Date: Tue, 22 Jun 2004 16:04:12 CST
Subject: Re: Financial planning advice needed
From: "John A. Weeks III" 
Newsgroups: misc.invest.financial-plan
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In article , T R
 wrote:

> I guess it is only responsible when giving this advice as a certainty to
> mention the potential downside. Every dollar you put away in your 20's could
> be next to worthless in your 50's, etc. So many things are moving in a
> unique way right now at a macro level that past is not prologue. What
> happens if the dollar crashes for good? What happens if inflation
> skyrockets?

If the dollar crashes for good, we are all going to have a whole lot
more problems to worry about than optimizing our retirement portfolio.
But in any case, you have to ask yourself who is going to be better
off...the person who is broke and living hand to mouth (and paycheck
to paycheck with thousands in credit card debt), or the person who
has established a low expense lifestyle and that is debt free and
has many thousands in investments?  I think most people would want
to be in the 2nd scenario.

> What about the impact of oil supply. Or terrorism?

Again, if those impact anybody, they are going to impact most everyone.
The person who is prepared for this by having their financial house
in order and has substantial retirement savings is going to be in
a much better position at age 60 if they find themselves jobless with
no hope of getting a replacement job.

> Sure you could hedge by putting your money into international funds or gold
> or whatever, but then again, everything might turn out well, and you hedge
> turns into a hog. There is no certainty about what $1 of saving in your 20's
> will turn into.

There is no certainty that anyone is going to live past their 20's, but
that doesn't mean that you shouldn't save for the future.  The stock
market has had a historical run of about 11% in annual returns, and that
was with two global wars, global depression, oil crunch, nuclear war,
the rise and fall of communism, and nearly all of the major industries
of the late 1800's now being obsolete and long gone.  Given all of that,
what makes you think that anything that happens in the future is going
to make the sum total value of the US ecomony suddenly become worthless?
Those are things that mentally ill paranoids think of, not well informed
and well adjusted rational people.

And suggesting gold as an investment?  Gold has no real value.  All it
is is a chunk of metal.  You cannot even eat it like wheat or soybeans.
While gold has had a few short periods of up trends, it has been a 
historical loser of value for everyone who invests in it.  Why get
into something where you know that you have a 90% or greater chance
of losing money?

> Don't forget that (often) one of the most certain investments you can make
> in your 20's and 30's is in your career and skill set.  In my situation I
> think a pretty good investment is paying somebody $20/hr of my time to mow
> the lawn, so that I can put that much extra time into my career.

That might not be as sure of a bet as it was a few decades ago.  When I
went to college, it cost about $1000 per year for tuition.  Nowdays,
the local state college is $16K per year.  The education that I got I
get to keep for a lifetime, but the specific job skills only lasted
about a decade before they were obsolete.  With techonolgy changing
so fast and skilled positions going overseas, the typical US worker
is going to have to retrain every 15 or so years.  As a result, it
doesn't pay to spend more on education than what you can pay back in
15 years.  That is why I think it is so silly for people to come out
of college with $80,000 and $120,000 of loans to train for a job
that makes only $40K or $60K tops per year--they will never get this
paid back in a lifetime, let alone before they have to go back to
school for the next career in 12 to 20 years.  My point is that you
have to be a lot more selective about how you spend your educational
time and dollars, and avoid running up great sums of debt in the
process.

-john-

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John A. Weeks III            952-432-2708         john@johnweeks.com
Newave Communications                       http://www.johnweeks.com
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