Dow Jones Industrial Average

[gregintenn]

Don't know about any epic "meltdown" but you're going to see the real market worth break through as soon as investors find out when the fed spicket will be turned off.

...and that'll be roughly when?

[tnguy]

I agree which is why I'm maxing out my 401K(based on what my employer contributes). Also, as soon as I have the funds I'm opening a Roth IRA. 
 
Lastly, if I had the money I would probably spend $100-200 a month buying up silver and gold. Real estate may be an option also. The house I bought sold for over $200K before the bubble. I only paid $137K so I'm hoping to make some money on it in a few years.
 
My GF's dad cashed out his 401K a few years ago and bought gold with the money. From what I could gather it was a smart move since gold shot up to $1,400 an ounce not too long ago.

At some point, government is going to see all that money hanging around in 401Ks and decide to help themselves to it. I'm still paying in but I'm not putting much faith in it being worth much when the time comes.

We have a demographic time-bomb going on. Private pensions will fare better than government overall but at the bottom line, it's all about the ratio of producers to consumers. Sooner or later, the producers will get fed up.

[Sam1]

Question, if the dollar strengthened, what would the stock market look like?  I am no expert, but I am not aware of problems with gold, even though gold values dropped significantly, which can be a sign of a strong USD.  I think the sequester did more good to the USD gaining strength than many experts would admit to.  Just my mountain hollar view point.

 

Problems with gold, there are plenty... first in my head would be when just a while back the bombardment of "BUY GOLD NOW THE DOLLAR IS CRASHING" advertisements, and posts and threads everywhere when gold shot up to $1800oz earlier in the year and people were scrambling to buy it.

 

Now every sucker that got into it has lost 30% of their investment cause it's back down to normal pricing.

[Guest Lester Weevils]

So what was the big winner for investors? Certainly not CD's. Not real estate; at least not in Tennessee. Precious metals haven't exactly wowed lately. Where is the right place to invest?

I don't have much money to risk, and have been following the old money in the mattress strategy. The bank and bonds pay so low that burying it in a hole in the woods doesn't lose much more value than keeping it in a bank, over a small time period of a few years anyway.

I've got so much aggravation at banks I don't want em to have more than a minimum amount of my money to speculate with. And in a tight spot maybe they won't even give the money back.

Just makes me too nervous to give my hard earned money to some shyster in an expensive suit. Always made me too skeered to "invest". Bought a second little house as a money sink. If everything quadruples in price from inflation, then probably the little house will be worth about as much "in real terms" than what I paid for it.

Its a problem what to do with money. Maybe metals will tank even more, but on the buy low sell high principle, if metals stay low for awhile I'd risk them tanking even more, and buy some. Ain't trying to get rich, just avoid being penniless.

[Sam1]

...and that'll be roughly when?

 

Whenever the fed decides to cut off QE3, this isn't some type of theory and I'm not a doomsday market prepper kinda guy.  But if you know about the market, you would understand that the fed pumping $75,000,000,000 into it each month is artificially inflating it.  The investors make money no matter if the money comes from the public, from the industry or the government.

 

Once QE3 is gone, we are not going to magically see a substantive influx of money coming in from the non-gov sources.  This issue has been discussed even before QE3 started

[tnguy]

Problems with gold, there are plenty... first in my head would be when just a while back the bombardment of "BUY GOLD NOW THE DOLLAR IS CRASHING" advertisements, and posts and threads everywhere when gold shot up to $1800oz earlier in the year and people were scrambling to buy it.
 
Now every sucker that got into it has lost 30% of their investment cause it's back down to normal pricing.

I think you have to accept that there's some risk of loss of value for certain things but that the risk is still better than some other things. There are definitely times not to buy though and the recent gold rush is one of them in my mind.

Probably the best advice is to make a plan and stick with it. Don't go with your emotions because they'll steer you wrong.

[tnguy]

I don't have much money to risk, and have been following the old money in the mattress strategy. The bank and bonds pay so low that burying it in a hole in the woods doesn't lose much more value than keeping it in a bank, over a small time period of a few years anyway.

I've got so much aggravation at banks I don't want em to have more than a minimum amount of my money to speculate with. And in a tight spot maybe they won't even give the money back.

Just makes me too nervous to give my hard earned money to some shyster in an expensive suit. Always made me too skeered to "invest". Bought a second little house as a money sink. If everything quadruples in price from inflation, then probably the little house will be worth about as much "in real terms" than what I paid for it.

Its a problem what to do with money. Maybe metals will tank even more, but on the buy low sell high principle, if metals stay low for awhile I'd risk them tanking even more, and buy some. Ain't trying to get rich, just avoid being penniless.

The problem with mattress stuffing is that the government is currently helping themselves to that wealth anyway. Currently inflation is probably running realistically at about 3%. That compounds over time as well. You could easily see those savings drop 25% or more in real terms over the course of ten years and if hyperinflation hits, they're gone.

 

 

[Sam1]

I think you have to accept that there's some risk of loss of value for certain things but that the risk is still better than some other things. There are definitely times not to buy though and the recent gold rush is one of them in my mind.

Probably the best advice is to make a plan and stick with it. Don't go with your emotions because they'll steer you wrong.

 

Agree 100% and we are still buying silver regularly just because.  We were paying a spot price of $30 a few months back and are now paying about $20.  I don't consider the previous purchases a loss because it's a long term investment for us and we've been on the same plan for years.  Metals only hold the value of availability and demand, if someone discovers a massive deposit of silver next week in Africa, then it could drop down to $10oz next month... You just never know and that's why I always advise against getting into metals to make money on just because a TV commercial says it's a good idea.

[tnguy]

That's another good point you raise there; dollar cost averaging. Don't sink a huge amount of money in at one go, invest slowly over time. You cut your potential gain but you also cut your potential losses.

 

One other opinion I have (and I'm assuming you'd agree), buy the real metal, not just certificates. If you can't hold it, you don't own it (Bitcoins are a little bit different there though).

Edited January 1, 2014 by tnguy

[Sam1]

Yeah we buy actual, and do it locally whenever possible and only in 1oz bars, nothing larger, and no coins.

 

Not sure why people buy paper gold/silver, it's more useless than putting the money in funds.

[Guest Lester Weevils]

The problem with mattress stuffing is that the government is currently helping themselves to that wealth anyway. Currently inflation is probably running realistically at about 3%. That compounds over time as well. You could easily see those savings drop 25% or more in real terms over the course of ten years and if hyperinflation hits, they're gone.

Yep, it depends on one's age, timeframe, and level of risk aversion.

Last time I looked you would be really lucky to make 1 percent on bank instruments, so bury the money in a mason jar the woods and you lose 3 percent over a year versus losing 2 percent (or more) burying it in a bank. Over a short number of years it don't matter much, expecially since there have been times when the bank won't give it back at all. There has been talk of banks charging you to take yer money, and in japan the gov bonds were paying negative interest sometimes, charging a fee for "keeping your money".

I won't give the gubment any money for bonds. Cashed out my gov bonds some time back. That is as sinful (and unwise) as giving an alcoholic your extra booze "for safe keeping". :)

As best I can tell, annuities play the market with new money and stash the proceeds in gov bonds, so if the market crashes and bonds stay flat, that annuity will be almost identical to money buried in a mason jar. Except if things get bad enough the annuity managers might not be in a position to give the money back.

A hard working young person with a stack and long term goals, it would be difficult to figure a good way to go.

It is just another aspect of entropy. Basic thermodynamics. Charge a battery, and you don't get as much out as you put in. Everything has an entropic shelf-life and on average ends up worthless at some time or t'other. Seems the same entropic hurdles storing wealth over time. Edited January 1, 2014 by Lester Weevils

[analog_kidd]

I think real estate is still a pretty good investment. Property costs are still low and I don't see them really going back down now. Your real money maker will be in investment property (rentals), and not so much a residence. Buying a house as a residence is still a good idea, especially if you are renting now, but a residence is not going to make you money, unless you downsize at some point. Your residence may increase in value, but you'll likely just transfer that value to another house if you decide to move.

 

Real estate will hold its relative value if hyper inflation ever hits us. For instance if everything doubles in price over night, a $100k house becomes $200k, but $100k in a bank is still $100k. If the cost of everything doubles, I can sell the house and still buy the same amount of goods as I could have before the jump.

 

The beauty of investment property is you put out a little bit of money to buy the house and then someone else pays the mortgage for you. Plus, the value of the property increases over time so that is an added bonus.

 

I've got two rental units where on each I invested a little money to fund the down payment and repair costs. They were both fixer-uppers, and when I got done, they were worth a lot more than what I had in them. Since I worked in all that equity, the bank let me refinance all of my costs and I was able to pay myself back my initial investment. At this point I have not payed anything out of my own pocket. The loan on the units are half of what they are worth, and someone else is paying that mortgage. The rent income on each is way more than double the mortgage, so I have a plan to pay off both houses in just a few years.

[jgradyc]

I believe that QE is artificially inflating the market. Traders are buying because money is still flowing in at nearly a TRILLION DOLLARS A YEAR.  Cutting QE from 85b to 75b per month is really nothing. 

 

The big institutional traders are like strippers dancing at a drunken frat party that's getting out of control. They all see it's out of control, but they keep dancing because that's how they make a living... but they're all keeping one eye on the door. At the first real sign of breakdown, there's going to be a mass exodus. 

 

I'm not a gold bug, but when everyone says gold is going down, I'm a bit of a contrarian. I think the GDXJ (Junior gold mining stocks) at 31 now will do really well over the next 4 years, so I plan to gradually invest in it.

[gregintenn]

Great discussion guys! Thanks for participating. I love to hear other peoples' opinions. Keep em coming.

[TMF]

Yeah we buy actual, and do it locally whenever possible and only in 1oz bars, nothing larger, and no coins.
 
.

Always been curious how normal folks can reliably liquidate precious metals at market price.

[Sam1]

We don't liquidate, only acquire. :) 

[Guest Lester Weevils]

http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

Cheery little article.

[Guest Lester Weevils]

http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=110D8-1&utm_source=taboola&site=nationalreview

Even more cheery stock market prognostication, from the economists who predicted the 2008 meltdown.

[Hershmeister]

Stocks are valued based on the present value of all future cash flows. While money is cheap, companies can make investments and borrow working capital for low rates. Its not only about the future sales, but also these issues. Companies have been cutting the expense line to hit earnings - thats why so many lay offs and lack of raises. I still invest in the market and left all my stocks/401 alone through the 2009 crash. I do feel strongly that its a smart play to take advantage of the current low rates and use that as leverage for real estate. No one will ever loan you hundreds of thousands of dollars for anything else. Buy a 250k house for $50k down and 4.5% interest that you can write off to an effective rate of 3% is a no-brainer. Also youre borrowing money cheap when you know interest rates are going up. It goes against everything i believe in otherwise financially, but its the only thing that makes any sense in this enviornment

[gregintenn]

You won't make me believe that borrowing money to invest is a good idea. It wasn't very long ago that real estate tanked and everyone was crying about "being underwater".

 

I do appreciate your opinion, but I prefer to stay above water and out of debt.

[Guest Lester Weevils]

Low interest home loan, viewed historically is good sense. The first few years of payments seem high, but after awhile the payments are lower than apartment rent "thanks" to inflation.

In the past job income has "kinda sorta" tracked inflation, though constantly slipping a little at a time, except for the one percent, who pay increasingly high percentages of fed income taxes simply because they make an increasingly high percentage of the cumulative income. Am not making a class warfare argument, but have spent a goodly bit of time studying IRS published data, and the truth am the truth.

For a big house loan to be a no brainer into the future relies on the assumption that one's income will track inflation. Which seems the higher probability the higher one's annual income may be. But to somebody near the middle it might be a risky assumption as long as unemployment stays high, which increasingly is looking like the new normal. Edited January 4, 2014 by Lester Weevils

[Hershmeister]

If one expects inflation then buying things "today" is better than buying pricier tomorrow. A house lets you maximize that. Also, to achieve any investment return above the market generally requires leverage. Each person of course must gauge their risk tolerance and expected future cash flows as well as the certainty of those.

[Oh Shoot]

I don't have much money to risk, and have been following the old money in the mattress strategy. The bank and bonds pay so low that burying it in a hole in the woods doesn't lose much more value than keeping it in a bank, over a small time period of a few years anyway.

 

Lester, GE Capital Bank pays .9% on savings, compounded daily, FDIC. Completely liquid. Better than any brick and mortar I know, and better than any CD I know right now. I stashed most everything there for a while as CD rates bottomed out.

 

https://www.gecapitalbank.com/en.html

 

- OS

Edited January 4, 2014 by Oh Shoot

[Glenn]

:rofl: Almost makes me nostalgic for the Carter years, when CD's were paying 15% or more. :rofl:

[gregintenn]

 

If one expects inflation then buying things "today" is better than buying pricier tomorrow. A house lets you maximize that. Also, to achieve any investment return above the market generally requires leverage.

I'm with you till you get to the "leverage" part. How is having debt on a piece of investment real estate better than having cash invested in the same property?