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Chief Moderator for my kids Julia & Kristen,
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Discussion Starter · #1 · (Edited)
So I am in again. In the 401K anyway.

Back at it, dribbling in the cash set aside Sept 2007. Bought enough Vanguard Total Market Index (VTSMX) to pay for a new Duc 1098 today. I sold it at $35 in '07, figure to pick it up today for around $17.85 It has not been this low since 1997. All I know is $17 is cheaper than $35, and that time is on my side. We will see it it turns out in 16 years. That is when I can begin to touch this money.

Who knows when the bottom is. I suspect the Dow will indeed go well into the 6K range. If it does, I will buy more, in greater amounts. If not, well, I have a decent entry point regardless.

Thank God I panicked in the fall of 2007. I wish I had panicked better, but it was a very good time to panic :lol

On another note, the recently released Treasury plan was met with a huge selloff. Some more reading on the subject has given me a bit of hope that the Obama crew, while printing money in mass quantities, is taking some intelligent steps. One piece of the Geithner plan that I particularly like is instead of giving the banks more money (which would never and probably should not pass in Congress anyway), the banks are basically being put through a "stress test" right now. This will get their minds right, hopefully. Evidently as bad as things were, they were not bad enough, given the CEO's outragous use of taxpayer dollars on bonuses and fancy toilets in their offices.

If you're the Treasury secretary, you certainly can't get up at a news conference and say, "We're going to force some of the nation's biggest banks to admit they're insolvent, so we can get the money we need to fix this problem." You want to see the Dow drop? Holy crap. So instead, Geithner was vague, and he is taking the heat. I think he is smarter than the media has given him credit for.

The issue that is killing the banks is they have bad assets that are untradeable and no way to value them. What Treasury is proposing is guaranteeing private investors a maximum set loss. Say an investor buys assets from a bank for $20. The government sets a "stop loss" for the investor" at whatever percentage. At least then, the investor knows the max they can lose. Their $20 asset would have a floor of, say, $10. A 50% loss is nasty, but eliminating the possibility of a 100% loss, well that is peace of mind. This may free up the markets and get things going again. It is not pretty, but it is a far more effective use of money. Who knows. By setting a base on losses, perhaps the market will come around and the government can "save" some money.

It is crazy that it has come to this. So much risk of unintended consequences down the road too. At this point though, I think governments around the world are just trying to make it through 2009. More than a few US banks will be nationalized before the end of the year though, without a doubt.

By the way, Treasure Secretary Tim Geithner makes about $191K a year. Peanuts for a guy like him. Right or wrong, I have to believe the guy is coming from a place of trying to do the most good of the country. Let's hope so.
 

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I'm still quite convinced that a hands-off approach of the govt would be better (and had we had such a situation I doubt we'd be in the mess we are now).

The Asian financial crises of last decade was caused largely by a sort-of similar governmental risk guaranteeing mechanism (though that was targeted at businesses). If the govt limits the downside of investing, people will rationally take on suprer-optimally risky investments, everyone is worse off.

I suspect that things will plod along without much action other than some good old stagflation, big banks and businesses will slowly crumble and become quasi-socialized in the process which will only serve to further reduce overall productivity and continue the trend of mediocrity.

I'm betting that despite this rather gloomy economic forecast, that the amount of money spent on suing the government over contracts, handouts etc will only increase and I'm hopping for some serious inflation to take care of equally serious student loans:laugh If I had assets to preserve I'd be socking them away in fairly inflation-proof venues (also with an eye to preventing easy expropriation by govt). Vanguard is probably quite good in that respects, though I've Austrian friends who have "suggested" stockpiles of unregistered gold... Same friend increased his investment portfolio by something like 3 fold over the last 10 months or so (was into selling short, then when the govt did away with that he did the same thing with Puts or something like that).
 

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I got bored with stocks back during the tech fiasco. Since then it's been all currency, spot and options. :). Took care of three out of four student loans this year. And there's only about 8 currency pairs to pay attention to, as opposed to the 2700+ stocks listed on the NYSE, plus indices, etfs and the like. My only gripe is that all the guys who got burned with stocks seem to think they'll make it back with forex. They're all screwing up my price action :rant

EDIT: I'm kind of chuckling watching Citi though...:laugh. I somehow managed to pick some up over the last two years at a price I'd rather not mention.:banghead
 

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Chief Moderator for my kids Julia & Kristen,
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5,503 Posts
Discussion Starter · #4 ·
No Forex trading in my 401K account. Hell, I can't even buy anything other than Vanguard, much less individual stocks. That is probably a good thing. :banghead Anway, the days of "buy and hold" forever are over. Active management, even in the boring old 401K, is required. My plan is to move more into stocks as we sink into the depths, and then back more toward 50/50 equities vs. cash and bonds down the road when the market recovers. Hopefully this happens before I die :lol

I'm still quite convinced that a hands-off approach of the govt would be better (and had we had such a situation I doubt we'd be in the mess we are now).
I agree. Too bad the gov't did not heed this during the tech bubble. The current mess makes the tech bubble look like child's play.

Who knows at this point. I feel like a passenger riding in a vehicle driven by a drunk driver. The tech bubble and it's aftermath amounted to breaking through a guardrail. The goverment stepped on the gas with cheap money, and now we are heading right for an immovable object, with gov't sawing away at the wheel.

It would have been better to have a dented fender back at the guardrail stage in this wild ride. Too late for that now though.
 
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