I think this is the beginnings of an economy based on perpetual growth and fossil fuel energy running headlong into geological energy constraints. Basically I see an undulatory downward path for the rest of my life. From here out, I think any rallies in our economic condition are going to be met with spiking commodity prices that knock us right back down.
Posted: Wed Nov 10, 2004 5:58 am Post subject: $250k to invest
I have $250k to invest -- currently in a dollar-denominated money-market account earning about 2%. Given the coming risks of hyperinflation and stock market & real estate market collapse, can someone suggest a prudent investment allocation of this money?
My ideas:
1. Euros -- on the assumption that many oil transactions will soon begin to be carried out in Euros, leading to an appreciation of the Euro relative to the dollar, but this is only speculation
2. Precious metals -- will hold value in a hyperinflation scenario, but seeing what a miserable investment they have been over the last few decades, I'm a little leary
Were it me, I'd suggest an asset allocation scheme.
25% Vanguard Precious Metals Fund (to hedge the value of the dollar)
25% Brandywine Fund (Actively managed value fund - the stock market is likely to underperform for the next few years, even aside from Peak Oil, but Brandywine has done well. And one must allow for the possibility of good times rolling for awhile)
25% Vanguard intermediate term bond funds (granted, the yield is poor, but it helps to reduce the volatility of the portfolio. It's liquid, and unlikely to decline much, even if interest rates move up. One would switch to a longer maturity fund if rates advanced significantly). If you'd prefer, a CD ladder, with 5% of the funds in each of 1,2,3,4 and 5 year maturities would be appropriate. When the 1 year paper matures, roll it over into a new 5 year CD.
20% land. Specifically, find a rural acerage with a trailer, a well, and a sceptic tank. Yes, such things ARE available for under $50,000. Rent it out for the present, and for current yield. If matters develop as we expect, you can move there. If they don't, you have current yield plus potential for appreciation.
5% gold and silver. For the silver, use the pre-1964 junk grade U.S. coins. For gold, buy the bullion coin of your choice.
Vanguard funds are no load, so is Brandywine. Brandywine has a minimum initial investment of $25,000; Vanguard Precious Metals initial minimum is $10,000.
Joined: Oct 20, 2004 Posts: 520 Location: The Land of Do-As-You-Please
Posted: Wed Nov 10, 2004 7:04 am Post subject:
I'd certainly look into farms/land as well, although as the price of petrol increases you may find that the value of the land actually decreases since commuting from it becomes impractical. Still, your ownership of the land could prove invaluable depending on what happens.
I would think you'd first have to define "invest"
Invest for a monetary gain or invest in securing a lifestyle. An investment in a farm would secure a lifestyle but possibly not a dollar amount (Falling property prices) whereas an investment for dollar amount might get you rich but leave you with a house not worth anything.
I suggest you look at foreign currency CDs available from Everbank. Some of them pay 5% or more (annual basis) for short term CDs. Given the poor outlook for the dollar and possibility of a dollar crash, I'm planning to put some money in foreign currency CDs
Joined: Oct 15, 2004 Posts: 2246 Location: Arkansas
Posted: Tue Nov 16, 2004 9:00 pm Post subject: invest
Your concern is how to protect yourself in a time period of hyperinflation, real estate collapse, and general collapse. So, in that dire circumstance I don't think that traditional investments work, bc its impossible to predict what entities or institutions are capable of surviving that situation.
So, if you are in debt, use your 250K to get out of debt. Hopefully you live in a state where, once your home is paid for, it cannot be subject to a judgment foreclosure, therefore, start by making sure your home is paid for, in fact, shelter is the first rule of survival, and it applies to your question. Then, make sure you are out of debt on all other things. Getting out of debt saves most people 6+ percent in interest alone.
Second, figure out how much money it takes to live a year, and then have that much money in savings - liquid. In fact, in planning for a complete financial meltdown, which your question assumes, you don't want the money to be on some account ledger, bc if the banks crash, as they did in the depression here and everywhere else in the world, it doesn't matter what your monthly statement says you have, its worthless. That's why our grandparents quit putting money into the banks, bc they didn't trust them after the depression. Even with FDIC accounts, its meaningless. During the 80s savings and loan crisis, many people were not able to withdraw their money from their FDIC insured accounts bc it took the Feds up to a year or more to process all the claims. So, get a safety deposit box and put enough actual cash in it to last you up to a year. If you want to protect yourself against deflation of your money, in a hyper inflating economy, buy gold or silver coins and put them in the safety deposit box. They are currency, and obviously gain in value as the dollar goes down in value, for the simple reason that gold world wide is traded in dollars, just as oil is traded in dollars. Therefore, when the dollar goes down, the price of gold goes up.
If you still have money left over to invest, after getting out of debt and putting a years savings away (in a safety deposit box with some of it in gold and silver coins), then consider investing in some oil or gas stocks. Boone Pickens recommends some of the Canadian tar sands companies like Suncor Energy. The Canadians are close, don't have the political strife, and have a lot of product to exploit, and Canada has a traditional western legal system to enforce your shareholder rights.
Just food for thought. This isn't your traditional investment advice, but then again, your question is how to make sure your $250K doesn't get wasted in a hyperinflating economic collapse, which isn't your traditional investment climate.
Joined: Jul 13, 2004 Posts: 74 Location: Cypress, CA
Posted: Wed Nov 17, 2004 8:28 pm Post subject: Invest
I also have a few questions about investing. Oil companies stocks seem to have +'s and -'s. Reserves increase in value, but less demand and the assets finally are all used up, hence become worthless. However BP is the largest producers of solar panels.
Gold - may have increase value since scared money move in that direction. But if everything become less expensive, would that include gold?
US CD's - Can the government really make the payments since revenues are going to be way down? And would the dollar be revalued, thus be worth less?
Land even farm land would be adjusted downward or it seems with all other assets. Thanks
Unless you know what you are doing I think you are better off spending the money on things you need while it has some buying power or use it to pay off variable rate debt or at least convert the debt to a fixed rate.
I think the markets averages will be flat for roughly two decades. So a buy and hold strategy will not work and success will be dependent upon trading and accepting smaller price swings.
I think natural resources will be the best asset class for the next 2 decades as is companies that profit in periods of economic/world turmoil like defense, casinos, pawn shops etc . That strategy has worked well since the internet bubble and should continue to do well long term.
I am not a fan of using mutual funds but If you decide to buy one consider a Vanguard natural resources issue or better yet consider using Sprott Assett Management based in Canada he has an excellent track record and his investment theme is based upon the peak oil theory and is heavily weighted to gold and oil related investments.
If you want to buy individual stocks my advice is to find value with a strrong potential of earnings growth momentum and preferably before the crowd piles in and/or find companies trading below free cash per share with a cyclical history of past profits.
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