are you feeling the pinch

[Kanani]

Originally Posted by ssullivan

Is it wrong of me to be hoping for a steeper drop in the American Indexes? I am hoping for a good 10,000 or under on the Dow, so I can get in. I'm with Mark J on all this.

Actually, it's not wrong. These unrealistic stock prices are not healthy. Just like the unrealistic realestate prices were not healthy.

The realestate market has been in a free-fall for 2 years. I don't think that it will stop until "Joe Average" is able to buy a home with 10% down and payments that are 30% of disposable income and a 30 year fixed interest rate. Until then, people will continue to rent.

[TaoJones]

From November 11, 2007:

Originally Posted by ssullivan

If there's one thing we figured out, it's that you can't go cruising unless you are on the "independently wealthy" side of things.

If you have to work, your destinations are limited and you don't end up getting to cruise the world.

We are on land for as long as it takes to become "independently wealthy." We'll only consider cruising again if we can attain that goal.

To that end, does anyone on here know how I can open up a bank/brokerage account in the EU (as an American) for invesetment into various bond and index funds?

I would like to get my money out of the USA for a while...

And today:

Originally Posted by ssullivan

Is it wrong of me to be hoping for a steeper drop in the American Indexes? I am hoping for a good 10,000 or under on the Dow, so I can get in. I'm with Mark J on all this.

Sean, trust your original instincts. The $US is in serious trouble, and it got there because of reckless, over-leveraged speculation in the unregulated derivatives market. That leverage was made possible by the virtually limitless creation of excessive "money" and credit.

How then, I have to ask, will the lowering of the Fed Funds rate by 75 basis points (.75 percent), thus promoting additional easy credit and, inevitably, inflation, lead to solving a problem caused by already excessive credit?

If one finds oneself at the bottom of a very deep hole, additional digging can't possibly return one to the sunshine and fresh air at the surface.

TaoJones

[TaoJones]

Originally Posted by GordMay

Bluefin Tuna is selling for 3,000 to 5,300 Yen per kG at this morning’s Tokyo Central Market (wholesale). (121-122 Yen = U.S.$1.00 )

Awaiting Wall Street’s Open, Asia Markets Plunge
http://www.nytimes.com/2008/01/22/bu...rssnyt&emc=rss

The correct figure for the $US/Japanese Yen cross is $1.00 = 106.768 yen, or 1 yen = $0.00936609, at the moment.

TaoJones

[ssullivan]

Originally Posted by TaoJones

From November 11, 2007:

And today:


Sean, trust your original instincts. The $US is in serious trouble, and it got there because of reckless, over-leveraged speculation in the unregulated derivatives market. That leverage was made possible by the virtually limitless creation of excessive "money" and credit.

How then, I have to ask, will the lowering of the Fed Funds rate by 75 basis points (.75 percent), thus promoting additional easy credit and, inevitably, inflation, lead to solving a problem caused by already excessive credit?

If one finds oneself at the bottom of a very deep hole, additional digging can't possibly return one to the sunshine and fresh air at the surface.

TaoJones

You're good... very good.

Thank you for the reminder. I hadn't set anything up in the EU due to my being part of the "poor class" rather than the "I have a deposit of $100K or more class.' Nobody wanted me. ha ha

It would be nice to find a spot to stash my currency (USD) while working up to the point I can be considered for more professional funds. Right now I was toying with Fidelity, but couldn't really do much with my cash there as I saw this little plummet coming. I kept it on the sidelines waiting for a nice, healthy crash so I could eventually get into an index fund. Currently, there aren't many other options, especially since I'm widdling my capital down a bit for a new boat right now.

Does all that sound reasonable? I seek the wisdom of you guys... finance is not something a younger guy can be great at. Just not enough life experience... but I'm trying.

PS: I know what you mean about the lowering of the rates to try and create more currency for easy lending. It does seem to fly in the face of what would be needed to counter the problem. But... they're surely stuck between a rock and a hard place on that one, huh?

[TaoJones]

Originally Posted by ssullivan

You're good... very good.

Thank you for the reminder. I hadn't set anything up in the EU due to my being part of the "poor class" rather than the "I have a deposit of $100K or more class.' Nobody wanted me. ha ha

It would be nice to find a spot to stash my currency (USD) while working up to the point I can be considered for more professional funds. Right now I was toying with Fidelity, but couldn't really do much with my cash there as I saw this little plummet coming. I kept it on the sidelines waiting for a nice, healthy crash so I could eventually get into an index fund. Currently, there aren't many other options, especially since I'm widdling my capital down a bit for a new boat right now.

Does all that sound reasonable? I seek the wisdom of you guys... finance is not something a younger guy can be great at. Just not enough life experience... but I'm trying.

PS: I know what you mean about the lowering of the rates to try and create more currency for easy lending. It does seem to fly in the face of what would be needed to counter the problem. But... they're surely stuck between a rock and a hard place on that one, huh?

You obviously get it, Sean - listen to your inner voice and you should be fine.

Now is the time to eliminate as much debt from your life as you possibly can - selling your vessel when you did was a very good move. I know you still want a more affordable boat, but I would counsel that the real price of "toys" is destined to fall in the I.O.U.S.A., so if you're patient for a couple of years, and aren't timid about bargaining hard, you'll be surprised what you can get from someone up against the wall of endless payments on all the crap he "bought" when times seemed so good.

What do I mean by "real price?" It's the price of something after adjusting for "real" inflation; i.e. actual inflation, not what those who massage the numbers for the government report it to be. So, if the asking price of a vessel five years ago was $50k, and it's still $50k today and in the same condition, it is actually much cheaper now, and the seller is probably much more negotiable. Never confuse nominal cost with real cost.

Before you commit to Fidelity, understand that almost all those in the financial business were "chasing yield." Even the most (supposedly) conservative money market funds exposed their depositors' funds to the MBS (mortgage backed securities) markets, and have taken big haircuts. So far, most are holding their NAVs at par ($1=1 share), and are using other funds to cover the losses. But eventually, when all derivatives are marked to market, the true losses will be exposed. The notion that you can't lose money in a money market fund will be proven incorrect.

It is generally reported that the present troubles are the result of the "sub-prime crisis." Not true! When the first two structured investment funds at Bear Stearns melted down last May and the event was blamed on ill-advised sub-prime lending, it was all smoke and mirrors, meant to obscure the reality that all derivatives are a house of cards, erected atop a Jello foundation, built on quicksand.

What's in play, now, is the collapse of the entire $516,000,000,000,000+ derivatives market (end of June, 2007 figures from BIS - Bank of International Settlements.) That's 516 trillion
dollars, American! Has that figure declined since June? Not at all, it's now over $600T. To provide some sense of scale, the entire US economic output/year is presently about $15T, and that of the entire world is about $66T.

Never forget the adage that trying to catch a bargain in the stock market when the prices of stocks that had been much higher are falling, is akin to catching a falling knife.

TaoJones

[MarkJ]

Typical: When America caughs the whole world falls over with flu.

Pox on the markets! Wall St only went down by 3.5% which is half what the rest of the world went down!

LOL
UK back up 3% and that will happen on all other markets today.

Nice interest rate cut from the USA.

Mark

[ess105]

Originally Posted by TaoJones

Now is the time to eliminate as much debt from your life as you possibly can

I actually have a different view. The time to have eliminated debt was during the last couple of years as the end of the latest boom cycle played out. Now, as panic sets in and folks run for the hills, is a good time to get into the right sort of debt and get some cheap leverage against income generating assets. Assets can be picked up at good prices which will give attractive yields. Banks will settle at less than 100c to the dollar to avoid foreclosure. They've already written down their mortgage portfolios in anticipation of this so it won't be a hard fight. That means there are real estate bargains out there. With good credit, loans against investment properties are getting cheaper by the day. I am seeing properties where the yields after every expense (including property management) has been paid exceed the rate being charged on loans. Time to buy.

[David_Old_Jersey]

Originally Posted by TaoJones

all derivatives are a house of cards, erected atop a Jello foundation, built on quicksand.

I think you are being generous , IMO more akin to "investing" the money in a Bookies - except the money you start with is real. and ends up with someone. I reckon online gambling with pretend money is more accurate.

I remember (vaguely) working for Bankers Trust back in the mid 90's - when Derivatives started to become mainstream (and BT were BIG on them) - albeit not my area. Me too dumb The guys who wrote these things were nicknamed the Rocket Scientists. Cos' they used to be. and to understand them you needed to BE a Rocket Scientist . I got very used to reading about all the compensation paid out for miss-selling......and the warnings "NEVER talk to the press".

All seemed like snakeoil to me at the time. I appreciate that the world of Derivatives has moved on since then and now cover far more sins . My views have also changed since then - it's worse than Snakeoil it's actually a new South Sea Bubble but on a simply unimaginable scale. And it's so big it's also now about the Emperors new Clothes.......

Put it this way, If I give you a dollar for a piece of paper with calculations written on it, I then sell it to Pirate Bob for USD1.10, who sells it back to you for USD1.20 then we have all made a profit. and you also have an asset now worth USD1.20, and you can afford for the investment to drop in value 20% before "losing" money.

None of this involves real money or real assets - so why would anyone do this? For the Financial Institutions it's because everyone else is and they "Need" to also report the big "profits" and on a personal level the employees are paid to do this (albeit in "real" money), and therefore would be stupid not to. The tragedy, if not farce, about all this is that what is happening becomes accepted as real.

So what happens when the music stops? (or enough people say "the Emperor has no clothes"). Whoever holds a piece of paper with calculations written on it discovers that you CAN still sell it. To someone to use to wipe their arse with. Once.

Now, who in a Bank or a Govt wants to admit to that??!!

[David_Old_Jersey]

PS Just listening to the BBC news.

Apparently it's all the fault of you Americans. Spend more. Go on.

[Weyalan]

You chaps all seem to know what you are talking about. So, leaving aside the sagacity/insanity issues of asking for financial advice from anonymous individuals on a sailing related web-forum...

My potential cruising kitty is currently about $100,00 (Oops; I just checked - about $90,000) which is currently invested in a managed fund (Skandia). Given that:
a) I probably won't be "cutting the lines" for about another 6 years, so I don't need the fund right now
b) That, economically, things are, apparently, going to get worse before they get better

Should I be sitting tight and leaving the money where it is, on the premise that the market will have recovered and then some in 6 years or so, or should I be cashing up a.s.a.p and putting my money elsewehere? For example, I could pay a chunk off my mortgage...

P.S. Rest assured that I am not going to take any opinions as gospel; this is more of a straw poll, to see what the gut feel is from y'all.

[ess105]

At the end of the day you have to take your own counsel but there's no harm taking input from others. Whatever you do it must be your own decision.

My take is that markets are fundamentally unpredictable. Risk / uncertainty reduces the longer you are in it and the less you put in or take out at once. I look at an equity based investments as a 5+ year investments. What that means is that I must not put myself in a position where I need that money less in less than 5 years. When you set off in 6 years you should avoid having all your eggs in equities or any other single higher risk vehicle.

I don't think the current volatility will settle down for many months. Another decision I have taken is to double my 401k payments so I get the advantage of the dips even though I have no idea or opinion when the bottom will occur. I may max out before year end but that's ok with me.

In writing this I have drawn the connection to 21 and card counting. Card counting works because you know when the deck is in favour of the player (not the bank) winning on average. At these times one increases the bet.

My take. I am putting my money where my mouth is. I may be right. I may be wrong.

[MarkJ]

Originally Posted by Weyalan

a managed fund (Skandia). .

Ask your accountant if Skandia is a good, well managed fund. If it is then leave it there and add as much as you can to it when you can

You're Australian, arn't you? Many think we will be well insulated from the problems in the USA due to the mining in Western Australia.

[TaoJones]

Originally Posted by ess105

I actually have a different view. The time to have eliminated debt was during the last couple of years as the end of the latest boom cycle played out. Now, as panic sets in and folks run for the hills, is a good time to get into the right sort of debt and get some cheap leverage against income generating assets. Assets can be picked up at good prices which will give attractive yields. Banks will settle at less than 100c to the dollar to avoid foreclosure. They've already written down their mortgage portfolios in anticipation of this so it won't be a hard fight. That means there are real estate bargains out there. With good credit, loans against investment properties are getting cheaper by the day. I am seeing properties where the yields after every expense (including property management) has been paid exceed the rate being charged on loans. Time to buy.

Actually, ess105, we share the same view - we merely differ on the timing.

You are of the opinion, I believe, that the time to take advantage of all the marked-down bargains has arrived, so now is the time to use debt to acquire revenue-generating properties with the accumulated capital you've put away while eliminating debt over the last couple of years.

I, on the other hand, feel that that time isn't here yet. In my view, the barrel has just gone over the falls - sure, it's discounted from when it was drifting lazily toward the precipice, but not nearly as much as it will be when it smashes into the rocks at the base of the falls.

The time to buy, Baron Rothschild is famously claimed to have said, is "when there's blood running in the street, and sell when everyone is pounding on your door, clawing to own your equities."

TaoJones

[irwinsailor]

My gut tells me to buy quality stocks in real companies with real earnings. They are on sale today and that is what I do. I always go where others do not. Many people will get rich on this sell off, why not be one of them? I plan to. Did anyone notice that west marine closed up today? What about Brunswick (searay hatteras etc)? I only say this because not everything was hit today. I think it is about time to trip the trigger on gntx it went on sale the past few days. So unless you plan to cruise in the next few months I would invest and pay down debt.

[Weyalan]

Originally Posted by MarkJ

You're Australian, arn't you? Many think we will be well insulated from the problems in the USA due to the mining in Western Australia.

This is the "party-line" being pushed by those who have a vested interest in you keeping your money invested with them... I would treat all such prognostications with a degree of suspicion. Australian raw material /resource stocks are in good shape primarily because China's manufacturing stocks are going gangbusters... but if America stops buying manufactured goods from China, surely this will reduce its need for raw materials? Or am I taking too simplistic a view?

The thing is, I am not suggesting getting out of the investment markets for good... merely preserving the value of my assets in the short term (by chucking them into my mortgage) and then redrawing and reinvesting once the market stops plummeting...