Your advice also elucidates why I don’t see the falling sky which is causing many people to panic. I have no debt, a pretty secure job, decent insurance, emergency fund in savings and laddered CDs which could take care of up to 3 years of living expenses (depends on how hard I squeeze) for me and my boy if I became jobless. The assets I do have on the market are some of my retirement yet I really don’t plan on ever retiring from working — I simply plan to become pickier about the work I do. Even if my job suddenly vanished, I have a multitude of employable skills from archaeology to xenoscaping. Essentially, without knowing it, I have followed most of your advice — although I’m sure you’re going “NO! NO!” at hearing my retirement is in the market :-). Trent also mentions that this is a long-term investment and warns not to use money you’ll need to rely on, he says that for him this is long-term, 10-15 years. You say that “At some point … investing will again make sense”. At what point do you think investing will again make sense? Five years? Fifty? Perhaps you’re betting on fifty, but I am betting closer to five. I’m just not betting the metaphorical farm. I don’t think Trent is either.

Brian – I have GOT to get a copy of “The Zombie Survival Guide”! It sounds fantastic.

It’s amazing how many people are willing to discount almost 100 years of repeated history.

It is true, the market is low…compared to last year. Unfortunately it needs to be compared to statistically significant data. Using reversion to the mean, which is a basic statistical measure, we have a way to go down before we “average out” to make up for the excess returns of the past 15 years.

This is not a difficult situation to understand. You just need to know what you are trying to understand. Finding it isn’t hard, it’s knowing where to look and what you are looking for.

So, here is your MBA million dollar answer.

Until foreclosures slow, things will progressively get worse. Foreclosures are the foundation. They effect everything. Employement, credit, economic spending, GDP, etc.

The data I discused earlier shows forclosures are virtually guaranteed to INCREASE in the next 1-3 years due to unprecendented rate resets. There are also over 600K “shadow” foreclosures that exist. Those are homes already owned by banks yet not on the market. This is to control supply to eliminate a further depression of prices.

It’s all about forclosures. Stock market forward thinking, economic indicators…toss them. Pay attention to housing.

Regarding Get prepared, that means take whatever means you need to to get your family’s finanical position both SAFE and CONTROLLED.

ELIMINATE AS MUCH FINANCIAL RISK AS POSSIBLE. This is advice that is true no matter the economic climate, but especially true when good times can no longer hide the cracks.

Pay off debt, Cash in the bank, save money, large emergency fund. whatever. The financial equivalent of preparing for a long, cold winter. Don’t concern yourself with the return ON your mony, but the return OF your money.

But if you have money in the market, or your emergency fund is a home equity line of credit or credit cards, or you are subject to substantial risk with either your assets or debt, I would try and control & eliminate that quickly.

I would keep my assets safe somewhere where I could control the return. CD’s, your own business, companies you FULLY understand etc.

I would not have substantial assets in “the market” because it is a speculators game.

At some point in time I imagine the market will correct itself and investing will again make sense, but I don’t think that time is anytime soon.

Like Kitty, I’m interested in know what people are doing rather than what they are saying. Its one thing to say the world is changing and the sky is falling but its quite something else to actually do something constructive to attempt to maintain normalicy in your life. Trent tells us what he is doing based on what he believes will happen. I’m doing similiarly.

Eden, Troy, you say “Be Prepared”. Ok – what are you doing in preparation for the ‘economic equivalent of thermonuclear war’?

Trent, I would be interested in hearing how you invest your retirement. If anything, your retirement funds should be in the market, not money you plan to spend in the next five to ten years.

I wanted to also present you with an alternative to just buying index funds or randomly picking 20 stocks that I’ve been tracking forever (and also blogging about): hedge fund portfolio tracking. We track some of the most prominent hedge funds who have proven they can outperform over the long-term. Sure, sure, I can already hear the skeptics hitting their keyboards. I just cloned a portfolio of the 21 ‘Tiger Cub’ hedge funds and that portfolio has outperformed the S&p500 by 15.5% since 2000. The numbers speak for themselves: http://www.marketfolly.com/2009/04/creating-tiger-cub-hedge-fund-portfolio.html

Just thought I’d toss another idea into the ring, as my results have been spectacular thus far. Look forward to reading your blog.

Jay

So am I bullish on the economy at this point? Absolutely not, because I’ve got the same concerns as Eden and Troy. Instead, I’m concentrating on income rather than capital gains and keeping my eyes peeled for opportunities.

Buffet admitted he made some huge errors last year. Berkshire Hathaway has been downgraded from AAA to AA2. Even the Oracle of Omaha is not immune to a credit drop.

Might make you rethink your investments. I am betting on VGENX and have stopped investing in total stock market index fund.

Buffet does say to be greedy when other are afraid, but the man is privy to all sorts of information we are not. In any case, Berkshire Hathaway basically tracks the S&P lately, not a big deal.

Investment-wise are still in ETFs and inverse ETFs and using options to hedge. We also have a chunk of our investment in gold due to our government’s money printing activities. No one knows what will happen, but we try to cover our bases and hopefully squeeze out some profit.

The world doesn’t want that to happen, and there’s alot of talent and energy invested in the U.S. — at home and around the world. We’ll find solutions to these problems, though it will take regulation and restructuring. I think the markets will come out of this more stable, with less ability to make people enormous fortunes but with more long-term stability. As Paul Krugman wrote yesterday in the NYTimes, the system needs to become a lot more boring.

Marc