are you feeling the pinch

[David_Old_Jersey]

Originally Posted by 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...

On the plus side no one is making money directly from a recomendation. On the downside sometimes "THEY" allow me to have crayons

Despite my previous post, in my heart I simply cannot see the western world falling off a cliff economically - but this may be just that I can't get my head around that......

If things go to form, in 6 years time probably be in the middle of an upswing, or at least be well underway.

IMO the choices are stay in for the 6 years. or come out now and re-assess / re-invest over the next year.

At the risk of being terribly unhelpful, it all depends on your appetite for Risk (and then your ability to assess and then manage the Risk) - to put it bluntly, if USD90k is 1 week's income , then it's an easy decision to make to stay in - however if that USD90k can NEVER be replaced then an easy decision to come out. But of course you are somewhere in the middle.

Say to yourself "I have USD90k", "would I choose to invest it into XYZ NOW? or would I keep it in the bank? and think about investing later".

At the moment that USD10k is simply GONE - with volatility at the moment it MAY come back next week / month - Personally I would be very tempted to hang on in their for a few more weeks (it's a gamble - could go down more) simply because of the volatility, and then sell out for a year (if intending to re-invest in Managed Funds / broad sectors). If staying in, you are saying that this investment IS the best option YOU have identified to turn USD90k back into USD100K, whether this be over 6 days or 6 years (not to say it isn't).

Of course not to say that certain sectors won't do very nicely in the coming years, no matter whether you or I are working in a Paddy Field - E.G. I can't see commodities becoming less popular with the Chinese and Injuns in the Global marketplace. Also I don't see a let up in the Oil wars anytime soon. But I have been wrong before. and WILL be wrong again!

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.

E & OE

[Weyalan]

David,

You have hit the nail on the head. $90k is a lot of money to me... basically a year and a half's wages (gross, or 2 years after tax). I don't doubt, for a moment, that the markets will recover and, in the medium to long term, I will recoup all the losses and then some. The point is, as a short term strategy, I can see short term gains in baling out, chucking the 90k into my mortgage, then chucking it back into the market in six months time when it will still be worth 90k, rather than 75k (or whatever).... of course, if I do it and the market rebounds next week, I look like a fool...

... anyway, I have an appointment with my financial manager on Friday morning, so I need to ponder my strategy between now and then.... good for thought, for sure.

[Therapy]

Originally Posted by Weyalan

... anyway, I have an appointment with my financial manager on Friday morning, so I need to ponder my strategy between now and then.... good for thought, for sure.

Let us know what you do.

I only lost 1k in "value" today!!

[Ex-Calif]

Originally Posted by David_Old_Jersey

Say to yourself "I have USD90k", "would I choose to invest it into XYZ NOW? or would I keep it in the bank? and think about investing later".

At the moment that USD10k is simply GONE -

I am a simple butt - But you all know that, already. I view it this way - I invested X dollars for a piece of paper that says I have 90k somewhere. It used to say $100k but now it says 90k. I don't have the X dollars anywhere.

The following is a bit Ameri-centric but that's where I am paid from. I don't transfer money around the world hoping to beat exchange rates - I'm not that smart.

Over 30+ years the dow beats the economy. It is a mix af some of the largest US companies. Most of them will survive, are well managed and will make profits. Some won't and they will be replaced.

Certain parts of the world are accelerating faster than others - Asia / China. I don't know much about individual Asian or Chinese companies but I do know there is lot's of volatility and the "rules" are less mature than in the US. I expect a better return and accept a higher risk.

US Small Cap companies captures the entrepeneurial spirit of the American. The next Microsoft, google, starbucks or whatever is hidden away in someone's garage. However so are a lot of crap companies that will declare bankruptcy. I expect a higher return and will expect more volatility.

So when I was young I purchased a large amount of small cap and Asian funds on a monthly dollar cost averaging basis. I purchased about 30% low-no load Dow fund on the same basis.

Declines in the market are buying opportunities for me. I also will periodically balance the portfolio.

I still buy 30% Dow and 20% small cap but I am a complete bull on Asia for the next 20 years so I am 40% in Asian funds and have taken a 10% position in a China fund. I would go deeper on China but honestly I don't trust them, their economy or their ability to regulate what's going on. They could blow up big time.

Over all I am 8-10% p.a. over the last 20 years. I am beating inflation and building a sizeable egg. And the best part is I don't have to think about it but about twice a year.

I am still 15 years to go and for me this is a good risk model. As I get closer to retirement I will likely move into more stable investments like term deposits.

It's not for me to chase currencies and I am Ameri-centric. I don't see another currency replacing the greenback as the "gold standard" any time soon so all my investments are US based.

Here's the real key - The first 30-X percent goes to uncle sam. The next 15-20% goes to investing. I live on the rest and don't acquire debt.

The idea of borrowing at 5% and earning 7% is great until the 7% becomes negative 10%. I am not smart enough to play the leveraging game - but you all know that...

YMMV...

[ess105]

Originally Posted by TaoJones

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.

Close. I don't know if we're at the bottom yet and will never know until a generous amount of hindsight can be applied. I have reached the conclusion that there is more upside than downside at the moment and the the returns I can now access exceed my long term needs. Because I don't know if this is the bottom yet I will average in on the equity side and really do my homework on the property side.

[Zeus]

This is a clip from Reuters. I live in Texas a little north of Dallas so this level of forclosure hasn't hit us.....yet. Gonna be a bad time for a flipper right now unless they can grab a few properties and hold on to them for a while.

The DataQuick Information Systems report said the 31,676 foreclosures in the fourth quarter were more than double California's previous peak in 1996 and marked a 421.2 percent jump from a year earlier.

[ess105]

This article (Ask the Mole: Don't get spooked in a bear market - Jan. 23, 2008) expresses my own sentiment quite well.

[philip van praag]

wall street down 200pt
thanks for the US market analisis very intresting well the bits i can translate into comon english!(not up on all the jargin)
so can we drift back on track
1 now will or is this afecting your plans what changes will you make
2 will you go now and come back sooner as the money wont go as far?
3 will you wait until the kitty is big enough to fund the trip?
4 how long would you be prepaired to wate for the markets to settle.
5 is this the best time to go for those that have some cash, is crusing in a resesion a good thing for makeing what you have go further.
6 how much do you think boat prices will drop % if any
7 were is the best place in the world to liveabord and wait out a resision, if living of savings.

[ess105]

Anyone approaching a long cruise should not have all their eggs in the stock market. Think of the converse statement. If you had your nest egg prepared and you were a year or two off, would you throw your entire savings into stocks an risk your departure date? The closer you approach your departure date, the more you should have in interest bearing products: CDs, etc. That way you ride out these storms. If you'd taken that approach then the current circumstances present opportunities to you. Cheaper boats. Cheaper investments (if you have surplus funds), etc. In answer to one of your question, if market sentiment impacts vacations then you may also find better prices in popular places such as the Carib as local folks compete for less overall business. The answer to all your questions will depend on how cruisers have prepared.

[Charlie]

Thanks for the interesting thread. Took quite a turn. I have an old fashioned means of investing that is similar to many of yours. Spend less than you make. Don't invest in anything you don't understand. Make sure that you know why someone buys whatever you invest in (e.g. I don't know why someone would buy a dirrivative so I don't invest in them). Make sure there is an immediate return on whatever money you invested in whether it is value added, dividends, or cash flow.

[TaoJones]

I'll co-sign what ess105 has said, above, with this proviso. Don't expect a recession, even a worldwide recession, to cause prices to fall as those in popular destinations compete for fewer tourists.

The recent, extraordinary, rates at which virtually all sovereign nations have been inflating their money and credit supplies in the "race to the bottom" has made follow-on price inflation inevitable. When prices rise at the same time the business cycle contracts, the result is ruinous "Staglation," the worst of all possible outcomes, short of deflationary depression.

Think about it - if you're in the tourist industry and your costs for everything required to run your business (labor, food, fuel, debt service, etc.) keep increasing, how aggressively can you shave the income side of the ledger in the hope that you'll make it up on volume? As you come closer to the line where you're working for nothing just to keep the doors open, how long can you stay with it before your product suffers, the tourists go elsewhere, and you buckle under the burden?

To answer your questions directly, Philip, in no particular order, I've already changed my cruising plans from "going now" to "not going now." Perhaps I'm too close to the economic side of life, but what is now unfolding in the markets has that Black Swan feeling to me (look it up), and I can't feel comfortable taking my eye off what's currently happening for even a short time.

How long would I wait for the markets to settle? Well, I'll be 60 in a couple of months, so I'm much closer to the end of my life than the beginning. Let's say I have twenty years left. Do I think things will return to some state of normality in the next twenty years? I'd put the odds at about 50/50. Unlike my life which is closer to the end, the potential melt-down of our planet's financial system is much nearer its beginning, and I can see it taking at least a generation to reach any semblance of stasis.

As to whether this is the best time to go for those with the capital to do so, that is only answerable on a case-by-case basis. Each individual must decide for him or herself. Will cruising during a recession be more economic - not this time, if ever. How much will boat prices drop? None, nominally, but in real terms, quite a bit.

I don't think there is a "best place" to ride out a recession, but your money will stretch further in Asia than most other places. What you have to determine is where you will feel comfortable culturally. If you love cruising somewhere because the climate is ideal, the food and drink is pleasing to your palate, the culture is interesting and the natives are friendly and accommodating but the ruling regime is repressive, why spend any more time there than you absolutely have to? I wouldn't let economics be the deciding factor in picking long-term cruising grounds if it meant tolerating fascistic repression.

TaoJones

[Microship]

One of the best investments is survival tools... they will return real value regardless of what happens to global markets or fiat currencies. Solar panels, watermaker, fishing gear, wood stove, sailboat, and other equipment for self sufficiency and skills-barter.

Of course, diversification and passive income are still essential. But lately I've been thinking that in a falling market, converting a percentage of one's assets into non-financial fundamentals may a better choice than attempting to do so later, when the same purchases will likely be a larger percentage of the same pie regardless of "dollar" measurements (or when a catastrophic event makes aquisition of such things more difficult).

Cheers,
Steve

[GordMay]

Originally Posted by TaoJones

... I've already changed my cruising plans from "going now" to "not going now." Perhaps I'm too close to the economic side of life, but what is now unfolding in the markets has that Black Swan feeling to me (look it up), and I can't feel comfortable taking my eye off what's currently happening for even a short time...TaoJones

A “Black Swan” is a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations and experience.
Most people expect all swans to be white, because that's what their experience tells them; a black swan is, by definition, a surprise.

The Black Swan: The Impact of the Highly Improbable
by Nassim Nicholas Taleb
Bookmashed : The Black Swan: The Impact of the Highly Improbable

[slomotion]

And then there is the unexpected consequence of a predictable event - such as global panic selling being sparked by an American president’s announcement of an economic stimulus plan. Hmmm - maybe that was the expected result.

[MarkJ]

Beware the media:

This mornings London Times says
"Global stocks dive on mixed rate cut signals

Wall Street plunged in early trading,"

But the real figures are different:

Index Value Change
All Ordinaries 5,445.64 0 (Not open yet)
Dow Jones 12,062.15 90.96
FTSE-100 5,609.30 -130.8
Hang Seng 24,090.17 2332.54
NASDAQ 2,285.05 -7.22
Nikkei 22512,829.06 256.01
S & P 500 1,330.94 20.44
SPI Futures 5,382.00 3

However the newspaper has kept with the wrong story!
And the FTSE (London) ending 130 down is nothing.