Transplanted from elsewhere

[solarbird]

smarier posted a poll about where the DJIA will end up. He had a set of ranges, starting with basically now, and going down to 4,000, and an option of "Say good bye to all your money."

I picked, "say good bye to all your money." because seriously, if these dicking-around bullshit hide-the-losses games keep happening, and there's every indication they're going to keep happening, one of two things will happen:

1) 80-90% loss from peak on the Dow Jones. That's not crazy; we're well more than halfway there already - roughly 63% there, to get specific about it - with about half of losses sorta-kinda stated, and with unemployment just starting to ramp up as we head into the real-economy takedown. That gives us a target of 3,000-1,500 (yes, that's the DJIA) in sight, and that's below his list. But that'll be in a deflationary environment, which means a lower actual number once we finally get there. I don't know how much lower. Or, we get;

2) Currency devaluation. A serious one, probably complete with good old fashioned printing. That's what I'm talking about when I say to keep an eye on the M1. In this case, none of these numbers mean anything, but you can say goodbye to all your money because it's not so much "goodbye to all your money" as "goodbye to your money," as in "goodbye to your currency," at which point all bets are off, all numbers are meaningless, possession is 98% of the law, and I hope you've got a good friends network with whom you can barter.

Now, we're not guaranteed either of these outcomes. This is not a promise. It will take some work to get there. But so far, this is where we're going. One can only hope that some sense of sanity can return soon to policy.

But even without that, the market is going to be very bad by historical numbers for some time. One of the things nobody has been willing to remember yet is that as of 2008 the demographic trend is against new net 401(k) money, even in a recovery. That market-goosing game - which has been substantial - is over for the next 20 years because of Boomer aging, retirement, and death. There's not going to be a return to the old market because the earning potential simply isn't there - at least, not on a summary scale. The amount of money going in is going to be balanced by money going out, no matter what the market does, so the old game is over. This doesn't mean there won't be money to be made in the market or it's going to crash to zero; but it does mean that this particular bias upwards is gone, and it's been substantial.

So, be aware, okay? And remember I'm not a financial advisor and this is not financial advice, and so on. But be aware.

And by the way, weird shit is going down in the bond market. TIPS are inflation-buffered/guaranteed Treasuries, and, "the breakeven spread on 10 year TIPS is about zero. The [credit] market is predicting no inflation for 10 years." The credit market is not perfect, but it's almost always right in the end, and if you bet against it, you'd better know something they don't.

Comments

[peakoilchaplain.livejournal.com]

In all of this chaos for the past 15 months, I had completely forgotten the baby boomer retirement effect on 401Ks/IRAs/the stock market in general. This has actually been anticipated for quite a long time, and the effect on equities is huge, or would be if the entire system wasn't looking to slump shortly into failure mode.

[ellerisse.livejournal.com]

So is this the point in time where I say 'gee, maybe I will not trouble myself putting an extra $X into my retirement account every month, since it's going to be a loss anyway?'

At least if we drop into a barter economy I can feel good about the random material purchases of the past year. Stuff has value! Woo!

[solarbird]

I'm certainly not going to tell you what to do. There are too many variables about what could happen in the future.

I am willing to say that I moved entirely to T-bills last December, which will be very difficult to lose money unless there's not going to be a currency outright anymore, in which case we have much bigger problems. And I can say that there's something called the 20-week moving average and the 50-week moving average in the stock markets, and that when the 20-week goes over the 50-week, that's historically a very clear sign that you are safely into the range of a climbing market. And that in the event of hyperinflationary printing bullshit, both real assets and stock indicies are reasonably good places to be, historically.

[ellerisse.livejournal.com]

Ooh, thank you. This is language I better understand and a bit less fearsome than what I think I got out of the first read-through. Thank you!

(...Less fearsome, anyway, except for the whole 'unless there's not going to be a currency outright' part, which is so fearsome it's funny: after so many years of studying about and playing pretend at barter economies and pre- or pseudo-currency cultures, the idea of living in one is hard to approach without a kind of mouth-open awe. It transcends anxiety and reason equally well, for me.)

[solarbird]

I would also suggest that now is probably a bad time to increase your spending, and that opportunities will abound for those with cash and no debt later into a long deflationary cycle.

[ellerisse.livejournal.com]

Yes, I was being facetious about that part. The material possessions I have recently acquired are not exactly barter goods. ;)