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Passions in Poetry

How Protect Your Money from Inflation and Recession

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threadbear
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0 posted 05-24-2010 11:40 PM       View Profile for threadbear   Email threadbear   Edit/Delete Message      Find Poems  View IP for threadbear

  There is certainly cause for alarm for the value of all major nation currency in the wake of the Euro impending crash, the hyper inflation of the US, the re-emergence of China's financial power, and the devaluing of both stocks and real estate (both thought to be ways to 'save money' in the long term.)

  There MUST be a way to keep the limited money we have, safe, in poor economic times such as recession and or inflation following it.    The problem is:  the safer havens have been proven to be unsafe.  Government and municipal bonds (notes that you can buy that loan either the Fed or city govt some money) were traditionally highly touted as a hedge against losing money.  But cities are going bankrupt, and not just small ones.  The 12 trillion dollar national debt will be $20 trillion in 10 years, so federal bonds are now suspect.   The logic in buying government bonds was that the government will NEVER fail, thus making the purchases goof proof.  Not so today.

So what is the average schmoe to do with his spare change?  I have researched this topic till I'm blue in the face.  NOTHING is safe.  There are NO great investments in the case of bad inflation or recessions anymore.  The financial models were smashed during the initial real estate quagmire.  They were all setup with the idea that insider trading wouldn't be part of the safety equation in figuring out what a 'safe' investment was.  The banks touted real estate as a safe place to store money, then bet AGAINST housing gaining money.  These are called 'derivatives.'  George Soros made billions betting against the market in this way.   Basically, it is a casino gamble:  the purchaser is saying that the value of something will go down, or not rise above a certain point.  There's always takers that will take that bet.  

But not all is lost:  here are some short term hedges against inflation.
- TIPS  Treasury Inflation Protected Securities are government bonds with interest rates that are set, in part, based on inflation.  If inflation rises, like it is doing, the rates of yield to you, result in a greater return.  This originally was used by Wall Street fat cats, but in 1997 the law was expanded to include all investors be included.
- GOLD ETF's - now, before you groan here me out:  if you had bought gold 2 years ago, you would have made DOUBLE your money.  But buying gold itself is difficult.  Most buyers have certificates of gold on deposit, and don't have the gold physically in their possession.    People get around this by stamping gold, and making it rare, and selling it as rare coins or issues.  These are most of the 'gold commercials' you see on the TV.
Gold ETF's are the next best thing.  ETF's are Exchange Trade Funds that group a similar buying strategy by buying a certain percentage of certain companies:  a Gold ETF fund will have some mining companies, gold itself, and investors in it's mutual type fund portfolion.  The major difference is that ETF's are traded daily on the Stock market, just like any one stock would be, even though it's made up several company holdings.  This very fact of diversity within a subgroup keeps the ETF's ratings by Morningstar very high (4-5 out of 5 in some cases.)

- Buy some stocks in the biggest commodity market, such as Proctor and Gamble.  Theory is that only the largest companies that sell MUST HAVES will make good profits.  Search and find out some companies that are well known, stable, and sell a product(s) that is/are universally needed.

-  Convert questionable purchases into cash.  IF cash loses it value, it will only lost 10-20% maximum, but stocks may lose up to 75% of their value in a bad crash.
- do not start a business during this period of inflation or recession
- do not buy an expensive house during this period of inflation
- do not buy a new car during this period, unless absolutely necessary.
- stop paying bills by credit card, and if possible, do not use for discretionary purchases
- don't feel you have to have EVERY new compu-gadget.  You don't.
- don't put your money in European stocks at the moment.  They are a good year off from rebounding.
- don't invest in any of the fields that the government has recently started owning: such as car markets, green technology, banks, etc.   These are artifically propped up markets and real value of these are realistically impossible to discern, at this moment.
- if you HAVE to ask yourself the question: Can I afford it?  ....then....you can't afford it.

I spent months working this list, and I hope it is of some value to y'all.
Thanks for indulging me,
Jeff
Ringo
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1 posted 05-29-2010 09:52 AM       View Profile for Ringo   Email Ringo   Edit/Delete Message      Find Poems  View IP for Ringo

I believe I will invest in beer.
It might only be a short term investment; however, I will get a bit of use out of it before it leaves me with nothing.

Life's journey is not to arrive at the grave safely in a well preserved body, but rather to skid in sideways, totally worn out, shouting, "WHAT A RIDE

Denise
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2 posted 05-29-2010 11:50 AM       View Profile for Denise   Edit/Delete Message      Find Poems  View IP for Denise

Thanks for your research on this, Jeff. It will prove helpful to those who still have any money left for investment purposes, and I know a couple who still do who are doing essentially what you have suggested.

The rest of us, like Ringo, will be better off spending the pennies left in our purse each week on the small pleasures in life (I've been thinking particularly of a professional manicure lately), because they will soon be vanishing as well by way of the coming inflation, wage freezes, and tax increases.
serenity blaze
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3 posted 05-29-2010 11:08 PM       View Profile for serenity blaze   Email serenity blaze   Edit/Delete Message      Find Poems  View IP for serenity blaze

Dude--is that a leisure suit?!?



Denise
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4 posted 05-30-2010 11:53 AM       View Profile for Denise   Edit/Delete Message      Find Poems  View IP for Denise

I think the manicure will have to wait. I really need to get a haircut this month!
N|D|N|C|Lost-Poet
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5 posted 06-01-2010 03:02 AM       View Profile for N|D|N|C|Lost-Poet   Email N|D|N|C|Lost-Poet   Edit/Delete Message      Find Poems  View IP for N|D|N|C|Lost-Poet

So.. Best bet is to buy all the gold you can and bury it in your backyard?
threadbear
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6 posted 06-01-2010 08:58 PM       View Profile for threadbear   Email threadbear   Edit/Delete Message      Find Poems  View IP for threadbear

no...geez...not a leisure suit.
It's a reversable Izod jacket; blue on one side, and khaki on the other.  

just trying to help y'all during trying times.

I'm taking a hiatus from the Alley for a while, for political reasons.
Denise
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7 posted 06-01-2010 09:05 PM       View Profile for Denise   Edit/Delete Message      Find Poems  View IP for Denise

I appreciate your helpful tips, Jeff. Many people can protect themselves using this information. As I said, I know a couple who are doing just that with their money and investments.

For the rest of us the best we can do is maybe try to stock up on non-perisables, maybe a little extra each trip to the market. Bad times are coming. Best to get what you can now.

We used to laugh at our grandparents stashing money in the mattress and around the house, using teabags two or three times, being frugal in other ways. Doesn't seem so funny anymore.

Balladeer
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8 posted 06-01-2010 10:25 PM       View Profile for Balladeer   Email Balladeer   Edit/Delete Message      Find Poems   Click to visit Balladeer's Home Page   View IP for Balladeer

Wait for me, Jeff....I'll bring the fishin' poles!
 
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