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Latest Comments8 Comments
When Stocks Go to Zero
Anyone see a problem with just dollar cost averaging into an index ETF over the next few months/years so that whent the tide does come in I am ready?
Dow in Secular Bear Market When Priced in Ounces of Gold
Can you set aside your Bush Derangement Syndrome long enough to realize that monetary policy is set by the Federal Reserve and not by the president?
As for your list of things contributing to our supposed decline (I would suggest you snap out of it and realize we are the U.S. not Europe and we do not succumb to "decline"), it is worth pointing out that a weaker dollar does make our exports cheaper. Not a reason to devalue the currency but you'll live longer if you look for silver linings.
Free trade does promote world economic growth. To deny this is to deny reality and common sense. Did you build your own car? house? computer? telephone? No, you traded with someone who knew how to do it more efficiently than you. Why would you shut yourself off from other achievers, regardless of what country they achieve in?
Uhm, low interest rates do promote domestic economic growth. They also lead to a weaker currency. The truth of one doesn't negate the other.
Budget deficits may not matter, so long as the borrowing is for something worthwhile. An endless war on poverty (aka Great Society) and paternalistic war on personal responsibility (aka New Deal) are not worth borrowing for. Yet most of our federal budget deficit could be wiped out if the Federal government stopped trying to be the man of every house in the country.
Would you rather fight the terrorists at home? Really? Frankly, I am glad Iraq is acting like a big ole terrorist magnet, pulling all manner of Islamic extremist into the giant meat grinder that is the United States Military. You probably haven't heard (or maybe you are invested in defeat so you didn't want to hear) that our guys are winning over there.
You can keep blaming Bush for your perceived problems. It isn't going to make you anything but bitter.
A Demographic Headwind for the U.S. Dollar
What Was Left Out of the Jobs Report
Worst Dow June Since Depression
Unemployment remains low.
Growth, though slow, continues.
Interest rates remain favorable for growth.
International growth remains strong.
Sure, the dollar is weak and oil is high but those are flip sides of the same coin. Credit policy is confounded by the subprime mortgage mess. These are temporary conditions--certainly not worthy of the doom spouted by these nattering nabobs of negativism.
Frankly the dollar is oversold relative to the strength of U.S. growth potential, particularly vis a vis the Eurozone.
Oil is looking like a near bubble and is priced based on distant supply\demand expectations which are rarely realistic when formed in such an environment.
Huff and puff about depression and recession long enough and you'll be sure to get it. Don't let a maniacal hatred of George Bush cause you to root against the U.S.
Inflation Triangle Dilemma: Dollar / Oil / Euro
When oil gets too expensive, the combination of increased production and reduced demand will bring it back out of the stratosphere. This will happen very quickly once the traders see that the upside potential is smaller than the downside. Ahmedinijad's grip in Iran is not terribly strong and once he is gone his yo-yo-like manipulation of oil prices will fade. Other crises will come and go but that has been the case in the Middle East for the better part of a century. There is talk of reducing government energy subsidies for consumers in Asia. Reduced consumption caused by even a modest slow-down in China/India would take significant wind from the speculator's sails.
Once the oil bubble breaks, it is likely to stay broken for some time. The high price now is stimulating oil exporters to spend lavishly. In other words, they are becoming accustomed to big incomes. When the price falls, they will have no choice but to pump more to maintain the spending levels to which they are becoming accustomed. OPEC members will bicker back and forth over who is over-pumping. We have seen this before.
Market forces will likewise find the appropriate value relationship of the Dollar/Euro. The long-term fundamentals underpinning the Euro are weak relative to those supporting the Dollar. The inherent strength of the U.S. system relative to that of continental Europe makes Euros a long-term loser, despite the near term support afforded by a weak dollar. Certain EU member nations are in no position to weather higher interest rates. Fissures will erupt, putting the unified currency and the member governments under pressure. The relative strength of the well-integrated U.S. economy will lend strength to the dollar, mitigating somewhat the effects of oil prices and interest rates.
Energy: Government Vs. Market Solutions
How is that rebalancing accomplished? You can either increase supply or decrease demand or some combination of the two. Government "solutions" invariably ignore free-market principles and in fact exacerbate the problem by artificially stimulating demand and discouraging expansion of the supply.
Punishing oil companies with windfall profits taxes or elimnation of subsidies may feel good, but it doesn't do a thing to increase the supply of oil and in fact, by reducing the cash flow of the oil companies, reduces exploration/extraction activities. So this government "solution" actually reduces supply, therby throwing supply/demand further out of whack.
Price caps at the pump artificially stimulate demand, thereby perpetuating the imbalance between supply and demand. Any sort of "relief" offered to the consumer is going to have the same effect. High prices reduce or eliminate "unnecessary"... consumption, thereby relieving pressure on prices.
It sounds harsh but market forces are the best solution to the problem. Goverment interference promises to make it worse, while presenting new opportunities for corruption as favored and out of favor industries vie for special treatment from the regulators.
My eight year old son understands this stuff. Too bad the politicians don't.
Preparing for the Fall
The biggest problem we face is the falling dollar. The glory of the market is that sooner or later, corrections happen. Take any money you need in the next six to twelve months out of the market to protect it and let the rest ride. Don't try to time it, just stay diversified and rest easy. Things may get ugglier. So what? We've been through this sort of stuff before. We'll get through it again.
Finally, don't trust a Press that is desperate to see their candidate win this Fall. They will do all they can to make people feel like they are reliving the Great Depression. They did it for Clinton 16 years ago, they tried to do it for Kerry in '04 and they will do it for Obama this year.