The American Financial Crisis Continues

May 15, 2010

While the media tells us the economy is coming out of its slump; we, the people, know otherwise. Many people are in debt up to their ears with mortgages and credit cards, and then they’ve lost their jobs. How are people going to get ahead, when the economy is NOT getting better.

Unemployment is considered a lagging economic indicator. Companies lay off their employees after they have been adversely affected by a recession. The fact is, many companies are not going to bring back the employees that have been laid off, so what are they to do?

The percentage of bankruptcies and foreclosures are very high and they will continue to grow until something is done to get people back to work. Perhaps this is the time for people to think about their passions and start their own companies to provide their own unique products or services to boost our economy. For those individuals that do not wish to become entrepreneurs, they need to find small business owners to work for. After all, small businesses are doing most of the hiring right now.

Many of us were raised on the premise to get good grades in school, get a good job, retire on our pensions and social securities, and live happily ever after. That may have been appropriate 30 years ago, but not in our economy today. Many companies do not have pensions anymore. Social Security and Medicare are in the red so severely, the government is going to have to pay back the money it owes to these programs in order to continue paying the current retirees.

When President Barack Obama took office, he signed a $787 Million Stimulus Package into law to stimulate our failing economy. The Stimulus Package contained money the Treasury didn’t have. As a result, the Federal Reserve printed the money to disperse to the American people. The Fed printed more money to soften the blow to the Market, providing an artificial floor. The media reported that the economy was getting better because the market was doing well. We, the people, were lied to in an effort to keep us from going into a state of shock and panic.

As we were going through our own crisis, Greece’s economy failed. Italy and Spain are not far behind. Germany is the only country that is solvent enough to bail Greece out.  What is really sad is that the United States is on the same track as Greece. If our officials don’t stop spending money they don’t have, this country will be broke. If that happens, who will bail us out? I doubt whether England will bail us out. We fought a war against England for our freedom.

No one is buying our bonds because they have been devalued. China and other countries are unsure about our solvency. If  we have credit limits put on us, the federal government should also have a spending limit. Presently, the government has no spending limit. The Federal Reserve can print as much money as the government needs to keep going.

What is Congress doing about this situation, anything? One or the other senator and representative is talking about stopping the Federal Reserve from printing more money and initiating a spending ceiling. The rest of Congress needs to get on the band wagon, because they are just as much at fault as the President and the Federal Reserve. If worse comes to worse, we, the people, need to take this situation into our own hands and get rid of the representatives and senators that have been around  too long. Perhaps we should vote in a new crop of lawmakers who will do what their constituents want. Our illustrious Senate and House of Representatives have their own agenda. We can fix that, everyone. Let’s use our right to vote to oust these politicians. Let’s elect officials that can do what they have to do.

We need to get this country out of debt. The budget should be balanced, just like our checkbooks. The President and Congress should not be spending money we don’t have. If you, my readers, agree, please comment on this article.

By Diane | Posted in Economic Trends, Get the Economy Back on Track | Tagged | Comments (0)

Will There Be A Market “Dead Cat Bounce?”

March 16, 2010

On February 22, 2010, Robert Kiyosaki wrote an article for Yahoo Finance titled “Doing the Dead Cat Bounce.” Until I read that article a few days ago, I had no idea what a dead cat bounce was. Robert describes a “dead cat bounce” in these words, “The market crashes, rebounds, and runs out of steam, then crashes again…unfortunately, and possibly, to a new low. When professional investors observe a dead cat forming, many will begin to sell. If their selling leads to a panic, the stock market goes even lower.” Incidentally, in the same article, Robert also predicted that the Dow Jones Industrial Average will plunge to 5,000 this year. For the most part, responses to this article were of disbelief. People think Mr. Kiyosaki is talking through his hat.

The article goes on to identify the Dow’s lowest plunge in the last 8 years (2002) at 7,206. In 2007, the high was 14,164. Last year, 2009, the Dow fell and stopped at 6,547. Robert says that the dead cat bounce began at 6,547, at which point, the market was oversold and buyers rushed back in, looking for bargains. A bear market rally began as investors scooped up bargains. On February 5, 2010, the Dow closed at 10,012. On the surface, this looks pretty good, doesn’t it?

What Does This Mean?

If you are wondering what this means to you, it depends on the type of investor you are. If you are bullish, you are as happy “as a clam” and looking forward to the Dow breaking 14,000 sooner rather than later. However, if you are bearish, you are waiting for the dead cat to finally die and for a double dip recession to begin.

Now I’m sure you are reading this and thinking, “What a pessimist? How can he make that kind of prediction when things are beginning to look up?” Let me go on to give you Robert’s reasons for believing the worst about this year’s market.

One of the theorists Kiyosaki follows, Richard Russell (a very wise man who has been in the business for more than 50 years) has been writing about the “50% Rule” of Dow Theory. Robert’s interpretation of the 50% Rule using real numbers is as follows. In 2002, the low was 7,286. In 2007, the high was 14,164. The 50% Rule number is 10,725…the halfway point between 7,286 and 14,164.

In 2007, when the market headed down and broke 10,725, professional traders who follow the Dow 50% Rule knew what was going to happen next. On March 9, 2009, the crash stopped at 6,547. On that day, the dead cat bounce began as the market began moving up.

On January 10, 2010, the Dow stalled at 10,725 and headed in the opposite direction again. Strangely enough, the 50% Rule came true. The next interesting point is 7,286, the 2002 low when the rally began. According to Mr. Russell, if the Dow holds at 7,286 and begins a rally, this might be a good time to buy. But, if it fails to hold at 7,286 and goes to 6,547, then we better look out for dead cats. Apparently, Mr. Russell predicts that Dow 1,000, the number where the Dow began its rally in the 1970s, may not be far from happening. If it does happen, there will be millions of upset and desperate baby boomers as their 401k’s and IRA’s implode. (If you are reading this article, and  are interested in an alternative strategy to save your 401k and/or IRA, please leave a comment with your contact information and I will be more than happy to assist you or someone you love.)

Other Markets

The 50% Rule may apply to other markets such as gold, the hot commodity right now. In 1971, gold was $35 an ounce. Mr. Kiyosaki says he started buying gold in 1972, when he was a pilot in Vietnam, as he watched the Vietnamese panic when they knew the U.S. was not going to win the war.

In January 1960, gold hit a peak of $850 an ounce. Gold dropped to a low of $252 in July, 1999. Robert bought a lot of gold in 1999, when the price of gold was low enough to cause Central Banks, like the Federal Reserve and the Bank of England, to dump gold in an attempt to protect the value of the dollar and the Euro (counterfeit currencies according to Mr. Kiyosaki).

Getting back to the 50% Rule, when the price of gold was passing $600 an ounce (halfway between $850 and $252), a rally in gold was in progress. As gold passed the $600 mark, mainstream financial experts began warning of a crash in the price of gold…stating that gold was in a bubble. Today, gold is fluctuating between $1,000 and $1,200 an ounce.

Is There a Gold Bubble?

When you bring inflation and the U.S. dollar devaluation into the picture, the $850 price of gold in 1960 is $2,500 in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?

You have to think about the answer to that question in terms of your personal feelings about Federal Reserve Chairman Ben Bernanke, President Obama, and Wall Street. If you have positive feelings for our economic leaders and our President, don’t buy gold. If you don’t have faith in them, maybe you should begin investing in gold and silver.

If the dead cat bounce dies and as Mr. Kiyosaki predicts, the Dow drops to 5,000 in 2010, the price of gold and silver may die as well, as investors cling to cash. The next question investors need to ask themselves is, “If the Dow dies and the prices of gold and silver drop, what should we invest in at rock bottom…stocks, gold and silver, or cash?

Robert knows what he will do, he says he will buy more gold and silver. Why, you ask? The answer is because he trusts gold and silver more than the Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years.

The Lost Decade

The people that Mr. Kiyosaki is most concerned about are the average investors who took their financial planners’ advice and bought stocks, bonds, and mutual funds to invest for the long term. Many investors are calling the past 10 years “The Lost Decade,” which means that those investors who diversified their portfolios with stocks, bonds, and mutual funds are long-term losers. Japan has been losing for Two Decades.

A Lost Decade means:

1. Zero job creation

2. Zero economic gains for the typical family. Home values are down and many families owe more on their homes than the homes are worth.

3. Zero gains in the stock market.

Over the next few months, we will need to watch the Dow and gold very closely. If the Dow breaks 7,286, the 2002 low, and continues down below 6,547, the 2009 low, watch out. If 6,547 is broken and gold passes $2,500 an ounce, we will have a lot more to worry about than the 50% Rule.

In conclusion, I hope Mr. Kiyosaki is not right about the Dow plunging to 5,000 this year. If he is right, we need to protect our investments. Like I said earlier, if you are concerned and would like more information about protecting your investments, please comment on this article with your contact information.

By Diane | Posted in Economic Trends, Get the Economy Back on Track | Tagged | Comments (3)

The Need For Economic Change

March 7, 2010

As we live day to day in this recessed economy, many people have decreased their discretionary spending to the point that they are only buying what they absolutely need. For those individuals that are unemployed, discretionary cash flow is tight to non-existent and many are living on their savings or on unemployment. Depending upon where you live, the odds of finding a decent paying job are slim to none. From the looks of the economic indicators, the “State of the Economy” is not turning around as the Obama Administration had hoped.

Last year, the current administration spent billions of dollars to stimulate the economy. This wouldn’t be so bad except the billions that were spent didn’t exist. The money was printed, which did more harm than good. Our government seems to be able to do whatever it wants. If a person printed his or her own money to pay their bills, he or she would be put in prison for counterfeiting. Obviously, there’s a double standard. Of course, I’m being facetious here but our government shouldn’t be printing money that it doesn’t have either.

There is so much money in the economy right now due to the Stimulus Package and the FED’s bail out of the stock market. Economists feel that the FED will increase interest rates to back out some of the money that was literally poured into the economy to save it from totally crashing. If we can’t decrease the unemployment rate and get people back to work, increasing interest rates will make it harder not only for the unemployed but also for our senior citizens trying to live on Social Security.

Even though the economy is in the doldrums, we need to focus on having a positive attitude and living one day at a time to the best of our ability. In the 1930s, when the United States economy was at the bottom of the barrel (so to speak) in a full blown depression, the President decided that the people didn’t need to wallow in bad news. Newspapers, magazines, radio announcers, public speakers, and our leaders didn’t focus on the economy. Everyone tried to be as positive as possible and the focus was on putting people back to work. This is what we have to focus on right now as well.

Where are we going to find jobs? Right now, the President and both Houses of Congress are focusing on everything else but the economy. Absolutely no one is talking to anyone else in Washington D.C. As far as the members of Congress are concerned, they have no idea what to do about anything, so they are letting things go with the status quo. This can’t  happen. Someone has to stand up and tell both Houses that they’ve got to stop spending money. The FED needs to be monetarily responsible. President Obama needs to focus on getting us out of debt and balancing our budget.

We need to start manufacturing what we need in the United States and stop importing everything. Our trade deficits need to turn into surpluses. But, how can we manufacture goods here in the US if our companies are outsourcing to Mexico and India where workers eagerly work for pennies on the dollar? We are outsourcing ourselves out of our own economy right now. Unfortunately, US workers are partly to blame. The Labor Unions encouraged the rank and file to vote against concessions that management proposed, forcing permanent layoffs and outsourcing. Remember our Arizona copper miners? I do!

Right now, a country as large as the United States is totally dependent on imports from other countries because manufacturing, mining, oil drilling, you name it costs too much to do in our own country. This has to stop. We need to stop depending on oil from the Middle East, Copper from the Orient, Steel from who knows where, etc. Our first priority is to put our people back to work. One way to do this is to quit outsourcing. However, in order to do that, our cost of living needs to change dramatically. Our people are going to have to lower their expectations so they can go back to work. Prices for goods and services are going to have to decrease, otherwise we will not be able to bring manufacturing back to the US.

I’m sure that Mexico and India are very happy to accommodate our corporations because their economies are flourishing as a result. The people working for US corporations in Mexico and India happily work for pennies because they can live on pennies. What about the people in the United States? Our workers won’t work for pennies because we can’t live on pennies. Prices are too high! Wages had to increase so people could afford to pay for necessities like food, shelter, and clothing.

Prices for food, shelter, and clothing need to stop increasing, freeze, or better yet decrease. The Consumer Price Index (CPI) needs to decrease dramatically if we are to put our people back to work. Our focus should be on balancing our budget and depending on our own resources, and not outsourcing and importing. When we accomplish these projects, the US will be No. 1 in World economies again. I have a feeling that if we are able to reel in our economy the Europeans will follow suit. How great would it be if the countries of the World could afford to pay their bills and had a surplus of cash in their treasuries?

Is that a dream or a reality? We need to tell our Congressmen and women that our budget needs to be balanced and our corporations need to come home and employ our own people. Our CPI needs to go down to accommodate our own people. There is enough oil and natural resources in our own country and if we, as people, conserve and re-cycle, we can decrease our needs as well as our carbon footprint, and stop wasting our resources. After all, charity starts at home.

By Diane | Posted in Economic Trends, Educational Opportunity | Tagged , , | Comments (0)

Cutting Medical Costs in These Economic Times

January 17, 2010

Rising medical costs is one of the reasons that there are so many people without health insurance. New technologies, medications, antibiotics, robotics, etc., are the reasons we pay so much for our medical care here in the United States. As we want more sophisticated treatments and higher tech tests to pinpoint diseases, our medical costs are going higher and higher instead of becoming more affordable.

I went to my favorite medical website, the Mayo Clinic, and found a great article on cutting medical costs. Due to the fact that the Mayo Clinic’s charges are not the most economical, I wondered what kind of information I would find on their site for this topic. For the most part, the information was pretty much common sense. The article, written by Mayo Clinic Staff, follows in its entirety.

How to cut your medical costs: Do’s and don’ts

How you can stretch your health care dollar during tough economic times — without jeopardizing your health.

By Mayo Clinic staff

“The wind began to switch, the house to pitch, and suddenly the hinges started to unhitch.”

This line from the “Wizard of Oz” could easily describe many people’s experience with spiraling medical costs. About 1.5 million families lose their homes to foreclosure every year because of unaffordable medical costs. Out-of-pocket medical costs, including health insurance premiums and copays, have increased by 45 percent in the past five years — and that’s for people lucky enough to have health insurance through their employers.

Given the double-digit increase in medical costs, you may be tempted to stop going to your doctor or to let your prescriptions run out. But before you go to that extreme — and potentially jeopardize your health — consider the following do’s and don’ts for trimming your medical costs.

Do know the rules

Each health insurance plan has its rules and requirements. Make sure you know and follow them. Failing to do so can cost you. For example, your doctor gives you a prescription before you leave the hospital after having surgery. After you fill the prescription, you discover that your plan won’t cover it because it was written in the hospital — but would have covered it if it had been written in your doctor’s office.

Do have a medical home

Research has shown that receiving care from your primary care physician — as opposed to hopping from specialist to specialist — is associated with lower total medical costs. In addition, many minor health problems, such as stitching up smaller cuts, getting a tetanus shot or dealing with a lower urinary tract infection, can be handled in your doctor’s office, saving you a trip to the emergency room.

Do use the emergency room but only for emergencies

Emergency room care is among the most expensive options for medical care. Of course, don’t hesitate to go if you have symptoms such as significant severe shortness of breath or chest pain, uncontrolled bleeding or sudden weakness anywhere in your body. For less severe symptoms, these tips may help you avoid the cost — and inconvenience — of an emergency room visit:

  • Have a plan. If you have a condition that can suddenly worsen — such as heart disease, migraines, diabetes, back pain or asthma — work with your doctor to develop a plan for dealing with any new complications. Ask about having mediations on hand for common complications.
  • Ask a nurse. Find out if your insurer or employer offers access to a 24-hour nurse line, where you can talk to a nurse trained in directing people to appropriate medical care. If you don’t have access to a nurse line, try calling your doctor or even the emergency room for advice.
  • Consider urgent care clinics. Located in drugstores, supermarkets and malls, these clinics are open evenings and weekends when your doctor’s office may be closed. They can handle many minor but urgent issues, such as a strep throat or a bladder infection.

Do shop around

If you need a test or an operation, ask your doctor to recommend more than one facility. Your insurer may be able to tell you which provider will charge less. Some insurers have Web sites to help you compare costs on common procedures, such as CT scans.

Of course, your best bet is to avoid unnecessary tests and procedures. If a test or procedure is suggested for you, ask your doctor why the test is necessary. And make sure you understand the answer. Get a second opinion if you aren’t convinced. Excessive use of medical services is a major contributor to rising health care costs.

Don’t skimp on prevention

Some of the most common reasons adults end up in the emergency room include falls, car accidents, fever, and chest and abdominal pain. Taking steps to reduce the risk of falls around the house, driving sensibly, getting your annual flu shot, and properly cooking and storing food are just a few of many ways that you can avoid getting hurt or ill.

Get on the healthy-living bandwagon: eat healthy foods, get exercise and stop smoking. Regular exercise and a high-fiber diet that includes fruits, legumes, nuts, whole grains and vegetables can reduce your risk of heart disease and other chronic conditions. And stopping smoking not only cuts your risk of illness, but also saves you money. For example, a pack-a-day smoker could save $5 a day, or almost $2,000 a year.

Don’t drop the ball on refills

Instead of throwing away your prescriptions, take another look at how much you’re paying. Generic drugs are equivalent in safety and effectiveness to their brand-name counterparts, but cost 30 to 80 percent less. Talk with your doctor about whether you can switch to a generic. If a generic isn’t available, ask your doctor about less expensive medication options.

You may also be able to save money just by switching where you buy your medications. Many prescription plans offer a big discount if you use their mail-order pharmacy. And some retail chains offer popular generics for just $4 for a 30-day supply. If prescriptions are still too expensive for you, a patient assistance program might be able to help. These programs, sponsored by drug companies, give free or low-cost medicines to people in need. Some also offer discount cards you can use at pharmacies. To find out if you’re eligible for an assistance program, ask your doctor or check online.

Don’t pay the bill before you check it

Review your medical bills carefully and question anything that doesn’t look right. Read your policy, explanation of benefits statements (also called EOBs) and any paperwork you receive from your insurance company. Make sure you actually received the treatments for which you’re being charged, and check that you aren’t being charged twice for the same thing. Finally, watch for typos or errors in the numbers.

I think the Mayo Clinic Staff did a great job, don’ t you? If we follow the advice provided I know we can save money. Also, if we focus on wellness, we can keep from getting sick and/or needing surgery. Let’s stay healthy and give doctors, hospitals, and nurses an extended vacation. What do you think about that?

By Diane | Posted in Economic Trends, Educational Opportunity, Keeping Healthy, The Power of Education | Tagged , , | Comments (0)

Is the Recession Really Over?

January 11, 2010

The newspaper and the TV newscasters are trying to make us believe that the economy is on the way out of the recession. Do you believe what you are hearing and reading or are you skeptical? You are on the right track if you don’t believe the folks that say we are in recovery, because we aren’t recovering any time soon. How do I know? I have an inside source of information that says the economy is not ready to recover just yet.

The market has been showing modest gains for the last few months. However, these gains are so modest that some people have begun to wonder whether they are from all the money being printed by the Federal Reserve. If the market was being driven by an economy that was getting healthier, trading would be heavier than it is. How can we trust these market gains when the increases are artificial?

Pretty soon, Mr. Bernanke and the Federal Reserve will raise interest rates because there are so many dollars in circulation. These dollars are the ones that are being printed to boost our lagging economy.  These same dollars bailed out the banks and all the other companies that were deemed essential to the economy. Where do you think the money for “Cash for Klunkers” and the $8,500 rebate for first time home buyers came from?

Right now, the 2010 Budget is 50% borrowed and printed money and 50% taxes. Can you believe that the United States, one of the strongest governments in the world, is running the government on borrowed and printed money? The United States government is in the same condition as most of the citizens, in debt up to its eyeballs. Maybe the government needs help from one of those Debt agencies that advertise their services on TV.

In the last month or so, the US Dollar rallied in the currency market. Against all odds, our Dollar is worth $1.00, but how long do you think this is going to last? Do you think our Dollar is going to remain strong against the Euro, the Yen, etc.? I have to tell you that I don’t think it will remain strong. The U.S. Dollar is going to devalue to the point of losing  value in the World’s economy. Pretty depressing, isn’t it? Optimism usually wins out over pessimism in my life, but I don’t think the Dollar is going to remain strong in the long run. This is not just my opinion. My source is extremely reliable. The best thing we can do is diversify away from our Dollar and buy Euro bonds.

We can also look forward to large deficits, increased taxes, and the cost of money is going to rise. So what else is new, right? When are things going to get better? Unfortunately, there are way too many questions and not enough answers.

Get ready for this hot tip! Unemployment is going to stay high. In December, the rate was 10%. From what I read in the paper today, we have to be lucky unemployment is not at 10.1%. Thanks a lot! Hopefully, no more people will be laid off, but until more jobs are created, it looks as if people are going to remain unemployed.

We thought the housing market was coming out of its slump, but guess what? This market will continue to decline. The news reported that commercial real estate rates were declining. Considering what the housing market did from 2001-2006, the bubble was destined to burst all over the place at some point. During the same time period, incomes went up 2% while the housing market went as high as 80%.

How much more good news do you want to hear. Just as I thought, inflation will be in the headlines. That means, interest rates will rise. Didn’t I just say above that the Federal Reserve would raise interest rates to take money out of the economy. There has been so much money printed and released, sooner or later we will have to pay the price with increased interest rates and inflation.

Strangely enough, some good things will come from this recession/depression in that people will use what money they have to pay down their debts. This is really good news because it means my debts will get paid off which will give me more discretionary cash flow. More cash flow is good, because commodities are going to rise dramatically. If you have extra cash, put it in commodities.

Last, but not least, emerging markets are going to rise in comparison to U.S. markets. With your extra cash flow, invest in commodities, emerging market stocks, bonds and currencies.

These are some of the economic trends that we have to look forward to in the coming months of 2010. For the most part, the news isn’t good, but it’s honest. I hope this is helpful in planning your budgets through the rest of the year. If it is, please let me know by commenting and leaving your name and email address. I would really like to know your thoughts.

By Diane | Posted in Economic Trends, Educational Opportunity | Tagged , | Comments (0)