For the past few months, the economy has been steadily (rapidly) declining despite the government throwing TRILLIONS of dollars at it. It has appeared to me that the government has drawn a line in the sand at approximately 7,700 on the DOW, which is the approximate low from the dot-com bust. Every time that level is threatened, the government rushes out some new stimulus plan or Fed action.
Each time in the past that we approached this level, the government bailout de jour has moved the market significantly lower. However, things are beginning to “feel” different to me and I question whether the government is still able to juggle all these balls. What do you think? Has reality finally arrived or will the government be able to keep juggling a little longer?
I agree that this is different. It is different because the US economy is different. The structure of the US economy has been eroded for since the 1980s. We have moved from an industrial economy (where we actually made stuff) to a service economy thinking it was all the same dollars. But they are not. We were a strong economy because we could always grow ourselves out of our economic problems. We always had the option of cutting back on spending, reduce our imports and let the GDP work our debt down to manageable levels. We don’t have the capacity to do that even if we had the desire. That is what I see as the one real danger we have now.
This recession is like an asteroid coming towards the earth. We are going to use all the uranium on earth to build a bomb to shoot at it to break it up. But if all the uranium on earth won’t make a bomb big enough then we can build no more bombs. We only have about $1Trillion or so dollars to use to get us out of this mess. If it is not enough money or if it is used the wrong way, we can’t reload. We are all in with this stimulus bill.
The only alternative is to start a war to get the economy back in order and that will only work if there is enough industrial infrastructure remaining to create a war machine. Engineers (and I am not talking about that computer systems BS, I mean real engineers…mechanical, structural, and electrical engineers), machinist’s, welders, etc. Those people are now retired and we use imported Indian citizen engineers and outsourcing for our manufacturing skill. That is the difference we have not kept our manufacturing base healthy.
It does seem to be getting worse. I was paying a lot of attention to this stuff back in Sept. when Lehman, etc. happened. But it causes too much anxiety to follow the ups and downs everyday, so I just concentrate on shoring up my own personal finances, and ignore the big picture.
The thing is, over a year ago I put some money in an Asian/European company index mutual fund because the dollar was tanking. It seemed like a good hedge. But now those countries are tanking too.
But it causes too much anxiety to follow the ups and downs everyday
That is the downside of market watching at anytime in its history…Anxiety is the norm for traders…WHich is why the burnout rate is astronomical…
Economy…it seems things just keep getting worse…I have no clue what to make of all this other than to get flat and get out of dodge for a while…I can no longer ascertain what is a good investment and what is a bad investment…Things seem upside down and I dont what to make of it…I do always say its always darkest before dawn,I’m unsure when dawn is coming…The lights may be out for a while in the US,hopefully not like Japan in the 90’s…We have no where to put cash to make a decent return which is sickening…Bernanke is forcing more and more people into a bad situation…I wouldnt touch much here…
Leaving aside a decent return right now, which seems hopeless at the moment…
what do you think about T-Bills or TIPS as a hedge against inflation/collapse?
Well, today was not the day. I heard one of the balls hit the floor, but the government is still juggling and still has most of the balls in the air. Tomorrow should be a big day as they unveil their housing fix de jour. If the old “buy on the rumor, sell on the news” proves true, tomorrow could be very interesting.
RookieNYC correctly pointed out sometime in the past, that in the great depression there was a big drop in 1929 and then a slow grind to the bottom over a multi-year period. It’s starting to feel to me like we’re in that slow grind heading down.
I know the Dow is not always the greatest indicator of where the economy is heading, but I think if it continues to drop in the next day or two that’s a sign of big trouble. So far, since this crisis started in Sept., 7500 or so seems to be the support level (if that’s the right term) at which it starts to bounce back into the 8000s. It closed around 7500 today. So that’s my amateur analysis of the situation.
The only alternative is to start a war to get the economy back in order and that will only work if there is enough industrial infrastructure remaining to create a war machine. Engineers (and I am not talking about that computer systems BS, I mean real engineers…mechanical, structural, and electrical engineers), machinist’s, welders, etc. Those people are now retired and we use imported Indian citizen engineers and outsourcing for our manufacturing skill. That is the difference we have not kept our manufacturing base healthy.
How is it that we can find all the money in the world to destroy each other but none to build a stronger, better society? :rolleyes By they way, we’ve started wars – Iraq and Afghanistan and guess what? Didn’t work…But - We have those people. Our country hasn’t been a place for them to thrive in because it rewards those wall street types that just ran away with other people’s money.
Dont be too anxious…We are overdue for a relief rally but make no mistake significant damage is done…Serious support levels have been severed and redemptions atleast among the offices I know have been at a very high level…People want out and I highly doubt they are returning to this market…From an investors standpoint (those with size money) this market is a crap shoot…Sad part is how long this will take to correct…The tech wreck of 1999-2000 we initially thought would take 10 years to rebound…We are in 2009 and look where we are…If you had your money in equities (as an investor) you lost money over a 10 year period…10 years is a very long time…Do I know what the next 10 years brings,hell no but imho sideways may be the move which will decimate traders more so than investors…Sideways markets are the hardest to trade,lack of follow through is the worst…We have been looking into high yielding insurance policies that pay a guaranteed yield over time…We have not invested dollar one yet but we are looking into it…T-Bills and Treasuries do not yield enough to attract a client nor does it feel very safe at the moment…Then again who said the safety of a 150 year old Insurance comapny is safe either at this juncture…Thats what makes this moment in time so difficult…You don’t know who to trust…Banks,Insurance cos,equity markets,commodities,government…Who do you feel %100 safe parking your money with?..I have no clue…
I just saw this on Bloomberg…T Boone Pickens got his cojones kicked in hard betting the long side of oil…The article proves that this depression/recession snuck up on many…T Boone took a whopping %97 LOSS…1.3 BILLION is now worth $40 MILLION…Talk about a real a$$ whooping…OUCH…
Thats what makes this moment in time so difficult..You don't know who to trust..Banks,Insurance cos,equity markets,commodities,government...Who do you feel %100 safe parking your money with?...I have no clue...
I know! ME! I feel 100% confident parking my money with ME! That’s the advantage of my silly little rental property business. I have no control of the stock market or the economy. Certainly, I can make some educated trades and I can win more than I lose. However, the market is always changing and it’s very difficult to not make the occassional serious mistake. As you said, stock prices are down over a 10 year period.
Contrast that to my silly little rental business. Yes, it’s dirty; dealing with tenants is a pain in the butt; storms occassionally damage my property; toilets get plugged; I have the occassional drug-dealing tenant from hell, etc. However, the income is absolutely predictable as people MUST have a place to live and the worse the economy gets, the more people will be living in rentals. I make money each and every month and that doesn’t change with the economy or the changing political winds in Washington. Finally, I don’t have to set an alarm or be at work at any certain time. I can take the day (or week) off without any notice. In short, I’m FREE!
RookieNYC,
What do you think about using TIPS to park money? I know we are in a deflationary period right now but it’s only a matter of time before the stimulus causes inflation (IMO, anyway).
I’m not sure that the market is really sold on Obama’s new housing plan. After the details have been released, the DOW is only up 4 points. Doesn’t sound like resounding confidence to me!
If you haven’t had time to read or hear about the plan, here it is in a nutshell: honest, responsible homeowners will be paying for the deadbeats!