If you had $30,000.00 to invest for say, six months or maybe a year. safe and liguid at the end of the term; what would you do with it?
Thanks,
Eric
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Replies
is this a poll, or are you actually asking a bunch of broke old carpenters about this?
LOL
Actually, there are a lot of high end people lurking here that know more than most of us builders, but my vote would go for US T-Bills or a mutual fund that invests primarily in that vehicle.
i'm betting that if you say why or what the background is for this moola and the goal, you may get some alternative solutions.
But watch your e-mail for scams now too.
;)
Excellence is its own reward!
is this a poll, or are you actually asking a bunch of broke old carpenters about this?
That's funny!!!! I ain't old yet (46 in March) but I am pretty broke!
The wife and I have sloooooowly but surely been saving for a house. We've had the better part of that sum sittin around in a savings account for sometime. That sometime being the time when prices have outpaced our savings for sure! :(
We are really hoping to buy this year (lease is up in Aug.) but we may wait a little while longer. In case we do or if this situation ever arises again, I would like to know what a good investment would be that is safe but will do better than a passbook.
Thanks,
Eric
Call Chas Schwab or another brokerage and tell the rep what you have and your requirements for access and consider their advice.
Anything that calls for safety and access should not be in stocks, but they have other ways to manae money.
MM acounts are less than one precent like passbooks, CD's go up alittle over 2 but can take long terms to get there.
Last I checked, Treasuries were paying close to 6%
Investing in them thru a mutual fund gives greater liquidity but has management fees. Be sure you pick a no-load fund. Load is a a sales charge..
Excellence is its own reward!
check out the EE treasury bond. EE bonds pay 2.61% , and you only have to hold for 12 months. you can buy on the internet using your visa, so if you got a cash back visa thats more money, 100% safe.
The best employee you can have but you wouldn't want him as a neighbor " He the shifty type"
Edited 12/29/2003 9:33:45 PM ET by BROWNBAGG
We've had the better part of that sum sittin around in a savings account for sometime.
Savings accounts are designed to keep u even w/ inflation........not NOT get u ahead. I found a local fee only financial planner, went to him. He likes noload mutual/stock/bond funds w/ low expense ratios. He also believes in being TOTALLY debt free, which ties in w/ my philosophy; esp after some poor $$ management on my part (lost my house). His clients average $375 / year, talked w/ another planner (not fee only) was not going to charge me a fee......just commissions, his $$ was approx. $1,500.00 up front w/ additional commissions every year after. Most of the knowledgeable ppl out there recommend noload funds.
What are your construction abilities?
Tim Mooney
just some more feedback
ya hope that $3 grand CC debt is paid off each month - if not you are missing by far
your best guaranteed investment
Stonefever ( as Piffin says brilliant feedback ) & Tomchalk good stuff
my response to stonefever's fine dissertation is if any of you have bond funds - get out now! rates have no where to go but up and you will not believe how fast your monies erode in such a vehicle if rates rise - if you are all set w/ untold equities maybe some funny money in high risk low grade stuff but talk about speculation
Brownbagg like your visa scenario - must be careful it is just a merchandise purchase like transaction rather than a money advance transaction - huge difference one beneficial to you and other a last chance ( expensive ) resort - I learned the hard way
I'd definitely go w/ always overbudget ( maybe not as a contractor )
check w/ your property owner where he stands on leaving lease early ( or even extending month by month if you're building ) your window of six mos checking out properties ( values often less in winter ) over say 2 mos is so more favorable
you find one middle of march, close middle of april - worst case scenario is you're held to your lease until June - I've seen contracts where those that sold you the property pay you rent until your lease expires or you do not begin payment until your lease expires - be creative you and the seller need each other!
if you're building anew you know that takes time to get off ground - start now and build a nice garage w/ apt type lodging above - move in there while your house is being built ( save all costs/ receipts ) then once your house is built rent out the apt and enjoy the monthly payments from your renter - may come close to covering your amortized mortgage payments
not sure of their lending for new const. but we are finishing up refi w/ Di tech ( ? mort arm of General Motors ) my wife saw advertised on TV - blow anyone out of the water on costs of loan - anyone looking for such money owes it to themselves to look there
have wings John
John,
Thanks for the good info and advice.
if you're building anew you know that takes time to get off ground - start now and build a nice garage w/ apt type lodging above - move in there while your house is being built ( save all costs/ receipts ) then once your house is built rent out the apt and enjoy the monthly payments from your renter - may come close to covering your amortized mortgage payments
Holy crap......you musta been reading my mind. MIL is coming along whether she likes it or not and will be a perfect fit for that apt. after we build a house.
How do you envision this scenario taking place from a financial standpoint?
Eric
Just make sure you dont get yourself in a bind . I would feel terrible . You have to know what you are doing with out any uncertainty. The purchase is the time to celebrate not the sale , cause you KNEW .
Tim Mooney
Tim,
Thanks. I wasn't planning on selling. Only reaping my 'profit" in the form of equity.
I have seen several properties similiar to what I would end up with in the area that are selling for much more that I can complete a home for.
I am leaning towards building for this reason as well as having a fresh new no/low maintaintence home. Selling would be an option only if we could not meld into the area and find a living.
I have plans for the equity along the lines of what you are doing.
Eric
That aint gambling then . Not everyone can move in to their project.
Tim Mooney
I would like to invest in something too, but all my money is tied up in cash."One measurement is worth a thousand expert opinions"
Tim,
I'm glad you chimed in here. I have partially built many homes and have completely built several turn-key "custom" homes in the past 25 years.
I have absolutely no doubts as to my capabilities to complete the construction of a modest home in a six month time frame which would correspond to a construction loan. I have experience building to that criteria as well.
The last home I completed was during the winter of 96' (19) a two family two story Ranch. I have the folder out and I can have the square foot price in a matter of an hour or so. I made a wage and a very decent profit also.
My theory is that I can build a home for my wife and I for ALOT less than it will be worth. My potential profit will become our equity. At the same time I will be able to develop a network in this new area enabling me to establish my current business in a new area.
This prospect is very exciting and at the same time very scary for both of us. The alternative would be to buy a fixer upper and work on it for the next five years.
This is all a hypothetical situation. I have my eye on several lots but there is a lot of leg work yet. Hearing from others on this board is very stimulating and enlightening to say the least.
Thanks everyone........
Eric
Edited 12/30/2003 8:32:52 PM ET by firebird
I had to ask your experience before I could reccomend what I would do.
This is fixing to be January . Top sales start in April. Need to have it sold by June.
Under those qualifications I would buy a repo or a distressed property. You might be able to clear 20 percent to the bottom line after labor and material are COUNTED. That would be 20 percent on top of the buying price so its unclear how much money that would be until you decided on a purchase. Frankly Ive been to several repo sales where I havent been able to buy . Couldnt get her done ! You may not be able to find a deal like that . If you dont you cant buy . I think the time is too short to build and sell unless you can stretch it out . The money you are talking about is working money any way , not enough to to a deal standing alone. Buying a preowned home would give you plenty of time.
Tim Mooney
Buy some GOLD with the CASH ! Also gold stock has been doing good such as the following stocks HMY, GFI IAG, GSS & VGZ . They also say the best investment on earth is a piece of it. Good luck!
My Newmount shares have gone up 2 1/2 times during the last year and a half, but gold stock for him? Not a chance. Unless you are a die hard gold bug, at this time you don't need any gold. Just my two cents.
Call me crazy, but for the short term its a good bet. If you invested in any of the stocks I quoted, your 90 day return (gross )would be at least 10% & up to 25% not bad for 90 days. Nem was $39.+ on 10/1/03 its around $49.00 today . Have not checked the spot price on gold but I am sure it will return more then what my bank does . Here's to a prosperous 2004 to all!
>>Here's to a prosperous 2004 to all! That I think everybody here will agree to.
May you all have a profitable new year.
I'd go with a CD.
No way of knowing if you'd make anything in the stock market or lose big time.
Skydiving-good to the last drop.
Three times the intrest in Treasuries.
'Course maybe you'd ratrher loan it to your local banker to help the folks back home than to the feds..
Excellence is its own reward!
No brainer !
Tools & trucks !
Congrets on your upcoming endeaver.
Last time I checked, ING Orange pays 2% on savings. Insured and completely liquid so you have the flexibility of taking out your money tomorrow or anytime in the future. CD is another choice, you trade your flexibility for a higher rate. Say if they pay you .5% more, over the year you'll get $150 more and you'll have to pay tax on that.
Treasury pays 6%? Hmmm I have to talk to Piffin about that. Interest rate is not going to go up anytime soon so if indeed you can get 6%, completely liquid and minimal risk, I'll go for it.
me .. i'd put it in Berkshire Hathaway B securitiesMike Smith Rhode Island : Design / Build / Repair / Restore
I had a chance to get into some Berkshire Hathaway A for about $12,000 back in the early 90's, hind sight is always 20-20. They didn't even have the B shares at that time.
When you said you'd put it in Berkshire Hathaway B securities, I hope you're only joking. This would not meet his objective and that's the only thing that counts in any investment.
6 months to a year.. safe ( ? ) liquid..!
BRK.B..
here's one way to even buy the A shares.. BRK.A
https://www.foliofn.com/wsjsp/lp/lp.fsp
Mike Smith Rhode Island : Design / Build / Repair / Restore
Edited 12/29/2003 11:18:35 PM ET by Mike Smith
6 months to a year.. safe ( ? ) liquid..!
No stock is safe for any period of time let alone 6 months to a year. His objective is safety of principal and his time horizon is 6 months to a year, so anything that has anything to do with stocks has no place in his portfolio.
Liquid? Absolutely. That's why I prefer stocks than real estate although I got burnt by both of them from time to time.
$4 a trade, may be now I can afford some BRK.A :)
tom... the other neat thing about "folio" is you can buy any fractional amount of a share you want.. ie: you can buy $ten dollars worth of BRK.A if you want... and ZERO commission in and outMike Smith Rhode Island : Design / Build / Repair / Restore
http://www.schwab.com/SchwabNOW/navigation/mainFrameSet/0,4528,522,00.html?dest=bondstres&orig=i%2Btoverview&ebmk=acquisition
not completely liquid if you buy direct but not a bad choice compared to CDs.
Excellence is its own reward!
http://www.schwab.com/SchwabNOW/navigation/mainFrameSet/0,4528,663,00.html?dest=bttreas&orig=bondstreas&ebmk=acquisition
Here are the rates:
6 mo. T bill .96%
2 yrs. 1.79%
1 yr. strips 1.11%
Told you not to trust the govt. :)
What can I say? All the big time real estate investors I know keep their free cash in them. What is the diff in rates you report and the 5-8% shown in that chart?
I presume promised to maturity vs traded value currently at short term?.
Excellence is its own reward!
I presume promised to maturity vs traded value currently at short term?
Close. If this were a long bond then you are exactly right. But this is a mutual fund, a completely different animal.
I briefly went through the fund and here is what I come up with.
The fund is a bond fund that invests in long bonds. Its current holdings consist of 37.40% US Govt and 62.60 AAA so this is not exactly a Govt bond.
There is a short term redemption fee if you hold it for less than 180d. and the MER is .59% which isn't too bad compared to the industry.
Here is the catch. The yield is all over the place depending on which cut off date they use. As of today the NAV is 67.12. 52 wk. high was 74.12 and 52 wk. low was 61.77. So you can see right away there is no guaranty of principal. The fund is either at the top 25% or the bottom 25% for the past 6 years compared to its peers so that tells you its performance is far from consistent.
Back to the cut off dates. The 1 yr. pre-tax return as of 9/30/03 is 9.40% and the return YTD is 2.55% so you can see it is actually losing money over the last three months.
Back to your question about the 5-8%, that's the annualized return over the last five or more years. Take 2002, the return that year is 26.79% so that pulls everything up. Given the volatility of the return and the fact that interest rate is so low that there just isn't much room for it to fall, any rise in interest rate will really hurt the return.
All the big time real estate investors I know keep their free cash in them.
Some of the reasons that I can think of:
-they know the management, just want to give them some playing money to please them, you know buddy buddy
-"their free cash", not ALL their free cash, it's called diversification
-no immediate use of their free cash, they treat it as medium to long term
-their financial advisor may have something to do with the decision, and it could be just part of porfolio puzzle
May be you can think of a few more reasons.
The way you make money in the stock market is to do what the rich do, as Mike already pointed out, Buffet, BRK. BTW, I wouldn't buy BRK at the current price, the premium is just too much. That's another story.
The way you make money is to do exactly the opposite of what poor people do. Of course, the way the market has been the last nine months, I now wish that I'd taken out a car loan and put the cash into the market instead instead of just writing a check for the car. Sometimes in the short term good sense and fiscal responsibility can bite you.
Hey, good discussion and thanks for all the good advice and pointers.
We carry less than 3k in CC at 9.9%. We scored close to 800 FICO through a mortage broker who of course pre-qualified us for alot more than we wish to spend.
I am not sure what I was looking for.......I think when I was a kid (60's) my passbook was like 5%?. It just sucks to not see the money grow.
Broker told us not to close the CC's but keep them in use pay off monthly and keep available credit to a minimum.
We are thinking about building rather than buying in order to profit from the equity we will create from that. Plus the advantage of not having w/e project for the next five years in the fixer upper. More on that later though.
Keep it coming........
Eric
We carry less than 3k in CC at 9.9%.
You realize that you're paying $300/yr in interest. That's probably about as much as you're earning on that $30,000 in the savings account. Pay off the CC's NOW. There is just no reason to carry a balance on the card. If you need the 3k again down the road when you're ready to buy, it's there for the asking.
Your FICO score will not be hurt much by having no balance, but I believe it would be by closing the account. Just use it, and pay the bill IN FULL every month.
>>I am not sure what I was looking for.......I think when I was a kid (60's) my passbook was like 5%?. It just sucks to not see the money grow.
Firebird, we are in a different time now. It works both ways. The way I see it it's actually good for you and me when the passbook is paying peanuts, that means as debtors we are paying much less for our debt. Of course the mortgage usually makes up a big chunk of that.
Feeling better now?
Edit. Pay off your $3000 in CC ASAP, right now. Forget any of the fancy stuff, keep it simple. You owe yourself to check out ING Orange. All I can tell you is I was in your shoes a few months
ago. ING is among the top 10 banks in the world, the deposit is insured I believe to $100,000, no fee whatsoever, pays you 2% right now on daily balance, completely liquid. For your situation, I don't think you can find a better deal than that. Here is the site.
http://www.ing.com
click US.
Caveat. Advice is always free, only at the moment when it is given. Some may cost you later on, at times a lot. So do you homework and make sure you understand 100% what you are getting into. Anything you don't understand, it's probably not for you.
Edited 12/30/2003 1:59:18 PM ET by TOMCHARK
For short term/unknown term investment your options are limited, as others have mentioned. Even with the zero risk classes of mutual funds, you may get screwed on penalties an such if they are not held long enough (beware).
A great resource for National rates on CDs, Money Market accounts, and such is:
http://www.bankrate.com
I often find that I can get much better rates on deposits (or loans) by shopping nationally instead of locally. The internet at its finest!
>>Sometimes in the short term good sense and fiscal responsibility can bite you.
Exactly. But again that's 20-20. We are here for the long haul right?
Edited 12/30/2003 1:43:12 PM ET by TOMCHARK
>>Sometimes in the short term good sense and fiscal responsibility can bite you.
Exactly. But again that's 20-20. We are here for the long haul right?
*********************************************************************
Yes, my long term thinking means paying no consumer credit interest, and a car loan falls in the group. And by paying cash, any and all games in negotiating a purchase price are eliminated. I was only pointing out in this case that stocks I purchased this last year brought in 20-60% returns. I would still likely do it the same way as the only good car payment is no car payment.
Uhh, guys, you're missing something...
First, firebird told us the money was to be used within the next 6 months or so. His dependency upon that amount is crucial to his goal. When we CFP's/brokers are given this challenge, we understand NOTHING is to happen to the principal but perhaps gain some interest. We also understand that this 6 months or so can easily become 2 or 3 months if something catches his eye.
Second, the amount of interest possible in this situation needs to be appreciated. His principal amount of $30k, working at 2% per year earns $600 over that period. Since we're talking of 6 months, cut that in half, or $300.
Third, what is a realistic rate of interest? We've seen several posts referring to some rates available. First of all, we need to consider just what is an acceptable investment vechicle for this goal. In short, it can only be something rated AAA or guaranteed explicitely by something that is rated AAA. Such as the U.S. government. But there are others.
CD's were mentioned. They have such a rating - IF they have been issued by a bank enjoying the backing of the government (FDIC). But CD's have a fixed life. Attempting to cash one in prior to it's stated maturity has costs.
Treasuries were mentioned. They have the rating, but guys, if there is anything you get from this post it is this one major point: THEY CHANGE IN PRICE. Sometimes significantly. This change in price is totally independent of the Federal Reserve, Greenspan, or whomever. It is only based upon supply and demand. When more people want to buy treasuries than want to sell them, the price goes up. And vice versa. These prices are guaranteed to be at 100% of their face value upon maturity. But anytime prior to that they can be anywhere from 2% to 300% (or even more) of that face value.
Today's WSJ, on p C10, gives us much insight on these and other interest rates. But the most appropriate numbers are found in the middle of the page under the Bond Market Data Bank, and then, Bond Yields for Treasury issues.
The issue maturing on 12/31/2005 (2 years from now) has a stated rate (determined at auction on the date of issue) of 1.875% and a price of 100.04% of face value, giving a yeild of 1.811%.
Jump down a few lines to the 02/15/2031 (27.875 years) issue. A stated rate of 5.375% priced at 105.30%, yielding 4.973%. What this one means is that the holder of this bond would earn $537.50 per year on a $10,000 face value. AND it also means that the holder is guaranteed to LOSE 5.3% of his face value upon maturity because of the premium price he paid to get the bond in the first place. When we calculate the amortization of that excessive price (meaning we subtract 3.3% of that premium from the stated rate), we end up with the real rate of 4.973%.
Please read this paragraph. Now let's factor in a bond market crash (Oh, they happen!). By this I mean interest rates climb over a short time to say, 8% (happened in 1994). That same bond above priced at 105.3 now becomes worth 65.8125, or a drop in value of almost 38%. That risk is in excess of what the stock market dropped in 1987 and close to what happened to the Dow over the past 3 years.
Elsewhere on that WSJ page, we find the highest yield for treasuries over the past 52 weeks to be 5.28 %. So when someone tells us that treasuries pay 6%, we understand that they are only telling us part of the information we need to make a decision. It's possible that an issue very well could pay that - or even more, possibly much more. But what we aren't told is the price of the bond (it could be 150% of face value) or how long that bond must be held to get that face value. Both are crucial to firebird's goal.
But back to the original question...
The only things firebird could possibly consider for this purpose is:
1. A savings account at the bank.
2. A saving account at the credit union.
3. A money market mutual fund investing in US Treasuries or AAA rated corporates (such as General Electric commercial paper). GMAC demand notes or Ford Motor Credit commercial paper does NOT qualify.
4. 1 or 2 month CD's, rolling them over until his need arises.
What hasn't been mentioned is the cost of the transaction. Savings accounts and money market funds have no commissions or loads (or should not). Should you start buying treasuries or other bonds, there's a commission in there somewhere, you just may not be able to see it. And if you think you're saving such commissions by dealing with a discount broker such as Schwab, you really don't understand how the system works.
Back to the earlier point about just how much return one can expect... At best, 1% over this 6 month period indicated. And that's good, darn good.
If you think you can get better, either you don't understand the risk involved, or you're involved in a Ponzi scheme.
Thank you. That is probably the most clear and concise explanation of how these things work that I have read. I probably couldn't turn arohjnd and explain it to somebody else as well yet, but I now grasp the concept.
And with this govt debt build up and the dollar revalueing on the world market, I wouldn't want to be betting what the end will be in six months or three years.
Excellence is its own reward!
Thanks. Too bad it was so wordy. I got a problem with that.
Now that we know more about firebird's situation, I like Tim's suggestions.
Along that same line, if firebird put his 30K into a piece of dirt to build upon, it removes these cash investment questions and allows him to start now towards that equity build. It also becomes the "down" for his construction loan. Off the cuff, I'd like to think he would gain time, position, and more value than a cash investment of 2% annually. IF he bought correctly.....
Thanks. Too bad it was so wordy. I got a problem with that.
Hey if Piffin didn't say he had a problem with that, how on earth could you get to have a problem. Any problem? :)
Long time posters have been burdened by many of my comments that end up taking two pages saying what someone else can manage in a sentence. Our (yours and mine) posts basically said the same thing, but yours was so much shorter.
That's one of the things I personally try to improve - saying the same with fewer words. People that can do so impress me.
Andy Engle is one such example. There are many more.
Thanks for your posts on this subject. They show you have a very good grasp of the issues.
See what Clay said in post 38241.57?
And read my post to Piffin too which is just before this post. I think he is just a little sensitive in his heart thinking that your implication
Long time posters have been burdened by many of my comments that end up taking two pages saying what someone else can manage in a sentence
was on him but being such a great guy he came forward to put your mind at ease. It'd never crossed your mind that he was being facetious, right?
Now a big thanks for bailing me out.
Did you say you're a financial planner/broker?
I sincerely appreciate the complements. Especially when they come from such respected people.
Perhaps I came across as a bit too hard on myself, but in reality, those that have the ability to communicate quickly and concisely make me envious. But in order to be truely successful as a person, one must recognize one's weaknesses. Those that have read my comments over the years probably have little quibble with me trying to cut down on the drivel.
One of my goals for self improvement is to reduce the amount of effort I place upon others in interpret my thoughts. In many ways, this is no different than many of you attempting to grow by sharing tips, experiences, and ideas. And it doesn't matter who you are or what you do, those of us that recognize the need to improve have already completed half the task.
Yes, Tom, I'm a Certified Financial Planner with a major national brokerage firm. Been at it for almost 20 years. The facetious issue never even crossed my mind.
Happy New Year, everyone. It's going to be a very good one for the vast majority of us. (I'm a bit concerned about the mortgage brokers amongest us, however. As well as the gold bugs and currency speculators.)
I guess I missread something between the lines someplace. All is well and have a happy new year.
Like ants and house flies, we'll always have some gold bugs.
;)
I know from experience the best way to kick the goldbug habit.
It is a disease similar to the market timing cult infection..
Excellence is its own reward!
I must have too. I'm blaming it on Prospero because they won't let me view multiple posts at the same time when creating a response post. The dirty socks.
I wish you and everyone else here the best of "Ought Four."
Especially WHW.
And Sam.
And Tim.
And everyone else temporarily off their feet.
I wasn't being facetious or anything like that when I complimented you on being concise. Really, you packed alot into those paragraphs considering the topic. I was impressed because when I have read or listened to an explanation of the same subject elsewhere by experts in teh field, they have talked over my head in lingo from Yale or Harvard or someplace like that. you did it just right, IMO.
Excellence is its own reward!
Now you are talking about me aren't you? :) See, no win.
Stonefever implying you being facetious? I don't think so. As a matter of fact earlier today I was going to wrtie to him about not to think too hard of himslf and to tell him that even though he commented on my ability to say what he said in a much condensed version, Piffin just didn't understand a darn thing from my post and he came to my rescue a few posts later.
All I am saying is if it takes him ten pages to explain something that makes somebody understand and my one page, although trying to do the same job and no body has a clue, then it's obvious that who's getting the message across.
I am going to write to him now and say a few words.
NAPPY NEW YEAR PIFFIN
.
I'm just to your post and I' d just like to say
WOW.
Clay
I've read all the posts, and don't believe anyone has mentioned the obvious: get out of U.S. currency.
I doubt the U.S. dollar, given the current accounts and budget deficits, is going to appreciate against any major currency within the next 6 months.
You can earn 2% in a savings account...or you can earn 2% in a Canadian dollar savings account, plus currency appreciation. The Canadian dollar is likely to be strong because of Canada's strong commodities production. Commentary from a man whose financial views I generally respect:
http://www.investorcanada.com/interview.php?contentID=1514&display=transcript
Note what he says about investing in Canadian banks, too...interesting play for U.S. investors.
I'll go out on a limb and say that Canadian $ appreciation will be 5% in 6 months.
Of course, it could be 5% depreciation...but I don't think so...maybe. This advice is worth what you paid for it.
Regards,
Tim Ruttan
What about 30,000 powerball tickets, I think the Jackpot is like @ $210jizzilon dollars tonight. That reminds me, I will be back in a few, gota run to the" Siete Once" to get my tickets!
>I'll go out on a limb and say that Canadian $ appreciation will be 5% in 6 months.
Thank you for the thought, Tim. That is a heck of a good thought. I've been thinking about the market over the next year a lot, and what I am going to do. I think there will be decent individual stocks. I think the market will generally be flat, but not slide into a bear market again. But it's not going to be a raging bull, either. Valuations are too high.
But I've been of the opinion for the last six months that the exchange markets are going to devalue the u.s. currency. Buffet is right about that. There are immutable laws of nature - and when huge piles over u.s. dollars go overseas, foreigners have to either 1) sit on them for no gain, and who does that? 2) invest them u.s. treasuries or stocks, which is what has been happening, or 3) spend them in the u.s. Supply and demand eventually mean that exchange rates balance out that our goods sell at the right price to balance the market.
And I have evidence for myself this is happening: the idiot chinese may have propped their currency at 8.25 won/1 dollar, but the japanese in spite of themselves have let the yen slid to 107/1 dollar. I have never in my life seen the yen that expensive to americans. The Euro, which I thought was sliding bad when first introduced, now looks like a british pound at .75/1 dollar. Even the Mexican Peso is becoming expensive to us.
And government deficits have the affect of increasing interest rates when demand from the government outstrips supply. No way around it. And if foreign dollars slow down pouring into treasuries, the supply decreases. $500 billion projected deficit this year, which is meaningless except the affect it has on demand for money.
So remodelers prediction for 2004: significant, 10% -15% devaluation of the us. dollar against all foreign currencies, including china at the tail end of the year. A spike in interest rates around summer-time, home mortgages in the 8-8.5% range. U.S. employment increasing dramatically. A flat stock market.
take care,
Thanks for the compliment, Remodeler. But Stonefever, obviously a knowledgeable investment advisor, doesn't think much of us "currency speculators". Of course, since I'm Canadian, I'm not a currency speculator for investing in Cdn stocks. :-) But if I was a Yank, I'd be looking beyond the border for investments.
Let's see...I agree with you that the US$ will fall further against major currencies. How much, hard to say, but 10% sounds like the least to me. The C$ gained 25% against US$ in 2003, and there's room to go. Don't know whether/when the Chinese will stop pegging the yuan to the US$, but if they do...watch out! Regardless, the U.S. will have to raise rates (of course, that's a pretty easy prediction: there's no room to lower them). Rate raising is the only thing that will prop up the US$ in my mind.
As for US employment increasing...I'm not so optimistic. This should be the year that employment increases (historically, 1 to 2 years after end of recession), but I'm strongly concerned about this trend to ship high tech/service jobs overseas. I suspect that this loss trend will at least equal new job creation. Oh, and this mad cow stuff won't be helping the North American economy either.
In my previous post, I pointed to an article by Donald Coxe (who runs investment houses in Chicago and Toronto). I agree with a lot of what Coxe says, with one notable exception. He thinks the tech market is doing a dead cat bounce. I don't think so. Tech spending is climbing after two flat years. Tech spending boomed in '98-99 in prep for Y2K, no surprise it was flat '01-02. In moving high-tech and service jobs overseas, it'll require tech spending for infrastructure improvements, plus there's new technologies to invest in.
One thing that Coxe nailed was that he was, and still is, bullish on commodities, particularly mining. China's manufacturing explosion means they're sucking up raw material (nickel, oil, etc.). This is a long term trend for the positive, especially for Canada. The only thing that could spoil the metals/mining party would be rising oil prices.
So I can't agree with you on an entirely flat market. NYSE, yes, but I think NASDAQ and some commodities will enjoy a decent year. I'll go out on a limb: NYSE closes 2004 between 10k - 11k (flat), NASDAQ between 2300 - 2400 (15 to 20%), TSE (Toronto Stock Exchange) between 9900 - 10400 (20 - 25%).
I really want to say NASDAQ at 2500, because I do think that people get a little exuberant over that sucker, but I'm trying to be...realistic.
But hey, whadda I know? I've lost plenty of money in the markets, so my free advice is worth every penny paid... :-)
Regards,
Tim Ruttan
I think 2004 will be the year for precious metals. As the US dollar falls Gold rises. Checked into it & Gold is up 18% for 2003. Its @ $412 +/- Remember when it was above $ 600. an oz.
I heard a couple of economists/investment advisors today who said that:
1) U.S. dollar won't depreciate against major currencies any further
2) U.S. unemployment will fall as the US economy grows 5% this year
The implication being that NYSE should have a good year. Both statements contrary to what I think will happen. Ain't discussing money fun? :-)
Regards,
Tim Ruttan
I don't know anyone who doesn't expect rates to rise, but I'll disagree on stocks, especially certain sectors. Multinationals will do well. Manufacturers of exports will do well. Natural resources and probably food commodities will do well. Shipping and transportation will improve. US Banks who are international will do very well, Citibank amoung them. Of course, Bankers always clean up after a war..
Excellence is its own reward!
i know this depends somewhat on where you live.but i would call my landlord ask what the penalty is for breaking the lease 6 mons. early.then i'd go looking for a house NOW during the winter when times are a little slower for real estate and buy now. as you have already experenced real estate is going up faster than you can save. 30k is a great down payment,buy now ,lock in a 4.5 intrest rate on lets say a 150k house. one year from now lets say it appreciates 5%.thats a 7500. return on your 30k plus you lived in it and it's yours, screw the landlord!good luck larry
http://www.schwab.com/SchwabNOW/SNLibrary/SNLib100/SN100_Performance/0,7609,50209,00.html
American Century Target Mat 2015 Inv (BTFTX)
Excellence is its own reward!
Pay off all credit card debt.
Buy real estate that is available below appraisal.
me ... I'd hand it over to the wife's boss ... the financial planner.
I do know one thing .... he wouldn't be suggesting playing the market .... stocks are a long term investment ..... said the wise man .....
best answer so far .... pay off the debt .... clean up the credit .....
hold what's left for a down payment.
Most credit cards are what .... 15 or 18%?
Bet no one can find a return greater than that.
Jeff
Buck Construction Pittsburgh,PA
Artistry in Carpentry
M&D and Jeff brought up an excellent point here. Pay off your debt especially your credit card before you even try to think that money you have now is yours.
But then from your first post I assume the $30,000 you have is your own money, free and clear.
Edited 12/30/2003 2:31:41 AM ET by TOMCHARK
from what I remember ... it helps to have everything cleaned up for about a year before the purchase ...
also helps alot to close all credit card accounts ... even one's with no balance. A zero balance still shows as a potential creditor ... or words to that effect.
Something like one small limit card per person is ideal.
JeffBuck Construction Pittsburgh,PA
Artistry in Carpentry
from what I remember ... it helps to have everything cleaned up for about a year before the purchase ...
That will definitely help if you are applying for a mortgage.
also helps alot to close all credit card accounts ... even one's with no balance. A zero balance still shows as a potential creditor ... or words to that effect.
Because when they calculate your debt to income ratio, your credit card limits will count toward your debt even you have a zero balance on your cards.
Something like one small limit card per person is ideal.
Amen.
In the short term like 6 months buy a CD at the best rate your local bank can provide.. normal fluctuations could make any investment scheme unprofitable..
Longer term I like having my money where the really big boys do.. The real fat cats will invest where the returns are stable and safe.. They buy stocks in the big companies.. not just fortune 500 companies, the Dow..
You know for certain that general Motors isn't going bankrupt in the near term nor will Dupont or well you get the idea.. since they are big powerful companies they know how to position themselves where the returns will be maximised..
That or you can spend every waking hour learning all of the ins and outs of each stock and still underperform the Dow.. (as do over 98% of all stock "experts" over a 5 year period)
Booze, hookers and a really cool chopper....I'd be dead at the end...done deal.
Yeah.......done that too.........that's why I am where I am now at 46!
Finally tryin to get smart!
Buy Cocaine cut it with baby powder to add to the weight, resell it at a mark up. It's a pretty good system.
Who Dares Wins.
Easy Gunny.........been there done that.....then some........ya don't wanna know what I got to show for that!
Oh wait; that wasn't me, that was a 'friend'.
Eric
"The number one rule in this business is you never get hi on your own supply." Scare face starring Al PacinioWho Dares Wins.
I have a similar situation but not the "safe and liquid" stipulation you mention. If I have money sitting around, it is going to make me money one way or another. I respect the conservative attitude many of my peers have, but it doesn't work for me.
1. (I) never invest in a mutual fund. I am smart enough to outperform those guys by doing research, taking newsletters, being educated about how the market works. In fact, the AMEX-traded SPDR's (s&P 500 index fund) is smarter than most of those guys. Why support a bunch of crooks? The -put your money in mutual funds, hold it even when you're bleeding money in a bear market I think is the biggest bunch of crap my generation has been exposed to.
2. IMHO, and my opinion only, warren buffet is NOT the great investing genius people like to view him as. He got tremendously lucky on one big bet - his insurance company - and wall street had its own reasons for bailing him out. He was an idiot for taking a majority stake in Salomon Brothers when his experience was running a podunk brokerage with his father in Nebraska. And now he says derivative trading is going to crash the market? What made him an expert? Getting burned by Salomon? He's now sitting on $15,000 in cash per berkshire b share? what the h@ll is he doing with that much in retained earnings?
3. Why would you want to take under five percent yield on any money, anytime? Rule of 72 - your interest divided by 72 is the doubling period of invested money that has its earnings reinvested as well. 2.5 percent is a doubling period of like 29 years, before inflation is taken into account. Has to be a better way to make money, even if the market is stale or sliding. Robert Kiyosaki is a good read - rich dad / poor dad.
remodeler
"The -put your money in mutual funds, hold it even when you're bleeding money in a bear market I think is the biggest bunch of crap my generation has been exposed to."
Remodeler,
I agree completely, And I was one of those "stupid fools" who bailed out of my riskier stocks when th DOW peaked in the middle 11's. Just as my now wife was buying Cisco "for the long haul."
"warren buffet is NOT the great investing genius people like to view him as"
True perhaps? But he is moving his wealth overseas, and out of......U.S. dollars, that is a sign.
Jon
Might I interest you in the 4Lorn1 capital depreciation fund. Currently I am offering a 25% return on all money invested. I operate on a six month cycle but could make a generous exception for you.
The way this works is that you send me whatever sum you wish and I, after a few days for fondling, send you back 25% of whatever you sent me. A simple and effective system. Currently many stocks, Enron included, are only offering 2 to 5% return on all monies invested. I feel that this offer is most generous seeing as this five times what many stocks are offering.
4Lorn1, I am in.
So I get my split of the 75% 50-50?
I'll do you even better. I've got some used Enron stock laying around that is worth only three cents a share on paper, but we both know it is really a steal at that price. Just think how much you will be worth when it goes back up to three dollars...
;).
Excellence is its own reward!
With all these offers on BT who needs a broker.
"three cents a share on paper" that sounds like a really good deal. Let me see... the wall I have in mind is 12 long... 8' ceiling... what's the repeat again? :) or :(
Did you get burnt by Enron? Whoever says he has never lost money in the market is either a liar or somebody who's never been in the market. In the long run you win some and you lose some. With discipline and the right approach, your winners should cover the losers with profits left.
tom.... i've been a sucker for buying on bad news ever since i passed on Chrysler at $3..
when i heard that the biggest energy broker in the world ... in Shrub's backyard.. was going thru bad times .. it sounded like good times to me...
luckily i only used some mad money... so...... ezcumezgoMike Smith Rhode Island : Design / Build / Repair / Restore
tom.... i've been a sucker for buying on bad news ever since i passed on Chrysler at $3..
"Never catch a falling knife", you did the right thing on Chrysler... but you learn the wrong lesson.
luckily i only used some mad money... so...... ezcumezgo
There is something I meant to ask somebody/anybody for a long time and it happens that you came along. You'd probably heard the story. BTW I am not testing you, I don't know the answer myself.
This guy went to Vegas with $100 in his pocket, kept rolling it up to $100,000 over the next few hours. Put the $100,000 to 7 under thinking that if he won he'd leave Vegas for good. You know the rest... so did he lose $100 or $100,000?
my theory is he lost $100... if he went out of the casino, had a cuppa joe.. and came back in.. then lost it .. he wudda lost $100,000 or at least whatever uncle didn't clean outta him before he went out for the coffee...
Mike Smith Rhode Island : Design / Build / Repair / Restore
I allow myself 5% of portfolio for speculation.
Gold was a wash so I moved it to enron on the way down. Seems some experts had me convinced that the contracts alone were worth five dollars a share. I bought at three, I think. It was a few days before the B word hit the papers.
I'm a mature investor enuf that I didn't lose sleep over it. I can even reconcile myself that I haven't sold and locked in my losses yet. Of course that's because it would cost me more to sell it than the stuff is worth, so I smile and think of my money being in investment grade toilet paper.
;)
And overall, I'm back above where I was just before 9-11
Life goes on.
Excellence is its own reward!
mature as in olde... not as in wise, right ?...
i think i bought enron at $2... but i sold it at 20cents.. nice thing about no commission tradingMike Smith Rhode Island : Design / Build / Repair / Restore
Wise is relative.
I keep that enron for a reason - to remind me in the future not to listen to experts. I expect the tuition for that lesson to pay off in many ways.
;).
Excellence is its own reward!
I know of at least one gentleman who has an Enron certificate, probably not the right term but a paper showing ownership of stock, for a share of Enron stock framed on his wall for much the same reason that you keep yours. He has it on the wall beside his desk where he can look at it while brokers attempt to sell him the next big, sure to make a killing, stock. Keeps him from forgetting to take all the hype with a grain of salt.
Being a novice in this financial game I enjoy watching and reading all the various stuff that transpires out there.(I remember watching PALM after it first hit the market. What was it, open at $15 or something, zooms to over a $100 dollars overnight and then zooms back down the next day.Wild game you guys play.)
Anyhow, my dad has been a dabbler for a while now and finally learned enough to get himself off the sucker lists.
I on occasion have had the experience of answering the cold calls from the expert salesmen brokers who call about getting in on the next greatest thing since sliced bread.
One time this guy calls about some medical plastic skin deal. Roar! I normally slam dunk these guys with bad words and such but I let this guy run with it since pop wasn't around and I had no pressing matters.
"No, he's not here right now. "
"Well, what line of work are you in?"
Yadayada and this guy begins his spin on me after I politely decline and tell him there is no way I am going to buy anything and try to get off the phone.
He continues so I let him keep his deal going and listen to his sales approach as he continued to build and try to close over and over again. I go out to the kitchen, grab something to eat, he's still going, he's trying to find out how much investment capital I have available.
I tell him I have a 1949 Babe Ruth card worth 2 grand, he tells me to sell it and buy this stock. I'm marvelling at the guy now.
I go to the can, take a dump, read the paper, his guy is still going.
Finally I look at the clock and he'd been at it for over a half hour with nothing much more than an occasional no from me.
I just said hey I got to go and the end of the story.
I watch that stock and it triples in a week.
Nah, just kidding. I don't know what it did.
Just wanted to say if any of you broker folk of this nature are out there surfing this thread you should be ashamed of yourself. Why don't you go get a real job and an honest living?
be a creep
a few years ago a buddy told me that his mother had a tip, and that we should buy all the apple stock we could, beg borrow or steal the money and put it all in apple. ya right i says, apple is worthless, i'm not gonna risk my money on that.
couple months later it is announced that microsoft has bought apple, and stock value tripled in a week i think it was.....ouch ouch ouch ya just never know. neither of us bought any of it. never did find out who his mom knew.
ING is a nice place with their 2% FDIC insured rates of return
Ford credit will take a depoist from you which is liquid and will pay 2.65% for $30,000
http://www.fordcredit.com/moneymarket/index.jhtml
GE has the same deal but only pay 2% for your amount, HOWEVER you do get a $25 one time bonus for opening an account with just $500, so parking a small spot of cash there would be pretty nice.
http://www.geinterestplus.com/interestplus/index.html
High rate of return, liquid, and your principle is only at risk should ford or ge go bankrupt.