Financial Info, Please

[Anja]

I see there are many here who seem to have a good knowledge of financial principles.

Would you lend me some advice on the direction of the stock market?

Here's the deal - I have, what is to me, a considerable amount of money in investments with a national bank.

This bank made a grievous error this Spring which cost me some money and since then I've seen a board full of similar complaints about unethical business practices. I closed my savings and checking accounts with them and went to a credit union. But I left my investents with the other bank because of the penalty issue. I think they mature in a year.

I won't be making much more money in my lifetime. And I have been rapidly losing what is, in my consideration, large amounts currently.

I wonder if I shoudn't just take it out and keep what I have. I've never been interested in making more. For me the investments were simply a safe place to store my money which had the pleasant side-effect of also increasing it.

Most of my acquaintances are saying, "No. Be patient. The market will rectify itself." But I'm not convinced. Mankind has a way of establishing "failproof systems" which do fail.

My husband says that if I take it out with the intent of retuning it when the market begins to stablize again that I will be "buying high." But I could consider the option of just sitting on it in future years. I have a reliable friend who would take care of it for me.

Now, I'm sure you guys must think I'm nuts. What I know about finances you could put in a thimble. But what I know about people tells me my money would be safe out of the bank.

When I get advice to leave it in I feel sort of like someone telling me, as I get on the Titanic, that we won't be needing so many lifeboats.

What are some perspectives on this?

[robespierre]

Buy gold/silver. Not stocks in gold/silver mining companies, or some other shares of funds... but real physical gold/silver and keep it yourself. Hyperinflation is coming.

[Risen]

Buy gold/silver. Not stocks in gold/silver mining companies, or some other shares of funds... but real physical gold/silver and keep it yourself. Hyperinflation is coming.

Precisely. I'm trying to secure some cash at the moment so I can buy into gold and silver soon before it makes it jump. I think I'll use the current credit situation to my advantage. Take out a $10,000 loan/line of credit from the bank and put it all into precious metals with the expectation of them doubling in price soon. The current dollar value of gold is not a real correlation with the amount of supply that is available, which is to say they are suppressing the value of gold. But they can't do it for much longer because people are starting to clamor for purchasing gold and silver, and finding that there's none available.

[ptgatsby]

Would you lend me some advice on the direction of the stock market?

No... and no one can. Do not, under any circumstance, let what others tell you factor into what you decide. No one knows.

What are some perspectives on this?

Keep in mind that I'm not offering any sort of sound financial advice. I can, however, generalise the following.

The sheer minimum amount of time for you to be invested in the stock market is 10 years. You need to find out what funds you own (if you have penalties, you must own funds) and their asset mix. If you can name the fund, I can look it up for you. The nebulous ground is in the 10-30 year bracket. Ideally you could wait 30 years before taking your money out. I don't believe this is an option, so I won't consider it.

Next, you need to know how many years worth of money you have available to you. Take your total investments and divide it by your expenses. Here's roughly where you stand;

@20 years - you have enough forever
@17 years - you have enough for 38 years
@15 years - you have enough for 28 years
@13 years - you have enough for 21 years
@10 years - you have enough for 14 years
@5 years - You have enough for 5 years

For example, if I spend ~15,000 a year and have 150,000 in the bank, I'm at the "10 years - you have enough for 14 years". Keep in mind that at the end of that time, there will be no money left to pass on.

These are all approximate, since the calculations are quite rough on such a simple calculation. However, it should give you a ballpark figure.

The current meltdown leaves no safe place. I don't want to be alarmist, but that's the nature of a financial meltdown like this. If you have lost less than 50%, consider yourself lucky. That's roughly where I'm at, heh :D So, for particular advice, I'd have to know actual numbers - but even given that, I couldn't really give you solid advice. This is a historical upset. The kind that is highly improbable.

Given the situation, and not knowing what you already have, the best bet is to find dividends and bonds (I'm assuming you need to live off the income already - if this is not the case, please disregard this part) that seem fairly solid.

If you have enough money to diversify properly (rule of thumb for the US, that'd be ~50,000 minimum, with major risk/cost breaks around 200,000/750,000), that'd be your best bet. That's the tricky part, unfortunately.

If any of this seems alarming at first, keep in mind that the two variables are "income" and "time". If you can spend less to get a lot more time. You can find alternative income to get a lot more time.

Please, feel free to ask anything at all/clarify.


** Edit: I took your OP to mean that you need to work out your retirement, and this puts it at risk. I may of misunderstood, on reflection. If this is not a risk for you at all, then it is only the time horizon that matters for your money. Anything less than 10 years should be low variation (bonds, dividends at most). If you plan on taking out more than a couple of percent of your money at any given time, that's what you need to look at.

I think I need you to clarify your particular needs, just so I can be clear.

[The_Liquid_Laser]

No... and no one can. Do not, under any circumstance, let what others tell you factor into what you decide. No one knows.


This is probably the best advice. No one really knows, and it's all a guess. Additionally you haven't really given us enough info for us to give good advice assuming that us strangers on the internet actually know what we are talking about. In short don't take financial advice from people on the internet.

[Anja]

Thank you so very much. I've been asking around in RL and pooling the suggestions to help me feel more sure of what I'm doing.

I don't need to pass any money on and I would guess that I have about ten more years before I need to go into assisted living. If anything of the system is left at that point, as a good taxpayer, I would have no qualms about accepting my share of financial assistance and it is good here in Minnesota.

If nothing is left of the system, I suppose I can join the hordes who will be dying off! It'll be close to time at that point anyway. Heh.

That's how I'm looking at it at present. No financial intricacies are needed as much as knowing that I'm using common sense.

Some acquaintances I talked to tonight seem to support this idea as well.

The "buy gold" idea is a good suggestion, I think.

[LostInNerSpace]

No... and no one can. Do not, under any circumstance, let what others tell you factor into what you decide. No one knows.


It's basically good advise. It's very true that no one knows. But we can look to the past for similar situations. A very similar thing happened in Japan. They had an explosive economy right to end of the 80's, then their bubble burst. They experienced what is known as a triple waterfall decline. Their recession lasted a good 15 years or more, not sure if they even ever came out of recession. I've not kept track of the Japanese economy for a couple of years. The thing to note was that it was the bursting of their real estate bubble that sent their economy into that deep recession.

Japan is a manufacturing economy. The last I read manufacturing was 50% of Japanese GDP. The US Consumer is approximately 70% of US GDP. The Japanese were financing their economic expansion with rising commercial real estate values. We were fueling consumer spending with rising residential real estate values.

What does this mean? Can't really say. It could be bad. If you are worried, a good strategy might be to take half of the table, meaning cash in half of your 401k.

[Anja]

I think I, by lack or knowledge or expertise in the financial area, need to gather information and consider what others are saying in order to make a decision. It's not so much a matter of having anyone tell me what to do as it is listening carefully and hearing answers in repetitive patterns. Then combining that with the directioon that seems the most comfortable to me.

I am appreciating the little details that I've been picking up from others. Things I hadn't thought of.

I do agree that the past is the best predictor of the the future.

[Little Linguist]

I'm not a financial expert, but I always hear that it is best to invest in physical gold. Be sure to inform yourself how to tell real gold from fake gold, though. (Weight, etc.) Silver - uh uh. Gold. You can never do anything wrong with gold.

Money in a bank, no way. Everyone knows about it. Grandma needs to go in a nursing home and no one has money, but they see you have 200,000 - YOU have to pay. Oh yeah. And by the way, if the US is anything like Germany, you have to pay taxes on the interest you make. Heh.

If you have a great deal of money, inform yourself on how to tell good, pure gold from crap gold and buy it. (But only if the price is cheap, not when it's especially high).

Alas, I have no money to invest, as I am a poor teacher. BUT if I did, that would be what I'd do.

[tenINsFJ]

Buy gold/silver. Not stocks in gold/silver mining companies, or some other shares of funds... but real physical gold/silver and keep it yourself. Hyperinflation is coming.

Ditto.

Don't count on our monetary system, there is nothing to give value to the dollar...except those that create it.. and trust me, you don't want that.

[Anja]

Real gold; fake gold. Gee, there's one more thing I hadn't thought of!

Oh yeah, the taxing here in MN is nuts. Everytime money changes hands somebody pays taxes on it again. The inheritance tax is pretty irritating to me considering that it was once taxable income. I think that's called double-dipping when it's done by the public.

[Anja]

Hi tENnis.

So what to make of these folks who say everythings's gonna be just fine and keep your money in?

Is it fair to view them as people who are protecting their own investments by giving that advice?

[LostInNerSpace]

I think I, by lack or knowledge or expertise in the financial area, need to gather information and consider what others are saying in order to make a decision. It's not so much a matter of having anyone tell me what to do as it is listening carefully and hearing answers in repetitive patterns. Then combining that with the directioon that seems the most comfortable to me.


Good idea.


I do agree that the past is the best predictor of the the future.

Actually it's not. The past can only really serve as a useful guide.

What happened in the past? What are the possibilities going forward?

Then there is the possibility that this time we will see something completely new.

[Little Linguist]

Heh. That's what I was just thinking. The German bankers made a huge mistake because they based their decisions on past precedent with regard to the American real estate market. If they had reconsidered their basis on past precedent, they might not have made the mistake. Just a thought.

[Anja]

Okay. The hopeful stance. Guess I can do that. I do know that in relationships that statement that the past is the best predictor of the future generally holds true.

I tend to look at society as a macrocosm of the individual. But yes, there is a qualifier. And that is"without useful intervention." And therein lies the problem. . .

[ptgatsby]

Is it fair to view them as people who are protecting their own investments by giving that advice?

No, it really isn't.

Let me put this another way; if you believe the past is the best predictor of the future, gold returns roughly 0% (I think it is about 0.025%, a little higher if you lease it) over time (real returns).

Historically, in real returns, any broad index returned 4-8% over the last century, compounded.

Buying gold now = herd mentality, nothing else.

[Anja]

I don't know that you understood my question, pt.

To reword: people who tell you to leave your money in the bank - are they suggesting you to do the same in the sake of hoping to quell a "run" on the banks.

Because, certainly, if many panic and take their money out that is not going to have good results.

Are we on the same page?

[ptgatsby]

I don't know that you understood my question, pt.

To reword: people who tell you to leave your money in the bank - are they suggesting you to do the same in the sake of hoping to quell a "run" on the banks.

Because, certainly, if many panic and take their money out that is not going to have good results.

Are we on the same page?

I thought you were referring to the market itself, not the banks.

I'd only be concerned if you are over the FDIC limit in a bank, or if you actually need tens of thousands in cash for some reason. Neither of which really matters in a bank run itself, unless there is an underlying cause (like the bankruptcy of the bank).

[Anja]

The day, a couple of month ago, when the first bank failed in CA I thought, "Uh-oh."

And I wont even go into what Wells Fargo did to me, but it was unbelievable until I read others were having the same problem. I had belonged to a MN bank which was bought by WF.

(I believe the limit is $100,000.00?)

[ptgatsby]

The day, a couple of month ago, when the first bank failed in CA I thought, "Uh-oh."

And I wont even go into what Wells Fargo did to me, but it was unbelievable until I read others were having the same problem. I had belonged to a MN bank which was bought by WF.

(I believe the limit is $100,000.00?)

The service definitely sucks and things can go topsy turvy, so transferring to a more reliable bank makes some sense. I see no reason why you shouldn't do that, if that is the issue... Credit Unions should be the safest, but I'm assuming they are of the same design as the Canadian CUs.

The limit is 100,000, except in special cases, as far as I know.

[Anja]

You're Canadian? Our friends to the north who keep getting dragged into our messes? Sigh.

Yes. The service. As i mentioned, I am accustomed to accountability and I certainly didn't get that.

I'd belonged to Norwest Bank before it even became Norwest - twenty-some years so when they sold out to Wells Fargo I just went along for the ride. But suddenly I was a stranger in my old bank. Very frustrating.

My husband walked out the day he went in for a loan and they handed him a mass of forms. Our financial reputation was stellar and it had taken years to develop. Overnight we lost it.

My credit rating took a dive thanks to the bank's error and I don't know how long it will take to renew it. I've had no cooperation from these fine corporate folks in helping me with this. Just form letters.

[ptgatsby]

You're Canadian? Our friends to the north who keep getting dragged into our messes? Sigh.


Hah hah... well, yah, I suppose we do :D In that case, I blame you guys for my current portfolio :D

My credit rating took a dive thanks to the bank's error and I don't know how long it will take to renew it. I've had no cooperation from these fine corporate folks in helping me with this. Just form letters.

That's quite unacceptable. Although I know the forms is a requirement now, unfortunately, as a product of stricter accounts standards (yah, ironic that, eh?) and counter-terrorism/money laundering.

The credit rating thing is something I wouldn't accept, but to get anything done in this climate, you'll have to play hardball, and even that probably won't matter. The problem with the banks being the way they are is that the individuals in the banks feel very threatened and tend to just stop caring!

I don't really understand the issue, I suppose. Canada has such a different banking system that I have never had issues like this. And the few times I did have any issues, it was relatively easy to solve... The complaints I get from the states is rather confusing to me, heh.

[Udog]

Anja, I find myself in the same boat as you, although with less money currently saved up. I'm still learning, but so far there are some trends that my INFP mind has picked up on. Keep in mind I'm still processing information - consider this my 'rough draft' gut feeling.

First, the threat of hyperinflation is real. It won't happen tomorrow, but figure in 2 or 3 years we can expect it. Maybe less, not likely more. So finding ways to guard against inflation may be just as important, if not moreso, than finding 'good investments'. So what are the best ways to protect against inflation?

Gold is a good, safe bet. Problem is the gold market is acting strange, with quality gold being in demand, hard to find, yet being strangely undervalued in relative terms. The terminology is still foreign to me, but it appears finding quality certificates, or getting your hands on the actual gold, is really difficult, while it's easy to find certificates where you agree to let the bank hold onto the gold. Maybe I'm off here, but I just don't get warm fuzzies from all that... it's going to take alot more research before I'd be brave enough to enter the market. I mean, what is keeping the banks from selling more certificates than they have gold? * genuine question *

Silver is treated as an industrial metal... so as production hurts so will its value. It's hard for me to get a feel on future value of silver.

I've also considered exchanging some dollars for the Chinese Yuan. I have little doubt that China's economy will grow stronger while the U.S. will grow weaker. I haven't learned how to best take 'advantage' of that yet, though.

Damn, this post is growing too long. I'll share more thoughts later if someone doesn't convince me I'm way off base.

[IlyaK1986]

China's growing stronger? HAH! That's a funny one. The Chinese are probably the single-biggest dependent country on the US doing well. If we go down, they're smashed.

[tenINsFJ]

Anja, it's definitely not okay to for them to lie to the public. Just don't fall into it :)

And I'm Canadian too!

PtGatsbys:

Gold value in 1910. $20.67/oz ... relative to dollar now.. $412.84
Gold Value in 1960. $36.50/oz... relative to dollar now.. $248.30
Gold Value in 2000 $272/oz... relative to dollar now $318.68
Gold value in 2005 $513/oz.. relative to dollar now $529.41
Gold Value in 2008 1,002.00/oz relative to dollar now $979.04

Bottom line.. yes gold prices rise and fall, but quantity never changes.. stocks.. really risky.

If you knew how our monetary system was set up... boy.. if anyone wants a copy of Modern Money Mechanics let me know.. I'll send it to them PDF.

And you're right Anja, we have a "failproof" system, but if you analyze it, it was built to fail.

[Udog]

China's growing stronger? HAH! That's a funny one. The Chinese are probably the single-biggest dependent country on the US doing well. If we go down, they're smashed.

I'm thinking long term. The impression I get is that China is artificially keeping the value of the Yuan low compared to the American dollar so we will export our business. Eventually, they won't need to do that anymore.

Short term though, I agree. If the US economy crashes completely right now, China is screwed as well. This is part of the reason I'm not ready to follow through with the "buy Yuan" theory just yet.

[spirilis]

Gold is a good, safe bet. Problem is the gold market is acting strange, with quality gold being in demand, hard to find, yet being strangely undervalued in relative terms. The terminology is still foreign to me, but it appears finding quality certificates, or getting your hands on the actual gold, is really difficult, while it's easy to find certificates where you agree to let the bank hold onto the gold. Maybe I'm off here, but I just don't get warm fuzzies from all that... it's going to take alot more research before I'd be brave enough to enter the market. I mean, what is keeping the banks from selling more certificates than they have gold? * genuine question *


A friend of mine was talking about this yesterday. He thinks there's a lot of manipulation going on, and I would agree that banks selling more certificates than they own would corroborate that behavior (it's like Short Selling, but in the gold market). Who knows though. Still smells funny.

As for what is keeping the banks from doing that... I'd like to hear the answer to this as well, but I have a sneaky suspicion the answer is "nothing."

edit:
Come to think of it, a simple google search had me reading at least one article (http://wallstreetexaminer.com/blogs/ducalion/?p=124) talking about big investment banks having a "short interest" in gold. I guess that answers your question--banks can short-sell gold all they want! If the raw material is hard to come by, then that tells me a lot of short-selling must be happening to keep the prices low as they are, and I think "manipulation" is an appropriate word to describe that behavior on a wide scale.

[IlyaK1986]

I'm thinking long term. The impression I get is that China is artificially keeping the value of the Yuan low compared to the American dollar so we will export our business. Eventually, they won't need to do that anymore.

Short term though, I agree. If the US economy crashes completely right now, China is screwed as well. This is part of the reason I'm not ready to follow through with the "buy Yuan" theory just yet.

They won't? Oh, they WILL. Know why? Because they're so technologically behind that once their workers start demanding higher standards of living and the world starts demanding that they don't throw so much pollution into the air that we can read it from California, and "the China price" gets eroded from within, China will just become a sad excuse for American capitalism.

Right now, China is growing. America and Japan are far, FAR ahead of it still, and always will be. America had its OMFG BOOM period, so did Japan, as did all of the other first-world economies.

Just because China is in the midst of one now doesn't mean it's suddenly going to become an economic superpower when its only claim to world competition means short-changing the people within its own borders.

[ptgatsby]

Bottom line.. yes gold prices rise and fall, but quantity never changes.. stocks.. really risky.

Real returns recent (relatively flat from ~1800dreds to the end of the Bretton Woods/1933 gold act)

http://www.typologycentral.com/forums/attachment.php?attachmentid=2575&stc=1&d=1223789940

It depends on your view of risky.

Considering the rate of return, I would consider gold a lot riskier. Or rather, the risk/reward is not so good.

[The_Liquid_Laser]

So what to make of these folks who say everythings's gonna be just fine and keep your money in?

Is it fair to view them as people who are protecting their own investments by giving that advice?

If you believe that the past is the best indicator of the future, then the best course would be to keep your money where it is. If you think this time is going to be much different, then you'd want to put your money somewhere else (although I'd choose real estate over gold myself). Ultimately the future is uncertain, and we don't know. Either one group is overreacting or another group is underreacting.

[Risen]

Silver... I've heard musings that we could see a silver backed currency in the coming years. I saw all the precious metals take a synchronized dive last week. I've heard it explained that this was likely due to " likely panic selling to raise cash for CDS debts and other liquidity requirements such as money market redemptions and so forth." Best explanation I've heard for the sudden sink.

[IlyaK1986]

In the long run, the stock market gives positive returns. It takes a crap on you every now and then in the short term, so you might get raped here and there, but as Buffett said, 5-10 years from now, people will look at this time as an amazing place to buy in.

[Risen]

Yep. As I understand it there were many who got rich though the depression. It's all about planning and taking the opportunities that arise.

[Bella]

Do it like Tony Soprano - hide it in the garden.

[spirilis]

Anja, I find myself in the same boat as you, although with less money currently saved up. I'm still learning, but so far there are some trends that my INFP mind has picked up on. Keep in mind I'm still processing information - consider this my 'rough draft' gut feeling.

First, the threat of hyperinflation is real. It won't happen tomorrow, but figure in 2 or 3 years we can expect it. Maybe less, not likely more. So finding ways to guard against inflation may be just as important, if not moreso, than finding 'good investments'. So what are the best ways to protect against inflation?

Gold is a good, safe bet. Problem is the gold market is acting strange, with quality gold being in demand, hard to find, yet being strangely undervalued in relative terms. The terminology is still foreign to me, but it appears finding quality certificates, or getting your hands on the actual gold, is really difficult, while it's easy to find certificates where you agree to let the bank hold onto the gold. Maybe I'm off here, but I just don't get warm fuzzies from all that... it's going to take alot more research before I'd be brave enough to enter the market. I mean, what is keeping the banks from selling more certificates than they have gold? * genuine question *

Silver is treated as an industrial metal... so as production hurts so will its value. It's hard for me to get a feel on future value of silver.

I've also considered exchanging some dollars for the Chinese Yuan. I have little doubt that China's economy will grow stronger while the U.S. will grow weaker. I haven't learned how to best take 'advantage' of that yet, though.

Damn, this post is growing too long. I'll share more thoughts later if someone doesn't convince me I'm way off base.

This post seems to confirm my suspicion-

Investors Hub - BB's Stock Haven () Message Board - Post #1332136 (http://investorshub.advfn.com/boards/read_msg.aspx?message_id=32947031)

Gold lease rates are rising from 0.25 to 2.5% per month, thats unheard of. Gold peaked at $1032 in March this year; however, since then it has fallen steadily, trading as low as $734. While this fall has been in line with a rising USD dollar, it has also been orchestrated.

Gold has been falling in an environment of rising inflation and rising uncertainty, and I've talked in the past about gold de-coupling from the USD correlation one day.

At this point in time we need to distinguish between different types of gold, i.e. physical gold and paper gold.

Central banks hold a lot of physical gold and it just sits there earning nothing. As we know, central banks have been pumping money into the markets for 13 months now; what has not been reported is that they have also made their holdings of gold available for lease for about 0.25% for a month.

A short seller in gold can sell spot and lease the gold from the central banks at a nominal interest rate of 0.25%. If you sell gold, you receive USD; the cost of borrowing USD is therefore 0.25% (the gold lease rate) - so as long as gold doesn’t go up it is a cheap source of funding.

The central banks don’t mind this, especially when they want the USD up and as a rule they always want gold to fall. A falling gold price is a sign that everything is ok.

However, as you can imagine this is a time bomb because they are leasing physical gold to a paper gold market. At some point in time paper gold will not trade the same way as physical gold.

The demand for physical gold is the highest it has been for years, and this is the problem. Without the paper gold carry trade, you could argue that gold would be a few thousand dollars higher right now.

All is not well in the paper gold market. And this is a sign of an impending big rally in gold.

Lease rates have been skyrocketing over the past month. For the past six years, the 1 Month Gold Forward Lease Rate has chopped about at levels below 0.25 percent. Higher volatility over the past year has seen the rate move as high as 0.5 percent, but only in recent weeks have we seen rates greater than 2.5 percent (see chart below).



On a global scale, the gold market is unregulated and opaque. No one really knows the size of the worldwide short position in gold, but it exists and it is large (at least 10,000 tonnes). Unlike financial markets, there are few rules and regulations on selling gold short. For years, a dark pool of short sales is believed to have been suppressing the natural ascent of gold prices.

The current spike in gold lease rates indicates that demand for physical gold is extremely high and growing quickly. We may well be witnessing the first seeds of the gold price breaking free from the short sellers and the end (death) of the gold carry trade, which so many bullion banks made such large profits on in the 1990's.

The lease rates (available on TheBullionDesk.com) will be the key indicator to watch. If the short sellers in the gold market cannot afford to roll over their positions, they will be forced to close out their trades by buying gold. This could be one potential catalyst (there are many others) that sparks a major gold rally in the months ahead.


We might be on the verge of a nice run in gold prices (due to the short squeeze). How soon, who knows.

[Anja]

Thanks, All, for helping me out with this.

No, I haven't taken any action yet. Sigh.

But your replies have helped me to get more clear with myself.

[Maabus1999]

The problem with investing in gold is itself is hyperinflated by man and speculation. It will be as unpredictable.

Plus the problem with hyperinflation is truly nothing can be protected completely, but gold could keep your money about near the same value of what it used to be.

Example, if gold goes up 100%, you get double your money.

However in hyperinflation, if it goes up near the same amount (among commodities similar to gold) your money relatively is the same amount.

Now gold may give you the best security, but it won't make you rich. It is a security only, and it is all hyperinflated in a sense.