Reinke Faces Life

http://tinyurl.com/f9tyj

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He acknowledges that the way he invests isn’t right for everyone. In fact, that’s what he tells people—including his four children—who ask him how they should invest.

“Most who ask don’t really know much about investing, and even though I actively manage my investments and own actively managed funds, I recommend they buy index funds and use dollar-cost averaging,” he said.

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Not bad advice for a Bull Market. In a Secular Bear, I’m not sure if that’s good advice.

There has to be some recognition of the Secular and Cyclical trends.

Auto-piloting your money is a good way to fly into the mountain. I have paid tuition at that “school”. Lots of tuition!

http://www.mises.org/story/2221 

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Over the past ninety-three years, since the founding of the Federal Reserve, the dollar has depreciated by over 95%. With money no longer being a stable repository of value – thanks to inflation –  a predictable shift in the American character has occurred. Gone are the low-time-preference days where hard work and savings paved the road to a better life for parents and children.

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This means that you MUST seek to put your "money" into things that appreciate in value. Or, at least, don't depreciate. Or, depreciate too quickly. Real estate (i.e., they ain't printing no more land!). Gold (i.e., mining is hard work and it has a long track record!) Stocks (i.e., they float, but buy low sell hi, and put the dif in gold). Tools that allow you to earn and save more.

Become wise in the ways of beating inflation. Spend wisely and quickly. Take value "off the gambling table" buy buying things that will retain their value. Bullion coins are my personal favorite right now! 

from an ezine I read:

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Our policymakers will follow the example of the Japanese, because it is the only model they can reasonably be expected to follow. And, as in Japan, the policies used will ease the pain a little but will certainly not cure the disease. Americans, long scolded by the rest of the world as being spendthrifts, will suddenly start to resemble their Asian counterparts in their saving habits. Consumer spending will drop, and the economy will scratch and claw frantically just to avoid falling into the abyss of deflation, the likes of which haven't been seen on American shores since the 1930s.
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So, we have to prepare for the Great Depression Version Two Point Oh! Interesting since we have exemplars of what happens when politicians run their countries off the economic road. If they inflate their fiat currency too much, hyperinflation a la Germany in the 1920s. If they inflate it too little, they miss an opportunity to profit from their counterfeiting. If they don't inflate, then they get deflation a la the 29 Crash which was caused by the Smoot Hawley tariffs. If they have the pension ponzi, then the old folks WILL be eating dogfood. And, if anyone gets wise to the crisis, a la the Japanese people and shift from spend to save, the economy goes in the dumpster.

My response: cutback on spending, save, avoid extravegence, invest, and horde. 

http://www.vanguard.com/VGApp/hnw/VanguardViewsArticle?ArticleJSP=/freshness/News_and_Views/news_ALL_whosaves_06142006_ALL.jsp&SYND=RSS&Channel=AN

June 14, 2006
Who saves for retirement—and who doesn't?
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If you're saving for retirement in an employer-sponsored investment plan, you're in good company. According to How America Saves, an annual report published by the Vanguard Center for Retirement Research, about two-thirds of eligible employees join their workplace 401(k) plan.

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Our old friend / enemy is the time value of money! There's a numerical example that regularly kicks around Wall Street that demonstrates a few years of maximum saving early outdistances lots of years later. For the later boomers and all that come after them had best prepare for the "years of lean" coming soon to a country near you.

Carter style inflation, dramatically higher prices, a lot of bickering squabling and hard luck stories on the horizon. 

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B691283FD%2D6169%2D455E%2D8401%2D0BEE157D16BF%7D&siteid=mktw&dist=nwhpf

LIFE SAVINGS
Show me the employee-buyout money
How to determine if a one-time or annual payment is your best option
By Jonathan Burton, MarketWatch
Last Update: 8:03 PM ET Jun 11, 2006

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SAN FRANCISCO (MarketWatch) — It isn't easy to decide whether to accept an employer's offer of a job-buyout package. Forfeiting your livelihood often means downsizing your own lifestyle, and if you need to keep working, you may face a tight job market.

Moreover, accepting an early-retirement or severance package sometimes calls for a crucial but baffling choice: whether to collect one big payout or a stream of income over time — usually several years at most, to usher you into retirement. While the regular payments do offer security, people more often are drawn to the large lump sum. But be warned: If you choose the one-time payout, make sure you handle it wisely. 

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Having received each one of those, I agree it easy to:

(1) forget your silent partners Uncle Sam (Federal Income Tax), Father State (the People's Republics of New York and New Jersey — yes both got their hooks into one), Mommy Government (the Social Security "Insurance" ponzi scam), and the Nanny State (the Inflation makes savings worthless).

(2) that it really isn't a lot of money, if you have nothing coming in. When you're young, it's a "no brainer". When you're an old fogy, it's a hard decision.

(3) "they" are out to screw you. If it's severance, count your change and your fingers. (Don't be cheap; use a labor attorney to review the document, they want you to sign! It was drafted by THEIR lawyers.) If it's a buy out, make sure you don't leave a nickle behind. (Don't be cheap; use a CPA to explain it to you in small words. Remember their CPA planned it.) If it's a windfall, be smart about taking it. (Don't be cheap; have a lawyer AND an accountant advise you. You may be able to or need to shelter it.)

I can tell you FIRST hand that I paid tuition at these three "schools". Expensive lessons!

FROM AN EMAIL CONVERSATION 

>I also think that my pension is a perk, just like any perk you've received over the years.

No, not a perk. It was part of the value equation that you accepted to give them your time. The problem with a government pension is that they are defrauding you. Or at least fooling you too into believing how good it is or will be.

Compare the difference between a pension and an IRA / 401k.

Your time is worth say a dollar. Now you can take the dollar put it in an IRA, or have Uncle Sam put it in your “government pension”. I’d argue you’d be better off if you COULD put that dollar in your own IRA.

Thirty years down the road, you have to go hat in hand to Mommy Government and apply for your pension. Who knows what the rules will be, the payouts, or anything? You're depending upon the American people's sense of "fair play" and the honesty of politicians to uphold the bargain made by their predecessors.

That money in your IRA is real savings. It's yours. You want it. Go take it! All of it.

The money in the Government Pension is just an IOU based on the willingness of future taxpayers to make good on what you’ve been promised.

And, if, like the social security ponzi scheme, you are unfortunate not to live long enough to collect, then who gets your “pension”? An IRA would go to your heirs. Your accumulated Social Security taxes (i.e., "insurance" premiums) and / or accrued  pension just goes into the common pot.

(There’s a reason why accountants joke that social security is welfare for rich white women at the expense of men, especially poor minority men!)

A corporate pension also represent real savings. The company usually has bought a bet with an insurance company to pay the pensioners off. Baring the insurance company and the company going belly up, you'll get your benefit.

Defined benefit plans are being abandoned by companies thru bankruptcy. The Government winds up holding the bag via the PGC. So, to a certain extent, there is little difference between the the bankrupted corporate pension, a government pension, and Social Security! Ask the pilots at Delta about pensions versus IRA / 401ks.

At one time, unions held their members' pension plan assets because no one trusted the companies. Federal prosecutions of the union pension trustees demonstrates the worth of that approach. 

So, I think you have to think very carefully about promises versus bank balances. You need to think about the time value of money, discounted cash flow, the value of annuities, and a "bird in my hand is worth two of your promises".

imho! 

One of the biggest awakenings I ever received was at ATT when I chatted with an actuary.

He disabused me of the notion that the ATT pension was a great benefit.

He pointed out that if they didn’t give me a pension and other benefits then they would have had to pay me more. At the time of the conversation, ATT put aside in the pension plan $8.43 per month per employee!

$8.43!!

They’d have had to pay a lot more in salary that that pittance. So, they weren’t doing me any BIG favor.

And, you wouldn’t want to guess how many people they fooled with the propaganda that the pension was an important benefit.

(01) Spend less than you earn! Save max in tax advantaged forms.

(02) Emergency fund equals a six month run rate.

(03) Save 10% for yourself; give 10% to charity.

(04) Insure the risks you can't afford to absorb.

(05) Separate your employment from your insurances, if possible.

(06) Understand your taxes that are deducted from your paycheck and the hidden ones like inflation.

(07) Value your benefits correctly. They may not be worth what you think

(08) If you have to ask the price, you can't afford it. Don't buy it!

(09) Pay off credit cards every month. If you can't, you can't afford what you bought. Take it back or sell it!

(10) Rent apartment if you have; buy a single family home as soon as you can.

(11) Buy your house to last a lifetime; pay it off in 20 years; no helocs; no refinance.

(12) Plan for your car to have at least a six year life; eight or ten is better.

(13) Finance that car if you have to for no more than three years; don't prepay it (rule of 78).

(14) Pay for six; first three to the credit union; after that to an earmarked savings account.

(15) That savings account is the maximum purchase price of the next one.

(16) Investments are not the emergency fund; not lotto tickets.

(17) Never invest in anything you can't explain to a child. Don't bet against the trend.

(18) No more than 5% in any one investment type, individual stock, or custodian.

(19) Special care if you buy your employer's stock; going belly up takes your paycheck and investment.

(20) When investing worry about roi first, taxes second, and risk third.

(21) Spend according to a lifetime plan; don't die too rich; don't enjoy life to save; you only go around once!

http://www.everbank.com/main.asp?idpage=pro_mscd&affid=eb&referID=11808

Ahhh, ain't gold wonderful. Bit not all that glitters is gold.

Take for example, the Everbank MarketSafeSM Gold Bullion CD

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A CD made of Gold. Invest by June 20, 2006.
Diversify, seek higher yields, and safely invest in Gold Bullion market returns. You can do it all with the new MarketSafeSM Gold Bullion CD from EverBank®.

This is the latest addition to EverBank's popular line of MarketSafe CDs. You'll enjoy many of the same great features and protections as the rest of the line, including 100% principal protection, market-driven upside potential, no account fees, and FDIC insurance.

A conservative investment with great reward potential, the MarketSafe Gold Bullion CD is a smart new way to invest in the Gold market. 
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It's really has no relation to a CD in the traditional banking sense.

Stodgy old traditional bank CDs pay a paltry amount of interest for locking up your money for some term. This, on the other hand, appears to be a straight gold play combined with a put at the current price at no cost with FDIC insurance?

So they get the use of your money for the price of a put and a call at the current price. Hmmm?

Thus, to the extent that whatever they earn with your money exceeds the cost of the put and call, they are a "winner".
Why wouldn't I just buy the put and the underlying coins myself?

Plus does the FDIC know they are insuring commodity trades?

AND, having worked on the Street, what about trading partner breaks, market discontinuities, and bankruptcies?

In short, all that glitters isn't, imho.