muses of the moment

August 24, 2012

Life Time Investing

Let’s talk a little about long-term investing. Actually, life-time investing.

During the winter season, people tend to listen more than during the harvesting time.

You may use the K-wave theory to your advantage over your life time without needing to hit every high and every low perfectly. Transitions between seasons may be 3-5 years, so you don’t miss the opportunities. Groovygirl likes this way of investing because it is less stressful and you can pick and chose investments within the larger scope to really study and research if you want to.

As an example, let’s pretend it is 2000 and you have just started working, therefore, saving some of your paycheck. Yes, life time investing requires that you save something every year/every paycheck. A foreign concept to most. Stay out of debt and save some money. (Note: you will notice that groovygirl has no dollar amounts in the life time investing outline below. That is because each season’s investment can be $100 or $1 billion. The concept is the same, so no excuses.)

What types of investments do you put your extra money into for the long haul? This is not money you are saving for a big purchase or to use for expenses; this is money for investments over  a life time. Money you want to keep and grow over a long period of time. Something you would hand down to your children or retire with.

Well, 2000, or depending on who you read, 1999-2001, was the start of the Winter Season of the K-wave cycle. Each season lasts about 15-20 years. GG thinks this one will last closer to 20, so for this example, we will go with that. (For this scenario, gg is assuming each “season” is 20 years, but they can be 15 years.)

During the winter season, the best investments are gold, “cash”, and after the credit crunch, bonds. So you would purchase gold, “cash” (gg suggests holding cash in the least depreciating currency/s). And after the debt collapse, money will bring in a hefty return in interest, since it will be so rare without easy credit/debt/ low rates. At this point (2012) we are not quite there, countries still believe they can “create” or “imagine” their way out of a debt collapse.

The signals that spring is coming are a high in gold and low in DOW (inflation-adjusted DOW).  Spring is characterized by slow steady growth, inflation (the good kind), but in the beginning, a fear of return to winter.

So at that point, you would sell gold and buy stocks or real estate, since the best investments during the spring season are stocks and real estate. Think about the last spring season: 1948-1966. It was slow growth, but the types of stocks that had constant and steady growth were AT&T, Caterpillar, GM…

Look for those types of stocks, not necessarily, those stocks. But stocks of companies and technologies that will build a new, more efficient infrastructure that will set the next 50 years or so. Things like alternative energy, appliances, and transportation, water filtration systems, technology/software that links systems already in place and makes them more efficient, internet infrastructure and data exchange.

Remember the housing market boom in the 1950’s? Thousands of returning GIs married and built houses. Remember they all wanted the efficient modern houses with all the latest conveniences? A similar thing will happen, but this time it will be a home of alternative energy and energy-saving systems and high speed internet-data transmission. Don’t worry about credit. After the debt collapse, a solid credit system will return slowly.

So for the sake of argument, let’s suggest that the spring season started in 2020 and lasts 20 years. So, now we are around 2040, start of summer.

A signal for the end of spring and start of summer is a high in stocks. Summer is a time of inflation, the bad kind. The last summer season started in 1966 and some say it ended in 1982, others, the 1987 crash. Think of the high inflation of the 1970’s and the fall of the inflation-adjusted DOW, ending with the ’87 crash.

Best investments in the Summer season are precious metals, commodities, and real estate, mostly because of inflation. But interest rates are high, so, make sure any new real estate you purchase can stand an increase in rates. At the end of summer, you could sell some of the real estate you bought in the Spring season, if you need some cash for retirement or a child’s college education.

So summer ends and we see a low in stocks and a high in precious metals/commodities. In our example, we are in 2060. Fall is like the 1990’s: euphoria. Stocks are a good place to be, practically every stock goes up.

So fall ends and by 2080, and we are into another winter. If you are retiring or need cash for long-term health care in late fall or winter seasons, remember to sell at the high of stocks and real estate and move into cash and gold again.

The goal of this type of life time investing is to keep capital intact, even in the face of inflation or deflation and be able to start to cash out when you retire or need money for long-term care expenses. Use the seasons to your advantage, and don’t take (all the) profits when moving from one type of investment to another. Roll the profits from the last investment into the next one. That is the growing part of the equation.

Important note: when gg is referring to real estate investments, she doesn’t mean your own residence(s). A season may influence when you buy or sell your own home, but your home is not an investment. Because on a yearly basis, it takes more money out of your pocket and doesn’t put money in. A real estate investment is a house/condo you rent, apartments, hotels, warehouses, office buildings, land you rent, shopping centers, farms, etc. Anything that produces an income. Ideally, more income than expenses.

Side musing: even if you are half way thorough life, you can still take advantage of the seasons left. There is always a best investment and a worst investment in each season. So, you always have an opportunity.

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4 Comments »

  1. Really appreciate this… Just need to find a way to drill this theory into my kids 🙂

    Comment by Firebug — August 24, 2012 @ 10:41 am

  2. Yes, always a challenge….

    gg

    Comment by totallygroovygirlfriday — August 24, 2012 @ 1:37 pm

  3. Great post! K-wave seems like the smart way to invest and if it can eliminate some of the stress in my life, I am all for it.

    Comment by sw — August 24, 2012 @ 9:18 pm

  4. Thanks, SW.
    gg

    Comment by totallygroovygirlfriday — August 25, 2012 @ 10:24 pm


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