How do you guys invest?

Nimbus

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Yes. Meaning the probability of a 2020 constriction, I think, is less than 50%. A downturn in the US economy is unlikely in part because 2020 is a Presidential election year. That being said, crystal balling is not a big factor in my investment decisions. Even if Buffett is not following his own advise, I am -- selecting a solid horse to ride is most important when the trail is unknowable.

You point out that the Fed is taking actions to forestall a feared downturn, but you are still anticipating a downturn. To continue to believe that there will be a 2020 constriction, you have to believe that the Fed is correct, and also that their efforts will be ineffective.
I believe the Fed is correct and I also believe that they are never in any position to stop seismic movements. The most that the government can do is to delay and mitigate. Nobody, not even the entire might of the Federal Reserve can stop a recession, otherwise we would never have any.

Do you think they just sat on their hands in 2008 and let many people lost half their retirement fund?

Let’s do a simple math here. Suppose I take your 50% number as fact. If I keep my stocks and nothing happens, my money would probably grow by 3% (averaging the past 3 months), but there’s half a chance that I’ll lose 50% of it. In the mean time putting it in bonds and treasuries would get me around the same 3%, but there’s half a chance that I would earn 0%, maybe a little less.

What would a reasonable person do?

EDA73FF0-0430-4F38-936F-F099B9B7577D.jpeg

Blue line: S&P 500 Index
Red line: Vanguard Total Bond Fund
 

FireEye

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I believe the Fed is correct and I also believe that they are never in any position to stop seismic movements. The most that the government can do is to delay and mitigate. Nobody, not even the entire might of the Federal Reserve can stop a recession, otherwise we would never have any.
They had been 'pumping' money into the economy since at least 2008. It's called Quantitative Easing. They attempted to reverse a year or two ago with Quantitative Tightening. I hadn't looked into how long that lasted.
 

FireEye

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What I have been wondering is why finance people preach about the stock market and to invest in mutual funds, when the real stock market in return in the last 15-20yrs really only increase of 4% per year before fees (with fees it's closer to 2%). They thought the average of return of at least 8%. Most people follow these financial gurus thinking they would be a millionaire by the time they retire, only to find out that they're not and that they would have to keep working much longer.
Screen Shot 2019-10-30 at 4.48.31 PM.png


Here is the real annualized growth rate of S&P from Jan 2000 to Dec 2018. This does not include the fees you pay in your account to the broker or inflation. The average return is touted as 6.41% when in fact the real gain in 4.83% and here's a more depressing picture when one considers inflation. Friends, your money that you invest since 2000 for 18 years gets 2.83%. It doesn't even include broker or account fees.
 

Nimbus

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They had been 'pumping' money into the economy since at least 2008. It's called Quantitative Easing. They attempted to reverse a year or two ago with Quantitative Tightening. I hadn't looked into how long that lasted.
QE and Repo are different. The former is slow and steady and acts as a stimulant, the latter is more of an emergency instrument.

From 2007 to 2018 the Fed took QE steps to stimulate the economy during and after the recession. This year they increased the rate to slow down what appeared to be an overheating economy, only to reverse it in September when the economy actually slowed down again.

I live close to Elkhart, Indiana, the RV capital of USA. Last year RV sales declined for the first time since 2008. My brother-in-law’s manufacturing company is also having a bad year for the first time since the Great Recession.

Unemployment number is still good, but it’s a lagging indicator. It means unemployment doesn’t rise until after the recession begins.

In any case, a recession is very likely in 2020, because I can’t imagine the economy remaining steady all the way to 2021.
 

jstar

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Here is the real annualized growth rate of S&P from Jan 2000 to Dec 2018. This does not include the fees you pay in your account to the broker or inflation. The average return is touted as 6.41% when in fact the real gain in 4.83% and here's a more depressing picture when one considers inflation.
Yep. The thing is also, that those overviews often show a longer period than people foresee and they invest after their neighbors or friends tell them to (so after a profitable period). And people often just look at an average percentage. If you buy in in 2007 for instance, it will take forever to make up the loss you suffered.

E.g. $100,000:
2008: $63,000
2009: $80,000
2010: $92,000

Nerve wrecking to see not even a break-even after 4 years...
 

jstar

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With deforestation and wood allegedly becoming a rare commodity, it became rather trendy a couple of years ago in many areas in Europe, to invest in forests.

Governments provided subsidies and according to different Annual Forestry Indices, you could get a return between 15 and 30%. (Mainly Oak)

Now there is a bark beetle active, it has a devastating effect on the (mainly pine) trees in Sweden, Belgium, Germany, etc.

So they hastily cut down the trees and collect and sell the wood to inhibit the further spread of the beetle.

There is currently so much (softer) wood on the market, that the price per cubic meter made a dive from €35 to €15.

There you go.
 

Nimbus

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Yep. The thing is also, that those overviews often show a longer period than people foresee and they invest after their neighbors or friends tell them to (so after a profitable period). And people often just look at an average percentage. If you buy in in 2007 for instance, it will take forever to make up the loss you suffered.

E.g. $100,000:
2008: $63,000
2009: $80,000
2010: $92,000

Nerve wrecking to see not even a break-even after 4 years...
It actually took 6 years to recover the value lost to the recession.

I don’t think the stock market is the best investment you can make. However, for most workers in USA it is probably the only investment vehicle they have access to without extra cost, through their employer’s 401K plan.

There’s a big incentive to use it because the money is added into the plan tax free, and many employers contribute to it in lieu of pension. Most employers use a matching scheme where they only put in as much as the employees do. My company matches 100% of the first 3% of my salary entered into the plan, and 50% for the next 4% contributed. In other word, if I save 7% then the company adds 5%. If I put nothing into it, then I get 0% from my company! On top of that the 7% that I keep is immediately taxable!

All the 401K plans that I have give employees several fund choices. There are at least one index fund, one bond fund, and one money market fund. If you feel that a recession is coming and you’re very close to retirement, then you should be proactive and move everything into bonds.
 
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Great thread, very interesting for me to read opinions of people who live in Indonesia for a longer period and/or who know the country very well. If one reads only articles of so called analysts or experts, it can get quite frustrating since I got the feeling that more and more so called experts only try to draw the darkest possible picture to get as much attention as possible nowadays.

A few days ago, I read an article that, amongst other things, predicted a state bankruptcy in Argentinia in 2020. Probably, this prediciton is not too unrealistic. But the article also stated that it is very likely that emerging countries which have high amounts of debt (Indonesia was named as an example) could get in big trouble as a consequence of Argentinia´s state bankruptcy, and that their currencies´ value could decline dramatically. Probability for this event in 2020 was estimated with 50% and value loss of IDR (compared to EUR) could be about 40%. Also the stock market could decline by 50% (said the article).

As I said, I agree with the possibility of a state bankruptcy in Argentinia in 2020, and I also agree that this might have a negative impact on emerging countries which have high amounts of debts since investors could become more careful if the development in Argentinia (or other countries as well) is dramatic. But I personally do not think that such a enormous effect on countries like Indonesia is realistic. During the last state bankruptcy in Argentinia, the impact on the EUR/IDR-exchange rate was also not that dramatic. And since the ECB probably will continue with their recent strategy, it seems not very likely to me that the Euro could increase that much in relation to IDR.

This is only one example of many that, in my view, draw an unrealistic and dramatic picture. So, it is a refreshing change to read your comments and statements about Indonesia´s economy and, partially, global economy in this thread (y)
 

jstar

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Talking about currencies, the problem for us common mortals who are more € oriented, is that everything is calculated via the US$ as primary currency. I don’t mean that it’s pegged but I’m talking about pairing.

So with an IDR ⬅➡ USD ⬅➡ EUR, there are some more variables when considering moving ? over for deposito or so. (With the aim of moving it back one day.)
 
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Ah, in Euro you meant. :) Due to the weak euro combined with the turbulences, we have reached the gold value of 2012.

Regarding the further development of the gold price, much depends on the reaction of Iran now. If they decide to attack targets in the Strait of Hormuz, I assume that there will be another impulse for gold and oil prices. Also if they attack targets which involve U.S. citizens since then Trump & Co. will take it to the next level.

Leaving the economical effects aside, one can only hope that both sides will stop this escalation in the very near future. People who tend to be pessimistic or hysterical already start to worry about WWIII again.
 

harryopal

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And what not to do. This last couple of weeks I have been getting emails from Citiflexi with lines like this: "That's thanks to a lot of work on our... you won't need to spend more than 10 minutes a day and see Impressive profits. Join our thousands of users that already enjoy from average daily profits of 1500€ !"

Yesterday the ABC ran a story about cyber scam investments that cost Australians $86 million in 2018 and one lady who was drawn in with a small initial investment and quick returns that led her to... (can you believe it? ) ... use her superannuation of $700,000 to make a lot of money. And it disappeared. Ohh dear. The full story is with this link:

https://www.abc.net.au/news/2020-01-06/cyber-pirates-of-the-caribbean-online-fraud-scheme/11719724

And this week two emails, different sources, indicating there are deposits to be paid into my account and for me to just update my bank details with them.
 
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And what not to do. This last couple of weeks I have been getting emails from Citiflexi with lines like this: "That's thanks to a lot of work on our... you won't need to spend more than 10 minutes a day and see Impressive profits. Join our thousands of users that already enjoy from average daily profits of 1500€ !"

Yesterday the ABC ran a story about cyber scam investments that cost Australians $86 million in 2018 and one lady who was drawn in with a small initial investment and quick returns that led her to... (can you believe it? ) ... use her superannuation of $700,000 to make a lot of money. And it disappeared. Ohh dear. The full story is with this link:

https://www.abc.net.au/news/2020-01-06/cyber-pirates-of-the-caribbean-online-fraud-scheme/11719724

And this week two emails, different sources, indicating there are deposits to be paid into my account and for me to just update my bank details with them.
It is really sad when someone loses his life savings. Having worked the whole life and being dependend on the state's money after all, must feel terrible. Especially if you took care of saving some money and being scammed then...

Some scams might be trickier than others. But the mails that you received seem to be quite obvious, I think.
Regarding the lady who lost $ 700,000, there was personal contact and if the person is charming and/or convincing, it seems to be likely that their strategy works with some people :( I always wonder how these scams can sleep tight...money makes things easier, I assume, but do these people never think about where it came from?
 

harryopal

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Wow! How lucky can you be? A new email today advising that I have a commission of $980,850 US to be paid to my account just as soon as I verify my email. Now, how will I spend it? Well a Lamborghini would be just the ticket. Not to go anywhere but to sit in and impress the locals while stuck in the traffic jam. And everyone needs a luxury villa with servants. As I am about to be rich it hardly matters if I get diddled on the villa deal. And if anyone wants to borrow a few thou', don't hesitate to ask.
 

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