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In Hyperinflation What Is Safe?

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Hi Tony,

 

"Yes he does need help but I am concerned where he will go for it. Nothing worse than him running into a predator who makes his/her living on the elderly."

 

Predators will prey on anybody. Remember, Crystal mendez, the featured teacher in the LA Times report a couple of years back--was sold a fixed annuity at 23 years old!

 

Because of the personal crisis that has hit TeeAich very hard, perhaps he will be more motivated to call VG, gets some help and actually follow up. This is terrible and it could have been prevented.

 

Its a lesson for all of us not to get too greedy when the market is going up. Have a plan with low cost, no load indexes as your primary investments, earn the market averages, rebalance when necessary and reset your equity-bond allocation as you age. Finally, stay the course.

 

Have a good day,

Steve

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Steve,

 

 

You are 100% correct. TeeAich and I need to open our ears and start listening!! Maybe in seven years I will get it right. I'm working on it.

 

 

 

In the meantime I hope the future brings some changes in how Wall Street operates so innocent investors don't always end up paying the price .

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Steve,

 

 

You are 100% correct. TeeAich and I need to open our ears and start listening!! Maybe in seven years I will get it right. I'm working on it.

 

 

 

In the meantime I hope the future brings some changes in how Wall Street operates so innocent investors don't always end up paying the price .

 

Tony, As you know there are several books that discuss risk managment. Larry Swedroe does an excellent job writting about managing long term risk. Read what an experts expert like Swedroe will do a lot for anybody. Basically, Larry Swedroe discusses a non reactive, long term way to invest in the market, not a reactive way based on current market conditions.

 

Tony, I'm not sure that I understand you second paragraph. Are you saying the the market went down because Wall Street is not operating correctly, and that the "innocent investors" have been taken advantage of , or are you saying that investors are paying more than they need to , to those who are sales agents?

 

 

 

Steve, I thought that you made an excellent post to teeaich about managing risk.

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.TeeAich, As a high investor at vanguard there are certified investment advisors that are available to give professional free advice so you can develop a balanced conservative portfolio.

 

YOur investment of 100 percent equity is too aggressive for a mature man. consider an investment that includes cash, bonds and a small amount of equity.

 

It is my opinion that you need to take immediate action since the market can go up or down.

 

Good luck

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IRA,

 

 

I'm talking to both issues actually. But I think this massive drop was caused by dishonesty and greed. How else can you explain folks being duped into buying mortgages they could not afford nor understand? How else can you explain major players like AIG doing what they did ? How about those golden parachutes? I have a fellow teacher here who is young and maybe is making $32,000 a year and is single. How did he qualify for a 200,000 mortgage loan? I never could at his age.

 

Our economy is in trouble if we can't return to doing business the right way. Everything is becoming a scam. Just sell sell sell. No ethics. I do know that business cycles occur and that is to be expected but this current mess goes beyond just being a normal downturn-Don't You think?

 

 

I'm at the point that unless some serious intervention occurs by the SEC and the government , I just don't think the stock market will be the place to be anymore to prepare for retirement. It will be too risky. Almost like putting your nest egg in Argentina stocks or something.Call it Socialism if you like but I just think this nonsense of abusing the shareholder's trust must end.

 

 

P.S. I got a D in college economics and it might show :)

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But I think this massive drop was caused by dishonesty and greed. How else can you explain folks being duped into buying mortgages they could not afford nor understand?

 

I'm at the point that unless some serious intervention occurs by the SEC and the government , I just don't think the stock market will be the place to be anymore to prepare for retirement. It will be too risky. Almost like putting your nest egg in Argentina stocks or something.Call it Socialism if you like but I just think this nonsense of abusing the shareholder's trust must end.

 

Tony,

 

To the first point above, let's not let off the hook those folks who took those mortgages. They were duped? What would have happened if the market had continued to rise? I doubt that these folks would have called themselves dupes; instead, they would probably be bragging about how smart they were.

 

To the second point, maybe we should all take a deep breath. Remember in the high tech days when things were going up and up, when people did not think that high tech companies would go down because "this time, things are different?" It may be that we have the reverse of that right now. Everything looks bleak, and even though the economy has always recovered in the past, we tend to fear that "this time, things are different." It's difficult to have perspective at times like these, but that's perhaps what we need.

 

I am COMPLETELY on board with your point about the abuse of shareholders' trust. I would like to see much more shareholder activism to put truly independent people on boards of directors. Mutual funds, pension funds, and insurance companies should flex their muscles and insist upon this; however, for very reasons, I am pessimistic that this will occur.

 

Hang in there, friend.

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As a result of wide fluctuations in the market, investor receive a long term high rate of return in equities( I think about 10 percent a year). I read an article in the curent Money magazine by Larry Swedroe. If I remember right he said that when we have downturns it like paying taxes. Its necessary to get higher returns longterm.

 

Tony, the market is always going to go up and down. There is always greed and dishonesty. we do not live in a fairtale world. The market now, is not different than other downturns in history, The market will come back at some time, there will always be investors who want to make money, and will invest. Of course there will be the inexperienced investors who sell at market bottoms. This market downturn is no different than the tech bubble, the tulip bubble, the real estate bubble, or any other bubble in history. I do not beleive that this time is any different.

 

Also my viewpoint is different than most. In a capitalistic market, why not pay an executive additional moneys if you feel the individual can produce wealth for you. There is nothing wrong with negotiating golden parachutts. This is equivilent to atheletes or entertainers who get large sums of money because they attract audiences. I believe that there are a lot of sore lossers who complain when the corporation losses money. You don't hear complaints when the corportations make money. I'm willing to pay large amounts to the help so I can make money.

 

 

 

 

 

 

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From the looks of things, our 403s are doomed even if we are fully in cash. Now I hope not, but I am afraid the dollar will tank in the next several months, and possibly for sure by summer as the US is unable to pay its debts. I realize the dollar is up now but that will be short lived by most estimations due the influx of dollars which they like to call liquidity which is a nice word for inflation.

 

I fear a hyperinflation which could bring the dollar to its knees. If we have a dollar worth 10% of its value within the next 8 months to 2 years, what is any other option to escape this? I have read on more than one occasion that they will have to adopt a new currency if this occurs. (I realize this is speculation at this point). I can't invest in yen, or swiss francs in my 403b. Maybe I am overly worried but after reading 4 books recently and many many news articles from varied market and money sources (admittedly some by contrarians), I am not feeling confident at all that any real comeback is even an option. The 401k is down 38% and we're not expecting more than a dead cat bounce and then continued devaluation in the markets.

 

Comments or ideas? How does one truly safeguard the 401k if the dollar tanks? You can't even flee to cash.

 

Given the rapid decline in commodies such as oil due to the lack of demand in the past month how many believe that inflation is a real risk to the economy? The government is now worried about deflation due to the lack of demand by consumers for goods and services which in turn will result in less production and more layoffs and a even lower level of demand which will drive prices down further.

 

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One way to solve our current economic challenge is to double the price of everything. Double everyone's pay, double the price of every home, etc, etc. Voila! - your mortgage now looks good relative to the value of your house, and the payment is now affordable. And if you happen to believe that prices will continue to rise, then you are quite interested in accelerating your purchases because tomorrow the price will be higher. Demand is strong, the economy grows (in nominal terms) and yes - we have higher inflation.

 

Effectively, this approach is approximately equivalent to halving the outstanding mortgage value for those whom have leveraged themselves into a home (or homes). The losers of this approach are those that loaned the funds (lenders & holders of mortgage backed securities) as they get paid back but the real value of their loan has declined. Oh & by the way, US Debt (as a % of Nominal GDP) Levels decline.

 

This has been done before. An nobody from the Fed or Treasury is ever going to announce that this is the gameplan. But the approach is certainly more politically viable than an explicit motgage reduction (Cram-Down) strategy that some have advocated. Just too much for us to handle - so we get to the same place using other means.

 

Deflation concerns in the very near term - Yes. But periods of Deflation are highly unlikely (Bernanke has already said he'll drop $$ from a helicopter to avoid that) to persist. Worldwide fiscal & monetary stimulus is happening each day - appropriately. And new initiatives will be added - until growth again kicks in. Policymakers will err on the side of doing too much.

 

What not to own: Long-term Bonds with fixed coupon rates. Go buy that foreclosure or any other real asset & use leverage to do it.

 

Danc

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"One way to solve our current economic challenge is to double the price of everything. Double everyone's pay, double the price of every home, etc, etc. Voila! - your mortgage now looks good relative to the value of your house, and the payment is now affordable. And if you happen to believe that prices will continue to rise, then you are quite interested in accelerating your purchases because tomorrow the price will be higher. Demand is strong, the economy grows (in nominal terms) and yes - we have higher inflation."

Effectively, this approach is approximately equivalent to halving the outstanding mortgage value for those whom have leveraged themselves into a home (or homes). The losers of this approach are those that loaned the funds (lenders & holders of mortgage backed securities) as they get paid back but the real value of their loan has declined. Oh & by the way, US Debt (as a % of Nominal GDP) Levels decline.

 

This has been done before. An nobody from the Fed or Treasury is ever going to announce that this is the gameplan. But the approach is certainly more politically viable than an explicit motgage reduction (Cram-Down) strategy that some have advocated. Just too much for us to handle - so we get to the same place using other means.

 

Deflation concerns in the very near term - Yes. But periods of Deflation are highly unlikely (Bernanke has already said he'll drop $$ from a helicopter to avoid that) to persist. Worldwide fiscal & monetary stimulus is happening each day - appropriately. And new initiatives will be added - until growth again kicks in. Policymakers will err on the side of doing too much.

 

What not to own: Long-term Bonds with fixed coupon rates. Go buy that foreclosure or any other real asset & use leverage to do it.

 

Danc

 

also those who have saving, such as the average person and retirees,etc wealth will be devalued.

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