Conventional wisdom says that stocks, bonds, and real estate are all recovering or will recover soon and therefore are good retirement investments and strategies. Thus most people are not worried about their retirement savings accounts. Unfortunately , the vast majority of retirement plans are are still focused on stock, bonds, and real estate. For many years people have been told to just place their money in stocks and don’t worry about it. But the future is going to be much worse for people who refuse to change with the changing investment environment.
Retirement Plans Are In Big Trouble
Present retirement plans are in big trouble. Many pension plans in the United States have been underfunded and poorly managed. There are protection levels in place, but they are designed to handle individual failures, not wide spread multiple pension plans going bad in mass.
Stocks, bonds, and real estate are very vulnerable with the very unstable economic conditions caused especially by the massive federal deficit (16 trillion dollars and exploding at $100, 000 every second!).
Concerning Bonds
The main appeal of bonds is that they are not stocks. As opposed to stocks bonds are supposed to be steadfast, reliable, & safe. Financial advisers tell us to have a greater ratio of bonds to stocks as we get older. While a younger person’s portfolio might be 30 to 40 percent bonds, bonds; older investors usually go for 60 percent or more of bonds. Because the profit potential for bonds is limited, there is a broad assumption that their risk potential is limited as well. Under normal conditions this is usually true; bonds are generally less risky than stocks. But with the massive federal deficit and other financial bubbles ready to pop future conditions will be anything but normal. Conventional wisdom says stick with bonds; they were good to us before and they will remain good to us in the future. As stated in the book titled The Aftershock Investor by David Weidmer PhD., Robert A, Weidmer, and Cindy S. Spitzer, bonds may be okay for now, but you had better keep your eyes open and get ready to get out as the investment environment begins to evolve.
Please do not fool yourself into thinking that bonds will provide you with lasting safety. Although bonds may be less risky than stock, they are not risk free. The risk factors include changes in interest rates, changes in interest rates, and changes in credit worthiness, and the passage of time. In normal times this risk factor would be none; but in a falling bubble economy in which the government is massively printing money, as inflation goes up and interest rates rise, bond values will quickly fall. Massive money printing will lead to rising inflation, and rising inflation will eventually lead to rising interest rates. As money printing and other manipulations begin to backfire, inflation and interest rates will rise, and bond prices will decline further.
With tax revenues dropping due to high unemployment and expenses skyrocketing due not just to inflation , but due to bailouts, covering guarantees on pensions, insurance, and other debt obligations, the government has no choice but to go deeper and deeper into debt. With inflation at exorbitant levels, no one will want to put their money into the treasury debt without significantly higher interest rates. Treasury debt will no longer be able to be paid, guarantees will not be covered, expenditures will be out of control, and the federal government will no longer be able to borrow money; unfortunately the U.S. government will go into default. Not all government obligations will be repudiated, but it is most likely that the most outstanding bonds will cease to be paid. Causes of hardship will be given priority. During this “Aftershock” the government safety nets for bonds will fail because the government will not have the money to serve them. Eventually we will no longer be able to print money due to rising inflation. Once we will no longer be able to print money, the government will no longer be able to make its interest payments on the federal debt and the government debt will pop. Needless to say, nearly all dollar denominated bonds and other assets will crash. Being 100% out of bonds before the “Aftershock” hits is essential.
Concerning Stocks
GDP grew 260 percent between 1980 and 2006, yet the stock market grew over 1,000 percent. That just doesn’t make economic sense. Big growth that is not firmly based on real fundamental economic drivers adds up to a bubble. Looking at long term history, the stock market grew 300 percent from 1928 through 1980; in contrast in 20 short years from 1980 to 2000 the stock market grew more than 1,000 percent! Investors will not all run out and stay out of the stock market at the first signs of trouble. Thus the stock market will not all fall at once, but will decline in stages, leading up to the biggest crash. The federal government can and will ease the pain of this for as long as possible with more money printing, but eventually this medicine will become poison, and there will be little that the Fed can do. without just making things worse…once foreign investors who own so many dollar-denominated assets begin to exit, the bubble will suddenly burst as more and more investors try to flee. Clearly getting 100 percent out of all stocks before this coming “Aftershock” is essential.
Concerning Real Estate
Unfortunately conventional wisdom on real estate is wrong, it is an economic bubble, concluded from the fact that real estate price growth since 1980 was no longer driven by fundamental drivers but instead by low interest rates, easy to access credit, and the rest of the falling bubble economy. Bubble prices don’t last forever because bubbles eventually pop. If you want to spare yourself from the falling real estate bubble you will either need to sell at a significant loss or hold on to the property for many many years. Unlike stocks and bonds real estate is more than just an investment, it is more often an important part of personal lives. Thus your decision will be a little more complicated and will need to be decided on the type of property, and your personal emotional affection to it.
In Conclusion
Your retirement investment priority should be 1) preservation of capital, 2) minimal volatility, and 3) reasonable returns. Gold and silver will be the first primary and most trustworthy components of your investment portfolio followed by High-dividend stocks, shorter term Treasury’s, Treasury inflation protected securities, foreign currencies, commodities, short stock exchange funds, short bond (as recommended by the Aftershock Investor). Gold and silver is an important element in your investment portfolio and will be much more important as this “aftershock” economic tidal wave takes full effect. Concerning your timing in making these moves it is better to move too early than too late to avoid significant loss of your savings.