Well those old fogeys and their old fashioned ways of working up the money to pay for what you buy and eschewing debt and spending within their means don't look so stupid now do they?
It's called "wisdom." Meaning they've been down that road before and maybe you should shut the hell up and listen to them so you don't make their same mistakes. Oh, never mind, Obama's gonna fix it all, ponies and puppies for everyone!
Yeah.
ReplyDeleteBest thing I've done recently is to have a substantial amount of money in cash.
My now 4-3-201K is a joke in comparison.
For my next trick I'm putting my money into a currency that's not going to be hit by massive inflation.
ReplyDeleteBetter update that image...
ReplyDeleteIt is down 299. Bet it closes down at 301.
I say we see Dow 5,000. Not "break into 5,000 range" like 5,930.
ReplyDeleteI mean 5,000.
In the meantime I have a nice pile of Yuan to get me out of the country if necessary.
Okay, but here's the question:
ReplyDeleteWhat should you do with your retirement savings?
Sure, we could put it in mattresses, but that gets 0 returns, so won't even keep up with inflation.
I'm trying to figure out what to invest in if we've bailed out of the market. And I'm not coming up with anything good, but I'd honestly like some opinions.
Come on now Captain...
ReplyDelete1938, the last time people were probably stuffing money under their matresses, the CPI was 14.2 and the Dow was at 133.88.
Had they BOUGHT instead of stuffed their money under the mattress, EVEN if they sold today they would have earned a 5.7% rate of return, beating the 3.9% inflation rate over the same time period. So, yes, buying the DOW would have been better than stuffing the money under the mattress. Had they done that... they would have... uh..$133 under their mattress as opposed to $6,700.
Secondly, everyone is selling now that the market it tanking. THIS is not the time to sell... the time to SELL was in the summer of 2007. Had our same mattress investor sold at that point, they would have realized a rate of return of 6.9% beating the the 3.9% inflation they experienced. Grampa who stuck his money under a matress still would only have $138. Again, in 2007, at that point, all the guys posting here how they are losing money in their 401k were gloating about how well those same 401k's were doing.
How can we miss such basic concepts of buy low and sell high? Now we are in the time to buy. Will it go lower? Maybe, but it isn't going that much lower, compared to how much it's fallen. Either way, a 6700 DOW is a good long term investment.
Sheila,
ReplyDeleteAssuming you've paid off your debts, or at least refinanced them to a low fixed rate, you need a mixture of cash to protect against deflation, and gold to protect against inflation.
There's no longer any diversity in paper currencies; global trade has tied them all together. Any country that tries to maintain a stronger currency will suffer ruinous deflation and mass unemployment.
Forget about earning interest; the only profitable activity in a socialist country is lobbying the government to give you someone else's money.
How about krugerrands ?
ReplyDeleteYeah, a 5,000 Dow is certainly possible. That would put us just below the level at which Greenspan gave his irrational exuberance speech.
ReplyDeleteIt's certainly true that stocks have been overvalued since then, but they should be close to fair value now (which is not to say they won't go lower).
Where did you get Yuan? I thought access to that currency is heavily restricted for private persons.
ReplyDelete5,000 is quite a number. I think 6,500 is already low enough, considering the fact that the once insolvent banks are propped up by tax money, so the financial system does not collapse.
The "old fogeys" have been as stupid as Generation X, Y, etc., in the sense that they all lack fundamental economic understanding, which could have helped them realize when to jump off the debt train.
Those old fogeys were doing the right thing then, because they lived in a deflationary regime. Anyone who tries the mattress technique today would be wiped out by the oncoming inflation tsunami.
ReplyDelete"Sure, we could put it in mattresses, but that gets 0 returns, so won't even keep up with inflation."
ReplyDeleteThe stock market isn't even keeping up with 0 returns. :)
At what point will the American people get fed up and overthrow the federal government?
ReplyDeleteAs for Sheila's question, I don't have any good answers either. The problem with bailing out is that you have to decide when to get back in. I've never been able to figure out when things will turn around, but that is the day or days you want to be in. Even missing one day in the market if it's a very good day hurts a lot.
The one good thing is that many of us have significant capital losses, which provide significant offset of anything else that has a capital gain. You also can offset other income up to $3,000 per year joint or $1,500 year solo. This year with one move of a mutual fund to another fund in the same family, I offset $15,000 in capital gains, was able to take another $3000 off my income and still have losses to roll over for next year's return.
As badly as the market has been butchered, I'm concerned that the bailout spending, the non-stimulus package and the $800 billion additional spending to the budget approved last week, will cause high inflation.
Here's another chart starting from the day Obama was elected. we started at 9500, now we are under 7000
ReplyDeletehttp://s.wsj.net/public/resources/images/ED-AJ102_1obama_NS_20090302200015.gif
The other glaringly obvious disadvantage to the mattress technique is that once it becomes widespread practice, home invasion becomes a much more lucrative practice.
ReplyDeleteAnd once it becomes more lucrative, it becomes more common. And when a robber comes in with the idea that there's bound to be cash in the house...well...it's just not pretty.