are you feeling the pinch

[pogo]

I could stay and work for another year, but the thing is however much I earn I cannot buy that year back.
"Troutbridge"
Good for you my friend; one never knows what the future holds.

Above my NAV station resides a small plaque, installed by the previous owner. I left it be; it reads, "I dropped out of the Rat Race. The Rats won!"

I would guess anyone who thinks escaping the US Markets, because it will be safer elsewhere, may be a bit juvenile. (or intentially misleading the masses)

Wouldn't it be a good charade to "pretend" doing something just the opposite of what a smart investor "really" is doing?

Unless I misread, don't WORLD markets, follow US markets, in the ups and downs?
In ranking world economies, USA was number 1.
If the state of California was a country, (despite what some think, it isn't) but if it were a country, it would rank 5th in world economies.
Even the state of Pennsylvania is ranked 17th, if it were a independent nation.

source CIA world factbook.... ahh, would that be biased?

Pogo

[Rez]

Since I know a lot of business people my age (68) and older, I forget that people twenty years younger don't know about things really going to hell in the economy, on a gut level. Everything just goes on and there is always something to invest in.

But IMO, the British economist who recently said "What's coming is going to make 1929 look like a walk in the park," is correct.

When I was young I was taught to watch for times like this, because if you have cash you can make a fabulous profit buying stuff for taxes, etc.

I hope that doesn't happen, because it would be a tragedy for just about everyone. But I think it is going to happen. And going to cash and sitting on it for a few years isn't significantly expensive.

[bcguy]

Does not stock market growth assume an infinitely replenishing earth? Seems that assumption may soon be hitting the wall in view of the sheer mass of a globally exploding human population stampeding to emulate western consumers. Lots of learned opinion out there that there is a much bigger crash coming (now perhaps inevitable?). Increasingly I feel more of us may choose to liveaboard, sail and re-learn some of our old self-reliant skills just to be prudent (but hopefully wrong). Is there reason to be suspicious of a system that as it's founding principle requires insatiable destruction and replenishment in order to exist? I wonder if investors have considered as a possibility in their broad based due diligence the question of limitations to our line of supplies...being the capacity of our natural environment to serve them endlessly up? "Sailing the Farm" is again becoming a relevant sentiment methinks. (P.S...just curious, anyone know what became of the author?)

Gary

[seafox]

Originally Posted by Rez

Since I know a lot of business people my age (68) and older, I forget that people twenty years younger don't know about things really going to hell in the economy, on a gut level. Everything just goes on and there is always something to invest in.

But IMO, the British economist who recently said "What's coming is going to make 1929 look like a walk in the park," is correct.

When I was young I was taught to watch for times like this, because if you have cash you can make a fabulous profit buying stuff for taxes, etc.

I hope that doesn't happen, because it would be a tragedy for just about everyone. But I think it is going to happen. And going to cash and sitting on it for a few years isn't significantly expensive.

And going to cash and sitting on it for a few years isn't significantly expensive.

What a joke. It is very expensive. We all have inflation in our economies. There is a rule called the "rule of 72". Basically if you divide 72 by the rate of inflation it will tell you how long your money will take to halve in value if you leave it in cash. Do the math, your pile of cash will run out if you do nothing with it. It is similar to putting your money in the sink and watching it go down the plug hole. That's why you need interest or return. To keep the sink topped up.

[seafox]

Originally Posted by bcguy

Does not stock market growth assume an infinitely replenishing earth? Seems that assumption may soon be hitting the wall in view of the sheer mass of a globally exploding human population stampeding to emulate western consumers. Lots of learned opinion out there that there is a much bigger crash coming (now perhaps inevitable?). Increasingly I feel more of us may choose to liveaboard, sail and re-learn some of our old self-reliant skills just to be prudent (but hopefully wrong). Is there reason to be suspicious of a system that as it's founding principle requires insatiable destruction and replenishment in order to exist? I wonder if investors have considered as a possibility in their broad based due diligence the question of limitations to our line of supplies...being the capacity of our natural environment to serve them endlessly up? "Sailing the Farm" is again becoming a relevant sentiment methinks. (P.S...just curious, anyone know what became of the author?)

Gary

he got bought out.

[Rez]

SeaFox:
In normal circumstances I agree with you and going to cash is a loser. But when deflation hits, the buying power of what you are sitting on grows expotentially, undoing the effects of many years of inflation.

I guess, having been a risk taker all my life, I don't feel that this risk is very big in terms of how much capital I have, and what it costs if this machinery rights itself and continues inflating un-abated. I have no debts and own a house and boat. I calculate that I am risking losing ten million by sitting still for a few years. But the flip side is that the cash will be worth hundreds of times its current value if serious deflation - read Depression - occurs. And, now having got out of Euros, I've added 25% to my cash supply of USD.

But, on a human level, I hope I am wrong about what I am seeing because it will go beyond losing money and houses for most people, and I think serious social upheaval will result.

Came ashore to wrap this stuff up and get a new hip and since both are done and Dr. says I am cleared to sail, shortly we will.

You are a sharp guy and where you ordinarily sail is beyond the capabilities of an ordinary seaman. I have great respect for that. My Grandfather often said, "The sea is honest and teaches honesty. If you don't learn the lesson she will put you in Davy Jones locker."

Best regards,

[Rez]

SeaFox:
In normal circumstances I agree with you and going to cash is a loser. But when deflation hits, the buying power of what you are sitting on grows expotentially, undoing the effects of many years of inflation.

I guess, having been a risk taker all my life, I don't feel that this risk is very big in terms of how much capital I have, and what it costs if this machinery rights itself and continues inflating un-abated. I have no debts and own a house and boat. I calculate that I am risking losing ten million by sitting still for a few years. But the flip side is that the cash will be worth hundreds of times its current value if serious deflation - read Depression - occurs. And, now having got out of Euros, I've added 25% to my cash supply of USD.

But, on a human level, I hope I am wrong about what I am seeing because it will go beyond losing money and houses for most people, and I think serious social upheaval will result.

Came ashore to wrap this stuff up and get a new hip and since both are done and Dr. says I am cleared to sail, shortly we will.

You are a sharp guy and where you ordinarily sail is beyond the capabilities of an ordinary seaman. I have great respect for that. My Grandfather often said, "The sea is honest and teaches honesty. If you don't learn the lesson she will put you in Davy Jones locker."

Best regards,

[seafox]

Hi Rez,
definitely a risk. I admire someone who has the guts to make a call and follow it. Most people follow the crowd like leemings and never sit down and try to work out what they think is happening and then back their decision by action.
I picked that the housing market was due for a fall and sold 12 rental properties I owned. Problem was that was 7 years ago before the biggest housing increase we had ever seen.
I was selling real estate at the time and had been investing in houses for years. When the rental yield became lower that what people were being charged interest I figured that investors were going to get out of property. Well the opposite happened I had all the reasons in sorted in my head when I did it. I took my gamble and lost. Those houses are worth over double what I sold them for now

I am still cashed up (banks pay 9% here).

Originally Posted by Rez

SeaFox:
In normal circumstances I agree with you and going to cash is a loser. But when deflation hits, the buying power of what you are sitting on grows expotentially, undoing the effects of many years of inflation.

I guess, having been a risk taker all my life, I don't feel that this risk is very big in terms of how much capital I have, and what it costs if this machinery rights itself and continues inflating un-abated. I have no debts and own a house and boat. I calculate that I am risking losing ten million by sitting still for a few years. But the flip side is that the cash will be worth hundreds of times its current value if serious deflation - read Depression - occurs. And, now having got out of Euros, I've added 25% to my cash supply of USD.

But, on a human level, I hope I am wrong about what I am seeing because it will go beyond losing money and houses for most people, and I think serious social upheaval will result.

Came ashore to wrap this stuff up and get a new hip and since both are done and Dr. says I am cleared to sail, shortly we will.

You are a sharp guy and where you ordinarily sail is beyond the capabilities of an ordinary seaman. I have great respect for that. My Grandfather often said, "The sea is honest and teaches honesty. If you don't learn the lesson she will put you in Davy Jones locker."

Best regards,

[schoonerdog]

Celestial,

Are you on the North Side? Just curious, my father in law lives there. Really lovely spot.

Doug

Originally Posted by Celestialsailor

I saw this coming 5+ years ago. I don't want to get political, so I won't say why I knew. I live in Hawaii and in a tourist town. I sold out at the height of the boom, built a house on the other side of the Island...cash and paid everything off. I was told I was being paraniod and foolish. Im bringing my boat from Ca. here this year and when I take off from here I can rent the house out.

[Rez]

SeaFox,
Sorry you took a hit. I got rid of some stuff too early too, "But only a fool waits for the top of the market to sell."

The tipping point in this whole mess, to me, is the amount of Derivatives floating about. I know there are ten trillion in credit derivatives, and I've read figures as high as 400 trillion for all derivatives. Derivatives are crazy - even crazier than a stock selling at over 100 times earnings.

I knew people well who were in business during the 1920's, and their description of 1927 is similar to what I see now. Everything speculative. Not based on value.

I've spoken to quite a number of people under 55 here (USA) and even though they are bankers or investment brokers and so forth, they have the belief "everything will be okay." I've felt like I was talking with little children. My father vividly described having this same experience, in the late 1920's

I hope things come off well for you. Sounds as though your piece of the planet may be just far enough behind the ups and downs here that you'll have some breathing room to make a move.

By the by: A family friend's grandfather died and left him $10,000 - in a bank which didn't go under in the early 1930's. He bought apartment buildings with that money and it was the base for a comfortable life. The most he paid for a building was $600 - "twice too much," he said.

[schoonerdog]

BTW, here in Annapolis jobs seem to be keeping up ok but housing is falling. Looking around it seems to be going at about -14% per year right now and Money Mag showed us due for a total of a 30% devaluation over the next few years from our present 10% drop. Annapolis has a huge boat show in the fall and this fall traffic was the slowest we'd seen. Boat builders we knew mentioned that while they were able to sell a power boat every week and 16 large multis a year in 2006 they didn't have a single order in 2007 and are now bankrupt. For the boating community for boats under 800k it will be a very difficult year. For multimillion dollar boats who are bought by people who really don't care what their house is worth or have to apply for a loan things are busier than ever. I think we'll get through this, but anyone who has bought a house in the last 3 years is going to be looking at a 100k loss when all is said and done. It's interesting though to see that Australia and New Zealand have also had sky rocketing housing price inflation and will be interesting to see if they too have similar devaluations.

[David_Old_Jersey]

Originally Posted by Rez

I've spoken to quite a number of people under 55 here (USA) and even though they are bankers or investment brokers and so forth, they have the belief "everything will be okay." I've felt like I was talking with little children. My father vividly described having this same experience, in the late 1920's

Originally Posted by David_Old_Jersey

Despite my previous post, in my heart I simply cannot see the western world falling off a cliff economically - but this may be just that I can't get my head around that......

One of my (many!) fears is that those nowadays at "the top of the tree" (in Govt as well as Finance - worldwide) have a similar outlook based on a shared experiance of everything always having turned out OK in the past - without an appreciation of the paddling previous incumbents have been doing under the surface / behind the scenes....due to their fear - because they knew 1st hand what the consequences of things going pear shaped on a massive scale could be.

I have an idea, but I don't know.

Many things look simple when you don't understand how they work

[TaoJones]

Originally Posted by Rez

The tipping point in this whole mess, to me, is the amount of Derivatives floating about. I know there are ten trillion in credit derivatives, and I've read figures as high as 400 trillion for all derivatives. Derivatives are crazy - even crazier than a stock selling at over 100 times earnings.

The latest Triennial Central Bank Survey, released by the Bank for International Settlements (BIS) in December 2007, reveals that the problem is much greater than you are aware, Rez. The following is excerpted from the report (page 8 of 59 in the PDF file):

"3. OTC derivatives notional amounts outstanding and gross market values

"Positions in OTC derivatives grew at an even more rapid pace than turnover. Notional amounts outstanding went up by 135% to $516 trillion at the end of June 2007 (Table C.5) [emphasis added]. This corresponds to an annualised compound rate of growth of 33%, which is higher than the approximately 25% average annual rate of increase since the current format of the triennial survey was established in 1998.

"Growth accelerated in all risk categories. The highest rate of increase was reported in the credit segment of the OTC derivatives market, where positions expanded to $51 trillion, from under $5 trillion in the 2004 survey. [emphasis added] Notional amounts outstanding of commodity derivatives rose more than sixfold to $8 trillion, although this may reflect a change in the degree of underreporting
as well as a genuine increase in positions (see below). Less extreme, but still high rates of growth were reported for the more traditional types of risk traded on the OTC derivatives market. Open positions in interest rate contracts increased by 119% to $389 trillion, and those in equity contracts by 111% to $11 trillion. Growth in notional amounts outstanding of OTC foreign exchange derivatives was less brisk at 83%, taking the volume of open positions in such contracts to $58 trillion."

http://www.bis.org/publ/rpfxf07t.pdf

Certainly, Economics isn't called the "Dismal Science" for nothing, but if you're fond of scary movies and books, read some of the info at the BIS site Bank for International Settlements and, if you let it sink in, you'll be scared to death.

TaoJones

[Rez]

Tao, thanks for the clear information. By the bye, the bank of international settlements is one of the real bad guys of banking, along with The Bank of England and The Federal Reserve System in the U.S. These privately owned institutions machinate disasters like wars and profit hugely. Personally, I do not think a long period of inflation and then a bust, where the people who were making vast amounts during inflation then get to buy everything for cheap, happens by accident.

[Rez]

SeaFox, I've been thinking about you selling too early, but since you have the cash and are getting 9% on it, you will have a chance to buy better than you had when the floor drops out.

I've made lots of similar mistakes. Half of which turned out to be ablessing (only have to kick myself half the night). The reason I made many mistakes was because I sat down and thought the situation through on a business level and said to myself that the going price of (apartment building, commercial building, etc.) was over the top - no longer profitable to buy as an income source - and I sold. My mistake was thinking that buyers look at things on a business level.

A family friend who was in his seventies (I was in my twenties) took me to lunch and asked me if I thought the owners of the cars parked outside even knew how much interest they were paying. "People don't think much," he said. "Unfortunately, people who know nothing are buying commercial real estate. Got to be careful around people who don't think. They make things volatile."

THe mistakes I've made where I've directly lost cash are the disgusting ones. But, every incident we learn something, as you have, and do better next time through.

Your cash may make you rich.

Best regards,