Monday, January 31, 2011

Investment Advice

Found this question sent in to the writer of a financial site that I read weekly:

Hello Mish,

I don't know if you give advice, but I heard you on Coast-To-Coast and you seem to know what you are talking about. I am 65 years old, get $938 from Social Security, and this is all I live on every month.

I have a CD that is about $16,000 now and is providing $75 a month. In about a year that will stop because the interest has gone down so much. If you were me, what would you invest in?

I lost $2,000 in the stock market a few years ago and the way it is now it is rather scary. I don't know what else to even consider and when I ask my banker he seems to be at a loss too.

Any help you could offer would be a blessing. Thank you for your consideration and kindness.

Stephanie - Somewhere, USA

Most retired Americans find themselves at this current financial level, faced with the exact same question. 

This is the damage that Bernanke does to the economy by keeping interest rates at 0%.  It crushes savers who get no return on their investment.

It forces them out on the "risk" curve, making them put their money into riskier assets to get the return they need to live on.  This creates inefficiencies in the market, and it is why we live in a world of rolling bubbles, an extreme boom then bust environment.

Where will the flood of cash move next that cannot get a return in a savings account?  Where will the next bubble form?

I believe it will be commodities, and precious metals will be the stars of the group.

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