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Author Topic: Investment Advice On Economic Collapse  (Read 20252 times)

Dianas Report

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Investment Advice On Economic Collapse
« on: March 18, 2013, 12:15:51 AM »
I need some investment advice, I am at a stand still and do not want to buy even into our Roth IRA. Looking at the stock market historical figures, it is about to plummet and Peter Schiff, among many others are shooting out warnings to everyone.

Are you still investing in the stock market, knowing it's priced at its peak?

Do you plan on selling everything prior to the crash or holding onto companies with great futures like 3D printing?

Should I just follow my instinct and wait to invest when prices fall or am I just being held captive by fear?

Help!!!

chad

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Re: Investment Advice On Economic Collapse
« Reply #1 on: March 18, 2013, 06:18:58 AM »
If it were common knowledge that the market is about to crash, it would already be crashing (or would already have crashed). So that isn't common knowledge, and it is doubtful that you or anyone else can say with any confidence what is going to happen in the short term. What we do know is that, over the long term, the market will go up (and, if it doesn't, we have bigger problems than our 'staches). And we also know that, on average, people who invest sooner do better.

GuitarStv

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Re: Investment Advice On Economic Collapse
« Reply #2 on: March 18, 2013, 06:43:42 AM »
To reduce market timing related risks (if this is your concern), invest in your chosen portfolio allocation on a regular basis.  (Rather than putting 12k in once a year, invest 1k each month).  Continue investing like this throughout any collapse/crash/etc. and don't lose your nerve.  This way if you're investing at the start of a collapse, you take advantage of the lower prices while the collapse happens.  You also have your money in your investments when the turnaround starts returning profits again.

COguy

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Re: Investment Advice On Economic Collapse
« Reply #3 on: March 18, 2013, 10:24:11 AM »
Looking at the stock market historical figures, it is about to plummet

Which metric are you looking at PE10, Trailing PE, Price to book?  It is not as cut and dry as you would think.  The experts are generally anything but.  Especially when they are forecasting to the world.  There are some interesting studies out there about how often guys like Schiff are right.  Generally, they are right about 50% of the time.  What are my odds on the roulette wheel again?

However, even with this knowledge I preferred the days when stocks were on sale big time.  Today, I just dollar cost average in a balanced mix that fits my risk tolerance.  I would suggest you do the same unless you really know what you are doing like one of our resident active investors.

GreenGuava

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Re: Investment Advice On Economic Collapse
« Reply #4 on: March 18, 2013, 10:46:28 AM »
Are you still investing in the stock market, knowing it's priced at its peak?

It isn't priced at its peak, unless it's your assertion that inflation is meaningless.  Furthermore, so what if it were at its peak?  I see people on all sorts of forums talking about how every previous peak was followed by a fall... no shit: if it was followed by a growth, the peak would be elsewhere.  Some previous (genuine) "all time highs" have been followed by a decade of growth before any meaningful (sustained or significant) fall. 

Should I just follow my instinct and wait to invest when prices fall or am I just being held captive by fear?

Plenty of people told me at the start of 2012 that I should move my money out of the stock market and wait for the fall.  I'm up something like 20% since then;  so glad I didn't listen to them.

If you're inclined to fear, I advise you to write out an investment plan - as in, literally write one out.  In it, write your asset allocation, your contribution intervals and amounts, and the regularity with which you'll be re-balancing. 

I advise you to also not try to time the market - experts can't do this successfully with any regularity, and unless you're already significantly wealthy, you really can't afford the risk of being out of the market while likely-meaningless fear takes hold.  Whenever you hear that a given expert has predicted past drops, ask how many times they predicted a drop that didn't end up happening.

Jamesqf

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Re: Investment Advice On Economic Collapse
« Reply #5 on: March 18, 2013, 10:56:04 AM »
On any given day, some percentage of investment "experts" will be telling you that the market is going to crash.  What you should be asking yourself is whether these people are making a living from their investments, or from selling those flashy doom & gloom newsletters?

If I had a way to accurately predict how the market was going to move, I sure wouldn't be telling everyone.  I'd be making my trades in secret, and amassing a fortune.

brewer12345

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Re: Investment Advice On Economic Collapse
« Reply #6 on: March 18, 2013, 11:05:58 AM »
Are you still investing in the stock market, knowing it's priced at its peak?

It isn't priced at its peak, unless it's your assertion that inflation is meaningless.  Furthermore, so what if it were at its peak?  I see people on all sorts of forums talking about how every previous peak was followed by a fall... no shit: if it was followed by a growth, the peak would be elsewhere.  Some previous (genuine) "all time highs" have been followed by a decade of growth before any meaningful (sustained or significant) fall. 

Should I just follow my instinct and wait to invest when prices fall or am I just being held captive by fear?

Plenty of people told me at the start of 2012 that I should move my money out of the stock market and wait for the fall.  I'm up something like 20% since then;  so glad I didn't listen to them.

If you're inclined to fear, I advise you to write out an investment plan - as in, literally write one out.  In it, write your asset allocation, your contribution intervals and amounts, and the regularity with which you'll be re-balancing. 

I advise you to also not try to time the market - experts can't do this successfully with any regularity, and unless you're already significantly wealthy, you really can't afford the risk of being out of the market while likely-meaningless fear takes hold.  Whenever you hear that a given expert has predicted past drops, ask how many times they predicted a drop that didn't end up happening.

In addition, you might want to consider an all-in-one mutual fund as an investment vehicle.  Once you pick the fund (Target date, balanced, VG Wellington and the like), you can pretty much just ignore everything that goes on with it other than maybe an annual check up to make sure this is still the fund for you.  These types of funds do a good job of taking the emotion out of investing, which is what you are currently being affected by.

tooqk4u22

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Re: Investment Advice On Economic Collapse
« Reply #7 on: March 18, 2013, 12:59:17 PM »
I think the bond market is grossly overvalued right now and I think the equity market is slightly overvalued based on fundamentals, but it is appropriately valued, and maybe undervalued, relative to the risk free rate.  The issue then becomes when does the steroids stop and will are slow slow slow growing economy ever pick up.

Keep in mind I do believe in market timing - but only when it is way out of whack in either direction (although timing the absolute top or bottom is impossible) - so sometimes it is good to lock in profits and sometimes it is good to go all in. 

Where do I stand today - based on my view noted above I am not selling and or adding more than my normal monthly amount - DCA is the way to go right now. 

Also, this isn't the first time we hit an all time high - it has happened many many many times in the past.

Jamesqf

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Re: Investment Advice On Economic Collapse
« Reply #8 on: March 18, 2013, 02:38:41 PM »
Also, this isn't the first time we hit an all time high - it has happened many many many times in the past.

And if it does crash, so what?  Unless you've sunk everything into futures & other derivatives (like that Apple fund guy on another thread), you've still got the stock.  In six months or so after the peak, it'll hit bottom and start heading back up again.

I started investing right after the '89 crash (first time in my life I had actual money), and have been through what, 3 or 4 major crashes since, not to mention many minor downturns.  Held on to what I had in every one, and came out the other side with more than when I started.

Dynasty

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Re: Investment Advice On Economic Collapse
« Reply #9 on: March 18, 2013, 03:02:55 PM »

If I had a way to accurately predict how the market was going to move, I sure wouldn't be telling everyone.  I'd be making my trades in secret, and amassing a fortune.

Best comment of the day.

sol

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Re: Investment Advice On Economic Collapse
« Reply #10 on: March 18, 2013, 03:36:46 PM »
How to identify an internet troll:

1. First post on forum
2. Makes controversial claim about forum topic
3. Using female name/avatar to draw eyeballs
4. And disappears into the night.

Good job all for trying to respond rationally and with good advice instead of succumbing to the requested flame war.

WageSlave

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Re: Investment Advice On Economic Collapse
« Reply #11 on: March 18, 2013, 04:51:23 PM »
Sol, you wrote what I was thinking.  But we can give her the benefit of the doubt, because it is a somewhat valid question.

For total economic collapse, I guess the best investment is a bunker, non-perishable foods and guns and ammo.

But investment in human capital always pays, economic collapse or no.  That is, DIY goes well beyond simple cost savings.  In good times, with adequate human capital, you can save money.  In really bad times (i.e. total economic collapse), you can take care of yourself and loved ones and stay alive.

But getting away from the Mad Max kind of scenarios, a general market tanking is I think to be expected---possibly many times---during a tour of long-term equity investing.  If the market is at or near a high when you start your investing "career", yes, it's sub-optimal.  But waiting for the "right moment" is generally even worse.

I don't think there's any 100% safe investment that will keep pace with inflation over a lifetime.  Maybe a 100% allocation in TIPS, but you're still subject to taxes.

PolarBeer

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Re: Investment Advice On Economic Collapse
« Reply #12 on: March 18, 2013, 05:00:19 PM »
My angle to the OP's worry is not that I really fear for my investments (because I'm in for the long term and I have the discipline to leave it alone) but I worry a bit about those I've been preaching Mustachian investing to. If the market should enter a decline, or worse another recession, I'm not sure those will have the stomach for it... despite me showing the them SP500 and MSCI World Index graphs for decades back and SPELLING OUT VERY CLEARLY that the market always does well in the long (longer than 5 years) term. I do fear that some of them will only have heard "this will get you a lot more money than the interest in your savings acccount if you keep it there for..." and then went all "Cool, I'll do that now and expect instant profits". That fallout will be interesting IF the markets crash soon (which BTW I don't expect).

RadicalPersonalFinance

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Re: Investment Advice On Economic Collapse
« Reply #13 on: March 18, 2013, 05:13:47 PM »
Are you still investing in the stock market, knowing it's priced at its peak?

Dianas, what month and year were you born?

Jamesqf

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Re: Investment Advice On Economic Collapse
« Reply #14 on: March 18, 2013, 05:21:20 PM »
For total economic collapse, I guess the best investment is a bunker, non-perishable foods and guns and ammo.

I disagree.  To prepare for a total economic collapse, learn to shoot a bow.  No matter how much ammo you stockpile, you'll eventually run out, but you can re-use arrows, and make new ones when those run out.

arebelspy

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Re: Investment Advice On Economic Collapse
« Reply #15 on: March 18, 2013, 05:36:00 PM »
I disagree.  To prepare for a total economic collapse, learn to shoot a bow.  No matter how much ammo you stockpile, you'll eventually run out, but you can re-use arrows, and make new ones when those run out.

I think ammo situations are too drastic to the point of being silly, but if we're going there, I'd prefer ammo, because you have to stay alive and outlast everyone else's ammo.  You can learn to shoot a bow and arrow when you start running out of ammo, but if you don't last that long (i.e. your arrows versus everyone else's ammo), it's a moot point.

But again, ridiculous situation, and cooperation and trust is the best way in that scenario anyways, IMO, to survive.
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MountainMan

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Re: Investment Advice On Economic Collapse
« Reply #16 on: March 18, 2013, 10:10:46 PM »
Invest now, every month.  Dollar cost average.

Every single investment talking head has been wrong about something.  They are also sometimes right about something.  Like a broken clock is right two times a day.  It doesn't mean they are right about everything. 

One thing I know about the market is that it goes down.  And goes up.  And goes down.  And goes up.  And goes down.  And goes up.  And goes down.  And goes up.  .....

Overall, over the long term, it sets new market highs.

Ignore the fear mongers.  Don't be an idiot with investing, but don't let fear keep you from the market.  Invest sensibly and buy when the market goes down, too.  Make a sensible strategy and stick to it. 

http://jlcollinsnh.com has some of the most sensible advice, I think, for the average investor.

Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #17 on: March 23, 2013, 10:59:26 PM »
Are you still investing in the stock market, knowing it's priced at its peak?

It isn't priced at its peak, unless it's your assertion that inflation is meaningless.  Furthermore, so what if it were at its peak?  I see people on all sorts of forums talking about how every previous peak was followed by a fall... no shit: if it was followed by a growth, the peak would be elsewhere.  Some previous (genuine) "all time highs" have been followed by a decade of growth before any meaningful (sustained or significant) fall. 

Should I just follow my instinct and wait to invest when prices fall or am I just being held captive by fear?



Plenty of people told me at the start of 2012 that I should move my money out of the stock market and wait for the fall.  I'm up something like 20% since then;  so glad I didn't listen to them.

If you're inclined to fear, I advise you to write out an investment plan - as in, literally write one out.  In it, write your asset allocation, your contribution intervals and amounts, and the regularity with which you'll be re-balancing. 

I advise you to also not try to time the market - experts can't do this successfully with any regularity, and unless you're already significantly wealthy, you really can't afford the risk of being out of the market while likely-meaningless fear takes hold.  Whenever you hear that a given expert has predicted past drops, ask how many times they predicted a drop that didn't end up happening.

In addition, you might want to consider an all-in-one mutual fund as an investment vehicle.  Once you pick the fund (Target date, balanced, VG Wellington and the like), you can pretty much just ignore everything that goes on with it other than maybe an annual check up to make sure this is still the fund for you.  These types of funds do a good job of taking the emotion out of investing, which is what you are currently being affected by.

I have a Vanguard Target retirement account but averages about 5% yearly return. I took a chance 2012 and invested on my own, made a decent profit but can't decide whether to sell or hold on to them (due mainly to Peter Schiff).

I am mostly concerned about our government devaluing our dollar, hyper-inflation and what that will do to our US companies.

Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #18 on: March 23, 2013, 11:06:21 PM »
If I had a way to accurately predict how the market was going to move, I sure wouldn't be telling everyone.  I'd be making my trades in secret, and amassing a fortune.

I firmly believe that there is enough wealth to spread among everyone. SO I would actually tell others about my successful trades so that others can benefit too! My main objective for accumulating a fortune is to improve humanity and our Earth. To leave this place in a better condition than when I arrived ;> 

I know that is aiming high but it is better to reach for the stars... atleast you know you won't get a handful of dirt!

Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #19 on: March 23, 2013, 11:09:03 PM »
How to identify an internet troll:

1. First post on forum
2. Makes controversial claim about forum topic
3. Using female name/avatar to draw eyeballs
4. And disappears into the night.

Good job all for trying to respond rationally and with good advice instead of succumbing to the requested flame war.

LOL, I actually did post before but the MMM site wasn't working properly, so it erased my posts.

Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #20 on: March 23, 2013, 11:15:57 PM »
Invest now, every month.  Dollar cost average.One thing I know about the market is that it goes down.  And goes up.  And goes down.  And goes up.  And goes down.  And goes up.  And goes down.  And goes up.  .....

Mountain man among others seem to suggest DCA as the best route and not to worry. I did end up buying silver and VXX, just to be safe.

Thank you all for the posts, I have been re-reading them to make certain that I did not miss anything crucial.

My actions for right now is to:
- Set up monthly withdrawals into my Vanguard Roth IRA (DCA)
- Roll over my traditional IRA's into Roth IRA
- Research reverse performing stocks incase the stocks do plummet

did I miss anything?

matchewed

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Re: Investment Advice On Economic Collapse
« Reply #21 on: March 25, 2013, 11:59:55 AM »
How did you come to the conclusion about rolling over your IRA to a Roth IRA?



Otherwise my take on your question is this; do not let an emotional response dictate your investment direction. Just invest in an index fund which covers the US market. jlcollinsnh was already mentioned and it is a great starting point to understand why the above is a sound idea.

On the other hand if you truly believe in the imminent collapse of the entire economic system, and therefore our current civilization as we know it, you probably should not invest in it. If everything starts collapsing there won't be a stock which is not affected; you will not find a "reverse performing stock" if the stock market crashes. The thing about peaks with something like the stock market is that there will always be new peaks as it (generally) goes up. Any given day it can do one of two things; go up or go down. Some people try to make money on guessing which direction it will go in a given time frame; some people don't think this is guessing but the use of metrics to predict the future. If you do not have the time to invest in learning these ins and outs then DCA is probably your best bet.

This is all said with the standard disclaimer that an online forum is a terrible place to get financial advice for investing. Do your homework or pay a professional for their advice and even then they can still give you bad advice or charge you exorbitantly for good advice.


Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #22 on: March 25, 2013, 11:07:17 PM »
How did you come to the conclusion about rolling over your IRA to a Roth IRA? Just invest in an index fund which covers the US market. This is all said with the standard disclaimer that an online forum is a terrible place to get financial advice for investing. Do your homework or pay a professional for their advice and even then they can still give you bad advice or charge you exorbitantly for good advice.

I had calculated the difference and it will save me several thousands of dollars to convert to Roth vs. keeping it traditional, even though initially I have to pay taxes on the conversion.

I do have a small investment on a Vanguard Index fund and my Target retirement acct. has index funds in them.

True, my friends are not interested in investing or finance, so I thought I would post here with like minded people. When I called financial advisors they seem to be oblivious to my concern of the economy, printing billions of dollars p/day, obvious inflation, millions more out of work & on some kind of government assistance and the effects on U.S. companies. They hardly guide me or answer any of my questions straight because they don't want to be liable to any losses. So I've been researching tons of information.

My instinct (not emotions) say stop investing for now, greater deals are yet to come. 

capital

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Re: Investment Advice On Economic Collapse
« Reply #23 on: March 26, 2013, 08:10:58 AM »
I am mostly concerned about our government devaluing our dollar, hyper-inflation and what that will do to our US companies.
Wouldn't devaluing the dollar make US companies more competitive in the export market? What series of events do you believe would trigger hyperinflation in the US, as opposed to slightly-less-low or high-but-manageable inflation? Inflation is near a historic low, and has been low since the Volcker recession:
« Last Edit: March 26, 2013, 09:31:50 AM by ehgee »

Dee18

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Re: Investment Advice On Economic Collapse
« Reply #24 on: March 26, 2013, 01:07:49 PM »
Sounds like you know what you want to do.  Since the crash of 2008 I have not invested as much in the stock market as most mustachians, despite low returns on guaranteed investments.  But I know that means I have to save more of my income.  For me, the trade off is worth it.  Each person has to determine his, or her, own risk tolerance. 

Dianas Report

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Re: Investment Advice On Economic Collapse
« Reply #25 on: March 26, 2013, 07:29:50 PM »
I am mostly concerned about our government devaluing our dollar, hyper-inflation and what that will do to our US companies.
Wouldn't devaluing the dollar make US companies more competitive in the export market? What series of events do you believe would trigger hyperinflation in the US, as opposed to slightly-less-low or high-but-manageable inflation? Inflation is near a historic low, and has been low since the Volcker recession:


ehgee, I'm uncertain how it can benefit our country. What do you think of this? http://youtu.be/pwI3Nya5L9g

Dee18, so true "Each person has to determine his, or her, own risk tolerance."

grantmeaname

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Re: Investment Advice On Economic Collapse
« Reply #26 on: March 26, 2013, 07:56:06 PM »
When I called financial advisors they seem to be oblivious to my concern of the economy,
This concern is vague.
Quote
printing billions of dollars p/day,
Let's dig a little deeper: what about this is bad?
Quote
obvious inflation,
Really? It doesn't look out of control to me. Where on this graph of the CPI do you see a problem?
Quote
millions more out of work & on some kind of government assistance
Lots of healthy economies have people out of work. Some kinds of unemployment are even good. What about this time is different? What, exactly, is the problem with our moderately high (and shrinking) unemployment rate? Why does that mean that investing is futile?
Quote
and the effects on U.S. companies.
Again, this is vague. What, exactly, do you mean?

Quote
They hardly guide me or answer any of my questions straight because they don't want to be liable to any losses.

Well, also, some of your questions are premised on factually wrong information, others are unclear, and others still have no clear implications for investing. Avoiding liability may be the sixth or tenth concern in line for a random financial advisor you dial up.

cats

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Re: Investment Advice On Economic Collapse
« Reply #27 on: March 26, 2013, 08:17:29 PM »
First off, I think for things like IRA and 401k, you should definitely invest as much as you can, because you can only invest so much per year.  If you sit out this year it's not like you can invest 2x next year.  Also, theoretically you aren't going to be pulling that money out for a while, so any hit you take in the next year or two will be made up (and then some) by the time you need the funds.

Aside from that, your attitude was mine last year--I had built up a pretty large cash reserve (not just b/c of investment nerves, I was also finishing grad school and wasn't certain what my future job prospects would be, so I felt it was prudent to keep a large amount in the checking/savings account), and wasn't sure what the hell to do with it, it seemed like everything was "overpriced".  Ultimately, my reason for having a large cash reserve (looming unemployment) got itself out of the way and I decided yeah, it was time to start accelerating my investments in accordance with my new salary, etc.

Here's what I do:  I use a sort of combo of dollar cost and value averaging.  I have a set amount that I "can" invest each month (let's call it 1k).  I have a desired growth rate for my investments (let's say 1% per month).  So, on average, I want my fund to go up by: (end value at the previous month+$1k) * 1.01%.  At the end of the month, I evaluate whether I am above or below that target.  If I am below, I invest my "base" amount ($1k), plus enough to make up the difference between expected and actual values.  If I am above (as I am right now), I invest $1k MINUS the amount that my actual value was over.  This way, you automatically invest a little less when the market is high/skyrocketing, and then invest a little more when things are low.  If you have multiple funds/stocks you are investing in, this approach will also tend to rebalance your allocation automatically over time.  I read several papers that concluded value averaging gave slightly better returns and slightly better protection against losses, and my own personal analysis seemed to point in the same direction.  It does require a little more active attention than plain old DCA, but it's basically a few minutes extra each month...not a big deal if I can get even a slightly better return!

At the moment, the market is going up way to fast, so I am putting in a little less than I absolutely can each month.  However, at some point, the market will at least slow down/flat line for a while (or maybe even crash), and then I'll be able to pump in more money from savings. 

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Re: Investment Advice On Economic Collapse
« Reply #28 on: March 26, 2013, 11:55:33 PM »
grantmeaname, I agree to disagree! haha, I guess time will tell whether the concerns I have today will unfold tomorrow. To be honest, I certainly hope the best for our beloved U.S. so hopefully I'm wrong and concerned for no reason. But I'm going with my instinct and holding on until I see valid reasons to be optimistic.


Cats, interesting formula you have. Thanks for sharing it, I will dabble to see whether I understand it correctly once I become more confident in our economy. Your right, money invested into IRA's/401K's should be priority.

John74

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Re: Investment Advice On Economic Collapse
« Reply #29 on: March 27, 2013, 12:07:42 AM »
grantmeaname, I agree to disagree! haha, I guess time will tell whether the concerns I have today will unfold tomorrow. To be honest, I certainly hope the best for our beloved U.S. so hopefully I'm wrong and concerned for no reason. But I'm going with my instinct and holding on until I see valid reasons to be optimistic.



That's it though. The best time to invest in the market is when everyone is pessimistic. When you see valid reasons to be optimistic then it's too late already, you missed the tide. When the world was ending in 2008, it was probably the best opportunity of a generation to go in big in the market.

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Re: Investment Advice On Economic Collapse
« Reply #30 on: March 27, 2013, 12:31:44 AM »
John74, everyone seems to be optimistic right now, see all the high stock prices?

I think 2008 prices & opportunities will happen again soon, so that is when I will buy.

MountainMan

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Re: Investment Advice On Economic Collapse
« Reply #31 on: March 27, 2013, 12:38:45 AM »
John74, everyone seems to be optimistic right now, see all the high stock prices?

I think 2008 prices & opportunities will happen again soon, so that is when I will buy.

It is very possible you will be waiting years.  Losing out on good investing opportunities until then.

You do not know if 2008 will happen again, or when.

That is why it is good to invest now.

If prices go down, you simply buy more shares on the way down for a lower cost.  This helps offset the fewer shares you buy for a higher price now.  That's what dollar cost averaging is.

John74

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Re: Investment Advice On Economic Collapse
« Reply #32 on: March 27, 2013, 12:57:26 AM »
We have not reached the levels of optimism seen in 2000 or 2007. The headlines are still mostly negative and individual investors are still sitting on the sidelines for the most part. The high asset prices (IMO) are not due so much to excessive optimism as they are due to excessive liquidity around the world. But yes, the stock market as a whole is not cheap anymore. Does not mean it has to get cheaper anytime soon (I think that excess liquidity is going to remain a problem for a while given the weak global economy).

But if putting money in the market scares you now, wait until everyone starts freaking out (again). It's not that easy to go against the grain. When the market drops like a stone, the last thing you want to do is throw good money after bad. I hope you'll have the fortitude to do just that when the time comes though, because it pays handsomely on the rebound.

grantmeaname

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Re: Investment Advice On Economic Collapse
« Reply #33 on: March 27, 2013, 06:08:15 AM »
John74, everyone seems to be optimistic right now, see all the high stock prices?
No. Stocks look a good deal cheaper to me now than they did in 2008 and 2001. The current PE ratio is 18, not 43 or 66 like it was before the prior corrections. If stock prices are high, it's because companies are making money hand over fist, not because investors have too much faith in the companies eventually doing the same.

Quote
I think 2008 prices & opportunities will happen again soon, so that is when I will buy.
But why? If you really dig deep into economics instead of repeating the same vague macroeconomic concerns that you hear on the radio from pundits, you're in a much stronger position as an investor and citizen. What about inflation is a bad thing? Why is unemployment in the 7% range a problem? Who cares about the number of housing starts?

Try an introductory economics book for a start, like Economics Explained, which we also read for the book club.

capital

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Re: Investment Advice On Economic Collapse
« Reply #34 on: March 27, 2013, 11:06:11 AM »
But why? If you really dig deep into economics instead of repeating the same vague macroeconomic concerns that you hear on the radio from pundits, you're in a much stronger position as an investor and citizen. What about inflation is a bad thing? Why is unemployment in the 7% range a problem? Who cares about the number of housing starts?

Try an introductory economics book for a start, like Economics Explained, which we also read for the book club.
Moreover, Peter Schiff is a single investor who apparently follows Austrian economics, which are not widely accepted. If you haven't already, I'd recommend reading someone like Paul Krugman (who follows the Keynesian/neo-Keynesian school of economics, and also was warning about the potential housing crash before it happened) for a while, and at least coming up with reasons you disagree with his analysis. Even if you're not sure of his reasoning, knowing that there are smart people who believe very different things about money, markets and macroeconomics will give you a sense of why a widely diversified strategy like DCA'ing into index funds is a good idea-- the market is sufficiently efficient-ish to take all of these opinions into account.

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Re: Investment Advice On Economic Collapse
« Reply #35 on: March 27, 2013, 01:51:14 PM »

If you haven't already, I'd recommend reading someone like Paul Krugman (who follows the Keynesian/neo-Keynesian school of economics, and also was warning about the potential housing crash before it happened) for a while, and at least coming up with reasons you disagree with his analysis.

For what it's worth, he also suggested the housing bubble: 
2002: "...Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

He's since backpeddled (A LOT)... but his column at the time seemed pretty clear to me.  With 20/20 hindsight, he's said that was, of course, not what he meant.

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Re: Investment Advice On Economic Collapse
« Reply #36 on: March 27, 2013, 02:54:10 PM »
I'm sticking to my dollar cost averaging and I can't imagine much of anything would change that for me.

I also recently started a Lending Club account, which is something to consider if you want your money completely out of the market.  For me, is is an additional investment which offers me a bit of diversification (and, historically very solid return), but it's something you might consider.

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Re: Investment Advice On Economic Collapse
« Reply #37 on: March 27, 2013, 05:41:17 PM »
Considering I love my job, its pretty secure (I have tenure), and I need to pay off some massive debt before I get to being fully Mustachian, I am going to stick with dollar cost averaging and ride this secular bear market to the secular bull, which I think is coming down the pike in about three years.

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Re: Investment Advice On Economic Collapse
« Reply #38 on: March 28, 2013, 12:26:32 AM »
It is very possible you will be waiting years.  Losing out on good investing opportunities until then. You do not know if 2008 will happen again, or when.If prices go down, you simply buy more shares on the way down for a lower cost.  This helps offset the fewer shares you buy for a higher price now. 
MountainMan, let me first start by sharing we are limited in investing funds, so I am holding off right now until I see a greater opening of opportunity to invest. I don't see it as loosing since the companies are not going anywhere, they will still be here next year and possibly cheaper than today lol. YES, I am certain it will, it is just a matter of when it will happen. Why would I want to buy little bit of overpriced shares today when I could just wait and buy them cheaper later??

The only time I get sad when I did not invest into a company is when they split or they perform like medbox, I could have earn million's off that stock but I thought it was ridiculous to buy into marijuana dispensaries. My loss. But the story inspires me to look for hidden gems...

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Re: Investment Advice On Economic Collapse
« Reply #39 on: March 28, 2013, 12:41:30 AM »
grantmeaname: really, I could not disagree with you more but then perhaps it is my lack of understanding what you know. Could you clarify why you think what you do? FYI: The true unemployment rate is 15% and that is just SAD!!


Thanks ehgee: "a widely diversified strategy like DCA'ing into index funds is a good idea-- the market is sufficiently efficient-ish to take all of these opinions into account"

Villanelle: Yes I am aware of Lending Club but we are not in the position to lend money right now but definitely on my list for the future. "started a Lending Club account, which is something to consider if you want your money completely out of the market." 
« Last Edit: March 28, 2013, 12:47:19 AM by Dianas Report »

MountainMan

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Re: Investment Advice On Economic Collapse
« Reply #40 on: March 28, 2013, 12:47:36 AM »

MountainMan, let me first start by sharing we are limited in investing funds, so I am holding off right now until I see a greater opening of opportunity to invest. I don't see it as loosing since the companies are not going anywhere, they will still be here next year and possibly cheaper than today lol. YES, I am certain it will, it is just a matter of when it will happen. Why would I want to buy little bit of overpriced shares today when I could just wait and buy them cheaper later??

Just to clarify, I'm talking about investing in total stock market index funds.  It sounds like you could be talking about investing in individual stocks, which are a different animal. 

Yes, the market will drop again.   

My observations are that:

  • It might not drop on your expected schedule.
  • It might not drop as far as you think it will.  Not all recessions are equal.  2008 (The Great Recession) was exceptionally harsh for recessions and not typical.
  • Investing at the bottom of the next market crash may, or may not, yield greater profits.
  • Dollar cost investing now, may, or may not, yield greater profits than waiting for the next market bottom.
  • This depends on how far the next crash goes.  This is not information you have.  Nobody knows.
  • Over many years, the markets set new highs.  For example, you have said in this thread that the market is at or near "its peak," suggesting overvaluation.  But the market will set new record peaks over time.  (See attachment.)

It's your money, of course. 

It just seems that your strategy might not account for all the previous.  (If it does, more power to you.)

(The attached chart is over 100 years of the stock market.  There are recessions and drops in the market, but over time, the market gets higher and higher and the drops no longer reach where the peaks were 50-70 years ago.  Yes, take advantage of market drops, but also keep things in perspective and realize the sheer size of the market and the power of its growth over many years.)
« Last Edit: March 28, 2013, 12:53:13 AM by MountainMan »

capital

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Re: Investment Advice On Economic Collapse
« Reply #41 on: March 28, 2013, 09:33:46 AM »

MountainMan, let me first start by sharing we are limited in investing funds, so I am holding off right now until I see a greater opening of opportunity to invest. I don't see it as loosing since the companies are not going anywhere, they will still be here next year and possibly cheaper than today lol. YES, I am certain it will, it is just a matter of when it will happen. Why would I want to buy little bit of overpriced shares today when I could just wait and buy them cheaper later??
Over many years, the markets set new highs.  For example, you have said in this thread that the market is at or near "its peak," suggesting overvaluation.  But the market will set new record peaks over time.
Or maybe it won't! Nobody knows. But good luck choosing a better investment.

(This is just a convenient graph I found; the Nikkei is currently at 2x this value, but still well below historical highs).

MountainMan

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Re: Investment Advice On Economic Collapse
« Reply #42 on: March 28, 2013, 05:18:03 PM »

MountainMan, let me first start by sharing we are limited in investing funds, so I am holding off right now until I see a greater opening of opportunity to invest. I don't see it as loosing since the companies are not going anywhere, they will still be here next year and possibly cheaper than today lol. YES, I am certain it will, it is just a matter of when it will happen. Why would I want to buy little bit of overpriced shares today when I could just wait and buy them cheaper later??
Over many years, the markets set new highs.  For example, you have said in this thread that the market is at or near "its peak," suggesting overvaluation.  But the market will set new record peaks over time.
Or maybe it won't! Nobody knows. But good luck choosing a better investment.

(This is just a convenient graph I found; the Nikkei is currently at 2x this value, but still well below historical highs).

Touché!

So if there was a scenario where the market traded within a range, what would work?  Assuming that you would not be able to time the market well enough to get out near the top and in near the bottom, then dollar cost averaging would probably be the next best strategy.

Of course, it bears saying that we are not Japan. :)

But it also bears saying that, as you said, market growth is not guaranteed.  But I would argue, that market growth is a strong likelihood.  I'm betting on long-term market growth over the next few decades.

Interesting discussion so far, I am enjoying this thread.

grantmeaname

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Re: Investment Advice On Economic Collapse
« Reply #43 on: March 28, 2013, 05:24:04 PM »
grantmeaname: really, I could not disagree with you more but then perhaps it is my lack of understanding what you know. Could you clarify why you think what you do? FYI: The true unemployment rate is 15% and that is just SAD!!
Could it be that you're willfully avoiding my arguments instead of trying to understand them and engage with them? You haven't referred to a single one of them in such a way as to connect to the ability of publicly traded corporations to make profits or the stock market's ability to earn you a return on your capital. Again, what about employment trends in the United States makes it relevant to this discussion? What does inflation have to do with it? Or quantitative easing?

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Re: Investment Advice On Economic Collapse
« Reply #44 on: March 28, 2013, 07:38:07 PM »
grantmeaname: really, I could not disagree with you more but then perhaps it is my lack of understanding what you know. Could you clarify why you think what you do? FYI: The true unemployment rate is 15% and that is just SAD!!
Could it be that you're willfully avoiding my arguments instead of trying to understand them and engage with them? You haven't referred to a single one of them in such a way as to connect to the ability of publicly traded corporations to make profits or the stock market's ability to earn you a return on your capital. Again, what about employment trends in the United States makes it relevant to this discussion? What does inflation have to do with it? Or quantitative easing?

Why, it's the punch bowl at the Fed's reinflation party:



See those airpockets the market hits every time they take the punch bowl away?

grantmeaname

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Re: Investment Advice On Economic Collapse
« Reply #45 on: March 28, 2013, 08:26:51 PM »
The money supply and inflation are not the same thing. That said, the point is that you're making arguments that connect macroeconomic trends to market performance. That's much better than saying "We're all doomed to poverty and ruin because of these three soundbites from Hannity!!"

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Re: Investment Advice On Economic Collapse
« Reply #46 on: March 29, 2013, 12:51:43 AM »
Mountainman, I really enjoying looking over the attached chart and staring at it quite some time. So much growth happened from 1983-2002, I hope to see our country prosper in this way again. So from reading your posts, your thoughts on it is that is bound reaching even higher, steady long term growth?

Point well made: "Over many years, the markets set new highs.  For example, you have said in this thread that the market is at or near "its peak," suggesting overvaluation.  But the market will set new record peaks over time"."Yes, take advantage of market drops, but also keep things in perspective and realize the sheer size of the market and the power of its growth over many years."

I keep rereading your posts. Hopefully, not only does this help me but it helps other MM's who are stuck and uncertain how to invest in this economy. Thank you.

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Re: Investment Advice On Economic Collapse
« Reply #47 on: March 29, 2013, 01:22:56 AM »
ehgee, what am I suppose to do with a Japanese chart? lol, thanks for sharing it. I had to look it up just to see what your taking about: The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange.

smedleyb: that chart is awesome. I think hyperinflation or atleast some significant inflation is already occurring (slowly) it is around the corner. It's happened before after our Revolution & Civil War. Let's look at the Reagan administration for a moment, the interest rates rose drastically, the second largest stock market crash (percentage-wise) in United States history occurred in 1987, preceding another recession, the deficit rose from $60 billion in 1980 to a peak of $220 billion in 1986 (well over 5% of GDP). Over this period, national debt more than doubled from $749 billion to $1,746 billion. OK, does this pattern sound familiar? Just change the leader's names, increase the debt numbers and we are in a hot mess. The high price of gold clearly shows the devaluing of our dollar.

« Last Edit: March 29, 2013, 01:48:50 AM by Dianas Report »

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Re: Investment Advice On Economic Collapse
« Reply #48 on: March 29, 2013, 01:48:04 AM »
Could it be that you're willfully avoiding my arguments instead of trying to understand them and engage with them? You haven't referred to a single one of them in such a way as to connect to the ability of publicly traded corporations to make profits or the stock market's ability to earn you a return on your capital. Again, what about employment trends in the United States makes it relevant to this discussion? What does inflation have to do with it? Or quantitative easing?

Yes, I am willfully avoiding your arguments lol. I am also trying to understand your perspective. I did post earlier, that in 2012 I invested on my own, individual stocks/shares of company's (nxpi, NVda, xin, ssys, ddd, cerp, trtc) I saw a great future in, did pretty nice actually $16,000 investment, $4,000 profit thus far but it is because it is overvalued. Uncertain whether to sell them high, but I believe in these company's, so I may just hold on to them even if a rollercoaster is about to hit. Do you think that's a bad decision? My silver stocks suck but it should eventually rise. I also own a few grand in VXX.

I probably should have taken everyone's advice with DCA and Index funds instead of individual companies. I think I may do that for 2013... but I still like the power I get from selecting individually.

I think employment rates, inflation and quantitative easing is tied to the this discussion... since it represents the ability an American has to buy & the value of the dollar or quantity they can purchase. ((QE: an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.)) I firmly believe that taking the dollar of the reserve in 1971 was a huge mistake. So what can my dollar buy today? two cucumbers or two apples

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Re: Investment Advice On Economic Collapse
« Reply #49 on: April 01, 2013, 01:56:18 AM »
Ok, still sitting still, hardly investing on individual stocks this year but am more focused on long term growth. Came across this article on money.cnn:

As a bull ages, more stable areas of the market, such as consumer staples and utilities, tend to be where the gains are. But because this bull occurred during a time of so much economic uncertainty, those sectors have already had big gains as investors sought safety.

Since this rally may have a while left to run, Jim Stack of InvesTech Research says to favor stocks that thrive in the middle of a bull. He likes technology in particular. Tech has better-than-average growth potential and is trading at a discount to the S&P. though it usually trades at a big premium.


Interesting Article posted: http://money.cnn.com/gallery/investing/2013/03/21/bull-market.moneymag/index.html?iid=SF_M_River