Good afternoon everyone,
Would anyone be able to suggest any alternatives to the US dollar that I would be able to put my money into? What currencies or commodities would be worth using to reduce the risk of dollar? I must admit I know very little about this particular subject. I'm not necessarily looking at this as an investment in which I'm trying to get rich, I'm just looking for something that will hold its value better than the US Dollar. As I put money aside for various things in life, I would hope there is something I could have that would be worth the same ten years from now as it would today. Any insights or suggested reading material would be appreciated.
Tyler McClellan comments:
If you want to buy things in dollars in the future then you'll want to hold dollars.
Gary Rogan counters:
That's like saying, "if you want to put gasoline in your car in the future you need to own gasoline today". Given the 90%++ loss of purchasing power of dollars in the last 100 years there just could be better alternatives than holding them today. If the point is that nobody knows what they are with any degree of certainty, that's a valid point.
Anton Johnson writes:
Inflation protected (at least to the extent of official figures) US series I savings bonds seem to be a decent savings vehicle, especially when they are accumulated over time. Unfortunately, there are minimum ownership periods and the maximum annual purchase is limited to 10K per person.
Craig Mee advises:
Beware of selling the low, Corban, effectively adding size in a market that's been trending south for some time.
If Euro goes to the dump, and USD goes bid a la 2008-09, then that may be a nice way to offload USD then and say buy Aussie at 60c to the USD. (We do have stuff in the ground that helps, although with interest rates cuts just coming through, it appears some goodwill that was present at the start of the year is being priced out of the market against the USD).
Good luck. Oh…beware of the Fed, or in this case FEDS, to up end things at any time…. though if history only always repeats to the letter, it would make investing a wee bit more straight forward…
Alston Mabry writes:
With a decent time horizon, you could put some money into corporate bonds and good divvy-paying stocks. That way you get the divs and also exposure to cap gains. just happen to be researching some recently, so here is a diversified group of sample tickers:
Leo Jia adds:
This is an age of vast changes. For that reason, we can easily lose our vision into the future in terms of what will be more valuable. Even though there are many discussions around the topic, I can't decide easily if the US dollar will be more valueless than any other currencies in the future. Many argue that it will lose more value, but I tend to think that it perhaps will be more valuable than most other sound currencies, for the very simple reason that the US has a more fundamentally solid mechanism of being a most promising country. The very fact that the people with big money are not running away from the US demonstrates it.
There is the notion (as Gary Rogan pointed out) that the dollar has lost 90% of its purchasing power over the last 100 years. While I agree that there has been a devaluation process going on, I don't think the notion should really be understood literally. Many things around any purchase (including venue, environment, safety, transportation, etc) have vastly changed from 100 years ago. All these add legitimate values to the product and hence cost for the purchaser. One can argue that the egg he buys today is not that different from that his grandfather bought 100 years ago. Yes, sure, but things in a social economy can not be taken separately. Many things in it are vastly different from 100 years ago: farmers' lives, air-condition for the chickens, refrigeration along the transportation, etc.
As to what can hold value better for the future, I would like to have agricultural commodities (hope to hear other arguments). I buy into the view that because people in China and India (accounting for nearly 40% of the world population) are getting richer, they will be demanding more higher-scale food like meat which then will demand more amount of lower-scale produces like corn or wheat (I have been actually experiencing the above view personally for the last 10 years in China). Sadly, the production of these lower-scale produces can not be increased easily, so these prices must go up. In the long term, the pressure for the price rise due to the imbalance of demand and supply will be added to the legitimate price rise (as I seasoned in the last paragraph), resulting in much higher prices in dollar's term. One note to add is that the inherent volatilities associated with these commodities along the way should be carefully considered.
Additionally if I may add as an option to where to put your money, it should be into your life, your personal and business interests, and perhaps some interests of any community you are in. My feeling is that this might be more important than anything else.
Laurel Kenner writes:
There are no safe havens any more. People have been remarkably complacent about the obvious rigging and zombization of financial markets, the transfer of power to lawbreaking elite firms, the restrictions on capital movement out of the country, the baldfaced lies about the nonexistence of inflation, the steady fiscal confiscation of personal assets, The fact that we still can have a meal at pleasure and joke about our plight means nothing in terms of economic freedom. Unfortunately, the one point that holds true is that the foundation of individual liberty is economic liberty. We have merely slipped back into the iron pattern of historical kleptocracies. Maybe that is why there has been so little effective resistance. Those who protest are marginalized by the mainstream propaganda machines. Case in point: Did the Fed just bail out Europe without anyone blinking an eye, and what does that mean for the global future?The only advice that I have found to make sense at all lately is "Be flexible." We are playing against a relentless statist enemy. Some Specs recommend Australian and Canadian currencies. That's merely a play on commodities. I need not remind anyone here that in the past century, the U.S. government made it illegal to own gold, and that a few upward ratchets on certain margin requirements would kill the commodities market. I don't speak from lack of experience. We are all traders; we all like the freedom that brings; and our livelihoods are in jeopardy.
Good luck to us all. The world has changed, and continues to speed with reckless blindness toward a future that I doubt will turn out well.
Alston Mabry writes:
Here is a question that might elicit some interesting answer:
Let's say you have $X (USD) that you must commit for the next five years. Where would you put it? Leave it in dollars? (Though a 5-year Treasury would make the most sense for "cash" with a 5-year lockup.) Gold? Stocks? Some other currency? Norway bonds? And why?
I don't have a good answer to that yet.
Steve Ellison writes:
My starting point on this question would be that diversification, including international diversification, reduces risk. The US economy and the Eurozone have roughly equal GDPs. Japan and the UK are smaller but still quite significant. China is tied to the US dollar. Therefore, a diversified cash portfolio might be 40% US dollars, 40% euros, and 5% each of yen, pounds, Swiss francs, and gold (in recognition of gold's historical role as a form of currency). One could fine tune this allocation to include small percentages of currencies such as the real and Canadian dollar. I would think of this allocation as the equivalent of an index fund, before considering the insights of the many on this list that know more about currencies than I do.
Hypothesis: Let's keep it simple.
Looking at the total population sizes of countries, and the ease at which you can organize and get out the broom when the recession hits. Trade: buy the currencies of countries with population less than 25 million, relative to their big brothers when times get tough… I'll leave it up to those with the necessary skills to optimize this a wee bit further which it undoubtedly needs (The Japanese yen was the only unwanted one at the party).
Zimmetro — Latin America is the best performing currency; the Paraguayan Guarani is up 15.90% on the USD this year.
We then have those strong Oceania currencies, the Australian Dollar, New Zealand Dollar and the Papua New Guinea Kina moving north 5.00%, 9.40% and 14.30% respectively matching the USD this year. The Singaporean Dollar and Japanese Yen both appreciated around 6.40-6.60%, against the USD this year. The South Korean Won gained 4.40%.
Europe's best performing currency, the Swiss Franc, rose 14.40% against the USD this year. Norway’s Krone also performed pretty well at 8.40% vs the USD this year. Africa’s best performing currency, the Mozambique New Metical is up 14.10% on the USD, while Mauritius Rupee 9.90%.
But the best performing currency who beats them all, is in Asia.
Myanmar. (Note the overall winner does have a pop of over 50mill), was a country undergoing some major political and structural reform, and goes to show , that this as a investment philosophy i.e structural shift is hard to beat.
I was hoping some one here may be able to help me out. After four years of dating my girlfriend, I have finally decided to ask her to marry me. I am in the early stages of looking for a ring and am obviously wanting to get her the best ring I can. Unfortunately what she deserves and what I can afford are two different things. Therefore my hope is that someone on this list knows someone that would be able to get me some type of deal on an engagement ring. I'm not looking for a hand out by any means, I just want the best value for my money. I'm also looking to get it pretty soon as I believe both of us would like to get married before I leave for Afghanistan next year. Thank you in advance to anyone who is able to help me out!
Dylan Distasio replies:
Good luck with the proposal! Unfortunately I don't know someone who can give you a deal on a ring. However, I would highly recommend checking out Blue Nile. They have beautiful diamonds at all price levels, quality levels, cuts, etc. at very low prices compared to retail. I am incredibly happy with them from personal experience. I was able to get a very high quality diamond for an engagement ring that my wife is now wearing. They also offer settings if you want to one stop shop. They ship quickly, and the diamond appraised at approximately 50% higher than what I paid. Most importantly though, it is a beautiful stone. My co-worker also had great luck with them. I'm not a Blue Nile shill, just a satisfied customer.
Charles Pennington weighs in:
Borsheim's is pretty good. With them I don't think you have to worry you're getting ripped off. You can call them on the phone and just talk with them about how much you're thinking about spending, and they'll provide a host of options for you. If you want, they'll even ship one or two out to you so that you can have a look. If they do rip you off, you can go complain to Warren Buffett at the next Berkshire Hathaway shareholders' meeting!
Caution: She may want a ring from Tiffany, even though you both know the extra money is just for the blue box.
Dan Humbert takes an unconventional view:
Don't waste your money on something so ridiculously overpriced as a diamond (especially since you indicate you are short on funds and are off to Afghanistan, meaning you'll have a lot more important things for you and your fiance to spend your limited funds on). If you and your fiance want an engagement ring, cubic zirconiums are nearly as good, and I understand there are now even better man-made diamonds that a jeweler cannot distinguish from natural diamonds — it takes an expert with sophisticated equipment. Exact types and prices are well-covered in the recent book Spent by Geoffrey Miller. No one else will be able to tell, and you and your fiance have no obligation to confess that you were not so wasteful as to buy in to De Beers's monopoly and ridiculous advertising that you should spend 25% (or whatever obscene portion of your year's salary) on the diamond.
Taking it a step further — this being a libertarian-oriented site, why get married at all? You and your love should set the terms of your own wonderful relationship rather than letting the government, courts and lawyers dictate the terms. It's a lot more romantic to voluntarily win each other's love each day, than to be obligated by the government to stay together unless and until expensive and debilitating proceedings involving lawyers and judges allow you to change the terms.
The dissenting view gets support from Kevin Humbert:
Dan offers excellent diamond advice. After losing a number of "real" diamonds to both women and thieves, I decided to look into synthetic diamonds as an alternative some time ago. At the risk of sounding cynical you don't blow through as many ring-requiring ceremonies & occasions as I have without incurring significant financial loss… and that's before the rings are even factored into the equation. Man made diamonds vary wildly in price & quality. Even so, the discount to comparable high quality diamonds is high enough to make something man made a no-brainer for me. As for whether anyone notices if it is real or not, I can't recall having met anyone outside of the jewelry industry who is impressed with a diamond wedding ring one way or the other, either real or synthetic.
But Laurel Kenner interjects:
Gentlemen! A fake gem sends the wrong message. And relationships without marriage usually turn out to be fakes, too. Just ask a wife whether her marriage is real or not.
An anecdote from Chris Cooper:
I once had an employee who had already made a lot of money from stock options owned by her husband and herself as executives at a big tech company. When they got married he told her she could have a one-carat ring now, or for every year she waited he would increase the size by an additional carat. After several years she caved in, and could be seen flaunting a 5-carat flawless solitaire in important business meetings. A stone of that size does tend to attract the eye.
Legacy Daily sends a specific suggestion:
Congratulations! Engagement and marriage are indeed very special life events. I have jewelers in the family who would be happy to help. I just called them to let them know that they might hear from you. Feel free to contact Artinian Jewelry.
John Lamberg looks back:
A word of advice: When your wife to be picks out a wedding ring, no matter what price, run, do not walk, to the counter and purchase it. Do not repeat the mistake I made many years ago and say, “let’s think about it…”. Some mistakes are never forgotten.
Victor Niederhoffer also reminisces:
I bought mine for 25 cents at Woolworth on 86th and Third Avenue. And as the poker player said after he took his real diamond from her the day of the wedding to throw into pot, "she's still wearing it."
The end of playoff games were like the market end. Down 10 points in last minutes in stock on Friday. The Cavs beat Orlando by one with a last second three-point shot by Lebron. It was one of the historic moments. "A second is a long time for me. For others, it's very short." said Lebron. The last second of the day, very long for those on wrong side. Last second of last day of 2008. Very long. "I was punch drunk. I was stuck," said teammate Williams who passed him the ball. How many times do we look at screen at end of day with disbelief. That price has to change. It didn't happen. It wasn't fair." That walk. The refs made a great call," said Lebron about a call against him with a minute left that would have iced the game. My goodness. Uncle Howie. Loved to argue with the refs before the game. "You miserable so and so. If you give me one more bad call during the game, because you're a jealous non-entity, I'll give you the beating of your life under the boardwalk after the game. " But Artie would say, "Now, Sam, I'm afraid your judicious decisions under pressure are often not as applauded as they should be. Might we take you out for some Moo Goo Gai Pan after the game?" Who's going to get the better calls? Lebron or Howie?
George Parkanyi adds:
This happened to me last year as well — or was it the year before? I never watch basketball and I happened to change channels and caught the end of a Cavaliers-Pistons (I think it was) game which went into double overtime and was won by the Cavaliers. It was fantastic action which even I as a non-basketball fan found spell-binding, and the announcers were excitedly going on how this would go down in history as one of the great classics.
Last night the Blackhawks-Detroit hockey game went into overtime but I had to pick up my son Tom at the end of his high-school dance. When I got home, the game was over, so I switched over the sports channel to check the highlights for who won. Guess what, it was the Cavaliers-Orlando game, and I got to see live two of the most amazing shots in basketball — the one by the Orlando guy who ran the clock down to one second and then made a beautiful two-point jump shot to ostensibly seal the game, and then the amazing three-point buzzer-beater by Lebron James. The clock was at .2 seconds when he left the floor to make his shot. (Although I can't figure out how one second was enough time for a pass from the sideline, the catch, and then the jump. When do they start the clock?)
Funny though, for some reason I don't seem to magically step into oil-goes-from-$50-to-$150 trades… this one doesn't seem to translate to the markets.
Corban Bates replies:
In basketball, the clock starts when a player in-bounds touches the ball. Therefore, the clock didn't start last night until Lebron touched it. One second on the clock is plenty of time to get a good shot off. In fact, the rules state that there must only be 0.3 on the clock to catch and shoot the ball (anything less than .3 is physically impossible and must only be tipped in). This came into play last year when my team, West Point, beat rival VMI at VMI. We were up one with 0.2 left and they had the ball out of bounds under their basketball. All five of us were guarding the paint knowing they could only, by rule, tip the ball in. Apparently they were not aware of the rule as one of their players called for the ball at the three-point line, caught it, and fired up a three. It went in, the crowd went wild, and they all ran around the court celebrating their victory. The looks on their faces when it was announced that we won were priceless…
Since this web site is read by many very successful investors, I was wondering if any of you had any insights on selling stocks. It seems there are a million different books and strategies on buying stocks, but not many people talk about when to sell. Right now I basically go off of what I am satisfied in gaining and start selling at that point. If it drops I usually keep buying as long as my analysis of the company still holds. This has worked out okay but I've missed out on a lot of gains and feel there is more to learn here. For instance, I bought ZINC at $2.50. It went up and bounced around from $3 to $4 for a while and I determined that at $3.50 I was satisfied with a 40% gain. Of course after I do this it shoots up to over $7 over the next couple months. On the other hand, in an attempt to exercise more patience, I held on to TRID when it was up over 40% and I am now in the negatives with it. I currently am up 110% on TUES and am confused about what to do with it. My instinct has been telling me to sell and lock in the gains but it just keeps going up. My dad once told me to "Sell and be sorry, but sell." This seems like pretty good advice but I can tell you when a stock keeps rising I sure am sorry I sold. Could anyone help me out? Not sure if it matters, but my investing style is that of value. Thanks in advance!… Brave Rifles!
Philip J. McDonnell replies:
Mr. Bates posed the interesting question of when to sell. Much of his discussion focuses on minimizing his subsequent regret. Many of us buy stocks because we fear the train will leave the station without us on board. We fear taking a loss because we cannot accept the cognitive dissonance of admitting a mistake. We also fear that the stock will recover from the loss adding regret to the cognitive dissonance. We fear selling a profitable trade because it may go higher and cause us regret. For most counters the question of when to sell is often answered before they buy. Suppose one did a study such as Vic and Laurel did in PracSpec looking at REIT returns in one quarter and what the market did in the next quarter. Then the criteria of when to sell is one quarter later just as used in the study. In fact very often the criteria used in a quant study is based on time and not on price. One can suggest a few general guidelines. One should sell if:
- The criteria used in your analysis have been met. This could be time or it could be something like the first profitable open such as Larry Williams has suggested.
- You no longer have an advantage.
- You have a profit so large that the position size is too large relative to your portfolio. Note that this criterion only requires a partial sale. My book talks about position sizing.
- You have other better opportunities and need to raise cash.
For a fundamentally oriented value investor the time element may not be so clear. Corporate reporting is on a quarterly basis so presumably the time frame for a value investor is quarterly or longer. So one should look to value as the criterion for exit as well as entry. If a stock has gone up quite a bit then much of its advantage in the value sense has disappeared. The position size may now be larger than the optimum and other under valued stocks may present better opportunities.
Correct position sizing is the only reliable money management tool. Stop losses are not guaranteed to work because of gap openings. They also do not work the way most people expect. Buying puts is usually too expensive. Thus we are left with position sizing. For a value investor with longer holding periods one might arbitrarily decide to cut positions in half to allow room to double before position size adjustment is required.
Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- Older Archives
Resources & Links
- The Letters Prize
- Pre-2007 Victor Niederhoffer Posts
- Vic’s NYC Junto
- Reading List
- Programming in 60 Seconds
- The Objectivist Center
- Foundation for Economic Education
- Dick Sears' G.T. Index
- Pre-2007 Daily Speculations
- Laurel & Vics' Worldly Investor Articles