Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

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rbj5000
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Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by rbj5000 » Thu Dec 28, 2017 9:10 am

Been researching the best methods to navigate and profit from a potential market crash. I've found many varied opinions and contradictory information. It seems buying gold and silver are probably the safest options for wealth preservation, but I would like to buy discounted assets during the downturn which requires being liquid and nimble.

A few things Im unsure about:

1. There is a debate as to whether deflation or inflation will occur. I believe there will be deflation then inflation, but how long will that take? I assume it will only be a matter of months from a massive crash in value, credit shortage and therefore deflation, followed by a flood of cash from the central banks and inflation, which leaves a relatively small window of time to use the cash to buy discounted assets. Is this true, and which is the best currency to hold?

2. James Rickards believes there will be a bank lockdown, and people wont have access to cash. He says this could extend for months. Would there be any offshore banks that would not close access to account holders, and if so, which banks? He is also very negative on Bitcoin, but if banks close down, wont people start looking for alternative currencies like Bitcoin or other cryptocurrencies out of desperation? The public already loves Bitcoin and hates bankers/fiat currency, so wouldn't it be the perfect time to own Bitcoin?

3. How will real estate, specifically land, react during a crash or correction? Does it depend on whether its land or housing? Which land would do the best and in which country? Some say there is a massive real estate bubble and it will go down dramatically, while others suggest its a hard asset providing insulation from a crash. So would it be wise to hold onto cash and wait to buy during a crash, or buy beforehand?
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by ochotona » Thu Dec 28, 2017 9:50 am

How can bit-thing be a currency if the value is so volatile relative to every currency and commodity on the planet? I have not seen a huge uptick in places that will accept it as payment. Remember the Emu farm scam? So many advantages to Emu meat... except no one wanted to serve it or eat it. Ooops.
Last edited by ochotona on Thu Dec 28, 2017 7:13 pm, edited 1 time in total.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Cortopassi » Thu Dec 28, 2017 9:53 am

**These are comments from a jaded 50 year old investor. No disrespect intended** :)

You are asking questions that if any of us had the answers to, we wouldn't be in the PP. Almost none of us are in the business of trying to predict where assets are going to be in the future. It is a frustrating, more often wrong than right effort. If you are spread across a PP and a crash happens,
by default when you rebalance, you will be buying the discounted asset, without needing to predict ahead of time.


--I used to listen to Rickards in the past, but like a lot of analysts, you get one thing right, people start listening to you, and then you get a lot wrong.

--You had a ton of people predicting QE would bring massive inflation and the death of the dollar, yet here we are.

--I won't try to answer your RE/land question.

--People have been predicting a crash for years, yet here we are 8 years later at Dow near 25,000. Find me the people who predicted that correctly! But then they'll be wrong when I start following them.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Kriegsspiel » Thu Dec 28, 2017 12:07 pm

rbj5000 wrote:Been researching the best methods to navigate and profit from a potential market crash. I've found many varied opinions and contradictory information. It seems buying gold and silver are probably the safest options for wealth preservation, but I would like to buy discounted assets during the downturn which requires being liquid and nimble.

A few things Im unsure about:

1. There is a debate as to whether deflation or inflation will occur. I believe there will be deflation then inflation, but how long will that take? I assume it will only be a matter of months from a massive crash in value, credit shortage and therefore deflation, followed by a flood of cash from the central banks and inflation, which leaves a relatively small window of time to use the cash to buy discounted assets. Is this true, and which is the best currency to hold?
Seems unpredictable, but I don't see why the best currency to hold in any event would not be US dollars.
2. James Rickards believes there will be a bank lockdown, and people wont have access to cash. He says this could extend for months. Would there be any offshore banks that would not close access to account holders, and if so, which banks? He is also very negative on Bitcoin, but if banks close down, wont people start looking for alternative currencies like Bitcoin or other cryptocurrencies out of desperation? The public already loves Bitcoin and hates bankers/fiat currency, so wouldn't it be the perfect time to own Bitcoin?
Why would there be a bank lockdown?

I don't really think "the public" loves bitcoin. It's something magical that they don't understand, but it seems like something that can make them rich really quickly. I am more apt to look at financial technologies through the lens Nicholas Taleb uses. If it's been valuable for thousands of years (gold), it's likely to be valuable for thousands more. If it's been valuable for a couple years (cryptocurrencies), it's likely to be valuable for a couple more years. This is also a good way to not get caught up in the early-adopter trap.
3. How will real estate, specifically land, react during a crash or correction? Does it depend on whether its land or housing? Which land would do the best and in which country? Some say there is a massive real estate bubble and it will go down dramatically, while others suggest its a hard asset providing insulation from a crash. So would it be wise to hold onto cash and wait to buy during a crash, or buy beforehand?
If, in your scenario, banks are closed for months, I don't see anyone paying rent.

In a financial crash, wealth is gone. I don't see why real estate goes up. It goes without saying that holding cash beforehand > buying during a bubble.
ochotona wrote:Rental property in a collapse? What if your renters stop paying and they squat and trash your property? You go there and they beat you and put a Glock in your face. What then? That goes for rental housing or farmland.
A financial collapse doesn't have to mean a collapse of law and order, of course. You won't make any friends, but you could still forcibly evict people.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by boglerdude » Fri Dec 29, 2017 4:57 am

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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by eufo » Fri Dec 29, 2017 6:43 am

boglerdude wrote:Looks like I recruited somebody :)

https://www.reddit.com/r/investing/comm ... n/druznyu/
Lol! It does.

To OP,

There are always going to be lots of variables to consider when trying to guess the future. It's not a pointless exercise, but it's also not a precise science. There are tons of analysts that will tell you what they think we're headed for, and some, invariably, will be right because, as a whole, they cover the spectrum.

I like James Rickards, but he is a doom and gloom kinda guy. He may eventually be right, but even he will admit that the hardest part to know is "when". There are tons of snowflakes that build together that eventually become an avalanche, but we don't know which snowflake it will be.

To be fully prepared for a market crash means to be fully unprepared for market prosperity. If you've been ready for the crash all year, you've missed out on some incredible gains. The idea behind the Permanent Portfolio and other such asset allocation portfolios is to be hedged and ready for nearly whatever the future wants to throw at you.

I, personally, don't follow the Permanent Portfolio, but a modified version of the Golden Butterfly that you can find on a great website built by a guy named Tyler on this forum. It changed my investment life! (Link Below)

https://portfoliocharts.com/portfolio/golden-butterfly/
Don't agree with me too strongly or I'm going to change my mind
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by barrett » Fri Dec 29, 2017 7:03 am

rbj5000 wrote:It seems buying gold and silver are probably the safest options for wealth preservation, but I would like to buy discounted assets during the downturn which requires being liquid and nimble.
The PP covers the gold issue.

Ditto for being able to buy discounted assets if you really do hold 25% in cash.

Holding some physical cash is probably not a bad idea.

Banks are not going to close down for an extended period.

Rickards, as far as I can tell, has no track record to back up his claims of looming disaster that he always sees coming. As far as I know he wasn't recommending that people buy long-duration US government debt in late 2008, and yet that turned out to be the asset to be in at that moment. He wrote Currency Wars in 2011 and totally missed that the best asset to own at that point was stocks.

Physical gold is a good idea to hold as a hedge but Rickards usually suggests a 10% allocation. Most on here would consider that on the low side. His recommendations to buy land and works of art are beyond the means of most individual investors.

The bottom line is that Rickards makes a living spewing doomsday scenarios.

My market crash strategy is the Permanent Portfolio because it is an allocation that's super easy to hold and can keep generating real returns if and when the various crashes don't materialize.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Kbg » Fri Dec 29, 2017 10:17 am

If you are convinced the market it going to crash, buy long dated puts. If you want to make money on the market crash buy more puts than required to cover your portfolio amount. The great thing about puts is you know in advance exactly how much it’s going to cost you if you are wrong. If you are right, you know exactly how much you will gain depending on when you sell your puts. All the rest of the stuff mentioned in this thread is pure guess work.

If you are a doom and gloom apocalypse kinda guy, forget all this stuff, buy some land that you can grow food on, learn how to be a farmer, learn how to store food the old school way, buy a year’s supply of fuel and a bunch of guns and ammo to protect it all.

If by nature you are a fearful kinda guy and want something to be legitimately fearful of financially, worry about inflation. The odds of it happening are nearly 100% in a modern economy and although the rate of inflation may be low it grinds like water on rock and will destroy your wealth over as little as a decade. (Tip: and the asset that protects you best against it is stock...gold’s relationship is tenuous and inconsistent according to most serious academic studies (as opposed to studies by people who make money selling gold))

So there you have it...really good and accurate advice (really).
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Mr Vacuum » Fri Dec 29, 2017 12:43 pm

Sign me up for when Kbg's book of eclectic investing strategies comes out. Unlike many resources advising a single way, Kbg has something for everyone.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Kbg » Fri Dec 29, 2017 1:41 pm

I think I must be getting too old...these types of questions I just don't understand. (Please tell me the future and do all the analysis for me, no problem right? If someone actually serious about this with their real hard earned money on the line, I'd think they would want to do their own research.)

I could have said: Please sign up for my 2018 Get Rich Now Report...only $9999.99. Hurry, limited quantities while they last.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Mr Vacuum » Fri Dec 29, 2017 2:19 pm

Kbg wrote:I think I must be getting too old...these types of questions I just don't understand. (Please tell me the future and do all the analysis for me, no problem right? If someone actually serious about this with their real hard earned money on the line, I'd think they would want to do their own research.)

I could have said: Please sign up for my 2018 Get Rich Now Report...only $9999.99. Hurry, limited quantities while they last.
That I would not buy, but the $50 volume on building the research/analysis skills through various case studies I would. I've learned a lot from your posts on different strategies and time horizons. It just struck me that you have commented on a number of them and have a unique voice and perspective that lends itself to critiquing the applicability of strategies for different situations, which would be quite different from other books dedicated to a single strategy.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by Kbg » Fri Dec 29, 2017 8:44 pm

Thanks Shawn, kind of you to say so.

I'd like to claim some brilliance, but really I've learned most of what I know via studying many different financial methods/perspectives/opinions and some of the best lessons I learned via the 2x4 on the forehead method (the aftermath of stupidity is usually the most effective teacher).

I do have one piece of advice for anyone who will ask...do your best to find whatever works for you personally and stick with that. The rest, while interesting, often is not helpful because for whatever reasons you can't follow it methodically. An OK system successfully followed is likely to outperform (for you) a great system you can't stick to.
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by mathjak107 » Thu Apr 05, 2018 5:42 am

any system you stick to can work very well . the keyword being stick to .

the problem i see over and over and data proves is that those who go more conservative in hopes of staying put don't .

they just have lower trigger points of fear as any loss to their brains triggers poor investor behavior or they hate getting left behind in a run up . .

you can see this right in the investor returns in morningstar. rarely does the investor even achieve the fund return .

investors are very poor at matching money to time frames as well .

taking long term money and mitigating short term temporary dips with things like bonds while hurting long term returns permanently has little financial logic .

it reaches a point where even falling in these dips leaves you at higher balances than you would have trying to mitigate these dips .

as it has been said by peter lynch. more money is lost or given up in preparation for the next downturn than is lost in any downturn .

it is almost comical to see those with very conservative portfolio's high five each other because they did not get caught in the down turn . but they fail to consider they would have simply have fallen from a much higher cushion and still had a bigger balance being more aggressive .


it is like this year my fidelity insight conservative income model is down 1.30% ytd (25%) equities ... my growth and income model 60/40 is up .25% and the more aggressive growth model 100% equity is up 1.66% .

the more aggressive the model the more it fell but fell from higher gain levels .

looking at the last decade ,that growth model can fall 30-40 % and still be way a head of the conservative income model in balance .

so it really is important to consider the reasons we invest the way we do because in the end it is usually our investing that takes the bits and pieces we manage to save and compounds it in to a meaningful sum .

the investing should have financial logic and reasoning to it other than mitigating short term dips if short term money is not important .
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by mathjak107 » Thu Apr 05, 2018 10:36 pm

except i run a 50/50 mix in retirement . we spin off all our short term money from it so my high risk days are long gone
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by mathjak107 » Fri Apr 06, 2018 4:02 am

Desert wrote:mathjak, I love your high-risk passion. Seriously.
risk and volatility are two very different things .
the natural market cycles for a long term investor are volatile and owning diversified funds is volatile but has little risk .

risk comes when you try to pick individual stocks and are held captive to the whims of a particular company , or betting on the next google. risk comes from mis-matching investments and time frames .

there is very little risk in diversified funds over the long term . it just is volatile . volatility means little to long term investors .

like i said there is no data that shows that investors with lower pucker factors tend to stay any better in balanced funds . their bad investor behavior just seems to get triggered at lower levels .

the important thing is just find an allocation that meets your goals and run with it turning off the noise .

i never made a big salary so growing my assets via investing was a priority . volatility and not risk was just fine . now in retirement 40-60% equities meets my goals .
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by boglerdude » Fri Apr 06, 2018 7:08 am

And when no one buys individual stocks anymore?
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Re: Market crash strategy: Cash, Bitcoin, land, deflation vs inflation

Post by mathjak107 » Fri Apr 06, 2018 8:06 am

with individual stocks you add a layer of risk to just market volatility to worry about .

now you have to pick the right stock ,in the right sector at the right time in just the right market sentiment . even if you got that right you still have to worry about what their competitors have on the drawing board .

so yeah lots of people buy individual stocks , but unless you can buy enough of them to diversify away individual company risk you have added risk to your investing and not just dealing with volatility which is pretty much all we have had to deal with over typical accumulation or retirement times frames .

rebalancing standard balanced portfolios are just fine for creating spending cash . retirees have been generating income off balanced portfolio's forever . stocks will never be what gets sold in severe down markets , bonds will be what is sold. in fact you may find you are not only creating spending cash but having to buy stocks in a bad drop not selling them .
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