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.


Elisheva Hannah Levin said...

It's one of those things that does not make me happy to say "I told you so." The people who are suffering will not be the ones who made the policies. They most likely have their golden parachutes lined up.

This reminds me of Jerimiad by Sting. "Everyone heard the big clock ticking, nobody knew the time..."

Me, as much as the rest of us. I kept hoping that someone would address it, but of course, I wanted to postpone the pain as long as possible. Looks like it's here. I am glad we own our house outright.

TheTutor said...

We have been paying off debt as fast as we can (we made some really stupid financial decisions when we were first married that are still haunting us) and are investing small amounts of money in camping equipment. Seriously. We don't own a house, so if the economy hits 1930s Depression-level recession, we want to be prepared. In the meantime, we are squirreling away some money to buy a small piece of property outright so we have a place to go if we need to. Otherwise, we'll be camping, gardening and hunting in the yards of family members. Are we crazy? Maybe, but it's better to have these skills, like hiking, camping, sewing and gardening and contentedly continue them as our hobbies and never need them, but we own those skills just in case.

I do have a question, though. What types of things could people do to earn extra money if there were a recession? If people have no money to spend, what would they be hiring others to do? As I mentioned, we are developing marketable skills, but we are assuming we will use those for our own benefit and maybe be able to barter them, but I am not holding out hope that we could make money off of them.

Off to find my foil hat. LOL. ;)