These are challenging times for savers
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!
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