Little faith in the market now

[Texarkandy]

Quote:

Originally Posted by Dennis .... as for the Working Class? I think Obama Is right in getting their $ out of those #401k/#403's, etc con games of Load funds and loosing peoples $ and into The SS system and double their SS in return..Most would be far better off ..Maybe this Time will finally prove to those people they are out of their Relm and should Not be investing such Important Savings.. And as Jack Boggle Said.. Too many Con men in the game now..Manipulating the markets..ETF's and Leverage/Hedge and Shorting has ruined the business of stablitly.. It's a Traders game now..and only for top Pro's.. ...

I am far from a supporter of Obama or the Democrats - but I think you are "spot-on" in your statement above.

Although I am fortunate enough to be the beneficiary of an early federal government pension (law enforcement) with a "diet cola" (CPI minus 1%) & employer subsidized health insurance, - I have a considerable pile stashed away in the federal TSP (a 401k type instrument). My plan is for the TSP monies along with SS to cover the deterioration of pension and other income from inflation in our later (post-62) years.

I've had my TSP heavily in equity funds over the years and made a little money, but had enough dumb-luck to move it all to the G Fund (Treasuries) in early 2007. To move any significant percentage of it back to equities after the events of the past year would take an extraordinary degree of market confidence on my part. This is not just a financial "game" I am playing - it's my life. Sure I'm not beating inflation with Treasuries right now - but I expect to "just" do so in future years with perhaps a little extra.

I believe your statement is a good reasoning as to why SS will never go away.

• Most Americans just can't finance a retirement on 401k's & IRA's alone without a healthy amount of financial diligence and a fair dose of sacrifice that is just not gonna happen for many Americans, despite their good intentions. Even then it's dicey considering the things you refer to.
• Hardly anybody gets a pension anymore, and in the private sector you never know how secure that pension may be.
• And while houses may continue to be treated as a piggy-bank in the long term, they certainly cannot be counted upon as a high performing investment vehicle.
• Our mobile society is as such that many families often don't remain geographically close enough to take care of/look after their elders in their old age.
• Retirement savings can thrown totally off-track (wiped-out even) by a medical "event" in one's 40's; 50's' 60's without decent insurance which is increasingly less available.
• As a society, even the hardest core American small-government conservative or libertarian is not going to tolerate elderly Americans living under bridges & eating cat-food.

What remains that "the masses" can count upon in their old age? SS.

I'm thinking that market events (both stock & housing) of the past year or so will make people vote for/support programs that bolster government guarantees of their retirements, be those guarantees be in the form of SS, a new kind of govt retirement system, or whatever.

In the meantime I wouldn't be surprised to see the masses develop a new financial paradigm of less-leverage in their personal financial lives & more investment in conservative CD's, bonds, fixed mortgages, etc. (or maybe not - maybe everybody's just waiting for the lull in the "party" to end so life can go on as usual)

[Architect]

I have a contrary view, as usual I guess. My faith in the (stock) markets has been strengthening the past year. In 2007 the Treasury and the stock market diverged. Treasuries were clearly warning of the trouble, but stocks were falsely buoyed up by the tail end of the credit bubble. I suffered fools crowing over their gains in the stock market, which was illusory.

But now, well I think stocks are hardly bargains yet, but at least the market is finally coming back to reality.

[Midpack]

Quote:

Originally Posted by Dennis as for the Working Class? I think Obama Is right in getting their $ out of those #401k/#403's, etc con games of Load funds and loosing peoples $ and into The SS system and double their SS in return..Most would be far better off.

Quote:

Originally Posted by Texarkandy I am far from a supporter of Obama or the Democrats - but I think you are "spot-on" in your statement above.

Don't agree in the first place, but I hope you mean creating a federal pension of some sort in lieu of a 401k/403b. You don't mean having everyone put their 401k money into Soc Sec under the current pay-as-you-go structure do you? It's bad enough to be forced to contribute to an unsustainable Ponzi scheme, we sure don't want to put more in it.

[Texarkandy]

Quote:

Originally Posted by Midpack Don't agree in the first place, but I hope you mean creating a federal pension of some sort in lieu of a 401k/403b. You don't mean having everyone put their 401k money into Soc Sec under the current pay-as-you-go structure do you? It's bad enough to be forced to contribute to an unsustainable Ponzi scheme, we sure don't want to put more in it.

Just for the record, my "ponderings" in my last post were in no way advocating a government takeover (confiscation) of people's 401k's and/or IRA's. (although I know some have advocated that)

I was thinking more in terms of what the voting masses might support & why - & I don't think even they would support that.

As to "spot on" - I was referring to:

Quote:

Maybe this Time will finally prove to those people they are out of their Relm and should Not be investing such Important Savings.. And as Jack Boggle Said.. Too many Con men in the game now..Manipulating the markets..ETF's and Leverage/Hedge and Shorting has ruined the business of stablitly.. It's a Traders game now..and only for top Pro's..

Personally, I think SS is enough of a federal role in ensuring a minimum level of financial security for the masses in their later years. The feds should focus on ensuring the long term security of that system and without raising SS taxes further or drastic benefit cuts that would undermine the whole purpose of the system. And therein "lies the rub".

But how we personally think things ought to be have nothing to do with the reality of how things will play out - and that reality is what we must try to divine & plan for.

[haha]

Obama's accession is so well timed with the economic and financial meltdown that many things we never even imagined might well come about. Personally I feel more of less negative about this as I have never benefited yet from anything that took from some to give to the rest, and I think that is what we have in store for us.

It will be interesting anyway.

Ha

[Texarkandy]

Quote:

Originally Posted by Architect I have a contrary view, as usual I guess. My faith in the (stock) markets has been strengthening the past year. In 2007 the Treasury and the stock market diverged. Treasuries were clearly warning of the trouble, but stocks were falsely buoyed up by the tail end of the credit bubble. I suffered fools crowing over their gains in the stock market, which was illusory. But now, well I think stocks are hardly bargains yet, but at least the market is finally coming back to reality.

I sincerely hope you are correct - and will probably venture back into stocks to a modest degree at some future point.

[Texarkandy]

Quote:

Originally Posted by haha ..... I have never benefited yet from anything that took from some to give to the rest ...

I confess to having received one unemployment check - right after I got out of the Army. I think it was about $62 dollars. I probably spent it on beer. (thus boosting Anheuser Busch stocks & local taxes)

Then I got a j*b.

Thanks, ya'll.

[Midpack]

Quote:

Originally Posted by Texarkandy As to "spot on" - I was referring to: Quote: Originally Posted by Dennis Maybe this Time will finally prove to those people they are out of their Relm and should Not be investing such Important Savings.. And as Jack Boggle Said.. Too many Con men in the game now..Manipulating the markets..ETF's and Leverage/Hedge and Shorting has ruined the business of stablitly.. It's a Traders game now..and only for top Pro's..

OK, that first part about 401k's and Soc Sec seemed very questionable IMHO.

[Architect]

Oh absolutely, I'm looking forward to owning stocks again. But presently they are pricing in a consumer recovery next year or after, which certainly isn't going to happen. It's going to be a brutal period to those expecting anything familiar, and it will last beyond a few piddling years. But eventually the imbalances will purge out and the economy will enjoy significant growth again.

Here's a link to ponder

http://www.nakedcapitalism.com/2008/...tic-about.html

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Originally Posted by Texarkandy I sincerely hope you are correct - and will probably venture back into stocks to a modest degree at some future point.

[ziggy29]

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Originally Posted by Architect Oh absolutely, I'm looking forward to owning stocks again. But presently they are pricing in a consumer recovery next year or after, which certainly isn't going to happen.

Certainly isn't going to happen? Do you know something with 100% confidence that we don't?

It's VERY fashionable to be a uberbear right now, and you may well be right, but the bears are getting awfully bold in their predictions now that some of them have (more or less) come true...

[unclemick]

07/01/1929 Wellington SEC yield Friday on the Vanguard website 4.35%.

Or that young punk - pssst Wellesley, 07/01/1970, SEC yield 5.78%.

Now if we all fessed up and admitted it was that stone simple - we would be stuck with discussions of bacon, dryer sheets, pictures of our hobbies and travels, etc.

Or even my poor - wait til next year Saint's. .

As long as Angus Maddison doesn't X America off his list - I think we're good to go.

Eli or Romo tonight?

heh heh heh -

[Frugality_of_Apathy]

Quote:

Originally Posted by ziggy29 Certainly isn't going to happen? Do you know something with 100% confidence that we don't? It's VERY fashionable to be a uberbear right now, and you may well be right, but the bears are getting awfully bold in their predictions now that some of them have (more or less) come true...

I'm 95% confident a consumer recovery isn't going to happen next year. The fundamentals are still poor. The government is going to try a couple more economic stimulus packages(because the last one worked out so well ) and we're just now seeing the tail end of 3/1 ARM loans and still have a glut of 5/1 ARMs that are going to be headed into foreclosure in the next couple years. Banks aren't going to be loose like like they were a couple years ago with their credit for at least 4 years when this recession was so long ago nobody remembers how it happened. Once the tide of foreclosures starts to eb you'll see credit reappear and until that happens the general populace just wont have the access to money even if they want to spend it.

[haha]

Quote:

Originally Posted by Frugality_of_Apathy I'm 95% confident a consumer recovery isn't going to happen next year. The fundamentals are still poor. The government is going to try a couple more economic stimulus packages(because the last one worked out so well ) and we're just now seeing the tail end of 3/1 ARM loans and still have a glut of 5/1 ARM that are going to be headed into foreclosure in the next couple years. Banks aren't going to be lose like like they were a couple years ago with their credit for at least 4 years when this recession was so long ago nobody remembers how it happened. Once the tide of foreclosures starts to eb you'll see credit reappear and until that happens the general populace just wont have the access to money even if they want to spend it.

With all due respect, while you might(or might not!) be 100% correct at prognosticating economic conditions, that doesn't necesarily say much about capital markets. It's like being the genius who can pick 80% winners in the NFL, as long as he can pick without a spread. Capital markets are like betting markets- everything is priced by expectations.

Ha

[Architect]

No, call it 95% confidence. I've studied this credit bubble and the consumer for the last two years, and this year enjoyed about a +40% return as a result. People like to say you can't predict the future, but that's not true - in some ways you can. Yes the consumer will retrench, retracing a 25 year spending spree until their savings go back up above 10% (this probably won't take 25 years though).

And I don't like how if you have a negative prediction your suddenly an 'uber bear'. I don't have any particular affiliation - bull or bear - but I just like to understand reality as best I can. And two years ago a credit crash was writ large in spray paint, as is the condition of U.S. consumers.

Take it for what it's worth, but the credit crash is actually a sideshow, the real story is consumer retrenchment, which has been my position. Look - I'm just looking for investment opportunities, if it was in buying gold or stocks I'd be all over it.

Quote:

Originally Posted by ziggy29 Certainly isn't going to happen? Do you know something with 100% confidence that we don't? It's VERY fashionable to be a uberbear right now, and you may well be right, but the bears are getting awfully bold in their predictions now that some of them have (more or less) come true...

[free4now]

For me, the biggest loss of faith is in the transparency of the markets due to the complexity of todays investment vehicles. The market can't serve it's purpose of being a weighing machine if there are vast segments of the economy (like the MBS's) that only hop on to the scale during a disaster and show up as black boxes most of the time to most players.

I also agree with Greenspan when he recently conceded:

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“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief”.

Our whole stock market is predicated on the idea that companies and shareholders have the same interest, namely growing and protecting the market value of the company.

But then Moody's goes and digs its grave by knowingly giving bogus ratings to MBSs. And lots of companies buy these MBSs without adequate due diligence, digging their own graves. So why would they have done such a thing, which appears to be against their self interests? I think it actually was in the self interests of the decisionmakers at Moody's and other companies to dig those graves. The employees who did this stuff thought they could take the profits now, which would make them look like stars and increase their bonuses, and then move on to another company before the shareholders had to clean up the mess. Or hope that a rising market would hide their tracks.

This points out a fundamental conflict of interest: Different players have different time horizons. A CEO is financially motivated by the compensation he receives while he is CEO; If the company falls over and dies the day after he leaves, no skin off his back. With CEOs turning over every few years, they aren't looking at the big picture.

The shareholder on the other hand is affected by results (and predictions of results) for the entire lifetime of the company.

None of these players are affected by collateral damage (e.g. if the failure of their company takes down the US economy as a whole). In fact there's now a perverse incentive: If a company can shift their failures into an area that would cause collateral damage to others, then they might be able to count on the government to step in and bail them out.

This disconnect between the self interests of the players and the markets is not new, but I think technology and lax regulation have made it easier for the players to hide things from the market, and therefore the market may not be as good of a weighing machine as it had been in the past.

[Frugality_of_Apathy]

Quote:

Originally Posted by haha With all due respect, while you might(or might not!) be 100% correct at prognosticating economic conditions, that doesn't necesarily say much about capital markets. It's like being the genius who can pick 80% winners in the NFL, as long as he can pick without a spread. Capital markets are like betting markets- everything is priced by expectations. Ha

That's true but this isn't a game of football where you can run through the teams stats and have a pretty good idea what one team will do against another team. The expectations the market trusts are all from people who have been right for the last 35 years and so far the bulls have been right 95% of the time and the bears mostly wrong. everyone who went to school in that time has been taught that bias so everything is slanted to be more optimistic than is warranted.

A year ago, 6 months ago, and 2 months ago that same thing has been said over and over. That all these future mortgage failures and bank failures have been priced into the market so it's all up from here, also expect $200/barrel oil by the end of the year.

The dominant school is Keynesian and that school treats price declines and economic slow downs as some kind of superstitious mysticism where the markets decline but they don't know why and blame it on savings.

Nothing can expand forever; a Ponzi scheme works great until you run out of people to buy into it.

[Architect]

Quote:

Originally Posted by Frugality_of_Apathy The expectations the market trusts are all from people who have been right for the last 35 years and so far the bulls have been right 95% of the time and the bears mostly wrong. everyone who went to school in that time has been taught that bias so everything is slanted to be more optimistic than is warranted. A year ago, 6 months ago, and 2 months ago that same thing has been said over and over. That all these future mortgage failures and bank failures have been priced into the market so it's all up from here, also expect $200/barrel oil by the end of the year. The dominant school is Keynesian and that school treats price declines and economic slow downs as some kind of superstitious mysticism where the markets decline but they don't know why and blame it on savings.

This is all very true. The long run we've enjoyed was largely due to continually expanding credit - and an wonderful technology boom along the way. But one thing you can depend on in economics is that nothing grows uninterrupted to the sky forever. The trick is picking when it doesn't.

[Hamlet]

Be careful with Treasuries at these levels, especially the longer term ones. If we get any sort of return to normal interest levels, it is going to demolish long-term Treasuries.

If you run the numbers on the value of a 3% 30-year Treasury when interest rates go to 6%, it gets pretty ugly.

Everyone is talking about deflation right now, but with the government running those printing presses as fast as they can, I would expect that a year or two from now we will be talking about serious inflation again.

Just make sure that you aren't avoiding one risk and running smack dab into a worse one.

Quote:

Originally Posted by Texarkandy I've had my TSP heavily in equity funds over the years and made a little money, but had enough dumb-luck to move it all to the G Fund (Treasuries) in early 2007. To move any significant percentage of it back to equities after the events of the past year would take an extraordinary degree of market confidence on my part. This is not just a financial "game" I am playing - it's my life. Sure I'm not beating inflation with Treasuries right now - but I expect to "just" do so in future years with perhaps a little extra.

[Texarkandy]

Quote:

Originally Posted by Hamlet Be careful with Treasuries at these levels, especially the longer term ones. ....

I'm no financial wiz - but I don't think Treasuries issued for the TSP G-Fund are the same as others.

http://www.tsp.gov/rates/fundsheet-gfund.pdf

Perhaps someone more expert could enlighten me further as to the differences vis-a-vis fluctuating interest rates & inflation?

[Architect]

Quote:

Originally Posted by Hamlet Be careful with Treasuries at these levels, especially the longer term ones. If we get any sort of return to normal interest levels, it is going to demolish long-term Treasuries.

Unless you hold them to term of course, then you can reinvest at higher coupon or some other investment.

If you stay away from bond funds, rising interest rates are great as they allow you to increase your growth and income, if you're a buy & hold bond investor.