Where is the US economy headed?

We will just have to wait and see, won't we, ci. What do you think about my statements about cultural problems, such as education and broken families being a very large component of the problems in our economy?

You spoke in pretty vague terms Okie. I know you mentioned that it was your opinion that these problems have an impact on the economy, but I'd like to see if we can find some data to support your opinions.

Actually, the impact on our economy is rather easy to identify; it has to do with middle-class wages not keeping up with inflation. That's the reason seven million more Americans are without health care. You see, the most important issues for parents is to make sure their children's health is secure by having health insurance. With the latest subprime debacle, more families will lose their homes. Those kinds of issues are common in media, and for you to identify "cultural problems of education and broken homes" doesn't begin to address the "real" problems of our economy.

So you don't think the increase in single parent families impacts the economic well being of families?

Financial Forces Run Amok
Without regulation, the invisible hand of the market is robbing us blind.
by Al Meyerhoff

For about the last 30 years, our nation has been traveling the deregulation highway, a road with no rules or direction. We have let enterprise be free, business go unfettered, the good times roll. And roll they have, but to where? One stopping point: the current mortgage crisis.
http://www.commondreams.org/archive/2008/01/14/6367/

okie wrote :



we have plenty of single parent families in canada , but all are entitled to basic universal health care .
doesn't make any difference whether they are rich or poor , single parent families , two parent families , same sex partners with or without children . THAT BASIC NEED IS COVERED FOR ALL !
imo not having to worry about that takes a huge load of everyone's shoulders !
hbg

I have been jumping up and down since 2005 warning of the threats to our economy. I wasn’t alone of course, but the media was looking the other way and critics like myself were dismissed as alarmist. You know what happened then? Last summer, the markets melted down, and the big banks wrote down Billions of dollars from their investments in fraudulent subprime loans. They minimized their “exposure” of course, not admitting the full extent of their complicity in these schemes and scams.

First the issue was minimized, even dismissed. And then it was marginalized as just about housing, and mostly blamed on borrowers. Then the big guns of the Federal Reserve began to cut interest rates and pump billions into to add “liquidity.” Problem solved? Far from it.

And then there were job reports suggesting a turn around until another real jobs report showed a downturn. And then it was Christmas and we were going to all shop our way of this crisis, but we didn’t.

In short, almost everything that was said/reported was deceptive and almost everything that was done was ineffective. As reports surfaced that two million plus American families faced foreclosure, the Treasury Department, with great fanfare, announced a “plan” which so far has just helped only a few HUNDRED families

The media still mostly looked the other way, even as polls showed that voters were more worried about the economy then Iraq. So then our fearless media stopped covering Iraq, accepting Pentagon claims that the surge was working even though more Americans were being killed there then ever. Soon, as the rest of the world reported that the US military was not achieving its goals, there was an escalation of bombing all in the name, of course, of routing Al Qaeda which everyone who knows the situation knows is not a big force in the Iraqi resistance.

Now the President is hinting that troop withdrawals will be canceled and more troops sent to Afghanistan all in the name of snatching victory from the jaws of defeat.

Back home, the recession that they said “might” occur is here, joblessness is up and housing is NOT turning around and the NY Times which in an earlier article admitted it overlooked the subprime crisis, is now saying that it may already be too late to act.

That was quick! First they deny the threat and then they say its too late to act..

The front page of the Times reported on Sunday:

No Quick Fix to Downturn

As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.

With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. Huge and complex, the American economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it. That makes it all but impossible to predict how much the economy can be expected to fall before it stabilizes.
http://www.newsdissector.com/blog/

According to the FBI, subprime mortgage fraud cases more than doubled during the past year - and they're expecting it to be worse this year.

Keep looking at the bright side, okie. Maybe, they'll disappear from our economic landscape.

Cicerone, this is how I have my money.

27% international/global - Templeton Foreign

29% Large cap - Janus Twenty

23% Asset Alloc?Balanced - T. Rowe Price Personal Strategy growth

20% Stable Val/ Money Mkt - Hartford Money Market HLS

plus gold and forign paper money.

Does this mean anything to you?

Amigo, It tells me you have done your homework, and are well diversified in your investment portfolio. Good show~!

As of last Friday, for YTD, the DOW was down 5%, and the Nasdaq was down 8%, but our "diversified" funds were down less than 2% (after our spending). Does this tell you anything?

YEAAA!!!

One more question please if you don't mind?

I was going to put 25% into gold Where would you take it from?

Please?

Amigo, I really can't make that kind of recommendation. Personally, I always found investment in gold as "fool's" gold, because if you look at the value of stocks vs gold, stocks have outperformed gold. Gold doesn't earn interest, and you can't "spend" gold. When we have an economy like we have today where "cash" is king (liquidity), I just don't believe gold is a good investment. Also, if you wish to sell gold, who will buy it? How much do you lose on the purchase and sale? That's my humble opinion on gold.

If you're worried about inflatiion, it's already with us.

There are still some good buys in stocks and stock funds. Many at Fidelity and Vanguard always outperforms the averages, and their fees are very reasonable. The market is on the down-side now vs the highs of last year, but a little wait might be in order. I think the subprime debacle will continue to depress stock prices this year. I saw a study once where they showed the difference between high fees and low fees, and for the long-term, the difference can be (tens of) thousands of dollars.

When the DOW was 14,100 last year, I sold 87 percent of our gains and transferred those funds into a federal money market fund. I sold more in December of the funds that performed badly to offset some high medical expenses for 2007, because the capital gains tax was reduced to 5 percent (rather than the regular 15 percent).

Well, nobody is talking about this, and it is the elephant in the room. Too bad the politicians and economists are not pointing this out daily. It is tough to find the data to illustrate the data on the web, I suspect because the libs don't want to recognize the problem.

This graph shows the difference between poverty rates with single families and two parent families in Newfoundland and Labrador, but it serves to illustrate the problem everywhere. The poverty rate among single parent families is several times higher.

http://www.hrle.gov.nl.ca/hrle/publications/povertydiscussion/chart2.htm

This site shows the rate of single parent families in the states, and DC. DC is the highest, and this is instructive because DC ranks high in expenditures per student to educate, but ranks very low in achievement. So we see the problem is probably not funding of schools, but a cultural problem here. Among the states, Mississippi ranks highest in single parent percentages and also very near the top in poverty rates, and also ranks very low in school test scores. Utah ranks lowest in single parent families and near the lowest in poverty rates.

http://www.kidscount.org/datacenter/compare_results.jsp?i=721
http://www.nemw.org/poverty.htm

Somebody needs to start talking about this as a huge component of the economy.

Amigo, Here'a a pretty good article on gold. Some of the big institutions are considering up to ten percent in gold, so there are two sides to every issue.

YOu might also consider rare coins...


http://blanchardonline.com/beru/beru.php?article=213&title=Gold_Returns_vs._Stock_Market_Returns

Here's a chart from Wikipedia that shows the appreciation of gold vs others that includes the DOW and S&P. This is the "iimpressioin" I've retained from many years ago.

cicerone thanks for the advice.
Thank you, thank you.

Amigo, You're welcome.

One last word on our retirement investments. When I retired, I wanted to consolidate all of the many different institutional funds and other investments we owned. I sold our rental property the year I retired in 1998, and finally consolidated most of the funds two years ago with Vanguard. I chose Vanguard because of their long-term performance and low fees, although I also felt Fidelity was a good choice.

As most financial pundits will tell you, it's a good idea to ratio your investments between equities and bond funds based on your tolerance for risk, and I also believe in this concept. Our ratio is about 40% Bonds and 60% Equities: what this ratio guarantees us in our retirement is that we won't lose much in volatile markets, but it also moderates our gains. I can live with that, because security is worth more to us, and I'm very conservative.

Finally, our cash position equals about 10% of our total assets that includes CDs, MM funds, checking, and savings accounts. I travel extensively every year (about seven times/year), but plan on cutting it down to five or six in 2008 by choice (getting creaky bones). By saving 15 to 20 percent of our income during our working years, we now live a very comfortable life, because our investments have done fairly well with very little risk-taking. Get rich quick schemes never work.

Just this morning I moved (profit taking) 10% into 18 month CD's, I think of this move as "conservative wait and see."

Recent evidence that the economy has weakened significantly has sparked discussion of possible fiscal stimulus measures. To be effective, such measures must be timely, targeted, and temporary.

*

Timely measures are those that, once triggered, stimulate new spending quickly so that businesses do not have to cut back on production or lay off workers due to weak demand.

*

Targeted measures include those aimed at people who are most likely to experience hardship in a weak economy, since they are most likely to spend quickly the bulk of any new resources they receive. Targeted measures also include those aimed at entities that would quickly spend any relief they receive, such as fiscally strapped state governments. If measures are not targeted, any stimulative effect is likely to be relatively ineffective.

*

Temporary measures are those that expire once the economy improves. Measures that are not temporary will increase long-term deficits, weakening the economy over the long term — and possibly in the short term as well, if the prospect of greater long-term deficits causes interest rates to be higher than they otherwise would be.

Some policymakers appear to assume that tax cuts are inherently stimulative, while spending increases are inherently less desirable as economic stimulus. Such assumptions do not withstand scrutiny. Both spending measures and tax cuts can be effective — or ineffective — as stimulus, depending on their nature and design.
http://www.cbpp.org/1-14-08bud.htm

The Bush economy keeps chugging along because of the sub-prime mortgage debacle. And Citi is looking for a foreign bailout; ah, the $elling of America continues because of greed. (CNBC):

Citigroup could write down as much as $24 billion due to subprime and credit-related losses, CNBC has learned. In addition, the company could lay off as many as 20,000 workers as part of a comprehensive plan to slash costs and raise capital.

Citigroup also intends to raise as much as $15 billion from various foreign and domestic entities including Saudi Arabian Prince Alwaleed bin Talal, Citigroup’s largest individual shareholder, as America’s biggest bank grapples with heavy mortgage market losses.

And by the way, in other, distressingly similar news:

Merrill Lynch Mortgage Losses Could Reach $15 Billion. Looks like the bull’s “boys” will get squeezed hard, and it’s looking for more money from friends abroad.

Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.

…To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.

The developments underscore the rising toll that the mortgage crisis is taking on many once-proud Wall Street banks. In recent months Merrill and several other firms have grabbed financial lifelines from wealthy foreign governments. Further investments by so-called sovereign wealth funds could prompt scrutiny by Congress.

…Merrill is hardly alone in seeking capital from overseas. United States financial institutions have raised more than $29 billion from foreign governments and their related investment entities, according to the market research firm Dealogic.

http://pandagon.blogsome.com/2008/01/14/citigroup-to-slash-20k-jobs-write-down-24-billion/