Where would you put cash you'll need in five years?

14 posts / 0 new
Last post
switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Where would you put cash you'll need in five years?

I intend to buy a piece of land with a house on it in about five years, assuming the real estate market hits bottom around then.  I have some cash set aside for this purpose.  Originally I was very concerned about hyperinflation, so I thought I would buy some more PM with that cash.  Now, however, deflation seems likely in the short term, and cash is probably a better store of value in deflation than gold and silver.

The problem is that it's difficult to know how long deflation will last before inflation kicks in.  I haven't read many predictions on this - perhaps because no one really knows :)  I guess my concern is that I keep this money in cash and then inflation kicks in, and by then the physical supply of PM in the US is even tighter than it is today.

Whenever I read Mish's blog I get the sense we're in for a long period of deflation lasting several years.  But then I read something from someone in the Austrian School and it looks like inflation is imminent.  I've learned an incredible amount in the past six months, but I still don't feel qualified to really make an informed guess.  Then again, people that have been studying this their whole lives have wildly different opinions - so I don't feel so bad. 

Five years isn't exactly short-term, but it's not long-term either.  If it was long-term I'd just buy PM and be done with it.  If it was one or two years I'd keep it in cash in a few different good banks.  But I'm not sure about the five year time frame.  What do you think?  

dcary's picture
dcary
Status: Bronze Member (Offline)
Joined: May 31 2008
Posts: 25
Re: Where would you put cash you'll need in five years?

Hedge you bets.  Some cash is good.  Some PMs are good.  My frustration at the moment is even finding PMs at a reasonable price to buy.  Whenever the market price of gold falls a bit, the premiums seem to go up some too...assuming you can even find anything on the shelves.

Short term deflation,,,longer term inflation if history has value.

Trevor's picture
Trevor
Status: Member (Offline)
Joined: Sep 10 2008
Posts: 5
Re: Where would you put cash you'll need in five years?

 

1/3 in Gold

1/3 in Energy

1/3 in cash

 

jrf29's picture
jrf29
Status: Gold Member (Offline)
Joined: Apr 18 2008
Posts: 453
Re: Where would you put cash you'll need in five years?

You'll drive yourself mad attempting to predict what the market will do timewise, because the reality is that nobody knows.  Even when all of the thories say that one thing should happen, the opposite will, because the short term markets are driven by human psychology, where everybody is second guessing everybody else. 

We're driving deeper into a recession, so there will be a tendency toward asset deflation.  The governments of the world will attempt to reverse this trend with monetary inflation.  Will they be sucessful in the short term?  Who knows!

Over the longer term, it is almost certain that we are looking at a devaluation of the dollar and monetary inflation, as well as pure asset inflation driven by increasingly scarce resources.  When exactly will that trend become more dominant?  Who knows!

In the short term, almost anything can happen, since the economy of the world is like the weather: a million butterfly effects make the near future impossible to predict on theory alone.  Five years is sort of medium-term, as you say.

So, inflation or deflation in five years?  If I knew I was going to use the money in 5-7 years, I would hedge my bets.  The fact that you'll need it after a definate time period is the key here.  Keep some money in cash (high yield CDs - try Everbank) and some in precious metals.  You'll always sleep well at night knowing that you're protected on both sides.  What percentage?  You'll have to decide that for yourself, because nobody else wants the responsibility of being wrong!   So, if you already have a stake in precious metals that equals or exceeds the amount you want to keep in them, then keep that money there (since you'd be selling at a great loss if you unloaded today), and put the rest in cash secutities.  If you haven't taken a stake in precious metals, then the next year or so should keep them priced very attractively.

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Where would you put cash you'll need in five years?

How about some commodity ETFs like the Elements funds? 

I have RJF, will get some others.

 

SG

Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 561
Re: Where would you put cash you'll need in five years?

Switters,

 There is no "answer" to your question, as I suspect you know.  I want there to be an answer too, so don't feel bad.

A few years ago I got really really into poker.  I read everything I could get my hands on and played countless hours.  I felt that I would have an advantage by studying -- and I did have an advantage.  But that didn't change the fact that every single poker play comes down to an educated guess.

You have an advantage because you are thinking and studying.  But you can only make an educated guess.

 (Having said all that, I wonder if you might want to buy some PMs simply because it might be better to be five years early than one day too late).

Hope this is helpful.

john50's picture
john50
Status: Bronze Member (Offline)
Joined: Sep 2 2008
Posts: 74
Re: Where would you put cash you'll need in five years?

You can make good money shorting stock indexes using an ETF with 1:2 leverage. Now is a great time to jump on the next slide lower for S&P 500 and others.

THe sign that it has reached bottom is weeks of consolidation, followed by a rise in copper - it is the first thing to go into production as factories start to pick up again. Copper just slide below #2/pound this week, lowest since 2005 and still dropping. The end of defaltion could be a few months or next year or two.

When prices begin to move again, bullion is will  lead earlier than stocks, copper first, then silver, then gold, if history has follows the same patterns. Oil and Gas are a good alternative to bullion, more upside IMHO.

Real Estate, look for a bottom in 2014-16 range according to demographics and cycle studies. Be patient.

JMCSwan's picture
JMCSwan
Status: Bronze Member (Offline)
Joined: Oct 19 2008
Posts: 40
Re: 'Making Good Money' on the 'stock' exchange...

john50, (Wed, 10/22/2008 - 19:42)

About your ideas for 'making good money'... on the stock exchange...

 Thanks, but no thanks! But of course, I wouldn't, even if I could, stand in others ways to go out and make their profits on the Slavery Exchanges, and go about raping 'Mother Earths' resources to make products that very few people 'need'.... THE exponential growth HOCKEY STICK CURVE for that mentality, going to plausibly result in humanity's extinction....

I've never supported the hypothesis, that 'humanity' was anything remotely close to what I consider 'human'; and I doubt the beings on the rest of the worlds planets observing the behaviour of 'humanity' on planet earth, could care one faggot if we all blow ourselves up..

I hope for your sake, buddy; that Nietzche is indeed correct; and that GOD (in whatever form, s/he may be) is indeed dead, and that there ain't no such thing as judgement day, or karma...... cause if there is; then there are one hell of allot of 'human' beings who are going to find themselves ****ed (pardon expression), by their own greed, and failure to use the capacities for reason, emotion and psychological awareness, that 'God' gave them....

Good Luck

 

 

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: Where would you put cash you'll need in five years?

Thanks to everyone for sharing your suggestions and ideas.

Here's my current situation, just to make it a bit more clear.  My wife and I are out of debt except for a small size student loan with a fixed 3% rate.  Because I am in graduate school now and will be for the next two years (finishing a degree in acupuncture and herbal medicine), the loan is in deferment and does not accrue interest during that time.  Even when payments start, they are not onerous at all and I don't think I'll have a problem making them even during deflation/inflation.

We are probably over-allocated in precious metals as it stands.  When we discovered Chris's site about six months ago and started reading in earnest about our current economic situation, we became convinced that inflation or hyperinflation was around the corner.  So we put most of our cash in PMs.  We do have three or four months of living expenses in cash on hand (along with a couple of months of food).

The third piece is that we own some land that we are looking to sell right now, because it's in a place that isn't desirable for us over the long-term.  If we can sell that land, we will keep that in cash or perhaps a combo of cash/energy.  The land is in Canada, and we were thinking of keeping the cash in Canadian dollars - but the Canadian dollar has taken a huge hit recently and I don't really know enough about foreign currency investing to have a sense of what foreign currencies are best.  We've considered the Merkx fund, or some other basket of currencies, but I need to do more research here.

So, we're crossing our fingers that precious metals recover by 2014-2016 (the predicted bottom of the housing market) and we can use them to buy a house.  In the meantime we're hoping that we can sell the land and convert that to cash as a deflation hedge.  We have no control over either of those events so I'm keeping my fingers crossed! 

 

 

jrf29's picture
jrf29
Status: Gold Member (Offline)
Joined: Apr 18 2008
Posts: 453
Re: Where would you put cash you'll need in five years?

Switters,

Sounds perfect, IMO.  If you're in a position where you can buy land without leverege, you're in a good spot.  Even if you're already invested in precious metals, today's prices of PM are very attractive, and they are a legitimate buying opportunity.  But, the fact that you'll need the money in a definate period of time should control your actions, and, alas, there's no way to time the commodity markets, even if you know you'll win over the long-term.

 So keeping the rest in cash is the way to go.  If you're worried about any one country's currency, try a mixed basket foreign currency CD (I know Chris has mentioned Everbank in the past, and they have attactive rates).

 As far as your student loan, remember that debts become very easy to pay off in times of inflation, hence inflation's attractiveness to central banks.  Especially with an unsecured loan at a fixed interest rate, you should have no worries at all, like you said.

rlee's picture
rlee
Status: Silver Member (Offline)
Joined: Sep 18 2008
Posts: 148
Re: Where would you put cash you'll need in five years?

In regards to buying land - house on it or not - consider the future is a bigger picture than just real estate bottoming out.  Prices are low right now, and while not as low as they will ever get, if you will borrow to buy it the rates to do so are very low.  I wouldn't advocate going to some big bank, but many local organizations that don't sell their notes could be an OK bet.  The reasoning is this:  While the price for the land may be cheaper later on, the buying power of the dollar may be that much less, thus you don't get a deal, and the chunk of property you love now won't be for sale.  Also, if you're borrowing later, the interest rates you pay will almost certainly be higher than you can grab today.  Also to consider is the location of this land, the taxes and other expenses to keep it, and if that's were you intend to be living for the long haul.

Good luck! 

krogoth's picture
krogoth
Status: Platinum Member (Offline)
Joined: Aug 18 2008
Posts: 576
Re: Where would you put cash you'll need in five years?
I worry about real estate investment in general because even though you may save big on the up front price, mortgages are getting tight stopping purchasing. The other bad thing is I believe in the future, depending on where you live, the state and federal taxes you will pay for property or a home will be so high, it will be like paying a mortgage and rent at the same time. This is the first time I think we have ever faced the fact that real estate is no longer a safe bet as it has always been.
Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Re: Where would you put cash you'll need in five years?

I would put most of it in US Treasury Bills and US Short Term Notes for the duration.

or a Money Market Fund that holds US Treasury Bills exclusively.

Stay away from Bank products.   The FDIC probably keeps its own money in T Bills anyway. 

Salis's picture
Salis
Status: Member (Offline)
Joined: Oct 25 2008
Posts: 3
Re: Where would you put cash you'll need in five years?

Gold/silver bars, stocks if you believe in the system as they are vastly undervalued and have been firesaled by the collapsing hedge funds.  You will never see this level of panic or liquidation again.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments