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It's not as dire as all that. Zero Hedge has a reputation for Chicken Little agitation ("the sky is falling!") Then when some segment of the economy experiences a downturn they say, "See, we told you so!"
The stock market is so hot right now (or at least up until a week ago) that it has to cool off. It declined in the past week because of the fear that the Fed might raise prime interest rates sometime in the future. If you are worried about declining stock values for the rest of the year, that just means that you will have to give back some of the huge gains that you earned in the second and third quarters of 2013.
Bonds are languishing at the moment, but nothing to panic about.
I look at it this way. If the whole economy does tank, like in 1930, there is nothing I can do about it anyway. No investment is safe, and neither is stuffing money in my mattress (because of hyper-inflation).
If I had a few hundred thousand $ extra to take a flier with I would invest in India. China is running out of steam and India, despite very uneven distribution of wealth, just keeps chugging along. I think India is about to make us sit up and take notice, economically. India is the largest free enterprise (sort of) democracy in the world and they have achieved economic growth without micro-managing the national economy or violating citizen's human rights. Their population is very well educated, especially in technology-related fields.
IMHO the United States' biggest foreign policy blunder of the second half of the twentieth century was in ignoring India. The reason was that we needed to cozy up to Pakistan to keep a military presence at the eastern end of the middle east. This drove India into the arms of Russia. Now we are way behind in terms of political and economic partnership with India.
(OK, that last bit was off-topic. I am not going to pull all my U.S. investments and ship them to India.)
Skateluvr, there are a lot of people that share your anxieties, and I sympathize. If I may, I will offer a few tentative thoughts:
Originally Posted by skateluvr
-In answer to your direct question with regard to gold: gold is the classic hedge against inflation. Historically, investors bought gold (an element that is very finite in quantity, which quantity does not increase/decrease easily) when there are worries about inflation (very simply, inflation is caused by an increase in the quantity of money in the economy that outstrips the increase in goods and services). The fact that gold has lost value is a prima facie indicator that the market consensus is that inflation is not a major concern in the foreseeable future. If anything, a very sharp and significant drop in the value of gold is a possible sign that the markets are concerned about the opposite: continued economic sluggishness.
-My own view is that cash and fixed income will not yield significant returns in the current environment. The Fed is still in pump-priming mode, so interest rates will remain low until we begin to see stronger signs of recovery in the real economy.
-What are some of the signs that the economic recovery is accelerating? At some point, although it may be difficult to see and feel right at this moment, the econonomic recovery (which is still somewhat lackadaisical) will once again show signs of robustness (GDP growth goes up, unemployment goes down, asset values in general, including, critically, housing prices, rebound to the point that they once again represent significant positive equity value (that is, market value minus mortgage) for a broader segment of Americans). It is at that stage of the economic cycle that rates will increase, as the Fed tries to put the brakes on, which they hope will be sufficiently in advance of signifcant inflationary pressure building up to undesirable levels.
When will this happen? No one can say with certainty, not even the Fed. At the current juncture, though, many thoughtful market observers think that it will take a while.
-Markets go up and down, in largely unpredictable short-term patterns, day by day, hour by hour, minute by minute. Trends do not reveal themselves in smooth, predictable curves. If you go chasing after short-term trends, particularly as a modest retail investor, it is likely you will get burned, for a variety of reasons. Investing is best done when you are set up to pursue objectives on a more extended time horizon.
-Unless you have the time, inclination and commitment to acquire a high and systematic level of knowledge, I would strongly encourage you to seek good professional advice in managing your investments. If you are not high-net-worth, avoid individual brokers (they are usually called "Financial Advisors"). I suggest you meet a few representatives of large fund managers with good reputations and strong long-term records of fund performance.
It is important that your investments are tailored to your specific situation and investment goals, and a good fund manager with the characteristics described above will have the resources and capability to steer their clients in the right direction. If you go this route, try to find a fund manager who meet the objective criteria, but next, who you feel comfortable with in terms of communication and responsiveness.
-I have given you some personal views, but when you meet with the fund managers, you should ask them the exact same questions. They should be able to provide answers that satisfy you in detail. Be very suspicious of those who say they can definitely know what will happen in the future, or who can "guarantee" you certain returns. No one can do that. If they could, they wouldn't be working for a living. Look for strong, thoughtful, and detailed views, but also an institutional set-up that emphasizes contingency planning and safety nets.
-Zero Hedge is very fringe stuff. Interesting to peruse, but it should not, IMHO, be the primary basis for investing substantial chunks of your net worth. Remember, this is a site whose incentive is to increase eyeballs, and one of the tried-and-true ways is to say provocative, controversial and colorful things. They have absolutely no fiduciary responsibility to increase the value of your investments, or to keep them safe. Can they occasionally have ideas worth thinking about? Sure they can. And if you were independently wealthy, with the training and the temperament to separate the financial wheat from the chaff, then it's a different story. If this is not you, then you may want to take it with bags of rock salt.
-I don't really want to go into my background, but your post hit a chord with me, so I'll just say that I have much more than passing familiarity with these topics. Good luck.
Bona Fide Member
I would only add that I feel for anyone trying to even preserve capital at this point, let alone make money.....When I was saving heavily for retirement in the 1990s, making money relatively safely was easy. Not so long ago, It was nothing to buy a 5 percent tax free muni bond (insured) on the secondary market. Now people would kill for one....
If you feel that the national defecit and the national debt will go down, manufactureing jobs will return to the US, crime will decrease, the concentration of wealth will reverse, then put every cent you have into the market. But consider this...
The stock market used to work in a very different way. People/banks would study a stock, then make a decision on whether or not is was a good buy or not at its current price. And buy it or not.
Now, the country is full of fund managers. Every month, working folk in say the Washington State Retirement fund give the fund manager millions of dollars to invest. That fund manager has no choice. He /She goes out on the market and competes with other fund managers for stocks. If people can not afford to allocate parts of their paychecks to the WSRF and cut back their monthly deductions, then the demand drops....and when those folk retire, as Mathman pointed out, the demand drops....I do not like that system right now for my funds.
It is possible that the democrats will get solidly in power, pass Eisenhower administration type tax brackets to redistribute the wealth, that congress will pass tarrifs on the Chineese and bring the manufactureing jobs home and put America back to work, and congress will raise the gas tax so that the true social cost of gasoline pays for infrastructer repair, new construction, maimed families, etc....further putting America back to work....that the morality of the country will change so that people believe in doing an honest days work for an honest days pay and not have children if they cant afford them....that we stop going to little unwinnable wars at the drop of a hat....I have a dream....
Chris who wants to see Oprah pay 70-90 percent income tax on ever penny she earns over $3 million a year.....and the money go to people who want a hand up, not a hand out....
Bona Fide Member
Thanks chris, I wish these things would happen, your innate since of fairness to all mirrors mine.
I think Oprah pays 15%. It boggles the mind. It should be 38 percent. She still has huge homes everywhere. She is quite detached from most Americans.
Figure Skating Is A Dangerous Sport
Your opinions are great...thanks for sharing. When you want to invest, do you go to large companies, for instance, Nationwide, Ameritrade and others or to your local bank investors??