gold.

What's funny is that for as long as I've owned gold it has never been a good time to buy gold, at least according to everyone else.

I bought it at 287-296 per ounce. This was back in the days of fiber optics and pets.com and all those things.

Was that a good time to abandon diversification? Isn't diversification for people who aren't willing or able to stake out a clear position on something? Isn't it for financial advisors who want to cover their backsides?

Today gold is at 1160+. Is it a good time to buy? How high can it go? Who can know? A lot of very smart investors are coming in right now and buying "a bunch of gold." Is the U.S. going to default on its debt? Is the dollar going to fall off the cliff? A lot of big money, including central banks around the world, are starting to think so.

To not buy gold you'd have to make a case that the dollar's going higher, and with Bernanke himself saying that interest rates will stay low, you've got a pretty iron-clad case for a low dollar.

Meanwhile countries like Australia are raising interest rates. So where do the investment dollars go? To Australia, for one. Currencies respond to supply and demand like everything else.

How long will this last? That's a tough question. The day Bernanke hints that rates will go up is the day I sell half my gold.

Is the U.S. like Japan during the "lost decade" (which was much longer than a decade?)? A lot of parallels being drawn. In which case you can project that the U.S. will lag other countries on interest rates and the dollar will depreciate further.

 

[REWahoo]

A lot of very smart investors are coming in right now and buying "a bunch of gold."

Only time will tell if those who are buying gold at these prices are "very smart investors". They very well may be - but there is no way anyone can know until the 'uncertain future' becomes the 'it was obvious' past.