How do you guys afford a brand new SLSA?

[MrMorden]

I have seen calls of the Dow going to 12000. I have also seen some predicting 6000, 5000, and 4000.

Since this is a zombie thread anyway...

....had you seen any calls two years ago for DOW 18,000?

Not quite there yet, but tantalizingly close.

17,958.79

Not a bad gain over just a couple years!

Reminds me of the famous quote...

"That which cannot go on forever will eventually end."

Sorry, I'm just not a believer in this market, which has been primarily crated by Fed money printing and interventions through stealth bond (and possibly equity) purchases. The Zimbabwe stock market was up several hundred percent just before their currency crashed into hyperinflation. Money printing works great until it doesn't.

[drseti]

I have to agree with Andy. Has anybody here seen his or her real personal wealth increase at anywhere near the rate at which the Dow is climbing?

Didn't think so.

[CTLSi]

......

[FastEddieB]

Reminds me of the famous quote...

"That which cannot go on forever will eventually end."

Or...

"In the long run we are all dead." - John Maynard Keynes

I've been hearing dire predictions about disaster in equities going back to at least 1975.

Anyone scared away by those predictions missed a huge runup over the years. About an 18-bagger, not including dividends.

But I don't "believe" in this market. It may go up. It may go down. It may trade in a range.

People buying stocks now may be shocked when the Dow drops to some scary level on the downside. Or pleased, if they ride it up to Dow 25,000 and beyond.

But anyone who has consistently invested throughout the years through ups and downs has done quite well.

But it's not for everyone, so I'm not making a case that anyone do anything different or beyond their comfort level.

[FastEddieB]

I have to agree with Andy. Has anybody here seen his or her real personal wealth increase at anywhere near the rate at which the Dow is climbing?

Didn't think so.

I'm diversified, but much of what I have squirreled away for retirement is in stocks and mutual funds and that portion has, mainly through luck but with a tiny bit of intuition thrown in, outperformed the Dow.

Many of the utility and blue chip stocks plod along, but pay out nice dividends along the way.

But a few other stocks - AAPL, GOOGLE, AMZN, PII - have WAY outperformed the Dow.

As have tech and biotech mutual funds.

Don't want to come across as bragging. Or prescient. Just want to provide a counterpoint to those who think the stock market is a minefield littered with the corpses of naive investors. Or gambling. That's just not how I see it.

[MrMorden]

Being a follower of Hayek and an anti-Keynesian, I think this is not going to end well. But Keynes was right in one regard:

"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

Currency debasement destroyed the Roman Empire, and it looks like we're on the same road. The US currency has lost 98% of it's value since 1913 (the year the Fed was incorporated), something it took the Romans 500 years to do.

[MrMorden]

Don't want to come across as bragging. Or prescient. Just want to provide a counterpoint to those who think the stock market is a minefield littered with the corpses of naive investors. Or gambling. That's just not how I see it.

I would not call it a minefield, and I think there is money to be made there. But long term I think the money is in shorting market growth, not going long on it.

I think of it more like a game of musical chairs, and when the music stops there are going to be a lot of people with nowhere to sit. And equity investors are *always* at the back of the line in the hierarchy of debt holders.

[FastEddieB]

No flaw there, that I can see.

All the more reason to diversify.

I can imagine a scenario where holders of gold and silver would look pretty smart.

But you know what can happen if all of one's eggs are in one basket.

Oh, and squirreling away cash has its own risks - physical loss, bank failure and inflation or hyperinflation among them.

So where does a rational investor put his or her assets while waiting for Armaggedon?

[FastEddieB]

But long term I think the money is in shorting market growth, not going long on it.

I heard the exact same sentiment at Dow 1,000. And Dow 10,000 (at least twice).

And everywhere inbetween.

I simply do not short equities. Ever. The downside risk is just too high - nearly infinite if things go against you.

Are you actually short the market? If you don't care to discuss it on a public forum, maybe next time we fly*.

*Have a pretty bad cold right now, but soon.

[drseti]

.So where does a rational investor put his or her assets while waiting for Armaggedon?

Why, into airplanes and avgas, of course!

[FastEddieB]

Why, into airplanes and avgas, of course!

I'm sure you can make a small fortune that way!

[MrMorden]

I do not short the market because that requires market participation, and currently I'm not participating. Price discovery has gone off the deep end in the market, and it's no longer rational. I try to stay away from activities I see as irrational. Well, other than aircraft ownership

Gold and Silver are good plays now, IMO, but most people buy ETFs, which are a terrible way to buy metals. The ETFs are contracts traders, and the contracts ofetn have 50-100 times the allocations (e.g. "owners") than physical metals actually exist. In other words, for each once of metal that exists, 100 ounces are sold. That works fine as long as nobody stands for actual delivery...

There are some ETFs like the Sprott Silver and Gold ETFs that are 100% allocated, and they simply buy metals as shares are bought so they always have allocation equal to their obligations.

Buying physical metals of course has storage and security concerns. To avoid some of that you can use a verified storage company like BullionVault -- When you buy an amount of metal, that metal is put aside with your name on it (e.g. you OWN the metal) in a vault in either the USA, Switzerland, or Singapore, your choice. BUT there is still counter-party risk involved.

If you want to be in the market and play gold and silver, you can invest in mining companies. The HUI index plays on that, but the whole sector has been bashed hard recently...I have theories on why that is. One could call this a possible bottom for the miners, but one could also be wrong.

Cash is nice, but with interest rates hovering near zero and far below real inflation, that is a holding action with no long term winning end game.

In the end I'd say there are very limited options for investing safely now. Productive farm land would be one good option that has shown great appreciation in the last ten years or so.

[Nomore767]

"In the end I'd say there are very limited options for investing safely now."

Our retirement portfolio is managed by a company who follow a low cost index based investing strategy.

The Dow is a group of companies who are supposed to reflect the market. There is always someone who claims to have 'beaten the market'. Sometimes their immediate returns are spectacular. Long term, not so much. But 'investing' (as opposed to gambling) is supposed to be a longer term strategy, rather than a quick roll of the dice.

Paul asks has anyone seen their personal wealth increase as this market has grown? The answer is yes. We have. Not stellar, or at the same rates the Dow, but steady growth. Index funds buy the whole market . We don't have a manager who 'beats the market' or who has some great insight on which stocks to own and which to avoid.
We have friends who had a couple of million in stock options and who paid a goodly fee to a company to manage them. Today their worth is maybe a couple hundred thousand. They sat and watched it all dwindle away and paid hefty fees for the privilege. They asked what we did, and them promptly went to one of those steak dinner meetings and gave the rest of their money to a money manager who hasn't done anything for them.

The key is, like LSA, knowing your 'mission'. We've changed from accumulating retirement wealth to managing and preserving that wealth. We have steady growth, whilst taking a withdrawal, and the plan is to make it last till we pass on.

Whilst in perfect world the last dollar you have would be used to tip the undertaker. In reality, your portfolio will expand and contract, leak cash, and react to crises in the world. Spending time trying to make the big score, or beat the system, is folly. I have a friend who had a sure bet system shorting options. When he pulled out they were 'only down $250k'! Another guy lost 2/3 of his portfolio in the same system. These were smart, capable individuals.

You can invest relatively safely. I say relative because nothing is for sure and we'll all get sick and die. Investments are the fuel for our future, why else would we do it? Keeping all cash under the mattress still risks devaluation and inflation. Even gold fluctuates.
You can't beat the system, but you can invest for you and your family's 'mission' for a comfortable life.

Occaisionally though…we do things that simply don't make for a whole lot of economic sense…like buy an airplane!

[drseti]

I'm sure you can make a small fortune that way!

You're right, Eddie. It's a good way to make a small fortune out of a large one.

[Jack Tyler]

The discussion reflects an interesting trend I've seen since starting to educate myself about investing three decades ago. There are always those on the sidelines who find all kinds of reasons to throw stones at the market (which encompasses far more than equities) and there are those like Howard and Eddie who seek to adopt reasonable investment paths, work at them steadily over time, and end up generally pleased with the results despite all the ups & downs. I know which camp I'm thankful I've been in.