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Comment by fnazeeri | Hacker News Reader

Brilliant! My advice is to stay in cash (or equivalent). Have patience. Wait 2-4 years and see what happens with the economy. Forget about the cash in the bank (I'm assuming you're well below normal retirement age). Set aside an amount of "play" money. Go play golf or hike Kilimanjaro or whatever works for you. Ignore "advisors" who tell you that you should invest in such-and-such. After some time, you will find things that interest you and that is what you should work on / fund. Invest in / spend time on things you love.

BTW, contrats. Nice job!

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I'm not saying rush into any investments. But waiting 2-4 years is the wrong move if you are looking to get in the market. A lot of very good stocks are on serious discount either right now or in the coming months. No one knows when the economy is going to stop declining and turn around (some economists are pointing to under two years). Be smart, do your research and try not to miss out on some money making opportunities.

And also congrats on your sale!

My advice is to stay in cash

Which would be fine as long as you aren't at all concerned about the very real possibly of hyperinflation. Be sure to pick your currency wisely.

What makes you say hyperinflation is a very real possibility? Some inflation? Sure, but thats natural. We don't exactly live in Zimbabwe (So I'm assuming at least).

Some links (not that I necessarily agree, just giving you info):

http://www.videonewslive.com/view/288549/peter_schiff_on_200...

http://www.naturalnews.com/019659.html

Surviving hyperinflation is easy, just hedge against all majors.

Could you explain in noob terms please?

One way is to buy long-dated call options on a broad range of issues: indices, index funds, precious metal funds, commodity funds, etc.

For instance, the SPY index fund currently trades at $80. Suppose you want inflation protection for it going above $100 by December 2010, and you want to protect $250k of your money.

You could buy SPY calls at a strike price of $100 expiring in December 2010. The cost of those call options would be about $8 per share. To hedge $250k, you'd need 3100 options, which would cost $25k. If the price rises into the $100-$108 range, you'd start recovering that cost. If the price exceeds $108, you'd start turning a profit. If the price popped to $175 due to hyperinflation, your profit would be ($175-$100-$8)*3100 = $208k. (BTW, options are sold in contracts of 100, so for 3100 shares you'd buy 31 contracts.)

Honestly, though, I don't see this as a good idea right at the moment. The market has been volatile lately, which drives up the price of options. IMHO, inflation is not likely to pick up in North America for at least 1.5 years, so you would need to buy 2011 options, which raises the price even more. If I were going to hedge inflation, I would wait until the current stage of the collapse had reached a lower plateau, some time had elapsed for volatility to decrease and option prices to go down, then buy before inflation expectations build and drive up the cost of call options.

Whatever you do, never use the various "ultralong" funds for buy-and-hold hedging. They are strictly for short-term trading. (Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)

Warning: I am not a professional options trader. This is not investment advice.

Why consider active investing at all? Just buy and hold an index fund if you want exposure to stocks.

So that all your money won't be locked in.

That is, for his ($175-$100-$8) * 3100 equation, you are only leaving 8 * 3100 on the table, as opposed to 100 * 3100 if you were to buy and hold.

Oh, my comment was more directed at the fear expressed in:

"(Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)"

With index investing at least you won't have to rely on a fund manager too much.

so how do you do that? :) Can I contact you?

"the only perfect hedge is in a japanese garden"

http://en.wikipedia.org/wiki/Stagflation

I thought the real possibility was deflation rather than inflation. Either way if I just wanted a way to keep the money safe I'd just buy some gold.

Your mention of Kilimanjaro was too much for me to miss this one. I discovered an old acquaintance of mine recently started up a Kilimanjaro hiking company ;-) http://www.expeditionkilimanjaro.com/ - awesome guy, would recommend traveling with him.

I'd very definitely disagree with the above - I'd say it's pretty certain that most of the West is going to go through a reasonably severe inflationary period, judging by economic history at least. Even if it doesn't, with interest rates so low cash is going to do nothing for you.

FWIW, if you know where you want to live for the next ten years or so, buy a place outright for cash. Worst case scenario, if house prices continue falling you've still got a roof over your head mortgage free.

It's probably worth putting some of your money in gold too as a hedge.

I'd certainly agree with the 'play' money idea as long as your family circumstances allow.

Brilliant! My advice is to stay in cash (or equivalent).

you'll need it to pay the IRS + state their 50% (if for example, you are a california resident). oddly enough lots of people forget about this simple fact. depending on how the deal is structured, there is a good chance that your tax bill is $1 million. oh by the way they then adjust your next year's taxes upwards and want quarterlies...so leave some money for those (you will get most of it back since your gain is non-recurring)

but still, you're a millionaire.

edit: whoops! i see you say you are in canada. well i suppose the tax situation is likely comparable....

canada is probably even worse

If he structured things properly, this is capital gains -- in which case he's probably got $750k tax-exempt and the rest is only 50% income, so his total income tax (federal + provincial) would be somewhere in the $500-600k range depending on which province he's in.

Maybe there are ways to stretch the gains over several years by clever investment?

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