Tuesday, January 22, 2008

Black Tuesday


Monday, while we were taking a holiday, world markets took a nose dive and today we are getting pummeled, all as a result the prospect of a US recession and further fall-out from the credit market turmoil. Bank of America Corp. fourth-quarter earnings fell by 95 percent and Wachovia Corp. reported its earnings tumbled 98 percent, with both banks citing the lending crisis. Apparently foreign investors are quite pessimistic over the U.S. government's stimulus plan to prevent a recession. As a result, investors abroad are moving money out of stocks and seeking safety in bonds and other investments.

President Bush is pushing a plan, one which requires Congressional approval, which calls for about $145 billion in tax relief to encourage consumer spending. (So, what are you going to do with your rebate?) Foreign investors are expressing the sentiment that this stimulus package is a disappointment because it is too little, too late, and they feel that it won't help the U.S. economy recover from the course it is following. Additionally, traders seem not to be impressed with Federal Reserve Chairman Ben Bernanke's moves to cut the interest rates to help the sagging economy. Today's emergency cut is just a band-aid to a much bigger problem. (Hint: Making money more easy to borrow won't get us out of this mess)

Lots of people are suggesting that gold and silver, and even other currencies are good places to park your cash these days. There's no doubt we are headed for a recession, and in some places it's already hit. Then there are others who say now is the time to buy stocks when prices drop to incredible bargain prices.

That's what we get folks when we borrow more than we can afford both personally and federally. The government's monetary policy has been incredibly reckless, and the answer is not to print more money or to borrow from Asia and Europe. The answer is to stop spending so much, and to cut back the size of government. How these presidential candidates can even be thinking about proposing Universal health care and increased spending on social programs, or increasing foreign aid and the continued policing of the world is just outrageous.

Each of us better be thinking seriously about how to personally weather this storm. Get your bills under control, spend less, and figure out how to bring in a bit of extra income. Take a close look at your investments and make some adjustments. It looks like we're in for a rocky financial 2008, even as the presidential candidates squabble over who sounds more or less like Ronald Reagan, or who voted for what legislation.

As for Black Tuesday...Well, I guess we should see a huge increase in the sale of Tums and Advil. Perhaps those are the companies to buy stock in today.