Advice?

That's why it's necessary to sell calls, I would never sell otherwise.

-- Ron

Buy gold, or do you think that will become worthless?

-- Ron

I don't think anyone is "guarnateeing" and future returns. It's just that compared to historical average, stocks are inexpensive at this time. The probability that it will go up in the long term from this present level is higher than it will go down.

gold is at over $800 an ounce. It may become $300 an ounce. Not worthless, but certainly worth a lot less.

Rational? Yes, but Economics is not an exact science, in spite of all the math that it involves. Rather, Economics is usually found in the Human Sciences college departments.

So, to state that a PE of 15 is "normal" is truly numerology. For the scenario might change drastically... or not.

Consider the S&P 500. If I had invested exactly 5 years ago, I would be underwater. If I had invested exactly 10 years ago, I would be underwater. Unless I had timed things correctly and invested somewhere near the bottom in the last 10 years, I would have lost money.

We are seeing one fraud scheme after another. People are questioning where the bailout money has gone and whether it has even had any effect on the economy. There's tons of bad news still to go...even the president-elect has told us so...

I started working around 1996 so I haven't been around that long. However, I'm in touch with many of the older folks that I know from previous jobs who are now retired or close to retirement and they say they have never seen things as bad as this with respect to the news on the economy.

I hope I am wrong about how bad I think things are. If I am wrong, at least I will have a job. If I am right, I will have some cash in the bank (who knows what that will be worth). If I stay invested in the market and things are as bad as I think they are, I might end up with no job and no cash.

Watch this.

Anoop

Physical gold seems like a bit of a pain and it is only worth going that route if I think everything will implode (there are some like Marc Faber that are of that opinion but I'm not convinced yet).

I haven't been able to convince myself of the risks of owning gold in an ETF or through services such as goldmoney.com. I think one could lose money with those just because the service/bank went belly up and didn't do their accounting correctly.

Anoop

And they weren't around when things were much worse than now either. Interestingly enough, I read somewhere that the fact that the generation that went through the last great economic turmoil is not around anymore is one of the factors that leads to another. Not that history is not plentiful with data, but that the memory of the pain and suffering is easily forgotten.

May everyone have a Happy 2009.

The S&P500, as represented by Vanguard's VFINX, has negative returns for 1,

3, 5, & 10 years. The EAFE has negative returns for 1, 3, 5, & 10 years. The Russell 3000 has negative returns for 1, 3, 5, & 10 years.

The S&P500 has a history going back to 1957, not 1871

the p/e at the close of Nov 2008 was 19.44, not 11.http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,0,11,0,0,0,0,0.html

Anoop thought that the dollar would be worth less in which case gold would be worth more. Certainly, if the cash crisis continues the value of gold and other commodities could fall.

Newmont's average cost of production is $480, so I don't think that gold has much downside.

I don't advocate that people buy and hold gold as a large percentage of their assets. I currently have about 5% of my assets in gold, and could go to 10% if I sell some other equity.

-- Ron

Physical gold has a number of disadvantages, and it would be a good idea to sell one's junk gold.

The GLD ETF should be as secure as having a broker hold your stocks and bonds.

As I pointed out in another posting in this thread, selling GLD call options allow you to have an income with little risk.

GLD Feb 90 calls are now at $3.60 which would give you an annualized return of 25% if the price of gold doesn't go down. Of course, if GLD shares go over $90, you would lose your shares netting you a annualized return of over 50%. Note: GLD shares are priced a little less than 10% of the current price of gold (per oz).

-- Ron

How does whether or not you are invested in the market have anything to do with whether or not you have a job?

Elizabeth Richardson

We're talking about probabilities here. If the market tanks, chances are employment will contract further. If my employer does badly (because all of its customers are doing badly) there's a good chance they may not need my services.

BTW, I would love to claim these are my ideas, but they are very strongly influenced by what I read in Zvi Bodie's book titled "Worry Free Investing."

Anoop

Thanks for the suggestion. I will into this more. I have limited knowledge of options trading, so I have some learning to do.

Some more questions for my education...

Have you looked into the risk of GLD outside of the price of gold? Is it regulated in any way to insure that it is really backed by gold? Is there insurance that will cover the investor in the case the bank sourcing the ETF goes belly up?

Also, what's the difference between IAU and GLD?

Thanks, Anoop

In times like the present, being retired with no need for furture employment, and owning my own home with no mortgage to pay, is a real comfort. I even have a fireplace and a woodpile in case oil and gas ever gets too expensive to buy, so it will be a long time and have to get much, much worse before I have to worry about necessities. Young people who sometimes hear advice to put everything into stocks and not be concerned about home ownership should stop and think.

Again, just because it was higher in the past, how does that mean that it will likely be higher in the future? Where's the cause and effect?

But is gold really a commodity? International loans between banks still sue gold as currency. Perhaps because it was used as a common currency in the past, it still lingers as such in the human psyche. I wonder if in such a time of crisis, especially with high inflation, if it wouldn't be seen as a "safe" currency (whatever that means), thereby making is price behave differently from commodities.

Any further clarification on my musings are welcome.

TIA

But that will happen (or not) irrespective of whether you are invested in "the market." There is no correlation between how you invest your personal finances and the national economy. Your personal net worth may increase or decline. I have money invested in the market. Does than mean you will lose your job?

Elizabeth Richardson