ASU2003

And you know that the stock market is going to drop 50%+. What could an American do to protect themselves? Even if they put all of their money into a stable investment, their salary (if they have one), homes, cash they have, & price they pay for goods would all work against them. I understand that controlled inflation is good for people who have some money, deflation is good for the poor.

I don't think that this will happen, but I'm glad that I wasn't invested in THLD last week.

And with the tech bubble, Japan in the 90s, the 1989 & 91 decline in the market, Enron/Worldcom, and a bunch of other events since the great depression have occurred. There are improvements in the control of the markets that weren't inplace before however.

What indicators are there that something bad is about to happen? Could the move to gold and metals be seen as a move to protect themselves?

Could something like the great depression happen if China decides to collect it's debt? If oil runs out and goes to $500-$1000/barrel? If social security goes bankrupt and leaves millions of old people without income? If the value of the dollar goes down 500% somehow? If unemployment goes up to 25%?

The only thing I can think of is to buy your house outright, have your car paid for, and get lucky and invest in the right foreign country that won't be affected too much by a collapse in the US.

flstf

If I understand what happened in 29 correctly, the best thing to do would be to sell everything before the crash and then buy it back and more for pennies on the dollar from desperate people. Cash was king.

Like Jimmy Stewart said in "It's a Wonderful Life", "Potter isn't selling, he's buying".

NoSoup

I suppose if you knew the market was going to crash, you could buy put options, or short the stock. In essence, you're betting that the value of the stock goes down...

__________________
I have an aura of reliability and good judgement.

Just in case you were wondering...

ASU2003

Even if I time the market perfectly, I won't be able to make that much money. I only have a little over $10,000 in the market right now. If gas costs $10/gallon, food costs 3x as much, and everything else, a little more money in my investment account probably won't make too much of a difference.

Now, if I had $500,000, then timing the market would be a smart thing and might mean the difference between a good lifestyle and standing in breadlines.

Buying stocks at the bottom is good if you can afford it, but usually the rich are the only ones who can, and they can invest for the longer term. And if cash is worthless or loses a lot of it's value, paying off the national debt will be easier, but the price of everything will go up a lot.

macmanmike6100

This is a very interesting thread. To be honest with you, I don't think that the average person has a lot of leeway. I'm in a similar position -- just entered the job market last year, $10K invested, that's it. I suppose in the event of America's financial collapse, I'd be doing my damnest to buy (low) but also work my ass off to stay employed, or something.

It'd be a mess for everybody.

paulskinback

Short the market big time! For those that don't know, shorting is selling stock without owning it on a long settlement time to buy it at a future date in the hope that it falls heavily.

You could also take out spread bets against the market by selling "geared up" contracts for difference - i.e. £1,000 = £10,000 worth of stock. But if you're wrong you're gonna owe a hell of a lot more than you bet.

Then buy it all later at a cheap price and hold the physical stock till it rises.

Instant Millions!

__________________
'Everything that can be invented has been invented.- - 1899, Charles Duell, U.S. Office of Patents.

'There is no reason anyone would want a computer in their home.' - Ken Olson, 1977, Digital Equipment Corporation

Poppinjay

If stocks even approached a 50% drop, the market would shut down for a cooling off period.

Plus, there's FDIC now and other factors to keep us from penury.

__________________
I think the Apocalypse is happening all around us. We go on eating desserts and watching TV. I know I do. I wish we were more capable of sustained passion and sustained resistance. We should be screaming and what we do is gossip. -Lydia Millet

Jimellow

What caused THLD to drop from 14 to 3 in a day?

As for knowing a bad time was approaching... There is a way to invest in stocks in a way that profits when they go down. I forget the name for it, but I'm pretty sure there is a way to do this.

As for gold.. To me it reminds me of the tech bubble, and likely will burst. Getting in now if one already isn't invested seems way too risky to me, especially considering how high it is.

I'm intrigued by THLD and why it dropped so dramatically, even though it was only cited as an example and not the main focus of the original post.

__________________
Desperation is no excuse for lowering one's standards.

ibis

This would amount to an increase in money demand, which will raise the world interest rates, lowering output(GDP). In other words, yeah it could but this wouldn't just affect the US. The debt market really is global, China can't demand it's money back (think fixed terms of loans). It can however, decide to limit theamount it loans in the future. This will raise interest rates in the US. Thse outside the US will see higher rates and lend there money to the US in hopes of greater returns, lowering the rates in the US to the world rate (which will increase because of the rise in money demand).
Oil consumption is greatly elastic at these amounts. There is a $ per barrel price that will make the construction of a decent public mas transport systemin the US. [insert many other industries that will flurish in the face of highoil prices] In the best case senerio, we will have some inflation and emergance of new technology. The worst case senerio is much more extreme...
Social security is simply a redistribution of wealth. This won't cause a depression. In fact, having it around is much more likely to cause a depression than not.
[I'll assume you mean close to 100% ]This can actually cause some pretty wierd stuff... You will see zero imports to the country (foriegn goods will be very expensive) and massivly huge amounts of production (real GDP). Again, this would be difficult to happen because of effects of globalization.
Interests rates will rise... but it really depends on the type of unemployment.
Yes, under any circumstance it's wonderfull to own your home outright.

Lindy

Best situation would be to be in a very strong CASH position and completely out of debt. The price of goods and services would fall drastically. A person with cash could take great advantage of this,in both tangibles and investments, assuming no bank failures.
Lindy

Rodney

What to do? One strategy is to park your cash in some relatively strong foreign currency that'll maintain most or all of its value if the dollar craters. After it does, if it does, invest appropriately in the U.S. at the new, lower prices. Under this scenario, housing prices would be rock bottom in a couple of years -- take your cash and invest in a foreclosure or two. There should be enough of them to go around. And the best time to buy is when everyone else is trying to unload -- if the deal is favorable to you.

Just parking your cash in a foreign account or in foreign-denominated bonds doesn't get you a great return. But if something really bad is going to happen at all, it'll probably come along pretty quickly -- I'd say more likely two years or less than five or more.

ASU2003

I think the reason that THLD dropped so much is that it had one drug that the FDA had some problems with. It seemed that investors were counting on this drug to make them a viable company.

When a few mutual funds and only a few people own a lot of the stock, they can effect the price in big ways. The market can adjust the price if no one is willing to buy it.

---------------
I'm aware that the banking system and SEC are set up to prevent another depression, and I'm not too worried. I just like having plans for what to do.

kentucky_lady

wow, i have no idea.