Europe will have to travel this route, too. If you're holding CD's for safety, you may just about plan on the return; barring some strange event. This also applies to the ultra short and short term bonds.
Inexpensive money will not be the fix; and I suspect the Fed knows this..........but QE 2.8888 or 3 or whatever is here and alive.
Perhaps this action is an attempt to provide some type of wiggle room for congress to become involved in mortgage modification plans.
Also, not sure about this "rate policy forward look" thing is going to play out. The Fed will start this pronouncments in the near future. But, of to what value???
http://www.bloomberg.com/news/print/2012-01-25/fed-says-benchmark-interest-rate-will-remain-low-until-at-least-late-2014.html
Comments
- Additionally, Gross mentions financial repression and doesn't see a rise in rates for three years (at least.)
http://www.zerohedge.com/news/bill-gross-explains-fomc-decision-qe-25-today-qe-3-4-5-…-lie-ahead
SIX OF 17 FED OFFICIALS SEE NO RATE INCREASE BEFORE 2015
http://www.zerohedge.com/news/fed-slashes-growth-outlook-six-fed-officials-do-not-see-rate-hike-until-2015
I'm almost looking forward to a complete collapse. We need to start over. And we will, eventually. Maybe gold is the way to go.
In my opinion he has been responsible for virtually single-handedly saving our sorry asses, in the face of virtual total abdication of responsibility by congress. And for that, he gets opinions like yours. Feh.
It is quite evident that you have no appreciation whatsoever of the checkered, unreliable, and downright idiosyncratic results of dependency on a gold standard. Read your history, I suggest.
Yeppers, it was a good day in the neighborhood today. TYVM.
Gross is spot on. QE 3, 4, 5, 6 . . . nth. This means that they will indeed halve the value of the dollar thru monetizing the Unfunded Liabilities over the next ten years. Or at least that's the plan. The only way they can possibly pay this tab. Monetization and benefit reductions and tax increases. Oh, BTW, do you know the definiation of job security? Press Operator at the BEP.
This means that gold will run for at least another two years (rono's been calling for a 15 year bull and from 2001 that's about 2015-16. That said, the Great Austerity will probably last until 2023 or so - another ten years of kicking the can - so I really don't see gold ever falling back that far.
Oh, and this is only if they're successful. If they're not, we get some sort of finanical meltdown and hopefully not bloody revolution.
Where to now, St. Peter?
Have some gold - real gold. Not tons, just some. 5% or so of your wealth. Cripes, you can stash a roll of gold eagles (quarter size and about 2" tall) in oatmeal can. Buy a 1000 oz ingot of silver, paint it black and use it as a door stop. The former worth about $35K and the latter $30K.
Guard against inflation. Guard against the Great Austerity. Screw the offical numbers as we all know better and we are the ones that must deal reality.
Borrow money if at all possible. Yeah, with zero interest rates, the supply of credit is greatly restricted. It's a classic Liquidity Trap but best explained with Econ 101 Supply/Demand charts for artificially set prices ====>>>> no supply. Nixon gas price controls - no supply. A couple of years back and the paper price of bullion was so much lower than the street price, supply disappeared or premiums went off the chart. Same/same today, but with credit. Rates are artificially low and bankers aren't willing to make loans at the official rate. Yeppers, 30 year fixed mortgages are around 3. 7%. Sure they are. And inflation is zero. Folks, no banker is going to make a loan for 30 at 3.7% - unless you have a huge downpayment and a credit score over 800 and your last name is Buffet or Gates. Sorry, they don't have any cash. Now if you want to pay 5-6%, well maybe they can find some money.
Nevertheless, in this environment with real estate cheap and money cheap and facing inflation - the answer is easy. Borrow every dime you can at the best fixed terms and buy real estate. I'd be very careful leveraging huge amounts on the roof over my head, but otherwise swing for the fence. The most precious area is probably cropland. Hell, it didn't even blink with the housing meltdown. However, anything with water, or better yet, on the water (inland). As for second homes . . . stay ahead of the boomer hoard if you can (they're just starting to retire and are in that housing phase) and scoop up some goodie in FL or AZ. In Florida nice single family condos are going for 40-50% of their peak. Yeah, they were overpriced, but this is still Florida.
http://en.wikipedia.org/wiki/Liquidity_trap
What other ways to preserve and hopefully grow your wealth?
peace,
rono
And BTW, one other thing that is also helping to keep inflation from exploding is because the current velocity of money is around zero. No lending, no movement and no circulation. That's the bitch - they're printing money like crazy but can't legally drop it from helicopters but have to funnel it thru the major banks and those folks are sitting on it playing with their puds. It's like when our gov't gives foreign aid to some poor country with starving citizens. They have to give it to the folks in power and so often, they folks send it to a swiss bank and the people still starve.
and so it goes,
peace,
rono
I don't care who appointed him, I just know that he will make Greenspan look like a wizard when its all over. And that's a feat.
Obama has kept a lot of the same fools (Larry Summers ring a bell?) that Clinton had on board. I'm surprised Robert Rubin isn't around. These guys dropped the ball before. Nothing changes.
Bernanke isn't really calling these shots, IMHO. Politics at play, pulling the strings. Its Obama's election year, need I remind you. I don't worship any of these clowns.
Gold may not be the answer. But really no asset class looks all that attractive right now, unless you believe equities can stay artificially inflated (with Ben's continued help). Not a gamble I'm willing to take.
http://www.crossingwallstreet.com/archives/2011/12/refining-the-gold-model.html
Regards-
Politics in general in this country have become more and more divisive. Not to say that politics hasn't always been the subject of heated debate, but the level of anger at "those leftys" or those "right-wingers" or whatever that one sees across the internet in various comments sections is downright concerning (I think.) It's not like that here, certainly, but the tension does start up almost predictably whenever someone makes a political comment or a comment that can be thought of as somehow insulting to one political party or the other.
There are many excellent debates on this board about various aspects of life and investing, but this particular debate continually results in the same things. Not saying it can't be debated, of course, but politics and monetary policy are two things where there are two sides to this board that I see no progress in either side changing its thinking.
As for a generalized statement on today:
From Forbes: "The Chairman was put on the spot with several questions regarding the effectiveness of his policies. Asked about the destruction of savings given ultra-low interest rates, Bernanke admitted he understood savers were getting a real bad deal. Essentially, Bernanke said the anemic recovery necessitated low interest rates to strengthen. Low rates are used to stimulate investment, according to Bernanke, and that “has a cost on savers.”
In other words, Bernanke told people to stop saving and start investing. When the economy is really bad, he explained, returns are going to be low and savers will get meager returns. Keeping your money in supposedly safe Treasury bills and CDs won’t help reactivate the economy, according to the Chairman’s view of the economy, and neither will keeping dollars under a mattress."
http://www.forbes.com/sites/afontevecchia/2012/01/25/bernanke-tells-people-stop-saving-and-start-spending/
I don't agree that this is a good solution and I do think it will have negative effects (which I've gone into on many occasions and I'm not going to get into it here), but it is what it is. The desired end result is inflation - that's not some sort of insult to Bernanke, it is what he has stated. Rono also goes into this below.
If this is a negative real interest rate environment (and it is and it may be for a long time), the question becomes how do you approach that? Everyone's answers are going to be different, and I think coming up with specific ideas (what to look for and what to avoid) would be a good and useful discussion to have here.
Personally, I continue to believe the real asset theme - and it certainly doesn't have to be only precious metals - I think agriculture/ag related will do well over the next decade and that food will become increasingly politicized over the next 5-10 years. As I've said before though, a lot can fit under the "real/hard asset" umbrella. I think REITs in the US are overbought in many instances, but many foreign (EM/developed) real estate stocks did not do well last year and would be of more interest (I think). Infrastructure assets, too - especially strategic/critical infrastructure. I think it's a little overbought at this point, but I continue to like Brookfield Infrastructure (BIP) - additionally, one of the few US REITs I do like is sister Brookfield Office Properties (BPO), but that also feels a little overbought), but there are other infrastructure plays, as well.
And, will stop well short of equating misguided or ill conceived government actions with corruption. Disagree intensely for example with many recent SC rulings like the one on unlimited campaign contributions. View it and the Justices who voted for it as misguided and detrimental to our system - but not "corrupt" - in the normal sense, anyway.
Maybe need an additional discussion area called "politics" to keep those excursions separate. Than again, let's assume David's not completely nuts - and we've probably already given him enough gray hairs. (-;
Additionally, such commentary predictably makes some half-assed reference to a subject which is inherently complex and multifaceted, again typically failing to recognize any historical experience on the matter.
The post which I found to be irritating certainly meets those "standards".
I respectfully disagree with Hank on this occasion. My response was not "partisan", but merely an attempt to demonstrate and refute some of the inconsistent and, frankly, rather vapid remarks of Mr. NoEskimo.
Scott, you should know me well enough by now to realize that I welcome intelligent (if sometimes heated) discussions, and almost always recognize that there is usually more than a little truth on both sides of most issues. This is why I tend to engage with folks who have different perspectives- it's a lot more interesting to hear opinions which may not be in agreement with mine.
However, I have little tolerance for aggressive and boorish ignorance.
Regards- OJ
Funny, I pictured you and your cronies getting drunk at the local VFW, touting the US as the eternal superpower of the world.
AAII investor sentiment survey was 48% bullish vs. 19% bearish as of 1/25/12 report. A slow melt-up will do that. So investors are not exactly "running scared" at the moment (bearish indicator)- though fund flows at the retail level were extremely negative for 2011 (bullish indicator). Lack of volume is a red flag right now for me at the moment (bearish), and I don't mind sitting on the sidelines with all these mixed signals. In the end, I feel it's an artificially inflated market, and a continued melt-up is entirely possible..for a while.
And I'm entitled to that opinion EVEN if it differs from yours.
Get off your high horse, these message boards aren't all about you, and what YOU disagree with.
Others can post their opinions, or vent. You can ignore what you don't like.
Deal with it.
And I don't think that too many folks would disagree with you either. Sneaking very timidly into the previous disagreement, it comes down to dealing with an artificially inflated market vs a totally uncontrolled deflated market (aka "The Great Depression").
"Mr. In-Between" don't exist in this arena. Not saying the choices are great here, but so far we're doing a bit better than they did in '28. And if Mr. Bernanke knows anything, he does know a whole lot about 1928.
And of course you're entitled to ANY opinion EVEN if it differs from mine... just as long as there is some reasoning there and not just an accusatory diatribe.
Others can post their opinions, or vent. You can ignore what you don't like. See, it works both ways, something some folks have a problem with.
I would post this as a new question; as it is buried too deep into this thread; which is generally not related to your question.
Regards,
Catch
There are some more opportunistic "property funds" in London (an example: http://www.eepfl.com/), but they are as volatile as REITs and are mainly Europe-centric. I'd be interested in more strategic/opportunistic real estate investments in the US, but there doesn't seem to be anything on the horizon. I don't think I'd invest in the homebuilders broadly; one may be able to make a thesis on why some specific segment might do okay, but I think anything involving homebuilders is really an "over the horizon and then some" investment.