POOM! (or soon to be POOM!!)

[Guest]

Re: POOM! (or soon to be POOM!!)

I guess you hadn't seen it posted. Bill posted on it here:

http://www.itulip.com/forums/showthr...57848#poststop

sorry, looked and couldn't find it. was it you? good one.

[jtabeb]

Re: POOM! (or soon to be POOM!!)

More precisely, I do not grok what is going on in the 0-3 year time frame.

Long before I joined iTulip, I was a federal debt/demographic entitlements crisis crank, which is to say I raved at my friends about all the points you cite above with respect to the 2017+ time frame. That is the problem I grok, and about which I feel very little uncertainty. (I'm still a crank about this issue.)

I'm expending all this skull sweat because I'm uncertain about whether the present crisis must lead to the end game in the next few years. The debt is still serviceable for awhile yet, and payments to honor the Trust Fund obligations haven't really started squeezing the discretionary budget. I can entertain a scenario in which things don't really fall apart for another ten years or more, even though the ongoing costs of the bailout and fiscal stimulus must advance the day of reckoning. I see the evolution of the immediate crisis as dependent upon Fed and government policy, the outcome of the fiat reserve currency ugly contest, and whether exporters to America prefer to revive the system of loaning in order to sell, or take their chances trying to set up a more sustainable system of global trade -- none of which I grok in the short term.

So, I guess you could say I agree that it's a question of when -- not how. It's just that massive devaluation of the dollar ten or more years from now versus devaluation next year have big implications for my investment posture, and I can't properly handicap the likelihood of POOM next year without better understanding the how.

I hate to but in but, I was so taken with you eloquent elaboration of the analysis method that you (and I) use to ascertain the likelihood of future events, that I felt I had to re-direct you back to it to answer your quandary.

Big picture, and this is for the here and now:

1. need a house in the next 5-10 years? = Buy NOW
2. don't have any physical gold or silver? = Buy NOW
3. Have a car that works, suits your needs, and is payed off? = if not, buy it now.


4. Do you have 1 & 2 accomplished? = Good for you, you are free to play the next bubble game ( BUT ONLY! If you have 1 & 2)
That is really all you need to understand. I looked at what is critical. Acquire the above three things, and do your best with the rest.

I have a lot of cash in my 401K and IRAs. Am I counting on that cash (or stocks or bonds, etc.) to provide ANYTHING for me in retirement, ABSOLUTELY NOT!

I don't think it will be useful for ANY OTHER PURPOSE than to PAY OFF DEBT in NOMINAL terms. I could loose principle if I invest in stocks, I could loose purchasing power if hold cash. So what do I choose? I choose what is useful. I don't have a house where I want to live, I need a house where I want to live. These Funds (IRA and 401K) would allow me to own a house almost free and clear. SO, I'm choosing to use those funds in a way that will be useful NOW, not later (when they may not be as useful as they are now due to either stock market decline and/or currency devaluation). Gold and Silver will be useful LATER, NOT NOW, that is why I am holding physical until it is USEFUL. (by useful I mean using them to get things I want or need, It is far FAR too early to be doing that with them now)

My VERY SIMPLE ADVICE IS use ALL the CASH you can RAISE NOW to purchase IN THE CLEAR what you need to secure (PAID OFF HOUSE) for your present and long term needs. Things that may be a problem for you to obtain if say we had a big BIG inflation.



To me, priority #1 is the Physical PMs.

If I have that taken care of #1, then my #2 immediate priority is to HOLD the TITLE to WHERE I INTEND TO LIVE UNTIL I RETIRE. That Means paying off my mortgage as soon as I can.

These are the only two riskless choices that I see available right now. I mean GAURENTEED return. (The price of the ounces my vary, BUT YOU WILL STILL HOLD THE OUNCES. The price of the house may vary, BUT YOU WILL STILL OWN THE HOUSE OUTRIGHT).


Demographics tells me that broad markets are going to go NOWHERE in real terms for 10-15 maybe even 20 YEARS. I think SECTORS will significantly outperform (ALT-E an Infrastructure) but that is not a sure thing.

If I had enough gold and silver and a paid off house, THEN and ONLY then would I be playing the "next bubble".

That's my plan and that IS what I'm doing now. Got the Gold and Silver, taking a shit deal so I can get a house next summer. I don't want to wait past the end of '09 because I see the greatest risk of high or very high inflation or a very bad economy( don't know what it will be other than just plain bad) in the second year of a presidential term. (They always try to take the pain early in the hope that things will improve come re-election time).

I should add a caveat: I have the closest thing to guaranteed income and employment. I serve on active duty in the US military. I can plan on my NOMINAL pay with certainty. I can't count on my pay in REAL terms so that is why I've made these choices. My bias would obviously be different if I could not count on stable long-term employment.

I wanted to have that in the open, but I do not think that it makes my conclusion any less valid.

I think the housing bubble, like the oil bubble, will prove to be correct in the End. They just both got too far ahead of themselves. Resource depletion will validate the latter, currency depreciation the former.

YMMV

JT

[jtabeb]

Re: POOM! (or soon to be POOM!!)

we should a pick place to meet in 10 years where can all get together and talk about how we played the whole sad predictable gov't spending, boom, bust, deflation, inflation, demographics curve.

how bout Vancouver BC, call it Aug of 2018? (Go when the weather is good)

[Judas]

Re: POOM! (or soon to be POOM!!)

I see the evolution of the immediate crisis as dependent upon Fed and government policy, the outcome of the fiat reserve currency ugly contest, and whether exporters to America prefer to revive the system of loaning in order to sell, or take their chances trying to set up a more sustainable system of global trade -- none of which I grok in the short term.

In the same vein I am starting to think that the timing, severity, and style of "splat" that is coming has far more to do with international relations and the long term goals of global and regional power blocs. This make me question everything and feel less and less sure of what I thought I knew.

I feel like we in the US aren't yet aware of how little Fed policy will matter if the Chinese cease buying our debt, Middle Easteners follow the Koran and create PM backed currencies, oil trades rapidly switch to non-dollar settlement, etc. The Big Important People we see on the nightly news pontificating and promising may be far more powerless and irrelevant than we think.

[jtabeb]

Re: POOM! (or soon to be POOM!!)

The Big Important People we see on the nightly news pontificating and promising may be far more powerless and irrelevant than we think.

ARE, would be correct. There is only one "big guy" and none of us are him

[ASH]

Re: POOM! (or soon to be POOM!!)

Big picture, and this is for the here and now:

1. need a house in the next 5-10 years? = Buy NOW
2. don't have any physical gold or silver? = Buy NOW
3. Have a car that works, suits your needs, and is payed off? = if not, buy it now.
4. Do you have 1 & 2 accomplished? = Good for you, you are free to play the next bubble game ( BUT ONLY! If you have 1 & 2)
That is really all you need to understand. I looked at what is critical. Acquire the above three things, and do your best with the rest.


YMMV

JT

Thanks, JT! If I was able to implement your advice, I would -- securing the basics makes all kinds of sense in this environment.

I've probably got 35 years of work ahead of me before I retire. When my wife was working, our upper-middle-class income allowed us to afford a middle class lifestyle while saving fairly aggressively, and it will again when she returns to work... until the tax man eats us alive. Even so, with a bit less than 5 years of work under my belt (more like 10 for the missus -- she skipped grad school), we're just not in a position to buy what we need to be secure outright. At this point, our entire savings -- 2/3 of which are in retirement accounts -- wouldn't quite cover the cost of a modest home in our area... leaving nothing in reserve for emergencies. Normally, being able to put 30% down on a first home (non-retirement savings) would be pretty good, but that doesn't buy the security of outright ownership. Also, despite the IRR mobilization being down-sized (and me consequently not receiving activation orders at the mobilization screening), I am hesitant to take on any large financial commitments until I'm well clear of the IRR.

At this stage in my life, my family's long-term security is going to be more dependent upon my ability to earn than upon the disposition of our present resources. However, we're working as fast as we can toward #1, and even though we can't provide for our long-term needs out of savings, we have set aside enough physical PM (#2) to get on our feet in a post-TSHTF world. #3 is accomplished (because way cheaper than #1, and cars are depreciating assets). Can I call this the "JT-junior strategy for 30-somethings?"

I am nonetheless fooling around with #4 because I don't think I have the income potential to save enough for a secure retirement unless I realize real returns on my investments -- merely protecting my savings from inflation won't be enough. The urgency of realizing real returns now is compounded by the government's fiscal problems: taxes are going up in the long run, and they are probably going up significantly for my tax bracket. This will be a headwind that reduces my ability to save later, and I figure my best shot at achieving security will be to do well now, when I have a decent after-tax surplus over my living expenses.

[Down Under]

Re: POOM! (or soon to be POOM!!)

Big picture, and this is for the here and now:

1. need a house in the next 5-10 years? = Buy NOW
2. don't have any physical gold or silver? = Buy NOW
3. Have a car that works, suits your needs, and is payed off? = if not, buy it now.

Good summary, JT. Distils things quite nicely.

[jtabeb]

Re: POOM! (or soon to be POOM!!)

Thanks, JT! If I was able to implement your advice, I would -- securing the basics makes all kinds of sense in this environment.

I've probably got 35 years of work ahead of me before I retire. When my wife was working, our upper-middle-class income allowed us to afford a middle class lifestyle while saving fairly aggressively, and it will again when she returns to work... until the tax man eats us alive. Even so, with a bit less than 5 years of work under my belt (more like 10 for the missus -- she skipped grad school), we're just not in a position to buy what we need to be secure outright. At this point, our entire savings -- 2/3 of which are in retirement accounts -- wouldn't quite cover the cost of a modest home in our area... leaving nothing in reserve for emergencies. Normally, being able to put 30% down on a first home (non-retirement savings) would be pretty good, but that doesn't buy the security of outright ownership. Also, despite the IRR mobilization being down-sized (and me consequently not receiving activation orders at the mobilization screening), I am hesitant to take on any large financial commitments until I'm well clear of the IRR.

At this stage in my life, my family's long-term security is going to be more dependent upon my ability to earn than upon the disposition of our present resources. However, we're working as fast as we can toward #1, and even though we can't provide for our long-term needs out of savings, we have set aside enough physical PM (#2) to get on our feet in a post-TSHTF world. #3 is accomplished (because way cheaper than #1, and cars are depreciating assets). Can I call this the "JT-junior strategy for 30-somethings?"

I am nonetheless fooling around with #4 because I don't think I have the income potential to save enough for a secure retirement unless I realize real returns on my investments -- merely protecting my savings from inflation won't be enough. The urgency of realizing real returns now is compounded by the government's fiscal problems: taxes are going up in the long run, and they are probably going up significantly for my tax bracket. This will be a headwind that reduces my ability to save later, and I figure my best shot at achieving security will be to do well now, when I have a decent after-tax surplus over my living expenses.

Ash,

I want to make sure that you are aware of something.

OFHEO's HPI data is deflated using CPI DATA which is WRONG (If you believe FINSTER). Therefore, Houses are MUCH CHEAPER IN REAL TERMS than is depicted.

This has one implication for me-> we are closer to high/very high inflation than most people are aware of right now.

Please add this consideration as a data point in your decision making process. (Actually, EVERYONE should)

again YMMV

JT

[bart]

Re: POOM! (or soon to be POOM!!)

OFHEO's HPI data is deflated using CPI DATA which is WRONG (If you believe FINSTER). Therefore, Houses are MUCH CHEAPER IN REAL TERMS than is depicted.

Also wrong if you believe John Williams and shadowstats.com.

[BDS4]

Re: POOM! (or soon to be POOM!!)

I'm wondering what is considered as "too much bullion" as a percent of total assets? Are you thinking more than the 10~15% that is commonly referred to as the "right" amount?

[phirang]

Re: POOM! (or soon to be POOM!!)

In the same vein I am starting to think that the timing, severity, and style of "splat" that is coming has far more to do with international relations and the long term goals of global and regional power blocs. This make me question everything and feel less and less sure of what I thought I knew.

I feel like we in the US aren't yet aware of how little Fed policy will matter if the Chinese cease buying our debt, Middle Easteners follow the Koran and create PM backed currencies, oil trades rapidly switch to non-dollar settlement, etc. The Big Important People we see on the nightly news pontificating and promising may be far more powerless and irrelevant than we think.

A lot of issues remain to be settled, and we are the pawns.

Life sucks, eh?

[jtabeb]

Re: POOM! (or soon to be POOM!!)

I'm wondering what is considered as "too much bullion" as a percent of total assets? Are you thinking more than the 10~15% that is commonly referred to as the "right" amount?

Some people *Cough*me*Cough* think 80% is the right amount and so that is how much of their protfolio they allocate to physical PMs.

(Yes, seriously)

[phirang]

Re: POOM! (or soon to be POOM!!)

Some people *Cough*me*Cough* think 80% is the right amount and so that is how much of their protfolio they allocate to physical PMs.

(Yes, seriously)

Whatever's left after porn, ammo, and beer.

I'm still convinced beer is the best investment.

[jtabeb]

Re: POOM! (or soon to be POOM!!)

Whatever's left after porn, ammo, and beer.

I'm still convinced beer is the best investment.

Of these AMMO is by far the best investment.

My Ammo investments are up 250% in 18 months!

(beer goes flat and porn, well, let's just say no one wants to buy "sticky" porn)

[Judas]

Re: POOM! (or soon to be POOM!!)

Hard liquor is a far better investment than beer: longer term storage, volume/drunkeness ratio, no required refrigeration and commensurate energy requirements, etc. Also, hard liquor of high enough alcohol content can have dual uses as fuel or for flaming projectiles.

I'm long hard liquor.