This is the new normal. If you have money, spend/invest it now. In the future it will be worth less.
There are no indications that inflation is going to be high in the next few years. One reason (despite the low rates) is that oil prices are likely to remain low (compared to the 100+/barrel prices). Of course someone should be investing their money instead of putting it into an interest bearing accounts but that has nothing to do with inflation.
The entire reason the FED didn’t raise rates is because of the abnormally low expectation of future inflation. Maybe I’m misunderstanding what you mean, but why would it be worth less in the future if inflation remains at multi decade lows?
I agree with you both. I was pretty drunk when I wrote the post, and the decision they made was what I expected anyway.
The USA is approaching 10 years of this virtually negative interest rate now, with other countries following suit, and Switzerland actually negative on deposits. What does this ultimately mean?
Where do you put your money?
[quote=“Charlie Phillips”]The USA is approaching 10 years of this virtually negative interest rate now, with other countries following suit, and Switzerland actually negative on deposits. What does this ultimately mean?
Where do you put your money?[/quote]
That is the right question. The next 20 years for stocks, bonds, real estate, and commodities could easily underperform the previous 20 years which were already not great, and even if rates start to rise again I don’t imagine it will be to any reasonable level to reward traditional savers, so the question of where to invest is more important now than at any time in several generations. The world is facing a very real retirement crisis where they will be getting hit twice. First because their own savings will be far less than they need due to very low investment returns, and secondly because social programs themselves could face financial shortfalls as we move forward.
People don’t see it yet because we are just in the beginning stages, but as the years go by this crisis will become more and more pronounced. My generation of 40 somethings and certainly the next generation after me are really going to struggle to save enough for a comfortable retirement. The vast majority will only have what they literally save, there won’t be any investment growth.
I’ve moved entirely into an asset class that will always perform well because it is due to human nature itself to exist, and that is volatility. My crystal ball says volatility traders will be the only game in town over the next few decades.
You invest in coming technologies, but you need to do your research and there are no guarantees.
I work in a high tech industry, understand the current situation fairly well but it’s still hard for me to pick an individual stock, and unfortunately many big corporations are highly diversified.
I once worked for a company in Taiwan which I bought options for at 22 , sold at a loss at 19, and whose stock subsequently went to 700…and now is around 150. Man, high tech stocks are tricky to predict even if you work for the bloody companies.
Having visited it recently Vietnam central coast could also be a winner. At least it’s cheap now. Taiwan real estate is expensive pretty much everywhere, China is expensive and it’s mostly a hell hole.
Iran stocks would be a good bet too…lots of intellectual capital, young population, currently low oil prices and regional instability keeping things damped down.
liveleak.com/view?i=993_1438918852
countrymeters.info/en/Iran
cnbc.com/2015/09/03/-stocks-are-falling.html
[quote=“Charlie Phillips”]I agree with you both. I was pretty drunk when I wrote the post, and the decision they made was what I expected anyway.
The USA is approaching 10 years of this virtually negative interest rate now, with other countries following suit, and Switzerland actually negative on deposits. What does this ultimately mean?
Where do you put your money?[/quote]
Hint: Japan
Get your money out and find value for money elsewhere. If no value, wait in cash till there is value or go short overvalued assets.
There’s always going to be opportunities here and there, but finding little pockets of potential investments isn’t really what’s important because the big problem with investing is cash makes no money and there’s no longer a base interest rate or guaranteed fixed income return that covers inflation. Even if you did put a portion of your investable assets in something that does well, your overall portfolio won’t perform that well because there’s still going to be too much of it in cash or other investments that may drag it back down.
Individual stocks or certain country index’s are fine to look at, but it’s not like you can put any significant money in those because of the high risk of being wrong. It’s basically just gambling, and you wouldn’t want to gamble with your retirement fund. So choosing a tech stock that does well is hard enough, but even if you did manage that it wouldn’t have as much effect on your overall portfolio as you’d like. Choosing an emerging market is great, but as we’ve seen they can collapse as fast as they rise. You could only ever put a small portion of your funds in there, which won’t have a great overall effect.
This is the reason why the future is so grim. The days of being able to balance a portfolio of domestic and international stocks, a basket of bonds with different grades and maturities, various commodities and real estate are gone. It’s likely all of those will underperform going forward.
So the question isn’t where to invest your money. The better question is where can you invest ALL of your money. What will your future total portfolio look like?
Brent, this is such a 180 from you. Just a few months back where you were predicting stocks would continue to perform as a sound longterm investment vehicles, as they always had.
What’s with the change? You have gotten really gloomy of late.
This is not a gotcha, btw, as I am quite sure your pinky knows more about investing than I do. Just wondering why you have gotten so disappointed.
Exactly. Because you know…it worked so well for Japan 
[quote=“BrentGolf”]
This is the reason why the future is so grim.[/quote]
Yeah Brent why so grim all of a sudden? What happened to the 6m - 1 yr downturn then another 7 year bull market you keep talking about? No more rinse and repeat? Backtracking? Speaking of backtracking, are you still sticking to your December rate hike prediction? Do you think the FED will raise in 2016? Will it “just be time”? :roflmao:
The FED likely won’t be getting the inflation numbers their looking for any time soon unless they resort to helicopter money. Most of inflation these days is from rent, health care, and education (not in the CPI). If overall prices ex-financials are mostly tame it’s probably because demand is low because the economy sucks. Sales ratios already show it. Why can’t they just admit this? And yes, it’s crucial for inflation to be at least 2% higher than the saving rate…because anything less takes longer to gut savers :eh:
They will always have an excuse because they know they painted themselves in a corner but still want people to think their policies work. People are starting to wake up to this reality after constantly being told everything is going well only to be teased with a rate hike that never comes. Dovish FED meetings are usually followed by stock market enthusiasm. Could it be the FED is loosing its thunder as well as its credibility? I wonder how well negative interest rates or QE4 will be received 
Maybe they’ll get the inflation they’re so desperate for if the USD finally starts to tank at some point
So now we’re looking at the global economy entering a recession/depression with EU/US/JP with rates already at zero or negative. Don’t worry, CNBC and Brent said it’s all part of a normal cycle that has been going on for hundred of years. Rinse and repeat :discodance:
I’ll just repeat, my question above was not an exercise in the hysteric gotcha of buzzkill. I assume Brent has changed his tune for a good reason and I’d like to hear it.
Hysteric? I’ve been saying the same thing for months. On the other hand, people who are wrong tend to change their tune… 
Cash does have value if there is deflation e.g. Property, stocks, commodities go down.
Rather park in low yielding cash and wait for value to appear - even if it means waiting for a stock market tracker fund to come down 30+ %
If recession comes, the USD generally goes up in value too as the everyone liquidates out of other currencies and runs for USD.
No point trying to predict outcomes, just sieze opportunities as they appear. Stock markets could still rebound from lows, but the risk reward of long term investment is fairly poor generally across the globe.
Thanks for the replies to this post. Brent and HH, you both have provided good advice and food for thought.
[quote=“Mucha Man”]Brent, this is such a 180 from you. Just a few months back where you were predicting stocks would continue to perform as a sound longterm investment vehicles, as they always had.
What’s with the change? You have gotten really gloomy of late.
This is not a gotcha, btw, as I am quite sure your pinky knows more about investing than I do. Just wondering why you have gotten so disappointed.[/quote]
If you really are interested, here’s a couple short articles discussing much of the same:
theironcondor.com/?page_id=2937
theironcondor.com/?page_id=3100
I’ve not changed my tune at all, no idea where you’re getting that from. I have always maintained and stated it dozens of times that for the average investor, sticking to dividend stocks and index funds and taking advantage of a dividend reinvestment plan is the best way to get the highest return they can and the same applies today as it always has. Nothing I’ve said changes that for the average investor. I said HIGHER, not high. Stocks haven’t and never will achieve a rate of return that would make me happy to invest in them, which is why I don’t. I don’t have one penny in stocks, haven’t in years. I just said for the average investor, stocks will return more than any other traditional asset class, which has been true for the previous 200 years and I see no reason why that would change anytime soon. Stocks, and more specifically dividend stocks are by far and away the best of the traditional asset classes and that won’t change. But I’m not the average investor 
I stopped trading stocks in 2011.
As far as recession goes, what I’ve been saying for years still applies. There will be a 6 month to 1 year period, probably fairly soon, where things collapse. When they’ve gone down sufficiently far, it will be followed by a sustained period of growth where stocks will lead the way. Why on earth would what happened the previous 50 times like clockwork suddenly not apply? I’ve not seen or heard anything that would make me believe this time is much different. The recession will crush asset prices quickly, then the economy will expand again and rinse repeat, muddle through. Returns for the past 20 years have been lower than the previous 20 years, and I feel that returns in the next will be lower than the last. But that doesn’t change the business cycle that will continue plugging along as usual.
I simply said that stocks are going to underperform their previous 20 years, as will bonds, real estate, and likely commodities as well. Which means people are facing a true retirement crisis. In the previous 20 year period, the average investor / financial advisor / Hedge Fund was getting a 3-5% rate or return. For the next 20 years that will likely be much lower. What’s that going to do to peoples plans? In a world where the expected rate of return might get cut in half, what then?
What are people’s portfolio’s going to look like for the next 20 years? Not small parts of it as in tech stocks or Japan, I mean the whole portfolio. In the new normal of super low interest rates which is here to stay for a while, what are people going to do? Accept a 2% rate of return, or do they have other ideas to bump that up to a reasonable level?
Well not everywhere is leveling off or deflating, African nations will undergo tremendous economic growth, in parts of the continent anyway.
Deflation is not necessarily a bad thing, cheaper commodities, cheaper housing, makes your money go further doesn’t it.
The future is not the same as the past. One of the dominant industries now is ‘the Internet’. This was barely predicted just two decades ago.
[quote=“headhonchoII”]Well not everywhere is leveling off or deflating, African nations will undergo tremendous economic growth, in parts of the continent anyway.
Deflation is not necessarily a bad thing, cheaper commodities, cheaper housing, makes your money go further doesn’t it.
The future is not the same as the past. One of the dominant industries now is ‘the Internet’. This was barely predicted just two decades ago.[/quote]
Few follow up questions then.
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Get specific. What exactly do you mean by investing in African nations or tech stocks. How? What investment vehicles? Which tickers?
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Returning to my point of allocation, I don’t imagine your confidence in “tech stocks” or “African nations” would be with enough conviction to commit a significant portion of your total investable assets into. So what percentage of your total fund would be allocated into those?
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And as for the rest of a portfolio that isn’t invested in Africa, Japan, or tech stocks, where does the majority of the rest of it go? Even after those allocations you’d probably still have well over half your investable assets still in cash. Where does that get invested?
gOod points Brett, I admit I hold almost all my not very sizable assets in cash at present. I am thinking of buying some property in Vietnam as it is cheap enough to buy in cash. Anywhere in Taiwan except shitholes would need credit. That’s more achievable from here.
But as for putting a large wedge every month into something, I dont have much confidence at present. When I say invest
In African nations would have to do DD, so consumer goods stocks in those countries, but again , it is not easy from this far remove.
For Iran I would also put some cash in index tracker.
Retirement strategies wont be the primary concern if there’s another banking crisis. The G20 already agreed to a bail-in arrangement using depositors to fund liabilities. Central banks won’t be enough to save the world next time around and they know it. It will be our turn to save the world, and we’ll all be heroes
I could see the African economy growing significantly in the next decade (what HH originally implied imo) but there isn’t a chance in hell that I would invest in anything specific. I am sure that there are index funds that are country or region specific and that might be an area to put part of your riskier portfolio in. But mostly I would be okay at missing out on a big gainer since there is so much risk.