Crash Crash Crash !!!!!!!!!!!!!!!!!!!!!!!!!!!

MiserlyMartin

I listened to the Peter Schiff audio about him buying a house and his advice to those in cash to convert into foreign currency;

His theory is that inflation will hurt those with cash. But if interest rates keep up with inflation then surely this is not a problem? Will they?

And which other currency will not be affected by high inflation too?

Buy precious metal he says. But gold prices are high, this is a bad time to buy in.

He is borrowing money to buy a house so that inflation will erode the loan. He does not advise cash rich investors to use that cash to buy a house. He advises they should borrow the money for the house and invest the cash abroad.

I see the problem he is talking about and it is scary that those who have been sensible will end up paying for Browns mistakes, but I can't see an unrisky way to avoid it.

chucky

I'm very glad that I didn't take any notice of the Gold rampers - bubble is popping...

"Gold price to fall below $900"
http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5063348/Gold-price-to-fall-below-900.html

sabretoothtigger

Inflation is a retrospect measure and it seems complex how it effects each person.

I mean do you really understand !!!!!! they are going on about with m2 m3 broad money supply because I dont but I can guess it has to filter down the system till we actually see it in the retail price index and by the time that happens you have already suffered the loss

ie. I dont think they will keep interest rates high enough to compensate the loss

I wouldnt buy foreign currency because I dont trust any foreign government to do better really but on average foreign stocks paying a good dividend could be a good hedge.

I read an article written over 12 months ago talking about bear sterns, nothing else had happened at that point but it was just discussing how the debt failure descends from the top hedge funds all the way through the banking system till it effects even building and mutual societies and finally the last and greatest loss is the person carrying cash in their pocket who have zero speculative market interest.

They collectively will pay the most because thats where the real cash of this country is, take even 5 or 10% off every uk person and you have yourself an absolute fortune to rebalance the economy with.
Finally we'll have an end at that point and it'll be growth from then on


The alternative to that is to wipe out people who lent money to lehmans, the bond holders. All the millionaires and the big funds who I guess represent pensions, etc. That would been a big thing so I guess the government views the incidental shaving off the sides of the british coin much less painful


http://forums.moneysavingexpert.com/showpost.html?p=18399731&postcount=422

harryhound

I agree, there was a hole in the centre of the money system. The fractional banking system had built a bubble of debt. This has collapsed, partly because some of the debt was bad debt from the day the deal was signed. The rest of the collapse was a self fulfilling result, caused by banks being unable to evaluate which debts were bad and so calling in everything. Dangerous or not, they had to get their hands on cash, in an attempt to defend their wafer thin capital base.

So the government has stepped in and "printed" or guaranteed huge sums of new money to attempt to fill the hole and bail out the system.

Meanwhile the world economy continues to contract as everyone tries to practice self defence. This means that now there really is a huge hole opening up in the real wealth of the world.

We have the classic situation where human nature is scared stiff of making further losses, so for a lot of humanity these real term losses are inevitable.

If the refinancing works and the balloon re inflates, then we will be rapidly back to worse inflation than what was developing in 2007. It will be worse because in the meantime the world's real economy will have suffered real damage.
If it does not work we are still looking at "stagflation" as the world's real economy continues to decline.
Either way money, especially our GBP, will buy less in the future.

So what it really comes down to is can we identify assets of real long term value being sold at distress prices, bearing in mind that most of us can only bring a distressed currency to the market to try and buy things - think how much more we could buy if we had Yen or Euro or even RMB in our war chest.
So buying shares in foreign "solid" companies would seem like a good idea, but what is a solid foreign company in world with a declining economy?

Harry.

PS I have some corporate bond funds in Euroland companies held in a M&G PEP/ISA.
So while trying to decide how to tax shelter some more ISA money. I flicked through the M&G funds. Even dodgy corporate bonds, after sliding over a cliff in the Lehman Autumn 2008, have shot up like a rocket since. Well they have not really, it is the pound that has taken a dive. The most impressive gainer seemed to be the sovereign bond fund.

So what would be a solid foreign company:
Low debt/selling a "necessity"/appreciating its shareholders/difficult for governments to interfere/future prospects?
I'm thinking drink, drugs, even armaments --> Perhaps a Swiss pharmaceutical company?

sabretoothtigger

My first thought is technology for future growth because its the opposite of houses and gold mines and maybe alot of industries that deal in assets they hope will appreciate in value.

If you look up moores law, it has been true for 40 years that technology companies deal in a product that constantly halves in value.
With enough cash flow , demand and ability to provide efficiency in their product these guys will come out of this first because they were always hard pressed to sell their product in the first place



Some of them will be heavily consumer reliant, non essential so its not a blanket thing but if any american stocks are worth buying it'll be the technology exporters I'd bet on and same for other countries.
I would favour asia and afaik its a large industry there fortunately


These companies will be really suffering loss of exports right now so should be cheap or good value or some might be on the verge of collapse. I dont know that kind of detail so prefer an asia index fund myself.
Cashflow for investment is probably pretty essential, I know Intel has billions on its balance sheets.
AMD nearly dived but has become fabless which means they are more a designer then a producer now which is less capital intensive, virtual products are still valid exports

I dont know medicine or war but someone mentioned BAE previously and its done well. Go with what you know

mewbie_2

harryhound wrote: »

I'm thinking drink, drugs, even armaments

Don't give up Harry.

Have you considered BTL?

harryhound

If the UK is in recession for years to come, there would be little prospect of capital gain.
The government is already trying to extend the time before a mortgagee can get repossession to stop tenants ending up on the street. Who is going to pick up the tab for the mortgagees extra costs - presumably the BTL mortgagor or failing that the shareholders/depositors of the mortgage provider.

tomterm8

bubblesmoney wrote: »

if you see the graph updated on 9.3.2009 then this is worse than 1930 depression. At this point - 17 months into the bear market - this is the worst ever (lower than the Great Depression bear after 17 months).:eek:

The S&P is calculated in a very different way to the DOW... just because the percentage value of the DOW crash is roughly the same at this point after the recession doesn't necessarily mean that this crash is of the same severity as the wall street crash of 1929.

chucky

this has been a quiet thread for a while...

sabretoothtigger

Lots of optimism recently and Ive not heard any great disaster indicators besides the obvious known knowns

Is the chart new