[thinkingeric]

The progression in your list of 'safety net' investments is 1) Cash 2) Savings accounts 3) Certificates of deposit 4) Bonds. That last step is a doozy. Considered this coursely, BND is perhaps appropriate. But it is hardly 'safe'. I think Taleb's idea of safe is more oriented toward catastrophic events. Think LTCM, Asian crisis, S&L, unregulated derivatives.

[steadicat]

Right. One of the talking points in my "discuss" section was "is BND safe enough"? I'm still looking for something better. Suggestions welcome.

[prestonbriggs]

Well, T-Bills, of course. Short term, so that you don't get stuck when interest rates rise. TIPS are another thought.

You're dismissing lots of conservative/safe alternatives because they don't yield much. But that's today. Next year, 5 years, 20 years, who knows? Today, maybe the best thing is to sit back and wait for better conditions, versus take on risk.

Overall, I thought your discussion of "why invest" was too brief. You don't actually need to invest/gamble your money. Just save it (T-Bills, etc) and work to make enough.

If you've got a pile, why invest? What's the possible use of doubling the size of your pile? Can't buy any more stuff. But if you lose half your pile, it might seriously hurt.

[lloyddobbler]

As the next guy mentioned, I'm also not sure about BND - or bonds in particular - as a good safety net right now.

With the U.S. as heavilty-leveraged as it is now, if the past is any indicator, we're headed for inflation. For the same reasons that we got into this situation in the first place (people buying more home than they could actually afford). Look at the debt-to-income ratio of the country (deficit-to-GDP), and it's a parallel story to the housing boom.

That being said, at current valuations, are even precious metals safe? Who's to say?

I'd be interested in looking for an ETF that trades in TIPS - while the return is almost certainly less, the security offered by it is almost certainly more.

Otherwise, you and I see pretty much eye-to-eye, except I'm more heavily invested in stocks right now (mostly because lots of people over the past few years have been running the opposite way - another Buffett-ism). Nice post!

[thinkingeric]

http://www.treasurydirect.gov/indiv/indiv.htm

Also perhaps money market funds.