Public Pension Millionaires

[jk]

Re: Public Pension Millionaires

Zimbabwe already tried that; didn't work.

1. work for WHOM?
2. not a major currency in the first place, let alone the reserve currency.

ej's been predicting 100% inflation [total, not compounded] spread over some 5 year period in the not too distant future. that will be a good down payment on what's needed.

[vt]

Re: Public Pension Millionaires

Reserve currency for how long?

http://www.amazon.com/Death-Money-Co...words=rickards

[GRG55]

Re: Public Pension Millionaires

Reserve currency for how long?

http://www.amazon.com/Death-Money-Co...words=rickards

Until something replaces it. And that doesn't look imminent, does it...

[don]

Re: Public Pension Millionaires

Until something replaces it. And that doesn't look imminent, does it...

a mixed basket system that includes the dollar may be much closer.

look what happens when an energy state proposes that - regime change.

serendipity? I think not . . .

[GRG55]

Re: Public Pension Millionaires

a mixed basket system that includes the dollar may be much closer.

look what happens when an energy state proposes that - regime change.

serendipity? I think not . . .

A mixed basket of currencies requires a higher level of global coordination and cooperation than appears possible in the present environment. There is much nonsense being written since Crimea about an emerging China-Russia led bloc, detrimental to the USA. These people read no history. China will do what is good for China. Russia is a historic enemy, and there is little trust between them. The USA has little to worry about, other than it's own internal policy mistakes messing up a good thing (entirely possible, and perhaps even likely, but not imminent).

[santafe2]

Re: Public Pension Millionaires

a mixed basket system that includes the dollar may be much closer.

look what happens when an energy state proposes that - regime change.

serendipity? I think not . . .

Don - If we take a 10 year view of the US$ it does appear that there is a downward trend within a narrowing channel. But it doesn't appear that a "breakout" from this channel is required for several years. I think if the US$ continues it's gradual slide in value the world will be OK continuing our exorbitant privilege. As others have said, the options aren't great. Entities want safety and as long as they do the US$ won't fall off a cliff.

[GRG55]

Re: Public Pension Millionaires

Don - If we take a 10 year view of the US$ it does appear that there is a downward trend within a narrowing channel. But it doesn't appear that a "breakout" from this channel is required for several years. I think if the US$ continues it's gradual slide in value the world will be OK continuing our exorbitant privilege. As others have said, the options aren't great. Entities want safety and as long as they do the US$ won't fall off a cliff.

The years since the tech bust have been a period of extraordinary and increasingly aggressive reflation by the Federal Reserve (until the taper started a few months ago?). And yet the US$ index seems to have held up remarkably well under that onslaught - something that the perpetual US$ doomers prefer to overlook.

Looking at a 30 year chart of the US$ index shows it spent most of that time between 80 and 100, with two excursions well above that (Reagan's Plaza Accord peak and the Clinton era tech bubble "surplus").

[vinoveri]

Re: Public Pension Millionaires

Agree the $ is going to be the reserve currency for sometime to come and is not going to go poof one day, however $USD index is a measure of relative value compared to other fiat currencies e.g., euro and yen so strength or stability should be considered in that context. The index could stay at 80 for the next decade while still losing 30_50% of its domestic purchasing power

[GRG55]

Re: Public Pension Millionaires

Agree the $ is going to be the reserve currency for sometime to come and is not going to go poof one day, however $USD index is a measure of relative value compared to other fiat currencies e.g., euro and yen so strength or stability should be considered in that context. The index could stay at 80 for the next decade while still losing 30_50% of its domestic purchasing power

Certainly. Isn't that why we hold some gold? And some oil? The US$ is "first among fiat", that is all. But that is why is won't be displaced any time soon as a reserve currency. What the critics of the US Dollar refuse to acknowledge is that every other country of note is playing exactly the same inflation game with their currencies.

For the longest time we heard repeatedly that the much vaunted Chinese economy and currency was a powerhouse compared to the US$ and if not for active management on the part of the PBOC it would rise inexorably...the Chinese were so superior. Well the Chinese widened the yuan trading band recently, and look what happened...

[santafe2]

Re: Public Pension Millionaires

The index could stay at 80 for the next decade while still losing 30_50% of its domestic purchasing power

That is why one should work hard to become an investor and be as small a consumer as possible. EJ's, "How much of a car should you finance?", is worth the price of entry to iTulip if you never read another article.

Owning things that people must have is good protection against fiat currencies. Middle of the road, middle class housing in a good neighborhood in the US will continue to offer capital protection. If you think the US$ will have ~40% less value in a decade you should buy a home as described above and take out a mortgage for 80% of the value. In a decade you'll look like a genius because inflation will have doubled from here and your investment will have appreciated by ~40% while you paid it down and had a nice place to live. People are becoming fond of saying housing is not an investment but anything bought on margin in a reasonable market, based on inflation, is an investment.

[vinoveri]

Re: Public Pension Millionaires

While your advice is eminently practical and appropriate for many, I would suggest gaming, looting, and playing catch me if you can with the money printers system would be more rewarding and fun. Or maybe, turn on, tune in and drop out. life is too short to hunker down and play the game, especially after one comes to realize its rigged, corrupt and unequitable. You gotta do what you gotta do for sure, but one
also has to look in the mirror. can anyone recommend a good version of Robin Hood?

[Thailandnotes]

Re: Public Pension Millionaires

That is why one should work hard to become an investor and be as small a consumer as possible. EJ's, "How much of a car should you finance?", is worth the price of entry to iTulip if you never read another article.

Owning things that people must have is good protection against fiat currencies. Middle of the road, middle class housing in a good neighborhood in the US will continue to offer capital protection. If you think the US$ will have ~40% less value in a decade you should buy a home as described above and take out a mortgage for 80% of the value. In a decade you'll look like a genius because inflation will have doubled from here and your investment will have appreciated by ~40% while you paid it down and had a nice place to live. People are becoming fond of saying housing is not an investment but anything bought on margin in a reasonable market, based on inflation, is an investment.

I know 4 expat couples who have been returning to various parts of the country with the idea of buying a house in the next 1-3 years. 2 have found houses that will come on the market about the time they are ready to buy. All four have been told housing prices are going down significantly in the next few years.

[charliebrown]

Re: Public Pension Millionaires

I understand the inflation part, but how do finance dynamics play in? What if interest rates rise and wages remain fairly static. Unless you are a cash buyer very few will be able to afford a house out of earned wages.

[santafe2]

Re: Public Pension Millionaires

I know 4 expat couples who have been returning to various parts of the country with the idea of buying a house in the next 1-3 years. 2 have found houses that will come on the market about the time they are ready to buy. All four have been told housing prices are going down significantly in the next few years.

Real estate costs are location based so one can almost never make the broad statement that prices will move up or down significantly without qualifying the statement with location. There surely are places like Los Angeles where real estate is too expensive and not suitable as middle class housing. To understand if the housing you're considering is suitably priced for the median middle class family in your location you have to apply a fairly standard formula; median monthly income / 3 = standard mortgage payment.

Let's walk through an example. Assume your median family of four makes $65k a year and nets $53k after taxes. That number comes from ADP for Arizona, states will vary. If you divide $53k by 12 and then by 3, you'll find that this family should not have a mortgage higher than $1,472 per month. Bankrate says 30 year fixed loans are 4.34% today so let's use 4.5% as the mortgage rate. Using a mortgage calculator we find this family can afford a $290,000 home. Since a home has other expenses like insurance, taxes and upkeep, I don't calculate the 20% down payment in my affordability estimate.

If you can find a home for that cost in a safe neighborhood with good schools, that is a fairly priced home. If median incomes go up prices will tend to move up. If interest rates move up, prices will tend to move down. If you think mortgage rates will move up to 5.5% over the next year or so you might only be willing to pay $260,000 for this same home. When we bought two investment properties in our area early last year we used 6.5% and although it wasn't easy, we did find homes that met all our criteria. It's not impossible to find these homes but your friends will have to be flexible in where they want to live and they'll have to work to find the right home.

[santafe2]

Re: Public Pension Millionaires

Real estate costs are location based...There surely are places like Los Angeles where real estate is too expensive...

I think this article from the Los Angeles Times says some of the same things I was saying.

http://www.latimes.com/business/real...#ixzz2xNx47U2Y