The Cellar  

Go Back   The Cellar > Main > Current Events
FAQ Community Calendar Today's Posts Search

Current Events Help understand the world by talking about things happening in it

Reply
 
Thread Tools Display Modes
Old 03-18-2008, 02:51 PM   #1
lookout123
changed his status to single
 
Join Date: Apr 2004
Location: Right behind you. No, the other side.
Posts: 10,308
Quote:
I worry about my retirement investments,
Stop now. You're young, you're still working, you will still be working for at least 2 if not 3 more recessions before you really need to move into retirement investment mode. A properly balanced and managed retirement account will make you nervous because of it's volatility through the years, but that is what makes it work.

Quote:
my sons college savings investments
May be valid concerns. How old is your child? Are we talking about the one year old? If so, then quit worrying and invest more into well managed growth funds after you log off the cellar - its a great day for you. If your kid is within a couple years of school then you need to go a different route.

Quote:
the market.
Do you mean the market that has made people ill with worry at their losses or the one that has gone on to set new all time highs after each recession? Hey look at that - it's the same market. Stocks have been the single best long term performer for retirement savings in every measurable time frame. Take a deep breath and actually think about what market volatility means to your everyday life. Not that much. Now remember that the talking heads on tv are reading all of their doom and gloom from a teleprompter because they don't even understand some of the words they're using. Let that deep breath out and go about your life.

Quote:
But I more worry about the US as a whole. I worry that more people will lose their jobs and lose their homes and not have health care.
Now that is a valid point. More people will lose their jobs and homes. That sucks from every angle but all you can do is what you can do - give a helping hand to those you can where you can - your community. More people without healthcare? That sucks too, fortunately there are safety net programs in place to help.

Quote:
Its going to further the divide between haves and have nots.
No it won't. The divide isn't dependent on a few dollars here and there. The divide has a stronger correlation to mindset than bank account balance. A few people have nothing. Most people have something. Some people have more. A few people have a LOT more. Don't like where you're at? Change it. You may not catch up to Bill Gates, but you might find away to remove money as a source of concern in your life.

Quote:
GWB seems to not care about the economy.
What's good old Dubya supposed to do? Lower taxes? OK, but that seems unpopular. Drop rates? Well, they are, but that is largely responsible for the mess we're in now. Greenspan completely dropped the ball the last time around. Lower rates spur inflation. Do you really want the dollar to be worth even less? The more the government tries to manipulate markets and economics the more things get screwed up. Corrections and recessions are supposed to happen. The greater distance we keep between the government and the economy, the better we'll be.

Quote:
And I have yet to understand, beyond greed, why gas prices keep rising.
The planetary demand on oil is expanding exponentially and the supply isn't increasing. The untapped sources within our control remain off limits because of fears for the environment. We have, as of yet, not found a suitable alternative energy source and the supply/demand equation has only recently made it economically desireable to develop it. Sad, but true.
Greed? Sure. Exxon and their ilk could slash their profit margins I suppose, but then they would lose investors. Then how are they going to expand and develop to keep up with demand? Oil futures are more important than the price today anyway. It is a price based on a future expectation of supply/demand. It's just harder to read from a teleprompter.

Quote:
But how long can we keep paying these prices at the pump?
You'll keep paying the price at the pump until you decide it just isn't worth it and find an alternative. Maybe ditch the FJ first for a Prius. Or maybe a Vespa. Maybe even a bicycle. Maybe you'll change the AC thermostat to 82 instead of 78. Maybe you'll just go without AC. The pain threshold will be different for each person, but it exists for each. Our automobiles and crisp cool houses aren't God given rights, they're luxuries. Just like our HDtv's. And vacations. and... get the point? It sucks but sometimes things happen that cause us to decide against a luxury. I'd like to returf the yard, but it just isn't in the budget right now. Maybe next year. Priorities.
__________________
Getting knocked down is no sin, it's not getting back up that's the sin
lookout123 is offline   Reply With Quote
Old 03-18-2008, 02:53 PM   #2
TheMercenary
“Hypocrisy: prejudice with a halo”
 
Join Date: Mar 2007
Location: Savannah, Georgia
Posts: 21,393
Yea, what he said. Sounds like I am on target or at least near it. Good post LO.
__________________
Anyone but the this most fuked up President in History in 2012!
TheMercenary is offline   Reply With Quote
Old 03-18-2008, 03:20 PM   #3
HungLikeJesus
Only looks like a disaster tourist
 
Join Date: Feb 2007
Location: above 7,000 feet
Posts: 7,208
lookout, that was a good summary of just about everything. No wonder they named a mountain in Colorado after you.
__________________
Keep Your Bodies Off My Lawn

SteveDallas's Random Thread Picker.
HungLikeJesus is offline   Reply With Quote
Old 03-18-2008, 03:25 PM   #4
lookout123
changed his status to single
 
Join Date: Apr 2004
Location: Right behind you. No, the other side.
Posts: 10,308
I've never had the chance to visit Cold Calloused Prick Peak, but I hear it's nice.
__________________
Getting knocked down is no sin, it's not getting back up that's the sin
lookout123 is offline   Reply With Quote
Old 03-18-2008, 04:36 PM   #5
tw
Read? I only know how to write.
 
Join Date: Jan 2001
Posts: 11,933
Quote:
Originally Posted by aimeecc View Post
I'm really worried about this recession. I can only imagine if I didn't have job security or savings how I would feel. I worry about my brother - he in construction.

Anyone else scared?
Scared? No. Finally, opportunity is appearing because the damage created by George Jr, money games, oil that was too cheap, et al is finally being realized. That damage created many years ago is only just appearing on spread sheets. Time to worry was when previous posts here discussed dangerously high housing prices fueled by money games (sub-prime loans only one of those problems). At that same time, the front page of The Economist showed a falling brick labeled 'housing prices'. Housing prices must drop something approaching 30% - a number that varies across regions.

How severe is this crisis? Defaults appear to be about 2%. Non-performance loans may be either 4% or 6%. Trivial? Yes. But due to spread sheet lying and money games (similar to those in Enron and encouraged by pathetic regulations by the George Jr administration), the last straw broke it. Many once regarded 'stable' entities (ie Bear Stearns) were doing what Enron did.

A resulting downturn should attack the many entities that have been playing spread sheet games. This will result in job losses, significant inflation, or other problems. But then you should have been preparing for 'bad weather' before my posts were warning of it.

At this point, the majority of damage to investments has probably been done. Company reports will continue to be negative. But knee jerk reactions this late in the storm are ill advised - a generalized comment that may not be valid for some entities. For example, if invested in Chrysler, then consider getting out of what has been a terrible investment for the past decade - see the product to know why.

Starting maybe this summer, some good deals should be available as, for example, house prices drop enough to return to reality. IOW time now to start study or planning for what those investments will be next year.

But again, learn from history. The massive spending by a wacko and lying government has only started to be felt. Deja vue Nam. Once those costs actually appear is about the same time that massive war spending finally stops. America's slow withdrawal (defeat) in 1972 Nam resulted in recession in 1976 and 1979. Don't expect investments to be as robust due to so many outstanding bills. See the next post to appreciate how large those hidden costs. We owe so much money to everyone that the dollar has dropped to $0.67. And then in the past month, it dropped another 4.5%. That is further loss on your investments and a reason why prices must increase.

Economics will punish America for "financial mismanagement" (quoting an international source) by George Jr's administration. Excessive economic incentives when the economy needed to be fixed by a downturn. From the 1970s, the economy prospered by selling off American assets and by exporting. One of the most productive jobs back then was selling used American construction equipment to many other nations that did not use money games to promote (lie about) growth. For example, Caterpillar is finding almost all its growth in exporting construction equipment. And, of course, companies who only cater to the top 1% income earners should remain profitable. Good reasons explain why companies such as Sharper Image must not exist.

Expect problems in public services and government spending. Government has been mortgaging itself especially with tax cuts while government spending only increased. Construction jobs created only by government pumping money (liquidity) into the economy must be reduced significantly - years from now.

Massive drop in the dollar is only part of the problem. Inflation will eventually also take revenge for all that spending created by mortgaging America. What happens to a treasury bond of 3% when inflation is 1.5%? Welcome to another pending problem.

Bottom line - getting out of investments is too late. Your time to get out is when others foolishly accused this poster of being so negative. Now is the time to start preparing for the many good buys. Now is the time to recognize that past history is not a good measure of better investments because some industries were fueled only by George Jr's economic mismanagement (stimulus packages).

When should you have been scared? When the Economist labeled the falling brick “Housing Prices”. The problem was that obvious back then. Too late to be scared now.

Last edited by tw; 03-18-2008 at 04:41 PM.
tw is offline   Reply With Quote
Old 03-18-2008, 04:44 PM   #6
tw
Read? I only know how to write.
 
Join Date: Jan 2001
Posts: 11,933
Rumsfeld said "Mission Accomplished" would cost about $660 per American and would be paid for by Iraq's oil revenues. If you had any economic grasp, then you knew he was lying.

George Jr now says the war costs about $25,000 per American. From The Economist of 13 Mar 2008 entitled "Eyeing the Wages of War":
Quote:
Suppose that, five years ago, George Bush had asked every American household to stump up $25,000 to pay for an imminent war on Iraq. How would they have responded?

That money, suitably husbanded, would have paid for arming, provisioning and remunerating the troops; treating the wounded; and restoring the army's strength in the aftermath. It would have paid just compensation for the death and injury of American servicemen and contractors, and it would have covered America's outlays on reconstruction. It would also have allowed America to subsidise the price of oil by $10 a barrel—offsetting the disruption to Iraq's supply.

Mr Bush never asked, of course. But this hefty sum is nonetheless just part of the toll the war may take on America by the time it is over, according to a new book by Joseph Stiglitz, a Nobel prize-winner in economics, and Linda Bilmes, a budget and public finance expert at Harvard's Kennedy School of Government.
Figure the war will costs about $3million per American or maybe $8million per every employed American. Those bills will be coming due. Meanwhile, that is a conservative number from those authors. Numbers probably will be higher due to inflation, dollar deflation, and other factors cited by the authors. Who must pay those bills?

Those who only understand war as a solution (ie 'big dics') must now deny this. Remember, America did not pay for most of Desert Storm. So the resulting downturn was mild. But America has yet to pay for "Mission Accomplished". Changes imposed upon the American economy should be considered when planning your financial future.
tw is offline   Reply With Quote
Old 03-18-2008, 04:48 PM   #7
tw
Read? I only know how to write.
 
Join Date: Jan 2001
Posts: 11,933
Aimeecc's question was how to invest? From The Economist of 1 Mar 2008 entitled "Money for old hope: A special report on asset manaegment":
Quote:
The privatisation of the Swedish social-security system provides a useful case study. Swedes were encouraged to pick their own funds, with 456 to choose from at the launch in 2000, ... But despite the large choice, most participants put their money into funds with an alluring recent record. The favourite fund at launch, specialising in technology and health care, had risen 534% in the five preceding years. Over the next three years, however, it lost 70% of its value. Oddly, once having made their choice, participants slumped into inertia; fewer than 4% changed their portfolio each year.

Chastened perhaps by their experience, over 90% of Swedes now choose the default option (the one that scheme members are assigned to if they do not want to make their own choice).
This same process occurs when people select mutual funds. Whereas shrewd investors would invest based upon a informed belief in new products and an innovative spirit, Mutual Fund investors tend to invest using assumptions only based in past performance and with little regard to what those investments actually produce. Most mutual funds are a sort of blind trust that somehow the fund will be profitable and mostly driven by past performance. Past performance is not a good measure because of economic pressures that are forcing changes.
Quote:
The sort of product that most people want is probably something that requires them to pay in a given sum a month for the rest of their working lives in return for a given annual income, or some proportion of their final salary, for the whole of their post-retirement lives. Anyone who could offer them something along those lines would crack the market.

Yet fund-management companies find it very difficult to make that kind of promise. The only investment that can offer a guaranteed inflation-linked return is index-linked government bonds, which offer very low real yields.
What should an investor do once this massive downturn created by financial mismanagement works itself out?
Quote:
The fund-management industry has done very well - but mainly for itself, says Philip Coggan.

Imagine a business in which other people hand you their money to look after and pay you handsomely for doing so. Even better, your fees go up every year, even if you are hopeless at the job. It sounds perfect.

That business exists. It is called fund management. ... fees in the industry tend to grow at around 15% a year because markets rise by an average of 8% and savings grow by 5-6%. This growth is being maintained despite the industry's vast size. ... the value of all professionally managed assets at the end of 2006 was $64 trillion. ...

The average profit margin of the fund managers that took part in a survey by Boston Consulting Group was a staggering 42%. In part, this is because most fund managers do not compete on price. Instead, they persuade their clients to select their funds on the basis of past performance, even though there is little evidence to show that this is a good predictor of future success. Nor can investors be sure that the intermediaries who sell the funds - brokers, advisers and bankers - will steer them in the right direction. These middlemen often get a cut of the fund managers' fees, so they have little interest in recommending low-cost alternatives.
First we pay fund manager who in turn has us paying middle men. That's many people charging fees; a major percentage of any profit from the initial investment.
Quote:
Hence the clients get engaged in a costly game of chasing the best performers, even though by definition they are bound, on average, to lose it: after costs, the average manager inevitably underperforms the market. Figures from John Bogle of Vanguard, an American fund-management group, neatly illustrate the point. Over the 25 years from 1980 to 2005, the S&P 500 index returned an average of 12.3% a year. Over the same period, the average equity mutual fund returned 10% and the average mutual-fund investor (thanks to his regrettable tendency to buy the hottest funds at the top of the market) earned just 7.3%, five percentage points below the index.
A well proven point made so often by many but just as often denied by some industry professionals. The average mutual fund underperforms the market.
Quote:
But whereas the clients have not always done particularly well out of the industry, the providers have prospered. In recent years the growth of private equity and hedge funds has led to more widespread use of performance fees, creating a new class of billionaires. The balance between the industry and its clients will not be redressed until investors learn that higher fees do not guarantee higher returns. ...

Even so, fund management is undergoing a revolution of sorts. "The industry is in the process of more change than I've seen in the 30-plus years that I've been in the business," says Mr Brown. In part, this reflects the lessons of the 2000-02 equity bear market. Pension funds had been heavily exposed to equities in the 1990s, which allowed the sponsoring companies to take contribution holidays. But when share prices fell, pension funds went into the red, raising doubts over whether equities were the right match for the long-term liability of paying out retirement benefits.
Once it was 'smarter' to invest our own social security money? Suddenly GM is proclaiming 'legacy costs' when GM rationalized that they need not contribute; and now owe $7 billion to pension funds. How many others also thought they could better invest their social security money - and then just as foolishly put that money in mutual funds or other 'we are better because we are professionals' investments.
Quote:
So far, fund managers have been remarkably successful in maintaining their high fees, even in the face of lower investment returns in recent years. For more than three decades they have been fighting the challenge from "passive" rivals, which simply track the market through an index such as the S&P 500 or the FTSE 100. But now there are passive versions of other fund-management styles too, even high-charging hedge funds. Asset managers, for so long the Bloomingdales and Harrods of finance, are facing competition from the sector's Wal-Mart in the form of exchange-traded funds (ETFs), a flexible vehicle that gives investors exposure to almost any asset class at low cost.
If a cross section of the S&P 500 returned a 12.5% return, then why would one settle for 10% in a mutual fund? 2% is a devestating fee when the average investement only returns 8%. Worse if investments do even worse do to 'economic revenge' and a war that must still be paid for. Now we have a whole new economic environment created by economic mismanagement over these past seven years.

Most people cannot invest in all 500 stocks. Now investors can buy a stock (an ETF) that, in turn, invests in all 500 S&P stocks. Invest in everything by eliminating the expensive 'good looking' professional. Get advantages of a mutual fund without the major expense - the professional. Reap higher returns by investing in an index fund. Or invest in ETFs. Some famous ETF stock symbols are SPY & QQQ.
tw is offline   Reply With Quote
Old 03-19-2008, 09:16 AM   #8
TheMercenary
“Hypocrisy: prejudice with a halo”
 
Join Date: Mar 2007
Location: Savannah, Georgia
Posts: 21,393
Quote:
Originally Posted by tw View Post
Bush Did It!!!! It's all his fault!!!!.
__________________
Anyone but the this most fuked up President in History in 2012!
TheMercenary is offline   Reply With Quote
Old 03-18-2008, 03:27 PM   #9
HungLikeJesus
Only looks like a disaster tourist
 
Join Date: Feb 2007
Location: above 7,000 feet
Posts: 7,208
That's not your name. That's just what your grandmother calls you.
__________________
Keep Your Bodies Off My Lawn

SteveDallas's Random Thread Picker.
HungLikeJesus is offline   Reply With Quote
Old 03-18-2008, 03:35 PM   #10
lookout123
changed his status to single
 
Join Date: Apr 2004
Location: Right behind you. No, the other side.
Posts: 10,308
She did until she died in the South Tower in 2001. Insensitive jerk.
__________________
Getting knocked down is no sin, it's not getting back up that's the sin
lookout123 is offline   Reply With Quote
Old 03-18-2008, 08:44 PM   #11
smoothmoniker
to live and die in LA
 
Join Date: Feb 2003
Location: Los Angeles
Posts: 2,090
Would now be a good time to mention short-traded ETFs again? For every direction the economy heads, there are ways to increase wealth, if you have diligently saved up the resources to invest.
__________________
to live and die in LA
smoothmoniker is offline   Reply With Quote
Old 03-19-2008, 12:01 AM   #12
tw
Read? I only know how to write.
 
Join Date: Jan 2001
Posts: 11,933
Paul Volcker is a retired Federal Reserve Chairman who destroyed massive inflation buy attacking the American Standard of Living using massive interest rates. He stopped trying to fix the economy, protecting jobs, and economic stimulus. He made everyone suffer which solved economic problems.

On Charlie Rose are answers to aimeecc questions. There are no sound byte answers. These notes from his discussion are some of the best answers that aimeecc might get.

Financial crisis is due to excessives in mortgage lending.

Federal Reserve action raises questions. Function is to provide liquidity to the financial industry center.
Now they stepped in to save Bear Stearns that was highly (excessively) leveraged. All investment banks are highly leveraged and interconnected. Federal Reserve now lends to investment banks - a major change. Is it wise? Could we have risked the demise of Bear Stearns? Unknown because all firms are so interconnected and also highly leveraged. So this is a test of a new financial system where banks are no longer the dominate center of our financial system. Investment banks are now larger, mostly unregulated, especially since SEC (ie remember Harvey Pitts) does little to no oversight.

Fed Reserve was not conceived as a place to put bad assets. Now that is what has happened. (Something like 50% of the Feds budget may be tied up with questionable mortgages.) Fed is taking over bad assets from these highly leveraged investment bankers. Volcker says this is wrong in the long term. Federal Government (Treasury) did not step in because government currently has no tools. That should change.

Freddie Mac, et al are government institutions intended to solve mortgage problems in times of stress. But for 1970 budget games, Freddie Mac became a big private intuition torn between whether it is a profit center or a mortgage solution organization. Fed had to step in because nobody else could (or would) - ie Freddie Mac and Sally Mae. That should change. Freddie and Sally have direct credit lines to the Treasury that were not used.

All this should have been seen coming. We did not ask obvious questions because short term profits and low cost imports made everyone happy - unaware because we wanted to be. Financial situation was unsustainable. We have been consuming more than we produce for a long time made worse because foreign investment let us ignore these impending problems.

Economy not too bad, especially exporters. But we have lost manufacturing capacity. If we can get through this crisis, we will have a better balance economy. Question is 1) how and 2) how long the pain,

How? Confidence among asset holders is too low. Even Freddie Mac & Sally Mae should go out and buy back their own paper. Things would be worse if commercial banks were not properly capitalized.

We convinced ourselves that complex financial instruments created market stability. Literally mathematical models with no basis in financial reality were used to justify absurd conclusions. Mathematicians without financial experience were making predictions that others believed. Humans got too exuberant.

Having the dollar as a world currency has been good for everyone - as long as the US economy is stable. Things such as protectionism has been harmful. Off balance accounting has been harmful. Instability in America creates instability internationally. Even Swiss Franc is worth more than a dollar. US has ignored these international problems created by a dropping dollar. Dropping dollar made worse by lower interest rates and resulting inflation. Volcker specifically mentioned increasing food prices. These rates are no where near to what Volcker had to fix, but equivalent to what was starting in 1970 that created the problems he eventually fixed with 15 and 20+% interest rates.

How long to fix? Business firms are strong. Problems are only in financial institutions and housing. Rest of economy is still in good shape although economy may now be in recession.

Past recessions verse now - confidence has not been lost. Concern would have existed had Bear Stearns declared bankruptcy causing non-performance with third parties. Would it have created a panic? Yes or no - also called unknown.

People are paying high for credit protection. When that diminishes, then stability is being restored.

What we must do? Take a serious look at the entire regulatory system. Financial system is now doing excessive risk taking. Too much off-balance financial statements. Too many people getting highly compensated for taking risk without suffering from their mistakes - sitting happy in Palm Beach - including those who decide these compensation packages. Banking system does not have this problem due to proper regulation. But investment banking system has no such regulation and is doing so with better contributions to Congressmen.
tw is offline   Reply With Quote
Old 03-19-2008, 09:45 AM   #13
barefoot serpent
go ahead, abbrev. it
 
Join Date: Jun 2005
Location: Lawrence, KS
Posts: 2,623
Quote:
Originally Posted by smoothmoniker View Post
Would now be a good time to mention short-traded ETFs again? For every direction the economy heads, there are ways to increase wealth, if you have diligently saved up the resources to invest.
SKF, SRS and others work for me.
__________________
Chooses rowing vs. wading
barefoot serpent is offline   Reply With Quote
Old 03-19-2008, 01:09 PM   #14
Undertoad
Radical Centrist
 
Join Date: Jan 2001
Location: Cottage of Prussia
Posts: 31,423
Quote:
Our dream is to have a large tract of land with water so when it becomes anarchy from global warming and the mismanagement of the US we have a safe haven.
Ironically, if your doomsday scenario becomes evident, the US markets will crash. Perhaps you should invest in foreign markets.
Undertoad is offline   Reply With Quote
Old 03-19-2008, 01:37 PM   #15
lookout123
changed his status to single
 
Join Date: Apr 2004
Location: Right behind you. No, the other side.
Posts: 10,308
if the US markets go, the foreign markets will also spiral until a new leader steps up. Foreign currency will be about as useful as domestic currency. If that is your concern you're better off investing in food, weapons, ammo, security systems for your land, and items that will be good for bartering in the new economy.

Or you can start preparing your doomsday safe house elsewhere - i'm thinking central america or australia.
__________________
Getting knocked down is no sin, it's not getting back up that's the sin
lookout123 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump

All times are GMT -5. The time now is 07:39 AM.


Powered by: vBulletin Version 3.8.1
Copyright ©2000 - 2025, Jelsoft Enterprises Ltd.