How to Invest ?

[osirissail]

The best way to make money is with money. Unfortunately, you need a shitpot full of money to be able to live off using money to make money. This includes investments in stocks and bonds and mutual funds. The only other way to make money is to - ugh! - go out and work for a living.
- - The average return on stocks and bonds investments used to average 6% averaged over 50 years. So you need a rather large sum of money invested to be able to skim off 6% a year and live on it. Even worse, now I see the recommended "skim" is down to 3 to 5% which means an even larger sum of money invested to get the same amount of money to live on.
- - For long term you can invest small amounts of money in the various stock & bond and mutual funds markets and NOT withdraw any to live on. Then you can get - normally - a faster growth of your money towards your goal. Meanwhile you have to have another source of income to pay for food and housing, etc.
- - So if your "nest egg" is less than half a million USD, you are really hard pressed to live off the "interest" these days. But if you have other sources like pensions and government payments then the percentage of your investments that you need to withdraw will be smaller and likewise the amount of your equity in the market can be smaller. There are not simple answers and hundreds of ways to lose your money.
- - So finding a reputable, proven financial advisor is very important. Unfortunately, like used car salesmen, many of them are not really working for you but for the commission they get by "churning" your money until it is all gone.

[70AMX]

Snippet From Bob Chapman mar 28 11
As a result more and more foreigners are bypassing Treasury and Agency bonds, as well as other US dollar denominated investments. We watch as other major nations accumulate gold and cannot help but think that the new world reserve currency will be gold backed.

Many countries buying Gold...central banks buying gold (instead of the normal selling of gold)...do you think that it's possible that they know a little more about where the world economy is heading than we do? Countries have always held gold as reserves but with little additional buying, now this has reversed and many countries are buying large amounts of Gold and we would not be doing our diligence if we did not start to notice the changes and adapt to the changing landscape.

[Zonker]

70AMX - I dont know what your background regarding trading is. I have been in that "battlefield" for almost 20 years and I can tell you - anything that is tradable is not a "sure" thing. I've been in "Heaven and Hell" and can assure you nobody out there wants you to make profit - even your honest financial advisor / agent.

A few examples of official authorities knowing whats going on :

- George Soros killing GBP, some officials in UK were sleeping I guess

- Swiss Central Bank selling half of the gold deposit at 300 CHF a few years ago

- USA just experienced one of the greatest financial disaster in their history

Just a few cases what all those Greenspans and friends can do.


Gold as the new currency ... I think a currency should be >>stable<< which is for gold not true at all. It makes crazy moves due to news which is always a bad sign. Also I dont want to have a currency that can be influenced by a few big traders - which in case of gold is true, look at the volume !


Bottom line :

If you want capital preservation then invest in defensive products with low return.

If you want to increase your wealth / create income - there is just no way around as to become a day trader. Anything else is a gamble. Als be aware that 85% of traders fail long term to be profitable !

I have come close to the stage where I can create a steady income by day trading and therefore to make one of my great dreams come true. Exploring the world with a sailboat and still be able to earn money wherever I am on the world as long as I have internet connection. It took me abt 8 years of self study to get there, a lot of money has been burnt and also I got a lot of grey hairs. I think it's possible to become a profitable day trader - but it's certainly not a fast way and it has to be prepared carefully.

[Delfin]

Originally Posted by denverd0n

And the last ten years has been extremely a-typical for both the S&P and for gold and silver. Why don't we compare the S&P to gold and silver for the PREVIOUS ten years?

Oh, I know why, because the results would be almost exactly opposite!

Why not go back 40 years? National Cash Register was doing well with punchcards then, so perhaps that is where you should put your money. The point is that what constitutes sane investing may change over time. The U.S. dollar is under serious pressure because of feckless spending by equally feckless politicians. Commodities purchased with U.S. dollars will continue to increase in the prices denominated in those dollars, which might be a change worth noting. Equities are a commodity as well, and so may benefit if their business models are immune to the impact of high taxes, inflation, crushing government regulation, etc. etc.

My advice was not to squirrel away gold or silver, by the way, although having been invested in them heavily for a decade has turned out ok. My advice was to a cruiser looking for a way to manage their resources while living on a boat. Some think that government bonds yielding 3% are the way to go. Others that the decade long malaise that has made the stock market a loser is just an anomaly, perhaps like the depression that only lasted a decade. I invest in commodity spreads, recommend the approach to friends because they generally return 25 - 75% per year, year after year. However, many feel than any time you mention the word commodity you are really saying you play craps, or roulette, without actually looking at the methodology or thinking about it beyond what people who know next to nothing about the subject say about it. That's fine with me; my advice is worth exactly what you're paying for it, and at the end of the day, you have to live with your own investment decisions. I wish smooth waters, a following wind and a growing bank account to everyone!

[Zonker]

Delfin ... are you talking about option strategies resp. condors ?

I think an "average" sailor doesn't know too much about option trading AND commodities ... imho a very challenging field !

[Delfin]

Originally Posted by Zonker

Delfin ... are you talking about option strategies resp. condors ?

I think an "average" sailor doesn't know too much about option trading AND commodities ... imho a very challenging field !

No, Zonker, I was referring to a specific research service that I use that costs about $600/year and makes spread recommendations throughout the year. If you invest in all of them, you are as diversified as you can get in this area, and since they give you a buy date and a sell date, you really don't have to study too hard to figure out how what to do. In fact, I have generally done worse when I try to out think a particular recommended trade, although currencies still give me the willies. As a cruiser, you can set up the trades to happen automatically at the specified time if you use the right kind of trading platform. For example, I was out and about today, so last night I set up a purchase of Sept Crude and a sale of May Crude today at 10:05 am PST. If I am off on the boat, I can have it automatically closed out on the identified exit date of April 14th. Will that particular spread make money, as it has 14 of the last 15 years? Beats me, but I do know that at the end of the year, with around 180 trades having been put on and taken off across all commodity groups, I will make money just like I have every year since 2003 when I started this particular approach.

My post above provides examples, if that is of interest.

[Doodles]

Originally Posted by osirissail

The best way to make money is with money. Unfortunately, you need a shitpot full of money to be able to live off using money to make money. This includes investments in stocks and bonds and mutual funds. The only other way to make money is to - ugh! - go out and work for a living.
- - The average return on stocks and bonds investments used to average 6% averaged over 50 years. So you need a rather large sum of money invested to be able to skim off 6% a year and live on it. Even worse, now I see the recommended "skim" is down to 3 to 5% which means an even larger sum of money invested to get the same amount of money to live on.
- - For long term you can invest small amounts of money in the various stock & bond and mutual funds markets and NOT withdraw any to live on. Then you can get - normally - a faster growth of your money towards your goal. Meanwhile you have to have another source of income to pay for food and housing, etc.
- - So if your "nest egg" is less than half a million USD, you are really hard pressed to live off the "interest" these days. But if you have other sources like pensions and government payments then the percentage of your investments that you need to withdraw will be smaller and likewise the amount of your equity in the market can be smaller. There are not simple answers and hundreds of ways to lose your money.
- - So finding a reputable, proven financial advisor is very important. Unfortunately, like used car salesmen, many of them are not really working for you but for the commission they get by "churning" your money until it is all gone.

I think these figures are about right for someone just retiring and planning on cruising full time assuming the boat is paid for already. With a $500,000 nest egg you can skim 4% a year ($20,000) and add to that a typical Social Security payment of $1,100 - $1,250/month and you've got about 3,000 a month to live on. Over the long haul the $500,000 should shrink very little if any, assuming some average investment returns.

[70AMX]

I am not talking about trading, I am talking about long term investing in physical gold coins of the realm.
The fed and all the western currencies are printing money at the fastest pace in history and the only way they can get away with it....is with almost zero interest rates. Economy 101 states that the printing of additional currency will devalue the existing currency and we have created some say 23.7 trillion of new debt.
A devaluation of all western currencies is and has been going on against gold and I believe that it will continue as long as we keep printing. We borrow 40% of our budget and now we are monetizing the debt because the world cant afford to buy treasury instruments anymore.
Jim Sinclair in the 70's predicted Gold would rise to 850....it did...years later when asked how he came up with that figure of $850...he said that he took all our nations debt with other countries and divided it by our gold reserves (8200 tons) and out came the number $850. Paul Volker raised interest rates and Gold came crashing down.....move ahead to 2011 and divide 8200 tons into what our debts are NOW and see what the figure would have to be to cover our debts abroad. No matter what figure you use as our debts to other countries...the amount will be staggering.
And this time we don't have the choice of raising interest rates without defaulting on our debts....so we will continue to devalue our currency as our only choice.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
Alan Greenspan

Alan Greenspan spoke at the Council on Foreign Relations, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed chairman said at the Council, according to economist David Malpass, who quotes Mr. Greenspan in one of Mr. Malpass’ emails on the political economy. Mr. Malpass writes that the former chairman of the Federal Reserve’s board of governors was responding to a question in respect of why gold was hitting new highs.

Many people should have known that we were heading to a collapse and they missed it by a mile.....but many people were warning about it and were laughed off the air....Peter Schiff's famous interview on Cnbs showed how the top economists were drinking the Kool Aid and that interview came back to bite them when peter was proved right.
Warren buffet in 2002 called derivatives "weapons of mass financial destruction" Jim Sinclair warned of these in 2001.
We now have between 600 trillion and 1.4 quadrillion in these unregulated securities.....they caused the meltdown with bear stearns and AIG and they are still THERE... a ticking time bomb.
Gold is a wealth preserver in times of turmoil and we are certainly in that situation now...Don't ya think?

[capn_billl]

I personnaly have bought some rental properties, but my wife is in the business. So I have inside knowledge, also I live and work nearby to keep an eye on. In my experience in the past I had a rental property that I hired a managment company to rent for me. The problem is that the managment company milked me with repeated and excessive "repair" bills hired out to relatives. Since I was no where near where I could drop in and check on it I, faced with a complaining tenent I had no choice but to pay. All my profits were eaten up by the manager, and eventually I had to liquidate at a loss. Now rentals are hot because of the number of people that have been forclosed on. In a few years when their credits improve they will stop renting and go back to buying. Then there will be a glut of rentals again. The biggest rule on investing is "Don't put all your eggs in one basket". I also own stocks in several companies, (and fields). And I own some "solid" comodities, gold, etc. And I put some in mutual funds, money markets. I didn't like the interest rate the bank was offering on its savings accounts, so I asked to speak with the manager. I told him 1% or I walk. He changed the account interest to 1%. Remember EVERYTHING is negotiable.

[ViribusUnitis]

If your looking to do rentals, I suggest you need to be in the real estate bussness. It would help to start by being a real estate agent. You'd get to look at all of the properties, as your showing them to buyers. Hopefuly, the buyers are buy enough houses for you to pay your bills, while you try to cherry pick the best valued properties from the market. You see them first, and you see them most. When the sellers get distressed, you are there to make a deal. As they say, the best way to make a profit is to buy low.

Being a real estate agent also allow you the kind of freedom with your time to take care of mannaging the properties. Don't think you can just buy a property, and have someone else mannage it, and make a huge profit. If some places it's possible, but often hiring someone to mannage the property takes up all of your profits. Being a real estate agent means your answering your phone looking for clients anyway. It also means that when your offering some people houses to buy, you can offer other people houses to rent.

If you've already got cash, your almost certanly going to need to leverage it to make acceptable rates of return in the real estate market JUST off of rents. That means you need access to the banks, and as a real estate agent you gets to see how many of the banks hanndle MANY diffrent clients. That means you know which ones are dealing, and which ones arn't.

If your noticing that looks an awful lot like regular work, you'd be right! In addition to all the trouble, you also need a cash fund to serve as the repair fund for the housing stock. When things break, you have to put up the cash to fix it right then. In the mean time, that cash is in a money market account, losing you money.

Another option for you to invest in is the concept of a "covered call" option. There are sigificant numbers of stocks that don't seem to move much. They tend to have rather high dividend payouts as well. You can buy the stocks for the dividend payout, and then sell "call" option contracts on those stocks. These option contracts are giving someone the "option" of buying from you, at a specific price, at a specific point in the future. They pay a premium for that privelage. If you pick a price that is higher than the stock's price climbs to, then you keep the stocks, the dividends, AND premium. Typicaly this isn't much money, but it's also typicaly fairly low risk. If your already doing the "dividend stock" stratagy, it doesn't take much, or cost much more to write covered calls on those stocks at the same time.

On another subject, what ever you do, you need to have the sort of emergancy fund like you would have when you are getting ready. If you end up needing a hospital, or the boat suffers a sigificant failure, your going to need cash to at least make things stop getting worse. (Example, get the boat hauled out before a busted sea cock outruns the bilge pump and sinks it. Timely action can prevent a minor incident from turning into a costly diaster.)

If your investments are some what illiquid, like CDs, bonds, real estate etc. you would end up taking a bath to liquidate them in order to raise the money you need. Even stocks could be a problem, if you bought the stocks in 2008, but needed the money in 2009. You would have to have liquidated the stocks at the "wrong" part of the cycle, and found yourself missing out of the later upswing.

If instead you maintain a reasonable emergancy fund, you'll always have some cash avalible in the event the unexpected happens, allowing you to ride through any "Crash" and take your profits when you feel comfortable.

[smurphny]

There is NO safe place for money. The stock market is rigged, no more than a crooked casino. It's no longer about investing in good companies, it's about computer wonks, black box programs at hedge funds, and inside info. Stocks could lose 1/2 their value in literally seconds with the next computer-induced panic. Commodities can go way up and way down for dubious reasons with 30 year olds in trading pits manipulating the price (think oil). Put your money in owning stuff like houses and sailboats. If not at all time lows, they gotta be close. At least you have something concrete and a boat to escape on when the house of cards finally blows over. If you have a lot of money you're not going to need, swear to never sell and buy a ton of Exxon, collect the 3% divvies and forget you own it. That's about as safe as you can get in the market (Exxon's got to be thinking about a 2:1 split soon). You could also become a trader but that's an expensive game to learn and not many folks have the discipline and psychological profile to be successful at it.

[webejammin]

I may die tomorrow we never know so live a little !!
I'm glag my extra cash went to buy our catamaran last Oct when the previous owner droped the price $30,000 and into our range and $30,000 less than comprobable boats. Now were getting her tricked out with crusing BLING and paying an out of work electronic tec $10.00 an hour to hook up the chartplotter instead of his usuall $40.00 an hour. The same guy is painting my apt complex and he's a fast good painter glad to have the work so he can get a date. I'm hopeing to have my apt's remodeled and the boat in great shape before this recession is over an so far it's costing me less than it would have 4 years ago.

[osirissail]

Originally Posted by smurphny

There is NO safe place for money. . .

That part is quite true and always has been true ever since Stock Markets have been in existence. The "market" does not make money or anything of intrinsic value like a manufacturing factory. All the money in the "markets" simply gets "redistributed" from one person to another depending upon their smarts and luck.
- - Putting your money in other places or no place at all usually means it will slowly lose value as inflation eats away at the currency.
- - Putting money into the "market" - if you are smart and are willing to do the intellectual work can get an amount of other people's money moved to you. Gambling, yes, but gambling based on smarts and knowledge. And a lot of work. But the more money you have the easier it is to get into the "club" of investors and make money. That is why "mutual funds" were invented to allow "small" investors to pool their money and get into the "big action."

[cat man do]

Originally Posted by 70AMX

Gold has averaged 18% for 10 years now.

And what about the 25 years before that?

Gold looks like a bubble ready to pop to me

[70AMX]

Are you sure Gold or Silver are in a bubble? or is it the western currencies that are in a bubble.....you cant print Gold.....But all the western currencies are being printed by the billions and trillions and they are all going down in value in relation to Gold.
Gold is wealth and all currencies are measured against it....at least for the last 5000 years or so.

In 1964 you could buy a gallon of gas for a quarter.....that 1964 quarter was 90% silver.....move up to 2011....and if I have that same 1964 90% silver quarter.....I can still buy a gallon of gas with the value of silver in it and get $3.80 (@3.49 a gal) change back....so in reality....the little silver quarter now will buy you 2 gallons of gas and give you change.
April 1 2011 value of 1964 quarter= $7.29

In periods of low inflation Gold holds stable. There can be no lasting stability in a currency that can be printed on a whim...while being backed by absolutely nothing. Countries that have tried this and failed include:

• 5 Examples of hyperinflation
  • 5.1 Angola
  • 5.2 Argentina
  • 5.3 Austria
  • 5.4 Belarus
  • 5.5 Bolivia
  • 5.6 Bosnia and Herzegovina
  • 5.7 Brazil
  • 5.8 Bulgaria
  • 5.9 China
  • 5.10 Free City of Danzig
  • 5.11 Georgia
  • 5.12 Germany
  • 5.13 Greece
  • 5.14 Hungary, 1922-1924
  • 5.15 Hungary, 1945-1946
  • 5.16 Israel
  • 5.17 Krajina
  • 5.18 Mexico
  • 5.19 Nicaragua
  • 5.20 Peru
  • 5.21 Philippines
  • 5.22 Poland, 1921-1924
  • 5.23 Poland, 1989-1991
  • 5.24 Republika Srpska
  • 5.25 Romania
  • 5.26 Russian Federation
  • 5.27 Taiwan
  • 5.28 Ukraine
  • 5.29 United States
  • 5.30 Yugoslavia
  • 5.31 Zaire (now the Democratic Republic of the Congo)
  • 5.32 Zimbabwe

As Jim Sinclair (jsmineset) points out:
Gold is a product of debt, not business activity.
If there was no business and no debt there would not be any interest in gold.
If there was good business and no debt there would not be much interest in gold.
When there is over the top Western world debt in either good or bad business gold goes over the top.
When there is a problem with the reserve currency over Western world debt, by default gold goes over the top, re-enters monetary system holdings, and makes (I think he means keeps) 80% of the gains it will make.


Bubble? I do see one but it's not in Gold or Silver....

I highly recommend the 2010 movie "inside job" it is available on netflix
you will be amazed at what you didn't know about the collapse of 2006/7