RE: Here's hoping you didn't miss the bottom of the market...

Yes, that's true. But considering what they are an indicator of (profits, which means the economy is mostly doing OK, but doesn't mean everyone is doing OK), I was just wondering if for another 18 months unemployment may increase steadily, making things difficult for poor people, whilst the market gets back in order (could be gentle or sharp rises, who knows?). This is why I was asking about inflation. Not sure what other factors may be pertinent - that's why I ask more generally too!

Flagpole,

I have read many of your threads over the years, and I would like to say that I agree with a lot of what you are saying. You seem to have common sense about how to invest money over the long term. The buy and hold method that you employ has helped numerous investors over the years. Also, for the record, I would like to add that I agree with you that the market will go up from here by the time you plan to retire.

However, there are a few things that I disagree with. Regarding Boomers, I would like to point out that many of this aging generation will continue to work far past the age that has been seen before. I recently read an article about a 90 years old who lost nearly everything in the Madoff scandal, and was forced to return to work to pay the medical bills for him and his wife. While this is clearly an exception, I expect to see more of this as more people enter their planned retirement age and find that continuing work is now necessary. Unfortunately, this will keep unemployment higher than you expect.

I realize that your investing techniques are dependent on the idea that the stock market will eventually rise anew. Indeed, you have good reason to think this way, as this as been the pattern over the past century. However, you must also be wary of the possibility that this trend could not continue. I have a sinking suspicion that this downturn is the beginning of a new way of life in America, at least during my lifetime (I am 18).

While I hope that we come out of this mess stronger, I acknowledge the fact that we are in a terrible mess. This country has been comprised of people who borrow money that they don't have to buy things that they can't afford for far too long, and we are now suffering the consequences.

Gone are the days of borrow borrow borrow, spend spend spend. I fear that the damage is worse than you think. This irresponsibility has gone on too long to be corrected in a year or two.

You called yourself a "glass is half full type of guy", but that is not a good thing when the glass is, in fact, only 30% full.

I am bullish in the long run, but I am on the lookout for reasons not to be, and am not ready to do any serious buying YET.

I have small positions in a few things, the biggest of which is USO. I believe that if the economy DOES turn around, oil consumption will be one of the first things to recover. This will be helped by massive government spending in these stimulus packages. Furthermore, OPEC leaders and heads of oil-rich states (e.g. Ahmadinejad/Iran) will simply cut production until prices stabilize and rise. I also have some more technical reason for this view, but they would take a while to explain.

Anyway, we are each entitled to our respective positions. However, I would like to commend you for your rationality and calm when dealing with the occasional Letsrun poster who reverts to childish name-calling.

Peace,

AGM

Today's BIG gain was a trading rally (those looking to cash in on yesterday's big drop), not something more substantial. People should NOT be geeked about today's gain just as they should not have been soured on yesterday's drop -- we're a long way from being out of these woods yet. The short-sighted get all bent out of shape. It's just not worth the grief. Invest for the long term, and then ONLY if you are already doing 15% toward retirement accounts and you have NO DEBT AT ALL, then go ahead and invest as a trader would -- in individual stocks and for short-term gain. Unfortunately too many people who aren't in the postiion to be able to invest like that do, and it is they who then are very worried about their futures. If people would be more sensible with their investing, this would not happen. Use your INCOME to fund your current lifestyle,a nd if you want to be a risky investor (with potential BIG gains) then work like mad to pay off all your debts, and THEN do that (only after 15% or more is going toward retirement first).

You make some interesting observations, but they aren't based in reality for the masses:

1) A 90-year-old returned to work? Fine. That's if you're lucky enough to live that long. Here in the US, the average male still doesn't have a life expectency beyond 80, and most are very unable to work regular jobs well in advance of that.

2) Many people, even before this crisis were planning to work about as long as they physically could anyway. Only a very small minority (and I'm in that minority) have arranged things so that they could retire much before age 67 or even 70. So, there will be some who thought they could retire at 65 and will discover that because of this recession they need to work until 68 or so, but that's about it. These baby boomers, even if they want to, cannot work forever, and as far as I'm concerned, they will ALL be done working about 10 years before I decide to retire; for anyone younger than me, it will be even longer -- a longer time tha they have to snatch up jobs left by them.

3) You are correct that the world will have to look at things differently -- they will actually catch up to the way I've approached personal finance my whole adult life. Borrowing to the gills will be gone, and that's a GOOD thing. Future growth will be based on reality instead of false reality.

4) You mention a glass that is 30% full. Where did you get that from? 70% losses are not a reality brother. I lost 39% in 2008. I don't count my 2009 losses or gain until the end of the year.

5) You are likely correct about oil, but unless you have serious family wealth, you are not in a postiion to buy individual stocks or commodities in my opinion. You should have a job first, and put 15% of your income into retirement accounts -- 401k, Roth IRA, etc. Then, you need to be debt free including a house, then build up an emergency fund of 3-6 months, and THEN you are ready to invest in the more risky fashion you are currently doing.

6) Once again, you are saying things that suppose I agreed with. You say you don't think this mess will be fixed in a year or two -- well, neither do I. I've said likely 4 years and I agreed with another poster that 5 years could be the number of years to pull out. I did refer to what many economists are saying about 2010 being a "solid recovery" year, but I didn't necessarily agree with that.

7) If you are indeed 18 (you seem to be decently mature in your writing for 18) then you should be pleased as punch that you get this opportunity with a super low market like this. You ARE making a mistake by dabbling in individual things though even though oil seems like a sure bet -- you're still not in a position to be investing like that in my opinion, and when you do score big in oil (as I think you might) this will open up the possibility for you to invest like that again in other individual stocks and commodities, and eventually you will be burned.

Stock-picking guru Jim Cramer suggests that you only invest in individual stocks or commodities after you've maxed out retirement accounts, and then he says you need to have a MINIMUM of 5 stocks in your "basket" of stocks. Beyond that he says never more than 20% in any one sector of the market -- you are breaking all the rules there by putting money in oil. Just not a smart strategy. Good luck to you.

lol @ Paavo...

lol @ flagpole...

Buy and hold strategy? Thats not a strategy...its a means of suicide, but not a strategy. Thats like playing poker, except you never fold. Not hard to imagine whats going to happen before long...

Trevithick wrote:

Obviously there have been some quite big gains in the US stock market today.

For the stock market to recover its nominal price it needs to go up nearly 100%. For it to recover its purchasing power, it needs to go up nearly 300% compared to Gold.

Now, I'll be leniant and say if it only goes up 150% then its recovered back to where we were in October of 2007, man times were great then weren't they?

Stocks were hitting new highs, Ethanol and Rail Road stocks were being pumped, it was warm out...Olympic expectations were high. Great times wasn't it?

Today was nothing but a short squeeze. I don't know what that means for tomorrow because traders will do one of two things now that the shorts have been squeezed, dump or buy after a big move up.

Stocks will go lower eventually...asset values are still too high for credit, and money is steadily losing its value as the national debt increases, and China/Japan/UK are forced into partial liquidation of U.S treasuries to purchase goods so their nations don't implode. The longer business as usual goes on, the worse the crash and devaluation of the dollar will be.

So I'm happy they're dragging out this crash, let Geithner and Bernanke drag it out. Drag it out, another day, great. Every day China gets a few Billion richer, and looks for something to buy. I told people, buy real assets. Something they can hold in their hand worst case. Worst case, something that makes something real. Things will get even worse if its just business as usual.

Stocks are still too expensive as dividends are cut and employment notches up and up. The PPT can fight its battle here at a huge cost, or 1000 pts lower on the Dow for billions less...

Who knows.

Yep.

On a warm summers evenin on a train bound for nowhere,

I met up with the gambler; we were both too tired to sleep.

So we took turns a starin out the window at the darkness

til boredom overtook us, and he began to speak.

He said, son, Ive made a life out of readin peoples faces,

And knowin what their cards were by the way they held their eyes.

So if you dont mind my sayin, I can see youre out of aces.

For a taste of your whiskey Ill give you some advice.

So I handed him my bottle and he drank down my last swallow.

Then he bummed a cigarette and asked me for a light.

And the night got deathly quiet, and his face lost all expression.

Said, if youre gonna play the game, boy, ya gotta learn to play it right.

You got to know when to hold em, know when to fold em,

Know when to walk away and know when to run.

You never count your money when youre sittin at the table.

Therell be time enough for countin when the dealins done.

Now evry gambler knows that the secret to survivin

Is knowin what to throw away and knowing what to keep.

cause evry hands a winner and evry hands a loser,

And the best that you can hope for is to die in your sleep.

So when hed finished speakin, he turned back towards the window,

Crushed out his cigarette and faded off to sleep.

And somewhere in the darkness the gambler, he broke even.

But in his final words I found an ace that I could keep.

You got to know when to hold em, know when to fold em,

Know when to walk away and know when to run.

You never count your money when youre sittin at the table.

Therell be time enough for countin when the dealins done.

You got to know when to hold em, know when to fold em,

Know when to walk away and know when to run.

You never count you r money when youre sittin at the table.

Therell be time enough for countin when the dealins done.

All I can afford are aluminum cans. Right now they are worth .57 a pound. I can't wait until hyperinflation kicks in and the price doubles in a year. Until then don't worry about that smell coming from my storage closet.

if the guy is 18, then invest in an education

flagpole, in times like these the best advice is often to tell people to make their own decisions.

You must have missed the speech tonight ... before I said we will see 6500 on the Dow. Now I think we will see 5500-5800. I invest for a living, and I'm on the sidelines for awhile longer.

Great speaker. But the overall plan is setting us up for more pain.

All true. Equities have never been risk free, that is why we want a premium adjusted to risk. The premium now seems to have vanished, but if you jump out of the market now, there is no upside premium and you have locked in your downside risk. So be like Dr. Strangelove and enjoy the ride.

Indeed. Obama, Bernanke, and Geithner are hellbent on setting us up for some major stagnation in the years to come, all under the political cover that this will always be an inherited legacy of course. Amazing how so few understand the magnitude of the structural dislocations and how government intrusion can only serve to obfuscate them further.

Sagarin wrote:

Amazing how so few understand the magnitude of the structural dislocations and how government intrusion can only serve to obfuscate them further.

Because they get their education from the tube.

The best hedge I've seen against the coming gloom and doom everyone is predicting is real estate. I'm charging more for rent today that I've ever charged in the past 6 years and people are blowing up my phone to rent my places. If you don't like getting that 2am phone call about a blocked toilet then land lording aint for you. Actually that’s a joke. There are ways to control that. My rule is if you plan to buy real estate, buy real, real cheap. In my area you can get a great properties in a working class neighborhoods for under 60k. The FHA has repealed their stupid 4 house minimum policy and you can now have 10 mortgages again. You guys can go with gold silver oil stocks bonds cash in your mattress or whatever. I've taken my early lumps in the rental business but now I'm making money cold hard cash month after month.

Let me first say I'm 100% in the stock market. About 35% in Lg Cap funds, 20% Small Cap/20% Mid cap, and 25% Int'l. My wife is about the same. We will be dollar cost averaging about 15% (not including company matches) of our gross annual income. I have extreme confidence that when I retire, I'll be a millionaire +. I'm not being cocky or arrogant, I just have a plan. What if the stock market doesn't come back? First problem I see with all the questions and fears and concerns is people don't understand what they are investing in. For us it's mutual funds (or 401k separate accounts). That represents many companies in one fund. So if Bank of America goes bankrupt, so what! It only represents less than 5% of one fund, which is 35% of my entire portfolio (at the max). My suggestion is to truly do some research and find out where to put your money that best suits you as an individual or you and your family. I've done that and nothing is going to outpace the stock market long term. And to those who've put money in and took it out a couple years later.....YOU ARE STUPID. Money invested is money for the long term. Advisors aren't stupid and zombie like, it's their job to make sure you aren't stupid with your money. I'll repeat, investing is for the long term, 10 or more years. As for me and my family, we are NEVER getting out. Even when I'm 90 yrs old I'll still be invested 100%. That gives me an even LONGER time horizon. Sure I'll pull money to live off, but I'm not putting squat into bonds and cds. Because inflation will eat that up faster than you think.

For someone who is on the fence, again, go back and do some research, it's your money, you should do that! As an alternative to 100% stock market, do this....

If you're married, take your contributions and put them 100% stock market, take your spouse and make hers/his 100% safe (stable fund/cds/money market, whatever). If you are single, take half and half.

Do this for 15 years and don't jump in and out of market or switch stuff around. If your Dollar cost averging there is no need to rebalance. I suggest not watching the negative news or checking your balance daily (you know who you are). After the 15 yrs is up, see who has won so far. You or your spouse? Which half grew more. The results will surprising.

In my opinion this would be stupid b/c I know who's going to win, but I'd try this if you are on the fence. You'll find that a few years you will be making more money on those cds, and then in other years you'll make a lot more with the stocks. But in the end, the long run, the market will out perform those inflation eating cds. Why? Because you're buying business's, and they go in cycles, but in the long run, business grows.

You are even more pro-market than I am (I do agree with most of what you said). Before you decide to NEVER put money in bonds or CDs, you might want to rethink that. Suppose you are 70 and there's been a 10-year bull market so that your total amount is way more than you thought it would ever be. Let's say it's $6 million. You could put half your stuff in bonds so that you only earn a total of about 5% on your stuff annually, and you'd be protected against another big downturn. 5% of $6 million is $300,000. Add social security to that too of course. Could you live on $300,000+ a year when you are 70? Probably. But, to each his own. I think you're correct that even today stocks will bring more long term than any other investment. A bad time doesn't wipe that away forever.

What part of the country are you in?

The thinng a lot of people don't realize is that you can invest a part of your IRA in rental real estate, as long as it's the IRA that is benefiting and not you, i.e. you are not able to live in the property as a personal residence. However you could do this later upon taking distribution of the IRA and transfering ownership from the IRA to you.

I have to disagree with those suggesting to leave money in the stock market forever, as all you are doing is riding the market down down down, up a little and back down. There is no reason to invest when you're going to lose money.

For most people, when the market is going down, put your money in a CD at 5% at a local credit union. If the market is going up then fine, put the money in the market. Otherwise get that 5% and you're way ahead of the game. For those losing 40% a year or more, if you'd instead been at 0 or 5% for that time, then put it back in the market when the trend was going back up, you'd be even more ahead of the game. Right now the trend is continuing downward. The market has lost more than 50% of it's value the last few years, on the average.

Discuss and test your investment and trading strategies with other runners on this thread.

This is a free site, and I'm not connected with it.

http://vse.marketwatch.com/Game/GameOverview.aspx?id=gains4runners

Flagpole,

1. I said that this was "clearly an exception" but it illustrates what the trend may be in the coming years. I'm not saying all 90 year olds will return to work, but rather the median retirement age goal will be raised.

2. See #1.

3. I think a happy medium is the best solution. People shouldn't be afraid to borrow, but should know their limits.

4. I wasn't suggesting that you had 70% losses. My "30%" was simply an arbitrary number, trying to emphasize that things may be worse than anybody could imagine. It is fine to position yourself in case the market returns in the next 5-10 years, but you should also be ready in the case it doesn't. I hate to feed into the negativity, but it is possible that this crisis marks the end of America as a global superpower. I'm not saying it is likely, only possible, and I want to be ready if it is.

5. Obviously I agree that oil prices will rise. However, I disagree with the rest of this part. I realize that diversification is important, but the more you diversify, the closer you come to simply owning index funds. This may be fine for many people, but personally, I am confident enough in my long term stock picking ability to beat the major indices by a comfortable margin.

6. Agreed

7. I am happy that I have this opportunity. However, I disagree that I should not be investing in individual stocks. My age allows me to take on more risk than someone in your position. Also, I never said I wasn't diversified. I am in 80% cash, and in the 20% in stocks, I have 40% or so in USO. The USO is a diversified ETF that roughly tracks the price of crude oil.

I have a read a few of Jim Cramer's books and watched his show before, but I have learned to take what he says with a grain of salt. He has advise that is geared towards the general population who don't know much, if anything, about investing. I have learned to watch his show as another source of entertainment, rather than actual advise. I would prefer to do my own research.

AGM