The worst is yet to come. What should we be doing with our money? I know that Faber, Rogers and Schiff generally recommend staying clear of the market and to load up on precious metals and commodities.
Obviously, I’d avoid anything that depends on the value of the USD for potential returns.
If you had $100,000 to invest… what would you do with it? Gold, mutual funds and ETFs in the precious metals sector, commodities, oil stocks?
Thanks guys.
I’m pretty heavily diversified but I think I’ve got a quarter of my portfolio in gold. I like emerging markets stocks, foreign bonds, I’ve actually got some American indexes. Mostly small-cap but I’ve bought some large cap too.
You gotta think that while the long term fundamentals for the dollar are bad, it may not perform too terribly in the short term as lots of other countries are having problems too. Moreover, inflation isn’t necessarily bad for stocks if all that capital flows into equities. So again, I think the theme should be getting ready for inflation and yields to rise but in the short term to mid term, it don’t think it will hurt to own equities and some bonds. I don’t buy stocks or bonds specifically though, it’s all indexes.
The other thing to consider is that while the money supply has been hugely expanded, there are still some serious risks of deflation out there. Namely, housing and, by extension, derivatives. So I’ve actually got cash on hand if I need it. I think liquidity is ultimately the name of the game with investing right now, it’s good to be able to turn around and switch directions if need be, so i don’t hold anything that will be particularly hard to get rid of.
Again, I don’t know what your time horizon is and I don’t know how much risk you’re willing to take.
“The worst is yet to come”?
Financial Safety Rule# 1 says:
" Nobody can accurately and consistently predict future economic events and scenarios- including “Austrian economists” , or " “Austrian” investment advisors".
Which means your own forecast :“the worst is yet to come”; may be wildly inaccurate, or “right on the money”, or even somewhere in between - there is simply no reliable way of knowing in advance.
Are You Talking About Using Money You Can, or Cannot Afford To Lose?
If you are talking about using money that you cannot afford to lose [i.e precious long-term savings for retirement etc.] and you are thinking of putting it all into gold, then you are taking some very big [and uneccessary] risks with that money you cannot afford to lose.
If you believe that you can beat the odds and predict the future [buying only gold is really just a way of making a prediction about the future], use only money that you can afford to lose to place your bet, not precious, long-term savings that you cannot afford to lose.
To learn more about Financial Safety Rule #1 and its implications for your savings/investments, please click on my profile name “onebornfree” and you will then see a link in the profile to that very same rule.
If, after reading that information you would like to discuss the ideas and concepts represented there in a little more detail , please feel free to private message me here [instead of talking via this thread].
Regards, onebornfree
I won’t necessarily give you much investing advice as I’m still young, but I will tell you to stay away from ETFs and buy the precious metal from a site like APMEX (so you actually have the gold/silver/palladium etcetera in your hand, because there is no gurantee you will ever see the precious metal if stuff starts to hit the fan).
Other than that I’m sure there are some on this forum who are better equipped to give you an answer.
obf is right imo, you’re just making bets based on what you think MAY happen. But then, you could be right, but your timing could be off. So not only do you not know exactly what’s going to happen but you don’t know WHEN it’s going to happen either.
Just my opinion don’t take it as advice. My personal investing strategy is to cover all investment classes I understand starting with the least risk.
Cash: 6 months expenses in a “high” interest savings account, this means about 1% at the moment… mfing pathetic. Its hard to take the inflation hit, but you just have to do it because of emergencies. e.g $10,000
Property: Get your hands on real property, this means allodial title land or precious metals. I prefer precious metals cause there is no paper trail. I would get 10k in gold and 10k in silver. Silver is a gamble, but one I would be willing to take. The silver gamble is the fact that since silver occurs 16:1 in ratio to gold the price should be the same ratio, in addition silver is used industrially and it has health properties. So basically I’m hoping that the market will someday correct based on those two facts, silver price will jump further than it should, and I will go trade all my silver for gold at that point.
Non speculative stocks: Non speculative stocks are stock bets you make not counting on price appreciation, essentially dividend paying stocks. I should for about 10% dividend returns and have a conservative method of picking them. I can go into more detail about picking stocks if you want. I would put 50k here.
Speculative gambling: I would choose lendingclub.com p2p lending. The rate is about 12% apy for a pretty safe gamble. I can tell you more about how to pick notes if you want. I would put the remaining 20k here.
However couldn’t you still conclude with a relative confidence that, for example, infaltion will hit the Dollar taking into consideration the circumstances the FED has put itself into? Wouldn’t you say it’s inevitable?
I’d say that depends on what happens with the housing market. If they keep it propped up then yes, I think inflation is inevitable. But then, assuming we know inflation will hit, we don’t know exactly when.
I think ETFs are fine for now. A stack of gold bars isn’t all you need if stuff really starts going wrong. I would consider an “exit strategy” =)
I don’t keep 10% cash. Banks with non-physical locations are giving more like 1.25 (1.5 intro) and one place to look is bankrate.com. If anyone is buying bank CDs, stop. 1 year annuities can beat out 5 year jumbo CD rates. The best we have now is a 3% “window annuity” with a 4% option for years 2-5.
Do you think the argument could be made that the continuation of bailouts / stimulus / cap n trade / health care trump’s the housing market? Of course assuming some of the money for these come directly from taxation and not inflation?
Absolutely. I do think inflation is at the “end of the rainbow” so to speak, I am not entirely clear on its time horizon. Health care entitlements are inflationary but they don’t become a real problem for another 5-10 maybe even 20 years? Then we don’t know exactly what will be done about them, we can only speculate. Cap and trade may be inflationary, I have no idea. I thought it was more of a regressive tax tbh. Maybe not. The stimulus and bailouts definitely do not outweigh the value of outstanding derivatives. We’re talking something like 50 trillion dollars of obligations. So basically, the main thing I see as potentially outweighing the derivatives is healthcare but that may not be a serious problem for another decade or more. Or maybe less, I have no crystal ball obviously. Then again I could be wrong about all this in which case I’ve kept my portfolio flexible enough to move things around if I need to.
To the OP:
This may be off topic, however I always include a percentage of “survival” preparation in my investment budget. I think of it as hedging my bets against a possible breakdown in the division of labor due to a hyperinflation scenario.
Ahh ok thanks for the response (=
I really have no idea how derivatives work, but from what I understand they’re a sort of bet investors make? And if the government quits propping the housing market up we would have a lot of losers basically?
I think it would be safe to say regardless of whether inflation hits, that the US economy will be in a depression for a long time to come. The amount of money government plans on stealing from the private sector through taxation (whether it be direct or inflationary), will only put barriers on productivity.
Which is why if you’re young like most of here, it’s best to be planning on looking for a job in a country like Singapore and renounce your American citizenship.
Honestly this is pretty damn frightening, I don’t know what else to say.
Derivatives take many forms. The ones that I’m familiar with are things like credit default swaps where two parties bet on the solvency of a third party (or more.) So if the third party goes broke, someone owes someone else money and if they can’t pay, there’s a problem. Because these institutions are all systemically linked, a collapse of one can lead to a collapse of many. That would be heavily deflationary. But then again, the situation is far more complex than my example. But basically, as I understand it, they’ve gotta do everything they can to keep the housing market from tanking. Which is exactly what they’re doing.
"I really have no idea how derivatives work, but from what I understand they’re a sort of bet investors make? "
Another good rule to possibly bear in mind [I’m not saying you would not, but since you brought up the subject [:)] ] - never put money into an “investment” you do not completely understand.
"I think it would be safe to say regardless of whether inflation hits, that the US economy will be in a depression for a long time to come. "
There is no such thing as a safe bet in investing. The economic future is entirely unknowable.
If you believe your own prediction I would humbly suggest that you make your “safe” bet on the future that you believe inevitable [ and any other similar bets] using money you can afford to lose- assuming you had some [lucky you, if you do] [:)]
Regards, onebornfree
Thanks so much for all of the answers and comments so far. You guys have given me a lot to think about! I plan on following up on your comments, but briefly…
If, as one of the answers said, gold is a fine place to put money that I could live without… then where do I put money that I can’t live without? I am under the impression that there is nothing more stable and sound than sound money, i.e. Gold. Are you saying to keep this money just in the bank? Of course I realize that there is fluctuations in an any investment product or commodity, but if I have a bunch of money now that I still want to have in the future, what’s better than gold?
What are some of the top dividend paying stocks that some of you own?
Neither me nor my wife have an IRA… and, as someone mentioned here, we are planning on moving overseas later this year (everything is set) and staying permanently if it works out. Should I bother with an IRA if we plan on living overseas?
Thanks again!
I think you should ask yourself the following questions:
How likely is complete economic collapse, social breakdown, war, famine, natural disaster? You should dedicate an appropriate portion of your resources (purchasing supplies) to these scenarios in proportion to the degree to which you believe they might happen in the future. This is self-insurance for things you cannot buy insurance for.
How likely is it that paper assets will significantly devalue? I think the answer to this is “certain”, but you may think something else. You should avoid paper assets to the degree you feel you cannot be sure they will hold their value.
This leaves real assets. Among real assets, you must ask yourself which asset class do you believe will depreciate the least or appreciate the most? Do you have the know-how to even make this assessment? Contrary to onebornfree’s nonsense which presupposes that holding paper money is the safest alternative if you do not know where else to put your money, you must balance this question with my previous one. That is, you must simultaneously balance all the allocations you might make into real assets against your fears with respect to paper assets. Maybe gold will depreciate more than oil and you will come to regret purchasing gold instead of oil. Gold is not the automatically correct answer.
For the assets you do leave in paper, do not treat ledger money and paper money the same. In the case of catastrophic economic collapse, cash (not gold, not silver) will be king. Cash you can hold in your hand. A bank account balance is subject to the whims of your bank and the FDIC. Treat bonds like ledger money, they will have no street value in case of catastrophic collapse.
My one specific recommendation to you is this: Buy a real cash safe, too heavy to be moved by robbers and put it in your garage or storage unit. Keep it secret and do not let your friends know about it. Physically control as much of your liquid assets as you possibly can. There is no reason not to, even if you hold cash, cash in your safe is in your safe, not in the damned bank.
Clayton -
Anyone who thinks they know that gold price will shoot up or collapse within a short time frame is full of it. Nobody is omniscient.
You should devote all your energies to figuring out how to avoid that 30% exit tax that was just implemented. Marc Faber recommends buying foreign real estate since it is immovable, which makes it difficult or impossible for the US gov’t to seize it. My advice for buying a real cash safe still holds except that, outside the US, you may not be able to self-secure your house with a firearm, which makes owning a safe riskier. Consider hiring private security to keep an eye on your house, but beware that whoever you trust is your greatest threat. The more unpredictable the political environment, the more important physical control of your assets becomes. If worst comes to worst and you simply cannot secure your wealth any other way, you can always buy a GPS and go way, way out in the desert and bury it like the pirates of old. It’s an extreme measure but, depending on just how bad things get, it may make sense for some individuals. Just make sure you don’t lose the damn coordinates. [;)]
Clayton -