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starbucks4ever (98.67)

These are challenging times for savers

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November 04, 2010 – Comments (5)

It can be heart-wrenching to own any dollar savings and hear every day from the media that you should be robbed through inflation to give house speculators the rate of return they were counting upon. But this justified emotional distress is only the half of the challenge. The other, and by far more difficult part, is to resit that little voice that's telling you: 'I must do something!" Sorry, but the time to do something was two years ago, and today too many traps have been set for the savers who came to the party late. The house speculators will only be happy to take their inflation gains and your savings to boot. Yes, it's too bad your savings will be cut in half by inflation, but trust me, it won't make you feel better if you lose the other half in stocks, gold, or commodities.  

It's now more important than ever to understand valuations and get emotions out of the picture. Your dollars are now worth 30% less than yesterday, which was 60% less than in 2007, and this is not the last QE either. True. But stocks are still 70%-80% overpriced, and you have to stretch your "greater fool" hopes to the limit in order to justify today's valuations. The indexes spiked today in what looks like buy-now-or-be-priced-out-forever rally, but they will come back. And when they do, it will still be a challenge to pick good stocks from the pile of junk. It will be a very challenging market where the ability not to trade will be as important as the ability to trade, and the rise and fall of several bubbles will make things very exciting. Welcome to interesting times!

5 Comments – Post Your Own

#1) On November 04, 2010 at 12:57 PM, LeoGetz (27.97) wrote:

There are ways to protect your savings from infation.  Investigate.

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#2) On November 04, 2010 at 1:41 PM, BillyTG (29.02) wrote:

zloj, where do you think money is safe?  market-ticker guy says not even metals are safe.  I have to believe that PMs are a far safer bet than stocks, real estate, or savings for the forseeable future.

LeoGetz, what about you? Where do you think is best?

Curious what the options are, other than cashing out and moving to some foreign location, which has also become much tougher and more expensive this year as the US gov/IRS cracks down.

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#3) On November 04, 2010 at 1:42 PM, russiangambit (29.37) wrote:

That is why people are angry. Tea Pary by many accounts is mostly people in their 50-60s. They don't know what to do, who to blame. They don't understand what is going on . But they see their net worth eroding and there is nothing they can do about it.

Only 50% of americans own stocks. And even then the distribution is very uneven. So, the wealthies get the most benefits from FEDs actions, the poorest get the least.

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#4) On November 04, 2010 at 2:59 PM, starbucks4ever (98.67) wrote:

#3,

The irony of the situation is that there is no escape for the poor even when they listen to the so-called financial experts's advice to save and invest. If they save in CDs, Bernanke will fleece them for the benefit of the rich. And if they try to imitate the rich and save in stocks, the stock prices will mostly stay where they are now, because they are already so overvalued that Bernanke's Robin-Hood-In-Reverse can merely hold the line on prices. So you either buy CDs and get wiped out by inflation, or buy stocks and also get wiped out by inflation, and in either case your savings will be transferred to the speculators who jumped on the bandwagon before you. But you still must save because retiring without a penny is not an option either. So the savers are just caught in a hamster wheel and the owner of the wheel gets all the profit.

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#5) On November 04, 2010 at 7:03 PM, MegaEurope (< 20) wrote:

So zloj, do you think it's possible for "everything" to be overpriced at the same time?  For example currencies, stocks, bonds, real estate and commodities?  I have to disagree - when some assets is overpriced, that means other assets are necessarily underpriced.

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