Given that there are some investment questions and answer below, the usual disclaimers apply: I’m not a professional adviser, so this is not professional advice. You get what you pay for which in this case is nothing.
Keep in mind that I’m a macro-investor on the sector level, that I believe in market timing, and that I believe that individual stocks are mostly efficiently priced (and thus that individual stock picking is a futile effort) but that the market itself is not. I may simply be demonstrating my strengths and weaknesses in my preferences. And you may simply have other preferences.
Brad) Specifically, how would you invest $80,000 cash in order to maximize your ERE?
As the housing sector is currently deflating, the money is likely best spent on residential real estate. I would consider commercial real estate (office buildings, etc) somewhat speculative, but if you can buy 100% cash, the risk of real estate is small. $80,000 should buy a house. If done in a state with low taxes, this is the best bang for the buck by far. In terms of “paper” investments, gold could and should go higher, but it could also go lower. Holding cash itself is no good either for the same reasons. Stocks and bonds are artificially inflated. If home buying is not in the cards, a permanent portfolio with frequent rebalancing is the best hedge.
Larry) What are your top five stock holdings and why?
The current market environment is pretty bad for stocks. In the US we currently find ourselves in a Kondratieff winter (since 2001) with a central bank that’s trying to fix problems Japan style by inflating the money supply. The banks aren’t buying it (financial institutions are still some of the riskiest stocks to hold) and so this has resulted in a liquidity crisis and a stock market bubble while the rest of the economy continues to deflate. In 5-10 years, things will turn around as they have already begun to do so in commodity exporting countries and so companies that are related to commodities, namely energy, mining, materials, and shipping will do well. I have a small speculative position in SB, a dry shipper. The housing boom created a lot of overcapacity in that sector and so now you can buy ships on the cheap. As stocks are currently heavily overvalued, I am conservatively positioned in stocks that won’t decline as much once this bear market rally goes down again. If I had to buy more stocks (at gun point), I’d buy MO (tobacco), WIN (rural telecom), EXC (Midwest nuclear energy), SNH (senior housing). These have, in my mind either good moat, high recession-resistant cash flow, and/or are not sensitive to credit risks which are still critical in this environment. I would not be adding to stocks at current evaluations. It is really a time to be selling stocks.
chris) How do you tell its time to buy a stock? (Please don’t say “when you have some money”)
The Shiller index of the S&P500 PE ratio is useful for this. Note that the P/E is not above 20 very often. Therefore it makes sense that if one buys a stock when the market is over 20, then the random chance of hitting such a period again will be small. Compare to the number of periods above 15. There are many more of those. Thus odds are better. At market P/E ratios under 10, it is almost impossible that a stock won’t find itself higher at any point in the future. On a shorter term, if you have access to S&P reports, you can also see that the P/E range (or whatever it trades on, yield, book value or EBITDA to enterprise value) various quite a bit over a year and that this range is more of less consistent. You could set a limit buy order in the lower 1/3 of that range and simply wait for it to trigger. It may take a several months.
Merijn Fagard) How to attain ERE in Europe, where the difference between before tax and after tax income is very high?
Europe is in many ways easier to handle than the US because the health care system is less of a disaster and only costs half as much to run per person. Furthermore, nobody needs to worry about haggling with insurance companies. In the US paying premiums is one of the biggest worries and people will in many case need to relocate to another state. The European infrastructure is also better which means that not only is not driving a car optional, it is also quite normal. So while one is not able to earn as much pre-retirement, one does not need to spend as much post-retirement either. Here’s a forum thread for ERE in the UK.
Matt) What will mankind’s biggest problems be in year 3000? 13000?
Widespread desertification. / Being extinct.
I have many more questions to answer. If you want to get one in, ask it in the comments of the announcement, not here.