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Originally posted by: sulobo9142
What is a good investment . Short term and low risk.
Hypothetically I have $20,000.
"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."
__Will Rogers
Hmm, . . . "good, "short term", . . . and "low risk", ehh ?
Nope, . . . DonDiego cannot come up with one of those. There was a time when folks'd just stick money in what was called a "Savings Account" at the local bank, the bank where they knew the tellers and the banker himself, pr'bly, . . . and that account earned 5%, . . . and it was safe. This was back when even DonDiego was young and people would get a mortgage and stay in the same house for thirty years and pay it off and have a little celebration where they would burn the mortgage, and even the banker would drink to it. Times were simpler, . . . and pretty much better too.
But nowadays everybody's just too darn smart, . . . way too clever, . . . so clever that the Big Bankers who haven't a clue whose mortgages the bank processed , . . . or to whom they were sold, . . . or to whom they were repackaged and sold and re-sold, . . . or who's gonna eat the loss when the balance exceeds the value of the property and the owner, whoever it is, just mails in the keys. Oh, and he doesn't offer 5% Savings Accounts anymore either.
But maybe a bank's not such a good idea anyway. There were 140 bank failures in 2009. But in 2010 that improved to 157, Oh wait! That's not really an improvement at all, is it? 2011 bank failures will pr'bly be around the same.
So here's why there's no good, short term, low risk investment.
To save the world from a colossal economic collapse two years ago the Government bailed out banks-too-big-to-fail. But they did it with borrowed money, . . . lots of borrowed money. But that's OK 'cause the Government set the interest rate real low, not only to save on payments but also because they wanted low interest rates so's the banks could lend lots of money so's businesses could borrow cheaply and keep the Country out of a depression. And investors bought the Government bonds, even at the low interest, because they were scared and the US was the safest place ever. Until they didn't.
And so the Government started selling the bonds to the Fed which would just "create-out-of-thin-air" a trillion-dollars or maybe a trillion-and-a-half-dollars or maybe even a little more and give it to the Government and put the bonds somewhere safe.
Now, . . . when money is just created like this and "distributed" that means there's more money chasing fewer goods and that means prices will go up. And they are, . . . like gasoline and food, . . . worldwide.
And that's where things are.
Therefore, DonDiego opines one should invest in things going up in price, necessary things - like oil companies, coal mines, fertilizer companies, food producers, and breweries.
But where are things gonna be?
Well, there is a way to get somebody other than the Fed to buy one's bonds, . . . just in case one thinks maybe runaway inflation is not a good thing. And one should think runaway inflation is not a good thing, . . . because when the price of food gets too high citizens riot; citizens rioted over high food prices in Tunisia and threw the President out. And high prices on food and fuel were largely to blame for Mr. Mubarek leaving office in Egypt. (DonDiego hopes no one gets too hungry in the good old USA, 'cause people get hurt in riots. DonDiego does not like getting hurt.) So one need only raise interest rates to get real people to buy one's bonds.
Uh-Oh! The US is still just coming out of a recession; the economy is not really strong. And if one raises interest rates to stifle inflation, then one raises the cost of borrowing on business and business cannot expand, and the recession persists, . . . or worse the economy goes into depression.
So to reign in inflation one must raise interest rates. To grow the economy out of the recession one must keep interest rates low. Not good.
And that's why there's no "good, short term, low risk investment". One has to place a bet on one of two bad outcomes.
DonDiego is betting on low-interest and high-inflation, because that's the easy thing for politicians to do. Until it isn't, when the food riots and gasoline riots start. And maybe an inflationary depression follows. The hard thing'd be to raise interest-rates and cause a deflationary depression.
DonDiego hopes he can sell his investments right before things collapse. And hunker down. And come out the other side.
A hypothetical $20,000 might best be spent on a plot of fertile ground nearby and some seeds and a dependable source of water. Or, if one chooses to participate in the riots, maybe some reliable weapons and ammunition. Or maybe split the investment down the middle.
DonDiego says: "Good Luck !"
