Comments on: Lies, Damn Lies, and Personal Finance

By: SJ

SJ — Tue, 19 May 2009 03:37:04 +0000

“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

HAHAHAHA too funny =)

@reinkefj — I have no well-thought out views on gold as an investment but I do dislike it conceptually, much for the same reasons as above.
Regarding the points you mentioned:
3 — You don’t need that much gold in that case; you are more advocating ppl carry gold with their emergency supplies, such as a flashlight, batteries, dried beans; all things I would really invest in =)
2 — Ignoring the legality of it… there are plenty of ways to hack it with trust I believe? (I am not wondering about estate planning yet (i’m 22) )
1 — Stocks aren’t really dollar denominated, the value is tied to the value of the company that should be tied to it’s productive capability which we are bypassing inflation.

I think gold makes sense as a “emergency/doomsday” sort of thing to go with your flashlight but long-term investing? Not so sure about that… I disclose I know nothing and just thoughts =)

By: DR

DR — Tue, 19 May 2009 00:38:50 +0000

Rob, the suggestion that somebody out there should apologize suggests that something went “wrong” last year. It didn’t. The market goes up and down. That’s what markets do. Sometimes, they go way up, and sometimes they go way down. Seeking an apology for this simply misunderstands the nature of markets. And as for predicting, there is ALWAYS somebody predicting that the market will either crash or skyrocket. As a result, when it does either, those that happened to “predict” the direction of the market step up and seek acknowledgment for their clairvoyance. Let them “predict” the market spot-on for 50 years and then we’ll acknowledge them.

By: Rob Bennett

Rob Bennett — Mon, 18 May 2009 20:36:02 +0000

I strongly believe that we are all owed apologies from those who failed to warn us about the stock crash. I also strongly believe that making such apologies would be a good thing for the “experts.” Many experts speak with far more certainty than is warranted. Making an apology now and again is an exercise in humility. We need more humility among the money experts. I personally have far more confidence in the ones who have no trouble saying those magic words “I” and “Was” and “Wrong.”

It is not true that no one predicted the stock crash. Robert Shiller predicted it. Michael Alexander (author of “Stock Cycles”) predicted it. Ed Easterling (author of “Absolute Returns”) predicted it. Rob Arnott (former editor of the Financial Analysts Journal) predicted it. There are lots of others.

The investing experts who push Passive Investing did not predict it because the idea that crashes can be predicted does not mesh with their particular investing beliefs. They were wrong! That’s what it comes down to. Experts should follow the literature. There is literature showing that it is possible to predict long-term returns dating back to the early 1980s. All experts, even those who follow philosophies that maintain that effective predictions are not possible, should be following the literature and remaining open to other ideas and reporting on those ideas in balanced ways as they discover them.

There is a crying need in the money field for more humility. Apologies would help a lot.

Rob

By: reinkefj

reinkefj — Thu, 14 May 2009 00:00:26 +0000

As a gold bug, as well as a tin foil hat on many topics, let me rush to the defense of the pretty yellow metal!

(Caveats, I worked on Wall Street and it’s a crooked casino. I’ve paid a lot of taxes and the government makes Wall Street look like choir boys. Lived thru the Carter stagflation and the misery index with 21% inflation. The dollar is a fiat currency; not worth the paper it’s printed on! Rules of thumb, no more than 5% in any investment, credit card debt is a disaster, and age discrimination means there’s a gap between your employment and social security. And, I’m a fat old white guy injineer who graduated with a low index.)

Gold, (bullion coins; not ETFs; not collectible coins; no promises to deliver; nothing overpriced; no “special” TV offers; from “good” dealers; just real metal that you hold in you hand at home or in your back yard!) deserves a place in your plan. (If not in your heart.)

Why?

(1) Gold protects you from the Federal Reserve’s printing press. Inflation has turned the purchasing power of 1970 dollar into less than a dime today. Dollar denominated assets are partially stolen each year to fund the government’s wasteful spending. If they couldn’t inflate, borrow, and deficiet, then they could spend future generations into the slavery of debt.

(2) Real bullion coins in your possession provide you an opportunity to avoid (evade) the death taxes. (One day they are in your nightstand. You die with your beloved family at your bedside. And, the next day they are gone. Instant tax deduction!)

(3) Should times get tough, gold has always been real money. Pilots in VietNam had gold coins in their E&E kit to bribe people. The joke among gold bugs is that in Roman times 2 ounces of gold would but a fine man’s suit of clothes. (With a sword?). Still true today! Can’t imagine you’d be hungry with a few of those in your pocket; anywhere in the world! Especially in Rawanda; see things there for how government inflation winds up. (Yeah, I know that can’t happen here? Right! See Carter inflation.)

Back before 1932 when FDR took the country off the gold standard, there was no inflation and it was hard for the government to screw us. We could do worse than insisting gold be money. At the very least, gold bullion coins deserve 5% of your assets.

imho, now let me adjust my tin foil hat, and move along.
fjohn

By: Jeff@StretchyDollar

Jeff@StretchyDollar — Tue, 12 May 2009 23:53:31 +0000

Amen! I agree with your conclusions and PT Money as well. Relying on the government and waiting for them to fix things isn’t going to fix anything – anyone should know that!

By: DR

DR — Tue, 12 May 2009 22:56:53 +0000

Ryan, I couldn’t agree more. We can and should study what the “experts” say about personal finance, but in the end, every situation is different and we have to make the decision for ourselves.

Orman’s advice on minimum payments is interesting. She is favoring liquidity over lowering interest expense. It may be that in some situations, that is the best approach.

By: Ryan P Smith

Ryan P Smith — Tue, 12 May 2009 22:50:03 +0000

I was shocked to see Orman say to only pay the minimum payment on credit cards and build up savings first. A complete reversal and shines a light that personal finance advice is just that, personal. If you are a government employee and in no fear of your job it is still a good deal to pay off high interest debt first. If you are in commissioned sales or in a position with fluctuating income you need savings first.

Thanks for the post.

By: Adam

Adam — Tue, 12 May 2009 22:46:32 +0000

I think you hit the nail on the head with your response. I hope Olen reads this and sees how dumb she really is. I agree with PT Money in that we need to stop babying everyone and let them fix their problems for themselves. Now you got me fired up!

By: PT Money

PT Money — Tue, 12 May 2009 20:54:22 +0000

Excellent smack down, DR. I couldn’t believe what I was reading either. I’m of the opinion Olean contrived this article just to make a wave. It’s so ridiculous. And then to think that the US govt should get involved. What a joke.

Mooney’s book is a joke, too.

We seriously need to stop this movement toward a country where no one can be a loser, even in the short-term.