Author Topic: Several Random Questions  (Read 2462 times)

Offline Tyler Durden

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Several Random Questions
« on: June 21, 2017, 08:16:14 AM »
Questions:

1.) Would any of you consider Crypto as still being rather unknown, or below the radar at this point?
   I start thinking it's popular because it's talked about on TSP so much, but when I talk to "normal" people, even those that are active in stock trading, I still find people that have never heard of Bitcoin.  Also thinking that on Wall Street it still might be seen as something of a novelty.

2.) Where is a good source on, or could somebody give me a layman's explanation of how bonds work?
   I understand it like this; You buy a 3 year $100 bond at 2% interest.  For three years you get a yearly payment of $2, totaling $6 over the life of the bond, and at the end you get your $100 back.  Also, every once in awhile you can trade your bond or sell it early?  Is this close to accurate?

3.) Have any of you experienced some sort of an "economic crash burnout?"
   I have been listening to TSP since August of 2010.  Although there isn't as much talk of it now, up until about 2012, there was quite a bit of material devoted to an impending economic crash.  I read Zero Hedge and they have daily articles about a crash being around the corner.  I don't even read those anymore because I'm just tired of hearing it.  I have missed a few opportunities because "stocks are going to crash!"  My wife and I combined make well over six figures and we've put off buying a house because they're just too expensive.  I've been waiting for some kind of correction so we can find a home, but the prices just keep going up!  Maybe this is the new norm.  Zillow says we can afford a $700k home.  Are you kidding me?!!  Maybe $400k is just the new entry level home price.  I still drive a car with 308k miles on it because 30k for a new one just seems too much, but people making modest wages are buying new pickups.
  I don't know.  I'm starting to think this sham can go on indefinitely.  Basically, had I been doing everything against good judgement and responsible money management over the past 3 years, I'd be way ahead of where I am now: Investing, home-buying, everything.  That overpriced house I could barely afford in 2014 would be even more way-overpriced now.  So is that way-overpriced home going to be super-way-overpriced in 2020?  Is owning a house equal to 6x your annual salary and devoting 66% of your monthly pay to your mortgage the new normal?  It's just disgusting to me.  Everything seems way too expensive, but everybody just seems to accept it and make it work.

Feel free to answer all or one.  As always, I'm really curious what you alls think.

Offline Mr. Bill

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Re: Several Random Questions
« Reply #1 on: June 21, 2017, 08:48:29 AM »
3.) Have any of you experienced some sort of an "economic crash burnout?"

Yes, repeatedly.  I've been hearing economic disaster scenarios ever since I was old enough to care about it (like, 1978 or so).

On the other hand, we did have the fiancial crash of 2007-2008.  The country didn't collapse into roving bands of looters, but it was really nasty for a lot of people.  In that case, prepping (investment diversification) saved our butts, and we had only minor losses overall.

Offline jerseyboy

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Re: Several Random Questions
« Reply #2 on: June 21, 2017, 08:03:18 PM »
On cryptocurrency, it is very speculative.  Years ago bitcoin rose rapidly to $900 and then fell to $300.  Now it is over $2400.  I would relate it to gambling. You can win, but be prepared to lose it all.

The current ones seem to be bitcoin, litecoin, and ethereum.

However, there are tons of digital currencies.  Even Ham Radio Coin.

http://cryptomining-blog.com/tag/hamradiocoin-pool/

Jerseyboy



Offline Smurf Hunter

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Re: Several Random Questions
« Reply #3 on: June 22, 2017, 10:19:47 AM »
Neither Crypto currency or bonds are really "investments" in my opinion. 

As Jerseyboy stated, crypto is speculative. It's slightly better than most casinos, but no one has a clue what could happen decades from now.

As interest rates rise, so will bond yields. In the past few years while the interest rates were nearly 0%, bonds were garbage. This helped fuel investment into equities (corporate stocks).
You'd buy a $100 bond and 5 years later turn it in for $101.00.  In some cases it was better than the bank's saving account, but not much else.

For various reasons, preparedness communities, including TSP, seem to shy away from serious financial talk. Most discussions are limited to "preserving wealth" (which I agree is important), but if I bring up life insurance policies or tax advantages, most people quickly lose interest (no pun intended).


Offline bigbear

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Re: Several Random Questions
« Reply #4 on: June 22, 2017, 10:37:05 AM »
1. It's not mainstream yet.  It's very niche to the libertarian/non-central bank types.  The gov't is considering taxing it, so IMO, that gives it some credibility and publicity.  Central/big banks are working on their own version of crypto.  Will there ever be one crypto to rule all cryptos?  Does it matter?

Today's news in support of it being a gamble:  http://www.investopedia.com/news/ethereum-flash-crash-panic-price-briefly-dips-010/

2. You're on the right track.  When you sell/buy before the terms of the bond end, then you're selling/buying based on the relative value of alternative bonds currently being sold.  If you bought a 5% yield/5 year bond 3 years ago, then you have 2 years of 5% remaining.  If current 2 year bonds are giving a 6% rate, then you'll have to discount (lower the sales price) the market value of the bond you're selling to compete with the new bonds.  But if current 2 year bonds are giving a 3% rate, then you can increase the sales price.  So if you anticipant rates increasing, then you can typically anticipate bonds decreasing in value (if you're planning on buying/selling before maturity).  It's this aspect that makes what the central banks do so critical and sensitive.  The bond market is much much bigger than the average person knows.  And has much more risk than most people realize too.  Personally, I'd rather invest in a company with cash flow to pay a strong dividend (energy is a dividend staple).

http://www.investopedia.com/terms/b/bond.asp

3. Me too.  I've missed more opportunities than I care to admit.  Buying Ford stock when it hit $1 being the one of the biggest...  $5-10k then would be $50-100k today plus dividends.  Central banks reign supreme (see crypto comment).  And they want stability and known outcomes.  Bonds have historically been a safe haven.  Bond yields should go up in risky times (just like banks should raise rates for riskier borrowers).  But central planners force rates down to stimulate spending (refi's to keep houses, lower rate car loans, student debt, etc. etc.) and push money out of bonds and into stocks (headlines that the economy is good).  I can't tell you what to do, but the game is rigged.  So betting against it will have many more bad days than good.  And even moreso when the central banks work together.

Diversification is important so you don't lose your shirt.  And that includes keeping some cash (physical bills and in the bank) is important.  Then when a buy-low opportunity presents itself, you can.  Like my Ford whiff above.

Home values are increasing because the used home inventory is lower than normal and more millennials are starting to buy.  There are still some foreclosure and/or sweat equity values if you're open to the hassle/work they entail.  What you're experiencing is what I ran into 2005-2006 when I was looking for my first home.  And why I ended up moving an hour away from work...  Don't compromise what you're willing to pay.  You'll have pressure from the lender and realtor.  You and your wife know your priorities in life.  They don't.  We were planning on my wife staying home, so we bought a house accordingly. 

Offline Mr. Bill

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Re: Several Random Questions
« Reply #5 on: June 22, 2017, 11:29:48 AM »
For various reasons, preparedness communities, including TSP, seem to shy away from serious financial talk.

I think one of the reasons is OPSEC.  For example, I would guess that most of the forum members have either invested in some precious metals or would like to do so.  But anything you can post about this subject risks revealing info you'd probably rather keep secret.  Even talking about which sort of coin to buy -- I mean, it reveals something if you're asking about buying a few 1-oz silver rounds, vs buying 1-oz gold in quantity 10.

Offline Smurf Hunter

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Re: Several Random Questions
« Reply #6 on: June 22, 2017, 11:35:41 AM »
I think one of the reasons is OPSEC.  For example, I would guess that most of the forum members have either invested in some precious metals or would like to do so.  But anything you can post about this subject risks revealing info you'd probably rather keep secret.  Even talking about which sort of coin to buy -- I mean, it reveals something if you're asking about buying a few 1-oz silver rounds, vs buying 1-oz gold in quantity 10.

Specific quantity details seem worth keeping vague for OPSEC.
Do say: "I started buying a little silver with each paycheck"
Don't say: "Each Friday at 17:30 I buy 10 silver eagles from Fred's Coin Shop on Main st"  ;)

But in general terms, if I tell you I own Wal-Mart stock, you don't know if I own 100 or 100,000 shares.  If I publicly declare I owned something worth millions of dollars, I agree someone might see me as an attractive target.

Offline Tyler Durden

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Re: Several Random Questions
« Reply #7 on: June 22, 2017, 11:37:43 AM »
Good answers all around!

I was chatting with my brother about the speculation of crypto the other day and it was brought up that it's probably here to stay, but like you've said, highly speculative.  Nobody actually knows what it's really worth yet.  And I have heard (probably on TSP) about the issue of dilution with the currencies.  If they all do relatively similar things, the legit ones should equalize in price.  Couldn't so many possibly come out that Bitcoin could fall to $5 each? 

Thanks for the bond answer.  I think I'll steer clear for the time being.