In so much as we are near the end of the second quarter '08 I thought for all of my dear friends from back in the day I would share with you these topical and timely Stock/Bond market tidbits for your edification and entertainment. I offer these without comment and strongly encourage you to get your advice as to how best to manage your portfolio in the near future from a trusted, UNBIASED advisor. In other words someone other than me. This isn't super secret stuff here. Wall Street Blue Chips are off by a full 4% Thursday and Friday as the smart money already knows what's coming.
An unprecedented 700+ Bonds and Bond funds are going to move from recommended buys to recommended sells. These run anywhere from B- to AAA rated. Bond insurers are anticipating 2 Billion in near term losses.
30 day Home mortgage delinquinciees are up 10.1%, 60 day delinquinces are up 20.2%. This is a number not seen since the 1930's. 7/1 sets another up tick in ARM's
It's quite possible that as many as 2,000 US Banks will become insolvent due to the ongoing Real Estate credit crisis. Even the national stalwart Bank Of America is floundering due to write offs from bad debt.
The previous crisis of 60 days or so ago was headed off by Fed intervention and international buying of US currency to shore up the dollar. It's unlikely that this will be possible again as the Fed has little to work with and our friends and allies are not in a position to buy more dollars as they also are feeling the effects of a worldwide slowdown. Not to mention they don't know what to do with the dollars they've already bought because they can't sell them without taking a steep loss. Thank God that oil is still traded in dollars because if it wasn't well...
So some of you might be saying well what can I do and how will this affect the price of a 12 pack and a pack of smokes. Like I said before heckifIknow. All I know is what I hear from those that I talk to daily, 26 years or so in the business I'm in where I talk to people from Connecticut to California and I have never seen such apprehension. We are either doing a heck of a job talking ourselves into a recession or we are going to be in interesting times. And wouldn't you know we just bought a new living room set.
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16 comments:
Doug,
You sound like a man that knows about finances, the market and the decline of the dallor and so on. I don't!
I have a 403-B. Am intrested in transfering all of it into something more lucrative. But where? My new employer gave me some optioins. But I am dumb founded!
The wife and I are in the buyers houseing market. Things are looking good so far for us, no sales yet though.
Doug, I just don't understand the Fed, or how it works.
Ric
Doug, are US Savings Bonds a safe bet? Not for a full transfer of all funds, but a side thing?
Doug,I-took-Economics-and-withdrew-unfortunately-I-Remember-supply-and-demand-but,you-are-so-way-ahead-of-the-"money-Smart"-people.Keep-it-up.You'll-be-ahead-financially:)
Like I said I'm no expert but what I'm hearing is a commodity based mutual fund/401K is a good bet right now. Gold funds are even better. With the dollar tanking and the market in full bear mode more and more investors are parking their money there. US Savings Bonds are safe but their rate of return leaves something to be desired.
The thing is stock market based mutual funds are still a good place for long term investment. In fact there will probably be some real bargains out there. Much like in the housing market, if you've got the money now's the time to buy. You have to do your own research. Financial planners are hit and miss. In Florida anybody can call themselves one. Problem is a lot of them are in it for their gain as much or more than yours, steering your money to funds in which they have a vested interest. Avoid at all cost those that attempt to get you to buy Whole Life. Makes money for them and their minions and will cost you a bundle.
Oh and you sure aren't the only one that doesn't understand the Federal Reserve. Established in the early 1900's it consists of 12 regional banks with a bunch of private member banks that must have non transferable assets in the central bank to be a member.
Created to help to prevent market panics, runs on banks and control the money supply. It's part of the reason you don't have to worry about losing your money (assuming you have less than $100,000) that's in the bank. Now as to what that money may actually be worth that's another matter.
Since it receives no federal funding it technically is not part of the Federal government although there is congressional oversight. I don't know what they do other than when that guy comes on tv and says that they're going to raise or lower interest rates and everybody on CNN starts acting all crazy.
The fact that their meetings are held behind closed doors and the minutes from those meetings are held as secret for a minimum of five years does leave something to the imagination.
UXG
Good one Doug. I am sure I know less about economics than Doung or most of you for that matter. But i will try.
As a recession looms over the financial sector, I feel confodent that we will pull out of this one as we have in the past. It is about an 8 year cycle. Regan inherited a recession from Carter. Remember Clintons slogan, "It's the economy, stupid". Bush inherited a recession from Clinton (the .com crash). A positive note (or for us old folk), a silver linning is we have always pulled out in good shape(perspective. I have some friends that couldn't retire because of the .com crash). When bonds are down, the stock market goes up. Gold has been goig up fast, but just like several decades ago, gold will crash, and should be looked at in a speculative mode, rather than a long term investment. A diverse Mutual Fund based in the stock market has always been the safest retirement investment (an avr. of 15% return). Ric, you can have your Mutual Fund divied between stocks that are more diverse. A portion that is risky (with a chance a loss or great gain), most is secure, such as blue chip, and some in a fedraly backed or guaranteed return. As Doug said, go to someone wheo is independant, and read any perspectis(sp). Check with them on your age group. That would determine the best risk group you should be in.
Oh while on the subject, we at work today heard on the radio something funnnnyyyyyy. I am still laughing inside. You have heard how if you buy this or that you will get a gas card worth "so much", or fuel at a pre-contracted price for any given lenght of time. Well, lack of a better term, brothels are now offering gas cards for those who patronize the establishment. It is my assumption to be the state south of me. Not Utah, Nevada. It will not be long now that prices go down.
The only way gold could CRASH is if huge reserves of it were dumped on the market and more was mined and put in reserve. Why do people act crazy when the Feds lower rates? because it de-values real money assets, that is hard cash in the bank that becomes worth less as the dollar becomes weaker. So that tends to piss off investors that have actually payed and saved. Imported goods cost more and Inflation increases but you can get a cheaper deal on loans and credit which is supposed to stimulate the economy short term. The problem with our country is that we are basing our economy on how well sales do at the shopping mall stocked with foreign goods. Unfortunately everyone is buying on credit and oops sometimes they don't have any money to pay the bill when it comes later. Save every penny and grow some vegetables the old fashion way, dump the SUV, gas is going to 7 dollars and will never go down again. My mother in law said that during WWII everyone had gold but the value was worth nothing compared to something to eat. I caught that Marc Farber guy the other night on Bloomberg and he was all about recommending gold and investing in something related to Agriculture because people will always need to eat. He also mentioned as Doug pointed out that many banks and insurance companies have already gone bankrupt and they and the Government are not coming clean about that to the investors. I have two kids in private $50,000 a year Universities in Boston, so that is where my investment money is tied up. Big mistake according to financial advisors to pay your kids tuition because your years of earning capacity are limited and theirs are just beginning But if I had some extra...
Juliet,You're-doing-your-boys-right.They'll-remember-you:)
Amen,Juliet.
Dave,What's-UXG-stand-for?
Joanna, UXG is a speculation symbol that in 20 years "could" and "should" pay-out nicely if Doug's theory is correct.
Doug, I understood about half of what u said. All I know is my long time neighbors are leaving, (foreclosure)..very sad. Bush fucked up this time and good luck to whom ever can fix us.
Pat,
I'm no fan of the current occupant but I don't know that we can lay this whole mortgage mess at W's door. Rather, it's more greed on the part of lenders pushing loans that they knew the borrowers could never repay and a lack of prudence on the part of home buyers that did not take the time to actually read and think about what they were signing. You are right that the next guy has got one huge mess to clean up. Sad, you bet. Few things could be worse for a family then to lose their home, for whatever reason.
Oh, and sorry about your canoe.
Canoe thief=Asshole.
Pat, Doug is right, most of the problem with the housing crash can't be put on anyone in any elected office. It is private sector that runs the housing market, not the executive branch in particular, let alone any other branch of goverment. Remember trying to get our first car, or credit card. Now they mail them to you without being asked. I understand that credit card debt is the main root to our economic instability. Many other factors are involved, but as Doug eluded to lood to greed. I believe that is where you will find the basis of our problems.
Doug, I am happy to go with this one, canoe thief=asshole
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