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Friday, November 22, 2013

12 Thoughts on Bigger Picture

The guy asked this: http://evilspeculator.com/?p=39382
...you repeatedly carry the banner saying we're all screwed....  there are some good minds here & I'd like to see a little discussion on the matter sporadically about long term methods to prepare...

This is a bait I can't refuse...lol
Here are some thoughts generally, and also about finances and investments.



Preparation:
1. Always have full tank of gas
2. Always have some food and water at home
3. Always have at-least one month of spending cash on hand. This doesn't need to include any bills you have to pay, just money your family spends in stores etc on average month.
4. Do buy some gold and silver coins. Keep them handy.

Before you think I am crazy, ask yourself this: How often does shit hits the fan? Every 100 years or so. When was it last time? Unless you are planning to die some time soon, you will see that fan in action in your lifetime. Remember, Noah build that ark BEFORE the rain started...!

Financials:
Get out of debt!
1. Pay off ALL card and loans. No other investments are possible, before you do that.
2. Do you want to make at-least 4% risk-free return for years and years? (Most hedge-fund managers would kill for this secret). Pay off your mortgage! No kidding.
Wonder about interest deduction? Don't. Its a scam. Just do your math - you'll see.
3. Pay cash. You will be surprised.... Especially when it comes to healthcare. (Karl Denninger agrees)

Investments:
1. Don't put your eggs in one basket! Literally!
Split your money between different institutions.
CD goes to TBTF bank
401k or IRA goes to Vanguard or Fidelity.
Trading account goes to any big house - IB, Ameritrade etc, or just play with big dogs and go to Goldman. May be commissions and requirements are not as good, but they are not gona go MFGlobal on your ass (well, hopefully)
2. Split your trading account into 2-4 different strategies.
This maybe easier said than done - takes a lot of time to manage bunch of positions and watch list, and research, etc
3. Keep position size small. Whatever you think your position size should be - half it.
4. Keep stops wide. Wherever you think your stop should be - is also everybody's else.
5. Don't listen to idiots like me - do your own thinking
I try...

And more:

Here is a workable plan for longer term (10 years plus), acknowledging inflation:

1. Consider mutual fund for S&P 500 index from Vanguard (low cost is The Key). Don't brush it off. This is a 'cream of the crop' of stocks, continuously changing its composition to create upward equity slope. Some of my thoughts on a subject are here: http://ibergamot.blogspot.com/...

2. Save equal small amount every month. $500 or $5000 - whatever seems small to you. Invest into mutual fund VFINX on a 1st of the month if following conditions are met: close of previous month is higher than a month before. If not - keep it in money market at Vanguard, until next month. Reinvest whole cash balance on next buy signal.
You can get fancy with it, add MA's, filters etc. But main point - it keeps you in the market, without buying into Bear Market until first meaningful bounce. In the mean time, you keep reinvesting dividends and get free shares, and there is no commissions, and their expense ratio is lower than SPY.

3. There are no stops. This is a Long Term System - 10 years or more. You will have a 50%+ draw-down, but you can not sell. It can ONLY be done with S&P500 or Dow Industrials.

    NOTE ABOUT STOPS:
Everybody is a long-term investor until a long bear-market. Guilty myself
Also don't think that trading without stops is acceptable. The fastest way to lose money is to disregard risk management. It ONLY applies to this particular system, and ONLY is you can keep that money invested for more than 1 whole business cycle (8-14 years)

4. Now do this:
take monthly chart of SPX going back to 1970's. Mark all buy points, calculate value of your account today, see your profit. Now you believe me?
This is what you can make in next 40 years
If you are over 60 - it may be late, but you can teach your son to do it

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