Post: #51

(01-25-2014 03:51 PM)worldwidetraveler Wrote:  

(01-25-2014 03:23 PM)Tail Gunner Wrote:  Inflation causes investors to engage in increasingly riskier investing behavior to preserve the ever-declining value of their capital. Usually, inflation causes a bubble, or some other economic catastrophe, that wipes out a high percentage of a nation's wealth.

There is a lot of money to be made in that situation if you are positioned correctly.

I also think that bubbles are creating not just from inflation but also from greed.

I saw this during our last real estate bubble. Hell, I tried to talk this one guy out of purchasing 8 properties thinking he was going to flip them in a couple of months. He got stuck with them when it crashed. All with mortgages.

That guy wasn't taking his chances because he was afraid, he was doing it out of greed.

I don't really feel bad when people lose out because they let their greed get the best of them.

Exactly. I agree. But that result of greed should also apply to bankers and other financial institutions.

Capitalism self-corrects the markets. Crony capitalism distorts the markets -- and rewards the stupid and greedy.

Post: #52

The stock market is the best investment for people who really have the discipline to just buy and hold, and drop any daydreams about 'beating the market'. Just grab a few index funds and leave it at that.

But if you're the kind of person who has a 'gambler's itch' or whatever, it's better to stay away from the stock market. To beat the markets you really need to study them full time and even most people who do that don't succeed. If you can't take the stock market for what it is, a reliable way to get 5-10% a year returns over the long run, then just keep your money in the bank.

Post: #53

(01-25-2014 04:26 PM)Glock Wrote:  

(01-25-2014 02:32 PM)scorpion Wrote:  

(01-25-2014 02:17 PM)WestCoast Wrote:  Inflation is only bad if you don't own assets.

If you don't get that statement you don't understand how the economy works.

Inflation is the greatest thing ever created.

Lol at your comments on trading fees if you think your $7 charge for purchasing 1,000,000 shares of spy is making Wall Street rich you don't know anything about the street. Your entire post is based on how Wall Street was run 10-20 years ago. It's like you're a history professor who didn't bother catching up to today. You can still buy shares of companies without even giving one cent to Wall Street but you obviously don't know anything about investing.

Your post reeks of a lowly college professor.

You guys talk about 0.05% fees but then don't complain once when you have to pay for using a moneygram/ship a package etc. Straight up nonsense.

It kind of says it all that you think inflation is the greatest thing ever created. Lets put that another way: the steady erosion in value of a man's earned income is the greatest thing ever.

Who could actually say something like that with a straight face? Only a banker. Why? Because the banker makes his money from other peoples' money. With inflation present, the banker has a much larger pile of money to play with, because people are forced to speculate ("invest") their money to prevent it from being eroded by inflation.

And surely, as a Wall Street guy you understand the power of percentages. Half a percent seems trifling, but on a big enough pool of money (i.e. the sum value of the market), half a percent generates an enormous return. Even more so when you can apply that half a percent every year as a management fee (and half a percent is very low as far as management fees go) or simply by churning people through different funds. Come on man, don't try to bullshit here. You know how the game is played. It's about getting as much money on the table as possible and then figuring out the least risky ways to grab a percentage of it.

Inflation is a hidden tax by the government. By increasing the money supply -- effectively printing money and spending it -- the government commensurately devalues all the assets that are denominated in that money.

Inflation destroys wealth; it is a terrible, awful thing. I don't agree with the people on the forum who seem to think that inflation is a good thing. There's a huge economics literature decrying the evils of inflation, and it is correct.

Sorry but this is a very media-friendly understanding of economics and inflation.

Inflation is not the printing of money. The printing of money is a byproduct of inflation.

Inflation, in its simplest explanation, is caused by economic growth. Inflation in some degree is 100% necessary. Hyperinflation is another story but to say that "inflation=bad" is misinformed.

Post: #54

(01-25-2014 08:15 PM)thedude3737 Wrote:  

(01-25-2014 04:26 PM)Glock Wrote:  

(01-25-2014 02:32 PM)scorpion Wrote:  

(01-25-2014 02:17 PM)WestCoast Wrote:  Inflation is only bad if you don't own assets.

If you don't get that statement you don't understand how the economy works.

Inflation is the greatest thing ever created.

Lol at your comments on trading fees if you think your $7 charge for purchasing 1,000,000 shares of spy is making Wall Street rich you don't know anything about the street. Your entire post is based on how Wall Street was run 10-20 years ago. It's like you're a history professor who didn't bother catching up to today. You can still buy shares of companies without even giving one cent to Wall Street but you obviously don't know anything about investing.

Your post reeks of a lowly college professor.

You guys talk about 0.05% fees but then don't complain once when you have to pay for using a moneygram/ship a package etc. Straight up nonsense.

It kind of says it all that you think inflation is the greatest thing ever created. Lets put that another way: the steady erosion in value of a man's earned income is the greatest thing ever.

Who could actually say something like that with a straight face? Only a banker. Why? Because the banker makes his money from other peoples' money. With inflation present, the banker has a much larger pile of money to play with, because people are forced to speculate ("invest") their money to prevent it from being eroded by inflation.

And surely, as a Wall Street guy you understand the power of percentages. Half a percent seems trifling, but on a big enough pool of money (i.e. the sum value of the market), half a percent generates an enormous return. Even more so when you can apply that half a percent every year as a management fee (and half a percent is very low as far as management fees go) or simply by churning people through different funds. Come on man, don't try to bullshit here. You know how the game is played. It's about getting as much money on the table as possible and then figuring out the least risky ways to grab a percentage of it.

Inflation is a hidden tax by the government. By increasing the money supply -- effectively printing money and spending it -- the government commensurately devalues all the assets that are denominated in that money.

Inflation destroys wealth; it is a terrible, awful thing. I don't agree with the people on the forum who seem to think that inflation is a good thing. There's a huge economics literature decrying the evils of inflation, and it is correct.

Sorry but this is a very media-friendly understanding of economics and inflation.

Inflation is not the printing of money. The printing of money is a byproduct of inflation.

Inflation, in its simplest explanation, is caused by economic growth. Inflation in some degree is 100% necessary. Hyperinflation is another story but to say that "inflation=bad" is misinformed.

You have it exactly backwards. Deflation is caused by economic growth as a product of increased productivity, which reduces prices. In a free market, increased productivity makes things cheaper to buy.

Deflation was quite normal during the industrial revolution, before the advent of central banking. The distortion of the free market by central banks is a transfer of wealth from the middle-class to the wealthy. Those bankers are not stupid, but they do rely on the gullible.

Quote:To elaborate just a bit, the rate of economic growth from 1866 to 1897, a period of secular deflation, was perhaps the greatest ever experienced by the US economy during a period of comparable length. Real GDP grew by more than 4 percent per year, on average, notwithstanding the persistent deflation.

http://mises.org/journals/fm/dec08.pdf

If you do not appreciate history, then logic and common sense works just as well. Are consumers better off when commodity prices rise or when they decline? Are people better off when oil costs $120 per barrel or $80 per barrel? Are people better off when gasoline costs $4 per gallon or when it costs $2 per gallon? Are people better off when corn and soybeans are expensive or when they are cheap?

How many food riots caused regime changes in the Middle East over the past several years? It was caused by an export of inflation from the West.

Post: #55

(01-25-2014 08:31 PM)Tail Gunner Wrote:  lol. You have it exactly backwards. Deflation is caused by economic growth as a product of increased productivity, which reduces prices. In a free market, increased productivity makes things cheaper to buy.

Deflation was quite normal during the industrial revolution, before the advent of central banking. The distortion of the free market by central banks is a transfer of wealth from the middle-class to the wealthy. Those people are not stupid, but they do rely on the gullible.

Quote:To elaborate just a bit, the rate of economic growth from 1866 to 1897, a period of secular deflation, was perhaps the greatest ever experienced by the US economy during a period of comparable length. Real GDP grew by more than 4 percent per year, on average, notwithstanding the persistent deflation.

http://mises.org/journals/fm/dec08.pdf

You're confusing the money supply with output. They're related but really separate things, even under the gold standard. It's a total myth that the money supply didn't fluctuate under the gold standard. Increases in productivity cause real prices to fall, that's neither inflation or deflation. The effect of real prices falling can cause people to spend less which then causes deflation if the money supply isn't increased by some other means.

As the great Milton Friedman once said:

Quote:Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ... A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.

Post: #56

(01-25-2014 08:50 PM)Ensam Wrote:  

(01-25-2014 08:31 PM)Tail Gunner Wrote:  lol. You have it exactly backwards. Deflation is caused by economic growth as a product of increased productivity, which reduces prices. In a free market, increased productivity makes things cheaper to buy.

Deflation was quite normal during the industrial revolution, before the advent of central banking. The distortion of the free market by central banks is a transfer of wealth from the middle-class to the wealthy. Those people are not stupid, but they do rely on the gullible.

Quote:To elaborate just a bit, the rate of economic growth from 1866 to 1897, a period of secular deflation, was perhaps the greatest ever experienced by the US economy during a period of comparable length. Real GDP grew by more than 4 percent per year, on average, notwithstanding the persistent deflation.

http://mises.org/journals/fm/dec08.pdf

You're confusing the money supply with output. They're related but really separate things, even under the gold standard. It's a total myth that the money supply didn't fluctuate under the gold standard.

Thank you for bringing up and responding to an issue that no one raised. That is called a straw man argument. No one ever said anything about the money supply not fluctuating under the gold standard. The money supply always fluctuates. The gold standard simply maintained those fluctuation levels within reasonable norms.

Milton Friedman made that statement in the context of central banking, not a free market. Moreover, his reference to a "little inflation" has nothing to do with the nearly ten percent inflation that we experience today (based on the honest pre-1980 government formula).

http://www.shadowstats.com/alternate_dat...ion-charts

Post: #57

Man who cares about inflation then lets refocus on the Crux of the post. The answer is still the same buy securities over the long term, invest in assets.

If you don't? You'll pretty much never get rich.

Investing should be as routine as going to the gym. Eventhough you'll have off days at the gym no matter what you gotta keep showing up.

Unless you make an insane amount selling a company or getting some $10M + lump sum. You're nuts if you're not investing on a monthly basis.

----

Use a simple rule of 72 to see how much money you're missing out on.

Let's say returns are 7.2% long term. Every 10 years you should double your cash. Compounding is insanely powerful.

Say you have $100K liquid

40 years later... You should have $1.6M versus... Some crap like $150K.

Missing out on a million bucks because you couldn't even read 1 investing book is pretty much the worst decision in your life.

I'll go ahead and pull on the heart strings of this forum and say not knowing how to invest is just as stupid as getting married to a 5'0 200 lb feminist.

Post: #58

(01-25-2014 09:12 PM)WestCoast Wrote:  Man who cares about inflation then lets refocus on the Crux of the post. The answer is still the same buy securities over the long term, invest in assets.

If you don't? You'll pretty much never get rich.

Investing should be as routine as going to the gym. Eventhough you'll have off days at the gym no matter what you gotta keep showing up.

Unless you make an insane amount selling a company or getting some $10M + lump sum. You're nuts if you're not investing on a monthly basis.

----

Use a simple rule of 72 to see how much money you're missing out on.

Let's say returns are 7.2% long term. Every 10 years you should double your cash. Compounding is insanely powerful.

Say you have $100K liquid

40 years later... You should have $1.6M versus... Some crap like $150K.

Missing out on a million bucks because you couldn't even read 1 investing book is pretty much the worst decision in your life.

I'll go ahead and pull on the heart strings of this forum and say not knowing how to invest is just as stupid as getting married to a 5'0 200 lb feminist.

WestCoast,

You've given this forum a trove of information over hundreds of posts on investing. I've gleaned a number of tips off you, but they're spread over so many posts that it's impossible for me to find a lot of the gems.

Considering you're a hawk for cash, have you considered throwing up a comprehensive data sheet of investing the WestCoast way? I think a lot of men, myself included, would really benefit from it.

Post: #59

^^^^^ What that guy (male defined) said.

I'm debating whether to invest 500 a month or use that money to pay off my student loans.

Post: #60

I don't know finance near as well as some guys on this forum, but I know economics.

WestCoast is right. In a deflationary environment, economic activity grinds to a halt, because no one wants to spend. So yes, you can safely throw what money you have in a bank or in your mattress, but you'd have very little opportunity to invest it in anything and make more. To some people that's fine, but if you are at all entrepreneurial it's not such a great situation. Even if you're not trying to invest your own money, there comes a time when you might want to raise money for your own projects. In the absence of capital markets, the only way to get money would be to borrow it from banks, so tight money is actually a boon for traditional bankers.

Here's the other thing, a lot of people are talking about inflation as if it's a thing. It's not. More precisely, it's not one thing. Inflation is a blanket term for an increase in prices, but prices can increase for any number of reasons. Quite a bit of nuance and understanding is lost when we refer to a variety of different phenomena by one name.

Post: #61

Emerging markets have inflation, they are growing.

Japan, a developed economy, has been suffering from deflation over a decade. The economic situation is not pretty and people have low morale.

Spain, a developed economy, has little to no inflation. It's economy is in tatters.

Proof, inflation = good and deflation = bad.

Post: #62

I can't really make that post because everyone has different incomes, expense lines, and more importantly different abilities to control their emotions.

If you haven't even read one fucking book, ONE then yeah we can't even start a conversation.

On a side note, it should be easy to read between the lines and see who makes money on this forum and who does not. Once you know that I would try to copy their mindset.

---

That said the post above this one is a no brainer if you have no debt, you should simply dollar cost into etfs with less than 15 pts in fees.

That's for straight up ZERO interest in finance. If you do that you'll murder all of your peers like OJ Simpson.

--
If you're asking what I personally own well lol, that would definitely be a great thread because all the haters I have all the guys who don't take risks and all the guys who don't understand what set up I am shooting for would certainly lead to bannings lol!

That and it's not worth disclosing on the Internet would only tell/show someone I trust in person.

Post: #63

Gear it towards the type of people you know are active here. Younger men on the path. You've met members, I've met members. We both know who we're talking to.

Believe me, I've read book. I've read too many books, I suspect. It's probably a reason I enjoy reading this forum. It takes those ideas I've spent hundreds of pages and hundreds of days thinking about, and slices them up into digestible nuggets.

Post: #64

The guys I have met have range though. If you're under 25 you should be reading 100 books a year and just dollar cost averaging.

If you're in your 30s and you have some shit figured out the ideas will come to you. You'll find loopholes in the tax system. You'll know the difference between an LLC and an S corp. etc. You will know when to pull the trigger.

Basically, time is a the cruelest enemy in te world. No matter what you are not beating time so you can't waste it idle in a checking/savings account.

You're in jail, that clock still ticks
You're investing in "CDs" lol good luck because that clock still ticks man

I would apply that to investing. Investing in a savings account or a checking account is literally like still water. When water is still it means everything in there is dead.

So if you already get that, then you can start looking at your expense line. Figure out what can be cut. I can tell you to the cent what I have spent over the last 3+ years every day and week of the month. This is real responsibility becuase it means I can't fake where my money is going.

Then you control those controlables.

Then finally, you should have niche knowledge in a space from reading hundreds of books a year now you can take a few risky investments while you continue to dollar cost average with the rest.

Buffet is also famous for the "punch card analogy" we should make people accumulate years and years of knowledge. Then they only get 5 shots their whole life to invest a large sum. That's pretty much the jist

Again if you don't want to learn anything and want to be a vegetable just dollar cost average into indexes and bonds.

Anyone who is not going down the path I am describing in this post is going to be wrong faster than an eminem song when they hit 40.

--

Md I have no idea if that answers your question.

Post: #65

I am absolutely with west coast on his point about DCA on SPY. I have been doing it for the past 5 years. It really hurts when you DCA on the way down but all it takes for this strategy is being boring and a lot of discipline.

The downfall for this strategy is that you dont see real cash flow being generated. At close to 1.5% dividend yield on SPY and and letting it reinvest to itself, you will feel like a poor man putting his money into lottery tickets BUT making REAL gains over number of years. The worst part is having your friends double or triple their portfolios in a span of 6 to 12 months when youre still licking your wounds while DCA on SPY.

So do yourself a favor. Start DCA on SPY and read more about investing.

@cardguy I think your OP was a lot of sales pitch done by the wallstreet trying to provoke an emotion or two. Real long term investing and making money is really about discipline and boring hard work.

Post: #66

WestCoast, great posts on this thread.

Post: #67

DA if what you're saying is true you're up probably close to 80% all in. I don't think that's a bad return at all.

The idea is that if you don't have any interest in investing you just DCA into a bunch of etfs with minimal fees under 15bps. Doesn't even have to be spy.

I am hesitant on giving anything else out because again I agree with buffet.

"Diversification is a protection against ignorance"

Meaning you can do better than the market if you have specific knowledge but the chances of someone having specific knowledge is low, so best to tell people to DCA.

If you want an example of specific knowledge WWT has a great example (I linked to it as a rep point for him) where he makes $70K off a flip. Guess what? He got that return because he had specific knowledge.


Anyway all that aside congrats DA. It's going to be painful when we have another dip, maybe in a year or maybe in 15 years but you have developed the correct skillset to control your emotions when it comes to volatility and that is going to pay off HUGE as you get older. That skill you now have puts you in the top 5% in my view. 95%+ of people can't even exhibit the discipline you did for 5 years. Let alone 40+ years.

I have more respect for people like DA becuase he is basically admitting he doesn't know a specific space well enough to invest. So instead of quitting and complaining he is simply playing the DCA game like a smart guy. And guess what he is richer for it.

Post: #68

Yeah, in terms of practical advice it's hard to beat DCA. I've been doing it for 10 years and it's worked out pretty well despite the crash. It's not going to make me wealthy but I'm going to have a nice retirement.

Post: #69

@WestCoast

Cheers mate. Actually SPA is about 40% of my portfolio. I still have a different portfolio in my current local market, and venture and learning about property rental markets now.

Gotta say though Ensam is doing it right too. Sometimes trying to outsmart the markets does not yield the results you want.

Post: #70

^ see this is exactly the progression I have described above.

DCA ... Then slowly obtain niche knowledge (apparently rentals in your city) for others it can be medical securities, others maybe industrials. It doesn't matter but the point remains.

You can either blindly dca and you'll see a handsome return. Or you can do what you're going to end up doing and what I personally do.

X% of my portfolio is DCA into indexes, this is money I am unwilling to risk large losses. I can see this part decline 10-40% and I won't bat an eye.
x% is in personal investment ventures, I have goals in life and have niche knowledge on some topics. I also have private investments (ie: I am a silent investor in the project)
X% I use as credit funding, a small amount to mess with my credit score to make it inflate ie: working the system. For the uninitiated an example is home ownership where if you have a history of timely payments and go through a 15-30yer fixed your credit score goes up.

Now I have access to 1) cheap debt due to a high credit score, 2) private contacts through biz investments - networking with elite people is never a bad idea especially if you can both profit from it!, 3) a portfolio that is tied to DCA into the global market, 4) continued increase in niche knowledge. This is a win win win win win. More elite contacts, cheap access to cash if needed, more trust with high end wealthy people, increased compounding KNOWLEDGE.

That's how you win at this. DCA is the starting point for 99.99% of people. If you can't even click a few buttons on the screen well..... You know the rest.

Post: #71

The fantastic wealth that giants like Soros, Buffett etc. have amassed is only because year in / year out they had knock out returns (yes, a few down years here and there, but they were rare! ). The magic of compound interest worked for them and those fortunate enough to invest with them because they have the skill to generate returns that are above, often FAR above average returns generated by a passive investment or by peers in fund management industry. It really is that simple.

To believe there's knowledge out there that guarantees you can do it, too, is simply not true. There are and were highly qualified finance professionals who went broke after a strong start (google for "Long Term Capital Management" e.g.).

Post: #72

The main advantage of owning a house or apartment is if your other avenues of revenue dry up YOU CAN LIVE IN IT. I'm unaware of any other investment where you can do that. But as far as making easy money buying property I think the party is over for the average investor, at least in the US.

tl;dr: I've learned a ton from this thread.

Post: #73

So DCA is investing the same amount of money in an investment month over month, over a specific period of time, e.g. $200/month for 20 months?

Post: #74

This has been a really interesting thread - and I want to thank West Coast for giving me alot to think about.

Post: #75

(01-25-2014 10:37 PM)Cattle Rustler Wrote:  Emerging markets have inflation, they are growing.

Japan, a developed economy, has been suffering from deflation over a decade. The economic situation is not pretty and people have low morale.

Spain, a developed economy, has little to no inflation. It's economy is in tatters.

Proof, inflation = good and deflation = bad.

You are not serous with this are you?