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The worst crash in our lifetime is coming

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On 6/10/2017 at 6:55 PM, 45Doll said:

If you think the U.S. dollar is backed by oil and therefore reliable as a store of value, explain that to the citizens of Venezuela. They have a giant reserve of oil and their currency is currently next to worthless.

The U.S. dollar is a currency created by the Federal Reserve and not the U.S. government, backed by nothing but debt, not tangible assets. Read exactly what it says on the U.S. currency currently in your wallet and purse. You'll notice you don't have any Silver Certificates in there. They're not hiding anything.

Since Nixon closed the international gold window the value of our U.S. dollar is based on good will. And hope.

Venzuela attempted to trade oil not in the petro-dollar, and attempted to bypass the various groups that rig the pricing of the petro-dollar. 

They also skipped useful things like planning to pay for food with their political decisions. 

You are correct about how the dollar exists within the law. But there is the practical matter of how the dollar exists in the global economy, and it's not that simple. 

It's based on good will, hope, the might of the US military, the strength of the US economy, and a bunch of other things. 

Also if it is unclear, the petro dollar is not hte federal reserve note. It's the various acts of collusion to ensure that oil trades occur in us dollars. This collusion has ensures it remains the global reserve currency. This is also not something inherent to how the currency exists from a legal standpoint. 

 

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1 hour ago, 1LtCAP said:

while this is true.....we used to be able to trade our cloth money for gold or silver. not so much now.

also .. I'm pretty sure you still can.  Hundreds of places all over the country, world, Internet, etc will gladly trade you gold and silver for your money. 

 

Here you go, trade to hearts content: https://comparegoldprices.com/

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Here's an example of my major money beef with the U.S. government and the Federal Reserve.

I put away $100 cash for retirement in 1975. Today that $100 cash will buy me only the equivalent of $21.50  in hard goods, whatever they might be. Through inflation they have stolen approximately 80% of the value of that $100 cash from me without me ever writing a check or direct taxation.

And when the time comes they will steal a lot more by turning on Helicopter Ben's printing press at the speed of bank owned microprocessors. Again, without any cooperation from me.

Not one bit different than the Roman emperors diluting the gold or silver content of their hard coins with other non-precious metals.

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Here's an example of my major money beef with the U.S. government and the Federal Reserve.
I put away $100 cash for retirement in 1975. Today that $100 cash will buy me only the equivalent of $21.50  in hard goods, whatever they might be. Through inflation they have stolen approximately 80% of the value of that $100 cash from me without me ever writing a check or direct taxation.
And when the time comes they will steal a lot more by turning on Helicopter Ben's printing press at the speed of bank owned microprocessors. Again, without any cooperation from me.
Not one bit different than the Roman emperors diluting the gold or silver content of their hard coins with other non-precious metals.


When I get back to my computer I'll post some more concrete numbers, but the savings rate has outpaced inflation or at the very least mitigated it. So that same $100 in a savings account would be worth much more than your $21.50. It would be worth more than $100....


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55 minutes ago, 45Doll said:

Here's an example of my major money beef with the U.S. government and the Federal Reserve.

I put away $100 cash for retirement in 1975. Today that $100 cash will buy me only the equivalent of $21.50  in hard goods, whatever they might be. Through inflation they have stolen approximately 80% of the value of that $100 cash from me without me ever writing a check or direct taxation.

And when the time comes they will steal a lot more by turning on Helicopter Ben's printing press at the speed of bank owned microprocessors. Again, without any cooperation from me.

Not one bit different than the Roman emperors diluting the gold or silver content of their hard coins with other non-precious metals.

Your $100 dollars in 1975 would be worth $465.19 today according to http://www.dollartimes.com/inflation/inflation.php?amount=1&year=1975

I can't vouch for the accuracy, but it sounds right to me.

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On 6/9/2017 at 9:15 AM, 45Doll said:

Just a couple of thoughts.

In all of recorded history there isn't a single instance of a fiat currency that didn't eventually fail. The U.S. dollar is fiat currency based on debt. Yes it will eventually fail. (Check with Venezuela.)

In my amateur opinion there is no solid financial reason for the stock market to be this high. With interest rates at 0% it's the only place since 2008 where some money can 'make' more money. If you can and do sell at a price higher than you bought. So it's a financial game of musical chairs. Yes, it will eventually collapse like every other bubble in history.

And our government cannot continue decade after decade to promise more than it can responsibly deliver and cop out paying with more and more public debt. (Not to mention the political ramifications.) Social Security is a simple money transfer machine, not an investment in someone's future. (Do you actually know where the Social Security Trust Fund is, and what it is?) And let's not forget Medicare and Medicaid. So yes, this will all collapse too.

The question is when? And why? No one knows. So the music plays on. Care to grab a chair?

"The trouble with money Bud... it makes you do things you don't want to do."

Lou Mannheim, Wall Street

The dollar hasn't failed. Nor has the British Pound, or any number of other currencies. Countries, however, and their financial underpinnings do fail. 

You can argue that they're being propped up by low interest rates, or that inflation has wrecked the value of the dollar, but it hasn't failed in the sense of the Weimar Republic Mark or the currencies of some of the other basket case countries.

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2 hours ago, JC_68Westy said:

Your $100 dollars in 1975 would be worth $465.19 today according to http://www.dollartimes.com/inflation/inflation.php?amount=1&year=1975

I can't vouch for the accuracy, but it sounds right to me.

The number is exactly right. What they are telling you is that, all other variables held equal or average, it would take $456.19 today to buy exactly the same thing that cost $100 in 1975. So my $100 bill I put in the drawer in 1975 now pays less than 25% towards the same item.

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1 hour ago, Newtonian said:

The dollar hasn't failed. Nor has the British Pound, or any number of other currencies. Countries, however, and their financial underpinnings do fail. 

You can argue that they're being propped up by low interest rates, or that inflation has wrecked the value of the dollar, but it hasn't failed in the sense of the Weimar Republic Mark or the currencies of some of the other basket case countries.

No, the dollar hasn't failed, yet. The Weimar Deutschmark hadn't failed the year before it did.

My original point was there's no fiat currency that has never failed. I don't believe we're going to be the exception.

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2 hours ago, mikeyjones said:

When I get back to my computer I'll post some more concrete numbers, but the savings rate has outpaced inflation or at the very least mitigated it. So that same $100 in a savings account would be worth much more than your $21.50. It would be worth more than $100....


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I am not talking about investment strategies. I'm talking about a $100 bill I put in the drawer in 1975 and didn't try to spend until 2017. My point is the U.S. dollar is not worth what it used to be, by in this case about 80%, and is constantly declining.

That 80% has been stolen from all of us.

That's why when currencies start to collapse there's a run on the bank. Because by the end of the week the same bill won't buy what it will today. Lots of examples throughout history, the latest one being Venezuela. (Which the MSM is being very careful not to report on.)

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4 minutes ago, 45Doll said:

No, the dollar hasn't failed, yet. The Weimar Deutschmark hadn't failed the year before it did.

My original point was there's no fiat currency that has never failed. I don't believe we're going to be the exception.

I will also point out the the US dollar has failed multiple times already. It's not the end of the world. We chugged along in the end. 

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I am not talking about investment strategies. I'm talking about a $100 bill I put in the drawer in 1975 and didn't try to spend until 2017. My point is the U.S. dollar is not worth what it used to be, by in this case about 80%, and is constantly declining.
That 80% has been stolen from all of us.
That's why when currencies start to collapse there's a run on the bank. Because by the end of the week the same bill won't buy what it will today. Lots of examples throughout history, the latest one being Venezuela. (Which the MSM is being very careful not to report on.)

Who mentioned investing? I said putting it in a plain vanilla savings account or CD.


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1 hour ago, 45Doll said:

No, the dollar hasn't failed, yet. The Weimar Deutschmark hadn't failed the year before it did.

My original point was there's no fiat currency that has never failed. I don't believe we're going to be the exception.

C'mon I just named three that have not failed. Every country in the world uses fiat currency. Very few of those currencies have failed. You're saying that the only reason the US dollar hasn't failed is because it hasn't failed yet. 

There is no reason why an honest fiat currency, one based on value and not debt, must fail. OTOH on a 100% gold and silver standard you'd have seen massive deflation during rapid economic growth. 

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2 hours ago, sota said:

I swear I had an economics professor lay out a case for, you can't have a thriving economy without some level of persistent inflation.  But then it all smells like a massive Ponzi Scheme anyways.

Inflation is supposed to encourage people to buy more stuff, presumably this keeps the economy going.  It makes sense to buy something today if you think it will cost more tomorrow.  Deflation has the opposite effect and tends to dampen economic activity:  You will not buy something today if it will be cheaper tomorrow.

However, many free-market economists argue that inflation is artificial government-created phenomenon and that we can have growth with little inflation:  "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. … A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society." Milton Friedman

Really, inflation serves as a hidden tax, as 45Doll found with his $100 bill.

 

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1) putting a piece of paper in the drawer is the worst way to preserve wealth. Heck, putting anything in a drawer except collectibles (and even then you take a huge risk) is a silly thing to do if you want value. Banks and CDs have nearly always been a bad way of preserving wealth for anything other then short term. It doesn't matter what the item in question is made of, paper or gold. You have no idea what X is going to cost in Y years because of demand and supply curves.

 

2) deflation/stagnation/inflation thing is a odd in that the "value" of money is never constant, as the value of what you can trade it for always changes. Take your $100 in 1975 and see how much computing power that would buy you. Now take the inflation adjusted $25 today and see how much computing power that buys you, it may that you get fantastically more for it. It isn't just what the inflation/deflation value of a stored X dollars is today, but also what it buys you today. Money is not magical. It has no value except in what it would get you today, not in what it could have gotten you if spent at a later point or at a future point. Its only realistic value is short term.  

3) $100 in 1975 is $450 today, 4.5x. Average income in 1975 was 8,630, today is about 45,000, 5.2x. Objectively you are better off today, about 20% better off assuming you take your pay and exchange for value instead of shoving it in a mattress.

Combing the above .. lets say your money was sea shells in prehistory and you saved them .. what is its value today? Does it matter and would have been wise to save your sea shells?  Money is only a means of exchange of wealth for the purpose of trade. It is not in its native form a storage of wealth, only a way to trade wealth at a moment in time.

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Everything deteriorates without up-keeping.  Thats natural law. There are NO (almost) exceptions to that.  Nobody has to conspire to do anything. Thats just the way things work.

Up-keeping takes time & effort. So its almost guaranteed that NOTHING holds value if you leave it as is. Even collectibles will bite dust given enough time, without care. 

Imagine putting truck load of bread or pumpkins or meat (worth $100) in that drawer along with the $100 bill. In 2017, rest of them would be long gone in to thin air, but atleast your $100 bill is worth something. 

It takes EFFORT to keep up value of something. INVESTING is that effort in economical sense. 

History proven that even materials will fail. SALT was once considerable solid, bankable trading material. Is bag of salt worth the same as it was centuries ago ? 

BIG exception so this is certain metals. ONLY reason they held value is because of their supply, demand and our inability to manufacture them. What do you think happens to GOLD / SILVER if a huge reserves of it is found in the earth or easily harvestable from an astroid Or more realistically, electronic circuits moving to printed plastic / fiber ?

 

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20 hours ago, 45Doll said:

I am not talking about investment strategies. I'm talking about a $100 bill I put in the drawer in 1975 and didn't try to spend until 2017. My point is the U.S. dollar is not worth what it used to be, by in this case about 80%, and is constantly declining.

That 80% has been stolen from all of us.

That's why when currencies start to collapse there's a run on the bank. Because by the end of the week the same bill won't buy what it will today. Lots of examples throughout history, the latest one being Venezuela. (Which the MSM is being very careful not to report on.)

You do know that even on the gold/silver standard, you could have put a dollar or  some gold in a drawer and the vlaue of both decreased right? That's how bretton woods came ot an end, too much un-agreed upon dicking with the vlaue of the underlying metals. 

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I am keeping my bond duration's short (2 years and less, mostly way less).  I keep thinking rates will go up and I am afraid to be long duration when that happens.  But so far (other than the post-election bump) that has now happened.

I am starting to consider TIPS via Treasury Direct now also...  What do you think of TIPS???

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1 hour ago, leahcim said:

I am keeping my bond duration's short (2 years and less, mostly way less).  I keep thinking rates will go up and I am afraid to be long duration when that happens.  But so far (other than the post-election bump) that has now happened.

I am starting to consider TIPS via Treasury Direct now also...  What do you think of TIPS???

 

All I've seen lately is a flattening of the curve.  Even if the Fed moves in June (tomorrow), the belly and long end of the curve most likely will not make a parallel shift.  

This means a few things: 1) you're not really getting paid to go out the curve, so keeping short duration isn't the worst idea.  2) The short end will move much more than the long end as the Fed hikes rates 3) I wouldn't be opposed to owning some floating rate products in my portfolio 4) TIPS are great if you're worried about inflation or stagflation, but you will get wrecked in a deflationary scenario - which has a greater than 0 probability 5) The 10yr is up almost 100bps from lows so we could see a modest rally before seeing a large scale sell off - from a technical perspective there is a large tendency to fill in gaps on a chart due to a large move.  

On that last point, we gapped up 80bps in 2 weeks after the election.  More often than not, those kinds of moves will be retraced and retested before breaking out of whatever current trading range we're in.  

I could go on, but most of my knowledge isn't directly applicable to personal portfolios - my focus is on large institutions.

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Yeah, I thought about buying 10 years in December or so, when the rates were in the 2.5s--but I decided to wait until it moved closer to 3%.  And I am still waiting.

As far as TIPS, I know the deflationary scenario is possible, I just think that inflationary is more likely.  Inflation has been very low for awhile, and I always think--reversion to the mean--inflation is going to come back sooner or later.  Problems with that line of thought is (1) it is conventional wisdom (which is often wrong) and (2) it may be much later rather than sooner.  I am not a Keynesian, but his quote is appropriate: "In the long run we are all dead."

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58 minutes ago, SW9racer said:

So impending doom or not, one can't just pull everything out of the market now, there won't be anything to retire on. So stay the course in index funds, or pull 20% aside in cash?  Still looking 10 years out

 

Don't try to time the market!!!!!  EVER! 

As a layperson, you have no edge over people who watch, eat, breathe the markets on a daily basis. 

Over any 20 year period in history, you would've been better off leaving money in the market than pulling out, even right before huge pullbacks.  

That said, as you approach retirement you might want to start dialing back the risk and moving more into fixed income.  

 

I'm not a financial planner, so you might want to talk to one and get their input.  

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Any thoughts on those "retire in year x" mutual funds?  Or is one just better off in paying the fee and having like a Fidelity actively manage the account?  (Damit Jim I am a moon shuttle pilot, not a hedge fund manager)

Those target date funds charge high fees. I personally would stay away.


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3 hours ago, SW9racer said:

Any thoughts on those "retire in year x" mutual funds?  Or is one just better off in paying the fee and having like a Fidelity actively manage the account?  (Damit Jim I am a moon shuttle pilot, not a hedge fund manager)

I have a buddy that's a fund manager. Pretty much lights cigars with bennies. 

He thinks all of us civilians are idiots. 

His rules:

never ever bet on disaster  

never bet on bull markets

always look out at least 5 years out

don't churn your accounts 

buy what you use  

never ever "invest" what you can't lose  

sounds easy and common sense, right? He tells me that 95% of investors break at least two of the above.

 

 

 

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11 hours ago, Walt of Destiny said:

I have a buddy that's a fund manager. Pretty much lights cigars with bennies. 

He thinks all of us civilians are idiots. 

His rules:

never ever bet on disaster  

never bet on bull markets

always look out at least 5 years out

don't churn your accounts 

buy what you use  

never ever "invest" what you can't lose  

sounds easy and common sense, right? He tells me that 95% of investors break at least two of the above.

 

 

 

Great rules.

Here is everything lazy investor needs to know about funds - http://longbets.org/362/ (Warren Buffett's bet with fund manager)

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3 hours ago, mikeyjones said:


That bet is very specific to funds of funds.


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Not really. I mean technically that is what it challenges, but the premise is that fund managers aren't worth it. HEdge funds have, in theory, the best managers. To eliminate jackpot luck for one, or a truly exceptional manager amongst a group of supposedly exceptional managers, he groups them together. 

 

 

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