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There are many and I will not disagree with them who say continued QE is a disaster for retirees and QE light or 2 will only make things worse, much worse. It is hard to grow your nest egg in a low interest environment and for certain pension funds will not be able to come close to averaging 7-8% returns. For those retired a safe 3-4% draw down could be a challenge. Annuities are taking a hit it just isn't a good environment for retirement planning right now. Do you folks have any thoughts on? Are folks aware of? Please keep your thoughts to this topic and don't engage in political bashing etc. I am not saying the policy is not needed but the unintended consequences for retirement could and are becoming considerable.
In the context of my VERY limited knowledge, QE is a sign of "last resort" monetary supply action. Obviously the economy is very fragile and it's about the last weapon in the arsenal that the Fed can use to hopefully stimulate without creating greater problems. However, macro economic "tinkering" is never a fail safe environment.
Given the basic fact of the tremendous increase in the money supply created by the recent new debt, its very hard to imagine that some serious inflationary impacts are not coming down the road. For planning purposes, QE to me is simply a sign that the current ultra low rate environment won't last. That view leads me to be very cautious about bonds going forward. Just my $0.002 opinion.
Last edited by Pilgrim21784; 10-05-2010 at 05:46 PM..
Not only is QE bad for fixed income investors, but I think it is a disaster for the country. The fed balance sheet has exploded with trillions (US government debt) setting the stage for more difficulties and pain for generations to come.
In the context of my VERY limited knowledge, QE is a sign of "last resort" monetary supply action. Obviously the economy is very fragile and it's about the last weapon in the arsenal that the Fed can use to hopefully stimulate without creating greater problems. However, macro economic "tinkering" is never a fail safe environment.
Given the basic fact of the tremendous increase in the money supply created by the recent new debt, its very hard to imagine that some serious inflationary impacts are not coming down the road. For planning purposes, QE to me is simply a sign that the current ultra low rate environment won't last. That view leads me to be very cautious about bonds going forward. Just my $0.002 opinion.
First let me say it is obvious you have more than just very limited understanding and have a clear handle on the nature of the problem. Those holding bonds with low yields in a period of inflation are in trouble. Those who get out first will be in much better shape. Thus the formation of a bubble that could burst and leave many retiree's in a real bind. To buy a long term CD now could be suicidal.
Not only is QE bad for fixed income investors, but I think it is a disaster for the country. The fed balance sheet has exploded with trillions (US government debt) setting the stage for more difficulties and pain for generations to come.
A year ago we were talking about the fed easing away from QE and now we are talking about QE light. Make you money now and get out and sit on and than ride the inflation bandwagon.
You really can't expect to just invest in savings or other interest paying accounts. Even pension don't work that way and most figure on a guaranteed %% when figuring month amounts. Over that amd they give extra checks at the years end.That is why most managigntheir own accoutns have a hardtime in keepi9ng up with the markets and fail to react enough or soon enough.
You really can't expect to just invest in savings or other interest paying accounts. Even pension don't work that way and most figure on a guaranteed %% when figuring month amounts. Over that amd they give extra checks at the years end.That is why most managigntheir own accoutns have a hardtime in keepi9ng up with the markets and fail to react enough or soon enough.
Not True, I recall the carter days when I had 14% CDs and if you were the fiduciary for a disabled veteran you are required to only use Federally Insured Accounts.
We are talking about this economic environment and with the 2 year at about a third of a percent folks aren't making money. It is possible to have a reasonable level of safety and still be getting more but many folks aren't.
First let me say it is obvious you have more than just very limited understanding and have a clear handle on the nature of the problem. Those holding bonds with low yields in a period of inflation are in trouble. Those who get out first will be in much better shape. Thus the formation of a bubble that could burst and leave many retiree's in a real bind. To buy a long term CD now could be suicidal.
I consider my knowledge base to be limited as I've spent some serious effort in getting a basic education in the area. Net result - the more I've learned the more I realize what I don't know, which is vast, hugely complex and generally beyond my "keen".
Having said that, a QE policy to me is analogous to an approaching train horning blaring louder as it gets closer to me. Precisely when the train arrives at the station and delivers its passenger (major inflation) is unknown --- but I can hear the approaching horn quite well. When the worm will turn isn't knowable, but I'm confident that it will turn. I just don't want to get caught when it does.
Boompa's point on the 14% "Carter" period is well taken. I also remember it clearly. The best one can do is to try and not be standing on the tracks when the train arrives.
I totally agree with your assessment of bond risk and/or long term CDs. While most of the bond funds (I'm strictly a mutual fund investor in bonds (T Rowe Price products)) have done fairly well YTD, I recently cashed out of bonds entirely. I heartily agree that its a good time to take your money and run. I view the inconsequential returns from short term CDs or T-bills as simply an insurance cost for parked cash. Contrarily, this has been an excellent time for some high risk equity investments, primarily in emerging markets. BUT - those best be short term and watched like a hawk. The bottom line in my view (and only my non-bankable opinion) is that we are in a rather unique investment period and need to plan accordingly.
How each of us tailors our plan is obviously and very seriously impacted by the mix of income sources (pension, SS, investment draws, etc.) and that income's relationship to one's BLE (Basic Living Expense) needs. However, QE is very definitely a major "heads up" to me and one which I suggest everyone ought to consider in their formulation going forward.
Last edited by Pilgrim21784; 10-07-2010 at 10:50 AM..
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