Get the Economy Back on Track – Well-Being, Wealth, N More

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 Change is Necessary for Progress | 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 Investing in the market | Comments (3)

Is The Recession Behind Us?

February 26, 2010

If we are reading the newspapers and listening to some of the analysts on TV, we are reading and hearing people telling us that the economy is doing better. Just who do they think they are kidding? Certainly not the American people! The politicians in Washington think if we are told the economy is turning around, we will believe it. Well, all I can say is…

Get real! I don’t know about you, but I certainly am NOT fooled into believing that the economy is recovering, because it isn’t, yet. Unemployment is in double digits in the states, even if nationally it is 9.7%. The unemployment rate here in Wisconsin is 11%. People are very cautious, and they should be. President Obama tried to stimulate the economy by spending $787 Million we didn’t have to stimulate spending, bail out the auto industry, banks, and last but definitely not least, Mr. Bernanke and the Federal Reserve printed money to put a false bottom in the stock market last quarter. Well, guess what? Stock prices are finally catching up with the padded market. People are finally realizing the impact that printed money had on the market. Have we learned our lesson?

We (the American People) know exactly what has happened here and we have tightened our belts for the long haul. The fact of the matter is our legislators haven’t learned a thing. Our incumbents have turned a deaf ear and a blind eye to what has been going on. Our illustrious legislators told citizens of the Concorde Coalition that as long as we can keep printing money to keep our economy going, we will. Can you believe an answer like this? Our legislators don’t care that our country is going down the tubes here and they are the reason. Have any one of them had the “guts” to say “STOP IT?” Do you think they would do it? Heavens no! They can’t agree, so they stopped talking!

We have to get off our complacent “butts” (please excuse the expression) and do something to stop the government from printing more money to solve our problems. The national debt is in the “Trillions.” Do you know what a “Trillion” is? I just know that a trillion dollars is 3 more zeros than a billion dollars. I’ve never seen that much money, have you? Our national debt has gone from billions to trillions with no end in sight unless we, the voters, stop the horrible spending. We also need to start creating jobs so people can go back to work.

I don’t think President Obama realized what he was getting into when he took office two years ago. He had the American people’s best interests at heart when he signed the Stimulus Bill. I’m sure he had no idea what was going to happen next. He probably thought he was going to have more say in how the country was run. Sorry Mr. President! You are a figure head. Unfortunately, there is a House of Representatives and a Senate that have the real power over the country. Then, we have the Federal Reserve Board. What are they thinking, printing all this money? How are we going to fix this situation?

Let me recommend a few things and see what you think? Mr. Bernanke, we need to stop printing all this money. STOP PRINTING ALL THE MONEY! Let the economy and the market do what it can to correct itself. We need to pay off our debt. The American People are expected to pay off their debt, why shouldn’t the country take responsibility for its debt and stop expecting China to buy our debt. They have already quit!

Another recommendation is to get rid of the incumbents in Congress. Let’s vote all new Representatives and Senators into Congress and start fresh with legislators that have integrity and care about what happens to America. We need representatives that care about their constituents and want what’s best for the country as a whole. That is an excellent place to start, don’t you think?

Let’s see if we can get our country out of debt! Senators Gramm and Rudman tried it quite a few years ago. Somehow, their bill fell by the wayside. Our new battle cry should be, “Let’s Get Our Country Out of Debt!” The ball is in our court, so to speak. What I mean by that is, we need to let our legislators know that we are not going to tolerate all this spending. The bills need to be paid!

We need to get people back to work so families can get out of debt and we need to get our country to stop printing so much money and start living within our means. This all sounds so simple!

Did you know that most of the people getting new jobs in this difficult economy are being hired by small businesses? Absolutely! Did you also know that the IRS is taxing small businesses until it hurts? The IRS has hired a bunch of new agents to investigate small businesses to make sure the country is getting all the taxes that are due. Did you also know that 50% of the American people making less than $50,000 are not being taxed at all? The rest of the people are making up for it, small businesses included. How are we ever going to experience a recovery if the businesses that are providing new jobs are being audited and taxed even more. We are shooting ourselves in the foot, here.

We have the best country in the world no matter how many problems we are experiencing now. Let’s utilize our right to vote and get rid of all the representatives and senators that cannot stand up for what’s right. Let’s also put our support behind small businesses to decrease the unemployment rate. If our politicians can’t do what is right, let’s get them out of office. Let’s also make our government tighten its proverbial belt and stop spending. If we have to have a spending plan in our homes, so should our government.

Let me know if you agree or disagree. Comment. Don’t be afraid to tell me what you think.

Entrepreneurial Education – Elective or Required?

February 17, 2010

If you’ve read the latest lagging economic indicators, especially the number of initial applications for unemployment published in our newspapers lately; you’ve read that the overall unemployment rate is 9.7%. Frankly, I’m not sure what statistical method was used to compute these numbers. Wisconsin’s unemployment rate is over 11%. I’m sure the rest of the States are sporting numbers just like ours. Unfortunately, this lagging economic indicator will likely continue well into the second quarter this year, if not longer.

How are we supposed to make it through difficulties like this? One answer involves a change in the way we look at ourselves. I don’t know about you, but I was raised to believe that “…if I did well in school, I would get a good job (as an employee) and retire with a pension.” Does this sound familiar? This is an antiquated thought process that needs to change NOW if we are to survive this continuing economic downturn and in the future. We need help! Help, that only successful entrepreneurs (people that have built multimillion dollar businesses from the ground up) can give us.

I’m sure you are reading this and scratching your head wondering what I’m talking about. Let me provide you with the article precipitating this discussion taken from the Opinion page of USA Today online for February 9, 2010. There is a very poignant article written by popular educator and bestselling author Robert Kiyosaki relating to this topic. Please read it in its entirety and let me know what you think.

We need two school systems

Education in America could use a big dose of innovation. How about one public school system for employees, and another for entrepreneurs?

By Robert Kiyosaki

In the summer of 1932, presidential candidate Franklin Delano Roosevelt promised, “I pledge you, I pledge myself, to a new deal for the American people.”

Today, it is time not for a “New Deal,” but a “New Mission.”

America’s schools need to take a page from the businesses that have been created by entrepreneurs over the past decades. Henry Ford, Bill Gates, Steve Jobs, Sergey Brin and Larry Page have all given us the road map, but the path toward entrepreneurship is often the road less traveled America’s schools.

The U.S. unemployment rate is currently 9.7% in what many call a “jobless recovery.” So what should we do? The problem and the solution can be found in America’s educational system and its current mantra: “Go to school and get good grades, so you can get a good high-paying job.” In simpler terms that means, “Go to school to become a good employee.” But there are too many employees, which is why we have an unemployment problem. Today, kids just out of school aren’t finding jobs. At the same time, many of their parents are going back to school for retraining. But they’re not finding jobs, either.

The idea of a high-paying job for life is truly an American dream — but no longer a reality. With low-priced labor and lower-priced, higher-performance technology, high-paying American jobs will be disappearing at greater speed as they move overseas.

Two-track system

America’s education system needs an injection of innovation — which is just what entrepreneurs do. We need two different public school programs: one for employees and one for entrepreneurs.

The way to train entrepreneurs is almost exactly the opposite of the methods used to train employees. Another common thread about Ford, Gates and Jobs is that they all dropped out of school. This is not to say education is not important, but training entrepreneurs is different from training people to be employees. It is much like the difference between traditional education and the military academy model.

Many of the lessons I drew upon to write my book, Rich Dad, come from the U.S. military academy system.

In 1965, I left a sleepy sugar plantation town of Hilo, Hawaii, and journeyed to Kings Point, N.Y., to attend the U.S. Merchant Marine Academy. With four years at the academy and six years as a Marine Corps pilot, including two trips to Vietnam, I gained many of the real-life skills and character traits I count on today as an entrepreneur.

Success in the military is a great bellwether signaling achievement in business. For example, the Israeli Defense Forces are a breeding ground for education and entrepreneurs, where many serve in units specializing in military technology. At the beginning of 2009, the 63 Israeli companies listed on the Nasdaq, many led by former IDF members, outnumbered those of any other foreign country, according to the book Start-up Nation by Dan Senor and Saul Singer. There are simple lessons here for America’s gridlocked education system.

If I were running America’s schools system, I would create the U.S. Business Academy for Entrepreneurs, modeled after our federal military academies. Admissions would be via congressional appointment along with nominations from community business leaders. The entrance exams would be rigorous; the curriculum would be very different from traditional colleges.

On first day at any of the five federal military academies, each student is required to memorize the academy’s mission. In the military, mission is more important than life. After leaving the Marine Corps and starting my own business, I found many executives with MBA degrees focused only on money. Money was their only mission. If they could cut expenses by firing employees, so be it. This was unconscionable at the academy and the Marine Corps. As military officers, our mission was to serve our country and bring our troops home alive. It was drummed into our souls that our mission was more important than our lives.

The mission of the U.S. Academy for Entrepreneurs would be to create sustainable, well-paying jobs for employees by aggressive growth of the business. Too many executives are trained to grow the business through mergers and acquisitions, using massive amounts of debt. Though this might make shareholders happy, in most cases it rips the soul out of the business, loading it with debt while putting the jobs of employees at risk.

Creating real jobs

If corporate executives cannot grow a business organically, they will often repurchase their shares to make it look as if the share price is going up — again to keep shareholders happy and the CEO employed. This is business manipulation, and not the true mission of a sustainable business. The lesson learned is, a loyal employee is not as important as money.

The U.S. Business Academy for Entrepreneurs would have only real entrepreneurs as teachers. I would ask that they work for only $1 a year (think of the great entrepreneurial CEOs who have turned around their businesses doing the same). You see, if they were real entrepreneurs, they would not need the money. They would teach for the same reason the students are there: the mission to create entrepreneurs who create sustainable jobs for the country.

Whether you agree with me or not, I hope it’s clear that we need to create more entrepreneurs — since only entrepreneurs can create real jobs.

We need to pledge ourselves to this New Mission: job creation by those who are true job creators.

Robert Kiyosaki is an educational entrepreneur, founder of the financial education-based Rich Dad Co. and author of best-sellers Conspiracy of the Rich and Rich Dad Poor Dad.

Posted at 12:16 AM/ET, February 09, 2010 in Education – Forum, Forum commentary | Permalink

I happen to agree with Robert about what needs to be done. Please comment!

By Diane | Posted in Entrepreneurial Education is Necessary!, Get the Economy Back on Track | Tagged Create Sustainable Jobs, Education for Entrepreneurs | Comment (1)

Stimulus vs Stimulate: How Do We Get The Economy Back on Track?

February 7, 2010

When President Obama took office, he signed a $787 Million Stimulus Bill to stimulate the economy out of recession and get money back to the people to spend. I truly believe the President meant well, but the Stimulus Package created a $12 Trillion dollar debt, which equates to $39,000 for every man, woman and child in America. Our country is in so much debt; however, nobody in Washington seems concerned about this. Just because they can, they started the printing presses at the Federal Reserve and just printed the dollars they needed.

These dollars were given to people in the forms of tax breaks, Cash for Klunkers, $8,000 for first time home buyers, etc., hoping to stimulate industries that needed it the most. The stock market benefited as well from the influx of printed money. As a result, a bubble was “created” to change the “Bear” market so investors wouldn’t panic and get out of the market completely. Did you think the gains last year were for real? Heavens no! They were created.

When President Obama signed the Stimulus Package into law, I’m sure he didn’t create it by himself. I’m sure his advisers encouraged him. If he felt that this package was going to turn the economy around and keep unemployment below 8%, per Congressman Sensenbrenner’s Newsletter-November 2009 – January 2010. The President hoped to put Americans back to work and keep unemployment figures from going above 8%. His heart was in the right place, but he was definitely misguided.

Congressman Sensenbrenner felt that if the President had continued to focus on the economy after he signed the Stimulus Package into law, perhaps things would not have gotten so out of hand. Instead of focusing on the crippled economy, President Obama turned his attention to health care reform and pushing cap- and -tax legislation that managed to spend $800 billion to reduce global temperatures minutely. The Congressman believes that America will suffer as a result of these misguided priorities.

To tell you the truth, I was unaware that President Obama had spent so much money trying to reduce global temperatures. As important as global warming is to the world, I think we need to focus on our severely ailing economy. There are so many people unemployed right now. We need to increase the manufacturing of goods and create new services to decrease unemployment. Putting millions of people back to work should be priority one right now. The focus needs to be on the private sector. Everything else can be prioritized when the economy starts holding its own.

Right now, we have dug ourselves an enormous “debt” hole that will be difficult to climb out of. We need to take an enormous amount of money out of circulation to let the economy get back on its feet. Unfortunately, there are so many dollars out there, the Fed will have to start raising interest rates to start reeling in the extra dollars. What then? If taxes are raised, Congressman Sensenbrenner feels that the country will be thrown from the recession to a “depression.” That happened to President Herbert Hoover many years ago.

I’m not going to get into a political discussion here, but from Congressman Sensenbrenner’s point of view, the Democrats are stifling the economy with government programs. Political rhetoric doesn’t really get us anywhere, but it makes for interesting reading. We have gotten to the point where something has to be done about the high unemployment rate. If we can get people back to work, the economy may begin to straighten itself out.

People are so concerned about their futures, that they are being very careful with their money in the present. We can’t keep spending what money we do have to artificially stimulate the economy. Saving is more important right now than spending. As a result of people saving their money, apparently President Obama is talking about another stimulus package. We cannot afford another $787 billion stimulus package with the amount of debt we are in right now. The government needs to start taking responsibility for its actions.

A person would not be allowed to get into so much debt. Credit card companies are diligent when they wan their money. When they don’t get their money, a person feels it immediately in his or her credit score. The government is allowed to carry an enormous amount of debt. No one seems to care that the government is carrying $12 Trillion in debt. This is totally outrageous in my book. The government must stop this spending spree before the United States loses its economic status with the other countries in the World. We definitely don’t need that type of humiliation.

The President should not be allowed to spend billions of dollars without a plan to pay it back. If government debt instruments are lucrative investments, then we should all benefit by earning the interest payments. Actually foreign governments are investing in America’s debt. Investing in our government’s debt is one way to benefit in this recession; however, it is much more important for the government to become fiscally responsible and stop spending money we don’t have. No more money needs to be minted to create artificial bubbles of economic health, especially in the stock market.

I have to say that everything I’m telling you is documented as real and true. We have a long way to go before the economy is back on its own track. The economy has been so artificially stimulated, it will take us years to break even-if that is even possible, I don’t know. The government needs to start saving money instead of spending it as soon as it comes off the presses (so to speak). We need to cut back on our own personal spending to the point of buying only the necessities.

The people are doing the best they can to get by one day at a time by saving their hard earned money for emergencies. Everyone is cutting back, trying not to spend what they don’t have. The government should do the same thing. Our government needs to stop spending money it doesn’t have in order to become fiscally responsible. Until that happens, our economy will be chasing its proverbial tail.

I hope this article has elicited feelings in you. If you have any questions or concerns, please write them in the comments section. If I don’t know the answer to your questions, I will get answers from my colleagues at work. At any rate, please let me know what you think.