Getting out of the market (and USD)

[ggking7]

My parents are a few years off from retirement and their savings is mainly in the stock market. The current economic situation here in the US seems really bad to me. From what I understand, this $700B bailout will be paid for by issuing bonds which, from what I understand, is basically printing money. That sounds like a terrible thing to do to the USD. I'm wondering if my parents should pull their money out of the market and the USD and into something safe like gold. What do you guys think?

[JV_Picker]

Use the portfolio tools at http://personal.fidelity.com/misc/buffers/market-volatility.shtml.cvsr?refhp=cp to get an idea of where your parent's portfolio should be. As far as pulling totally out of the U.S. equity market, I'm not sure where you can go. Europe is slowing down, Russia is a total coin toss, China is experiencing their own downward roller coaster ride. South America's strongest economy is Brazil, and their major indices have been trending down over the last few months.

If your parents are holding individual companies, I'd take a look at the secular stocks. Drugs, healthcare, food. Since your parents are fairly close to retirement, they should take a hard look at their bond portfolio and see whether any adjustments can be made there. Everbank (www.everbank.com) has a number of easily-obtainable foreign CD and bond products if you really want to get away from the US dollar. There are principal and political risks, such as Pakistan invading Canada.*

* - See http://www.youtube.com/watch?v=il8XWIi-WPE.

[clavocat]

My parents are a few years off from retirement and their savings is mainly in the stock market. The current economic situation here in the US seems really bad to me. From what I understand, this $700B bailout will be paid for by issuing bonds which, from what I understand, is basically printing money. That sounds like a terrible thing to do to the USD. I'm wondering if my parents should pull their money out of the market and the USD and into something safe like gold. What do you guys think?

Let me know when you sell, that's when I know it is time to buy. Capitulation anyone? My opinion...the market goes up. In 5 years from now it will be above the levels it is now. It sucks for older folks who are about to retire, but for young people this is (will be) a great time to buy. If your worried about further depreciation of the equity markets, you may want to lose some of your more volatile mutual funds and buy total market funds, bond funds and some risk free assets or close to (CD's). Take it for what it's worth, but when you sell most other nervous investors will be selling and when you guys are out of the markets, the buyers will take over. I've been buying the market for the past month and will continue to do so.

[freakscene]

tax free municipal bonds ;)

[jrobbins]

I bought me some Australian and Euro last week when US Dollar index was overbought at 80. You never know what the jokers in the White House are gonna do with our money. Better diversify than die.

tax free municipal bonds ;)

[Horsefish]

My parents are a few years off from retirement and their savings is mainly in the stock market. The current economic situation here in the US seems really bad to me. From what I understand, this $700B bailout will be paid for by issuing bonds which, from what I understand, is basically printing money. That sounds like a terrible thing to do to the USD. I'm wondering if my parents should pull their money out of the market and the USD and into something safe like gold. What do you guys think?

Your parents are not alone. The old buy and hold strategy doesn't work. It is now more like buy and educate yourself enough to understand market movements. The time to sell was last January.

Now is not the time to liquidate your parents holdings. There may be a little more downside here but soon things will settle down and we will be flat to moving up. Maybe even rapidly. If you sell now you will taking maximum loss.

Review the portfolio and ask questions about individual stocks. There may be some that have been killed by current market changes that should be sold.

[ggking7]

What about the whole printing money thing? Won't that have a massive inflationary effect on the USD?

[Horsefish]

What about the whole printing money thing? Won't that have a massive inflationary effect on the USD?

There is always going to be inflation. Playing in the currency market or trying to guess where gold is going carries more risk than most other options.

Give the portfolio a chance to recover and then when your parents reach retirement and need income, look into dividend, interest, or royalty instruments. FS suggested tax free municipals as one suggestion. Look at PFF, NLY. SJT, FTR, NGLS, and there are many more. I'm not saying buy here but weigh your options.

[englishman26]

I think gold is a safe bet whatever happens actually.

[madcowdisease]

Let me know when you sell, that's when I know it is time to buy. Capitulation anyone? My opinion...the market goes up. In 5 years from now it will be above the levels it is now. It sucks for older folks who are about to retire, but for young people this is (will be) a great time to buy. If your worried about further depreciation of the equity markets, you may want to lose some of your more volatile mutual funds and buy total market funds, bond funds and some risk free assets or close to (CD's). Take it for what it's worth, but when you sell most other nervous investors will be selling and when you guys are out of the markets, the buyers will take over. I've been buying the market for the past month and will continue to do so.

Lavocat, I admire your bullish disposition. I am a longterm investor in my mid-20s. I have a degree in economics and work in the brokerage industry. I like to think I have a handle on what is transpiring - as much as can be grasped given the circumstances I guess. Based on my research - and not the sensationalsim of modern era TV and news - this time seems different. This seems much different than the crash of '87, much different than the LTCM mini-bear of 1998, and much different than the bear market induced by the terrorist attacks of 9/11/01 that lasted until 2003.

All of the above mentioned declines were rescued based on the policies of Alan Greenspan. These tactics, known as the Greenspan Put, where he and the FOMC would slash interest rates to stimulate the economy are at least partially to blame for the asset bubbles we have experienced since his corronation as Fed chief. I hate to say it but it looks like we are finally paying the piper. Granted this is not the sole reason we are effed right now but these decisions played a large role. I don't think we can "fix" this mess with the same strategies of bail outs and rate cuts.

There is a pardigm shift in the way the world works. And as much as I hate to say it I think America has lost its reign atop the worl hierarchy. Not to say she will be replaced but, for the time being, will share that perch and give up much of her share of the pie as we lose our creditworthiness as a nation. We are truely witnessing globalization as we all become intertwined.

To further complicate the issue we may find ourselves rushing in a new det of ideals, a New Deal 2.0 where we become more socialistic and mirror many of the policies of Europe. America has hit the mature stage of her development where we produce little and simply manipulate money. The growth engines of the world are in developing nations that focus on manufacture. Without a true econoic engine we could very well find our populace voting themselves gifts from the treasury in the form of Bulshevik style healthcare and housing.

I don't mean to scare you, and I am in the small group that thinks this won't quite be the 2nd Great Depression however we are in for some serious changes as a country. One of which would be great and has my support is the notion of doing away with the FOMC and fiat money ane returning to backing our currency with gold. Here is the one guy who got it all along:

http://www.youtube.com/watch?v=ji_G0MqAqq8

[ggking7]

madcowdisease (http://www.onlinetradersforum.com/member.php?u=2059), that's exactly the kind of stuff I've been thinking.

Here's the thing that freaks me out more than anything else I think:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=djia&sid=&o_symb=djia&freq=2&time=20

Don't the last 10-15 years look really overbought? Is this the kind of growth that's fueled by credit and must eventually come back to reality?

I've always thought that a good stock market strategy would be to determine what the average growth rate for something like SPY (S&P 500 ETF) has been throughout history, calculate whether we are above or below that level now, and buy or sell based on that information. Of course, that's a long-term strategy. How does it sound? Where are we now?

[freakscene]

Don't the last 10-15 years look really overbought? Is this the kind of growth that's fueled by credit and must eventually come back to reality?


i wouldnt say overbought

perhaps it can be attributed to technology boom of computers, which impacted just about all aspects of business (things that used to be done manually but not any more) post1980's ?

what will be the next innovation that delivers this kind of boom?

will the market meander along as it did for so many decades prior until that innovation happens?

beats me

horsefish is right, buy and hold over extended periods may not be the best approach for a long while

[Joyell]

[QUOTE=madcowdisease;144987]One of which would be great and has my support is the notion of doing away with the FOMC and fiat money ane returning to backing our currency with gold.


Agreed. How much would the price of oil drop if we backed our dollar with gold, and raised interest rates a little?

The higher prices at the pump is hurting our economy.

[john_for_u80]

I think gold is a safe bet whatever happens actually.

Gold might see 600 before it goes higher!

[Horsefish]

[QUOTE]


Agreed. How much would the price of oil drop if we backed our dollar with gold, and raised interest rates a little?

The higher prices at the pump is hurting our economy.

I'm just curious. I have seen a lot of discussion lately about returning to a gold standard.

Is there enough physical gold in the world to support the entire world monetary commerce? If all countries were to base their currency on the value of gold, what would that value be? If gold went up to $3000 per ounce, how would you pay for something that costs $1.59?

Wouldn't we just be trading dependence on places like Saudi Arabia with their OIL for dependence on whatever country has the largest deposits of gold. Great for them.

[Gordo]

Who knows what Fort Worth holds?