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Looming economic collapse

ThermionicScott said:
Yeah, I think the distinction is that the cash/MM earns less than the (long-term) treasuries, but is more liquid. At least on paper, the PP sounds like a good plan to protect against loss and beat inflation.

- Scott
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Don't buy long-term treasuries that's just silly and over-predictive. Pick up cash and short-term treasuries then hedge that with gold and silver, it'll be a safe yet probably boring/lame thing IMO. As long as you have a solid plan for how to put a bunch of U.S. dollars in your hand if you NEED TO, and have something else if not then you're good.
 
I'd say go 1/3 stocks 1/3 gold 1/3 silver for 50% if you're trying to cover all bases.. For half your position. Then cash and shorter treasuries for the other part. Prepare for boredom though it is incoming.

Remember the key is to be ready to beat inflation but have quick access to $USD if deflation emerges.
 
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ThermionicScott said:
What do you guys think of things like Harry Browne's "Permanent Portfolio"?

25% US stocks
25% US treasuries
25% cash/money market
25% precious metals (chiefly gold)

It's reasoned that the stocks are for prosperous times, the treasuries for prosperous or deflationary times, cash for flexibility, and gold as a hedge against inflation: http://www.getrichslowly.org/blog/2009/04/20/fail-safe-investing-harry-brownes-permanent-portfolio/

- Scott
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I think it's stupid.
 
The Central Scrutinizer said:
I think it's stupid.
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I'm afraid I have to agree. It's stupid.

The first two planks aren't bad; mixing your investment about equally between debt and equities is basic investment 101 advice. I tend to go more heavily into equities, but that's because I'm still fairly young and consider poverty to suck; if you're close to retirement and more worried about capital preservation, go with more debt. I also think that treasury debt is probably a worse choice than private debt unless you are playing silly tax games -- which, if you're taking investment advice from a web forum, you shouldn't be.

Keeping a fixed percentage of your money in cash or cash equivalent is stupid. Keep as much cash as you need; no more, no less. Cash is a lousy investment, and you get just as much safety from the treasury bills and better return.

And 25% in gold? That goes beyond stupid to "conspiracy-tard." I don't know where this idea that gold is an inflation hedge originated,.... but it's not. Just look at the numbers since 1970. It's also not a good store of value; it's way too volatile. And of course buying gold now, at the peak of one of the largest bubbles in gold's history, is a classic sign you don't know what you're doing.

But even aside from that, this particular portfolio is way too heavily weighted towards "Mad Max" avoidance, and it doesn't even do that particularly well. In anything short of a full-out Thunderdome scenario, treasuries are just as safe and give better (i.e. any) returns. And who's going to buy gold in Thunderdome? If you're worried about that, buy ammo and bottled water -- and you can trade the water for as much gold as you like when people learn that gold is notorious for its lack of thirst-quenching ability.

If you're worried about inflation, buy TIPS. If you're worried about deflation, buy conventional bonds. If you want to assure growth, buy equities.
 
But it’s gold, it always retains it’s value, of course you have to take it in exchange for the last of your food!
 
lomiller said:
But it’s gold, it always retains it’s value,
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Except, of course, it doesn't. Gold is one of the more volatile investments out there. The S&P 500 has a "volatility" (standard deviation of annual return) of about 16%; the DJIA has a similar number. Bond indicies are something about 10%, IIRC. Commodities generally are about 20%.

Gold, by contrast, varies by something like 40%.
 
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drkitten said:
And 25% in gold? That goes beyond stupid to "conspiracy-tard." I don't know where this idea that gold is an inflation hedge originated,.... but it's not. Just look at the numbers since 1970. It's also not a good store of value; it's way too volatile. And of course buying gold now, at the peak of one of the largest bubbles in gold's history, is a classic sign you don't know what you're doing.
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I'll add one thing: Bying gold is not investing, but speculation. There's no way to judge whether it's over- or undervalued at any given time. Because its industrial use is minor, the price of gold is based solely on the popularity of owning gold. Buying stocks during a stock-market bubble is never a good idea, but if you do that you may still break even in the long haul -- if you picked a good company it may grow into the bubble valuation, and if they pay a dividend, you'll inch closer to being even after each distribution. But buy gold at the height of a gold bubble, and you'll never break even.
 
timhau said:
I'll add one thing: Bying gold is not investing, but speculation. There's no way to judge whether it's over- or undervalued at any given time. Because its industrial use is minor, the price of gold is based solely on the popularity of owning gold. Buying stocks during a stock-market bubble is never a good idea, but if you do that you may still break even in the long haul -- if you picked a good company it may grow into the bubble valuation, and if they pay a dividend, you'll inch closer to being even after each distribution. But buy gold at the height of a gold bubble, and you'll never break even.
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And to bring the discussion back to the questions of which experts to trust, a simple glance at Harry Browne's web site shows him to be a classic snake-oil salesman who's trying to push his particular political and economic theories on you in order to sell you his investment advice.
 
drkitten said:
Except, of course, it doesn't. Gold is one of the more volatile investments out there. The S&P 500 has a "volatility" (standard deviation of annual return) of about 16%; the DJIA has a similar number. Bond indicies are something about 10%, IIRC. Commodities generally are about 20%.

Gold, by contrast, varies by something like 40%.
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I agree but I still think my example of gold not holding it’s value was funnier.
 
timhau said:
It may lose value, but it'll never, ever lose its shine. Just go to Cairo, take a look at Tutankhamon's burial mask and tell me you don't want to take it home with you.
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For its beauty, yes.

But for its value, you´re better off selling it and buying stocks and bonds instead.
 
So drkitten (and whoever else want to weigh in) what do you think about real estate?

Specifically, I live in Southern California, make pretty decent money in a relatively stable industry, have some student loans to pay off but otherwise no debt and am thinking about buying a house - after all prices are cheap and interest rates are low. This would be my first house and furthermore I'm a veteran so I would qualify for the VA loan which I hear is pretty sweet.

My plan for the house is to maybe get a 3 bedroom, live in 1 room and rent out the other 2 (I'm not married so it would be workable). That way I could live pretty cheap and have other people pay my mortgage while I pay off my student loans and build up my savings. In the end I will have money in the bank, no debt (except for my mortgage which won't be a problem as long as the housing market comes back/I'm not underwater) and a house. Seems like a win-win-win. What do you think?

The only problems I see with this plan are a Mad Max type scenario/major collapse of the economy/deflation/prolonged collapse in the housing market/etc. - all of which are as far as I know unprecedented and which don't seem to have much credence on this forum. Otherwise, if the world continues to follow the same trajectory it seems to have up until this point, I think my plan is relatively solid.

Of course I won't try and stick the JREF forum with the mortgage payments in case it doesn't work out but what do y'all think?
 
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