Financial topics

[jusme]

Higgi

I went back and read a lot of old post's.One that you stated was to open a treasury direct acct. Is that still something you would advise ? I guess I need to look at something a little faster on the return. Seeing as how I'm old and a late starter If I did a little T. D. what else would you advise? I have been reading this site since '07'.

I did what I believed was all the right,smart things to do.No debt except 2 1/2 years left on a very inexpensive car that had great low mi.

Have a food storage ,med's ,first aid, water. Cut cable. Mostly just Internet, electric, water, and at present a maitinence fee which I'm sure will rise in the very near future. Pay credit card off each month. My friend and I infact share the car to save. He has a small amount in 401 k and likewise savings.I'm just now able to start saving a little every month.

We live in central Fl space coast. In a condo which is paid for but the insurances are going to be killer !The real market value is getting close to what the original buying price was in '91' when he bought it.

I'm 62 on S S .He's 58 still employed. I guess i'm looking for some (a ) safty net ? Trying to figue out how or where to put some $ to make some . Low/no risk. I'm not looking to make millions just something steady for at least the next 10 years.

I've expressed to John and wish to express gratitude to all who post. Getting were I'm at was because of finding this site. I had started the food storage after katrina and just happened to stumble on this site one day and very glad I did.

I have to state a lot of what is discussed is way over my head. But i'm getting the jist of a lot more than when I first found it.

Anyone that has any ideas to post will be much appreciated.

I told John not so long ago this feels like it does when we prep for a hurricane. Now we just sit tight and hope for the best.

Best To all jus me.

[Higgenbotham]

Higgi

I went back and read a lot of old post's.One that you stated was to open a treasury direct acct. Is that still something you would advise ? I guess I need to look at something a little faster on the return. Seeing as how I'm old and a late starter If I did a little T. D. what else would you advise? I have been reading this site since '07'.

I can't advise because everyone's circumstance is different and nobody really knows, but can mention some of the pros and cons are of using Treasury Direct.

Treasury Direct is a safe place to keep cash if a lot of bankrupcties are happening but the US government and its money stays stable. The US government could default on its debt or partially default, so that's a risk. And the US government is a lot further in debt than it was a couple years ago.

Someone can keep cash balances in Treasury Direct by letting short term bills mature. But there's no interest on them. It would be sort of like keeping cash in your mattress except cash is really Federal Reserve Notes issued by the Federal Reserve which is not part of the Treasury or the government. On the other hand, Treasury Direct is all electronic so if there are computer failures or power outages it could be difficult to access the account.

If someone wanted to take some risk to try to earn some interest, it might be possible to wait until there are default fears and interest rates rise on US government notes and bonds. Under those circumstances, someone may be able to earn a good bit of interest but there would be a chance the government could default and all the money could be lost or the interest payments stopped.

[John]

A web site reader has just called my attention to any article
where Richard Koo explains why quantitative easing has failed,
and why the U.S. is following exactly the same path as Japan.

> Here's Richard Koo's New Blistering Presentation On Why QE2 Has
> Been A Disaster

> Gregory White | Apr. 11, 2011, 10:57 AM

> Monetary policy has failed alone to lift the U.S. economy, because
> the private sector is obsessed with minimizing debt, according to
> Nomura Chief Economist Richard Ko.

> Speaking this weekend at George Soros' Institute for New Economic
> Thinking conference at Bretton Woods, Koo outlined why the
> U.S. and Europe have missed the lessons of the Japanese
> experience.

> Koo's presentation explains how the U.S and Europe have expanded
> their monetary base, but that this flood of cash isn't driving
> economic growth because banks, businesses, and people are paying
> down debt. Koo says that only the government can step in to spend
> the excess savings in the market.

> http://www.businessinsider.com/richard- ... 011-4?op=1

Lots of graphs follow.

John

[OLD1953]

No surprises on the Koo article. That QE2 has had no effect beyond simply prolonging the inevitable is painfully obvious. When the states cut this fall, the pressure on Congress to raise tax rate levels will be enormous. The governors don't have that cushion of "borrow what you want" that Congress does.

Trouble on the corporate front is brewing up, as more examinations of the books are turning up interesting irregularities.

http://www.bloomberg.com/news/2011-04-1 ... egins.html

[JLak]

...

Koo says that only the government can step in to spend the excess savings in the market.
http://www.businessinsider.com/richard- ... 011-4?op=1

I just can't comprehend how these "pure macro" economic theories (neo-Keynsian) maintain credibility when they not only fail over and over again, but lack any semblance of logic beneath the numbers. If you have ever worked in the government (I do), you'd understand that government spending is fundamentally different than the aggregate spending of private citizens. It distorts incentive and shifts capital away from efficient production of 'useful' goods and services. We destroy every industry we buy from. It also tends to benefit only a very small number of individuals that have the ability to win contracts, but requires no reinvestment on their behalf, and therefore lacks the kind of 'trickle-down' effect that a competitive market creates. Seriously, how many times does an idea need to fail before it is considered wrong!?!? Did nobody learn the scientific method in grade school? Falsible objectivity, people...
Please people, repeat after me: "Government spending cannot fix the economy."

[OLD1953]

You have to keep in mind there's an enormous difference between "stimulus" as in "throw money in the air and hope it sticks somewhere" and building infrastructure. Infrastructure investment is not a quick fix for anything, but it provides the basis for productivity improvement over time.

To put it another way, I've seen companies hire 20 IT staff and buy a bunch of servers with no plan at all how to use them, and they get nothing but local email and some support, because that's what they planned for. OTOH, a company that invests in the actual infrastructure needed to connect their offices together and decides on a plan to actually make company officials collaborate and work towards a coherent vision will realize a lot more from the same level of investment.

The government's "plans" for building strength and influence worldwide seem to rely on the idea that "somebody else" makes power and investment happen, because they don't do a lot in any of those regards. And that's why they often fail.

[vincecate]

"Individual investors (AAII poll)—most bullish in six years
Newsletter advisors (I.I. poll 20-week average)—most bullish in seven years
Futures traders (trade-futures.com poll)—most bullish in four years
Mutual fund managers (% cash)—most bullish ever
Hedge fund managers (BoAML survey)—most bullish ever
Economists (news-org polls)—unanimously bullish
Top global strategists (three national year-ahead panels)—unanimously bullish
Even most 'bears' on the economy are bullish on stocks because of inflation!"

http://www.elliottwave.com/freeupdates/ ... mpede.aspx

If everyone is bullish they are already invested and there is nobody else to buy. Chance of stocks going down seems high.

[JLak]

Chance of stocks going down seems high.

Chances of any dollar-denominated asset going down seems pretty darn low to me:

No need to read the news; just watch FRED.

[vincecate]

Chance of stocks going down seems high.

Chances of any dollar-denominated asset going down seems pretty darn low to me:
[..]
No need to read the news; just watch FRED.

Long term you are correct. Measured in falling dollars everything will seem to be going up over the next 10 years. But near term the interest rates determine what is a reasonable P/E for stocks (roughly the inverse of the interest rate). When inflation starts interest rates will go up, and P/E ratios will go down. This will happen much faster than inflation drives the value of stocks up, I think.

[OLD1953]

M3 is the important measure, which the Fed no longer reports. M3 can be calculated from other Fed data, and some folks do just that.

http://nowandfutures.com/key_stats.html

Bernake has tried hard, I'll give him that, but we have not approached the quantity of spendable money in circulation and savings we had in 2008. If you examine the components, it appears that small savings are probably increasing or small debts are being paid down, while huge debts (corporate, government) are increasing and large savings are being liquidated, IMHO to chase the commodities markets. The next set of losses will be horrific and totally nonrecoverable.