Search found 64 matches

by aac74
Wed Jul 23, 2014 9:50 am
Forum: Personal Consumer Issues
Topic: Computer Fried By Lightning - Security Question
Replies: 15
Views: 3786

Re: Computer Fried By Lightning - Security Question

It's easy to turn a chromebook into a desktop. Just add a wireless mouse and keyboard (any windows compatible USB RF one will work, Logitech are the best - http://www.logitech.com/en-gb/product/w ... 70?crid=27).

Plug in any HDMI monitor and you can even use a wired internet connection via a compatible usb to Ethernet dongle (http://www.amazon.co.uk/gp/product/B003 ... UTF8&psc=1)

There are also new all-in-one machines with large 20"+ widescreens called Chromebases:

http://www.lg.com/uk/chromebase/lg-22CV241-B
by aac74
Wed Jul 23, 2014 6:28 am
Forum: Personal Consumer Issues
Topic: Computer Fried By Lightning - Security Question
Replies: 15
Views: 3786

Re: Computer Fried By Lightning - Security Question

I'd use a Chromebook or chromebox for anything sensitive.

Encrypted hard drive, secure boot, linux, no installed apps. This is 1000 times more secure than the average windows machine.
Especially if used with google 2 factor authentication.

What if your machine had been stolen or you got a virus that recorded your login passwords ?

There is a small learning curve and you need to set up a cloud printer (HP eprint is good) but if you want security you have to get off windows.

http://www.buntutech.com/chrome-os/
by aac74
Sun Apr 27, 2014 4:10 am
Forum: Personal Investments
Topic: Convince me to lump sum into the market
Replies: 59
Views: 14121

Re: Convince me to lump sum into the market

I think that if you are scared of market falls you are better off diversifying into things like bonds, gold and REITS rather than devising complex entry plans.
What if the market falls 25% then falls another 25% ?

The Bogglehead way is all about the physiology of staying in the market through shocks.
How would you react to a 50% stock market fall ? If you feel you would react then you are too heavily invested in stocks.
by aac74
Thu Apr 10, 2014 6:12 pm
Forum: Investing - Theory, News & General
Topic: Is there an alternative view ? [Alternatives to index funds]
Replies: 14
Views: 2958

Re: Is there an alternative view ? [Alternatives to index fu

Low cost index funds and not trying to market time are the correct approach.

However there is much evidence and debate about pivoting part of your portfolio or changing the balance with age or adding other types of asset classes e.g. gold and REITs (that are uncorrelated with the stock and bond markets).
by aac74
Sat Jun 22, 2013 6:59 am
Forum: Investing - Theory, News & General
Topic: Gold continues its free fall
Replies: 34
Views: 6431

Re: Gold continues its free fall

Gold stocks are doing great. Crashing while S&P hits new highs. Just what I want:

Image
by aac74
Mon Jun 03, 2013 9:48 am
Forum: Investing - Theory, News & General
Topic: Why no mutually owned companies beyond finance/insurance?
Replies: 14
Views: 18386

Re: Why no mutually owned companies beyond finance/insurance

While not a co-op (more and individualist anarchy under a benevolent dictator) VALVE is an example of a non traditional tech company.

There are no managers, all associations are spontaneous. Employees are paid a low basic salary but bonuses are unlimited and decided by complex multi stage peer reviews.
Thus it tries to be a perfect meritocracy.

http://en.wikipedia.org/wiki/Valve_Corporation
by aac74
Mon Jun 03, 2013 9:36 am
Forum: Investing - Theory, News & General
Topic: Why no mutually owned companies beyond finance/insurance?
Replies: 14
Views: 18386

Re: Why no mutually owned companies beyond finance/insurance

Another major UK retailer that is a coop:

http://www.johnlewis.com/

[Political comments removed by admin LadyGeek]

Large industrial Co-op in basque spain:

http://en.wikipedia.org/wiki/Mondragon_Corporation
by aac74
Tue May 07, 2013 5:44 am
Forum: Investing - Theory, News & General
Topic: I am curious, Indexes
Replies: 6
Views: 824

Re: I am curious, Indexes

All indexes remove and add companies from time to time based on market capitalisation.
If they didn't they would, over time, become less of a representation of a segment of the market (e.g. top 500 companies weighted by market cap).
Thus funds looking to track an index needed to do the same (or they would stop tracking the index !).
by aac74
Wed Apr 17, 2013 5:10 am
Forum: Investing - Theory, News & General
Topic: A nice talk about gold in ones portfolio
Replies: 103
Views: 10049

Re: A nice talk about gold in ones portfolio

With government bonds in a crazy bubble and the stock market entering a fifth year bull, diversification is key. Boggleheads often say there are no alternatives but precious metals and REITs are great alternatives. 5% to 10% allocations make a lot of sense. PMs perform well when interest rates are below inflation as it seems they will be for some time. They also perform well in times of crisis e.g. if interest rates rise and thus force massive austerity. REITs follow an 18 to 20 year mortgage credit cycle and thus are sometimes strongly correlated with stock indexes and at other times they are not. e.g. they had a massive recent crash but rose during the .com bust. Plus REIT yields are more tied to the real economy rather than bond prices o...
by aac74
Mon Apr 15, 2013 2:51 pm
Forum: Investing - Theory, News & General
Topic: A nice talk about gold in ones portfolio
Replies: 103
Views: 10049

Re: A nice talk about gold in ones portfolio

Clearly the last 18 months in precious metals can now be seen as a bear market i.e. NOT a bubble ?

On the other hand everything else, stocks, bonds and even real estate in some parts of the world, does look like a bubble !
Particularly as data coming from China, Japan, Euro and the US all seems to be pointing to a slowdown.
by aac74
Tue Apr 02, 2013 3:39 pm
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7782

Re: What happened to all of the gold bugs?

Why is no one talking about gold stocks ? http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=XX%3aHUI&uf=0&type=2&size=2&sid=16794&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=13&rand=1816315798&compidx=&ma=0&maval=9&lf=1&lf2=0&lf3=0&height=335&width=579&mocktick=1 They can still be had for the same price as 7 years ago. Looks like a bargain and the place to be rebalancing into. Defiantly no bubble here, they are only up about 3% a year over the last 20 years. If gold was in a bubble it would be at many multiples of its cost of production and gold stocks would thus be rising not falling. It's hard to get acc...
by aac74
Tue May 15, 2012 9:17 am
Forum: Personal Investments
Topic: Bubble Alert
Replies: 43
Views: 5134

Re: Bubble Alert

Property isn't in a bubble ! But no one is buying ? It's going to zero with natural gas, right. Who needs houses or heating ? :oops:
by aac74
Tue May 15, 2012 9:04 am
Forum: Personal Consumer Issues
Topic: Hair clippers? Any self-barbers out there?
Replies: 42
Views: 8515

Re: Hair clippers? Any self-barbers out there?

Much easier to do the back of your head if you use a clipper with a 180 degree rotating head:

http://www.philips.co.uk/c/mens-groomin ... 70_00/prd/
by aac74
Sun May 13, 2012 12:07 pm
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

The point is that there are some risks that only gold can protect you against and because those risks aren't zero, neither can your gold allocation be zero.
by aac74
Sun May 13, 2012 8:30 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

What's the worst that could happen ? Can dollars be exported forever ?

Each ended with debt and inflation:
Image

http://www.youtube.com/watch?v=aVJaQ7NWpdU

Someone in this thread said that a person's main property was a 'life hedge' against inflation. However I'd say that outside of the main metro areas you are outside of the US property market.
The market that is most sensitive to growth and inflation. Maybe the next property boom will be a cash rather than mortgage boom with Chinese people rushing to swap paper dollars for hard assets.
Are they doing to be using this cash to bid up prices outside the main cities and resort towns ?
by aac74
Sat May 12, 2012 1:30 pm
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

But does the government's inflation number represent the price rises that real people are experiencing ?

If real inflation is 2x or 3x the official rate are things that are linked to it good enough to maintain a standard of living ?

Property, gold and stocks are linked to real monetary inflation directly, no government 'calculations' necessary.
But you need a combination of all three because they don't usually all rise together or at the same rate.
by aac74
Sat May 12, 2012 4:57 am
Forum: Investing - Theory, News & General
Topic: Sideways Market
Replies: 58
Views: 6669

Re: Sideways Market

:oops: genius.
by aac74
Sat May 12, 2012 4:32 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

Why you should not blame 'speculators' for gold's high dollar price:

Image

Real gold bugs are simply inflation hawks who realise that gold is required as well as property and stocks to guard against inflation.
by aac74
Fri May 11, 2012 4:56 pm
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

The crisis can't just melt away because the crisis is debt. It's either deflation and default or very high inflation. i.e. the recent crisis has just been the warm-up. The big crisis lies in the future. Could be 10 weeks or ten years but it's going to happen. e.g. France is weeks away from a bond crisis that could smash the euro apart. Gold in dollars isn't going to 'revert to mean' (outside of a bubble) because it is real money. When gold rose from $35/oz it never traded at $35/oz ever again. It will never ever trade at $100/oz or $200/oz or $300/oz ever again. If it did (with the cost of production between $600 and $1450/oz) all production would stop. Oil will never ever trade at $20/barrel ever again either. The value of gold is not chan...
by aac74
Thu May 10, 2012 11:44 am
Forum: Investing - Theory, News & General
Topic: Retail investors on the sidelines
Replies: 8
Views: 1546

Re: Retail investors on the sidelines

Depends if the bloomers are panic selling. It's panic that prices will fall that drives prices down, not too many sellers. i.e. sellers accept slightly lower bid prices. Same as it is panic that prices will rise that pushes prices up. i.e. buyers accept slightly higher offer offers. Trades happen when one buyer meets one seller and a price is agreed that both accept. If there are more buyers than sellers or more sellers than buyers this is an illiquid market and prices become unstable and highly volatile. Prices crash quickly up or down depending on the type of imbalance. Boomer selling will not make the markets illiquid. 80% of trades are high frequency computers now anyway. Markets sell themselves on being deep and liquid most of the time...
by aac74
Thu May 10, 2012 11:25 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

Gold miners at 27 month lows, worst bubble peak ever ???

http://www.marketwatch.com/story/potent ... _TD_latest
by aac74
Thu May 10, 2012 3:37 am
Forum: Investing - Theory, News & General
Topic: OK, Maybe I am Wrong on Bonds
Replies: 53
Views: 5807

Re: OK, Maybe I am Wrong on Bonds

Stocks were at (inflation adjusted) values of 1895 in 1980 ! It was a massive buy signal. It was a signal to go all in on stocks.

Dow/gold ratio of 1:1

http://paperempire.net/wp-content/uploa ... -ratio.gif

You buy when things are cheap and everyone is fearful.

1895 prices means property is on sale, just like stocks n 1980.

You buy low and sell high:

http://www.sharelynx.com/chartstemp/USHLSPOG.php
by aac74
Thu May 10, 2012 3:11 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

If you have cash in a CD you are saving money under the bed ! You are getting a negative return after inflation. (real inflation experienced by real people is higher than 2%) Thus you might as well put some gold under the bed until interest rates rise. How is this difficult to understand ? Gold isn't taken at wal mart but neither are Euros or Chinese RMB. The free market didn't choose the US dollar. Americans are forced to use the US dollar, why do you think private gold ownership was banned in the US until 1974 ? If gold isn't money why do central banks own it and why are they buying more. Why don't they own diamonds or stocks ? Aren't they putting themselves at risk if the dollar price falls ? Why do they buy more gold when the dollar pri...
by aac74
Thu May 10, 2012 2:35 am
Forum: Investing - Theory, News & General
Topic: Housing prices at 2002 (and 1895) levels
Replies: 28
Views: 3947

Re: Housing prices at 2002 (and 1895) levels

Weren't stocks at 1895 levels in 1980 - adjusted for inflation ? Dow /gold ratio 1:1 Buying opportunity maybe ? http://paperempire.net/wp-content/uploads/2010/05/dow-gold-ratio.gif In the UK property investors are buying at 6% and 7% gross yields. If you buy now and sell in 2024/5 you will make money (unless the fed stops printing, deflation sets in and the US defaults on its debt). This is based on an 18/20 year credit cycle that has been in place for 200 years. You will feel the effects of the cycle most in high quality urban land in highly developed mortgage markets e.g. top 10 US metro areas or the UK. http://www.amazon.co.uk/The-Power-Land-Fred-Harrison/dp/0856831093/ref=sr_1_1?ie=UTF8&qid=1336635148&sr=8-1 http://www.amazon.co...
by aac74
Thu May 10, 2012 2:10 am
Forum: Personal Investments
Topic: Fear of bonds--Help!
Replies: 37
Views: 4863

Re: Fear of bonds--Help!

REITs are the new bonds ?
by aac74
Wed May 09, 2012 2:38 pm
Forum: Investing - Theory, News & General
Topic: OK, Maybe I am Wrong on Bonds
Replies: 53
Views: 5807

Re: OK, Maybe I am Wrong on Bonds

The difference is that we know exactly what is driving the cycle in land and property prices i.e. expansions/contractions in credit and shifts in lending toward property across the business cycle. Land is fundamentally inelastic. Its price must rise if the economy grows. As soon as there is any rise in land prices banks are more willing to lend to property companies, land speculators and home buyers. But rises in land prices, property prices and rents makes companies less profitable and so more lending shifts into the property sector, further raising prices. This has been going on for hundreds of years. We also know what will stop it or damp it down: An end to fractional reserve banking or at least a massive increase in reserve requirements...
by aac74
Wed May 09, 2012 10:30 am
Forum: Investing - Theory, News & General
Topic: The stock market keeps peaking at the first of the month!
Replies: 7
Views: 1032

Re: The stock market keeps peaking at the first of the month

The the last 3 years there has been a summer sell off and each one has been bigger than the last.

Will be interesting to see if the latest downturn becomes another 'waterfall' (summer 2011) or 'flash' (summer 2010) crash or something bigger based on a Euro bond collapse ?

How much of this is driven by a 1 year QE cycle ?
by aac74
Wed May 09, 2012 9:47 am
Forum: Investing - Theory, News & General
Topic: Retail investors on the sidelines
Replies: 8
Views: 1546

Re: Retail investors on the sidelines

I think it's worse than just market timing. Many people put large lump sums in at the top and pull it all out again at the bottom. No drip feeding in or out !

Thus they maximise their loss.
by aac74
Wed May 09, 2012 9:36 am
Forum: Investing - Theory, News & General
Topic: Low-cost funds dupe investors
Replies: 20
Views: 2556

Re: Low-cost funds dupe investors

Isn't the whole point of an Index fund that the manager doesn't pick how to allocate capital, the cap-weighted index does !

This makes it sound like the manger of the fund is making mistakes and doing a bad job !

If the manager of an index fund was beating the index he would be fired ?

Putting 90% of capital into something that has been a winner for 9 years is just a joke. If investing was that easy everyone would be a billionaire !
by aac74
Wed May 09, 2012 8:51 am
Forum: Investing - Theory, News & General
Topic: OK, Maybe I am Wrong on Bonds
Replies: 53
Views: 5807

Re: OK, Maybe I am Wrong on Bonds

Why not stay the course and protect yourself at the same time ? REITs focused on yield are the new bonds. They are about as far from a bubble as you can get. Betting against REITs means you are betting against 200 years of European and American history - i.e. the 18/20 year credit/property cycle. YES you can time the market - but only the property market. Fred Harrison predicted the UK property peaks of 1990 and 2007 in his 1983 book (based on 200 years of property data). Because the property market in the UK always peak in Q3 you can even time it down to a few weeks (18 years ahead of time !) Harrison engaged in a correspondence with Dr Homer Hoyt the leading expert on US land price cycles in the 1970s. Hoyt claimed he no longer believed t...
by aac74
Wed May 09, 2012 7:30 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

Are people in Europe buying gold for the 500% upside ?

Some people must be buying because I'm waiting 2 weeks for delivery on my Canadian Silver Maples.
I thought commodity bubbles end in a glut, not a shortage ?

http://kingworldnews.com/kingworldnews/ ... 3A2012.mp3
by aac74
Wed May 09, 2012 3:12 am
Forum: Investing - Theory, News & General
Topic: Economics. [Does it help the investor?]
Replies: 83
Views: 7079

Re: Economics. [Does it help the investor?]

How an Economy Grows and Why It Crashes http://www.amazon.com/How-Economy-Grows-Why-Crashes/dp/047052670X/ref=pd_sim_b_2 Basic Economics: A Common Sense Guide to the Economy http://www.amazon.com/Basic-Economics-Common-Sense-Economy/dp/0465022529/ref=sr_1_1?ie=UTF8&qid=1336549664&sr=8-1 Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics http://www.amazon.com/Economics-One-Lesson-Shortest-Understand/dp/0517548232/ref=pd_sim_b_3 The Price of Everything: A Parable of Possibility and Prosperity http://www.amazon.com/The-Price-Everything-Possibility-Prosperity/dp/0691143358/ref=sr_1_2?s=books&ie=UTF8&qid=1336549923&sr=1-2 Boom Bust: House Prices, Banking and the Depression of 2010 http://www.am...
by aac74
Tue May 08, 2012 8:31 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

Gold is money - store of value and means of exchange. Silver and Platinum have also been used as money but have many other uses. The fact that there is little industrial demand for gold outside of jewellery make it work even better as money. Central banks own gold not because it is shiny or expensive (like diamonds) but because it is money. It is chosen by free markets as money because of all its monetary characteristics: portable, divisible, doesn't degrade, universally exceptionable etc ... The less paper money acts like money (i.e. the more it is printed and the less interest it can earn) the more people and central banks want to swap some cash reserves for gold. You can't afford to wait for the wide spread prices rises to happen before ...
by aac74
Tue May 08, 2012 3:53 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

By dropping interest rates to zero, well below the real inflation people are experiencing, cash in the bank has become the same as cash under the bed. As long as interest rates are well below inflation it makes sense to take some cash from the bank and buy some gold coins to put under your bed. The return to cash (end of the gold bull market) can only happen with either a) long term deflation or b) far higher interest rates. a) Long term deflation could be handled by Japan because it started with low debt and lots of domestic bond investors. This is not true of the US. Deflation would quickly lead to default (because of the jump in real value of the debt) which would lead to instant massive austerity as the government cut spending. b) Highe...
by aac74
Mon May 07, 2012 6:20 pm
Forum: Investing - Theory, News & General
Topic: bond markets defy experts
Replies: 96
Views: 10102

Re: bond markets defy experts

The US is not Japan ! Japan had debt to GDP of 40% in 1990 NOT 100% debt to GDP that needs to be monetised by inflation or risk default because of deflation - rising real value of debt. The Japanese debt was mainly internal and thus did not create inflation as it expanded. Borrowing from foreign creditors is inflationary. Because the US has to borrow for foreigners it can not expand its debt the way Japan did. Deflation would in effect be a massive debt expansion and default would soon follow. Default would mean massive austerity This can't be allowed to happen. Japan has a highly productive export based manufacturing economy pushing prices down. The US imports Chinese inflation. The Japanese central bank's aim was to limit deflation (to 1%...
by aac74
Mon May 07, 2012 2:02 pm
Forum: Investing - Theory, News & General
Topic: 100-Year Treasury Bonds?
Replies: 10
Views: 1200

Re: 100-Year Treasury Bonds?

BUBBLE ! BUBBLE ! BUBBLE ! BUBBLE ! BUBBLE ! At least with Pets.com there was a chance you might get your money back ! Betting on deflation is delusional when the whole world is printing money. Betting on spontaneous price stability as the result of a perfect symmetry between money printing and debt is also a very slim hope. Economic history shows that more intervention leads to more instability. The difference between the tech bubble and the bond market bubble is that when the bond market collapses it will be the end of the world - everyone will feel it one way or another. The only question is do we have high inflation and then a bond implosion (because interest rates are forced to rise) or does the bond market implode and then inflation t...
by aac74
Mon May 07, 2012 11:06 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

The lower interest rates are (currently zero) and the higher government debt is (currently 100% of GDP and rising) the better an investment gold is because the higher the chance of very high price inflation/reductions in purchasing power (or at least the fear of it). Thus it makes sense at the moment to swap some cash savings (that are earning very low interest) for physical gold and/or silver. Plan to hold this for at least five years. Only think about selling if gold looks like it is in a bubble and interest rates have risen to match inflation (i.e. steps are being taken to curb inflation). The kind of inflation fighting you had in 1981 (interest rates at 20% - bond investors being killed) can't happen at today's debt loads. Any rise in r...
by aac74
Mon May 07, 2012 4:16 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

I'm a boglehead because I have 95% in index funds and a few gold coins and gold mining stocks. I would recommend holding some physical gold and silver forever because they are inflation proof money. We know this because you can buy just as much oil with an oz of gold now as you could in 1970. Gold is not just a commodity, it is a currency. Because of its inflation proof nature and inability to print up at will it can enter bubbles at times of high inflation and financial collapse. We are not there yet, we are still climbing a wall of worry and the bigger the pull-backs the bigger the worries will become. Thus you should be buying on gold weakness, not selling. Eventually everyone will be all in and the price will fall from its bubble valuat...
by aac74
Mon May 07, 2012 3:30 am
Forum: Investing - Theory, News & General
Topic: For those bullish on emerging markets
Replies: 16
Views: 1527

Re: For those bullish on emerging markets

There's a lot of data that shows that when super fast growing economies slow they never grow as fast ever again:

e.g.
Thailand
Japan
South Korea
Soviet Union
etc ...

It is easy to have very fast growth in an underdeveloped country.
This is because there are lots of unused land labour and capital waiting to be deployed.

However at some point growth slows because it now has to come from productivity gains that are much harder to do than building infrastructure.

http://media.ft.com/cms/b8268ffe-7572-1 ... 9e2340.pdf

Just because Emerging markets are slowing does not mean the returns from equities can't exceed developed markets.
by aac74
Sun May 06, 2012 2:59 pm
Forum: Investing - Theory, News & General
Topic: Real inflation and best source for it
Replies: 48
Views: 3601

Re: Real inflation and best source for it

The very best number for inflation is the one you calculate for yourself. It will be 1000x more accurate than CPI: http://news.bbc.co.uk/1/hi/business/7669072.stm http://www.neighbourhood.statistics.gov.uk/HTMLDocs/dvc14/index.html The CPI number being less representative of reality is not a conspiracy. It just represents the government doing a worse job over time - no one would last long at the BLS if they suggested a new calculation that would show a much higher CPI. However if you work for the BLS and suggest a new powerful 'scientific tool' like hedonics that also happens to produce lower numbers you are heading for the top ! The BLS was a monopoly. Without competition humans and the organisations they work for degenerate over time. The...
by aac74
Sun May 06, 2012 2:22 pm
Forum: Investing - Theory, News & General
Topic: Real inflation and best source for it
Replies: 48
Views: 3601

Re: Real inflation and best source for it

The Cpi is supposed to represent an average urban families spending: http://www.bls.gov/cpi/cpifaq.htm#Question_6 I agree that if the average middle class person is experiencing a 5% inflation rate and the CPI is 2% then CPI is a number that has very little relevance to them. Except that the CPI is the number used by the Fed and politicians to set policies. Maybe that is one reason why the average middle class person is getting poorer ? Maybe QE price rises made the rich (owners of oil stocks) better off at the expense of the poor (buyers of fuel) ? No one can choose their basket of goods totally. It's dictated by an individual's circumstances or the business that people are in ! If you are an undertaker you are buying wood. If you are a pl...
by aac74
Sun May 06, 2012 11:54 am
Forum: Investing - Theory, News & General
Topic: Real inflation and best source for it
Replies: 48
Views: 3601

Re: Real inflation and best source for it

So, if I follow your argument, I should be perfectly happy if someone came along and substituted a 1970's car and a 1970's computer for what I have now. After all, in relative terms, nothing has changed - I still have one car and one computer. No No No ! That's not what I'm saying at all ? What I'm trying to say is that hedonic substitution implies that the dollar is gaining purchasing power (by artificially reducing prices for reasons of technological progress). Technological progress has nothing to do with purchasing power. This is one of the sources of an official inflation number that is too low. This in turn produces interest rates that are too low and feeds asset price bubbles. You might be satisfied with the utility of your computer...
by aac74
Sun May 06, 2012 10:46 am
Forum: Investing - Theory, News & General
Topic: Recency bias: the last 100 years
Replies: 9
Views: 1421

Re: Recency bias: the last 100 years

There is only so many places you can put money. In the modern world you are forced to take much more risk than the past because of inflation and artificially low interest rates.

I would look at being as diversified as possible.
by aac74
Sun May 06, 2012 9:58 am
Forum: Investing - Theory, News & General
Topic: Real inflation and best source for it
Replies: 48
Views: 3601

Re: Real inflation and best source for it

Just because Shadowstats calculation isn't perfectly identical to the old methodology does not make it more or less wrong than the government's 'scientific' calculation. What shadowstats is telling you is that the rate of inflation is about 2% higher now than 1991. What the government is telling you is that inflation is about 3% less than 1991. Shadowstats tells us there were no overall price falls in 2009. The government says there were. Unless you were buying a house or getting cash for a clunker in 2009 did you feel you were much better off ? You can make up your mind from your subjective experience which is more accurate. Shadowstats certainly rejects hedonic substitution as it should do. Inflation indexes are social science and thus at...
by aac74
Sun May 06, 2012 7:44 am
Forum: Investing - Theory, News & General
Topic: Real inflation and best source for it
Replies: 48
Views: 3601

Re: Real inflation and best source for it

You are quite right to distrust the US government inflation data. If inflation (CPI) was calculated the same way as in the 1970s it would be over 10% now rather than the official 3% http://www.shadowstats.com/alternate_data/inflation-charts It is quite clear that that real and official inflation started to diverge around 1988. Between 1992 and 2002 real inflation rose while the official rate fell ! This was a major reason for the low interest rates that produced the tech and housing bubbles. The Fed's New Keynesian/Neo-Classical model of the economy was bad to start with (not including bank lending). Inputting super low inflation data made it even worse. The reason for this is modern calculation methods: http://seekingalpha.com/article/2493...
by aac74
Sun May 06, 2012 4:56 am
Forum: Investing - Theory, News & General
Topic: Gold is ready to fall
Replies: 157
Views: 15979

Re: Gold is ready to fall

It's true that a gold investor may be selling some of their gold now but not to buy dollars or dollar bonds ! They would be rebalancing into property and commodities, particularly natural gas. i.e they are keeping their inflation hedge on because the last 5 years have shown that no mater how big the economic problems central banks can always generate positive inflation. The Japanese central bank in the 90s could have done this if it had wanted to. The Fed generated inflation in the depression by revaluing the dollar against gold after 1932. The whole point of paper currency (rather than a gold standard) is that you can always create inflation. If you have a massive debt problem inflation is the first and only answer. Japan didn't take this ...
by aac74
Sat May 05, 2012 2:32 pm
Forum: Investing - Theory, News & General
Topic: Why should positive real returns be expected for stocks?
Replies: 14
Views: 2110

Re: Why should positive real returns be expected for stocks?

I'd say the biggest threat to stock returns is inflation.

The answer is diversification into inflation protected bonds, gold, REITs and maybe commodities.
Also BRIC and emerging market equities may provide more inflation protection (higher real returns) than US, UK and Europe - this is a total reversal of fortune with former basket case economies now better run than western economies.

It has been statistically proven that the longer you are invested the more diversification increases your returns because of the greater number of market conditions you need to ride through.
(e.g. inflation/deflation/currency devaluations/wars/regional crises/flash crashes/recessions etc...)
by aac74
Sat May 05, 2012 9:16 am
Forum: Investing - Theory, News & General
Topic: Index funds are revolting in the UK
Replies: 2
Views: 722

Index funds are revolting in the UK

Michelle Edkins, the global head of corporate governance at BlackRock, has emerged as the driving force behind the wave of shareholder revolts that have rocked Britain's biggest companies:

http://www.telegraph.co.uk/finance/news ... volts.html