The Price of "Prudence"

[Cut-Throat]

Going all in, particularly in July '32.

But what was the right move after the head-fake correction in mid-1930? Selling it all and staying away for two years. If you got back in toward the end of the rally in early 1930, you got creamed.

Is this 1932? Mid-1930? Or (most likely, IMO) something in between?

Hindsight is wonderful, since it tells us what to do. Too bad it's over 75 years too late to be of use.

And even if we made the right move *now*, do we know when to change direction? I think a lot of us don't. Which is why we may tinker on the edges -- particularly now with more people building more protection against inflation and depression in their portfolios and some people lightening up their AA a bit -- but for the most part, core investment strategies haven't changed much.

Some of the people who went too defensive in the early 1930s may have missed the explosive recovery in late 1932 and 1933.

Don't worry we're all dead in the long run.

And there is only hindsight - No one knows the future or the right moves. But history is a good guideline for the wise.

 

[bbbamI]

Dear Prudence open up your eyes
Dear Prudence see the sunny skies
The wind is low the birds will sing
That you are part of everything
Dear Prudence won't you open up your eyes?

Beatles

 

[unclemick]

Hmmm - 60's and 70's - bags of silver coins, 10% in a goldmine (non working), timberland (with Spotted Owls), freeze dryed food.

Some things actually did work out - like pssst Wellelsey, 12 gauge pump and AR 7(22 cal) were a lot of fun. So was my backpack take down fly rod and survivalist tackle box.

As to actual ER - Index 500 and fixed rate insurance investment contracts (401k) versions of the 50/50 Ben Graham defensive investor or Bogle's 60/40 policy portfolio turned out to be the horse I rode in on.

'God Looks After Drunkards, Fools and The United States of America.'

Faith and time in the market.

heh heh heh - the other stuff I tryed/experimented with over 4 decades made great stories at parties. .

 

[HFWR]

Dear Prudence open up your eyes
Dear Prudence see the sunny skies
The wind is low the birds will sing
That you are part of everything
Dear Prudence won't you open up your eyes?

Beatles

Yeah, I thought of that too...

The "White Album" was a masterpiece. I'll have to remember to take it into the bomb shelter with me...

 

[harley]

In one of the books I read, the author tries to protect a trivial amount of wealth by literally spending hundreds of thousands of dollars (and getting in further debt in the process) to acquire a second citizenship, guns, Swiss bank accounts, survival gear and what not. He clearly thought that being prepared for whatever disaster was the "prudent" thing to do and that the money was well spent. But what if the world doesn't end? His extreme "prudence" might have costs him a shot at financial independence or worse...

Which book was this? I'm curious about the "what not" because he could have done all the rest of it for a few thousand, maybe a few 10s of thousands. I like reading about survivalism and offshoring. Not that I would ever do it, but it tickles my anarchist tendencies. One of my favorite fiction book series recently is Lee Child's Reacher books, which wander around the "off the grid" concept. Just fun stuff.

 

[Nords]

C'mon, 30 posts and no one has mentioned Taleb yet?

But what's an extreme? Going 10% into gold? 20%? 50%?
Selling all your stocks? Selling half of them? Deciding to ratchet down your AA a bit because you realize you overstated your risk tolerance (guilty as charged)?

How about a portfolio of 100% Treasuries and selling S&P500 options?

 

[yakers]

100% treasuries, that was the recommendation in Your Money Or Your Life. Love the book but never liked the financila advice, maybe he wasn't so far off>

 

[Bimmerbill]

If I had the money I woudn't mind building a nice camp/bunker in the middle of 500 acres somewhere remote.

I do try to keep some ammo (its expensive as hell right now, hard to find) on hands and am working on a decent canned goods supply just in case.

Its a small thing, but I think I feel better knowing that I'll have food if there is a disruption in the food supply for whatever reason. I started the canned food pantry during the H1NH initial outbreak. I need to get more...

 

[audreyh1]

My strategy for handling the doomsday scenario is to enjoy life as much as I can today, so that when life as we know it comes to an end, I can feel that at least I made the most of it when the making was good.......

Audrey

 

[Urchina]

\ and am working on a decent canned goods supply just in case.

Its a small thing, but I think I feel better knowing that I'll have food if there is a disruption in the food supply for whatever reason. I started the canned food pantry during the H1NH initial outbreak. I need to get more...

I think this is just plain common sense, especially considering the fact that there are few places in the country that aren't prone to natural disasters of one kind or another. Isn't the FEMA recommendation two weeks' worth of food and water stored at home for emergencies? I think that definitely qualifies as "prudent." Even beyond that... to a certain degree.

 

[unclemick]

Agile, mobile and hostile.

Pre Katrina our 'fish camp' was was 12 foot above Lake Ponchartrain - they esimate the storm surge may have been as high as 35 feet. I watched CNN in Memphis.

Couple years ago - ice storm here in Missouri - after two days without heat/electricity - went to visit friends in Alabama.

Tornado siren is about 1/4 mile away - and I have a basement.

In my old age - that's about as far as I'm willing to go in 20 minutes.

heh heh heh -

 

[John Galt III]

My sense of doom and gloom comes from the sense that the system is rigged and gamed by the few cogniscenti, and also that we are dependent upon fellow humans to do the right thing and to do their jobs well, or not ( regulators asleep or uncaring/bribed; mortgage brokers making awful loans to deadbeats, pocketing the commission risk-free to the broker, passing the bad loan down the line, all legal, all permitted by the "law". Huge financial institutions who profited from the scam being bailed out by the prudent taxpayers.)

So, one can get out of the game, and keep all his/her money in cash or CD's, but then the huge bailouts for the sleazy financial institutions cause huge inflation and the cd's and cash are whittled away.

Maybe Obama got elected because we just saw how a "capitalist", "low taxes", "private enterprise" republicans-at-the-helm system can be gamed so that it reaches right into your very own independent, private, capitalist, entrepreneurial, conservative pocket and extracts your money (via bailouts) to give back to the Wall Street scum who stole it to begin with.

I suppose the reasoning is "Why have my money stolen by Goldman Sachs when I can have it stolen by the welfare state ? I might get some of my money back if it is stolen by the welfare state "

 

[free4now]

I think it comes down to a question of how well you trust your instincts. Some people really are good at predicting disasters (e.g. people who live in hurricane areas facing approaching hurricanes). People who have dangerous enemies may be quite reasonable to spend big bucks offshoring their money or burying gold bricks. But for most of us, fear drives us much further than reality.

The simple reality is that most things we fear don't come true. For most people an automobile accident is the most likely way to lose it all. I think it makes much more sense to spend on safety systems for the car, deadbolts for the house, and let most else go, than to be one of these people who commutes three hours a day from their bunker in the woods.

 

[audreyh1]

There is a big difference between contingency plans for a natural disaster (having food, water, cash on hand, evacuation strategies) or a bad bear market, and the kind of wholesale doom and gloom world-ending scenarios that call for living in a secret bunker and hoarding gold and ammunition. I think it was this latter scenario that the OP was referencing.

Audrey

 

[redduck]

For example, one of the blogs I was reading last night had a link to an article of dubious journalistic quality which claimed that US Embassies abroad are being instructed to purchase at least a year's worth of local currency, and to have it done by the end of summer. The speculation of the article's author was that a US bank "holiday" was going to be declared for a while this fall, making regular banking transactions nearly impossible, and so folks should (presumably) have a lot of cash on hand at home just in case.

How likely is this to happen? I have no idea. How valid is the information in the report? Who knows?

You really have "no idea?" I bet you have some idea.

 

[TromboneAl]

Moderation in all things

Including moderation (seriously).

 

[audreyh1]

Oh, man, get all recursive on me why don't you! LOL!

"Let us be prudently prudent".

Audrey

 

[W2R]

Oh, man, get all recursive on me why don't you! LOL!

"Let us be prudently prudent".

Audrey

"Let us be prudently prudent, Prudence, preparing the prunes!"