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View Diary: David Stockman: “get out of the markets and hide out in cash” Corruption Of Capitalism (122 comments)

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  •  I wonder how hiding in cash would work out (14+ / 0-)

    if inflation began?  

    I'm not really saying that there is the possibility of rampant inflation, but just sleeping on you money under the mattress isn't really very sound financial advice.

    If it is true that the Fed has vastly inflated the money supply and that a collapse of markets is bound to happen (sure has happened before and even after less spectacular run-ups as in the last 4 years), then won't there be enormous fluctuation in the value of cash as well?

    Go, then, is he really a gold bug? uffff....

    I do enjoy seeing him write about the wrongheadedness of Republican policy and Republican-caused deficits, but it is unfortunate that he has virtually no audience among today's insane tea bag republicans. So, his words are nice for liberals to see, but I fear they will sway few if any conservative readers. Too bad.  

    "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

    by YucatanMan on Sun Mar 31, 2013 at 10:25:36 PM PDT

    •  It's not just inflation (14+ / 0-)

      It's that 90% of people don't have their money in "the market" they have their money in 401k's and IRA's and other confidence schemes designed to separate people from their money and keep them away. All of us who don't control our own money face a massive loss if we try to extract our money from the con artists and bankers.

      The reality is that we don't actually have any money. All we have is a quarterly statement with pretty numbers on it that can be rescinded at will by the bankers and con men. As they periodically are every time the con men and bankers want to take our money for themselves.

      As those of us who lived through the 2000's remember how most people saw zero growth in their retirement accounts for a decade while *bush ran the economy into the ground.

      •  IRAs are frequently self-managed (3+ / 0-)
        Recommended by:
        skohayes, Deep Texan, Odysseus holders full control over their money. Past 401k's are rolled into Keoghs for just that purpose.

        Denial is a drug.

        by Pluto on Mon Apr 01, 2013 at 01:32:47 AM PDT

        [ Parent ]

      •  I have complete control (6+ / 0-)

        over the investments in my 401K. I can change them into cash with a day's notice. I can move the money around every day of the week if I so choose.
        Most 401ks are set up the same way.
        Educate yourself about your 401k and what you can do with the money.

        “We are not a nation that says ‘don’t ask, don’t tell.’ We are a nation that says ‘out of many, we are one.’” -Barack Obama

        by skohayes on Mon Apr 01, 2013 at 04:00:56 AM PDT

        [ Parent ]

        •  Yes, but (3+ / 0-)
          Recommended by:
          corvo, PsychoSavannah, ChemBob

          if you cash them out, you pay a massive tax penalty at least twice as high as any some "investment" banker pays on their investments if they liquidate them. Unless you put them right back into another 401k or equivalent.

          My point is you DON'T have real control over your money. It's only yours to the extent that the bankers allow YOIR money to be YOURS. The game is utterly rigged. All any of us has, in the end, is a sheet of paper with numbers on it and the fantasy that we have money. Everything else is a rigged game.

          Not to mention that many of us don't know enough about investing and have actual other jobs to do, which is why we PAY financial professionals to invest for us, not gamble our money for their own entertainment.

          I love the trumped up accountants who seem to believe that everyone should not only be able to do THEIR job at least as well as they do or they are fair game to be cheated and robbed by the banksters, but also, you know, be able to do their own useless job as well. You know the economy only needs accountants, why would we need teachers, artists, writers, designers, doctors and everyone else? We should all be accountants so we don't get cheated. And why should financial experts actually do what we PAY them to do? If we can't oversee their every move, why, we deserve to be cheated and robbed, right?

          •  Self-directed IRAs. (3+ / 0-)
            Recommended by:
            YucatanMan, semiot, skohayes

            The law already allows you to completely avoid the casino of the stock market.

            Wikipedia: Self Directed IRA

            Prohibited asset types

            IRS regulations prohibit IRA investments in life insurance and in collectibles such as artwork, rugs, antiques, metals (there are exceptions for certain kinds of bullion), gems, stamps, coins (there are exceptions for certain coins minted by the U.S. Treasury), alcoholic beverages, and certain other tangible personal property.

            You can buy real estate.  You can make person-to-person loans.  You can invest in someone else's small business.
            Prohibited transactions

            IRS regulations prohibit transactions that are an improper use of the value in the account or annuity by the account owner, the account owner's beneficiary, or any other disqualified person. These rules are generally designed to prevent self-dealing. Disqualified persons include your fiduciary and members of your family, such as your spouse, ancestor, lineal descendant (e.g. children), and any spouse of a lineal descendant). In addition, other disqualified persons include:

                Service providers of the IRA (e.g., custodian, CPA, financial planner);
                An entity (such as a corporation, partnership, limited liability company, trust or estate) of which 50% or more is owned directly or indirectly or held by a fiduciary or service provider;
                An entity that is a 10% or more partner or joint venturer of with an entity that is 50% or more owned directly or indirectly or held by a fiduciary or service provider;
                Additionally, in the case of a SEP or SIMPLE IRA:
                    The Employer;
                    50% or more owner of the Employer;
                    Officers, directors, 10% or more shareholders, and highly compensated employees of the Employer;
                    An entity 50% or more owned by the Employer;
                    10% or more partner or joint venturer of the Employer.

            The following are prohibited transactions with an IRA:

                Borrowing money from it.
                Selling property to it.
                Receiving unreasonable compensation for managing it.
                Using it as security for a loan.
                Buying property for personal use (present or future) with IRA funds.

            The law already allows great freedom in what you do.

            You want to buy scrubland, and reforest it to reduce CO2 and global climate change?  Permitted.

            You want to buy houses and rent them out?  Permitted, with arms-length management.

            You want to lower interest rates on student loans?  Find the valedictorian in the next town over and write him a personal loan.

            Nobody looks in the dusty, cobwebby corners of law.  But this is all black letter law today.

            -7.75 -4.67

            "Freedom's just another word for nothing left to lose."

            There are no Christians in foxholes.

            by Odysseus on Mon Apr 01, 2013 at 07:36:29 AM PDT

            [ Parent ]

          •  I did not say (0+ / 0-)

            to cash out your 401k, that's a stupid move (and I should know, since I did do that at a former job).

            But you have other options:
            1) Don't invest in a 401K, and put the money towards a ROTH or regular IRA, where you can direct where the money is invested (there are brokerages that only deal with environmentally responsible companies, for example) yourself. There are different tax rules for each option, so be sure to look into that as well.

            2) Most 401Ks have more than one option for investing your money. If you're worried about the stock market, put the money into a money market fund or similar low risk investment. You won't see much growth, but when the market crashes, you won't lose a lot of money, either.

            3) It's YOUR money- not spending a little time doing some research is simply not that hard with a computer at your fingertips. Most companies that manage 401Ks have lots of resources for amateur investors (like you and me) that make it less complicated and easier to understand.

            And by the way, I'm not an accountant, I'm a hog farmer who hates math. If I can do it, anyone can.

            “We are not a nation that says ‘don’t ask, don’t tell.’ We are a nation that says ‘out of many, we are one.’” -Barack Obama

            by skohayes on Mon Apr 01, 2013 at 03:03:55 PM PDT

            [ Parent ]

      •  I don't think the economy has been good (0+ / 0-)

        since at least before 9/11. We were told it was good, as trillions were stolen from public coffers and the price of fuel, education, and health care increased 20% or more every year.

        I think the economy has now finally improved, but after a decade or more of struggle, a larger percentage of Americans than ever before are unable to recover.

        I'm living in America, and in America you're on your own. America's not a country. It's just a business.

        by CFAmick on Mon Apr 01, 2013 at 10:39:37 AM PDT

        [ Parent ]

    •  There's all kinds of cash. (7+ / 0-)

      Safe cash. Diversified cash. Strategic cash. Cash that appreciates in value. Cash that pays interest. Plenty of US banks allow depositors to hold foreign currencies (for those concerned about dollar debasement).

      A balanced cash portfolio, with a dash of metals, is only prudent. That's what central banks hold.

      Denial is a drug.

      by Pluto on Mon Apr 01, 2013 at 01:29:21 AM PDT

      [ Parent ]

      •  Hey, listen, (1+ / 0-)
        Recommended by:

        you actually have to already have money, to not have already been robbed blind, to not have lost your job years ago and been unable to find one because of your age, and on and on.

        I'm sick of people who have been lucky, and apparently had the time to manage every single dollar that they've owned, lecturing the rest of us as though what we brought to the society was worthless.

        •  Actually, I was answering a question (1+ / 0-)
          Recommended by:

          ...waaaay at the top of this thread:

          If it is true that the Fed has vastly inflated the money supply and that a collapse of markets is bound to happen, then won't there be enormous fluctuation in the value of cash as well?
          However, I did add a link because the topic was "what to do with IRAs and 401Ks" -- if one got out of the market. So, I presumed to be constructive.

          Most of us have been financially marginalized by the collapse of the US economy in 2006. Until then, and up to 2008, I did talk about currencies and outside-the-market strategies for Democrats to protect themselves financially. But when the big banks were not nationalized by February 2009 and the nation's economy handed over to Summers and Geithner, I stopped writing economic Diaries because there was no longer a political solution.

          I am well aware that it is too late, now. The person you describe is not me.

          Denial is a drug.

          by Pluto on Mon Apr 01, 2013 at 02:54:57 PM PDT

          [ Parent ]

    •  Given his comments on Nixon, he's a gold bug. n/t (5+ / 0-)

      You show a little grit and you lands in jail.

      by cal2010 on Mon Apr 01, 2013 at 02:19:42 AM PDT

      [ Parent ]

    •  I'm amazed it has stayed propped (2+ / 0-)
      Recommended by:
      Words In Action, corvo

      this long.

      collapse of markets is bound to happen

      "Til you're so fucking crazy you can't follow their rules" John Lennon - Working Class Hero

      by Horace Boothroyd III on Mon Apr 01, 2013 at 04:31:09 AM PDT

      [ Parent ]

    •  When people say hide out in (8+ / 0-)

      cash they usually mean short-term low-risk investments (such as CDs, T-bills, money market funds, etc). Cash under the mattress really makes no sense (if T-bills are unsafe, so are Federal Reserve notes, which is what cash is). If someone thinks that a systemic financial collapse is in the works (including a US default), the best thing to own is something that would have value in such an environment (such as cigarettes or food or other essentials).

      •  sure, but not everybody understands that (3+ / 0-)
        Recommended by:
        corvo, YucatanMan, doc2

        -You want to change the system, run for office.

        by Deep Texan on Mon Apr 01, 2013 at 06:07:47 AM PDT

        [ Parent ]

      •  Yes, I understand what various investments are (1+ / 0-)
        Recommended by:

        considered "cash" but as they often offer very low returns, I used the "under the mattress" imagery for the nice image. :-)   You'll sometimes find investment articles with the same sort of silly usage.  

        Your comment was very helpful for those who don't really understand what an investor means when he says "keep your investments in cash."

        "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

        by YucatanMan on Mon Apr 01, 2013 at 09:37:13 AM PDT

        [ Parent ]

    •  General inflation is only possible when theeconomy (0+ / 0-)

      is operating at full capacity & employment.  Otherwise any new dollars created by the Govt only go to increasing production.
      Inflation is actually a pretty simple equation:
      more money and the same amount of real goods and services = inflation
      more money and an equivalent amount of increased goods and services = price stability
      less money and the same amount of goods and services = deflation
      Of course we are nowhere near full capacity right now and at the pace we're going....we're not likely to be in this decade and as such there is absolutely inflation to be concerned about.
      After all, a little inflation is absolutely vital in a healthy prevents hoarding and allows people to be able to afford their interest payments on the debt.

      MMT = Reality

      "The Earth is my country and Science my religion" Christiaan Huygens

      by Auburn Parks on Mon Apr 01, 2013 at 02:49:42 PM PDT

      [ Parent ]

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