Comments on: This AIM chat made me clench my fists

By: Bob

Bob — Mon, 01 Jun 2009 18:44:55 +0000

@SK: I get the impression your comment was tongue in cheek, so my comments are completely unnecessary. I think cmadler above was most on point – the points were cogent and well thought out and implied a high level of knowledge and understanding of the situation. The chicken little’s arguments were vacuous and their predictions still have not come true by a long shot. The market has already started to recover. A recession or even a depression is still a far cry from a complete collapse.

By: SK

SK — Thu, 29 Jan 2009 17:03:58 +0000

Hey .. I remembered reading this post so came back to it. Seems like your friends were on to something…. Do they have a personal finance blog I can subscribe to?

By: Nathan

Nathan — Fri, 10 Oct 2008 00:56:41 +0000

Just because something hasn’t happened in recent history is not enough evidence to say that it can’t happen or even that it’s unlikely. While the economy always has it’s ups and downs, it seems like we are actually in a downward spiral because the government is only concerned with short-term fixes that bite us in the ass in the long run. And it’s not really their fault. They are just doing what their constituents want them to do. We are a country of spoiled children that want their problems fixed immediately, and if it leads to bigger problems, down the line, that’s someone else’s problem. In the past, the common man didn’t know very much about what was happening in politics, but now through political competition, candidates have become very efficient at doing exactly what their constituents want them to do, even if it’s not the healthy choice. They must pander to our impulsive choices in order to win elections, but in the past, there was enough of a veil to allow them to make unpopular though intelligent decisions for us. Therefore, because our government must cater to the impulsive desires of spoiled children, it is very conceivable that our economic system will eventually implode, and we may go into a depression that will make this last month look like nothing. You can’t rely on evidence to predict the end of an era. The Roman empire only had to fall once.

By: rob

rob — Wed, 08 Oct 2008 18:01:08 +0000

@Pablo –
Couldn’t agree more, that one astonished me too. I think it’s a mindset here (America) that the american colonies *were* the british empire, and it all went bad for them when we became independent. I apologise on their behalf. I’ll invest my 1 pound into the iron industry at, oh, around the time of Henry VIII thanks.

By: Kay

Kay — Wed, 27 Jun 2007 07:49:32 +0000

This intrigued me very much. I get each of your points.

By: Pablo

Pablo — Sat, 06 Jan 2007 02:23:35 +0000

I’ve been reading your blog since this past fall, but the points these gentlemen bring up are quite absurd. Like the first poster mentioned, there must’ve been a bong and a Che Guevara shirt somewhere when this conversation took place. Utilizing Britain as an example of an empire falling is the most fallacious of all the silly points these guys made. Look at the London Stock Exchange: it is now competing with New York in the financial world for supremacy as the biggest purveyor of global capital. Bloomberg, of all people, is frightened by the growth of the financial industry in London. Britain was on the up and up in 1750; it controlled the world by 1850. I would’ve killed to have invested in British industries in 1750–by 1850 I would’ve been the equivalent of a 19th century billionaire. And even during Britain’s precipitous decline as a first rate world power post-World War II, there was nothing remotely catastrophic about its decline, which more than allowed for London to remain a vibrant financial center. I predict the same will happen to the U.S. and its financial structure vis a vis the rising powers in Asia. Of course there will be bumps along the way, but I’d bet on the resiliency of the American financial system much more so than on the opinions of these knuckleheads.

By: Colin

Colin — Thu, 20 Apr 2006 16:00:11 +0000

It is not true that you would have lost money in the British stock market over the long run, neither when their late 18th Century declned nor their late 19th Century empire. In fact, many economic historians argue it was good for the British economy to set its money-sucking colonies loose — sort of like the way the US would gain financially from giving Puerto Rico its independence.

By: cellardoor

cellardoor — Mon, 17 Apr 2006 17:47:02 +0000

Fist clenching indeed…

1.Unless your friend is going to invest in assets that are non-publicly traded securities, why the hell wouldn’t he put the money in his retirement fund and invest it however the doom’n'gloomers want? So what if the US collapses — stick your IRA money in emerging market funds if you like. (The takeaway for me, isn’t that the US will or won’t collapse — just that the guy probably doesn’t know what he’s talking about.)

2.Unless maybe he thinks that a future administration will abolish the benefits on IRA’s and punitively tax them disproportionately — and even then, what does he think will happen to non-IRA assets?

3.A tongue in cheek suggestion: The only way he’d be correct to avoid contributing is if he’s putting that money into guns and survival gear. If so, he should still invest in a traditional, but self-directed IRA (w/insane fees), and buy the guns through it (and at least get the AGI deduction — I suspect this guy’s income isn’t high enough to knock that out). Technically, if he starts using them for his own benefit, that’s self dealing (I think that’s the term), just as if you sell a valuable house from your taxable portfolio to your self-directed IRA for $1. The only thing is, in the scenario where he needs to use them — I doubt anyone’s going to care…

4.What the hell were his alternatives? Let me guess — a fund run by the guys who told him not to invest in retirement accounts?

5.I’m trying desperately to come up with a scenario where the guy wasn’t on crack — is it possible he meant that he didn’t want to pay social security taxes?

By: Grumpy Old Man...

Grumpy Old Man... — Thu, 30 Mar 2006 09:41:37 +0000

Your friend also needs to learn a little history before he argues from it.

In 1750-1820 the UK had lost 13 of its less profitable colonies (the real money at the time was in sugar), but had gained Australia, de facto control of India and had knocked then previous superpower (France) off its perch, establishing what became known as Pax Brittanica. It was poised on the great age imperial expansion and had launched the Industrial revolution.

By: Kien

Kien — Mon, 27 Mar 2006 06:53:15 +0000

I don’t believe in all the doom and gloom that people keep talking about because quite honestly a person who is smart enough can find a way to make money in any economy… even in anarchy. I personally have an investment thesis in case of doomsday which is to invest in GAG – Guns Ammo and Gold. But I still have my shares in tech companies because I’m not that pessimistic.

Something that should be a concern as far as investing in 401Ks is related to the National Debt and was pointed out by Suzie Ormon who has a great TV show on CNBC. She says that 401Ks were made back in the 80s when taxes were really high. The government created 401Ks so that people can shelter their money and have it grow tax free. So the plan was to put as much money in the 401K as possible and avoid paying the upfront taxes. Then some time later you withdraw the money when the tax rate is low and your advantage is all the money that you invested has grown and you withdraw it at a lower tax rate.

However, today year 2006 we’re at the lowest level of taxes we’ve been at in decades. And with the National Debt looming out there, there is only one solution… RAISE TAXES. So Suzie goes on to point out that if you put too much in a 401K right now you will putting it in when your taxes are low and withdrawing them later when your taxes are likely to be high, which obviously makes no sense. I’m not saying don’t use the 401K at all, but understand that it’s a tool and not a perfect one. You must understand how to use it. Suzie Ormon suggest only adding to the 401K what your company will match.

I hope this was informative.