Speaking of investments. Any of you doing this?

If you're looking for a conservative, non-stock investment, go for bonds.

If you're nearing retirement age, you should already be switching some of your stock investments to bonds. The recent market troubles might prompt you to move an even greater percentage to bonds. (That was my dad's 2008 strategy, and it seems to be a wise one).

If you're relatively young and won't be retiring for a while, I would stick with stocks and weather this storm. There may even be some good values out there if you're willing to be a patient, long-term investor.

 

That's good, basic investment strategy, something big companies teach their employees when it comes to advising others.

 

I've got about 25 years to go before I retire, but I have been buying bonds for about a year now. My 401k has gone a little bond heavy in recent years too, about 30 percent. I am no broker, but that just seems like a smart move right now. When the market corrects itself, I will switch out of the bond market and back into stocks. But that could be years from now.

 

Depends, RPM.

Right now, your bonds should be gaining in value -- given the Fed's belated chainsaw routine on interest rates. If you have staggered durations/yields on them (laddering), so much the better.

The problem lies in the fact as those bonds mature or get called, your yields aren't what they were six months ago, since prices and yields move inversely to each other.

Where am I going with this? Unless you need the $$$$$ like right freakin' NOW, you need to be in the stock market as much as your stomach can tolerate. Hopefully, you won't stay out of the market for years. Otherwise, you're going to leave a lot of money on the table.

 

But when the dollar is worth less, people tend to want to hold a more stable asset like gold, right? That increases quantity demanded and, therefore, price. Correct?

 

But would you buy the "stable asset" when it is at its highest price?

Buy low, sell high or the reverse if it pleases.

When the dollar is at its weekest, it wouldn't be wise to go out and buy Euros or Pounds.

 

You literally can buy gold coins, which were once in circulation. Coin exchanges, those places that buy and sell silver and gold, is where you go.

My uncle has done it for years at a place in Signal Hill - across from the Costco.

If the price of gold is $800 an ounce, you buy a gold coin for a couple bucks more - and the store buys them back for a couple bucks less. That margin is the store's revenue.

The gold coins my kids have are 1/2 ounce. I have seen one ounce coins as well.

 

True, but I just wonder if gold has peaked...with the way things are going, I think it's going further up.

 

I view it more as the USD going down...

 

That was my point. It's not at its highest.

 

Just for shits and giggles, and just because I'm a numbers geek, I found a years worth of dollar and gold spot prices. After a legal pad sheet full of scribbling and formula filling, I found what I had expected. The two are very negatively correlated (moving in opposite directions). They have a correlation factor of -.7362. Correlation of -1 means they move in exactly the opposite direction all the time. +1 means they move in the same direction all the time. -.7362 is about as negatively correlated as I've ever seen when comparing two assets.

Yes, when the dollar's falling, gold is a satisfactory parking place for the money you once held in cash.

But what rpmmutant said a few posts ago is very true. If conditions continue to worsen and the dollar continues to fall, most investors will rid themselves of cash and you'll have no one to sell the gold to in the end.

 

Here's my thinking though: Interest rates can't go down much further. What are they now? 3.5 percent. They can only go up. When that happens, the bonds mature quicker. The bonds don't become any more valuable, they just reach their intended value in a shorter time period.
Besides, I am buying them more for my kids than me. The ones in my 401k are there because I don't think interest rates will continue to fall. They can't. When they start to rise, money in saving accounts and bonds will grow. Not at an alarming, but better than most other places.