Fed Policy Change

[Dash man]

My main concern, having more to do with past FRB policy, as well as fiscal policy, is that "we" have pumped up the economy by running huge deficits and using "inaccurate" monetary policy, so actually allowing the economy to find an equilibrium free from fiscal and monetary shenanigans will be difficult, assuming anyone actually tries. We've painted ourselves into a corner...

Yes, the global governments don't have a very good history of manipulating economies with long term success. The post WWI policies led to depression, currency wars and eventually WWII. The Great Society led to more currency wars and high inflation. Who knows what the latest spending sprees, interest rate repression and money printing will result in? It's not going to be pretty.

 

[HFWR]

It's not going to be pretty.

Likely not, but we may very well muddle through, which is a long way from "ideal".

A sustained glide path that gradually lowers the deficits, then the debt, is what I would suggest, not that anyone listens to me. But we are not good at long-term planning, when there's an election around every corner...

 

[brewer12345]

I should probably go some Alcoa stock after reading this thread.

It always perplexes me why people get worked up about this sort of thing. If it is going to happen, you cannot change it and more than you can alter the tax code or repeal the laws of gravity. A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc. But I am not planning on piling into physical gold, tinfoil, shotgun shells, or MREs with 90% of my portfolio. I don't feel the need to own a survivalist compound. And so on. And I don't spend a lot of time worrying about this nonsense.

 

[Dash man]

I should probably go some Alcoa stock after reading this thread.

It always perplexes me why people get worked up about this sort of thing. If it is going to happen, you cannot change it and more than you can alter the tax code or repeal the laws of gravity. A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc. But I am not planning on piling into physical gold, tinfoil, shotgun shells, or MREs with 90% of my portfolio. I don't feel the need to own a survivalist compound. And so on. And I don't spend a lot of time worrying about this nonsense.

I'm not sure where you get the survivalist perspective. You must be reading a lot more into this thread than the rest of us.
My concerns come from our government's inability to learn from history or to understand the future unintended consequences of its actions. If you study the global policies and actions that led to the Great Depression, as well as those leading to the inflation of the 70s and early 80s, you will see there is trouble ahead. If you look into the structural changes in the economy that have occurred since the 2008 crisis, we are likely headed to a much more serious financial crisis within the next decade. The preparedness is to hold stocks in companies producing needed goods and services, and companies that will have pricing power to increase prices. Avoid companies reliant on discretionary spending. Owning hard assets is a good hedge. Bonds or any debt may be a bad investment if things get to the point of large defaults or even just large interest rate hikes. Cash is king during a deflationary period, but be ready to invest when inflation kicks in.
Or you can be complacent and think nothing will happen except the good times rolling on forever...like they thought in 1929.

 

[brewer12345]

I'm not sure where you get the survivalist perspective. You must be reading a lot more into this thread than the rest of us.
My concerns come from our government's inability to learn from history or to understand the future unintended consequences of its actions. If you study the global policies and actions that led to the Great Depression, as well as those leading to the inflation of the 70s and early 80s, you will see there is trouble ahead. If you look into the structural changes in the economy that have occurred since the 2008 crisis, we are likely headed to a much more serious financial crisis within the next decade. The preparedness is to hold stocks in companies producing needed goods and services, and companies that will have pricing power to increase prices. Avoid companies reliant on discretionary spending. Owning hard assets is a good hedge. Bonds or any debt may be a bad investment if things get to the point of large defaults or even just large interest rate hikes. Cash is king during a deflationary period, but be ready to invest when inflation kicks in.
Or you can be complacent and think nothing will happen except the good times rolling on forever...like they thought in 1929.

Um, ok. That seems like a lot of hand wringing about a grocery list of stuff you have no control over. How is that working out for you?

 

[Dash man]

Um, ok. That seems like a lot of hand wringing about a grocery list of stuff you have no control over. How is that working out for you?

So you don't have control over how your investments are allocated? How's that working out for you?
I thought this was a forum to share ideas. Why the attitude? There are more and more people who are realizing this economy is headed for a world of hurt. When or how bad no one knows. But one thing I'm sure of is it won't always be a bull market. If you don't want to listen to any thoughts other than those that agree with yours, that's your option. But there's no reason to put down other ideas with your uneducated perspective of "you have no control over."

 

[HFWR]

So you don't have control over how your investments are allocated?

I believe that was exactly the point: we DO control our asset allocations, our expenses, and, to a lesser extent, our incomes. We have less/no control over macroeconomic events, etc.

 

[brewer12345]

So you don't have control over how your investments are allocated? How's that working out for you?
I thought this was a forum to share ideas. Why the attitude? There are more and more people who are realizing this economy is headed for a world of hurt. When or how bad no one knows. But one thing I'm sure of is it won't always be a bull market. If you don't want to listen to any thoughts other than those that agree with yours, that's your option. But there's no reason to put down other ideas with your uneducated perspective of "you have no control over."

Thank you, but I am plenty educated. Perhaps overeducated, in fact.

Of course I have control over my investments. Did you see all the things I listed that I do to hedge against unpleasant outcomes? But that is about all I can do. The Fed Chairman, President, head of the IMF, Mr. Putin, the Elders of Zion, etc. unaccountably do not take my calls.

In the meantime, I would guess that we get a parade of the tinfoil brigade here roughly weekly. They always have some pet dire scenario and they always get upset when I either poke fun at them or point out that we are along for the ride no matte what we do or believe. After 11(?) years on this forum, you will excuse me if I get a little tired of the same old fearmongering every week.

I know how to hunt, fish, camp, hike, brew beer, bake bread, grind flour, forage, etc. I live a generally low cost llifestyle in a part of the country that is not disaster prone. I heat my home a lot with free firewood in the winter. I have a stash of shelf stable food, shotshells, aluminum foil, TP, etc. There is little or nothing else I can do to insulate myself from the lumps and bumps that may emerge. In the meantime, I would rather spend my time enjoying life and spending time with my family. I worked hard to get to this point, and I intend to enjoy the hell out of it.

 

[MichaelB]

I have no idea what the future holds for us but I think it is a mistake to underestimate policy makers and especially the Fed. Some pretty smart people working on this stuff. My look at history shows lots of growth with periodic disruptions and there's no reason that should change.

A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc.

Pretty good advice IMHO.

 

[Dash man]

I have no idea what the future holds for us but I think it is a mistake to underestimate policy makers and especially the Fed. Some pretty smart people working on this stuff. My look at history shows lots of growth with periodic disruptions and there's no reason that should change.



Pretty good advice IMHO.

The smart people you refer to have made many mistakes that have led to the various financial crises in our history. One major issue is they tend to look more at past data rather than future indicators. Historically it has not been a smooth ride, though I will concede that growth over the long term has been robust. But as retirees, we don't necessarily have the time we used to in able to recover. Should another crisis occur, many in our situation will find ourselves unprepared by relying on the "model" asset allocations of large bond holdings and index funds that contain stocks of all industries, including highly leveraged companies. The periodic disruptions we've seen in our history have had severe effects on many individuals, which often gets lost as time moves on. There is a complacent attitude here and just because the so-called doomsayers haven't been right yet, doesn't mean there is no trouble on the horizon.
Why shouldn't people be able to discuss alternative thoughts and strategies without being put down by others? Seems to me people are just denying anything could ever go wrong, and to me that is unrealistic.

 

[CaliforniaMan]

I'm not sure where you get the survivalist perspective. You must be reading a lot more into this thread than the rest of us.
My concerns come from our government's inability to learn from history or to understand the future unintended consequences of its actions. If you study the global policies and actions that led to the Great Depression, as well as those leading to the inflation of the 70s and early 80s, you will see there is trouble ahead. If you look into the structural changes in the economy that have occurred since the 2008 crisis, we are likely headed to a much more serious financial crisis within the next decade. The preparedness is to hold stocks in companies producing needed goods and services, and companies that will have pricing power to increase prices. Avoid companies reliant on discretionary spending. Owning hard assets is a good hedge. Bonds or any debt may be a bad investment if things get to the point of large defaults or even just large interest rate hikes. Cash is king during a deflationary period, but be ready to invest when inflation kicks in.
Or you can be complacent and think nothing will happen except the good times rolling on forever...like they thought in 1929.

Seems to me there has been a lot of learning since the great depression. The rise of protectionism, FED decreasing the money supply, countries returning to the gold standard, allowing bank failures were all avoided during the 2008 recession due to government actions. It was painful to say the least, and there was much resistance but it was the opposite of the 20s and first few years of the 30s.

As for the structural changes, one could equally make the argument that we are setting the stage for rousing growth.

But in the end we just don't know. I have to agree with Brewer. Learn from history, set up your AA to weather reasonable storms, and then enjoy life. No use in continually worrying about what we cannot change.

 

[audreyh1]

So you don't have control over how your investments are allocated? How's that working out for you?
I thought this was a forum to share ideas. Why the attitude? There are more and more people who are realizing this economy is headed for a world of hurt. When or how bad no one knows. But one thing I'm sure of is it won't always be a bull market. If you don't want to listen to any thoughts other than those that agree with yours, that's your option. But there's no reason to put down other ideas with your uneducated perspective of "you have no control over."

LOL - I think you might be a little off base regarding who is educated or not.

Survivalist perspective is coming across loud and clear to me in this thread. A strong message of "we are doomed". That's pretty hard to work with from an investment perspective. And of course we all are doomed......eventually.

 

[MichaelB]

Why shouldn't people be able to discuss alternative thoughts and strategies without being put down by others? Seems to me people are just denying anything could ever go wrong, and to me that is unrealistic.

No one is stopping you or anyone else from sharing your opinion or suggesting strategies.

 

[brewer12345]

LOL - I think you might be a little off base regarding who is educated or not.

Survivalist perspective is coming across loud and clear to me in this thread. A strong message of "we are doomed". That's pretty hard to work with from an investment perspective. And of course we all are doomed......eventually.

The funny thing is that my lifestyle is probably the closest to survivalist/prepper of anyone on this thread and I am the one saying to get on with life.

 

[audreyh1]

The funny thing is that my lifestyle is probably the closest to survivalist/prepper of anyone on this thread and I am the one saying to get on with life.

And I'm glad to hear you say it too!

 

[Dash man]

Seems to me there has been a lot of learning since the great depression. The rise of protectionism, FED decreasing the money supply, countries returning to the gold standard, allowing bank failures were all avoided during the 2008 recession due to government actions. It was painful to say the least, and there was much resistance but it was the opposite of the 20s and first few years of the 30s.

As for the structural changes, one could equally make the argument that we are setting the stage for rousing growth.

But in the end we just don't know. I have to agree with Brewer. Learn from history, set up your AA to weather reasonable storms, and then enjoy life. No use in continually worrying about what we cannot change.

The FED decreasing the money supply was a mistake that was one of the contributing factors to the Great Depression, however in 2008-9 they didn't know when to stop. It has continued and has gone too far and will be very difficult to navigate out of without triggering deflation followed by hyperinflation. The gold standard prior to WWI worked remarkably well for abut 70 years. After WWI some countries tried to go back to the pre-war price of gold, while others wanted to reset the gold price to a new level and didn't follow agreed upon rules, worsening the financial crisis.
Banks in 2008 should have been able to fail, because bankruptcy would have created a longer term healthier economy and healthier banks with clean balance sheets. Instead all that debt was just moved from the banks to the government and hasn't gone away. Consumer deposits were already protected in 2008 by the FDIC, and Roosevelt pretty much did just that to save confidence in banks in 1933, followed by the actual creation of the FDIC. The way the banks are set up now being much more highly leveraged had set them up for the crisis, and things haven't changed much. Regulation hasn't really fixed the problem, just burdened all banks.
The structural changes of bailing out banks, auto companies and such, with the taxpayer taking on the debt, and all the entitlement debt looming in the future, is not a recipe for rousing growth. That is evident by the sluggish economy we're in now.

 

[Dash man]

LOL - I think you might be a little off base regarding who is educated or not.

Survivalist perspective is coming across loud and clear to me in this thread. A strong message of "we are doomed". That's pretty hard to work with from an investment perspective. And of course we all are doomed......eventually.

I guess when a discussion on economics turns to assumptions of being a survivalist rather than providing real substance about the economic discussion, one has to wonder...

 

[HFWR]

There are many who think we should have let the banks fail. While I have some empathy for that POV, I think so many dominoes would have fallen that the repercussions would have been far beyond what most can imagine...

As for me, I got a call from Quicken loans a few weeks ago, trying to get me to cash out some equity on my home at "historically low rates". I refi-ed about 1.5 years ago to a 3.75%, 30-yr fixed. Told them I wasn't interested in cashing out, and already had a lower rate than they were offering.

Hopefully, others have taken this same opportunity to de-leverage.

 

[brewer12345]

I guess when a discussion on economics turns to assumptions of being a survivalist rather than providing real substance about the economic discussion, one has to wonder...

You really have to wonder why extremist views being expressed are being met with disbelief/mockery/suggestions of survivalism? Uh, OK.

And now for something completely different:

 

[springnr]

Time to tie some trout flies
LOL, who said 12345 wasn't gettin' any?

 

[M Paquette]

It can be hard to discuss economics with some folks.

"Das ist nicht nur nicht richtig, es ist nicht einmal falsch!"
-- Wolfgang Pauli

So it goes, so it goes...

 

[Gumby]

Thanks to all for an interesting discussion.

Porky Pig Cartoon Ending "That's All Folks!" - YouTube