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What we have today is kind of worrying because we have a near-zero interest rate, minimal inflation, and low growth. The national debt is already as large as we would want it to be. In the next downturn, we're out of Keynesian tools in the toolbox.
but that does not mean you do not learn to play the cards you are dealt . blaming the dealer is a path to financial failure in the end .
nothing changes , in more than 30 years i can say there was never a day we weren't waiting for that deeper plunge or we thought things were in a bubble . there was never a time we were not climbing a wall of worry in my lifetime .
it is only hind site that makes things look better .
It's human nature to be fearful. Talk about doom and gloom and you will easily sell doom and gloom products like gold, market timing services, alarmist literature, annuities, non-traded REITS, etc. Notice that these salesmen NEVER talk about diversification into bonds? Education about diversification is bad for business.
allocating to bonds if you are a long term investor is a short term answer to a temporary problem (dip) that ends up causing a permanent loss of growth .
it may make very little sense depending on the time frame for the money to protect against a temporary dip and cut your long term growth prospects . .there are very few accumulation time frames which span decades where bonds would have helped you more then hurt your performance .
even rebalancing takes money out of the greatest growth vehicle and puts it in to the vehicle with much lower growth potential .
in the end the logic makes little sense when long time frames are involved .
having a lower volatility investment shows no evidence in the morningstar small investor returns, of folks not exhibiting bad investor behavior in downturns .
balanced funds showed the same flight out as growth funds did and investors lagged the funds longer term returns just the same as the growth funds . .
folks just hate losing money more then making it so a lower allocation to equity's does not seem to change that fact much.
bonds are fine when you have time frame restrictions on your money .
Last edited by mathjak107; 07-03-2016 at 04:21 AM..
The inevitable, sudden, and complete economic collapse of the US economy is taken as a fact by The End of the World as We Know It groupies over there.
That's because the only country that counts as "civilization" is the US. Don't you know that producing electricity is such a complex process that even with 9 billion people on Earth, nobody could possibly figure out how to get the US power grid functioning again for at least a couple of decades.
I agree with most of what you post, but I'll have differ on this one. There have been several times the power grid collapsed in part of the US, most notably on Aug 14, 2003. Electric power to much of the east was down for a few days, but was restored. https://en.m.wikipedia.org/wiki/Nort...ackout_of_2003
We recently went through the worst economic depression since the great one, so it seems plausible another could come soon.
2008/2009 was nothing like the Great Depression. The unemployment rate was higher in 1981 than at any time in the 2008/2010 span. Unlike the Great Depression, the Federal government took reasonable steps to mitigate the correction in 2009. Massive deficit spending and near-zero interest rates. TARP to inject liquidity into the system. Anybody unemployed got unemployment insurance and they were extended to 1 year. The Federal government paid 2/3 of COBRA premiums. Nobody starved. A lot of people made bad decisions and lost everything but it was nothing like what happened in the Great Depression. 6 years later, the stock market is fully recovered. In many places real estate prices are higher than ever. The crazy messing with the residential mortgage process in the name of social engineering is behind us. If you have bad credit or inadequate income, you can't buy a house.
There are structural economic problems caused by offshoring, automation, and a huge wave of immigration of unskilled people that has created an oversupply of unskilled labor. It places an enormous premium on getting a good education and obtaining/maintaining 21st century job skills. Conversely, it creates a huge penalty for not having job skills and a good work ethic.
Capitalism is inherently unstable. What modern social democracies try to do is dampen the instability. What we have today is kind of worrying because we have a near-zero interest rate, minimal inflation, and low growth. The national debt is already as large as we would want it to be. In the next downturn, we're out of Keynesian tools in the toolbox.
I didn't mean to imply that the Great Recession was like the Great Depression in any way. The causes, the federal government's handling of it, its severity and duration ... nothing was as bad. The paralysis that hit the credit markets in 2008, though, was a "near miss" and it could have gotten much worse if the feds had not acted quickly and effectively. It was as close as we've come to an economic catastrophe in the 80 years since the reforms of the 1930s, which included ending the gold standard, which the poster I was responding to claimed had "destablized" the economy. He/she also claimed historical authority for his/her belief when the fact is that the US economy has been infinitely more stable in the eight decades since the abandonment of gold than it ever was in the preceding 150 years.
I don't disagree with your other observations on the economy BTW.
I agree with most of what you post, but I'll have differ on this one. There have been several times the power grid collapsed in part of the US, most notably on Aug 14, 2003. Electric power to much of the east was down for a few days, but was restored. https://en.m.wikipedia.org/wiki/Nort...ackout_of_2003
We recently went through the worst economic depression since the great one, so it seems plausible another could come soon.
Days without power is not years or decades without power, which is what many doomsters over on the SSP forum envision. Moreover, every time there's a major blackout, engineers learn more about the causes of grid failure and how to mitigate them. Recovering from a grid failure is actually easier than recovering from a natural disaster that causes major power outages because fewer repairs need to be done. Every single year, significant areas of the US lose power because of natural disasters that require weeks to repair because every single feeder line into every single street and/or home that's been damaged has to be repaired before service can be restored to very localized areas.
As both GeoffD and I said, the Great Recession was nothing like the Great Depression. You need to read up on what conditions were like if you think 2007-2009 was anything truly like it. When people lost their jobs or their businesses, there was no "saftey net". People died of starvation. People died of hypothermia. Unemployment was in the 25% range for several years, and in the 10-15% for almost the entire decade of the 1930s. People who lost their savings in bank failures never got any of their money back.
Days without power is not years or decades without power, which is what many doomsters over on the SSP forum envision. Moreover, every time there's a major blackout, engineers learn more about the causes of grid failure and how to mitigate them. Recovering from a grid failure is actually easier than recovering from a natural disaster that causes major power outages because fewer repairs need to be done. Every single year, significant areas of the US lose power because of natural disasters that require weeks to repair because every single feeder line into every single street and/or home that's been damaged has to be repaired before service can be restored to very localized areas.
As both GeoffD and I said, the Great Recession was nothing like the Great Depression. You need to read up on what conditions were like if you think 2007-2009 was anything truly like it. When people lost their jobs or their businesses, there was no "saftey net". People died of starvation. People died of hypothermia. Unemployment was in the 25% range for several years, and in the 10-15% for almost the entire decade of the 1930s. People who lost their savings in bank failures never got any of their money back.
The power down scenario is not something perpetrated by the people on the SSP forum. It is fostered and prodded along by our own government and utilities. The People on the SSP forum just prepare for it. Just like they prepare for anything else.
It's human nature to be fearful. Talk about doom and gloom and you will easily sell doom and gloom products like gold, market timing services, alarmist literature, annuities, non-traded REITS, etc. Notice that these salesmen NEVER talk about diversification into bonds? Education about diversification is bad for business.
You must be speaking for yourself. Certainly not for me. It is not my nature to be fearful. I don't buy gold. I don't know what salesmen you are writing about. I have never seen anyone selling market timing services, or alarmist literature and I have never bought any of those items...or annuities, nor non-traded REITS.
actually i did own a non traded reit and did quite well with it when it went public years later .
there were also some annuity products with guarantees that were so good i am kicking myself for not buying them when i had the chance . now they are no longer available because the insurer's realized they sweetened the deal way to much . moshe milevsky called those products right when he said he did not know how the insurers could offer them and we should buy them ./ he was right and now it is to late unless you already own them ..
so there are to many good products out there to paint them all with the same broad brush .
i made quite a bit of money trading in and out of gld this year some times as much as 2 to 3x a week recently so while i do not own gold as a long term investment it sure has been an excellent speculative trading vehicle this year
Last edited by mathjak107; 07-03-2016 at 07:10 AM..
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