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ultimo 11-21-2009 09:06 PM

Uncertain Future
 
There are so many uncertainties with regard to the future that it's difficult to know how to plan.

Even the worst case scenario in FIRECalc may not be bad enough to reflect what the future may hold.

U.S. dollar index is at new lows and heading lower. Interest rates held artificially low into the foreseeable future. Inflation and higher taxes almost certain.

I've had a large percentage of my savings in gold and gold funds since 2001, and the rest in foreign currencies. At that time it was easy to foresee what was going to happen economically. It's much more difficult now, the question being, how much worse will it get?

Hate to sound pessimistic, but I'm sure others have similar concerns. I'm skeptical of the various asset allocation models I've seen (e.g., X% stocks, Y% bonds). What happens if both go bad?

The strategy I'm considering is to cash in gold and gold funds, hold on to the cash, and then invest in bonds when interest rates inevitably rise. Didn't 30 year bonds hit 15% back in the late 70s or early 80s? At some point, especially when inflation kicks in, I'd expect interest rates would have to move up significantly.

All thoughts appreciated!

brewer12345 11-21-2009 09:23 PM

So you have already made up your mind and want our approval. Good luck!

ultimo 11-21-2009 09:57 PM

Haven't made up my mind, nor am I looking for approval.

I'm interested in how others are dealing with economic uncertainty in terms of asset allocation, and I've shared my thoughts on what I'm currently considering as a strategy.

73ss454 11-21-2009 10:14 PM

Was there ever a time in history where the future was certain? Put a plan together that your comfortable with, rebalance once a year and hope for the best.

Otherwise put your money in CD's and get eaten up by inflation.

samclem 11-21-2009 10:42 PM

Quote:

Originally Posted by ultimo (Post 877392)
I've had a large percentage of my savings in gold and gold funds since 2001, and the rest in foreign currencies. At that time it was easy to foresee what was going to happen economically.

If was easy for you to see then, why didn't you get in and out of the US stock market on the rises and dips? You'd have made a fortune. Or, you could have just shorted financial stocks or GE starting in mid 2008--easy money.

The truth is that it's only easy to see in retrospect.

We had a recent good discussion on possible/likely US inflation, here it is.

ultimo 11-22-2009 01:05 AM

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

ultimo 11-22-2009 01:07 AM

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.

ultimo 11-22-2009 01:22 AM

Thanks for the link to the discussion on inflation. Heyyou posted exactly what I'm thinking about:

Quote:

High inflation may offer you the opportunity of long term, guaranteed double digit bond income from your shrunken portfolio...
What I'm considering doing is not allowing my portfolio to shrink, and to do that by cashing out and waiting patiently in CDs or something. I'd be willing to give up a small percentage to inflation just to keep it safely away from volatility.

An interesting topic!

ultimo 11-22-2009 01:37 AM

I'd love to get a copy of this report:

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

Société Générale tells clients how to prepare for 'global collapse' - Telegraph

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economiesas a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

[Continued via the link above]

plex 11-22-2009 03:35 AM

Regardless of what strategy you use, I would not recommend going 100% or even 50%, in any particular type of asset. Every type of asset class has risks to it, and I really mean, every single asset class.

This applies to gold, gold, historically, has kept up well with inflation, and has been an inflation hedge. There is a big caveat to this though, over a very long span of time, it tends to increase with inflation, during shorter periods of time, it has a tendency to contract during types of large uncertainty (recessions), and retract during expansions (after recessions). We have seen gold expand 500% in the last 8 years. Do you think that tracks inflation, which has only gone up (very roughly) 36% in that period? Where do you think gold is heading next now based on that information?

My advice, stick with with diversification (figure out a proper one for your needs). Even among the safe assets, there are certain risks you still have to use diversification to hedge against.

Also, the dollar falling only matters in context to trades made between international and domestic stock, and when you go buy things outside the country. It should not affect how you are allocating your domestic mix, only your domestic/international balance.

shotgunner 11-22-2009 03:58 AM

If the Maya's are correct my early semi-retirement ends on 12/21/2012, accepting that fact has made planning much easier.

It was painful to watch my portfolio go down in 2008 and early 2009 because a portion of it was in equities. Things looked bleak in early March for sure. However, although I have not fully recovered what I lost I have been happy to see my portfolio increase since March.

I was not able to predict the decline and the advance but they are easy to see in hindsight. A balanced portfolio, rebalanced as needed seems to be a very effective way to be prepared for whatever happens.

We could have an economic collapse or maybe we won't.

If you are not working and you cash out to a CD's you have effectively locked in your standard of living with the only guess being the amount and effective of inflation. This strategy is great if your N/W is so large you can live forever on a 100% cash position, most of us can't.

Make your best decision on what you really believe the future holds and then live with that decision right or wrong, a mistake either way brings consequences. If you are looking for affirmation of what you believe you are looking to join a herd and a herd mentality, no matter how big or small the herd.

ultimo 11-22-2009 03:59 AM

I agree that every asset class has risks, but every now and then the future is so clear that decisions are easy. That was the case with gold (and foreign currencies) in 2001. The writing was on the wall.

Now we're in an era dominated by fiscal policy and it's not so easy to see what's going to happen. Natural economic forces are blocked by intervention.

I disagree that the falling dollar matters only in terms of international and domestic stocks or when one buys things overseas. It also matters to oil and gold and, ultimately, to inflation since we import so many of our goods from China, etc.

I never do things by halves, perhaps ultimately to my detriment. Clearly, gold is going higher, but there's a point, though, where I'm happy to say that I have all I need to survive and am willing to cash in. The question then becomes, now what?

And that's the question I'm mulling over right now...

ultimo 11-22-2009 04:07 AM

Quote:

If you are looking for affirmation of what you believe you are looking to join a herd and a herd mentality, no matter how big or small the herd.
I've never followed the herd, as my previous decisions demonstrate. People thought I was nuts in 2001 to put my money in gold!

I'm just fishing to see if there are others who perhaps think similarly outside the box. I'm questioning the typical asset allocation model and wondering if there are others who have a similar view to mine and what their strategies are. That seems fair enough, and what forums are for.

Although I made a great decision in 2001, I make no claims of being a market prognosticator. Fortunately, my job at the time put me in contact with CEOs of international companies and I learned a lot from them, including the fact that what people are really thinking often differs from the info their companies put out.

CyclingInvestor 11-22-2009 04:52 AM

"The world will only end once. Everything else is a buying opportunity." (Attribution unknown)

ultimo 11-22-2009 06:45 AM

Quote:

"The world will only end once. Everything else is a buying opportunity."
Well, I definitely disagree with that. It's the minor ups and downs in between nirvana and annihilation that'll kill ya.

LOL! 11-22-2009 07:33 AM

FWIW, I use a typical asset allocation strategy and have done so since 1999 with equities, fixed income and real estate in the portfolio, but no gold.

I have found that it works splendidly. Some years, things go up and other things go down. In other years, things go down and some things go up.

Presently the portfolio is about where it was in late 2006 which is the same place where it was in late September 2008. That is, ignore the run-up in 2007 and loss of the 2007 gains in 2008 and the portfolio is just chugging along. This despite the 45+% drop in equities from 2000-2002 and 50% drop from the October 2007 highs to the March 2009 lows. This is also despite a low allocation of about 30% to fixed income and cash.

The main thing that all this has confirmed for me is that rebalancing when the market drops substantially actually works. Ups and downs don't kill ya, it's when you forget to rebalance in times of nirvana and annihilation that do.

And it's threads like yours that tell me we are closer to annihilation (i.e. buy equities) than we are to nirvana (i.e. sell equities).

Here's a little article from today helping to explain this: http://www.nytimes.com/2009/11/22/business/22mark.html
Quote:

THE benefits of this approach were evident over the two years through October, when a basic portfolio split 50-50 between broad stock and bond indexes, with annual rebalancing, dropped by only 3.5 percent, Vanguard found. By comparison, the S.& P. 500 lost about 30 percent in that period.

REWahoo 11-22-2009 07:44 AM

Quote:

Originally Posted by ultimo (Post 877444)
It's the minor ups and downs in between nirvana and annihilation that'll kill ya.

I'm with LOL! - those are rebalancing opportunities.

I'm of the opinion those who worry "the end is near" would do better stockpiling MREs and ammunition. And if you're really worried, check out this company - they appear to have all the bases covered: Montana Gold Bullet, Incorporated

walkinwood 11-22-2009 09:25 AM

Quote:

Originally Posted by ultimo (Post 877436)
I've never followed the herd, as my previous decisions demonstrate. People thought I was nuts in 2001 to put my money in gold!

What else have you predicted that came true? Look for your past predictions and gauge how often you were right v/s wrong.

re: the future, you may very well be correct, but you need to figure out the magnitude of the damage if you're wrong. If you can live with that, then you're fine & have probably diversified your investments in some manner - even if not the traditional equities/bonds. Just know, that the financial industry also did its "stress tests" before 2007, and passed! That's confirmation bias at work, and it is very difficult to identify.

I think it is a given that interest rates will rise in the future - but when? When inflation strikes, bonds do not jump up overnight, do they? If the bond interest rates do not go up immediately, will the purchasing value of your cash not shrink before you invest in bonds? I'm interested in hearing the mechanics & timing of moving from cash to bonds when inflation hits. An example using the 70s will be great.

Zathras 11-22-2009 09:52 AM

Quote:

Originally Posted by ultimo (Post 877392)
There are so many uncertainties with regard to the future that it's difficult to know how to plan.

This is exactly what diversification is for. If you go all into one asset class, and bad things happen to that one asset class, you get hammered. If you diversify the pain is much less, you may even get a net gain even if one area gets hit.

Quote:

Originally Posted by ultimo (Post 877392)
I've had a large percentage of my savings in gold and gold funds since 2001, and the rest in foreign currencies. At that time it was easy to foresee what was going to happen economically. It's much more difficult now, the question being, how much worse will it get?

No one can tell with certainty. So to protect yourself from bad things happening you use diversification.

Quote:

Originally Posted by ultimo (Post 877392)
The strategy I'm considering is to cash in gold and gold funds, hold on to the cash, and then invest in bonds when interest rates inevitably rise. Didn't 30 year bonds hit 15% back in the late 70s or early 80s? At some point, especially when inflation kicks in, I'd expect interest rates would have to move up significantly.

This largely depends on the size of your portfolio and your annual needs.
If you have tons of funds and don't need to draw down your portfolio this may work for you.
As you noted that the past is not a gaurentee of future results, there is nothing that gaurentees you 30 year bonds will hit 15% again. You may 'expect' interest rates to move up significantly, but what if they don't in the time frame you are planning for?

Someone recently predicted the S&P would go down to 740 by the end of October. Prior to that they predicted a drop in the S&P over the next (at the time of their posting) 30 days, TWICE.
It seems obvious to them that this HAD to happen, was going to happen without a doubt.

You may be right, things may get worse, but you may be wrong and they may stay the same, or even improve. I am ready for any of these events through diversification. No, I won't hit the jackpot in any of those scenarios. But likewise I won't take a serious hit in any of those events.

FIREd 11-22-2009 10:26 AM

Quote:

Originally Posted by ultimo (Post 877431)
I'd love to get a copy of this report:

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

Société Générale tells clients how to prepare for 'global collapse' - Telegraph

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economiesas a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

[Continued via the link above]


Just a few thoughts:

1) Societe Generale clearly states that this is not a forecast, but a mere exercise aimed at exploring the possible dangers we are facing.
2) The scenario outlined is one of three possible scenarios explored, and it happens to be the most bearish one. Given the media's bias towards sensationalism, it is not surprising that the media chose to focus exclusively on that particular scenario. However, it does not make that scenario any more likely than the two other, less bearish scenarios.
3) If Societe Generale is so great at analyzing macro-economic environments, how come they didn't see the worse financial crisis since the great depression coming and had to be bailed out by the French government in 2008?

Ed_The_Gypsy 11-22-2009 11:17 AM

There have been real global disasters in the past. I do not think we will see anything like them again. Honestly. Nothing a good asset allocation won't survive.

Gold will not survive a real meltdown. Only ammunition and a secure camp in the woods will. If you don't run into someone bigger than you. If your ammunition doesn't run out. If you don't run out of food or water. If you don't get sick. If you have someone who can stand night watch. (Don't fall asleep!)

Now, will one be able to maintain an unchanging lifestyle forever while depleting his assets at the rate of 10% a year? Those people are living in a dream world and certainly will have their own personal disaster.

One ultimate solution might be to buy a good boat and learn how to navigate and fish and then disappear to sea for a few years.

People did survive the Great Depression. Some better than others.

NW-Bound 11-22-2009 01:31 PM

Quote:

Originally Posted by Ed_The_Gypsy (Post 877514)
... Gold will not survive a real meltdown. Only ammunition and a secure camp in the woods will. If you don't run into someone bigger than you. If your ammunition doesn't run out. If you don't run out of food or water. If you don't get sick. If you have someone who can stand night watch. (Don't fall asleep!)

Now, will one be able to maintain an unchanging lifestyle forever while depleting his assets at the rate of 10% a year? Those people are living in a dream world and certainly will have their own personal disaster.

One ultimate solution might be to buy a good boat and learn how to navigate and fish and then disappear to sea for a few years...

Recently, I have been obsessed with getting an RV for extended travel. Though I do not see myself not having a permanent home (not yet anyway), I have read blogs of people who live a nomadic life in a class C RV, or even a small travel trailer. They seem to enjoy their life. Some even post their expenses. Heck, it still costs more than SS, but I hopefully should always be able to supplement it with my shrinking assets even if the market tanks again. Do I sound optimistic here?

So, me worry? ;D

By the way, knowing that you are in the oil industry, I remember that in the late 70s when I was getting my undergraduate degree, the graduating seniors talked about how the chemical engineers were getting the highest offer. Then, in the early 80s, when I was working, there were talks about how the U-Haul one-way rent was cheaper going into Texas than the rent going out, due to the en-masse exodus from the oil state. Good grief! I am glad I am not in that field. :flowers:

oldtrig 11-22-2009 06:19 PM

Quote:

Originally Posted by 73ss454 (Post 877404)
Was there ever a time in history where the future was certain? Put a plan together that your comfortable with, rebalance once a year and hope for the best.

Otherwise put your money in CD's and get eaten up by inflation.

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.

kumquat 11-22-2009 06:31 PM

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

Rustic23 11-22-2009 06:41 PM

I remember reading a book in the 70's that said that when interest rates went over 10% you should move strong into bonds, below that stocks.

oldtrig 11-22-2009 08:01 PM

Quote:

Originally Posted by kumquat (Post 877585)
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:whistling:. 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:rofl:

oldtrig

73ss454 11-22-2009 08:27 PM

Quote:

Originally Posted by oldtrig (Post 877581)
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 11-22-2009 08:28 PM

Quote:

Originally Posted by oldtrig (Post 877609)
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?
Quote:

Originally Posted by oldtrig (Post 877609)
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 11-22-2009 09:34 PM

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. :nonono::nonono:
oldtrig

harley 11-22-2009 09:42 PM

Quote:

Originally Posted by oldtrig (Post 877628)
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. :nonono::nonono:
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 ;D) 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. :laugh:

Zathras 11-22-2009 09:45 PM

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 11-22-2009 10:48 PM

Quote:

Originally Posted by oldtrig (Post 877628)
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 11-22-2009 11:10 PM

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 11-23-2009 09:37 AM

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. :)


Quote:

Originally Posted by ultimo (Post 877426)
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 11-23-2009 11:50 AM

Quote:

Originally Posted by ultimo (Post 877427)
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 11-23-2009 01:48 PM

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 11-23-2009 03:23 PM

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 11-23-2009 07:07 PM

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 11-23-2009 07:26 PM

Quote:

Originally Posted by 73ss454 (Post 877642)
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. :whistling:
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. :greetings10::greetings10:

Gone4Good 11-23-2009 08:13 PM

Quote:

Originally Posted by semtex (Post 877795)
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 11-23-2009 09:23 PM

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 11-23-2009 09:30 PM

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

Zathras 11-23-2009 09:33 PM

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 11-23-2009 11:41 PM

Quote:

Originally Posted by Zathras (Post 877821)
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.

Quote:

Originally Posted by . . . Yrs to Go (Post 877895)
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,..."

Quote:

Originally Posted by Zathras (Post 877927)
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 11-24-2009 12:10 AM

Quote:

Originally Posted by jdw_fire (Post 877951)
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.

Quote:

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 11-24-2009 12:34 AM

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 11-24-2009 02:55 AM

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 11-24-2009 06:01 AM

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 11-24-2009 06:24 AM

Quote:

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 11-24-2009 06:29 AM

Quote:

Originally Posted by ultimo (Post 877963)
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.

ultimo 11-24-2009 06:29 AM

Quote:

I have been listening to predictions of financial doomsday since I was a child in the 1970s.
I was a child in the 60's, and looking for a job in the 70's, right when unemployment reached this terrible high and interest rates were in the mid-teens. I don't know how much of a child you were at this time, but I was 22 and my future was at stake, and we haven't come near anything like that since... until now.

ultimo 11-24-2009 06:36 AM

Quote:

I think only time will tell if those who are buying gold at these prices are "very smart investors".
Jim Rogers, Paul Tudor Jones, Peter Schiff, Marc Faber, David Einhorn, John Paulson, etc..etc..including Buffett and Bill Gates... yep, they might be proven wrong... but they're certainly not your everyday "gold bugs"!

ultimo 11-24-2009 06:58 AM

Quote:

"The only thing gold is telling us is that people love to chase the latest, greatest, can't miss, investment of a lifetime."
I'd say we're not nearly there yet.

I don't want to get caught up in a bubble. In my first post here I said I'm thinking about selling my gold. I'm not banking on yet another frenzy...

If I were 40 I'd hold onto my gold for at least another four years. But I'm 53, I already put in 9 years with gold, I've done very well, I want to sleep at night and I want to retire in two years.

I'd be happy to sell my gold in the next couple of months still knowing it will go higher only because I want the certainty of a number I can plan around.

53 hit me like a sledge hammer... maybe it's a different age for others. This is the year I think I'm willing to give up gains (and risk) for a knowable future, even if it means leaving money on the table.

ultimo 11-24-2009 07:18 AM

Samclem:
Quote:

You never know what some folks will do.
or did

ultimo 11-24-2009 07:35 AM

Samclem, I get the feeling that what you're saying is that what I did was wrong--to put all my eggs in one basket--but the proof is on the table, at least for me. No, I didn't diversify. Yes, I did put my money where my instincts were. Yes, I was right. But that was an easy exercise (and I was also quite astute at that time, much to my eternal gratitude). It was an easy call back then (I'm talking 2001!). It's much more difficult now, largely because of fiscal policy and FED intervention...

REWahoo 11-24-2009 08:31 AM

Quote:

Originally Posted by ultimo (Post 877982)
Samclem, I get the feeling that what you're saying is that what I did was wrong--to put all my eggs in one basket--but the proof is on the table, at least for me. No, I didn't diversify. Yes, I did put my money where my instincts were. Yes, I was right.

I think what Sam and others might be saying is what you did is only a good move if your instincts are correct. Most of us are not as gutsy (pun intended), don’t have your clear 2001 insight and choose to hedge our financial future by diversifying.

Assuming you sell before gold prices decline significantly (not saying they will), you can probably lay claim to being smarter than the rest of us in the room. Had your instincts been wrong, you probably wouldn't be posting here - or if you were, you might be telling a story similar to this one.

I don't think my instincts or my intellect can know which investment will be "the one", so I choose to take what I believe to be a more conservative course and diversify. I see no reason to add to the risk of becoming a “lost it all in the market” statistic.

Congratulations on picking the right number on the roulette wheel.

I think your idea of selling soon is an excellent one.

samclem 11-24-2009 09:09 AM

Quote:

Originally Posted by ultimo (Post 877963)
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?

Yes, diversification is for people who don't know what the future will look like, and who understand their level of uncertainty and what that uncertainty could mean to their portfolio.

Did you own only gold, or did you own other stuff (i.e diversify) at the same time (you mentioned foreign stocks)? Why would anyone own anything else if gold is the the ticket?

Keep spinning the wheel and doubling down. I don't need to hit a home run, I need to keep hitting singles reliably.

It's a common fallacy to believe that a good result is proof that the decision that produced it was also a good one.

Quote:

Originally Posted by brewer12345 (Post 877394)
So you have already made up your mind and want our approval. Good luck!

Seems so.

Zathras 11-24-2009 09:20 AM

As ReWahoo said, it is wonderful that your gamble paid off.
I don't feel like taking the risk with a single asset portfolio.
More often than not, those that doe have tales of woe to tell. Although there are also some like you that hit it big. Kudos to them:)

I am also not saying it is a bad idea to buy ANY gold, just not to go 'all in' in gold or any other single asset class. Most if not all of the investors you listed would say the same. They may have stakes in gold, but also in many other asset classes (or at the very least, different commodities).

TargaDave 11-24-2009 11:05 AM

Quote:

Originally Posted by ultimo (Post 877967)
Jim Rogers, Paul Tudor Jones, Peter Schiff, Marc Faber, David Einhorn, John Paulson, etc..etc..including Buffett and Bill Gates... yep, they might be proven wrong... but they're certainly not your everyday "gold bugs"!

Be aware that most of these current gold advocates would never suggest going 100% into precious metals, let alone any one asset class. They also work with advanced stop loss mechanisms knowing full well they could be wrong on a bet.

ultimo 11-24-2009 04:08 PM

Quote:

Did you own only gold, or did you own other stuff (i.e diversify) at the same time (you mentioned foreign stocks)? Why would anyone own anything else if gold is the the ticket?
Yes, I also bought foreign currencies, mostly Aussie dollar, but not initially. I didn't diversify into things that didn't look positive against the scenario I strongly believed was unfolding: a declining stock market and U.S. dollar. I didn't put money into things that I thought would lose money in that scenario.

Quote:

It's a common fallacy to believe that a good result is proof that the decision that produced it was also a good one.
I agree that sometimes bad decisions can produce good outcomes... and sometimes good decisions can produce terrible outcomes.... but all that matters in the end is outcomes.

I believe my decisions were very good ones. I followed macro trends (a postgraduate program in economics, which I undertook purely for my own information, helped in this regard). I didn't listen to the talking heads on CNBC nor follow the herd. At that time it was clear that the stock market would eventually reach an inflection point. I wouldn't call myself lucky on that point, but my timing was fortuitous to some degree, as it always is, for everyone.

And now I'm at another decision-making point and this time with a view to retirement. I'm interested in the perspective of others who are engaged in similar planning. I've given a general summary of where I'm at, what my circumstances are, what I'm invested in and have asked others for their perspectives on asset allocation against a bearish backdrop of continued dollar depreciation, higher inflation (longer term), etc., etc. I've received some good information and advice, and for that I'm very thankful.

oldtrig 11-24-2009 04:29 PM

Quote:

Originally Posted by ultimo (Post 877966)
I was a child in the 60's, and looking for a job in the 70's, right when unemployment reached this terrible high and interest rates were in the mid-teens. I don't know how much of a child you were at this time, but I was 22 and my future was at stake, and we haven't come near anything like that since... until now.

I agree

I was a child in the 40's and 50's. I also was self-employed in the late 70's, 80's and half of the 90's. None of those times compare to whats happening now. I believe we are already in the early stages of a depression. My dad would be 94 if he were alive. He told me many stories about how hard times were in the last depression. It was really sad about how some of his friends lost everything. oldtrig

Gone4Good 11-24-2009 06:59 PM

Quote:

Originally Posted by jdw_fire (Post 877951)
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,..."

Yup.

Quote:

Originally Posted by ultimo (Post 877961)
What gold is telling us is that there's no faith in dollar

Quote:

Originally Posted by ultimo (Post 877963)
. . . To not buy gold you'd have to make a case that the dollar's going higher

Maybe, except Gold is completely unhinged from dollar moves. Since 2000 the dollar index is down 25%, Gold is up 360%. Since October 2008, the dollar is down 10%, gold is up 140%. And in January and February of this year when the dollar rose nearly 10%, gold rose by slightly less. Clearly something else is going on here.

But at the same time, it looks like we're still in the early days of a gold bubble. These things typically last years. So I wouldn't be surprised to see $2,000 or higher before its all done. It doesn't hurt to have a major "news" network forecasting the end of western civilization every night. But none of that makes me want to buy it.

timwalsh300 11-24-2009 09:27 PM

Quote:

Originally Posted by ultimo (Post 877392)
I'm skeptical of the various asset allocation models I've seen (e.g., X% stocks, Y% bonds). What happens if both go bad?

This is a strange statement/question, given that you are talking about holding 100% gold, cash, or bonds. What happens if your one asset goes bad?

I agree that things are very uncertain right now for investors. Stocks are still somewhat expensive according to historical P/E10 data and dividend yields. But bond yields are also near historic lows and interest rates have nowhere to go but up. Commodities like gold, copper, and oil are at or near historic highs despite huge inventories, from what I understand. And real estate prices, while down from their peak, are still above their historical trend line too.

So nothing appears obviously undervalued right now, except maybe the Dollar - and that may in fact be the case if the loose fiscal and monetary policy (which has people in such a panic about inflation) ultimately fails to stop the deflationary forces at work. Indeed, we can't even agree on whether the US is headed for a Japanese-like "lost decade" or Zimbabwe-like hyperinflation.

I guess it's more likely that the outcome will be something in between. Anyway, all this probably makes the case for balance and diversification between cash, bonds, stocks, etc. even stronger.

Tim

Berkshire_Bull 11-24-2009 10:00 PM

Quote:

Originally Posted by ultimo (Post 877392)
There are so many uncertainties with regard to the future that it's difficult to know how to plan.

Even the worst case scenario in FIRECalc may not be bad enough to reflect what the future may hold.

U.S. dollar index is at new lows and heading lower. Interest rates held artificially low into the foreseeable future. Inflation and higher taxes almost certain.

I've had a large percentage of my savings in gold and gold funds since 2001, and the rest in foreign currencies. At that time it was easy to foresee what was going to happen economically. It's much more difficult now, the question being, how much worse will it get?

Hate to sound pessimistic, but I'm sure others have similar concerns. I'm skeptical of the various asset allocation models I've seen (e.g., X% stocks, Y% bonds). What happens if both go bad?

The strategy I'm considering is to cash in gold and gold funds, hold on to the cash, and then invest in bonds when interest rates inevitably rise. Didn't 30 year bonds hit 15% back in the late 70s or early 80s? At some point, especially when inflation kicks in, I'd expect interest rates would have to move up significantly.

All thoughts appreciated!


You're going to be sorely disappointed with cash. The US Consumer is important but nowhere near as important as they once were. China now has a middle class, India has a middle class, Brazil with a middle class, the real story is the global economy. Don't miss the forest for the trees. Inflation is dead and will be for many years. Wages makeup most of inflation and with the HUGE cheap labor pool in Asia and South America it will take years to utilize the capacity before wages can start to climb.

The story is global competition for the worlds resources. Get long this market, the train's leaving.

samclem 11-24-2009 10:24 PM

Quote:

Originally Posted by Berkshire_Bull (Post 878227)
Inflation is dead and will be for many years. Wages makeup most of inflation and with the HUGE cheap labor pool in Asia and South America it will take years to utilize the capacity before wages can start to climb.

There are many possible causes for inflation. High labor costs were the cause of the last big US inflation bout in the 1970s, and I agree that isn't going to happen again soon. But the more "normal" cause for inflation, historically, has been debasement of fiat currencies through introduction of excess money. When the US government owes huge amounts to many foreign entities, and the US government owns the printing presses, the conditions are ripe for a the government to create a lot of money. Inflation s great if you are the debtor. Add to this the paucity of means by which the government can legitimately raise real revenue (because slow overall economic growth isn't expanding the tax base and already high tax rates can't be increased further without killing the economy) and other govt spending requirements (ballooning social spending, continued high levels of military spending, etc) , and inflating the currency begins to look like the least bad option.

I wouldn't bet against high US inflation in the coming 5-10 years.

jdw_fire 11-24-2009 11:20 PM

Quote:

Originally Posted by ultimo (Post 877392)
I've had a large percentage of my savings in gold and gold funds since 2001,

a curiosity question, how do you own your gold? ETF, futures, FOREX, options, physical gold stored in a storage facility, or did you take physical delivery (if so was it bars, coins, jewelry, or something else)?

FIREd 11-25-2009 02:09 AM

I sold my gold at a huge profit last year but I am hanging on to my 30 lbs of silver. It's my ticket out of Dodge is things get as dire as some of you predict...

ultimo 11-25-2009 05:27 AM

Quote:

a curiosity question, how do you own your gold? ETF, futures, FOREX, options, physical gold stored in a storage facility, or did you take physical delivery (if so was it bars, coins, jewelry, or something else)?
Unfortunately, I bought gold before ETFs were invented, so it's in coins and funds like BGEIX and FSAGX. My gold (and silver) coins are stored in a safe deposit box at my bank.

ultimo 11-25-2009 06:07 AM

Quote:

Inflation is dead and will be for many years. Wages makeup most of inflation and with the HUGE cheap labor pool in Asia and South America it will take years to utilize the capacity before wages can start to climb. The story is global competition for the worlds resources. Get long this market, the train's leaving.
I agree that inflation is dead for the next few years, which is why I'm willing to just park my money by the roadside somewhere. BUT I think inflation, if not hyperinflation, is a sure thing down the road. I want to organiize myself around that scenario.

W2R 11-25-2009 08:02 AM

1 Attachment(s)
Quote:

Originally Posted by ultimo (Post 878258)
I agree that inflation is dead for the next few years, which is why I'm willing to just park my money by the roadside somewhere. BUT I think inflation, if not hyperinflation, is a sure thing down the road. I want to organiize myself around that scenario.

My crystal ball says... "The future is misty and obscured. Guess anything you like, but prepare with all possibilities in mind. Above all, read and study every word of William Bernstein's The Four Pillars of Investing."

semtex 11-25-2009 02:09 PM

Like i did not put it clear. my understanding, gold is something useless at normal evn unless something very bad happens. so when gold keeps up and up, it is telling use something, what's the thing, i wish i know,

but should be something big,


Quote:

Originally Posted by Zathras (Post 877821)
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" ;)


M Paquette 11-25-2009 02:22 PM

Um. Don't mind me, but when I see all the discussion of buying gold here, and among friends, family, and casual acquaintances, I can't help but think back to 1999 when these same people were all talking up hot stocks.

This, to me, is an indicator that a particular market is far closer to a top than a bottom. I'd rather buy the unpopular, oversold assets myself. (Currently trolling real estate markets...)

brewer12345 11-25-2009 02:25 PM

MP, are you looking at properties or securities? Resi, commercial, something else?

semtex 11-25-2009 02:28 PM

basically gold is the last resort, means people lost confidance to the whole financial system.

why not, jp debt is 200% gdp and neg saving rate and people are older and older. us is following up closely.

M Paquette 11-25-2009 04:00 PM

Quote:

Originally Posted by brewer12345 (Post 878396)
MP, are you looking at properties or securities? Resi, commercial, something else?

Residential properties in higher end resort areas, particularly ones impacted by the recent economic fluctuation. It's amazing how overextended the 'well-off' can get. :nonono:

The intent is to get something I can enjoy as a second/vacation home that will also do reasonably well over a 15-20 year holding period. Realistically, I don't expect to break even taking expenses into account, unless I run this particular as a rental. The 'imputed rent' and intangible benefits should be worthwhile for me, personally, though. This will be capped at not more than 10% of net worth.

There is a possibility of converting the property to my primary residence, if I buy in another state with certain tax advantages to me, so I'm also screening with suitability for a primary residence in mind, including access to shopping, medical care, airports, etc.

One target, Incline Village, NV, made #1 on Forbes "America's Most Troubled Luxury Neighborhoods" list. :rolleyes:
In Pictures: America's Most Troubled Luxury Neighborhoods - 1. Incline Village-Crystal Bay, Nev. - Forbes.com

And there are plenty of troubled properties at a small fraction of the insane prices in that article in the town, probably two dozen with Walk Scores of 90 or better.

semtex 11-25-2009 04:00 PM

yes, jp has more chances to implode

traineeinvestor 11-25-2009 07:23 PM

As an aside, the local paper carried an article today claiming that a significant part of the run up in the price of gold was due to large producers like Barrick unwinding hedges. If so, the implication is that when the finish unwinding a sizeable part of the demand will fall away.

I have no idea whether this is correct or not.

hguyw 11-25-2009 07:29 PM

Nixon was a Republican.

LARS 11-25-2009 07:43 PM

Quote:

Originally Posted by M Paquette (Post 878424)
Residential properties in higher end resort areas, particularly ones impacted by the recent economic fluctuation. It's amazing how overextended the 'well-off' can get. :nonono:

The intent is to get something I can enjoy as a second/vacation home that will also do reasonably well over a 15-20 year holding period. Realistically, I don't expect to break even taking expenses into account, unless I run this particular as a rental. The 'imputed rent' and intangible benefits should be worthwhile for me, personally, though. This will be capped at not more than 10% of net worth.

There is a possibility of converting the property to my primary residence, if I buy in another state with certain tax advantages to me, so I'm also screening with suitability for a primary residence in mind, including access to shopping, medical care, airports, etc.

One target, Incline Village, NV, made #1 on Forbes "America's Most Troubled Luxury Neighborhoods" list. :rolleyes:
In Pictures: America's Most Troubled Luxury Neighborhoods - 1. Incline Village-Crystal Bay, Nev. - Forbes.com

And there are plenty of troubled properties at a small fraction of the insane prices in that article in the town, probably two dozen with Walk Scores of 90 or better.

Haven't look at Incline Village in a long time. Still, I am surprised (even with declines in real estate markets) that anything in IV is priced reasonably. Interesting...

ultimo 11-26-2009 01:59 AM

Quote:

Like i did not put it clear. my understanding, gold is something useless at normal evn unless something very bad happens. so when gold keeps up and up, it is telling use something, what's the thing, i wish i know,
It's basically telling us right now that central banks will go from being net sellers of gold to bet buyers.

Doesn't matter what happens with the rest of the gold market... that changes everything.

ultimo 11-26-2009 02:10 AM

Quote:

Maybe, except Gold is completely unhinged from dollar moves. Since 2000 the dollar index is down 25%, Gold is up 360%. Since October 2008, the dollar is down 10%, gold is up 140%. And in January and February of this year when the dollar rose nearly 10%, gold rose by slightly less. Clearly something else is going on here.
I think what's happening has to do with the un-hedging by mining companies like Barrick and the purchasing of gold by central banks, like India. So lots of demand coming in at the same time mining companies are reaching the limits of production.

ultimo 11-26-2009 02:21 AM

Quote:

As an aside, the local paper carried an article today claiming that a significant part of the run up in the price of gold was due to large producers like Barrick unwinding hedges. If so, the implication is that when the finish unwinding a sizeable part of the demand will fall away.
You're right about Barrick, but they've been unwinding for years now. Their unwinding is dwarfed by the fact that central banks are no longer selling... in fact, they're buying.

Gold is always a one-hit wonder. But when it hits, it's awesome. People have a naturally bullish instinct and don't generally know how to react to bearish circumstances.

ultimo 11-26-2009 02:24 AM

Quote:

"The intent is to get something I can enjoy as a second/vacation home that will also do reasonably well over a 15-20 year holding period."
Can you go go overseas? Adelaide, Australia is in the epicenter of the world's greatest mining boom.

traineeinvestor 11-26-2009 03:51 AM

Code:

Can you go go overseas? Adelaide, Australia is in the epicenter of the world's greatest mining boom.
I think you mean Perth.

Australia as a lot of great places to visit and live in. I'm not sure if I would pick Adelaide as a holiday home destination.

ultimo 11-26-2009 04:51 AM

Quote:

I think you mean Perth.
Perth is where it was, Adelaide is where it's at. Perth had a mining boom, Adelaide has had an exploration boom. In terms of real estate, which is what the person was asking, Perth is sitting on the edge... too far, too fast. Adelaide is just ready to begin. I myself just bought a place in Adelaide CBD for $450K, and people are amazed> There are bargains still to be had in Adelaide, but not in Perth.

tulak 11-26-2009 12:15 PM

Regarding gold, I watched a segment on the Newshour last night:

Dollar's Weakness Inspires Modern-day Gold Rush | Online NewsHour | Nov. 25, 2009 | PBS

I loved the end. There was a guy in the suit, saying the dollar will be worthless and gold is the way to go. Then they cut the gold dealer, who looks, well, not very suit-like:

Quote:

JOHN WILLIAMS: What has been done over the last couple of decades has set up the ultimate debasement of the U.S. dollar. The dollar as we know it is going to become worthless in the years ahead.

PAUL SOLMAN: But people can be wrong. I mean, the last time we were here, we were doing a story about inflation. Inflation went away. We never even did the story. Are you not at all humbled about making these predictions?

JOHN WILLIAMS: Well, I -- in my humble, most humble opinion, we have in place now everything that has been the nightmare of the people looking at this system over time.

PAUL SOLMAN: John Williams' gold dealer begs to differ.

CHARLIE MAMMOSER: Even though gold has gone up $150 in the last month, the dollar still is $1.49, $1.50 to the euro. It's not going nowhere. So, I think it's more feeding of itself. It's going up, so more people are jumping on the bandwagon. That's kind of how I see it.

PAUL SOLMAN: So, this is just a speculative bubble even, perhaps?

CHARLIE MAMMOSER: Yes, that's kind of how I see it. And I'm just wondering, when's it going to pop?
Love it.

But you really have to see Charlie Mammoser to get the full effect...

calmloki 11-26-2009 12:29 PM

Quote:

Originally Posted by kiki (Post 878614)
.. There was a guy in the suit, saying the dollar will be worthless and gold is the way to go. Then they cut the gold dealer, who looks, well, not very suit-like:
Love it.
But you really have to see Charlie Mammoser to get the full effect...

Saw that - my gal mentioned that there are just some people that you can see having long hair - even when their hair is gone. I liked his teeth - kind of a Steve Buscemi effect.

ultimo 11-26-2009 01:34 PM

Gold is going into strong hands like hedge funds managed by John Paulson, Paul Tudor Jones, David Einhorn, Eric Mindich, David Hayman--the cream of the crop. Public institutions like central banks in India and China are big buyers too. Momentum on gold is building now, as latecomers climb on the bandwagon.


We're seeing demand for gold all over the world. Pension funds allocate about 5% as protection against the weakening dollar. Chinese citizens are encouraged by their government to hold gold, not dollars. On Nov. 18, Russia's central bank announced it would buy any and all gold its sister organization, the State Depositary for Precious Metals and Gems, was willing to see. Now the Vietnamese central bank has granted quotas to import 10 tons of gold for use by its banking system and gold traders....

Good article. Continued at:

Run With The Gold Bulls - Forbes.com

meaglin 11-26-2009 02:37 PM

For my wife and I, we've simply cut back on expenses wherever possible to offset any losses in the market. We rarely eat out, instead opting for coffees and meals at home with family and friends. Neither of us are shoppers. Entertainment is a walk on the beach, a good movie on TV or a good book. We love to visit with family and friends over a meal or a good bowl of homemade ice cream.

NW-Bound 11-26-2009 06:23 PM

Quote:

Originally Posted by meaglin (Post 878642)
For my wife and I, we've simply cut back on expenses wherever possible to offset any losses in the market. We rarely eat out, instead opting for coffees and meals at home with family and friends. Neither of us are shoppers. Entertainment is a walk on the beach, a good movie on TV or a good book. We love to visit with family and friends over a meal or a good bowl of homemade ice cream.

I've stopped worrying too much about the market. Sure, I have to cut out some luxuries of the past, like foreign travels. Few of us really have to worry about having a bare cupboard like people of the third world. So, why not cut back on extravagance and enjoy the simpler pleasures in life? We all got but a life to live. How much of that life should we spend worrying?

ultimo 11-27-2009 05:45 AM

Quote:

We rarely eat out, instead opting for coffees and meals at home with family and friends. Neither of us are shoppers. Entertainment is a walk on the beach, a good movie on TV or a good book. We love to visit with family and friends over a meal or a good bowl of homemade ice cream.
Sounds absolutely divine... Can't wait to get there!

Gone4Good 11-27-2009 10:15 AM

Quote:

Originally Posted by ultimo (Post 878528)
I think what's happening has to do with the un-hedging by mining companies like Barrick and the purchasing of gold by central banks, like India. So lots of demand coming in at the same time mining companies are reaching the limits of production.

Every bubble has a plausible underlying story.

In this case I find it interesting how quickly the story changed from "the dollar is declining" to "supply / demand" once someone points to the fact that gold is appreciating many times faster than the dollar is depreciating.

If my goal is to hedge an exposure, say dollar weakness or inflation, I'd be very concerned that my hedge vehicle movements are multiples of the thing I'm trying to hedge.

Quote:

Originally Posted by ultimo (Post 878630)
Gold is going into strong hands like hedge funds managed by John Paulson, Paul Tudor Jones, David Einhorn, Eric Mindich, David Hayman--the cream of the crop.

Strong hands, huh? In my line of work they're known as "clients". And within that category they're known as "fast money" clients. Sometimes "chimps". But never "strong hands".

LARS 11-27-2009 10:48 AM

Seems to me there is such distortion in all markets and asset classes due to massive government intervention it is near impossible to make "rational" bets for near term investments. Gold included in this category.

Still, long term trends can be discerned and bets can be placed (i.e. inflation thesis, deflation thesis). But even in this case, the abilities of governments to follow irrational policies for much longer than expected is a real risk.

It was terribly obvious to me that the credit bubble (courtesy of Greenspan) was going to blow. What I did not anticipate was that it would carry on much longer than I thought.

Not really sure what all this means for investing in a market where risk tolerances are still dramatically out of whack. All I can say is that I have taken the approach of being very fleet on my feet (ie- more trading than owning) and not making large bets on any one investment.

Like the Sergeant on Hill Street Blues used to say: "Be careful out there..."

ultimo 11-29-2009 05:53 AM

Quote:

In this case I find it interesting how quickly the story changed from "the dollar is declining" to "supply / demand" once someone points to the fact that gold is appreciating many times faster than the dollar is depreciating.
The story never changed... it's all part of the same story. A declining dollar certainly increases demand for gold, but whoever said there's a one-to-one correlation between the dollar and gold? The strongest correlation between gold and anything else is between gold and real inflation. And with the U.S. and other governments around the world holding interest rates down and printing money as fast as they can, where else can gold go but up?

ultimo 11-29-2009 06:00 AM

Quote:

Like the Sergeant on Hill Street Blues used to say: "Be careful out there..."
And cover your back. I think we're at a time when we hope for the best but plan for the worse. Which brings me back to my original post. Cheers.

ultimo 11-29-2009 06:44 AM

Quote:

If my goal is to hedge an exposure, say dollar weakness or inflation, I'd be very concerned that my hedge vehicle movements are multiples of the thing I'm trying to hedge.
I'm not sure what you mean by this...? Isn't that what hedging is all about?

JacQueuf 11-29-2009 08:55 AM

is gold even something that should be on the mind of people? im not really sure gold would have any worth to any country if its not producing well, anything... and correct me if im wrong but the world kind of depends on the u.s. and we've all seen the proof. so whether you're up to your neck in gold or not wouldnt the dollar and the u.s. still pretty much dictate what goes on?

Zathras 11-29-2009 09:45 AM

Quote:

Originally Posted by ultimo (Post 879146)
And cover your back. I think we're at a time when we hope for the best but plan for the worse. Which brings me back to my original post. Cheers.

And the answer from almost everyone is Diversification.
You don't seem to like that idea, but it is basically the best strategy to protect yourself.
No, it won't protect you in 100% of the possible situations, but it will come a lot closer than putting most of your portfolio in any one asset class.

P.S. There is nothing wrong with not liking the opinions you get. Just don't act as if your OP hasn't been answered already by many people.

Gone4Good 11-29-2009 10:26 AM

Quote:

Originally Posted by ultimo (Post 879145)
The strongest correlation between gold and anything else is between gold and real inflation. And with the U.S. and other governments around the world holding interest rates down and printing money as fast as they can, where else can gold go but up?

Hmmm, with US inflation up only 1.7% over the last 12 months one of the places gold can go is down.

I'm reminded of similar conversations we've had on this forum about how oil wasn't a bubble either.

Meadbh 11-29-2009 11:51 AM

Well, Ultimo certainly is a gold bug. This has been a good thread and I look forward to studying the Societe Generale report. I can never get enough macroeconomics......which is the reason why I got out of Japan in the early 1990s.

Personally, if my gold doubles in value within a year, I'll probably sell. Better not to get greedy!


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