Investment

» permabear - Is Suite 101 investment really up and running again?

In response to Is Suite 101 investment really up and running again? posted by somedude3:

somedude,

Talk to ten stock market bears and you'll get 10 different opinions about how things are going to play out and what's the best way to invest.

Within the bear universe there are the inflationists who believe that the Fed will do whatever it takes to keep the economy going. They will decimate the dollar in the process and produce a boom in commodity prices, including precious metals, oil, etc. On the opposite end of the spectrum are the deflationists who believe that the credit crunch we are only in the early stages of will lead to a deflation in which the prices of everything will go down over time and cash and treasury bonds will be king. Because these two viewpoints are totally contradictory, you have to take a position to decide the best way to invest.

Personally I don't know which side will win. But I am invested in a way that plays both sides. I continue to be a big believer in precious metals. Gold, as an example, has had a great run from the $270 range in 2000 to the current price of close to $800. I believe the upside prospects for gold are in the thousands if the inflationists turn out to be right. At the same time I am holding a lot of safe investments like short term bond funds and money market funds. You don't get a lot of return from such investments but you don't lose money either. Not losing money in a market like we've seen lately is winning for not losing.

Whether infationist or deflationist, most bears are on the same page that the coming era is a very dangerous era economically. Only speaking for myself, I believe that the U.S. government and U.S. consumers have been living way beyond their means for the past decade and longer. Easy credit of the past six years, prompted by the Fed cutting the Fed Funds rate to one percent and encouraging credit creation on a massive scale contributed to the housing bubble we read so much about these days. I believe housing prices went way beyond historical norms and will take many years to work off. The use of derivatives took all those irresponsible mortgage loans and packaged them into instruments that are being held by insurance companies, banks, hedge funds, etc. all across the global financial universe. No one, not even the most staunch bull knows how much bad paper is out there or what the consequences of this bad paper are going to be.

All of these irresponsible credit practices and debt creation helped the consumer and the government go on its merry way for years and avoid bad times. The U.S. hasn't experienced a really nasty recession probably since the early 1980s. I believe that Greenspan's policies helped avoid the downside of the business cycle. But the history of economics says you can't have booms without having busts. By putting off the pain of recessions for the past couple decades, the Fed has put us in the position of being set up for one doozy of a recession if not depression.

I can't say how bad things will get, but I think it's very possible that we could see 10 percent plus unemployment. We could see the stock market lose half its value. We could see housing prices fall by 50 percent or more in the most overheated markets. In short we could experience one heck of a nasty recession, possibly a depression. Whether it reaches Norm's TEOTWAWKI scenario remains to be seen. But I believe it's prudent at the very least to be cautious with your invesmtents, avoid debt as much as possible, hold a good portion of your money in very safe investments like CDs or treasuries and hold some precious metals as a hedge against the worst.

-- posted by permabear

» allancoleman - Is Suite 101 investment really up and running again?

In response to Is Suite 101 investment really up and running again? posted by eccm:

He just says " next year " , eccm . I doult if anyone is calling for mid - 1600's by January .

-- posted by allancoleman

» Normxxx - Is Suite 101 investment really up and running again?

In response to Is Suite 101 investment really up and running again? posted by permabear:

(Impatiently) Waiting For The Beginning Of The (Imminent) Positive Season
http://normxxxruminates.blogspot.com/200...

-- posted by Normxxx

» permabear - Is Suite 101 investment really up and running again?

In response to Is Suite 101 investment really up and running again? posted by Normxxx:

I think even bulls and bears concur that the current market is oversold. It feels due for a relief rally at the very least. But in order to rise, there has to be a catalyst. In the previous two runs the catalyst was the Fed. The Fed may very well be cornered into another rate cut on 12/11, but how many more times is the stock market going to rise on the hopes of the Fed rising to the rescue, only to see further credit problems in the weeks that follow? The reality is that right now the economy appears to be slowly turning negative. Whether it be bank write-offs, retail sales, consumer confidence, and last but not least- jobs, the numbers are starting to turn negative. If there is a recognition that the economy is turning weaker, that the financial companies, including banks aren't out of the woods with their write-offs, and that the Fed's powers in the current situation are limited and also contribute to a further weakening of the dollar, the catalyst for a strong higher move in the market may not be there. And we may in fact be in the long awaited bear market as the Dow theorists are predicting.

-- posted by permabear

» Normxxx - The Worst Is Yet To Come

The Worst Is Yet To Come, Say Subprime Experts
At the end of August, about $46 billion in subprime loans had defaulted; that number is expected to triple in 2009

-- posted by Normxxx

» Normxxx - MELTDOWN?

MELTDOWN?
Worsening Credit Crisis Leading to Meltdown of Financial System and Severe US Recession
http://normxxxruminates.blogspot.com/200...

-- posted by Normxxx

» Normxxx - Nightmare Economic Scenario

New Wave of Mortgage Failures Could Create a Nightmare Economic Scenario
http://normxxxruminates.blogspot.com/200...

-- posted by Normxxx

» Normxxx - Credit Crisis to Credit Crunch

Credit Crisis to Credit Crunch
By John Mauldin
http://normxxxruminates.blogspot.com/200...

-- posted by Normxxx

» Normxxx - The Next Credit Scandal

The Next Credit Scandal
http://normxxxruminates.blogspot.com/200...

The major banks have already reported billions in unexpected losses from complex investment vehicles known as CDOs. Now they face big risks from other corners of the debt markets- but don't expect them to warn investors anytime soon.

-- posted by Normxxx

» Normxxx - Dead Men Walking

Surreality Check... Dead Men Walking
http://normxxxruminates.blogspot.com/200...

-- posted by Normxxx