How's everyone handling their 401(k)'s these days?

[CivicFan]

Originally Posted By: VeeDubb
To be exposed only to systemic risk, you're portfolio has to mirror "the market.". In this day and age, the hard to know where the market boundary is. Back in the old days it was the S&P 500. Now even global markets are highly correlated. And you can argue that currencies and commodities should also be included to further diversify away aggregate risk. Most 401ks only include highly correlated investments which is a joke.


I, too, believe that everything is correlated nowadays given the speed information is processed. That's why I disagree that bonds are "safe". I think they are as exposed to systemic risk as stocks, gold or any other vehicle. [start rant] The only differential for bonds is that they are not residual value but it usually doesn't matter to the small scale investors because when it's time to exercise that right, there is nothing left in the pot for you anyway. [end rant]

Anyway, since the market is so correlated, you can eliminate non-systemic risk cheaply by sticking with a small scale portfolio instead of trying to build a portfolio that includes everything.

 

[Drew99GT]

Originally Posted By: bradepb
Originally Posted By: Drew99GT
Originally Posted By: bradepb
this past downfall should be pretty much once in a lifetime and was very predictable.


The next downfall is very predictable as well IMO. We are headed for MAJOR financial crisis in this country - our path is mathematically impossible if we don't fix our budget crises at all levels of government.

I said before the 07 market crash to stay in for the long haul, but I'm not saying that anymore. This is a market that is majorly volatile and it needs extreme prudence in watching your portfolio.

My .02

you could very well be right and I admit its scary, I have been thinking about moving more to cash and less in the market but at that rate I will never retire, you just have to believe that with the dow at 10,000 now its highly unlikely it will be lower in 15 or so years

http://www.ibtimes.com/articles/46106/20100825/video-charles-nenner-dow-to-5000-in3-years.htm

I personally think this analysis is spot on.

Talk to Pablo - he knows how to day trade these kind of markets with success!

Seriously, if you could find something safe like a closed end high dividend yield type fund based on precious metals or soft commodities, that would be a safe bet. When this ship finally gets righted or something catastrophic happens (like the rest of the world stopping funding our debt for good), the prospect of inflation and super high interest rates is very real, which will literally crush bond prices.

 

[PandaBear]

Originally Posted By: crinkles
i dunno panda... were those risks worth the "dead decade" for investment - the 2000's? even in ten years it has to go somewhere. it didn't.


I am not a "buy and hold" believer. Since I started my 401k in 2003, I keep all my $ in cash till after the bust. I think most of the stocks that makes profit from the US income is overpriced, and many Euro income is as well. However, I think the Asian growth potential is high (just by looking at how much infrastructure need there is) and the Euro financial crisis of Greece/Spain/Portugal will make them more discipline in terms of keeping the Euro stable in the long run (compare to the USD or Yen).

I also only hold stock/fund till they rise to a stable value that aren't likely to rise quickly. Then I sell them and hold on to the cash till I see something that's worth buying, sometimes it could take years.

You may not agree with my investment strategy, but I do think I'm taking a safe approach comparing to buy and hold for 10-15 years and sustain the certain bust.

 

[Win]

Originally Posted By: Drew99GT
The next downfall is very predictable as well IMO. We are headed for MAJOR financial crisis in this country - our path is mathematically impossible if we don't fix our budget crises at all levels of government.

Yep.

 

[CivicFan]

Originally Posted By: Win
Originally Posted By: Drew99GT
The next downfall is very predictable as well IMO. We are headed for MAJOR financial crisis in this country - our path is mathematically impossible if we don't fix our budget crises at all levels of government.

Yep.

The question is, how do you take advantage of it?

 

[javacontour]

Some would suggesting buying land in remote WY or Montana and then stockpile food, guns, ammo and gold.

Your results may vary.

 

[mrsilv04]

Enjoying reading all of the responses. Thanks for a good job of keeping politics out of it.

 

[VeeDubb]

Panda, the Euro is in a world of hurt and will not exist in it's current form over the long run. Shorting the euro has been the easiest money I've made in my lifetime. It was money growing on trees.

 

[PandaBear]

Originally Posted By: VeeDubb
Panda, the Euro is in a world of hurt and will not exist in it's current form over the long run. Shorting the euro has been the easiest money I've made in my lifetime. It was money growing on trees.


In the long run, I'm sure Germany, France, Netherland, etc will do something about it and make it more discipline than the USD policy.

 

[Win]

Originally Posted By: CivicFan
Originally Posted By: Win
Originally Posted By: Drew99GT


The next downfall is very predictable as well IMO. We are headed for MAJOR financial crisis in this country - our path is mathematically impossible if we don't fix our budget crises at all levels of government.



Yep.


The question is, how do you take advantage of it?


I'm not really sure that I want to take advantage of it so much as I want to minimze harm to me and mine from it.

I have real property. Less than 1% of our wealth is in securities, so the movement of the dow and its impact on me thus far has been pretty attenuated.

How that will work in an eotwawki scenario, I have to say I don't know and don't really want to find out, but dirt's gotta be better than paper. They do call it real property for a reason.

 

[brianl703]

Originally Posted By: Drew99GT
our path is mathematically impossible if we don't fix our budget crises at all levels of government.


As long as there is ink and paper, there is no problem.

 

[VeeDubb]

Panda really? Have you looked at sovereign default probabilities implied by the price of sovereign credit default swaps? Six eurozone countries have double digit default probabilities. Austria and France are twice as likely to default than the US. The Netherlands and Germany are in the best shape and still have higher default prob than the US....... But I agree, I'm sure they will do their best. And they will succeed over the long run when we have toothfairies and unicorns.

 

[Drew99GT]

Originally Posted By: brianl703
Originally Posted By: Drew99GT
our path is mathematically impossible if we don't fix our budget crises at all levels of government.


As long as there is ink and paper, there is no problem.

I hope that was sarcasm.

 

[CivicFan]

Originally Posted By: Drew99GT
Originally Posted By: brianl703
Originally Posted By: Drew99GT
our path is mathematically impossible if we don't fix our budget crises at all levels of government.


As long as there is ink and paper, there is no problem.

I hope that was sarcasm.


Nah, it's pretty much the truth as long as we are the biggest economic power in the world.

 

[Drew99GT]

Originally Posted By: CivicFan
Originally Posted By: Drew99GT
Originally Posted By: brianl703
Originally Posted By: Drew99GT
our path is mathematically impossible if we don't fix our budget crises at all levels of government.


As long as there is ink and paper, there is no problem.

I hope that was sarcasm.


Nah, it's pretty much the truth as long as we are the biggest economic power in the world.


Watch this:

http://www.youtube.com/watch?v=m1VbGcaVvFM&feature=mfu_channel

Sorry, monetizing debt (aka creating money out of thin air - either printing it or digitally crediting treasury accounts) doesn't work. Never has, never will in the long run. Unless you like ridiculous inflation with your cheeseburger.

Keep your head in the sand. Remember, our present value debt is over twice world GDP.

 

[Drew99GT]

Research what David Walker has been saying for the last 15 years about the future prospect of our financial well being in the US.

 

[StevieC]

Originally Posted By: Drew99GT

Sorry, monetizing debt (aka creating money out of thin air - either printing it or digitally crediting treasury accounts) doesn't work. Never has, never will in the long run. Unless you like ridiculous inflation with your cheeseburger.

Keep your head in the sand. Remember, our present value debt is over twice world GDP.


Yeah it worked really well for Germany when they did it.

 

[CivicFan]

Germany was not the greatest world power then but a weakened country that had to pay restitution to Britain and France. Crazy inflation was an easy answer to their problem.

 

[Pablo]

I pretty much don't use regular stock funds anymore.

I have some GNMA and other income type funds but that's about it for GXXXX or FXXXX or PXXXX labeled funds. These things are just not nimble enough for me. I assemble my own mutual funds - with STRONG companies, including some with good yields. This latest correction and we are in a correction, has hardly touched me.

I do day trade 2X and 3X ETF's. Both bear and bull - can't call them long and short, well short is OK. Don't even think about hanging on to them.

 

[PandaBear]

Originally Posted By: VeeDubb
Panda really? Have you looked at sovereign default probabilities implied by the price of sovereign credit default swaps? Six eurozone countries have double digit default probabilities. Austria and France are twice as likely to default than the US. The Netherlands and Germany are in the best shape and still have higher default prob than the US....... But I agree, I'm sure they will do their best. And they will succeed over the long run when we have toothfairies and unicorns.


You can believe what you want to believe, and so do I. I believe that having the more disciplined nations complaining about debt ratio of the weaker one will make Euro a more disciplined currency than the US. Defaulting risk based on CDS price? That's how AIG got killed based on their valuation by selling a whole bunch of them based on past performance using past equation. I'm not a believer but if that fits your bill, more power to you.

Also having a whole bunch of former communist nations having to quickly build up the entire infrastructure would provide a lot of growth opportunities. The US, well, I don't think any one in power want to spend a whole lot of money building up the South, Mexico, etc that peg their currency against USD. Now Asia, that's a lot of growth in Korea, Vietnam, Thailand, etc and of course China. They are pegging against USD right now but probably want to diversify, hence the increased stability in Euro IMO.

The point is not whether the Euro will default, but whether it is going to be dropping in value more than the USD, and whether their economy will be growing more than the US, and whether other sovereign fund wants to increase holding in Euro as reserve vs USD or not.