What's a safe investment for generating income?

[Silverling]

I read Gowdie's book several years ago and watched his doom presentation online. Nothing came of it.

That book was published in 2015 and if someone was to have taken their money out of the sharemarket at that time they would have lost a lot of capital gains. On September 1 of 2015 the All Ordinaries was around 5,058 points. Today it is at 7,255 points. So from Sept 1 2015 to now the sharemarket has gone up 40% +. During that time term deposits have hit record lows at around 1.5%.

I think it is better to have some assets in physical gold and silver and to keep some money in stocks at all times. I hold the ETF VHY in my super and receive distributions of around 5% per annum and they are paid out in cash every 3 Months. The other black swan is our currency, sinking into the black hole very fast @ only .66c to the USD. This is where having gold and silver will help as you can see by the price rises now.

As for the lady in question I wouldn't charge head on into the toppy sharemarkets now. However, having some sort of allocation in the sharemarkets (even if small) might be a good idea. If Gowdie's predictions do come true at some stage (already waiting 5 years) then she will still have the majority of her cash ready to scoop up those good shares at much lower prices, good luck to her!

 

[BuggedOut]

Vern Gowdie is not necessarily "wrong" but I think that he has a bit of a blind spot.

He underestimates the willingness and ability of the central banks to print money and inject endless stimulus to hold the asset markets up. Shiney is right in that the outcome of this would be a dropping AUD (or even fiat overall) which means the last place you want to be is in cash. If we get a decent Black Swan (and Coronavirus could very much be *IT* for Australia) then we might get the sort of deflationary crash that Vern predicts, but I've come around to the view that the Central Banks could well do "Whatever it takes" to hold things prices up in local currency even if means trashing said currency in the process.

We all remember the GFC in 2008 but very few remember the stagflation of the 70s.

 

[Aurora et luna]

I agree with you guys about the risk in staying with cash, however I think with all the bad news going around, there is a very good chance of the market popping within a year!
Staying in cash for a year doesn't sound too risky at this stage.

 

[mmm....shiney!]

Staying in cash for a year doesn't sound too risky at this stage.

It’s the opportunity cost she has to take into consideration ie the potential for another 15-20% rise in the share market over the next 12 months as well as a fall in the AUD and a corresponding inflation of consumer goods as a result of easing monetary and fiscal policy and the falling value of the AUD.

She may be wiser to liquidate a portion of her stocks into cash rather than the majority of her assets. Maybe her initial investment?

 

[dross]

I haven't looked into it in any detail (do your own homework right) but i seem to remember govt / military housing seemed OK, buying shares into it or blocks of cash. They used to take care of everything and when the military personnel move out they do all the repairs reno's etc. You don't own the houses so its neither here nor their. I could be completely wrong and things may have changed totally, I'm sure a quick check would uncover if it's still worth while or gives a higher yield that the banks. Just a thought.

 

[harry_mr]

You want to give us an outline of his theory?

I read Verns newsletters weekly, he had a financial practice I belive on the gold coast which he sold and now writes for PPP. Id describe his writings as having a very conservative approach to investment risk at present particular the share market. Im not sure what the age statistics are for his readers but if you believe a market correction is ahead and you are in or near retirement age and lose 50%+ then its unlikely you will be around long enough to recover those loses. Vern includes graphs in his news letters from well respected firms which I like as its supporting evidence of what he is saying. One thing Ive seen consistently across a number of financial video and articles Ive watched is the amount of respected people saying how long this market has held up without a crash which tells me a lot of them expected it and have likely been sitting on the sidelines for some time. After running a small niche business for 20 years I took an interest in gaining a better understanding of the financial system after the Dot com bubble era, now its almost become a hobby. Once you discover the emperor has no clothes you can never unsee it. For me trusting anything in the world of finance including investment advise from most financial advisers has long gone. The simple fact is everyone is looking for the unicorn of low risk high return, good luck. If people believe this market is real then why look to get out of it, maybe endless growth is possible till it isn't. Even in my own group of associates I am surprised how little they understand about inflation, currency debasement, central bank manipulation and how this rigged game has shaped their lives without them even realising they were an unknowing participant.

 

[JulieW]

I am surprised how little they understand about inflation, currency debasement, central bank manipulation and how this rigged game has shaped their lives without them even realising they were an unknowing participant.

Very true everywhere I suspect.

Knowing the truth is both terrifying and liberating.

The next scary part is the answer to the question of whether the gnomes of Zurich are extraordinarily intelligent and have a sure hand on the tiller, or are ivory tower deluded and think they are steering a runaway train.

 

[Aurora et luna]

My friend has decided to proceed with the downsizing of her share portfolio.
Her portfolio has basically gone nowhere over the last ten years!
Comparing the prices she paid and what they are worth now, if she sold the lot, she thinks she will actually generate a capital loss.
No more stock picking for her; she will re-invest in a professionally managed investment fund, but only after the crash!
Actually what dividends she did received when averaged out, wasn't much better than if she had left her money in term deposit.

 

[mmm....shiney!]

Even in my own group of associates I am surprised how little they understand about inflation, currency debasement, central bank manipulation and how this rigged game has shaped their lives without them even realising they were an unknowing participant.

Precisely why being in cash can be the worst position to be in.

Currency debasement through monetary policy is why the 2 main assets have inflated while at the same time the PPP of the AUD (chart 1) has declined. The moral of the story is that you've got to be playing in the game or you'll never win. So if you don't own assets ie RE or shares but instead just hold cash then you're not taking advantage of the manipulated rules. And in news which is not new to any of us, when measured in gold the Dow is in a bear trend (chart 2) yet in a bull run when measured in cash (chart 3). Real estate is similar (chart 4).

Apologies for mixing the currencies but it's easier finding stats for the US markets than the Australian.

Chart 1: The change in the PP of $100


Chart 2: How many ounces of gold it would take to buy the Dow



Chart 3: Dow Jones index



Chart 4: Gold to housing ratio



These charts explain why there has been a huge increase in "wealth" inequality. The "haves" ie owners of assets have been advantaged over the "have-nots". And it's not just a game designed to benefit the mythical elite, normal every day people have been winners as well. This is how governments stay in power and why any threat to the two asset classes through government policy can render a political party unelectable, at least for now anyway.

 

[mmm....shiney!]

The AUD chart above is frightening. Runaway inflation on the whole since 1973. A deliberate policy on the part of our central bank and governments to destroy the AUD in order to force us into purchasing non-productive assets.

 

[Aurora et luna]

^
Inflation is a killer of wealth however I think her strategy of holding cash for up to one year is sound!
I think the risk/reward ratio favors her!
Risk 2% net inflation on her cash for maybe a 30 - 60% reduction of the share price in the near future.
If I had a decent share portfolio to write home about, I would also be selling it off and staying in cash with the intention of buying gold or platinum during any dips. If by chance the stock market does crash by 50% and I still have any cash left, it would probably all into the stock market.
You are right about inflation being a killer; I remember in the early 1970s having lunch regularly at the Coles cafetaria.
For 50 cents, you got a salad, main meal, desert and a pot of tea
I was rooming in a boarding house where a serviced room was $7 a week
Though I only got paid the princely sum of about $27 for a 40 hour week.

 

[mmm....shiney!]

^
Inflation is a killer of wealth however I think her strategy of holding cash for up to one year is sound!
I think the risk/reward ratio favors her!

Hazarding a guess at what the market may be like in 2-3 months is fine. One year out and it’s impossible to say the risk to reward ratio is in her favour - or not.

 

[GoldenEye]

So where do you put cash to avoid a bank bail-in?

 

[mmm....shiney!]

So where do you put cash to avoid a bank bail-in?

An offset account?

 

[harry_mr]

^
Inflation is a killer of wealth however I think her strategy of holding cash for up to one year is sound!
I think the risk/reward ratio favors her!
Risk 2% net inflation on her cash for maybe a 30 - 60% reduction of the share price in the near future.
If I had a decent share portfolio to write home about, I would also be selling it off and staying in cash with the intention of buying gold or platinum during any dips. If by chance the stock market does crash by 50% and I still have any cash left, it would probably all into the stock market.
You are right about inflation being a killer; I remember in the early 1970s having lunch regularly at the Coles cafetaria.
For 50 cents, you got a salad, main meal, desert and a pot of tea
I was rooming in a boarding house where a serviced room was $7 a week
Though I only got paid the princely sum of about $27 for a 40 hour week.

Ah inflation the hidden tax. Carried out in stealth by central bankers. Fiat would work perfectly fine if not for the intervention of the central banks, it has a few advantage over gold with storage and transporting it but its just too easy a target for those greedy banks and government to keep their hands off. Gold is a little harder to manipulate by them, if they bash it down too hard gold will grow legs and develop its own market between parties independent of spot. They can always ban gold but I'm not sure that trick will work again. In the case of a 30-60% crash cash liquidity will be king however what will its purchasing power be relative to gold or something else of value?

 

[harry_mr]

The AUD chart above is frightening. Runaway inflation on the whole since 1973. A deliberate policy on the part of our central bank and governments to destroy the AUD in order to force us into purchasing non-productive assets.

The AUD is at the beck and mercy of the rest of the world its likely toast over the long term.

 

[GoldenEye]

An offset account?

Don't you need a debt to utilise an offset account? I've assumed our retired friend has no debts.

 

[harry_mr]

Aurora et luna we cant forget there is a compulsory 10% tax of workers wages that is always looking for a ready home and the share market is always a ready recipient. It is a huge amount of money that has to find something with a return, less the suits have to give up their bonuses. With near full employment this money is sloshing around the markets, however if unemployment were to rise this could compound a drop in share prices along with a drop in revenue from consumer spending. Ironic if I do the right thing being frugal all my life and save more money than I spend I am penalised in purchasing power and am forced to gamble it into risky markets to maintain purchasing power. This is where many retirees have found themselves, yet the gamblers have been rewarded punting at the rigged casinos.

 

[RBrowny]

In my opinion, real estate is the safest investment. Regardless of the recent crisis, real estate is still a good, long-term investment. If you look back 30 years, real estate is still valued much higher than it was. And if you have tenants paying your mortgage, it makes the investment that much more profitable.

 

[SilverDJ]

In my opinion, real estate is the safest investment. Regardless of the recent crisis, real estate is still a good, long-term investment. If you look back 30 years, real estate is still valued much higher than it was. And if you have tenants paying your mortgage, it makes the investment that much more profitable.

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