Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Posted: Wed May 25, 2005 9:00 pm Post subject: What kind of investment portfolio would you build w/ $100k?
Option a: Just answer the question in the subject
Option b: Read the following for a (shallow) human element, then answer the question in the subject
Basic story is this:
About a year ago I reserved a loft in an up and coming area in downtown San Diego, which should be ready for move-in by the end of the year. When I sell my current condo in a few months I should walk away with ~$100k, tax-free.
I'm at a crossroads - I'm definitely an optimist when it comes to PO. But at the very least I'm certain there will be a healthy recession ahead which may very well hammer the US housing market. It's hard to walk away from this project as I've been dreaming about buying something like this for years, it's a great deal at this point in time (I'm buying ~20% below current market value based on similar resales in the area), and of course friends and family are giving me a very hard time for even contemplating pulling out. My folks said if the thing tanks, I lose my job, etc, they'll help me out no matter what - like I want to bring them down with me when their own real estate holdings go down the tubes, lol., esp. when they're bumping up against retirement.
So as the days pass this monkey on my back seems to be consuming bananas at an ever increasing rate. If I happen to make the choice to step away from my little dream home, the question is - what would you do if you were in my situation? Guess I'm looking for suggestions to comtemplate and research further to push me over the edge. Emotionally I really, really, don't want to do this, but rationally I feel like I'm being an emotional fool.
That being said, just because a recession occurs housing may not decline. Keep in mind that the U.S. is pumping dollars out as if there's no tomorrow. Interest rates are being kept low. And there are lots and lots of people (i.e., voters) who would become dissatisfied if housing declined substantially.
So....if you don't feel a strong need for liquidity, and you do believe that inflation is likely, and you're in a recession resistant job - then do the project. Life is not certain, and enjoyment of the present is not a bad idea. I expect hard times to hit in 3 years - but there isn't a strong consensus on that point, and many expect decades to pass before major problems come up. It would be sad (or worse) to sacrifice your dreams for something that will happen a quarter century from now.
On the other hand, if you want liquidity, consider an asset allocation scheme with about 20% in cash equivalents (money market funds, insured savings accounts), 40% in stocks (Vanguard Energy Fund or equivalent, Vanguard Precious Metals Fund or equivalent, Brandywine fund), 20% in a 5 year CD ladder (i.e., 4M in 1 year CD's, 4M in 2 year CD's, and so on out to 5 year maturity. When the 1 year CD's mature, invest them in the 5 year CD's available at that time) and 20% in undeveloped rural land as both an inflation hedge and a speculation.
This should eliminate whatever doubts you have about investing in real estate. As for the best investment in a bubble, it depends on your aim. If you expect a lot of deflation, then the highest return you will get is going to be money. Not the crappy US federal reserve money, that's just a toy for the government to manipulate the US economy (which is why there is a bubble in the first place). You want hard money, gold, silver. Forget euros unless you like a bit of risk, because if you want euros you might as well invest them in euro bonds and stocks. Eurozone is severely undercapitalized relative to America and that creates an environment for very good returns. When the US mortgage bubble bursts, the eurozone is where the international herd money is going to flow to next. But remember that it's riskier than straight money.
Avoid asian economies. I know everyone says that they have high growth, but for investment purposes that's irrelevant. What matters are returns, and asians tend to have very high rates of savings, which translates in a very crowded investment market and low returns for investors.
That's the best advice I can give you for a short-term investment. In the long-run oil depletion really messes up any prediction.
That's an interesting take, hadn't considered out of control inflation buoying the housing market in the event of a burst bubble The place would have to lose approx. 35% value for it to eat my $100k. My job is secure (software engineer but in the medical field w/strong experience - been there over 4 years and have learned how to make myself indispensible... was laid off before ). Also I do well enough that even with the mortgage + hoa + prop taxes and my current 'consumption' rate I can save $2k monthly, so I'm not really stretching myself if I go thru with this.
Guess you could say I'm an optimist who's worried about the pessimists being right I'm afraid if I go through with it I'll be so worried about not being able to turn on a dime (not having easily liquidated assets) that I won't be able to enjoy it.
Jaws,
Actually check that blog out every once in awhile. I'm aware of the bubble conditions we're in, and I'm not looking at this as an investment so much as something I would like to simply own mid-long term (at least 5-10 years) if possible. It will actually cost me significantly more to rent, like I said I'm getting this quite a bit below current market value - so in a way it could make economic sense as long as I stay in the area.
The investing advice you guys gave is fantastic. The pointers are very much appreciated.
I'm still on the fence in terms of where to put money at this point. Short-term there is still money to be made in equity market. We really could be years away from PO. Short-term concerns
- inflation ramping up (based on energy costs and a Yuan repeg)
- potential oil squeeze coming in the summer
- Also literally thousands of heavily leveraged hedge funds that mirror with each other tinkering with the market could cause economic and financial woes
- increasing U.S. debt fueled by war
At the moment in my retirement savings I'm about 50% money market/bond funds, 25% index funds (although I'm thinking of shifting this to energy, natural resources, and some gold) and about 25% self-directed for short-term direct stock purchases.
So I'm probably a little less bearish short-term than most PO forum posters.
Unless you are an adept pro at finding individual undervalued stocks with business and earnings catalysts which takes tons of time and knowledge (you must understand accounting and finance) or can find a competent hedge fund manager that will take 100K, I would tend to stick the money back into real estate repos fix them up and repeat the process every 2 years tax free.
As for the best investment in a bubble, it depends on your aim. If you expect a lot of deflation, then the highest return you will get is going to be money. Not the crappy US federal reserve money, that's just a toy for the government to manipulate the US economy (which is why there is a bubble in the first place). You want hard money, gold, silver.
Dude, in a deflationary environment the last thing you want to hold is gold and silver! By definition deflation is a fall in commodity prices. You want to hold gold in times of INflation, not DEflation.
During deflation, the best investment strangely enough is plain old cash.
As for the best investment in a bubble, it depends on your aim. If you expect a lot of deflation, then the highest return you will get is going to be money. Not the crappy US federal reserve money, that's just a toy for the government to manipulate the US economy (which is why there is a bubble in the first place). You want hard money, gold, silver.
Dude, in a deflationary environment the last thing you want to hold is gold and silver! By definition deflation is a fall in commodity prices. You want to hold gold in times of INflation, not DEflation.
During deflation, the best investment strangely enough is plain old cash.
I think you're confused about my use of the word deflation. What's going to happen is asset deflation, where the price of assets relative to commodities such as food, energy and labor goes down. In nominal US dollar terms the most likely outcome is for all prices to go up since the government is actively pursuing an inflationary monetary policy. But in gold terms, the price of assets will go down.
Gold and silver are more than just commodities, they are also currency, a form of cash. The value of gold is much greater than just the demand for gold jewelry and microchips. The value of assets relative to gold will certainly fall, especially since demand for gold increases when monetary inflation is occuring.
Dude, in a deflationary environment the last thing you want to hold is gold and silver! By definition deflation is a fall in commodity prices. You want to hold gold in times of INflation, not DEflation.
During deflation, the best investment strangely enough is plain old cash.
That's funny dude! What are you smoking? I want some.
No seriously the last thing you want in a bad economy is cash. Get physical gold / silver bullion. At least 10% of your net value should be under your bed in the form of precious metals. If you're pessimistic you should increase that to 30% or more. Don't buy paper gold - no-one knows for sure how much actual gold is backing it. Take delivery.
Halfin is right in a deflationary environment prices fall. So holding cash is king.
Unfortunately, I think a portion of our economy will be in a massive deflationary environment and another in a massive inflationary environment. That is how our government is getting away with keeping the CPI so low as the real cost of living for basic needs is skyrocketing.
When it comes to investing I am going to stick with what works for me buying low float small caps that are undervalued on an accounting basis and has a strong catalyst (usually a blow out earnings report) and beat the institutional investors to it.
Granted the pickings are slim right now but in most cases they do become successful when you find them.
Joined: Jun 12, 2005 Posts: 4189 Location: 1st territorial capitol of AZ
Posted: Thu Jun 16, 2005 2:37 am Post subject:
I'd buy a farm. I think $100k will buy something in the Midwest or South/Southeast, if the economy tanks you can end up sitting prettier than a lot of people, and if it doesn't you've always got it to sell again if you like.
About a year ago I reserved a loft in an up and coming area in downtown San Diego, which should be ready for move-in by the end of the year. When I sell my current condo in a few months I should walk away with ~$100k, tax-free.
Do you want to stay in San Diego? I guess that's the biggest question for me -- just how far along are you in wanting to make life changes based on a peak oil (and in SD, peak water) future? I would imagine farm land anywhere near SD is going to be more than your $100,000. And farming there is predicated on a purely hypothetical future water supply.
It seems like your location is going to dictate a lot of your investment options. It's hard to make an investment plan separately from a life plan, when it involves major practical matters like where to live and where to work. If you don't take the loft, where will you live instead after you sell your current home?
here's my quick take on it. Like most here I would go for gold in the short term to secure the value of the money when the economy tanks.
When the economy crash, the oil valves will still be running wide open for a short period of time. This will create a very short term (couple of months while Opec clamps down production) glut on the oil prices and they may drop to $30/brl. At this point buy oil futures for two or three years out (and hold them close to that time).
In the following couple of years after the crash the economy will begin to move again, But will be hit by full blow Peak oil and true net declines. When this happens, sell your oil futures and make hay.
And if you don't like playing the commodities market, you could substitute oil futures for oil producer stocks. They should do just as well as the futures. _________________ Angry yet?
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). Also I do well enough that even with the mortgage + hoa + prop taxes and my current 'consumption' rate I can save $2k monthly, so I'm not really stretching myself if I go thru with this.
I'm afraid if I go through with it I'll be so worried about not being able to turn on a dime (not having easily liquidated assets) that I won't be able to enjoy it.
