Galt's Gulch

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  • Posted by term2 7 years, 7 months ago
    The stock market is a giant slot machine. So many things affect whether someone new is going to pay more than you did for your stocks- I just stay out of it.
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    • Posted by ChuckyBob 7 years, 7 months ago
      I've been in the market for decades. If you treat it like a casino it will treat you the same way a casino does. If you study it and trade dispassionately it will act like a cash cow. If you think you are going to throw in $100k today and have a million dollars tomorrow you will be sadly disappointed, unless you are the Hildabeast trading cattle futures (but I digress). Between stocks and real estate I was able to retire at 55. I never made over $100k at my job until the last few years. It only took 30 years of careful budgeting and prudent long-term investing.
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      • Posted by term2 7 years, 7 months ago
        I think the major gains in the stock market are from federal reserve money printing and cronyism. I have patiently analyzed for years only to have the gains wiped out in a few days. I have probably given up on many of the gains the federal reserve has put out there, but I dont have the aggravation either. I started several businesses and made my money that way. fortunately.
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  • Posted by mia767ca 7 years, 7 months ago
    read the book..."Creature from Jekyll Island"...then you will understand...this is the 4th Federal Reserve the country has had...the previous 3 resulted in national bankruptcy...the 4th will be no different...we were an agrarian economy back then...we recovered quickly...not so this time...collapse and 90% of the country dead within 30 days...back to the 19th century we go...be prepared if you are to survive...it is not a question of "if"...only "when"...
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  • Posted by chad 7 years, 7 months ago
    Where is the Gulch? We need to move there and soon. It may be simply living in a manner where we are not observed and not part of the operational status that will want us numbered, quantified and controlled to the smallest degree of our lives. If you calculate real costs including the cost of energy and food (which most use) there is inflation at a much higher rate than is admitted to by the government. The unemployment rate is incredibly high (when you count those unemployed and not just those on the governments unemployment rolls) and the available jobs are low paying and cutting hours to avoid the ACA. The ACA is not about paying for health care it is about collecting taxes in an attempt to take more money out of circulation to dampen the affect of inflation and hopefully tamp out the fire that may cause the collapse of the dollar. I think it will collapse and since it is the support for nearly every other currency in the world this will not be Zimbabwe where the destruction is limited. Can you say; 'hundred trillion dollar notes'?
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  • Posted by Herb7734 7 years, 7 months ago
    In the long run, there is no escape from the fantasy economy perpetrated on us by the gurus of finance. About the only things of real value when we look way down the road after collapses will be owning stuff and protecting it with force. Of course, I'm predicting total Dystopia, but I'd like to be more optimistic. Perhaps I'll just join the local Optimists Club.
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  • Posted by $ blarman 7 years, 7 months ago
    Every Monday morning my talk radio station is all about how investing in the stock market is a proven winner and investing in gold is stupid. They all want to ignore the fact that our economy has been manipulated - easily since 2000 and increasingly since the 2008 crash. Japan just got caught using tax money to prop up the NIKKEI exchange and I couldn't help but think that the US has been doing exactly the same thing. This article points out the very same danger points that I noticed several years ago: that the investment economy is mainly based on three legs: housing, bonds, and stocks. In a stable and robust economy, all three stools are solid. In our present economy, bonds are way down because of interest rates, and housing is also over-inflated due to interest rates which facilitated people getting into houses they can't afford long-run. Because bonds are unprofitable due to insanely low interest rates and housing is very high-risk, many investors turn to stocks, creating artificially high demand and the associated higher prices. Right now, investors are over-invested in the Stock Market, meaning that their portfolios aren't diversified enough where in the event of a stock market downturn, most are going to lose everything.

    If the market goes south, we're going to be a lot worse off than we were in the early 1930's during the Great Depression - especially once all the rioting starts. It's not going to be a pretty world.
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  • Posted by CircuitGuy 7 years, 7 months ago
    These monetary-policy-is-too-loose cynics are always with us, but at this time I'm starting to agree with them. It's not just that rates are low. They're at less than half of historic norms. The valuation of every business is affected. I don't understand why we don't see more inflation. That part's a mystery to me.

    At any rate, a few years ago I was fond of saying "This is the 1996. We just reelected a center-left president. New technologies are poised to change everything, but we don't know how." Now this feels like 2000. I have reduced my exposure to large-cap equities and have started writing some in-the-money calls on SPY. I am not a permabull.
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    • Posted by freedomforall 7 years, 7 months ago
      "I don't understand why we don't see more inflation. "
      It's not in the interest of the state propaganda bureau to inform the people how bad the economy is performing. Maybe if they don't admit it, then the people won't blame them for causing it.
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      • Posted by CircuitGuy 7 years, 7 months ago
        "the state propaganda bureau "
        We should not be dependent on the gov't to provide the macroeconomic numbers we base business decisions on. People sometimes use numbers from industrial companies like Caterpiller (CAT) as a bellwether for the broader economy or they just focus on their industry's bellwethers . I don't see any inflation, and if I did, I don't see it as a problem unless it's large and/or unexpected. It's very easy to update prices now. The weird thing is I don't see it. I don't see suppliers raising prices or customers volunteering to pay a premium for faster service. Inflation feels stable in the 2% range. My concern is when it starts and central banks raise rates, the value assets (bonds, equities, a small local business) all will drop substantially..
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        • Posted by freedomforall 7 years, 7 months ago
          If you haven't noticed food prices going up you must let someone else do the shopping.
          Government uses "chained CPI" to account for people switching purchases to another commodity when the price gets too high on the one they actually would choose to buy. So now lots of people are eating 99 cents/lb chicken and pork when they'd much rather eat $9.99/lb beef and fish, but government ignores the increase in beef and fish prices because there are alternatives. This is rubbish and because the government then limits the CPI linked retirement increases to this unrealistic lower inflation, the retirees (who could afford steak when they were working and paid in heaps of taxes to support all those government consultants and lawyers Dom Perignon habits and congressional million-dollar retirement) now get to eat beans and rice instead.
          Thanks Barrack, you ignorant savage!
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          • Posted by ChuckyBob 7 years, 7 months ago
            Here here! I've been watching food prices intently since 2008. The price per package on prepackaged food has not risen so much, but the size of the package has shrunk. When was the last time you saw a true half gallon of ice cream? So, the ignorant masses say "I'm still paying the same price for my Snickers bar", but don't realize they are getting 10% less.
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            • Posted by DrZarkov99 7 years, 7 months ago
              The "pound" of coffee is now eleven ounces, and will probably shrink again. The yogurt that used to be eight ounces is now down to half that size. Some of us have been watching, like you.
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              • Posted by freedomforall 7 years, 7 months ago
                Good points, DrZ.
                I buy my coffee as green beans from an importer online and roast them using a hot air popcorn popper. Home roasting does lose about 10-15% weight compared to already roasted beans, but I pay about $5 to $6 per pound (up from $3-$4 a few yrs ago) incl shipping cost for fresh Sumatra green coffee beans, and home roasting in small batches (50gm) has much better flavor results due to freshness. Coffee prices do vary quite a bit on supply due to weather, too, but the trend is definitely up sharply.
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            • Posted by $ allosaur 7 years, 7 months ago
              I've noticed that over-the-counter medications, vitamins and herbal and sea life health boosters like expensive Prevagen now fill half if not a third of the container.
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            • Posted by freedomforall 7 years, 7 months ago
              Agreed. Blue Bell is the only one I have seen, and their unit price is usually much higher than the brands in 1.5 quart sizes. Most ice creams have also cheapened the ingredients (corn syrup instead of sugar, and artificial ingredients instead of cream) and that lowers the quality tremendously. If you have a Trader Joes near you, try their high end house brand ice cream in the one quart size usually at about $3. Good ingredients, traditional good flavor( and high fat content.) Coffee flavor that you actually can taste coffee.
              Paper products contain lower square footage for the same price (paper towels and TP.) Lots of other products are lowering quality to keep prices down, in effect manufacturers are switching ingredients for cheaper ones, which hides the inflation even more because the quality degrades.
              Government doesn't account for any of this because it hides their complicity in the con.
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              • Posted by term2 7 years, 7 months ago
                As a company owner, I can tell you that we have moved most of our production to china in an attempt to lower costs and preserve pricing. We have taken as much as we can to china, and now we are going to have to raise prices and suffer lower demand for our products. No wonder manufacturing just flat out moved to china....
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                  Posted by CircuitGuy 7 years, 7 months ago
                  "we are going to have to raise prices and suffer lower demand"
                  I've heard on this message board people are able to raise their prices significantly because of inflation. If it's true, you should find you cannot keep up with your customers' demand and cannot afford to pay and vendors without raising prices.
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          • Posted by term2 7 years, 7 months ago
            I have noticed that slowly but surely, I am lowering my living standard. Netflix instead of Directv. Hardly ever go out to movies. Go to sit down restaurants less. Buffets are great in vegas to save money and get variety- and I dont have to tip (lots of the buffets let you get your own drinks even so why tip?). So called fast-casual places like chipotle offer better food than the McD variety, and no tipping there either.
            Kia Soul instead of Chevy Avalanche. Chicken instead of beef (better for you anyway tho)
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          • Posted by CircuitGuy 7 years, 7 months ago
            To all you people who carefully track inflation, what do you do with this information? Is it your basis for increasing prices and explaining it to customers? Or does it signal that you should be invested in cyclical investments vs those that aren't as affected by the economic cycle? Is there some way to exploit the difference in expected inflation vs actual inflation using options on Treasuries or something like that?

            If there is some way to use this information, there must be a way to get it without literally going to stores and working out the price of milk and candy bars. It seems like there's a way to pull this info from filings from large companies. I suggested Caterpiller (CAT) as a way to measure GDP. There must be some non-anecdotal way to get the consumer and producer price data you need to make investment decisions.
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            • Posted by ChuckyBob 7 years, 7 months ago
              Any organization that puts out an inflation number is going to cook it to fit their narrative. So, listening to anyone to get an accurate number can be counter productive. So, I rely on my own nonscientific survey. Yes, I am acting on this info. I have bought a bunch of shares in a bank that is currently trading below book value. Traditionally it has traded at a premium to book. Once it becomes apparent that we HAVE to raise rates the banks will go up and I will use that to counter the moderate dividend stock drops. I have also gotten out of M-REITs since they will be on the wrong side of the interest curve. I expect that we will have at least one rate increase prior to the end of the year. The talking heads say that any divi stock will suffer when rates go up, but I have seen my HSC (a REIT, but not an M-REIT) rise in tandem with BAC when talk of rates hikes is heard. T usually drops, as would be expected.
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                Posted by CircuitGuy 7 years, 7 months ago
                "Once it becomes apparent that we HAVE to raise rates the banks will go up and I will use that to counter the moderate dividend stock drops. "

                This outlook makes perfect sense to me.

                I've been expecting inflation and then rate hikes for eight years, but we've seen just the opposite. Eventually they have to happen.

                REITs have done well. A colleague years ago told me to invest in Realty Income Corp (O), but I didn't partly b/c of the rate concerns you mention.

                One worry I have about financial services is the psychology of low rates. Many people accept zero interest rates as a fact of life. A piece of RE would rent for $1000/mo, they say, so assuming today's rates, that's worth $300k. A stock pays 2.5% dividends, and people hold it for the income. What's going to happen when rates double? We know those assets will be worth half. I would expect financial services people are on top of it, so they're stocks would be safe from this, since managing rate/credit risk is their main job, but I wrongly believed that in 2007-2009.

                I reduced my large-cap stock exposure earlier this year. I write some calls on SPY and some individual stocks. I don't share your feeling that inflation is here already, but I do have a feeling that this is like 2000. This feels like 2000-- a stock market peak. Unlike in those days, rates are already at rock bottom, so I think inflation has to come. Unless automation and foreign trade mean traditional monetary policy doesn't apply. I heard about technology obviating traditional valuation methods in the year 2000. This is a peak.
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                • Posted by ChuckyBob 7 years, 7 months ago
                  The reason I say inflation is already here is that even though prices may not be rising rapidly, what you get in each package has shrunk. We're getting less for our money. That's inflation.
                  Yep, this market is feeling a bit like a bubble. Eventually we will pay the price. If I had to put a date on the bubble pop it would be late 2018-2019. I plan on getting a lot more defensive before then. That's what worked for me in 2008.
                  Your example of the asset price drop works better for young bonds. With stocks there may be a tangible book value to support a floor over the long term. (Short term things can drop to unrealistic levels like when BAC was trading in the mid $2.00 with a tangible book value of over $10. That was a fun buying opportunity) Old bonds also have a redemption value that will help support a floor.
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                    Posted by CircuitGuy 7 years, 7 months ago
                    "what you get in each package has shrunk"
                    People have been saying this since the early 80s, arguing inflation wasn't decreasing as fast as people thought. I agree package sizes change, but this it's just part of normal "money illusion". Nothing new or different is happening now.
                    "If I had to put a date on the bubble pop it would be late 2018-2019."
                    I'm guessing 2017.

                    I agree completely on shifting toward short-term bonds and value stocks.

                    "like when BAC was trading in the mid $2.00 with a tangible book value of over $10."
                    How did you know they wouldn't fail? I correctly predicted the bust was coming, but I wrongly thought financial companies were totally on top of things and would come out ahead. I did not understand, so I was not buying financials except for as part of general large-cap funds.
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