If the economy is going to hell what do I do with my savings?

[Sterling]

Do I trade my dollars for Euros? What do I do to keep my cash from becoming worthless in the event of a big plung?

[ayeshahaqqiqa]

1. gold and silver,

preferably in coins, are a good hedge in uncertain times.

[izzie]

9. Coins have no silver or gold in them

What about gold? The type you can hold not stocks. Used to be able to buy S. African at an oz. at a time. It would be pure. Rings and things are not pure. One troy oz. is about silver dollar size and you can put them anyplace. I understand gold is high now but usually have quote in paper daily. I used to know people who did this and i used to read quote because of gold stuff I bought for my business. It was sold at a daily price.

[Blue Wally]

18. Here is some information

http://www.onlygold.com/

This should cover the how and where to buy gold bars and coins.

[ayeshahaqqiqa]

27. Coins do have gold and silver in them

they also have dates like 1892 or 1799. Old coins are a good investment, because they have actual precious metals in them. Any dime or quarter or half dollar minted before 1965 has silver in it, and is worth more because of that.

[amazona]

2. an excellent question

I think it is too late to change your dollars for euros -- they have lost close to 50 percent of their value against the euro in recent years already.

Since I have a very low income and can't replace my savings, I too am interested in the answer to your question, so my post is mostly in the nature of keeping you "bumped" in hoping of attracting some informed comment.

One way to keep from being over-invested in cash is to pay off your home.

[Laelth]

3. Yes, but ...

if the real estate market crashes as well, you could lose all that equity you just put into your home. That would be bad.

I'm not a financial analyst, and I can't tell you what you should do, but, facing the same option, I am strongly considering not paying off the home mortgage, especially given that I have a nice, low fixed-rate loan.

-Laelth

[amazona]

8. well too late! :-)

There is a backstory to my paid-off home.

During the S&L crisis of the early 1990s, we had a terrible real estate crash in New Orleans. There were over 50,000 boarded-up homes in the GNO area. Most were sold "as is" but I was able to buy very cheaply into an area where they were making a concerted effort to save the neighborhood. No closing costs, free termite treatment, new roof, etc. My down payment was also very low but there was no pre-payment penalty. Then, during a short time of opportunity in the late 90s, I was actually able to earn some money for a change. So I decided to pay off my home.

Because I live in Louisiana, I pay no property tax on my modest home.

Therefore, after all the numbers are run, I am actually ahead of where I would be if I had rented. My equity may go up or it may go down, but I'm already to the point where I'm living "rent free."

Paying off one's home in states where property tax is high could be unwise, if circumstances change, and the tax becomes un-payable, causing one to lose one's home and one's equity. Each state, and perhaps even each county or parish, is different.

I don't want anyone to take investment advice from me. I have lost plenty in crummy investments, from T on down. All I can really say is that, for me, buying and paying off my home proved the best way to preserve my money, and that stocks and gold proved wonderful ways to lose money. Others who are more sophisticated undoubtedly have more inspiring stories.

[cally]

7. It is generally not a good idea to put too much cash into your

home. Think about it this way. You put 20 percent equity into your home and pay 5 to 10 percent interest. Housing values increase 5 to 10 percent on the total value of the home yet you have only invested 20 percent of the value. The interest on the loan is tax deductible but not for other investments. Also, home prices may fall and then you will lose money.

I have no idea what to do with savings. Some are advocating precious metals but I just don't know.

[OutsourceBush]

4. sent it to me for safe keeping

[shesemsmom]

5. I tried 10 days ago to put mine into

Halliburton, I told my investor they are making big bucks and there will be no investigation now. He just laughed I didn't think it was funny.

[Historic NY]

6. Look for another boost in interest rates by Dec 14th.

Eventually cd rates will rise enough to make it feasible to take the cash out of your mattress and put it in the bank. I've been looking at the euro/gold thing too but I think we are a bit late to get on the train. It is tempting. My take is that interest rates will probably climb back to the late 70's - 80's range to stem off inflation. That is bad for spenders but good for us savers. If you have a credit union near your compare their rates with regular banks on savings or cd's it tends to be higher. For now I just keep my money in short term 6-8 month accounts since the rates are trending upward. I'm not a financial guy and I like to know where my money is, since I've given up on trusting the market.

[Digit]

10. Donate it to DU (grin)

Yeah, I can be a suckup. :+

[Ugnmoose]

11. Go offshore

Best rates are in foreign instruments. Stay in high quality and you will pick up some nice gains if U.S. dollar continues to tank versus the risk.

[Sterling]

13. Interesting. Anything specific?

What kind of broker should I go to for that kind of thing?

[Squeech]

12. I'm not enthused about gold

This is the third time today I've said essentially the same thing.

The gold bugs' theory is that gold is a hedge against catastrophic inflation. The problem, however, is when you get to the point where your dollars have become worthless and you need to spend your gold-- so you dig up one of your Krugerrands out of the back yard and go out to spend it. How are you going to carry home $400 worth (in today's terms) of groceries, let alone eat them all before they spoil?

Plus, what kind of economy could we have that would make the dollar worthless, but still retain markets that would accept your Krugerrand? I think what would really happen would be a barter economy with occasional outbreaks of armed turf wars, and having a stash of gold would merely make you a more tempting target.

What I'm doing right now is investing in an international stock fund with my 401k "contribution." Which implies that I think the likeliest scenario is, the dollar will drop, but not catastrophically, and interest rates will rise, but not precipitously, and by 2008, the US economy will have been eclipsed by Europe, maybe China, and possibly Brazil. With an international fund, I hope to get both the superior performance of businesses outside our borders, and the extra added advantage of a more favorable exchange rate between their currencies and dollars.

[distantearlywarning]

26. Isn't owning gold illegal?

I could have sworn that I read or heard that somewhere.

Or maybe it was that the government had the right to confiscate your gold in times of crisis?

[UNIXcock]

14. Dirt, they ain't gonna make more dirt ...

... real estate is a proven hedge against even the worst of economic times

[BillZBubb]

17. Not really. There are a lot of variables.

Real estate goes through cycles like any other commodity. I put a lot of my money into real estate when polls showed Bush* might win in 2000. I knew the stock market party was over.

Now, I am seriously considering getting out of all real estate. We are in a bubble and it will burst.

[UNIXcock]

25. undoubtedly there is risk, however ...

... it's been apparent to me that with even minimal research and speculation, sound RE investments can be made in the right areas

.... Many deals can be made with only a decent credit score (no money down). The first house my wife & I bought years ago, was a "sweat equity" fixer-upper that took a goodly amount of our effort to get marketable. But within a short couple years, we turned it for a substantial profit allowing us to move into a new house that afforded us some time for things other than "house-maintainance"

... YMMV, good luck whatever path you choose!

[David Zephyr]

15. Pay Off Any and All Debts, If You Haven't Already.

After that, Sterling, I would have to admit that I'm much in the same place that you are as where to put money.

[greatauntoftriplets]

16. God_bush_n_cheney keeps saying.....

gold. I have some. He sincerely believes in it.

[DoNotRefill]

19. small arms and ammo.

if kept in decent condition, they last forever, and you can always sell them. If things get REALLY bad, you can use it to hunt for food or keep people from killing you, or for serious barter.

You've got to be careful about what you buy...."collectible" guns (unless they're "class 3") tend to be pretty easy to lose money on. Personally, I suggest semi-auto AK-47s. Ammo is cheap ($80 for 1,000 rounds) so you can get a lot.

[DemExpat]

20. Maybe investing in self-sufficiency

is the smartest thing we can do.

DemEx

[CHIMO]

21. For What It's Worth

What I have seen in the real estate market is that everyone needs a place to live/survive. When it comes to a downturn in the real estate market the lower priced homes hold more of their value than the upscale places. Thus as we need a place to live I would move to the min requirements that one need to survive.
What I have not seen addressed yet is the consequences of galloping inflation. When inflation soars it seems to lead to social unrest. How that would play out is not known but one could image the results from mobs.
Gold is always the haven for security. One doesn't require a wheelbarrow to transport it. Thus one can have some security without having to carry around a huge wheelbarrow.
As for the stock market, I think that the P/E are quite high at the moment.
I think that the biggest unknown is what happens when there is a high rate of inflation as that seems to upset the rules that everyone believes they know.

I am not in real estate and at present have no investments in the stock markets. This is my own opinion and observations.

[oblivious]

22. For me, the HK dollar looks like a good bet at this point.

I'm no expert, but I do read the news and when economists from major world banks started saying out loud early this year the US dollar was in for a dive, there was no question. I transfered what I could to Can $, thankfully.

The rest of my assets are in HK$ and it's very frustrating since we're tied to the US$. Our economy is going great, no debt, huge surplus. Our dollar should be up there with the Euro. It's only a matter of time before we depeg, and the HK$ should shoot up. I notice China is finally making noises about letting the yuan go up a bit by year end. I'm guessing the the HK$ will be depegged then, but the HK Monetary Authority is very tight-lipped about this topic, so I have no evidence other than a hunch that this will happen. If it does happen (again just an opinion), the HK dollar should take quite a jump.

[UdoKier]

23. You have savings? Wow.

Most Americans don't. I sure as hell don't. I'd be happy to just be out of hock.

[bvar22]

24. If you buy bullion or coins,

be prepared to pay a "premium," as much as $30.00/oz above the price quote of the day PLUS Sales Tax.

Also, some states require ID and registration, but I've been told that you can refuse and still buy in most states. I attempted to refuse to register the purchase of a Krugerrand in Minnesota, and the dealer refused the sale and said he was supposed to report people who refused to register. I hadn't given my name or ID to him, so I left in a hurry.

The best state to stealth buy coins or bullion is Idaho. Several of the dealers there advertise "absolute privacy". I talked to one by phone, and he told me that he would honor my right to buy anything I wanted without the govmint getting involved.

Ultimately, I didn't buy because the premium and tax on the small amount of coins I could afford made it unattractive as a hedge against Armageddon. The "Premium" is sliding scale, and drops steeply for heavyweight purchases (beyond my means).

I investigated this about 3 years ago, and the price of gold was at 383.00/oz, with the "premium" 1oz coins were between $410 and $425. 7% sales tax upped the price to about $450.00
The price of gold today is 449.xx/oz.

I don't believe that I would be able to charge the Dealer a "premium" if I decide to resell my coins back to him. In fact, I wouldn't be surprised if he charges ANOTHER premium to buy it back, but I don't know that for sure.

There are Gold Swapmeets in almost every state where the "premiums" would be either non-existant, or negotiable. They fly below the radar as coin shows, or Coin Collector Club Meetings. I never investigated this avenue, but my understanding was that you have to know someone to "get in".