Financial Advice.......401K suggestions

[FISHIN SUCKS]

Okay, so with a trend looking like it did a couple years ago with fuel prices rising and 401k's tanking, is this a time to consider pulling the money out and putting it somewhere else? Mine has rebounded and doing well. but some people I know are saying this may be worse than a couple years ago. Some are saying to liquidate what you've got and buy silver and gold, saying by years end our country is going to bust! Well, I'm not in panic mode, but just wondering what some experts (or smart people:)) are willing to contribute here. Thanx as always for any input,

tom

[DickB]

Okay, so with a trend looking like it did a couple years ago with fuel prices rising and 401k's tanking, is this a time to consider pulling the money out and putting it somewhere else? Mine has rebounded and doing well. but some people I know are saying this may be worse than a couple years ago. Some are saying to liquidate what you've got and buy silver and gold, saying by years end our country is going to bust! Well, I'm not in panic mode, but just wondering what some experts (or smart people:)) are willing to contribute here. Thanx as always for any input,
tom
I am retired from corporate life and have a few years to go for Social Security eligibility. We are living on our savings, so I have some skin in this game. I'm not an expert, but have done a lot of reading over the years and wanted to make sure that I knew what I was doing before pulling the plug on corporate life. I was an engineering director when I left, and knew that I would never again get a job that paid as well, so I needed to be comfortable living off investments before pulling the plug.
Your best strategy for the long haul is a diversified portfolio of stocks, bonds, and short-term investments. Mutual funds are a great way to go. Look carefully at the costs of these funds before you invest. (I learned this the hard way.) Avoid the heavily-managed funds, because they are generally expensive in terms of management fees, and on average do not perform any better and often worse that index funds. Index funds generally have low expense ratios of 0.5% or less. Pick a portfolio balance stocks versus bonds with which you are comfortable and manage that mix. For example, if you have 70% stocks and 30% bonds now and one quarter later stocks have gone up so you now have 73% stock and 27% bonds, shift funds from stock to bonds to get back to your 70/30 split. This is actually easy to do and has proven to be the most effective investment strategy for the vast majority of us mere mortals. The experts have tools now to run thousands of what-it scenarios based on past market performance, including the depression, recession, and booms, and this strategy always performs the best.
The worst thing most of can do is try to guess when stocks have peaked or hit bottom, when gold is up or down, and jump in a big way from one to the other. We pick wrong more times than not.
My 401K and other investments went down but they didn't tank. One of the investment accounts that I have to supplement my 401K has a personal rate of return of 8.14% over the last 5 years and 9.98% since inception. I don't have the data on my 401K, but I manage all of my investments in a similar fashion.
One of the best books that I have read on the subject is "Work Less, Live more" by Bob Clayatt. Not only does he give advise on how to save and invest while earning, like many others do, but he advises how to live off your investments and manage them while taking an income from them. I have almost nothing on this from other sources. The book is not a long or difficult read.

[Tony]

Good post, DickB.
Fidelity houses my money, and they have an option to automatically re-balance accounts.


:beer:

[FISHIN SUCKS]

Many thanx Dick!!! Like Tony said, great post and much appreciated. Because my company contributes to my 401k, I didn't really want to bail on it, but don't want to be one of the many people that lost a few hundred thousand either. thanx again,
tom

[Just Say N20]

. . .but don't want to be one of the many people that lost a few hundred thousand either. thanx again,
tom


Been there, done that. In spades. At 55, I'm now pretty much acknowledging my wife and I are going to have to work until we die. With our daughter having 2 more years at U of M, time is not on our side for recovering back a nest egg. Especially with fuel getting stupid again, and the impact that has on the price of everything else. Back to $800+ a month for car gas.

And I'm hearing rumors that the psychotics in Washington, are discussing eliminating the home mortgage deduction, as well as charitable giving in an effort to suck even more money out of us.

"Hello? Washington? You are all arrogant morons! We have a spending problem, not a revenue problem!"

[Tony]

Bill, +1 on college costs being another example of outrageous inflation (just finished with 10 consecutive years for our own two kids), along with gas, food, and most everything else. This, of course, while salaries are stagnant or dropping.

Regarding losing tons of 401 money, if a company mismanages their finances so bad that they could not honor pensions to employees, than that should be a crime not allowed.

If, however, money disappeared because of the market crash...simply leaving it where it was would have returned its original value, plus about 15% more, by now. Wall Street is one area of our economy that seems to be doing fine, although that might be experiencing a dramatic correction soon!

In Michigan, as you probably know, we had a former governor rob a sh!tload of state pension money to disguise his budgeting ineptitude. Now the very people he stole the money from are being forced to repay it, because the pension fund is "underfunded"! Same thing happens at the federal level, with SS for example, we just have not bothered to face that fact yet.

Sorry for the politics...I'll try not to let it happen again. :bonk:

Summer is almost here!

:beer:

[Ghost]

I have a bit of a different take.

First a couple of disclaimers. First, I am not any kind of licensed financial guy. Second, useful financial planning cannot ignore political analysis. I will do all I can to avoid the politics, mentioning things ONLY for the purpose of considering how they affect individual financial planning, not to push anything political here.

I completely agree with a bunch of what Dick said above, but I must respectfully disagree with some things as well.

Will start with a point of agreement. Watch out for mutual fund fees, they are often a ripoff. (Not just pricey, an actual ripoff.) A friend of mine who is a licensed investment pro pointed out to me that the large agencies sell THE EXACT SAME THINGS to their clients at artificially high prices. Stuff you can buy on the open exchange, your own UBS or Oppenheimer or whomever will sell you for a markup that has ZERO VALUE ADDED. A literal ripoff. And they are supposed to be in YOUR court. Probably a legal violation of fiduciary responsibility to their clients, if anyone pursued it in an honest court. Beware. Beyond that, a lot of fund management fees are ridiculous.

On to points of disagreement. I don't agree with the notion of some ratio of comfort for stocks and bonds. I couldn't disagree more, actually.

IN GENERAL
Dick's post reflects very traditional sage investing advice. I believe that advice was exactly right for many years here in the US, perhaps from WWII to the recent past. But it is important to consider that this period was an ABERRATION in the history of investing throughout the world. The world is not safe, not stable, and IS boom and bust. Where the traditional advice fit America for most of our lifetimes, it is now outdated. The traditional notion of "safety" is simply extreme diversification. The assumption of that is growth and prosperity, a rising tide that lifts all boats.

That assumption is no longer useful, in my view. We face contraction, not growth, and massive looming bankruptcies. (If you want to make sense of stats on this, note that the official stats don't properly adjust for inflation. They can show what looks like growth in dollars. But if you measure how many hot dogs or gallons of gas the GDP can buy, we aren't growing. Worse yet, much of what has been booming is completly unsustainable.)

So, in a rising tide, where you can safely rise by tying yourself to as many other boats, you want to do the OPPOSITE in a falling tide. All those boats will pull you down with them, and a LOT of them are going down. So, you need to be VERY CHOOSY about what you buy, and tie yourself to a (relative) few good investments. The more the better, but a relative few compared to what you could get away with in the "happy stupid times."

People keep asking whether we are going to see market gains or losses. I think this is the wrong question. There will be both. What we are going to see is RE-VALUATION, a massive thinning of the herd. Strong fundamental things will win, weak things will lose.

So, diversify as much as you can, but do so in very carefully chosen areas of strength.

MORE SPECIFICALLY
0. Get rid of EVERY 401k immediately upon leaving the company. Convert to IRAs (and consider Roths). IRAs allow you to buy virtually anything, thousands of choices. 401ks limit your choices to 3-25 items, none of which may be safe in ugly times.
1. Food will be in demand.
2. Energy will be in demand.
3. Water will be in demand.
4. Shelter would be in demand, but we have a glut of it, so it's a bad place to tie up wealth. If you have equity, consider selling, renting, and buying back in later for cheap.
5. Think less about stock prices, and more about DIVIDENDS. Dividends are the sign of a healthy company that TURNS A PROFIT.
6. I'm 100% out of bonds.
6a. With credit tight, as companies are dying, people will make desperate attempts to get ever-more-expensive credit to tide them over. There may be some quick bucks for the savvy junk bond buyer, but it's like playing musical chairs well. You can win big, but the downside risk is huge. The strong companies won't need to borrow like the weak ones. The weak ones will default a lot. So, buy stock in winners, rather than lending to losers.
6b. I wouldn't touch ANY municipal bond with a 10 foot pole. Governments and municipalities are even more reckless risks with worse balance sheets than the weak businesses.
6c. Bonds are a nightmare as inflation increases, which it will continue to do. You lock yourself into a fixed return and you get paid back in dollars that are worth pennies.
7. Look for things that individual WILLING consumers buy with their own money. For instance, you could have made a killing in big defense stocks over the last decade. But eventually, as the rotten economy is further exposed, these will be secondary to staples like food, energy, water, shelter.
8. Every fiat currency throughout history has been destroyed. The only exceptions are the ones that exist today and simply haven't been destroyed YET. The dollar is being destroyed right before your eyes. Take that to the bank. More than 70 percent of the world's dollars were created out of thin air in the last 5 years. The "magic" of gold and silver (and other precious commodities) is that people WILL want those forever. Prices will rise and fall, but with trillions of further deficits coming, interest rates rising and credit for the US drying up, the ONLY way to pay the bills will be to double-down on printing money. I am absolutely long in gold and silver and other precious metals.
9. People should honestly consider whether their state and local governments are their friends or enemies, and vote with their feet for their own safety. Will they protect your property rights, or find newer and more pervasive ways of confiscating your stored wealth? States will be winners and losers just like companies. Which is another reason to sell real estate, to be liquid and mobile, and shop for better places to live for pennies on the dollar later. Mass movements of population are the historical NORM, not the exception. Almost no one our age has even heard of Natchez, Mississippi but per capita, it was once the wealthiest city in the US.
10. Timing the market is always risky. For the most part, go long in things you believe in. That said, I am nervous about the market, and won't be buying in until a major correction, which I am expecting. That's my own gamble.
11. The definition of prosperity is high and rising living standards. Living standards rise when people spend their time and money PRODUCING things consumers want. People WANT orange juice. They will buy it, and being able to buy it ever more cheaply RAISES living standards. Paying people to grow oranges is GOOD. Paying people to fine drivers who roll through STOP signs with no other cars in sight? This LOWERS living standards. Nobody's living standards are raised by the act, but wealth is consumed. Less orange juice for all. In the short term, non-producers can prosper at the expense of producers. In the long term, they can only do it with ever-increasing muscle and violence. So, if you are a hard-core cynic, you might place your bets on the predatory non-producers who take by force and don't produce. But if you think there is hope in a dismal economy, bet on industries that produce what individual consumers want to buy.
12. The economy is FUNDAMENTALLY sick. By this I mean that a large percentage of the people who do actually have "jobs" are doing the wrong things every day. A huge chunk of the population, both employed and unemployed, is not producing anything that raises living standards. Rather, they are doing the opposite, lowering living standards. Until this changes, living standards will continue to fall and the country will suffer ever increasing poverty. Massive borrowing (and creating money out of thin air) has hidden this and delayed the effects, but they are kicking in ever more. Smart people have been circling the wagons. Smarter people started long ago.

CONCLUSION
The best investment advice I ever heard was to "invest in something you know something about (something you understand)." This doesn't mean you have to know how a semiconductor works, but you need to know what a computer does and whether that will be considered valuable to its potential customers.

The sage advice for the bygone "happy stupid times" enabled people who didn't do much studying or research to get "decent" returns without thinking. Those days are largely over. Anyone who wants even to protect his buying power is going to need to work at it more, probably a lot more.

[Marlin275]

CONCLUSION
The best investment advice I ever heard was to "invest in something you know something about (something you understand)." This doesn't mean you have to know how a semiconductor works, but you need to know what a computer does and whether that will be considered valuable to its potential customers.

I buy Apple computers and the stock.
I bought the second Macintosh made, the FatMac 512k in 1984
big mistake, glorified typewriter for $ 5000.
But it showed me the potential.

I eventually realized that if you bought the stock
you would do better than buying the computer
but for the design business Apple rules.
So I have made money both ways.

I came to the stock late, about $ 86. a share, not complaining but it was $15. a share for years.
Here’s the thing: If you had taken the $5,700 spent on Apple’s PowerBook G3 in 1997
and invested that cash in Apple stock instead,
you’d have had over $330,000 worth of shares today.

Apple Inc. has a market cap of $304.76 billion, second only to Exxon.
I don't see all the doom and gloom but when things get crazy
put a stop loss order on your stock.

Sales of the iPad in 2011 could exceed some of the highest expectations.

America is still the world's leader
has companies that are the best
and products the world wants.

[Ghost]

CONCLUSION
The best investment advice I ever heard was to "invest in something you know something about (something you understand)." This doesn't mean you have to know how a semiconductor works, but you need to know what a computer does and whether that will be considered valuable to its potential customers.


I buy Apple computers and the stock.
I bought the second Macintosh made, the FatMac 512 in 1984.
big mistake, glorified typewriter for $ 5000.
But it showed me the potential.

I soon realized that if you bought the stock you would do better than
buying the computer, but for the design business Apple rules.
So I have made money both ways.

I came to the stock late, about $ 86. a share, not complaining but it was $15. a share for years.
Here’s the thing: If you had taken the $5,700 spent on Apple’s PowerBook G3 in 1997 and invested that cash in Apple stock instead,
you’d have had over $330,000 worth of shares today.

Apple Inc. has a market cap of $304.76 billion, second only to Exxon.
I don't see all the doom and gloom but when things get crazy
put a stop loss order on your stock.

America is still the world leader and has companies that are the best
and products the world wants.

First, just to clarify what I meant, my comment about not knowing how a semiconductor works but knowing the value of a computer had nothing to do with the choice to buy one or not. It had to do with understanding how to evaluate stocks in the computer industry. That said, as Marlin describes, when you are in an industry, it's a great opportunity to evaluate the tools of that industry for investment.

Second, also just for clarity, Apple fits my definition of a producer that makes products that people want and raise living standards.

But while we in the US have leading companies like Apple that make things people want, we have too much dead weight. To my point, investors need to pick winners (like perhaps Apple) but not rely on an index of the American business world. The tide is bad, but there will be winners. (Especially internationally.)

As an aside, looking at Apple, as good as they are, with their market cap up rivaling Exxon, I wouldn't touch them. They innovate, make a bunch of cash, and then the ankle-biters commoditize their splashy new product. Happened with mouse-driven computers in the 80s, and MS/PCs copied them drove them back down. Happened with iPods and then mp3 players got commoditized. Happened with iTunes and now Amazon sells downloads. Happened with iPhones and now the Droids and others are running them down. The tablets and such are really just an extension of the phones, already being run down by the competition. Unless they have a new game-changer, I'd be looking for Apple to shrink for 5 years before they produce their next big thing. But that's just me. Apple was at 5 bucks in the late 90s. After a trip up to 34, it was as low as 7 bucks again as recently as 2003. It's what, $350 now? I'll *think* about buying back in at $165 - $200 maybe. Maybe they have something awesome going, or maybe there is enough world market to keep them up at those prices. I don't know. I just think there are far surer bets elsewhere. Of course, if the dollar is in enough trouble but Apple continues to rule its roost, maybe it will still go way up as the dollar falls. Interesting one to ponder.

[The Hedgehog]

I am a registered rep (Series 7 and 63). I specialize in institutional fixed income securities and managed a $300 million portfolio a number of years ago.

I would not touch gold or or munis. Gold may run for a while on fear but leave that to the speculators.

Personally, I choose a balanced portfolio approach and don't try to pick the highs or lows either. I agree with investing in companies that make money and can pay dividends. I think that Dick B and Ghost make some good points.

I do not recommend bond funds for retail.

[Conquistador_del_mar]

My best friend and roommate from college visited me over the weekend. He manages a 2.4 billion dollar mutual fund and has one of the most successful records of the many available making his fund in the top 1% over the past 10 years. In a recent interview, I remember a few of his comments about investing in today's world. He said it takes a rifle approach in today's world instead a shotgun approach like in the past - meaning that even in certain desireable industries, one needs to zero in on only the best. I sure did not learn from him - lol. It sounds like some of you guys are giving some good advice. Bill

[BUIZILLA]

I'm VERY concerned on what I am seeing on the horizon..

how do you reduce spending in a tax code? :eek:

you can't

I predict inflation through the roof, 9-10% by November-December...

oh wait, it already started :bonk:

don't you love that the gubbmint doesn't use food or energy costs in their cost of living reports?

yeah, okayyy

[DickB]

Ghost, I agree with some of your points but not all of them. For example, your advice to focus on stocks that pay dividends is a good one, and I agree with your statement that trying to time the market is risky. However, I don't believe that your statement on bailing from your company's 401k is valid in all cases. If your company's 401k is all company stock, I would say yes, bail in a heartbeat. But my company's 401k offers lots of choices, including low expense mutual funds, so there's no need to bail. If your company offers good choices, there's no issue with sticking with them. Also, in my case, my 401k is about 1/3 of my total portfolio, so not all eggs in one basket.
My point is not simply diversification, but diversification plus active management. The discussion on Apple serves as an excellent example. It's easy to look backwards and say this or that stock, like Apple at $15 a share, was a great buy. But who among us knew when Apple was $15 that it would go to what it is today? The point about a diversified portfolio is that most often some parts will go up and some will go down. If you periodically rebalance, you don't have to predict which parts will go up or down and when. As long as some go up and some go down, and do so cyclically, you come out ahead. Yes, if the entire economy collapses, everything will go down. But even through the Great Depression this did not happen. I'm not that pessimistic. I guess if I were, I'd be selling my Donzi today and stocking a bunker in Nevada.
I'm sure you've heard the secret to success in the market: buy low and sell high. Of course, the $64,000 question is when and what is low and when and what is high? If you just buy and hold, that is, don't actively manage your investments, you're never selling, thus never selling low. How do you make money that way? So don't just pump money into your 401k and never look at it. By rebalancing every quarter or half year or year, you are in effect buying low and selling high, even without being able to predict when a single investment is at its peak or valley. When you rebalance, you sell, by definition. If you don't rebalance, you don't sell. Sell high, buy low to make money.
BTW, real estate is pretty darn low right now.
Another thing to consider at some point is an annuity. No, I don't recommend that you put all your money there. An annuity is only as good as the company behind it, and we've all seen large companies fail. Plus, many annuities offer no hedge against inflation. But they can provide a good deal of security that you will have a 'guaranteed' base income for life and avoid becoming destitute. I personally have recently put a relatively small percentage of our investments into an annuity. As long as the annuity company doesn't go under, if things go really badly we may end up living in a trailer home, but at least we'll have a home. (Nothing against trailer homes here BTW.)

[Ghost]

Dick, thanks for your thoughts. Even though we disagree on some things, it's useful to kick ideas around.

I have two questions from what you wrote.

First is aside from being able to take a loan from a 401k, what advantage does it have over an IRA? An IRA lets you buy anything. I've never seen a 401k with more than about 12 choices. (And once you leave the company, I don't think you can take a loan from a 401k anyway--I think you have to pay it back in 30 days or so.) I see no reason not to roll a 401k over when you leave the company. Does not mean bail on them while in the company, just to jump to something better immediately once the company relationship is terminated and you can jump to better with no penalty.

Second, is real estate really "low?" While it is way down from the highs, we have tons of supply, tons of further looming foreclosures, rising underemployment, rising interest rates, and threats to drop the mortgage interest deduction. All are downward pressures on real estate prices. So, while I think it has fallen a lot, I only see it dropping more and more. (Except in DC, where it is still rising.)

Regards,

Mike

[Marlin275]

As an aside, looking at Apple, as good as they are, with their market cap up rivaling Exxon, I wouldn't touch them. They innovate, make a bunch of cash, and then the ankle-biters commoditize their splashy new product. Happened with mouse-driven computers in the 80s, and MS/PCs copied them drove them back down.

US Mac sales grow 9.6% in Q1 2011 as rest of market drops 10.7%
They are selling more computers now than anytime in their history.
They are increasing market share and they have PLENTY of room to grow up from their 11% of the market.
Their laptops are rated number one in the world and the majority of college students now have them on campus.
Those kids will drive the future and Windows is not their direction.



Happened with iPods and then mp3 players got commoditized. Happened with iTunes and now Amazon sells downloads.

ITunes' Market Share Continues To Rise
iTunes' share of the paid digital download market rose to 66.2% in the third quarter of 2010 from 63.2%, according to new data from the NPD research group Distribution executives at record labels say the disparity between the two may be even steeper, with Amazon commanding just 6% to 10% of the market in any given week, and Apple closer to 90%, notes the "Wall Street Journal" http://www.macnews.com/2010/12/17/itunes-market-share-continues-rise



Happened with iPhones and now the Droids and others are running them down.

Apple sold 16.24 million iPhones in the fiscal 2011 first quarter,
representing 86 percent unit growth over the year-ago quarter.

Verizon iPhone helps Apple outgrow Android in March ad impressions.
In March, Apple remained the top manufacturer on Millennial's network when all devices, including tablets, were factored in, taking 32.08 percent. The iPhone, too, was the top smartphone, representing 19.42 percent of all devices.

In a marked shift from his former belief that sales of the iPhone would dry up after two years, Roger McNamee, a prominent venture capitalist who has invested heavily in Palm and Facebook, said in an interview that Apple will likely lead a 10-year technology growth cycle with the continued success of the iPad and its App Store ecosystem.



The tablets and such are really just an extension of the phones, already being run down by the competition.

Research firm Gartner sees Apple's iPad controlling the lion's share of the tablet market for the next three years, and remaining the top mobile platform in terms of sales through at least 2015.

The impact of Apple's iPad is already being seen in the slowing PC consumer market, but a new survey by Google's AdMob indicates iPad use is taking the place of a wide variety of other activities.




Unless they have a new game-changer, I'd be looking for Apple to shrink for 5 years before they produce their next big thing.

Apple could launch an Internet-connected high-definition television set by the end of 2011, entering the lucrative $100 billion LCD TV market, a new report claims. "The combination of Apple's powerful ecosystem, industrial design savvy, powerful brand and ability to reinvent product categories could make Apple a powerful force in the TV world over the next few years," he said. Such a product could be paired with a subscription service to iTunes, allowing users to access content and services at a flat subscription rate that would negate the need for a cable box and digital video recorder.



But that's just me. Maybe they have something awesome going, or maybe there is enough world market to keep them up at those prices.

Apple's sales abroad helped offset the effect of a weak US economy.
International sales account for 58 percent of Apple’s revenue.



I don't know. I just think there are far surer bets elsewhere.

Name them . . .



Of course, if the dollar is in enough trouble but Apple continues to rule its roost, maybe it will still go way up as the dollar falls. Interesting one to ponder.

VERY interesting indeed:
Posing the question of whether Apple is the 'most valuable company in the world," Credit Suisse on Thursday initiated coverage of the iPad maker with a $500 price target, saying it believes Apple is well positioned to command a majority share of a booming tablet market expected to grow to $120 billion over the next four years.

In his inaugural note to clients, analyst Kulbinder Garcha concluded that Apple should be able to deliver extensive revenue and earnings growth of 50% and 46%, respectively, over the next two years, given that all indicators suggest the company will easily sustain its competitive advantage through its integrated ecosystem of software, hardware and services.

"Three years after the launch of its first iPhone, we believe few handset vendors come close to the quality of Apple’s hardware, software, and services," he wrote. "We also expect the company’s services offering to evolve along with its device portfolio."

To that end, the analyst noted that the success of the iPad only reinforces the notion of increased user loyalty, which could translate to more stable market share in Apple's handset business. Apple will maintain a share as high as 50% by 2015, given its aggressive pricing, time to market advantage and a software edge.

"We argue that the iPad’s rapid adoption could prove to be a Trojan horse from which Apple could see more rapid corporate adoption across its product line," the analyst wrote. "Furthermore, our proprietary Credit Suisse IT Survey demonstrates that not only do CIOs rate the iPhone as the strongest of all platforms across metrics such as roadmap, distribution, and sales, but also that it is set for rapid adoption over the next 12 months."

http://www.appleinsider.com/articles/11/03/17/500_target_slapped_on_apple_as_ipad_seen_dominatin g_120b_tablet_market_by_2015.html

AAPL: What could go wrong?
"Apple shares aren't just cheaper than the S&P, they're bizarrely cheaper," writes Tiernan Ray in the current issue of Barron's. "Backing out cash and marketable securities of $60 billion, or $64 per share, ... it trades at 11 to 12 times this year's projected earnings per share, versus the S&P's average of 14 times, despite EPS growth projected at 52% this year by analysts."

http://tech.fortune.cnn.com/2011/04/04/aapl-what-could-go-wrong/?section=magazines_fortune

[Phil S]

It's all in "Plastics" and "Ball Bearings" these days...I'm tellin' ya !

I like commercial real estate. I love trend analysis, but you can worry yourself to death with it as well.

[Ghost]

Unless they have a new game-changer, I'd be looking for Apple to shrink for 5 years before they produce their next big thing. But that's just me. Apple was at 5 bucks in the late 90s. After a trip up to 34, it was as low as 7 bucks again as recently as 2003. It's what, $350 now? I'll *think* about buying back in at $165 - $200 maybe. Maybe they have something awesome going, or maybe there is enough world market to keep them up at those prices. I don't know. I just think there are far surer bets elsewhere.


Name them . . .

First, I think it is important to be clear about what is meant by a "surer bet." I am speaking of holding onto stored wealth, without risk of having it evaporate. So, what are those things?

Food. Energy. Precious metals. Not just commodities, but producers. Fundamental staples, basic needs. Not as sexy. But FAR less downside risk, and lots of upside potential in a collapsing market. Apple has upside potential but a lot of downside risk as well. It is not a sure bet by any stretch.

Frankly, I will take gold and silver straight up for 5 years over Apple. If I am wrong, it will only be world markets that keep Apple up. It won't be the US market, without huge surprise injections of credit to postpone the pain that's coming here. Further, debt crises and currency debasement are happening the world over. A huge bubble is bursting. Expect a return to basic needs, on a massive scale far larger than the dot com bust.

Apple has had a great run. I'd cash out now if I were holding it.

Some particulars:

The PC market, especially the college PC market, is likely to get killed just as the bloated college tuition market itself is going to get killed. If it stays alive for a while, it will only do so by further burdening the rest of the economy with useless degree factories funded by forceful theft from the taxpayer. The market of willing people paying for useful college degrees, with their own money, will be cut at least in half over the next decade. $150,000 for a Sociology degree?! Are you kidding? We have law students clamoring to get their money back from Ivy League schools. The junk degrees existed in numbers yesterday, but not tomorrow. Community colleges and online education will be the next education boom.

iTunes might continue to do well. Or not. I think it is one of their better chances at keeping their legs, but it won't be enough unless they own the entire world music market.

New options in TV are interesting, but I'd bet on the folks who own the bandwidth and content, not the platforms and devices. But I acknowledged that if Apple has the next revolution up its sleeve, I may be wrong. But I think you'll find that we've hit peak media consumption for a while. As folks lose their houses, they drop HBO and other luxury media. I suspect this market is pretty saturated until serious healing happens in the economy. There MIGHT be a revolution to be had in targeting media. Of the hundreds of channels most people have, most probably care about 15-30 channels most of the time. It's possible a better targeting model could be a revolution here.

I think you're wrong about iPhones. I think Droid is catching up and the stats you quote are Apple against Apple, not Apple against Droid.

Apple's history is one of innovation and pioneering, with rockets upward, followed by great falls, where the also-rans start drafting behind the pioneers. Tablets?! Tablets are so far toward full PC functionality that they simply cut a share of the laptop market. No huge growth of the pie there. Best hope for Apple there is a shot at expanding their footprint in the laptop market. Maybe a shot in the world market as a low-cost laptop, but I don't think even then. People who have one laptop only will want a cheaper one with a keyboard.

Apple as 3/4 the market cap of Exxon? In a world where massive debt will see massive defaults and currency collapses? I'll take XOM in a heartbeat.

Apple is up near $350. It was at $90 a mere two years ago. Grab your profits while ye may. Ask yourself, aside from designers, who NEEDS Apple's products to be efficient, versus buying inferior but sufficient goods? Cadillacs instea of Chevies? They are largely luxury items. Music downloads, fancy phones, tablets, these will fall in demand compared to food and energy and other staples.

I will be pleased to be wrong. Life will be much more comfortable.

[FISHIN SUCKS]

It's all in "Plastics" and "Ball Bearings" these days...I'm tellin' ya !
I like commercial real estate. I love trend analysis, but you can worry yourself to death with it as well.
......and 'gauze pads' and 'anti-freeze......preferrably Prestone'.

Commercial real estate seems a bit scary, I see a lot of Blockbuster's and Border's closing in strip malls along with a lot of other retailers.

Okay, so I started this thread and left out one bit that motivated me to start it. This one guy that I know that is saying to buy silver and gold and get out of stocks, funds and bonds, is claiming that our economy is going to bust! He states that it is historical that all developed economy's have a life span of about 225 years before they collapse. My old college roomate (Political Science major) has stated that there is some truth to that, but is not so sure that this is a possibility here.

Just saw on the CNN that Clark Howard says the best way to save for your retirement is the Roth IRA. While I care about my retirement, I'm 43 and just don't want to get devalued.......but would also like to grow what I've got. As always, many thanx for your inputs, very interesting info here,

tom

[Tony]

Has anybody worn their Crocs to Ruby Tuesdays, then relaxed after dinner in their Lazy-Boy?


These 11 stocks turned $10,000 into $100,000 in two years:

•Crocs (CROX) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:CROX), up 1347%
•Gulfport Energy (GPOR) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=GPOR), up 1,227%
•ION Geophysical (IO) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:io), up 1,098%
•Ruby Tuesday (http://content.usatoday.com/topics/topic/Ruby+Tuesday) (RT) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:rt), up 1,072%
•Buckeye Technologies (BKI) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:bki) , up 1,059%
•KapStone Paper and Packaging (KS) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:ks), up 1,036%
•SFN Group (SFN) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=sfn), up 1,024%
•Veeco Instruments (VECO) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:veco) , up 1,017%
•La-Z-Boy (http://content.usatoday.com/topics/topic/La-Z-Boy) (LZB) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:lzb), up 1,016%
•Genworth (GNW) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:gnw), up 993%
•Sonic Automotive (SAH) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=TICKER:sah), up 906%


Source: USA TODAY research, S&P’s Capital IQ

[DickB]

First is aside from being able to take a loan from a 401k, what advantage does it have over an IRA? An IRA lets you buy anything. I've never seen a 401k with more than about 12 choices. (And once you leave the company, I don't think you can take a loan from a 401k anyway--I think you have to pay it back in 30 days or so.) I see no reason not to roll a 401k over when you leave the company. Does not mean bail on them while in the company, just to jump to something better immediately once the company relationship is terminated and you can jump to better with no penalty.
Good points. I don't see anything wrong in rolling over a 401k to and IRA. With my company's 401k, I do have some small benefits such as discounted brokerage and no-cost transfers within the 401k, that I might or might not get with an IRA. So while it very well could be advantages to roll over to an IRA, I don';t think it is necessary in all cases.

Second, is real estate really "low?" While it is way down from the highs, we have tons of supply, tons of further looming foreclosures, rising underemployment, rising interest rates, and threats to drop the mortgage interest deduction. All are downward pressures on real estate prices. So, while I think it has fallen a lot, I only see it dropping more and more. (Except in DC, where it is still rising.)
Low in terms of buy versus sell. Is it at the lowest point? Who knows? But if I buy now and sell some time in the future, will I make money? Again, who knows, but I might bet that real estate prices will rise over current value in the foreseeable future, even if they go down first, and if I buy now and sell then I would have bought low and sold high and made money. Not necessarily bought lowest or sold highest.
It's the same with rebalancing a 401k or other diversified portfolio. You're not buying lowest and selling highest, you're buying low and selling high. You're not making the most money possible, but you're making money. You don't have to know when the peaks and valleys occur to make money, but unless everything in your portfolio on average increases in value, you do have to actually buy and sell to make money. So my point is really to rebalanced to make money. You have to actually sell to realize a gain, and if you're not rebalancing your not selling.

[DickB]

Commercial real estate seems a bit scary, I see a lot of Blockbuster's and Border's closing in strip malls along with a lot of other retailers.
I would argue that those examples represent a technology change, not necessarily a real estate trend. I'll bet Amazon and Google have acquired lots of commercial real estate. My former company had dealings with Google. The scope of the data centers that they have built and are building, in terms of building size, number of servers and disc drives, and electrical power consumed, is staggering.

[Marlin275]

Apple has had a great run. I'd cash out now if I were holding it.

Ahead of Apple's quarterly earnings call on Apr. 20, investment bank J.P. Morgan has raised its projections of Apple's earnings through 2012 in expectation of continued growth from the iPhone and iPad.



I think you're wrong about iPhones. I think Droid is catching up and the stats you quote are Apple against Apple, not Apple against Droid.

Apple took the biggest chunk of smartphone revenues in 2010 against everybody. Now with Verizon as a partner, their market potential just expanded.


Tablets are so far toward full PC functionality that they simply cut a share of the laptop market. No huge growth of the pie there.

Apple's iPad is indeed cannibalizing the traditional PC market--and laptops in particular, we’re living in a post-PC era. The only “media tablet” shipping and selling in bulk right now is the iPad. It owns well over 90% of the tablet market. The iPad is showing that most people don’t need a PC for most things.

Nobody Predicted The iPad’s Growth. Nobody.
The iPad sold three times as much as the average tech blogger predictions, and five times as much as the average Wall Street analyst prediction.
Think about that the next time you see a prediction for anything in tech.
The newer it is, the less anybody knows.



Best hope for Apple there is a shot at expanding their footprint in the laptop market. Maybe a shot in the world market as a low-cost laptop, but I don't think even then. People who have one laptop only will want a cheaper one with a keyboard.

You have just defined the iPad as a low-cost laptop and an external keyboard is available for the purists.



Ask yourself, aside from designers, who NEEDS Apple's products to be efficient, versus buying inferior but sufficient goods?

People NEED computers, the iPad is cheaper and superior to all its competitors, in this case inferior is not sufficient.

[Ghost]

FWIW, my gloom-and-doom is not based on anything like a 225 year cycle, which strikes me as too specific to to support for prediction. Rather, it is based on observeable destruction of the currency, an observable banking crisis that hasn't really gone away but rather got kicked down the road with a bunch of new debt, and observable governance that forcibly pays for non-producing jobs, overpays for poorly-producing jobs, and raises the cost of competitive jobs that do produce.

If we were taking the necessary bitter pills (a return to sound money, 75+% shrinking of the public sector, grandfathering out the SS and Medicare/Medicaid entitlements, tax reduction) we'd STILL see the country get a lot lower standard of living. Just as a family lives high when running up credit card debt and lives modestly when paying it off.

But we aren't taking those necessary measures. Instead, we are massively increasing debt and future obligations pushed on the taxpayers. Some of the impact of this is 100% predictable: massive inflation. Parasitic public-sector spending has become a 60 lb tick on a 150 lb man. At least one of them isn't going to make it.

Some things are predictable, and some not. What is predictable here is that this economy, and the public sector spending that is killing it, are doomed to fail. What is not predictable is exactly what form that demise will take. Like a falling satellite, we know it will crash down, we just don't know exactly where.

I will state right now, on the record, that the debt and entitlement obligations we have today WILL ABSOLUTELY BE DEFAULTED ON. It is a metaphysical certainty. The only way to pay them is would be shocking new private sector growth (maybe 25 - 100% year over year for many years) which won't happen. Even crushing new taxes won't help, because though they help the deficit in the short term, they further kill the economy--the tick just sucking the remaining blood faster, in effect.

Which leaves two major options, or a combination of them, to deal with massive debt and entitlement obligations. One is outright default. The other is creation of more dollars out of thin air, mostly as credits with the Federal Reserve (printing is so last-Tuesday).

The reality is the politicians will almost certainly opt for the latter. Not sending Social Security checks is immediate disaster for them. So, they will default the sneakier way. They will create money. Now you'll get your check, and it will clear, but it won't help much because a hot dog will cost $10. Then $20. And so on.

Buizilla hit the nail on the head. This massive inflation is not some theoretical notion, it has already started. Gold and silver (and other things with real, intrinsic value) will continue to benefit. Not because they are moving up, but because the dollar is falling relative to them.

The keys to investing in this environment are assessing:

What things people will demand MOST in a highly-prioritized consumer market with diminishing wealth to make purchases
How to avoid having your wealth confiscated with ever greater taxation
What amount of self-reliance is needed (what you must DO for yourself versus what you will be able to buy) as things worsen
If you are in a sailboat race heading into a 4 knot current and the wind dies, you drop anchor. Instead of desperately searching for a gust of wind here and there, losing ground at 4 knots, suddenly you are GAINING ground on nearly everyone at 4 knots. That's what the gold and silver play is. An anchor against a falling dollar. As the economy sees more trouble as these massive debts are called upon for payment, successful businesses will be like the rare gusts of wind. Apple, for one, *might* be such a gust. But can you predict it AND time it? Or is the surer bet simply to drop anchor?

When the market starts to crash again, Wall St will have to raise cash to cover a lot of short positions. They will selloff some gold and silver in doing so, and it will drive prices down. I would buy all you can when this happens. Once that selloff is done, they will decouple from the market, and spike up as the market continues to fall. My money is precisely where my mouth is. I wish the outlook were better but I'd be lying if I told my friends anything other than what I believe to be true. And I will be happy and plenty comfortable if I am wrong.

But here's the thing. For all its history, the subject of economics usually comes with a bit of theory and a lot of explanations of why the theories didn't properly predict what happened. If you are looking for useful explanations of what has happened and what will yet happen, I highly recommend reading the Austrian economists. Murray Rothbard, Henry Hazlitt, Ludvig Van Mises. Here's what is key: they are the ones whose predictions actually matched what has actually happened.

[Ghost]

Ahead of Apple's quarterly earnings call on Apr. 20, investment bank J.P. Morgan has raised its projections of Apple's earnings through 2012 in expectation of continued growth from the iPhone and iPad.

Apple took the biggest chunk of smartphone revenues in 2010 against everybody. Now with Verizon as a partner, their market potential just expanded.

Apple's iPad is indeed cannibalizing the traditional PC market--and laptops in particular, we’re living in a post-PC era. The only “media tablet” shipping and selling in bulk right now is the iPad. It owns well over 90% of the tablet market. The iPad is showing that most people don’t need a PC for most things.

Nobody Predicted The iPad’s Growth. Nobody.
The iPad sold three times as much as the average tech blogger predictions, and five times as much as the average Wall Street analyst prediction.

Think about that the next time you see a prediction for anything in tech.
The newer it is, the less anybody knows.

You have just defined the iPad as a low-cost laptop and an external keyboard is available for the purists.

People NEED computers, the iPad is cheaper and superior to all its competitors, in this case inferior is not sufficient.

I think you have missed my point altogether about "surer bets." By your own logic, the leading edge of tech is unpredictable. The decline of the dollar is not. I have noted some risks for Apple, and also acknowledged it may be one of the select winners. Upside potential with plenty of downside risk. Precious metals have a different risk/reward profile. Tortoise and hare.

And as for the notion that "people need computers," I would recommend closer examination. For what do they "need" them in business, and how will those businesses fare? For what do they "need" them in personal use, and how will those consumers fare? And when contemplating how they will fare, one must compare to how they are doing today, and the computer industry's capacity today. And also consider what people and businesses HAVE now, and how they might scrape along on the cheap with what they have if cash gets tighter. Remember, Apple is trading at more than 18 times earnings. That model is typical, with investors anticipating future gains, but it has so much hope built in it can crash a lot on mere bumps in the road that challenge that hope.

If the US gets worse but the world surges ahead, Apple may thrive internationally. If the US gets worse and the whole world catches pneumonia, maybe not until after a few years of stock price collapse. Reward, and risk.

[Ghost]

I would argue that those examples represent a technology change, not necessarily a real estate trend. I'll bet Amazon and Google have acquired lots of commercial real estate. My former company had dealings with Google. The scope of the data centers that they have built and are building, in terms of building size, number of servers and disc drives, and electrical power consumed, is staggering.

I agree that Blockbuster and such are tech trend examples first, and commercial real estate examples second. But I also suspect commercial real estate is in for more hits based on lots of other reasons, though the tech trends tend to exacerbate this also. (Hmmmm, given that ticker symbol SRS has been in long decline, maybe it is about time to buy it. Shorting still scares me though, for timing issues, and inflation issues.)

But even if you think something is falling in value, the dollar decline is a huge factor that tends to drive the PRICE of everything up. If the dollar falls enough, PRICES of anything can go up even though their actual value is falling. A share of Blockbuster stock could go up in dollars, but the dollars you sold it for might not buy a hot dog anymore. And you'd have LOST value owning that stock, AND you'd have to pay capital gains on the dollar increase, which is just criminal. You lost, and had to pay taxes on a phony gain.

Everything is racing against everything else. And while this is ALWAYS true, some of the norms and conventional wisdom change when the vallue of the dollar is dropping so much more rapidly than people are used to.

[Marlin275]

I think you have missed my point altogether about "surer bets." By your own logic, the leading edge of tech is unpredictable. The decline of the dollar is not. I have noted some risks for Apple, and also acknowledged it may be one of the select winners. Upside potential with plenty of downside risk. Precious metals have a different risk/reward profile. Tortoise and hare.
And as for the notion that "people need computers," I would recommend closer examination. For what do they "need" them in business, and how will those businesses fare? For what do they "need" them in personal use, and how will those consumers fare? And when contemplating how they will fare, one must compare to how they are doing today, and the computer industry's capacity today. And also consider what people and businesses HAVE now, and how they might scrape along on the cheap with what they have if cash gets tighter. Remember, Apple is trading at more than 18 times earnings. That model is typical, with investors anticipating future gains, but it has so much hope built in it can crash a lot on mere bumps in the road that challenge that hope.
If the US gets worse but the world surges ahead, Apple may thrive internationally. If the US gets worse and the whole world catches pneumonia, maybe not until after a few years of stock price collapse. Reward, and risk.

As I stated before you can make money until the world collapses with a stop loss order on your growth stocks.

My good friend was also betting that everything would tank over the last year and has not made money.
He needed World War 3 to break out for his strategy to pay off.

[Ghost]

As I stated before you can make money until the world collapses with a stop loss order on your growth stocks.

My good friend was also betting that everything would tank over the last year and has not made money.
He needed World War 3 to break out for his strategy to pay off.

What did he do? I've been invested based on the falling dollar for 4 years plus and it's been dead on. But I avoided the temptation to short, which requires timing as well as anything else. (And is hugely dangerous in an inflationary environment, where you can bet on losses in value and be right, but see nominal, illusory gains in prices.) Shorting since the Dow hit 7000 would have gotten you killed. Is this what he did?

Just for the record, stop losses are a hair riskier than you make them out to be also. Set them too high and they just keep triggering as false alarms, sometimes locking you into a bunch of losses. Set them low enough and there is risk that on a really bad day you can get killed, selling FAR lower than the stop loss is set. Especially with today's massive computer trading. The flash-crash was an interesting example. If you are using them to protect against a large, sudden crash event, this is the one event where they are least likely to be effective. Still a good idea, don't get me wrong, but it is important to note they are FAR from foolproof.

[Marlin275]

What did he do? I've been invested based on the falling dollar for 4 years plus and it's been dead on. But I avoided the temptation to short, which requires timing as well as anything else.

Shorting was part of his strategy.



Just for the record, stop losses are a hair riskier than you make them out to be also. Set them too high and they just keep triggering as false alarms, sometimes locking you into a bunch of losses. Set them low enough and there is risk that on a really bad day you can get killed, selling FAR lower than the stop loss is set. Especially with today's massive computer trading.

Trailing Stop Loss Order is the best version I have found.



The flash-crash was an interesting example. If you are using them to protect against a large, sudden crash event, this is the one event where they are least likely to be effective. Still a good idea, don't get me wrong, but it is important to note they are FAR from foolproof.

I was watching the market during that whole event in disbelief.

The new circuit breakers would halt trading for five minutes on any S&P 500 stock
that rises or falls more than 10 percent
in a five minute period.

[Craig S]

Second, is real estate really "low?" While it is way down from the highs, we have tons of supply, tons of further looming foreclosures, rising underemployment, rising interest rates, and threats to drop the mortgage interest deduction. All are downward pressures on real estate prices. So, while I think it has fallen a lot, I only see it dropping more and more. (Except in DC, where it is still rising.)

Regards,

Mike

Hey Mike...Good thoughts. I'm a teacher (as long as it holds out) and a small investor...just have a few rent houses. I see real estate as always local. In this case, I'm betting on Houston, and I'm betting on inner city living...both for the long run. The supply is different - and fixed - in my stuff. I stay out of the other investments (other than wooden boats and the Nova!) ;cause I don't understand them. I know how to keep an old house going.

I'm not saying this to sway people to invest in real estate, only to point out I don't think all real estate is the same. Its all determined by the local market. And we haven't all felt the huge swings that other parts of the country felt.

Craig