Sunday, January 11, 2009

Investments

I have a modest amount of money in a 401K that's growing steadily more modest and I've been pondering a plan of action. I know I mentioned buying gold coins and whatnot, but that's just a hedge against losing everything as declining demand for commodities will probably offset any inflationary hedges. It's irrelevant anyway since the IRS keeps 401K money locked away from such things.

Our company's 401K plan managers made their yearly pitch with the typical "can't predict peaks/troughs" bits; but what if the trough is still well off and there's still time to save something by tucking the cash in safer plans? With American leaders set to follow the failed Japanese post bubble plan, it seems like playing the 'bear' will be a strategy that will pay off for ten or more years. From Karl Denninger:
Please tell me this is a joke. Obama really believes that The Fed can hold interest rates at zero for four years and they can spend without bound, while the bond market will blithely look on at $1-2 trillion deficits annually and the economy will begin to recover?
...
This plan is asinine in that if it "works" the flight out of Treasury debt that occurs with a recovering economy will guarantee rising rates (and thus torpedo the budget and government through radically increased borrowing costs) while if it fails we will have spent the money that is going to be necessary for that direct assistance to Americans.

I've seen stupid come out of our government before, but this takes the cake; it is, in fact, a "can't win" proposal.
That post, and this one where he predicts that a depression (a 10% market contraction) will hit this year leave me more pessimistic than ever. Of course every recession has it's cheerleaders who claim that the day of judgement is nigh, but this time it would seem that there are too many fundamentals to be ignored.

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