... why reduce debt? Nothing is better for devaluing your debt as inflation. It makes it worthless. The question is whether there will be a significant inflation at all. I doubt it, since lot of assets were burned recently in the market drop so there is actually missing liquidity. US could easily face the problem of deflation rather then inflation in the near future.
A well balanced portfolio of your investments is the best what you can do in long term. It is hard (if impossible) to time the markets. A well balanced portfolio generally means: 60% equity, 30% bonds, 10% alternatives (including gold).
Ask YC: How bad is the economy?
21–30 of 73 posts
Re: Ask YC: How bad is the economy?
#22"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…
During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…
My father, uncle, and grandmother were refugees during the Korean war. They were strafed by a plane, and a piece of shrapnel hit my grandma in the middle of her thigh. Fortunately, she had sewn a hidden pouch in her clothing, and the shrapnel was stopped by the big wad of cash she had there, thanks to wartime inflation.
(My mom was also a refugee, but she has an entirely different set of stories. My mom's side of the family is actually from North Korea.)
Re: Ask YC: How bad is the economy?
#23"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…
During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…
You are talking about the hyperinflation of the 30s, which stopped well before the war started, before the National Socialists even. There were price controls and scarcity during the war, but no wheelbarrows of cash.
Re: Ask YC: How bad is the economy?
#24Earlier quoted context omitted.
Having hordes of actual cash won't protect you from inflation if it starts to become a problem. There's a reason gold is trading incredibly high right now.
Oh I understand this, but for most people doing any kind of trading is just out of their league. I'm sure most people will be happy to know the $50k they have in their ING Account will be safe from most things while the economy levels back up again over the years.
It's not exactly "trading" to keep something like 15% of your savings in physical gold, GLD ETF, or everbank CDs (gold backed interest earning certificates).
Re: Ask YC: How bad is the economy?
#25Very bad. Stay away from Stock Markets.
Any time you hear that it is time to invest!
As painful as the current situation is for some, it certainly is a better buying opportunity than a few months ago.
Re: Ask YC: How bad is the economy?
#26Protect yourself from what, exactly? Your savings is protected by the FDIC up to 100k per acct. I honestly don't believe that the tech/info sector is going to lose that many jobs. If Cisco does consolidate, it (hopefully) will be non-core resources, such as HR, and internal operations. If you have a 401k, you're screwed either way since you have very few options on where to invest. If you have an IRA, you can hedge r…
Anyone know exactly how the FDIC thing works? Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll take some time for them to get their act together and I might not be able to access money in the short term. Is this correct? Or can they swing into action immediately to keep the money coming out of the ATMs? In that case it might make sense to have stashes of…
No, it does not make sense to stash a thousand bucks under your pillow.
Re: Ask YC: How bad is the economy?
#27Very bad. Stay away from Stock Markets.
Any time you hear that it is time to invest! As painful as the current situation is for some, it certainly is a better buying opportunity than a few months ago.
And the great thing about that is, it might be an even better buying opportunity a few months from now! =)
Re: Ask YC: How bad is the economy?
#28Protect yourself from what, exactly? Your savings is protected by the FDIC up to 100k per acct. I honestly don't believe that the tech/info sector is going to lose that many jobs. If Cisco does consolidate, it (hopefully) will be non-core resources, such as HR, and internal operations. If you have a 401k, you're screwed either way since you have very few options on where to invest. If you have an IRA, you can hedge r…
Anyone know exactly how the FDIC thing works? Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll take some time for them to get their act together and I might not be able to access money in the short term. Is this correct? Or can they swing into action immediately to keep the money coming out of the ATMs? In that case it might make sense to have stashes of…
The FDIC is insolvent. There was never a substantial fund; insurance premiums were simply deposited at the treasury.
If a few more large banks fail the treasury will have to come up with the money to cover. Odds are low that the usual customers for treasury debt will want to help (China, et al), so the Treasury will have to collude with the Fed to print up the money to cover. Which means inflation.
Another thing to keep in mind is that in the event of bank failure you have no legal guarantees of a timely refund from the FDIC. They may take many months to reimburse you.
In any case, there are much safer ways to store your money than at a bank. Directly own equities, such as GLD and currency ETFs. Directly own treasury bills and notes. If your brokerage goes under, or even if the ETF management goes under, you still own the underlying assets outright, regardless of any $100K cut-off.
Re: Ask YC: How bad is the economy?
#29Earlier quoted context omitted.
Anyone know exactly how the FDIC thing works? Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll take some time for them to get their act together and I might not be able to access money in the short term. Is this correct? Or can they swing into action immediately to keep the money coming out of the ATMs? In that case it might make sense to have stashes of…
No, it does not make sense to stash a thousand bucks under your pillow.
I haven't done this, but I actually think it's a good idea to have $1K in fives hidden somewhere. If the power goes out for a week in a region that would be a great thing to have.
Re: Ask YC: How bad is the economy?
#30... why reduce debt? Nothing is better for devaluing your debt as inflation. It makes it worthless. The question is whether there will be a significant inflation at all. I doubt it, since lot of assets were burned recently in the market drop so there is actually missing liquidity. US could easily face the problem of deflation rather then inflation in the near future. A well balanced portfolio of your investments is t…
This only works out if there is WAGE inflation. It is very possible for inflation to run rampant while nominal wage growth trails far behind. This is probably the most likely scenario. Have fun paying off your devalued debts with an income of $0, because you're unemployed.
In the intermediate term, asset deflation will probably be the dominant force, even if consumer staples continue to inflate somewhat. The very high general inflation is in store for later.