US economy, confidence

[terminatd]

The bond market is dead, the devaluation of the US dollar means that long term bonds are a negative investment. The US dollar has lost 10-20% to other major world currencies. The s&p is overvalued. Gold is on the rise again. we are living in strange times. We are poised for an world economic disaster with deflation of goods and inflation of energy costs. Consumers are in huge debt. So, how do you feel about your future, job, economy etc. Not to be a downer, but these are serious times.

 

[FordSVTFan]

Well thank god you live in Canada, because I think your view is a little skewed

 

[AV8R]

Please don't be so optimistic about things.

 

[FordSVTFan]

The sky is falling, the sky is falling!!!

 

[terminatd]

Don't shoot the messenger, check the economic indicators, its going to be a slaughter. Preservation of capital will be the buzz phrase. No, I don't want to see this happen.

 

[Jon]

Originally posted by terminatd
The bond market is dead, the devaluation of the US dollar means that long term bonds are a negative investment. The US dollar has lost 10-20% to other major world currencies. The s&p is overvalued. Gold is on the rise again. we are living in strange times. We are poised for an world economic disaster with deflation of goods and inflation of energy costs. Consumers are in huge debt. So, how do you feel about your future, job, economy etc. Not to be a downer, but these are serious times.

The Fed did what we all expected and held the overnight federal fund rate at 1.25%. Yes, this does discourage bond investiment but that is not necessarily bad news. Let me explain. The commitment to keep short term interest rates low will also stabilize long-term rates and calm our inflation expectations. These combine to lower nominal interest rates which is a real benefit to corporate and private borrowers. Heck, I just refinanced my mortgage at 5.75% with no points last month. The extra $700/month will go right back into the ecomony. Maybe some coil overs and headers for the Cobra. Back to my point, this greater liquidity should help boost gains in the stock market and stimulate further investment. Additionally, a weaker dollar will bring back competitiveness to many US multinationals as well as domestic manufacturers.

However, I do believe the EBC will raise rates soon.

Most indicators show declining energy (oil) prices. That should further drive our recovery.

World economic disaster? How do you figure?

 

[Ghoust]

all relative...it will get better.we have seen worse...

 

[terminatd]

Jon, that house that you just remortgaged has dropped 20% in value.

The fed isn't worried about inflation, its deflation. They have indicated that they want the US dollar to drop relative to other currencies and the international standard, gold. Money has been leaving the US recently at an enormous rate. Americans have been buying luxury condos here in Canada, making 15% on their money in the last 5 weeks. The US manufacturing and wholesale goods prices are dropping at historical rates. Its like the comuter industry, would you buy a cobra today if it was 1000.00 cheaper next month. I don't give the the fed much credit in being able to move the economy. The shift from a gold backed economy in the 70's to a paper one gives them no power. They recently stated that they would just print more money to stimulate the economy, this will devalue goods and assets.

 

[Jon]

Originally posted by terminatd
Jon, that house that you just remortgaged has dropped 20% in value.

The fed isn't worried about inflation, its deflation. They have indicated that they want the US dollar to drop relative to other currencies and the international standard, gold. Money has been leaving the US recently at an enormous rate. Americans have been buying luxury condos here in Canada, making 15% on their money in the last 5 weeks. The US manufacturing and wholesale goods prices are dropping at historical rates. Its like the comuter industry, would you buy a cobra today if it was 1000.00 cheaper next month. I don't give the the fed much credit in being able to move the economy. The shift from a gold backed economy in the 70's to a paper one gives them no power. They recently stated that they would just print more money to stimulate the economy, this will devalue goods and assets.

I'm still wayyyy ahead on home equity, it's a California.

Yup, the Fed has never really had to worry about deflation in the past . Greenspan can learn a few things from Japan and the liquidity trap they've been experiencing for the last year or two. But we are far from deflation, thankfully. Yes, prices for some goods are dropping but mostly due to sales incentives like rebates in the auto industry. Overall, we are still running 1-2% inflation which is a good standard. Yes, capitol is leaving (the US) since interest rates are currently higher in both Canada and EMU but that's normal, trillions are traded everyday in the capitol markets --it's the ebb an flow of int'l money.

Switching from Gold to fiat money gives the central bank (the FED here in the US) the ultimate power. Matter of fact, monetary policy is THE most effective way to stabilize the economy. Strangely, it is more effective when contracting than expanding. But that's another matter. If anyone is interested I can elaborate about the benefits of NOT having a gold standard.

Actually, they don't print money. The Bank of Canada, for instance, buys and sells gov't bonds to member banks from it's own asset reserves. Nothing is created from thin air. The Bank of Canada can't print money, that's the job of the Gov't. Neither can its US counterpart the "FED" (Federal Reserve).

You do make a good point about jobs. At least here in the US we are having higher than normal unemployment. Towards the end of the year we will come out of the recession and jobs should pick up to natural levels.

But why are you so worried, you're Canadian, right? You guys are doing very well by comparison!:coolman:

 

[03DOHC]

Originally posted by terminatd
Jon, that house that you just remortgaged has dropped 20% in value......

Not in CA and especially in the Bay Area. I just refinanced too. My place has gone up in value 50% in the last year and a half, and it's a tiny place.

Work seems to be picking up slightly for us. So from my rose colored glasses it seems to be getting better.

 

[terminatd]

Your home values are relative, you have lost value in an international perspective, a loss in standard of living. The real estate market is the only cylinder keeping the economy above water. The same thing is happening here, our home increased 100,000 in the last year. everyone is refinancing, extending debt and in the last year pulling funds from the market. Since investment is more mobile and international, I am really looking at the global implications. There ia a saying that when the US sneezes, Canada gets a cold. That is true of other nations. I have justed cashed in US dollars for Gold bullion and have significant US market exposure(35% of portfolio).
The state of California is in huge trouble, the debt is something like 18 billion and if they fired every state emlpoyee they still couldn't balance the budget. Taxes and government services will have to rise and the result will be an erosion of the relative gain on your home.
The incentives from the vehicle manufacturers is deflation. The fed claims that the energy costs have gone down while the Wall Street Journal claims that they have gone up. I would believe thew Journal. I have seen many Cobras on this and other boards for sale due to job loss or reduction and many of the so called economic experts are useless. So, while I don't have a crystal ball, its the sentiment of "Joe sixpack", the average guy that is the best indication of the economy.

 

[Leadhead]

Originally posted by terminatd
Your home values are relative, you have lost value in an international perspective, a loss in standard of living. The real estate market is the only cylinder keeping the economy above water. The same thing is happening here, our home increased 100,000 in the last year. everyone is refinancing, extending debt and in the last year pulling funds from the market. Since investment is more mobile and international, I am really looking at the global implications. There ia a saying that when the US sneezes, Canada gets a cold. That is true of other nations. I have justed cashed in US dollars for Gold bullion and have significant US market exposure(35% of portfolio).
The state of California is in huge trouble, the debt is something like 18 billion and if they fired every state emlpoyee they still couldn't balance the budget. Taxes and government services will have to rise and the result will be an erosion of the relative gain on your home.
The incentives from the vehicle manufacturers is deflation. The fed claims that the energy costs have gone down while the Wall Street Journal claims that they have gone up. I would believe thew Journal. I have seen many Cobras on this and other boards for sale due to job loss or reduction and many of the so called economic experts are useless. So, while I don't have a crystal ball, its the sentiment of "Joe sixpack", the average guy that is the best indication of the economy.

You might be right, however here is another way to look at it. This is just my opinion. The reason the dollar is devalued right now is probably because the countries that opposed our actions in iraq dumped their stock of dollars because they didn't think we could pull off what we did. Like you said earlier, this also effected the bond market. When we get positive control over iraq and it's economy and start rebuilding it, our companies are going to bust that market wide open. Our stance will be that untill we see fit that iraq is on it's feet, repudable companies will handle iraqs foriegn trade. The companies that will broker these deals will be american and british companies, and what currency do you think those deals will be done in? That's right, dollars. Considering iraqs vast oil reserves, we will probably set the oil price very low to undercut opec and then we will be selling iraq most of it's food! You see, we will be profitting off of both sides. Not only will the dollar at least gain back it's 20%, but alot of other countries currencies are going to lose their value by probably the same amount because they will have to buy back the dollar in order to buy oil at the same low price as other not so dumb countries. Why do you think there is all of this baseless reasoning of NOT lifting sanctions on iraq? Those are the countries that sold their stock of dollars.

I could be wrong, but that is what I think is going on.:shrug:

 

[FordSVTFan]

Lead that was a good retort!!!

 

[SVT4ME]

Wow all this info about money. Work hard and you shall be rewarded.

 

[harry gilbert]

WWIV is just over the horizon. Invest in defense stocks. Lay in supplies of food and water. Stock up on guns and ammo (oh, that's right, you live in Canada, no guns allowed).

 

[Jon]

Originally posted by terminatd
Your home values are relative, you have lost value in an international perspective, a loss in standard of living. The real estate market is the only cylinder keeping the economy above water. The same thing is happening here, our home increased 100,000 in the last year. everyone is refinancing, extending debt and in the last year pulling funds from the market. Since investment is more mobile and international, I am really looking at the global implications. There ia a saying that when the US sneezes, Canada gets a cold. That is true of other nations. I have justed cashed in US dollars for Gold bullion and have significant US market exposure(35% of portfolio).
The state of California is in huge trouble, the debt is something like 18 billion and if they fired every state emlpoyee they still couldn't balance the budget. Taxes and government services will have to rise and the result will be an erosion of the relative gain on your home.
The incentives from the vehicle manufacturers is deflation. The fed claims that the energy costs have gone down while the Wall Street Journal claims that they have gone up. I would believe thew Journal. I have seen many Cobras on this and other boards for sale due to job loss or reduction and many of the so called economic experts are useless. So, while I don't have a crystal ball, its the sentiment of "Joe sixpack", the average guy that is the best indication of the economy.

I like that analogy about the US sneezing and Canada getting a cold .

Some goods and services have devalued while others have increased. Goods and services that bear greater international competition, like cars, are likely to go up an down in price with their foreign counterparts. So while buying a Cobra may be a deal (compared to last year) the insurance you'll pay for it has probably gone up. Mine has at least.

But falling prices are not necessarily bad for the economy. While it is true that businesses have to charge less their costs are less too.

The energy cost issue is a vague one because it depends on your time horizon. Over the last quarter oil has dropped in price. But I suppose it may be up this week versus last. More to the point, whether that's good or bad depends on your perspective: higher oil prices will boost infation, lower oil prices will boost profitability for those industries that depend on oil.

Yes, in international terms my house has been devalued by the fall in the dollar.

For the average Joe Sixpack, inflation really should mean nothing. Unemployment however means everything. And this is probably the most concerning economic indicator.

While 18 billion sounds like a lot it could easily be wiped-out by a good year or two. The state economy works in cycles. Right now we are in a recession it is expected that the state will run up the debt during these periods. A balanced budget is not appropriate at this time. The thing about recessions is that the longer you are into a recession the more likely you are to come out of it. Generally, recessions are a deflationary adjustment in the economy.

I find it curious that you cashed in your dollars for gold. Why not cash in your dollars for Euros instead? Why gold?

 

[terminatd]

Leadhead,
The Irag situation is important but doesn't figure into the current economic equation. The US is spending tons of dough upfront and will recoup it over time. The benefits in Iraq are to stabilize the region and world oil prices.

SVT4ME,
Excellent point, work hard. Most people don't think about the global economy and their is good reason not to think about something that you cannot control. For people with savings, investments or retirement funds these issues are crucial to preserve your capital. These people can move their investments globally and they are leaving the US at an historically high rate.

harry gilbert,
We are allowed to have guns, just not the good ones.

Jon,
I was wrong, the California debt is 38 billion. Doesn't California and all states have to balance their buget by law. The Feds don't have to. US government and municipal bond defaults are at a 3 times historical average. The US debt has risen 750 Billion in the last 19 months. The bond crash will be huge. Certain equities will do well, however others will get hammered.
As for gold, its the only safe haven and I expect a huge pop. The euro is supported by the two largest economies Germany and France, both are in big trouble. The euro as 1st class world currency has been the beneficiary of the week US dollar and not based on econimic integrity. The EU members cannot agree on economic policy, the too many interests scenario ala the UN. They are worried that the currency is too high and they are about to tank. Japan is at a historical low in gold holdings as is the US. Gold is the old standard, paper is in trouble. These are strange times, never seen before so the generalities don't apply. Buy hard assets, gold, silver, real estate and a cobra for fun.

 

[Leadhead]

Originally posted by FordSVTFan
Lead that was a good retort!!!

Thank you.:beer:

Leadhead,
The Irag situation is important but doesn't figure into the current economic equation. The US is spending tons of dough upfront and will recoup it over time. The benefits in Iraq are to stabilize the region and world oil prices.

I would agree accept in the area of dollar value. Such a large portion of the dollar or any currency's value is effected by currency trading which is global in scope and so would be directly effected by speculation of the stability of that country by foriegn traders. I am not talking about your average day trader, I am talking about banks, some governments and corporations. Institutions that move large volumes of money on a dayly basis.