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On 8/14/2021 at 10:47 AM, di1630 said:

Anyone with good ideas on investments to hedge vs inflation ?

Real Estate has in the past been a proven hedge.  Consider new property or the structure of existing property you own.

I currently own six houses, five outright.  I also have a longtime investment property that I am selling and reinvesting via the IRS 1031 provision.  In short, I have owned a property for 29 years and can no longer depreciate.  I am selling and immediately reinvesting in another "like-kind" property which defers the capital gains tax (my son will have to pay it some day).  I have already identified the new property and it already has a rental lease in place.  While I cannot establish a new depreciation schedule, in doing the exchange I am moving that invested capital form a state that is unfriendly to outside investors (South Carolina), to Florida with much lower property taxes and higher rental incomes.  The overall exchange will increase my monthly cash flow by $700.

You may also consider land, particularly land that can be used for farming, they don't make any more of it and depending on the area you can get a big tax break if used for agriculture.

Whatever you do, I would suggest a diversified approach that spreads your risk.

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13 hours ago, FDNYOldGuy said:

Only cash loses if you stay on the sidelines during an inflationary time like we've seen since March 2020. "Time IN the market beats timING the market." 2008 levels were reached late 2013-early 2014 and, if you stayed in the market and kept adding capital, you made out handsomely and solidly beat inflation with one of the greatest bull markets in history. If you cashed out at the wrong time, it really hurt. For March 2020, we were back above those levels within a few months.

I'm not saying you're wrong when the downturn comes that cash is great, or that it's that easy to ride through a downturn. Hell, I'm guilty of not heeding my own advice some, too, because I thought I KNEW it was the correction. It's not easy to watch your money evaporate. But, it's certainly not much easier to watch markets continue up double digit %s while you're sitting in cash earning nothing/next to nothing.

If you're not trying to retire tomorrow or in the next 5 years, you're likely better off just to keep plugging away and not trying to time it. If it does crash, you're getting discounted securities to stuff all that airline retirement money into. If it doesn't, you'll feel awesome that you made all those gains while others sat in cash waiting for the shoe to drop. 

Then again, if it crashes tomorrow and you would have gone to cash but decided not to after this post, I don't want folks hating me. So, the BL is: do what you're most comfortable living with. But, try to not let emotion run your decision making. If the markets really fall off a cliff and everything tanks, we've all likely got bigger problems than worrying about our retirement accounts. 

Agreed, only to add that cash is a party of diversifying. We've gotten so used to the concept that stocks are the only place where your money can make money, because fed policy for the past 15 years has basically made that the truth, barring real estate.

 

How does the phrase go? Bulls get rich, bears get rich, but hogs get slaughtered.

 

There's just too much that doesn't add up, and it looks like inflation is going to be what brings the whole silly plan down. Consider:

- higher than expected unemployment, yet 10 million unfilled jobs

- crippling supply chain issues *still* hitting nearly every industry. Does anyone think it's good for the economy that you can't buy new cars thanks to the chip shortage?

- all of the growth estimates have been off in the wrong direction, and this is after a pandemic set the bar very low. And now China's growth is also slowing.

- the government is literally injecting $120 *billion* per*month* into bonds and mortgage backed securities.

- inflation... The great destroyer. Right now the cost of margin trading is between 4 and 6% depending on how much money you have in the account. That's with interest rates effectively set at zero by the fed. If inflation continues, and you know it's going to because the Fed is now admitting that it's happening and they wouldn't do that if there was any hope that it wasn't, the cost of all of that leverage is going to go up. Fine and well as long as the stock market keeps delivering these eye-watering games that we seem to have completely acclimated to, but if the FED has to admit that inflation is now a concern, how long do you think they'll be able to keep injecting 120 billion per month into the market?

What happens when the biggest support for market prices gets removed, at the exact same time that the cost of leveraging goes up?

I was talking to someone who expects a 50% reduction in the s&p 500. It sounds crazy, until you look at the chart and realize that a 50% drop would only bring us down to 2016 levels.

 

Is it really hard to imagine the market, after enduring a global pandemic that continues to cripple the economies of entire countries, would go back to a level it was at only 5 years ago?

 

I'm not advocating for selling everything and sitting on a pile of cash, but if you're not going to take profits after the most incredible run up in prices under the most unlikely conditions, then you're never going to take profits at all. So many people who are euphoric over the stock markets last five or six years don't seem to have stopped to consider exactly what the implications are if this really is the New Normal. 

 

Now is a really good time for people to look at their bank accounts and make sure they are complying with the common sense financial security measures that no one talks about anymore. Do you have 6 months of expenses in a savings account, ready for an emergency? If you lose your primary income source at the same time that the market takes a giant hit, are you going to be in a pinch? Do you have a mortgage that you can only afford if there's no change to your employment status?

The biggest losers in any crash are always the retail investors. Always. Meme stocks and cryptocurrency have the institutional investors on edge. Sure they'll get on CNBC and tell you how they're buying Bitcoin, but they're surprisingly quiet when they sell after all the retail investors follow their lead and buy something they don't understand. 

 

And of course I could be wrong, I probably am. But my family and friends who have everything in the market right now I'll admit that none of this makes any sense. And when I ask them when, if not now, is their trigger to take profits, they have no answer.

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I completely agree, @Lord Ratner; this market is nuts and I have no clue how it keeps going up. It's all built up on cheap debt that corps are taking on to buy back their own stocks/competitors or individuals are using to purchase higher and higher priced assets (cars and housing being huge). Interest rates are in the basement, P/E ratios are crazy by historical standards, and debt ratios are high. Not to mention a lax Fed monetary policy that's fed all of this. 

But, I've been saying that since 2014 and shocked yearly as it just continues up. The only "saving grace" to all of this is that the entire world is going through the same thing, so if it is all built up on debt and free money, is it just the new normal and we're going to experience a big bump in inflation?

Either way, you're 100% correct on getting back to the basics. Have an emergency fund, diversify your holdings, and be cognizant of your expenses to not be under water if income drops due to unforeseen circumstances. And, keep saving for retirement.

None of us (including the experts) can predict the future. A few "geniuses" will have called it, but it's more the broken clock is right twice a day level than someone actually knowing. So, just be as financially healthy as you can.

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On 8/18/2021 at 1:01 PM, FDNYOldGuy said:

But, I've been saying that since 2014 and shocked yearly as it just continues up. The only "saving grace" to all of this is that the entire world is going through the same thing, so if it is all built up on debt and free money, is it just the new normal and we're going to experience a big bump in inflation?

The new normal is exactly what the World Economic Forum is pushing for with The Great Reset. Klaus Schwab is a literal Bond movie villain in real life. Watch some of the videos from last year's World Economic Forum. Get ready for what they claim will be a massive cyberattack.

KlausSchwab.jpeg

World Economic Forum.jpeg

villian.jpeg

 

@ClearedHot@Lord Ratner
If you're not stacking silver YNGMI. Follow @FDNYOldGuy's advice and have the basics to include holding actual precious metals, not owning them in a stock.

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  • 4 weeks later...

https://www.cnbc.com/2021/09/13/house-democrats-propose-new-retirement-plan-rules-for-the-wealthy.html

Not good for those of us in the civilian sector…

Democrats’ legislation would end the mega-backdoor Roth by prohibiting all after-tax contributions in workplace plans and prohibiting after-tax IRA contributions from being converted to a Roth account.”

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8 hours ago, LJ Driver said:

https://www.cnbc.com/2021/09/13/house-democrats-propose-new-retirement-plan-rules-for-the-wealthy.html

Not good for those of us in the civilian sector…

Democrats’ legislation would end the mega-backdoor Roth by prohibiting all after-tax contributions in workplace plans and prohibiting after-tax IRA contributions from being converted to a Roth account.”

Prohibiting after-tax contributions in workplace plans... so no more Roth TSP?

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29 minutes ago, pawnman said:

Prohibiting after-tax contributions in workplace plans... so no more Roth TSP?

 

No, Roth TSP/401k would still be a thing.  It's just saying you can't convert after tax monies into a Roth IRA.  This would mean most of us "rich" guys wouldn't be able to contribute to our Roth IRAs via the "back-door" or "mega back-door," like we do now.  It's simply a money grab by the dems...something we've all known they've wanted to do for a long time.

A lot of us Delta guys (not sure what other companies have the option) use this to stuff our Roth IRAs to the gills. As an example, last year I used the "mega-back door roth," to convert 30k into my Roth IRA and was still able to contribute 6k into a traditional IRA (after tax), the convert that into my Roth IRA.  So even though I made too much to directly contribute to my Roth IRA, I was still able to put 36k into it.  That option would go away.  Not the end of the world, but certainly a loss in a very nice benefit.

This is just the start of what they really want to do, because us rich guys are so greedy and "we didn't earn that."  Means testing SS, eventual taxing of our currently "tax-free" Roth TSP/IRAs will likely be the next things in their sites.  I'm certainly not planning on getting SS as part of my retirement plan, if it's there, cool more beer money.

 

If that still doesn't make sense, check this out. It's different than the standard back-door roth.

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  • 4 weeks later...

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

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1 hour ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

Depends on when you need the money...within next couple years?   Savings account (preferably "hi yield") would likely be your best bet.  If you don't really need it for 5-10 years or more, your options are more varied, and many on here and elsewhere would suggest dollar cost averaging (or not who cares) into a low-cost index fund.

Alternatively you could go put it on black.

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1 hour ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

Crypto. Seriously. 

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9 minutes ago, VMFA187 said:

Crypto. Seriously. 

Bitcoin is back to $50,000.  As inflation continues and the clowns pushing more stimulus get closer to success Bitcoin is looking better and better.  I think $300,000 within two years.

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2 minutes ago, ClearedHot said:

Bitcoin is back to $50,000.  As inflation continues and the clowns pushing more stimulus get closer to success Bitcoin is looking better and better.  I think $300,000 within two years.

Concur. I think it gets to six figures in November / December, maybe even as high as $140k. 

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4 hours ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

bro, that's the million dollar question for everyone (no pun intended)...real estate is in a bubble, stocks are inflated, crypto is super volatile, savings can't keep up with inflation.  if you figure it out, let us know. 🍻

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9 hours ago, KWings06j said:

Looking for advice on short term investments. I've got a sizeable chunk of change from selling my house that I need to figure out what to do with. I'm going to be renting for the next couple years and then looking to buy again when the market has hopefully returned to sanity. Main concern is just not losing buying power to inflation but also want to make sure I'm not going to lose half of it in the next correction. Any advice?

Yeah, go back in time and don't sell your house.

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6 hours ago, HeloDude said:

Don’t worry, everything is fine.  Biden told me so.  And if things like gas goes up, then that’s just the price we have to pay to fight climate change.

At least we saved 10¢ on that 4th of July Cookout!

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On 8/18/2021 at 7:18 AM, ClearedHot said:

I also have a longtime investment property that I am selling and reinvesting via the IRS 1031 provision.

Is this your first time doing a 1031? Looking for any intel/recommendations around this process 🍻

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17 minutes ago, Day Man said:

Is this your first time doing a 1031? Looking for any intel/recommendations around this process 🍻

Yes first time doing a 1031, have owned the home for 27 years.  Three items;

1.  Identify the new property soonest and have a backup.  I am lucky already had a property that I am buying from a friend.  Would have to go back and review the rules but I think you have to close on the replacement "like kind" property within 120 days.

2.  You will need an intermediary, by IRS rules you can't touch the proceeds of the sale.  In my case I have a lawyer in South Carolina (where the original property is), that performs this service.  He will hold the funds in escrow and deliver to title company in Florida upon closing on the new property.

3.  Try to find a replacement "like kind" property that is slightly more than the property you are selling.  Some of the literature says it has to be equal to or greater but checked with my CPA and you can actually go lower.  It does trigger capital gains on the difference and you don't want to pay that out of your "winnings." 

Good luck.

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How about avoiding home country bias and investing in the world instead of just looking stateside for investment opportunities? There's some good research by Meb Faber on global portfolios. Yes, here at home everything is expensive and there's not many good places to put money. But internationally that's not the case. In fact there has been research suggesting that buying the cheapest 25% countries overall beats the S and P, though will have some years of underperformance. That's the conclusion I came to. The US market is only 50% of the stock world and like 15-20% of the bond world. Anyone on here invest globally? Cambria has some interesting funds like GVAL that I've started diversifying into. Curious on everyone's thoughts.

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23 hours ago, QAZqaz said:

How about avoiding home country bias and investing in the world instead of just looking stateside for investment opportunities? There's some good research by Meb Faber on global portfolios. Yes, here at home everything is expensive and there's not many good places to put money. But internationally that's not the case. In fact there has been research suggesting that buying the cheapest 25% countries overall beats the S and P, though will have some years of underperformance. That's the conclusion I came to. The US market is only 50% of the stock world and like 15-20% of the bond world. Anyone on here invest globally? Cambria has some interesting funds like GVAL that I've started diversifying into. Curious on everyone's thoughts.

I have an international stock fund and international bond fund in my portfolio just for this reason. Majority of my investment is in the US though.

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23 hours ago, QAZqaz said:

Anyone on here invest globally?

I like picking countries with demographics I like (young populations heading to consumerism, growing industry/QoL, reasonably stable governments, etc.) and throwing money in ETFs of those countries for my IRA. Still got a few years (although getting closer quickly, it seems) until I can access my IRA without penalties, so it’s a long play hoping the numbers do their thing. But, definitely have had some decent unrealized gains on the journey thus far. 

Then again, these days, most US large/mega caps are pretty internationally diversified, so you’re getting decent exposure even investing in US companies. 

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15 hours ago, FDNYOldGuy said:

I like picking countries with demographics I like (young populations heading to consumerism, growing industry/QoL, reasonably stable governments, etc.) and throwing money in ETFs of those countries for my IRA. Still got a few years (although getting closer quickly, it seems) until I can access my IRA without penalties, so it’s a long play hoping the numbers do their thing. But, definitely have had some decent unrealized gains on the journey thus far. 

Then again, these days, most US large/mega caps are pretty internationally diversified, so you’re getting decent exposure even investing in US companies. 

Take a look at this article:

https://mebfaber.com/2019/01/06/you-would-have-missed-961-in-gains-using-the-cape-ratio-and-thats-a-good-thing/

"This strategy beat the S&P 500 by four percentage points per year.  Despite higher volatility (mostly the good “upside” volatility, by the way), it still resulted in a higher Sharpe ratio and lower drawdowns than sitting in expensive US stocks."

The chart that goes along with that quote is definitely worth looking at. CAPE might just be another metric you use to pick countries that look appealing to you. The point though, is these days I'm coming to the conclusion that diversification away from large companies / US companies might be a wise move. It is true that borders matter less and less, but if you're investing in expensive companies, international or not,  your future expected returns will still go down.

WRT investing in mega caps when they are the largest cap company at the time...see chart below. 

 

mega cap investing.jpg

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On 10/13/2021 at 10:42 AM, QAZqaz said:

Take a look at this article:

https://mebfaber.com/2019/01/06/you-would-have-missed-961-in-gains-using-the-cape-ratio-and-thats-a-good-thing/

"This strategy beat the S&P 500 by four percentage points per year.  Despite higher volatility (mostly the good “upside” volatility, by the way), it still resulted in a higher Sharpe ratio and lower drawdowns than sitting in expensive US stocks."

The chart that goes along with that quote is definitely worth looking at. CAPE might just be another metric you use to pick countries that look appealing to you. The point though, is these days I'm coming to the conclusion that diversification away from large companies / US companies might be a wise move. It is true that borders matter less and less, but if you're investing in expensive companies, international or not,  your future expected returns will still go down.

WRT investing in mega caps when they are the largest cap company at the time...see chart below. 

 

mega cap investing.jpg

Interesting article, definitely need to explore his website a bit more. Curious of course what others opinions on this metric are. 

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