Leveraging a windfall

[280plus]

Hold it is...

[Waitone]

While investing is alluring make sure you prepare for life's inevitable downturns.  Just assume you will have a 6 month job outage.  Avoid putting money into financial assets which have a penalty associated with early withdrawl.  Under no circumstances use a 401-K as a savings account for money you have to have quick access to.  Pull money out of an IRA or 401-K and the federales and state will get about 45% percent.

I fell into your hypothetical situation when the last company I worked for was bought and the new owners bought out my contract.  I did all the right things and then the wheels fell off.  I had the cushion as described but that ran out.  Worse than a train wreck.  Bad things happen.  Just plan for it.  Oh, and if you say, "Hey, it happens to the other guy."  Remember that you are someone else's other guy.

[Otherguy Overby]

One thing to remember is "inflation" is really just theft of your wealth.

The next is the dollar has no "real" value, it only has a perceived value.

So, to preserve wealth one needs to have most all of it in assets of some form other than currency.

Lastly, regarding debt, anytime the interest rate is near or less than inflation, it's a bargain and doubly so if the interest is deductible.

PS.  Don't believe the government's inflation figures.

[Art Eatman]

"Don't believe the government's inflation figures."

Amen!

What fries me is that when any class of items really inflates, the CPI folks take it off the list.  Housing, cars...And then they include the notion that when a brand name food item jumps, I'm gonna go buy generic.  Duh?

In 1971 I turned the key and drove out in a brand new Chevy 3/4-ton van.  $3,200.

In 1985 I turned the key and drove out in a brand new Toyota 4WD PU.  $9,500.

Last Tuesday I went tire-kicking at Mr. Toyota's in Austintatious.  Looked at a brand new 4WD PU.  About $30,000.

Now, tell me again about this 2% and 3% inflation?

The rule of 72:  Divide a percentage into 72, and that gives the doubling period.  2% into 72 means doubling in 36 years, etc.

I don't even wanna get into what guns cost, 36 years ago.

Ain't fiat money wunnaful?

Art

[Scottmkiv]

Get this book:

http://www.amazon.com/gp/product/0471295639/103-3472126-1349438?v=glance&n=283155

and read the part about investing in the stock market. No one can outguess index funds consistently, so don't pay them to try.

[Art Eatman]

Interesting bit of analysis fro Gary North, today:  In the event of a recession, silver, as an industrial metal, will either see a decline in the rate of price-rise, or will decline in price somewhat.  Gold, moving because of different market forces, may well continue to rise.

Ergo, swap silver for gold of equal $$$ value if you think a recession is coming.

Art

[280plus]

FWIW - I was surprised to fine that most of those hip hop "gold" teeth are actually platinum. Anyone remember "The Mad Trapper" in that Bronson movie "Death Hunt"?  

[Felonious Monk/Fignozzle]

Scott-- just ordered the book.  As a bit of trivia, I began reading "How to get started in Active Trading & Investing" by David S. Nassar, and in his conclusion, he mentions "Against the Gods: The Remarkable Story of Risk" by Peter L. Bernstein (the book you referenced) as one of the BEST books he's ever read regarding a foundational approach to investing.

Thanks a ton.

[...has left the building.]

I like books like "Random Walk" and "Against the Gods" but I can't deny the fact that there are funds out there who have been beating the indexes for over 30 years. These funds are normally kept low-key for a reason. Someone related to my wife's family works for a relatively unknown, but in some circles well-known, investment manager. The fund's compounded annual returns since 1972 is...*drum roll*...17.23%. They are up 15.91% in the past 12 months. Please don't e-mail me asking me which fund it is because the company recently closed new investments to it anyway. I didn't get on board either because their initial investment could buy one of the better houses in my area.

The, "index funds are the way to go", series of books are excellent for the passive investor. But for the active investor, they are simply self-defeating.

[Guest]

Gary North and Franklin Sanders have been having a back-and-forth re. precious metals for a couple of days- it might be worth while to read the other side of the debate as well.  You'll find it here:

http://www.321gold.com/editorials/sanders/sanders021306.html
New, Improved Confusion on Gold & Silver By Franklin Sanders

lpl/nc