Joe Doakes from Como Park emails:
I was worried about a stock market crash in October so I got out of the market.
Now it’s peaking, record highs.
I’m not convinced anything has changed. The fundamentals still feel phony. It’s irrational exuberance.
Of course, I’m also missing out on the gains. Time to jump back in? What say SITD readers?
Joe Doakes
Open floor.
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The global economy is based on asset bubbles, underfunding government actuarial systems, and debt now. Look at everything DEMOCRAT Larry Summers says. He’s in total panic because he knows the only hope is for the West to central plan a higher GDP to pay the interest. Of course this is impossible. His policies got into this mess. Inflationist statism is about to collapse.
Read this article https://www.researchaffiliates.com/en_us/publications/articles/414_wheres_the_beef_lies_damned_lies_and_statistics.html
And listen to David Stockman interviews to understand it http://contrakrugman.com/ep-60-krugman-copes-with-trump-special-guest-david-stockman/
https://www.youtube.com/watch?v=CDnKRSlo7so
http://www.businessinsider.com/erics-russell-napier-investors-gamed-by-the-financial-system-2016-11
http://www.businessinsider.com/real-vision-tv-doug-noland-on-central-bank-bubble-2016-11
If it wasn’t for the Second Amendment we would already have a police state.
I agree with your assessment of the market, JD, but if you do your due diligence, there are some stocks that are valued correctly and are worth looking at.
I’ve converted 25% of my investments into physical metals and another 20% into metal mining stocks, 25% is in cash and the remaining 30% is in a lower risk mutual fund. This is what I’m comfortable with right now, but I look at my options daily.
I pay for information from hedge fund guys and they are choking on gold. If you want to see how they think, look on Business Insider and Zerohedge for quotes form Real Vision interviews. (I have two posts above that are awaiting Mitch’s moderation).
I understand that the SEC people find cheaters the same way casinos find cheaters. They look for someone who consistently beats the odds.
If you can consistently beat the market you need an edge, like insider knowledge or, even better, the ability to tell the future.
Imagine you have read a few books on finance, and spend a good part of your time, say eight hours each week, catching up on the market, analyzing stocks, etc, and investing accordingly.
Now imagine another person. This person has spent every moment of their life since puberty lusting after wealth. So have his father and his uncles, back through time immemorial. Money is all that they care about, and they went to grad school in finance at a prestigious college just to learn more about how make lots of money. Now imagine dozens of high rise office towers filled with hundreds or thousands of people like this, with access to trading software and analysis tools you could only dream of.
That is who you are trying to outsmart with your market picks.
Go for a stock index fund if you think the economy is going to grow robustly, and buy bonds if you think the Democrats are going to be in charge. Hedge like crazy.
Buy indexed mutual funds funds. If you feel like speculating, buy some precious metals. However the price of gold has already jumped and it may only be good as a hedge.
I don’t get why they are doing this, but they are giving away one of the best Real Vision interviews, here: https://twitter.com/realvision/status/808311358932615168 Doug Noland.
There is a $billion industry supporting, and half the AM radio day is filled with people who tell you you CAN time the market.
It is a lie.
The guys who advise on the company 401k program have a interesting little tidbit in their educational program. They look at returns of one of the indexes, I think the S&P 500 for the last 100 years ( I think it is). But their point is that you can’t time the market. If you were out of the market for the 20 highest gain days during their period, you net market gain is near zero.
You have to have money on the table, but bet red or black, stay off the numbers.
Even before the run up, the market was overvalued. Now I believe it is overvalued that much more. There has to be a correction. At least that is what fundamentals tell us. But then, there is plenty of money to be made on the way down as on the way up. You just have to know which stock to buy and when. Simple, really… NOT!
Market timing is more about risk management. They use their voodoo charts or whatever, but once their position is down 2% they sell and reload. if it works 40% of the time you do OK.
When I thought Hillary was going to be President, I was prepared to stock up on bullets. But now that Trump is President, I’m not. My bullet strategy changed. I’m wondering if my stock strategy should change?
Have you guys changed your market strategy following the election, or is this the same investment strategy you followed before the election?
Same. In the long run there is no combination of growth and inflation that will “defease” the planet’s debt.
IMO, the guy with the best generalized strategy and commentary is Marc Faber. He makes great adjustments to a diversified approach. If I could do it over that is what I would do.
If there was a right answer to investing in the stock market everyone would be rich. I could devote the time to trying to understand its arcane workings, but I think I’d end up more confused. I have a gut sense that it is all built on bubbles and illusions, but I couldn’t tell you whether it is better to jump out of the window or run out the door before the house comes crashing down. A couple years ago though, I was able to convert my 401(k) to a self-directed IRA and have been buying rental properties.
Pro-tip: don’t get your investment advice on the internet and don’t churn your retirement account. If one could “time” the market nearly all investors would be millionaires.
You HAVE to pay for advice that gets how central banks and governments are affecting everything. i.e. bubble management. Speculation. And good luck with that. #WeAreDoomed
what would you guys recommend for someone just starting a 401k and extremely tolerant to risk?
I am reminded of noting, during a Six Sigma class in 2004 or so, that I didn’t believe the stock market would keep going up at 7-10%–that the fundamentals to watch were population growth and productivity, and you simply cannot get to even 7% stock market growth with 1-3% GDP growth sustainably–somebody has to buy those stocks, after all, and without wage growth, that isn’t happening.
My guess is that if things go well for Trump, we get 3-4% growth and corresponding stock market growth. If the Fed and Democrats screw things up well, or we watch a few bubbles pop, we’re talking about a 30% slump in stocks. I don’t know which it will be.
My reason for continuing to invest, really, is the tax break, and the simple fact that stocks simply reflect the economy as a whole. Not much else is going to outperform it year after year.
For me pretty much mutual funds, some bonds (gov’t and other), and a fair amount of stashed cash. I don’t have much in metals other than a good quantity of lead which I pray doesn’t become a precious metal. We outright own most of the typical assets folks have so our debt load is pretty small.
Ammo has been a better investment than gold ever since gold took off. I’m serious.
I have never been convinced that the stock market was really anything but Las Vegas, writ large. You have companies that have made little or no money, ever, valued obscenely high due to the “potential.” You have companies that are stable, delivering consistent earnings, year after year, whose value cycles like waves on the beach with an off-shore storm. The market moves up or down, on the same general news from month to month (so the talking heads say, I am not sure they really have a clue.)
I like Vanguard low cost index funds. They have many different options as it relates to your personal tolerance for risk. If your employer matches your contribution, let that be your minimum contribution. Personally, I would suggest a 25% contribution if you are able to do so. And Rebalance your funds yearly.
I’m thinking that when (if) the DJIA hits the 20K mark I may move a good portion of our holdings to a really conservative portfolio and watch for a while to see where trends take the markets. I’m optimistic that Trump will form policy that makes ownership of equities a smart investment for average folks. Money has no chance for growth when its hidden in a mattress, and that’s about what you got with a bank savings account. What are the options when saving accounts pay such dismal interest rates? I’ll be looking at some stocks to own that I believe have real value rather than chasing the “next big thing”.
In a rare instance, I agree with Emery.
In general, diversify between as many investment classes as you can. Rebalance annually if it makes sense (rebalancing a 401(k) is tax free so it’s fairly easy, not so if you’ve got investments you’ll get hit with big taxes on).
As for stocks, I’m in in a balanced way. But I will point out that I’m very diversified between US and international stocks and bonds, REITs, commodities (gold counts here), etc. So even though the Shiller PE index is at highs only reached in 1929, 2000, and 2008, I’m still staying the course. Who knows? The Donald might kick of a massive burst of growth if he manages to reduce regulations, cut taxes, etc. But nobody knows the future and timing is a sucker’s game.
POD said“what would you guys recommend for someone just starting a 401k and extremely tolerant to risk?”
Emery on December 12, 2016 at 11:05 am is correct
POD for someone in their early thirties who isn’t averse to risk set aside no more than 15% of your monthly investment for High-Risk investments and recognize it for what it is:Gambling. You can have a lot of fun and you’ll definitely learn a lot, but when it comes to timing the market you are ALWAYS drawing to an inside straight. Sometimes you’ll win but don’t ever kid yourself that you’re that smart – its usually just luck!
The market will rollover 20% and then Yellen will unleash the final QE before the global wipeout.
My peeps say the Fed’s balance sheet is going to more than double.
POD, I’m with kel and would add that they get advice from a good financial planner. I’ve always been told that over time the markets have outperformed most other types of investment. I tell younger folks the important thing is to start saving (investing) very early on. Set aside as much as you can weekly and stay with it, and try very hard to not touch it. Take as much advantage of employer matching funds in 401k as possible. The markets go up and the markets go down but over a period of time the dollar cost averaging thing works in ones favor. If a person uses discipline and not over spend on short term feel good luxuries when the time comes in life where you start drawing down your investments you’ll be happy that you started early.
Get stable stocks that pay dividends.
“Get stable stocks that pay dividends.” http://www.proshares.com/funds/nobl_index.html
I have been adding to my portfolio of bullets and shells since the primaries. That won’t change until I get to 1,000 rounds for any rifles and handguns that I might have and 500 rounds for any shotguns that I might have. I love my pellet guns and crossbow, because the rounds for them are cheapest.
With the political inversion, I’m thinking about becoming a bunker flipper.
Buy cheap from right wing preppers; add an open concept kitchen and a built-in expresso machine, couple pictures of Bill Moyers, Feng Shui certify it and sell it to panicked snowflakes for a bundle.
Not that any of you don’t already know this, but as Scott says above, start early with a 401(k). I know people who started a 401(K) when there were around 21-22 years old. By the time there were 35, they had more in their fund than many people have at retirement. Even if they contributed no more, but just let it grow until retirement, they’d be okay.
I also know some people who had some bad setbacks since the last recession. Those with some money put away (and had minimal debt) came out much better than those who didn’t have a lot to fall back on. That’s a nasty spiral that is hard to recover from.
Start 401k as soon as you have a real job, and ….resist the siren song of quick riches, whether that’s with an inappropriately aggressive plan, or flat out get rich quick schemes.
You guys need to read David Stockman’s new book and get back to me. I’m on page 50 and what is going to happen is clear as a bell. The best portfolio is ammo, cash, and gold.
“The best portfolio is ammo, cash, and gold.”
None of which is edible.
Also, the US, which is supposed to be on the brink of collapse, has the largest supply of ammo, cash, and gold in the world.
The bond market is going to back up uncontrollably before Trump’s first term ends. The knock-on effects are predictable.When the 10 year treasury hits 4% the USA is broke. When it hits 5.25% interest is the biggest treasury expense. Then throw in all of the private debt that won’t work.
They have to suppress interest rates and force people to buy government bonds, hence the Second amendment.
If Stockman is recommending brass, copper clad lead, gold, and ordinance steel as a retirement plan or survival plan, why the heck is he living in New York City? For that matter, even if he’s merely predicting economic collapse, why live in Gotham?
I’m not opposed to any of these as a hedge against catastrophe, mind you, but I don’t think Stockman is interpreting his work completely this way. Either that, or he really, really, really loves sauerkraut on hot dogs, bagels, and thin crust pizza.
ok so from what Ive gathered its an aggreaive 401 (k) that I can essentially basically gamble with; cash, gold and bullets. Talk about all over the place. I cant afford gold yet so Ive been buy silver occasionally too because it has a ton of inflationary upside, and its $15 a ounce, not $1200. Good move?
Gold and silver are insanely volatile. It doesn’t take much. That is the way to think about it.
Y’know, after the collapse, if I trade a krugerand for a case of canned beans, I won’t be thinking “Gosh! I was sure smart for buying gold!” I’ll be thinking “Gosh! I was sure stupid for buying gold instead of canned beans!”
Jethrene,
Actually, the U.S. has the least gold of almost any country. In fact, the Treasury has sold more than they’ve bought over the last 10 years.
China, by far, has the most gold, both physical and in the ground. They have bought up a lot of gold mining companies since 2009. They are pushing for the yuan to become the global reserve currency and has made currency agreements with the OPEC countries, France, Russia and most likely England, to abandon the dollar for oil purchases.
And, TFS, David Stockman and Jim Rickards have it figured out. It would be wise for all of you to read their respective takes, backed up by some hard evidence.
I suppose it depends on how you count it, Bosshoss. Most gold is made into jewelry. By that measure, India consumes the most gold annually, China comes next, and then the US. Per capita consumption figures are close for all three. But no one thinks of India or China as being a rich country, despite all their gold.
Adam Smith cured me of any tendencies I had of becoming a gold bug. He devotes a lot of Wealth of Nations to describing economic booms, busts, currency frauds, and inflation schemes, by businesses and governments, and they all took place at a time when everyone was on the gold standard.
Gold is just money, a currency, that isn’t controlled by a central bank or country. It’s value is strictly derived by market forces in the long run.
Money is a store of wealth, a method of exchange and a measure of value. Gold is sometimes more valuable at one or more of those depending on circumstances.
Silver is similar, but for a bunch of reasons, fluctuates way more than even gold.
This isn’t necessarily about doomsday.
The other thing is, today they are coming up with digital versions of gold accounts so you can use it to purchase stuff easier. Easy to move in fractional amounts, unlike the real stuff or what you would get from a stockbroker. This improves it’s utility.
The other thing is, Japan, and Europe are more screwed up than we are, so the dollar could go into extreme demand and break the global economy, which would break the global monetary system and this would drive the demand for gold. Strong dollar plus gold going up in dollar terms at the same time. The would be a new phenomenon.
anyone got a solid opinion on Bitcoin?
The big problem with bitcoin is someone could make a better version of it. Plus everyone is hoarding it even though it’s a great medium of exchange + it’s new = so it’s likely wildly volatile.
If you look at the free market as a means of efficiently converting labor into capital, currency is an inefficiency that the market will work to erode. In that sense, bitcoin may be the perfect free market currency.
QUOTE: “If you look at the free market as a means of efficiently converting labor into capital, currency is an inefficiency that the market will work to erode. In that sense, bitcoin may be the perfect free market currency.”
The good thing about it in this sense is that it’s inherently slightly deflationary just like gold. A slight ongoing deflation was the way man lived until central banking was developed, which is superior. This is the root of all of our problems right now. Once the USSR fell and China opened up, statist inflationism quit “working.”
I can’t recommend David Stockman’s new book enough.
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