• PeteyBrian

    In 2007-2008, I warned an ultra high net worth investor who had their entire liquid net worth in money markets of only one US bank to diversify to many banks/brokerages (keeping in mind FDIC limits) and/or into many different types of bonds (Certificates of Deposits/US treasuries/Municipals/Corporates) for their safer money. She didn’t heed my advice.

    Years later she confronted me – telling me that I was wrong when I said her bank could default on her large bank holdings. I responded that the bank she had her money in DID fail, but that the US Government BAILED that bank out. If they didn’t bail out those troubled banks/brokerages, she could have had lost most everything! She didn’t believe me, of course, and thanks to the USA – she didn’t have to experience this loss.

    In 2008 and 2009 most large U.S. Financial institutions did fail. Only a $2 trillion bailout from the US government, and changes to the accounting rules – allowed the banks and brokerages to remain solvent as many banks/brokerages were levered as much as 30 times cash on hand and with the US housing market asset prices also in freefall. Leverage is great when assets prices rise, but when asset prices fall – watch out!

    I was shorting US financial indexes around that time – was a bit early so I lost some value initially, then doubled my money towards the bottom of the financial crisis – then I got greedy and maintained my shorts when I should have just closed out my profits – later giving back much of my gains when word of the financial bailout occurred and the banks exploded to the upside as insiders and people in the know prospered. Guys like Warren Buffet with his big bet on Goldman Sachs – looks smart from the outset – then you realize that he’s connected with President Obama and was in on the meetings on how to fix the crisis which included bailout discussions… Then you realize that the rich and well-connected in the know investors – benefit from their acquired “knowledge.” Lol!

    • Harald Baldr

      “then you realize that he’s connected with President Obama and was in on the meetings on how to fix the crisis which included bailout discussions”

      No doubt about that. It’s the main reason I like his company Brk-B. He always vocally support big government and the establishment’s candidates at elections. A week ago he came out in support for Hillary Clinton. Naturally they shower him with favors and goodwill in return. It’s the same story with the Keystone XL pipeline which would hurt his railway freight business. Naturally he’s the main benefactor behind the derailing of said project and the reason it never gets the go ahead.

      You want your money riding on said winning team even if it runs against your political persuasion (which it does in my case).

      • PeteyBrian

        Agreed! I’ve never owned BRKB so I’ve missed some great returns over the years.

      • PeteyBrian

        A couple of value add points for consideration:

        I’d need to research their succession plans with Warren Buffet and Charlie Munger being older than dirt. Lol. Or see if I can look into my crystal ball and determine what manager will be the next Berkshire Hathaway.

        Also – the fund is so big now after all the years of success, that perhaps it will perform more in line with the markets especially since it’s harder to find deep value in today’s large cap markets big enough to make a difference. Alternatives might be a cheap S&P 500 index Exchange Traded Fund from say Barclays bank or a cheap mutual fund index fund from say Vanguard.

        • Harald Baldr

          Their whole corporate culture is solid and whoever comes after will be a cut of the same cloth. Look at Apple, they’ve surged on after Tim Cook took over. Don’t see why Berkshire can’t do the same. Only question mark is of course if he will be able to buddy up with the power structure the way Buffet has. That may be impossible.

  • disqus_q14bh9K8Yv

    Let’s ponder the suggestion that the markets would crash would investing in Index Funds long term still be viable? Specially Index’s in the US?

    • Harald Baldr

      Yes. There’s never a better time to get in than during a crash. Of course timing the bottom and predicting the length of a downturn is impossible. Historically the US market goes down swiftly but rise slowly over a longer period of time.

      One popular strategy many use is to Dollar cost average meaning they buy in at pre-set intervals. Let’s say every 3 or 6 months as markets tank.

      • disqus_q14bh9K8Yv

        How about the now moment? Or is it wiser to wait later in to 2016?

        Thank you for recommending me the little book of common sense Harald!

        • Harald Baldr

          I would wait for a more favorable entry point sometime next year were I you. It will likely be a volatile year with some big swings and hopefully some wild panic phases. There’s no meaningful correction going on as of yet. Take the time to continue learning and never rush a decision to buy. Wait until you believe you see a good buying opportunity that rhymes well with your investment horizon.

          You certainly started at the right place by reading The Little Book of Common Sense Investing 😉

Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.