finance

u r all saavy educated, diverse people. is there about to be another market bubble burst? bonds? is anthing safe? please lets talk about what you expect....gold took huge dip..why? is it buying time?

lets have a free wheeling exchange. gs has so many bright, educated people.

Should people go to cash? I have bonds and lost 3 percent-worried sick re money...whats the prognosis?

I am far, far, far from an expert, but here are my thoughts. (Disclaimer: Don’t do anything I recommend! )

First, are you planning for the long term? Second, can you tolerate the risk of temporary loss against the expectation of later recovery?

If yes to both…

1. Inflation will eat up all “safe” money (like cash, money market vehicles, etc.). This is true even for the moderate amount of inflation that we have now. In the future, sooner or later we will have to address the seventeen trillion dollar national debt. I do not see any way of paying it down, or even of servicing it, except to print more money. This could cause huge inflation in the future, seriously affecting the buying power of people on fixed incomes (like an annuity). Also, Social Security is in big trouble and may not be able to keep up with inflation by cost-of-living increases in the future.

2. Right now the Fed is keeping interest rates unnaturally low in order not to disrupt the fragile recovery. In general, low interest rates are good for stocks and bad for bonds. So right at this moment the Dow is at an all-time high and bonds are not earning anything. This will change as the Fed gradually raises interest rates over the next couple of years.

3. Just speaking for myself, I would not invest in gold (much less in specialty stocks, commodities futures, etc.), because I know nothing about what economic conditions make these vehicles go up or down. It is just a crapshoot to a non-expert.

4. In the very long run common stocks have historically returned pretty close to ten percent, handily beating all other forms of investment. But in the short run, they are up one year, down the next. If you are depending on dividends or systematic withdrawals from equity accounts for day-to-day living, you need some kind of guaranteed floor.

In the next decade or so the baby boomer generation will be entering retirement. The reason the stock market has done so well over the last several decades is that the baby boomers acquired an immense amount of collective wealth and had nothing to do with it but invest in the stock market. When they all retire they will take their money out if the stock market and use it to live on. This could cause the market to underperform in a big way.

But maybe not. The new millionaires will have the same problem as everyone else – what to do with their money. They might decide that there is no better option than to plow it back into the market.

For the long haul I do not see any better option than to create the most diverse portfolio you can come up with. Mutual funds that invests in a broad mixture of large and small cap and growth and income common stocks, international equities (not too long ago the U.S. markets did about two-thirds of all the trading in the world, now it is about one-third), municipal and utility bonds (don’t buy any city of Detroit bonds, though ), fixed-rate principle-guaranteed money market offerings, even U.S. treasury notes. IMHO I trust the managers of these funds to be able to keep my holdings balanced and in tune with current trends better than I can (plus, I don’t want to spend the time or to endure the headaches of managing my own money). Diversify, diversify, diversify.

Anyway, that’s what I think. YMMD.

ty mm!

That sounds like a good way to plan, Mathman. Everyone I've talked to seems to feel that this approach makes for the best outcome in an uncertain world. And, as you say, a reputable and trustworthy financial company has people who spend their time doing the requisite homework that most of us can't do, so a mutual fund or other plan from one of those institutions can be one way of keeping one's nest egg well nourished.

A direct bet on the market can be made by buying into an index fund, which is one of the options in my 401K. I've used it for years and since as MM pointed out, when interest rates are low, people have no choice but to buy into the market.

Right now, you can get better interest on your money by storing it under the bed or in a safe deposit box. Bank interest is so low that your resulting gain every year is a loss, since you keep paying the bank from time to time to take your money out via ATM's, not to mention checking charges & other fees. Not that I recommend keeping money under the bed. But it's sad. Under the bed storage is a 0% rate of return, a safe deposit slightly lower due to the yearly charge.

IMHO for a moderate investor the twin hobgoblins are fear and greed. If your holdings go down on Tuesday, don't rush to sell on Wednesday. (You should have sold on Monday, but who knew? )

Steady as she goes. :yes:

Old saying about the stock market:

Bears make money.
Bulls make money.
Hogs get slaughtered.

dorispulaski said:

A direct bet on the market can be made by buying into an index fund, which is one of the options in my 401K. I've used it for years and since as MM pointed out, when interest rates are low, people have no choice but to buy into the market.

Right now, you can get better interest on your money by storing it under the bed or in a safe deposit box. Bank interest is so low that your resulting gain every year is a loss, since you keep paying the bank from time to time to take your money out via ATM's, not to mention checking charges & other fees. Not that I recommend keeping money under the bed. But it's sad. Under the bed storage is a 0% rate of return, a safe deposit slightly lower due to the yearly charge.

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Get thee to a credit union. Unless you're a billionaire or bigger business you don't need to have a bank. A credit union has all the same "fail safes" as a bank, yet they answer to the members (account holders) not share holders (As you are a shareholder).

the rates suck interest wise at the credit unions, too, but at least you're not being charged outrageous fees like if you were with Wells Fargo or other prominent banks.

Actually my local bank Webster Bank, (which is a real local bank) gives me a better deal than the credit union I used formerly but neither has interest that amounts to anything.

dorispulaski said:

Actually my local bank Webster Bank, (which is a real local bank) gives me a better deal than the credit union I used formerly but neither has interest that amounts to anything.

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each establishment is different, I would just be sure to do your homework with every way you go. I know of all the options any of the credit unions in Alaska will do better than the banks for their account holder.

My credit union quit giving free checks, and it had very few ATM sites, so I kept finding myself paying ATM fees. Then it started holding checks that we deposited for over a week without crediting them.

That was that.

However, for various reasons, we need a local bank. Most of our real stuff goes through the old IBM credit union in Vermont, but we've switched to Webster for local stuff in CT.

dorispulaski said:

My credit union quit giving free checks, and it had very few ATM sites, so I kept finding myself paying ATM fees. Then it started holding checks that we deposited for over a week without crediting them.

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ugh, that's probably a sign that they aren't doing well... probably a good idea to get out. The one I'm with is pretty small nationally but with shared branching I can go into most credit unions in the country and at least get basic needs met when I can't get to my regular CU.

That sort of works. Supposedly credit unions give free ATM privileges to members of other credit unions, but I haven't had much luck with this option in FL. Often it appears that everything in FL is set up to gouge the visitor, including the banks. We set up a small account there to get free ATM, which seemed to work OK.

dorispulaski said:

That sort of works. Supposedly credit unions give free ATM privileges to members of other credit unions, but I haven't had much luck with this option in FL. Often it appears that everything in FL is set up to gouge the visitor, including the banks. We set up a small account there to get free ATM, which seemed to work OK.

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I wouldn't doubt that is exactly what's happened. I would have to look up the shared branching info from my CU to see if we get coverage in FL. I know in California where there are several branches of my CU you have to sometimes drive an hour out of your way to find an ATM or CU that will work with you. It really depends on the state, I suppose, and what type of banking you do on a regular basis.

But for most nickel and diming fees that banks have CUs *typically* don't have them. As long as you keep the min balance in the account at mine (which is a whopping 5 bucks in the basic account) you are a member in good standing and you don't get hit with any fees.

Folks-is a crash imminent? my brother has a 401 k. he feels he will go to cash, as he can. i have an MS trust with diff rules. Bonds did ok, but know they are losing and several econs says bond is next big burst. I see Newsmax videos and its terrifying. There is no way to pay off the debt, the dollar has lost 40 percent of purchase power since 2008. My brother reads zerohedge.org and it speaks truth.

He is now the trustee but wants me to make decisions I have no knowledge of. MM, Im sad to say I was excellent at all but Math, but memory issues since age 28 derailed my magna cum degree. I have never taken economics. It seems that some other currency could become the world currency? How soon? it seems if you know how to bet against things-options-that will be where money is made.

I am worried sick, alone, and wonder if the govt shuts down, what happens to me alone. I really wonder if it is time to be agressive, as the Banksters plan to steal what they can find. Please read zero hedge....it seems a matter of time-there is no way to deal with the debt? or is there?

Please continue discussion as we are all affected and in mostlt same American/global boat. Bless you.

Does anyone understand how gold had 35% yanked overnight? My 10 little pieces lost about 6,000.00. Is it now the only thing to buy? Who had power to cause this and why? MM, can you research and give a best guess? Are you a math prof or econ? TY.

I am looking to relocate to a skating family house. If you need money, see the collapse imminent, I want to leave this state and start over. Share house? Rent room? I will have to do it. Lord bless us and protect our nest egs for there go we as poverty cases.

Skate fans are the best-music/dance/sport...no one like us GS die hards! And everyone here seems so knowledgeable. When is the predicted market crash? I admit I'm so afraid, alone and-u know.

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 said:

Folks-is a crash imminent? my brother has a 401 k. he feels he will go to cash, as he can. i have an MS trust with diff rules. Bonds did ok, but know they are losing and several econs says bond is next big burst. I see Newsmax videos and its terrifying. There is no way to pay off the debt, the dollar has lost 40 percent of purchase power since 2008. My brother reads zerohedge.org and it speaks truth.

He is now the trustee but wants me to make decisions I have no knowledge of. MM, Im sad to say I was excellent at all but Math, but memory issues since age 28 derailed my magna cum degree. I have never taken economics. It seems that some other currency could become the world currency? How soon? it seems if you know how to bet against things-options-that will be where money is made.

I am worried sick, alone, and wonder if the govt shuts down, what happens to me alone. I really wonder if it is time to be agressive, as the Banksters plan to steal what they can find. Please read zero hedge....it seems a matter of time-there is no way to deal with the debt? or is there?

Please continue discussion as we are all affected and in mostlt same American/global boat. Bless you.

Does anyone understand how gold had 35% yanked overnight? My 10 little pieces lost about 6,000.00. Is it now the only thing to buy? Who had power to cause this and why? MM, can you research and give a best guess? Are you a math prof or econ? TY.

I am looking to relocate to a skating family house. If you need money, see the collapse imminent, I want to leave this state and start over. Share house? Rent room? I will have to do it. Lord bless us and protect our nest egs for there go we as poverty cases.

Skate fans are the best-music/dance/sport...no one like us GS die hards! And everyone here seems so knowledgeable. When is the predicted market crash? I admit I'm so afraid, alone and-u know.

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Skateluvr, there are a lot of people that share your anxieties, and I sympathize. If I may, I will offer a few tentative thoughts:

-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.

thanks guys.

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....

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.