Sell Everything

[Jim Nickerson]

Re: Sell Everything

Hold -Printed currency, not "cash" in a bank account.

Hold Physical Gold and Silver

Hold T-bills, not bonds, not CDs.

Wait for those in panic to seek safety, pick them off when you think is right.

It strikes me as nuts for anyone to suggest to iTulip readers they should hold "printed currency" vs. "cash" in an interest bearing account.

It would be interesting to see you expound on the wisdom of your recommendation. I expect it has a lot of deep serious thought behind the notion, and I'd appreciate knowing your perspective.

To which Sap. answers

[quote=Sapiens] http://www.ces.org.za/docs/NofM.pdf [/Sapiens]

Sapiens,

You've got to be kidding, an answer of 122 page PDF. Are you not capable of personally writing what it is that makes you suggest anyone with more than 1K in cash ought to be holding the bills rather than hold such in an interest bearing account?

I think anyone who would take all his cash and hold it outside an interest bearing account would qualify as a fool.

[Jim Nickerson]

Re: Sell Everything

Someone in a message about something else suggested that perhaps some of the more bearish readers are expecting an extended run on the banks.

To my simple thinking a bank and a brokerage account are not the same thing, but perhaps to the more learned there is no difference. Would cash in a brokerage account not be safe if there were to be a run on banks?

I personally only have $45 in a real bank account, and only because of being too lazy to close the account.

[Sapiens]

Re: Sell Everything

[QUOTE=Jim Nickerson]To which Sap. answers

http://www.ces.org.za/docs/NofM.pdf [/Sapiens]


I think anyone who would take all his cash and hold it outside an interest bearing account would qualify as a fool.

A fool is as a fool does....

[Finster]

Re: Sell Everything

To which Sap. answers

http://www.ces.org.za/docs/NofM.pdf

Sapiens,

You've got to be kidding, an answer of 122 page PDF. Are you not capable of personally writing what it is that makes you suggest anyone with more than 1K in cash ought to be holding the bills rather than hold such in an interest bearing account?

I think anyone who would take all his cash and hold it outside an interest bearing account would qualify as a fool.

FWIW, I agree there is merit in holding at least some of one's cash in the form of printed currency. Bank accounts are insured by the FDIC, but the FDIC has only a small fraction of the resources that would be needed to cover the bank accounts it insures. If there were a systemic problem with the banks, it would likely take an act of Congress to bail them out.

This is not all that hypothetical. Remember the savings and loan debacle of the 1980s? The S&Ls were insured by the FSLIC, just as the banks are by the FDIC. Depositors may get their money back, but they may have to wait a while for it. While you're waiting, that printed currency could come in very handy.

[Jim Nickerson]

Re: Sell Everything

FWIW, I agree there is merit in holding at least some of one's cash in the form of printed currency. Bank accounts are insured by the FDIC, but the FDIC has only a small fraction of the resources that would be needed to cover the bank accounts it insures. If there were a systemic problem with the banks, it would likely take an act of Congress to bail them out.

This is not all that hypothetical. Remember the savings and loan debacle of the 1980s? The S&Ls were insured by the FSLIC, just as the banks are by the FDIC. Depositors may get their money back, but they may have to wait a while for it. While you're waiting, that printed currency could come in very handy.

So Finster, do you see any difference between having cash in a brokerage money market fund, I personally use Schwab, and a bank's money market fund? I think Schwab has about 4 million of insurance on every account, if that actually means anything.

[Jim Nickerson]

Re: Sell Everything

[quote=Sapiens]

To which Sap. answers



A fool is as a fool does....

I take it that you are not capable of personally explaining your recommendation. Good enough.

[javacat97]

Re: Sell Everything

Didn't I hear that the ultimate advice of this news letter was to remain invested as the final run of the bubble produces outsized gains? (Not sell everything)

[Ed]

Re: Sell Everything

You need to try harder with your reckoning. Comparing US$ from quite different times is NOT meaningful because the purchasing power of the US$ has varied a LOT. Look at
http://homepage.mac.com/ttsmyf
and note your 'the seventies' between 1966 and 1982.

Cash is US$ (future purchasing power uncertain). Treasury bills, notes, bonds, etc. (EXCEPT FOR TIPS) promise a specified stream of future payouts in cash/US$. TIPS promise a specified stream of future payouts in consumer purchasing power -- i.e., future payouts' US$ are uncertain, but the consumer purchasing power of those future payouts' US$ IS CERTAIN.
So, unless you use US$ as wallpaper, ...

[Finster]

Re: Sell Everything

So Finster, do you see any difference between having cash in a brokerage money market fund, I personally use Schwab, and a bank's money market fund? I think Schwab has about 4 million of insurance on every account, if that actually means anything.

There are definite differences. Bank accounts are generally covered by FDIC insurance. Brokerage accounts are usually covered by SIPC and other insurance. You'd need to check the details of the coverage for a full explanation, but cash is generally covered only if it's being used for investing and trading.

A money market fund is not the same as a money market account. A bank money market account is usually FDIC-insured. A money market fund is simply a mutual fund that invests in short term credits and is managed so that its net asset value stays at $1 per share. There is no guarantee that it will. Money funds can and do occasionally "break the buck".

Not all money market funds are alike, either. Most stick with fairly high quality credit, but some restrict their assets to short-term treasuries like TBills. These latter are arguably safer than most banks.

The point, however, is not simply whether you would get your money back. You probably would. The question is what do you do while you're waiting. That's where the cash under the mattress comes in.

[Sapiens]

Re: Sell Everything

The point, however, is not simply whether you would get your money back. You probably would. The question is what do you do while you're waiting. That's where the cash under the mattress comes in.

Finster,

Your pedagogical skills are superb, when you are not showing off.

-Sapiens

[Jim Nickerson]

Re: Sell Everything

There are definite differences. Bank accounts are generally covered by FDIC insurance. Brokerage accounts are usually covered by SIPC and other insurance. You'd need to check the details of the coverage for a full explanation, but cash is generally covered only if it's being used for investing and trading.

A money market fund is not the same as a money market account. A bank money market account is usually FDIC-insured. A money market fund is simply a mutual fund that invests in short term credits and is managed so that its net asset value stays at $1 per share. There is no guarantee that it will. Money funds can and do occasionally "break the buck".

Not all money market funds are alike, either. Most stick with fairly high quality credit, but some restrict their assets to short-term treasuries like TBills. These latter are arguably safer than most banks.

The point, however, is not simply whether you would get your money back. You probably would. The question is what do you do while you're waiting. That's where the cash under the mattress comes in.

Thanks, Finster. I appreciated before asking some of these differences, and I did confuse money funds and money accounts.

Some serious collapse, an example of which I cannot think, could realize the issue of what one does while waiting. I am such a pessimist, but despite that I have a serious reservations that a point could come such that I could not access my funds for other than short periods of time. How much does one hold in gold or bills to cover one's ass, it could be days, weeks, or even months in a worst case scenario? That is a rhetorical question.

[bart]

Re: Sell Everything

Just a mild observation...

In a thread entitled Sell Everything, there has been no mention made of shorting or using any of the shorting funds or ETFs designed for it or even the use of put options.

[c1ue]

Re: Sell Everything

Hold -Printed currency, not "cash" in a bank account.

Hold Physical Gold and Silver

Hold T-bills, not bonds, not CDs.

Wait for those in panic to seek safety, pick them off when you think is right.

The option I have chosen is to move money offshore into ultra-conservative banks in other countries.

I figure the ATMs will work no matter what, and furthermore if there is a currency inflation of the US$ (accelerated beyond what has already happened), I can again experience the benefit as I did while in Japan in 1999 - 2002.

Japan, Switzerland, and a little in Russia (for admittedly scarier looking ruble exposure).

As for FDIC - I thought I saw a paper not too long ago where an analysis of FDIC showed any major banking crisis would run the program out of money in 6 months. This is just like the pension program, only if the overall economy and government are in trouble there will be nothing left to add in.

At least, not until inflation has spoiled most of the 'insurance'.

[Jim Nickerson]

Re: Sell Everything

Just a mild observation...

In a thread entitled Sell Everything, there has been no mention made of shorting or using any of the shorting funds or ETFs designed for it or even the use of put options.

Bart, that is a good observation, and to offer a possible reason: perhaps most people are sucked into believing the market will continue to go up--which it may do and do. I got out of some long leveraged ETF's 9 market days ago, and wrote somewhere here, that my doing so indicated that the market had one more reason to keep going up, which it has done.

Relying upon memory I was in some short funds back in Nov. 1999 and I got killed in them.

It would seem wise to me for there to be some reversal in the upward movement of the markets before anyone gets seriously short, though some of the posted asset allotment accounts have established short positions.

Another mild observation, of all the people who contribute (and frequently) here, I would say you write the least about how you may be positioned. Why don't you join the "game" and put up an asset allotment in that thread?

I note there are some others who speak alot about how they think one should be invested, but they have not put up asset allotments either, that is to say they have not put their monies where their mouths are.

[vinoveri]

Re: Sell Everything

Maybe once the trend is clearly down (or if you think you can time the market) - things have looked bearish for a while now and folks who've been shorting markets are probably a bit frustrated by now (and with a bit less $) ... the oft-quoted Keynsian poiny regarding how markets can remain irrational markets longer than one can remain solvent seems relevant.

That said, there are some great and leveraged ETFs for shorting the markets e.g., SDS, QID, DXG, are apparently supposed to return double the inverse of what the S&P 500, Nasdaq, and Dow Inds return respectively.
These funds can be traded in retirement accounts (brokerage IRAs) - and they effectively circumvent the rules prohibiting "selling on margin" in IRAs (although I suppose you could argue it's not really margin selling)

I would tread lightly shorting the market in the final stages of a bubble which could continue on for a while.