Where do we invest our money?

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hucklejohn's picture
hucklejohn
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Where do we invest our money?

About 18 months ago I began a forum topic by the same name.  One responder, JAG, appropriately rephrased the question, "How does one protect the purchasing power of their savings in this crazy market enviroment?"  (And it's crazier now!)  By the way I am constantly amazed at the usually optimistic tone of most mainstream investing sites like Vanguard & others.  They appear to believe every Federal Reserve press release, have learned nothing from the 2008 crisis, and see no debt or dollar crisis ahead.  Rarely does one read anything that does not deviate from mainstream (and usually wrong) economic thought.  Traditional asset allocation models are followed. "Hold the course" is the slogan.   For example, in today's environment why in the world would anyone allocate funds to long term government bonds?     

Anyway getting back to the main purpose for my topic.  Where do we invest our money to protect the purchasing power of our our assets, given the continual debasing of the dollar?  Certainly investing in precious metals is one option.  One option is to handle one's own investments.  Others are limited by an applicable 401k plan.

However, whether their assets are great or small, many would prefer for whatever reason to have someone else do the managing.  This could be a mutual fund, a brokerage account or a managed account.  That is the purpose of this forum topic.

One example of a mutual fund whose objective is maintaining purchasing power is Permanent Portfolio (PRPFX).

Sitka Pacific Capital Management I believe has some type of managed commodity account.

(I have no interest or assets in either of these two organizations).

Any other suggestions or thoughts regarding this topic?  (And don't forget to do your own due diligence on any of the sources included here.)

Phil Williams's picture
Phil Williams
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Leeb Capital Management

I have some of my assets allocated to LCM's "Peak Resources" fund. It has individual stocks in commodity based companies such as: gold and silver miners, bullion, oil and gas producers, coal producers, rare earth miners, etc...

 

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Johnny Oxygen
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Re: Leeb Capital Management

Stephen Leeb?

 

I think its ironic that whomever posted this on YouTube titled it:

Steve Leeb Points Out The Fallacies of Peter Schiff's Senseless Liquidationist Theories

I think history speaks for itself here. I'm curious as to why you value Leebs judgement.


Phil Williams's picture
Phil Williams
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Posts: 337
Johnny Oxygen wrote: Stephen
Johnny Oxygen wrote:

Stephen Leeb?

 

I think its ironic that whomever posted this on YouTube titled it:

Steve Leeb Points Out The Fallacies of Peter Schiff's Senseless Liquidationist Theories

I think history speaks for itself here. I'm curious as to why you value Leebs judgement.


Johnny,

Yeah, he looks like a hyperactive moron on the video, but he's really not good on TV. It's also impossible to know if his point was wrong, given that we don't know how things would be w/o the bailout. Having said that, I was against, but if the bailout kicked the can down the road and allowed me more time to prepare, then maybe it was for the best. If you haven't read any of his books, they are right on the money. I am in total agreement on his thesis on the interconnection of commodities and future shortages. His book "Game Over" is really interesting.

I've read a couple of Schifff's books as well, and I agree with a lot of what he has to say. Of course everyone made a big deal about how horribly Schiff's clients did in 08'. Ultimately, as much as I like Peter Schiff, I think he underestimates peak oil and the shortages in commodities we are facing. I get the impression from him that the free market with small gov't will fix all after some pain. I'm all for small gov't, but free market capitalism will not put fish back in the ocean, oil and minerals in the ground, or topsoil back where it belongs.

All in all, I feel that he understands the dire situation we are facing in regard to natural resources better than any other advisor I have come across. (I am sure someone else is better, but this is my point of view) His fund gives me exposure to those resources.

Thanks

Phil    

Johnny Oxygen's picture
Johnny Oxygen
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Re: Johnny Oxygen wrote: Stephen

Touche'

"hyperactive moron" Laughing

I agree with your assessment of Schiff but in regards to the video, and subsequent videos, I think that Schiff understood the big picture at that time better than Leeb.

Leeb's response was the same as many others at the time which was to do whatever to stop things from collapsing. To see someone defend so vehemently that position really gets my back up. It makes me think that if his judgement is so myopic on the largest financial, political an social event in sixty years then maybe so is his perspective on commodoties.

I am biased though. I just can't stand the guy. Laughing

 

 

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patrickhenry
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Hucklejohn...This article

Hucklejohn...This article addresses the question of what to invest in during the greater depression 

http://www.caseyresearch.com/editorial.p...

 

By Doug Casey, The Casey Report

Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed.

The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, largely because they’re essential to everything. Retail prices are generally the last to move, partly because the labor market will remain soft and keep that component down, and partly because retailers cut their margins to retain customers and market share.

We are in a financial no-man’s land. What you should do about it presents some tough alternatives. “Saving” is compromised because of depreciating currency and artificially low interest rates. “Investing” is problematical because of a deteriorating economy, unpredictable and increasing regulation, rising interest rates and wildly fluctuating prices. “Speculation” is the best answer. But it may not suit everyone as a methodology.

There are, however, several other alternatives to dealing with the question “What should I do with my money now?” – active business, entrepreneurialism, innovation, “hoarding” and agriculture. There’s obviously some degree of overlap with these things, but they are essentially different in nature.

Active Business

Few large fortunes have been made by investing. Most are made by creating, building and running a business. But the same things that make investing hard today are going to make active business even harder. Sure, there will be plenty of people out there to hire – but in today’s litigious and regulated environment, an employee is a large potential liability as much as a current asset.

Business itself is seen as a convenient milk cow by bankrupt governments – and it’s much easier to tap small business than taxpayers at large. Big business (which I’ll arbitrarily define as companies with at least several thousand employees) actually encourages regulation and taxes, because their main competition is from small business – you – and they’re much more able to absorb the cost of new regulation and can hire lobbyists to influence its direction. Only a business that’s “too big to fail” can count on government help.

It’s clearly a double-edged sword, but running an active business is increasingly problematical. Unless it’s a special situation, I’d be inclined to sell a business, take the money, and run. It’s Atlas Shrugged time.

Entrepreneurialism

An entrepreneur is “one who takes between,” to go back to the French roots of the word. Buy here for a dollar, sell there for two dollars – a good business if you can do it with a million widgets, hopefully all at once and on credit. An entrepreneur ideally needs few employees and little fixed overhead. Just as a speculator capitalizes on distortions in the financial markets, an entrepreneur does so in the business world. The more distortions there are in the market, the more bankruptcies and distress sales, the more variation in prosperity and attitudes between countries, the more opportunities there are for the entrepreneur. The years to come are going to be tough on investors and businessmen, but full of opportunity for speculators and entrepreneurs. Keep your passports current, your powder dry, and your eyes open. I suggest you reform your thinking along those lines.

Innovation

The two mainsprings of human progress are saving (producing more than you consume and setting aside the difference) and new technology (improved ways of doing things). Innovation takes a certain kind of mind and a certain skill set. Not everyone can be an Edison, a Watt, a Wright or a Ford. But with more scientists and engineers alive today than have lived in all previous history put together, you can plan on lots more in the way of innovation. What you want to do is put yourself in front of innovation; even if you aren’t the innovator, you can be a facilitator – something like Steve Ballmer is to Bill Gates. It will give you an excuse to hang out with the younger generation and play amateur venture capitalist.

This argues for two things. One, reading very broadly (but especially in science), so that you can more easily make the correct decision as to which innovations will be profitable. Two, building enough capital to liberate your time to try something new and perhaps put money into start-ups. This thinking partly lay in back of our starting our Casey’s Extraordinary Technology service.

Hoarding

In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway.

We’ve previously dismissed the foolish and anachronistic idea of saving with dollars in a bank – so what can you save with, other than metals? The answer is “useful things,” mainly household commodities. I’m not sure exactly how bad the Greater Depression will be or how long it will last, but it makes all the sense in the world to stockpile usable things, in lieu of monetary savings.

The things I’m talking about could be generally described as “consumer perishables.” Instead of putting $10,000 extra in the bank, go out and buy things like motor oil, ammunition, light bulbs, toilet paper, cigarettes, liquor, soap, sugar and dried beans. There are many advantages to this.

Taxes– As these things go up in price and you consume them, you won’t have any resulting taxes, as you would for a successful investment. And you’ll beat the VAT, which we’ll surely see.

Volume Savings –When you buy a whole bunch at once, especially when Walmart or Costco has them on sale, you’ll greatly reduce your cost.

Convenience –You’ll have them all now and won’t have to waste time getting them later. Especially if they’re no longer readily available.

There are hundreds of items to put on the list and much more to be said about the whole approach. The idea is basically that of my old friend John Pugsley, which he explained fully in his book The Alpha Strategy. Take this point very seriously. It’s something absolutely everybody can and should do.

Agriculture

During the last generation, mothers wanted their kids to grow up and be investment bankers. That thought will be totally banished soon, and for a long time. I suspect farmers and ranchers will become the next paradigm of success, after being viewed as backward hayseeds for generations.

Agriculture isn’t an easy business, and it has plenty of risks. But there’s always going to be a demand for its products, and I suspect the margins are going to stay high for a long time to come. Why? There’s still plenty of potential farmland around the world that’s wild or fallow, but politics is likely to keep it that way. Population won’t be growing that much (and will be falling in the developed world), but people will be wealthier and want to eat better. So you want the kind of food that people with some money eat.

I’m not crazy about commodity-type foods, like wheat, soy and corn; these are high-volume, industrial-style foods, subject to political interference. And they’re not important as foods for wealthy people, which is the profitable part of the market. Besides, grains are where everybody’s attention is directed.

But there are other reasons I’m not wild about owning any amber waves of grain. Anything you want to plant will practically require the use of a genetically modified (GM) seed from Monsanto. I’m not sure I really care if it’s GM; all foods have been genetically modified over the millennia just by virtue of cultivation. And $1 paid to Monsanto typically not only yields the farmer $5 of extra return, but produces lots of extra food – which helps everybody. But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure. This is a subject for another time, but it’s a thought to keep in mind.

In any event, agricultural land is no longer cheap. But I don’t suggest you look at thousands of acres to plant grain. Niche markets with niche products are the way to fly.

I suggest up-market specialty products – exotic fruits and vegetables, fish, dairy and beef. The problem is that in “advanced” countries – prominently including the U.S. – national, state and local governments make the small commercial producers’ lives absolutely miserable. Maybe you can grow stuff, but it’s extremely costly in terms of paperwork and legal fees to sell, especially if the product is animal based – meat, milk, cheese and such. Niche foods are, however, potentially a very good business. Eternal optimist that I am, I see one of the many benefits of the impending bankruptcy of most governments as again making it feasible to grow and sell food locally.

Above all, though, this isn’t the time for business as usual. You’ll notice that “Working in a conventional job” didn’t occur on the list above. And I pity the poor fools working for some corporation, hoping things get better.

ao's picture
ao
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I concur with Johnny O
zeroenergy21 wrote:

[Yeah, he looks like a hyperactive moron on the video, but he's really not good on TV. It's also impossible to know if his point was wrong, given that we don't know how things would be w/o the bailout. Having said that, I was against, but if the bailout kicked the can down the road and allowed me more time to prepare, then maybe it was for the best. If you haven't read any of his books, they are right on the money. I am in total agreement on his thesis on the interconnection of commodities and future shortages. His book "Game Over" is really interesting.

Leeb is brilliant but he's also an idiot (we've all met and know people of this ilk).  He's one of those savants who often can't see the forest for the trees.  He's been wrong as much as he's been right.  My favorite is his over-the-top recommendation of Enron immediately before iits nosedive.  Need I say more?

h2oBoy's picture
h2oBoy
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Posts: 52
Stephen Leeb

Steve Leeb Points Out The Fallacies of Peter Schiff's Senseless Liquidationist Theories

I think history speaks for itself here. I'm curious as to why you value Leebs judgement.

Wow, what an emotionally charged exchange. I actually follow both Peter and Stephen as well as others including Automatic Earth. However, Since March 09 I have totally invested my $6 figure IRAs in Leeb's Real World Investing. I've followed their recommendations on stocks and timing, literally. From March 2009 through May 2011 my account grew 186%. Only recently have I gone to 40% cash, 30% bullion and coins, and 30% Leeb stocks to protect my earnings (following CM's advice). Uncertainties abound everywhere.

Best of luck to us all and my greatest thanks to CM and all his work.

David

deepsky4565's picture
deepsky4565
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Posts: 3
Investing advice

Sorry to bring up an old thread, but it seemed better than starting a new one. I'm looking to get some money next year, and if things haven't hit the fan yet, I'd like to educate myself on investing, stocks, commodities, and the like. My goal is to protect and grow the capital if possible and change careers to one that is more community minded, and healthier, but probably a lot lower paying. My friend has done Investools and wants me to do that, but I would like some advice from anyone here that has any to offer. Thanks!

SteveW's picture
SteveW
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Posts: 490
Investools

I'm not familiar with investools but a quick google shows it costs $699 and then $59 a month. I think you have to realise that outfits like investools are in business to sell their course materials and have no interest in your investing success. However as a TD-Ameritrade product it is probably a useful educational program as well as an entry into the TD-Ameritrade brokerage. OTOH, almost every online broker includes tools on their website that are freely available. At a first year cost of $1407 you'll need a $140,000 portfolio for the marginal cost of the course to be 1% or a $70,000 portfolio at 1% for the ongoing annual charge.

If you are a complete neophtye and don't know the difference between common, preferred stocks and bonds then you need some basic education. Otherwise if you have some basic education and are comfortable handling your own account I don't see the need for any course since it might merely result in you entering an area for which you are unprepared. No course is going to make you successful since that depends upon yourself, your knowledge, insight and luck.

There is also a a wealth of information available online including some very savvy investors on this site who are prepared to share their opinions.

Welcome to the site and good luck with whatever you decide.

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