Four Year High!

Buying theory eh rgathright, I can buy that, lol....

Somehow, I have the impression that the regulators do not exist to protect the little guys but to mediate differences between the BIG guys. No, they do not do a lot to help us and that's for sure. The Bernie Madoff debacle was a prime example of how incompetent the SEC is. Even after receiving solid evidence of Madoff's ponzi scheme, it still took them years to figure out what to do with it. Madoff himself was pretty dumb too, though, so maybe they deserved each other.

Still, it is possible to make decent money via investing in the stock market. Buying good mutual funds from a trustworthy and low cost fund company is probably one of the better methods. 4 of the 6 Vanguard funds I own earned better than 8% last year. While not great, that beat ALL of the fixed income type investments by up to several times over. The oil and gas royalty trusts are another place to make good money, although with more risk.

As to the OP's statement from the Yahoo news article... yes, figured in US dollars, the US stock market has had quite a surge over the past 3 years. This is a lot less impressive, however, when figured in ounces of gold and not in declining fiat currency terms. Oil, for example, is not over $100 a barrel because the US dollar is strong. It is high in price because it takes more of the now less-valuable dollars to buy a barrel of oil. It's the same with stocks. A profitable company is a real asset, so it takes more of the now less-valuable dollars to buy its shares too. Combine that with about $5T pumped into the US economy by the Fed and we have more dollars bidding the prices of fixed assets even higher.

Although there are many ways to calculate the true rate of inflation, one of the better ones, IMHO, is to calculate a ratio of this year's money supply divided by last year's money supply and convert that into a percentage increase or decrease. For example: if the US money supply was $2.5T last year and it is $2.8T this year, we have 2.8 / 2.5 = 1.12 which implies (1.12 - 1) x 100 or an inflation rate of 12%. While this is a simple estimate of inflation, it is also a reasonably accurate one as long as national production is similar from year to year. If it isn't, then adjustments can be made to rationalize the differences caused by production changes. With fewer goods produced and more money pursuing those goods, there will be a tendency for higher inflation numbers. Although this would be rare, this also works for deflation when the money supply is reduced from one year to the next.

@Ed_b You make a solid case for diversifying, yet even the most stable investments can lose their value quickly.




Go check UNG then:
http://finance.yahoo.com/echarts?s=...1:symbol=ung range=1y indicator=volume charttype=line crosshair=on ohlcvalues=0 logscale=on source=undefined

I agree with Ed_B's comments regarding an oil and gas play. If I were ready to sell a coin or two with an eye toward portfolio diversification (and a little income generation) I'd look at something like Chesapeake Midstream Partners, L.P. (NYSE:CHKM). This is NOT a recommendation, just an example.

What is the alternative? If you simply hold onto cash you are guaranteed to lose money due to inflation.

When stocks shot up in Mar 2009, many investors stayed on the sidelines and missed the rally because the experts were calling it a dead cat bounce. Unless a dead cat can bounce a lot farther than I would have thought possible, they were wrong. But I still think there is an artificial feel to this recent "bull" market and I would hesitate to jump in, especially now when things are looking more overbought (just an opinion) than ever. A correction's coming, I have little doubt, but when and how much of one? That's the question.

Thanks, Ed. Since I've been here, I've developed quite a high opinion of you, as well. But in my case, if one only gains wisdom by making egregious errors in judgment, is that truly wisdom? I lost thousands when the Dot.com bubble bust. After that debacle, I learned to place my trust in physical silver over faceless board members with opaque mission statements.

Difference is, you can tell when the tides will change.