Saturday, August 9, 2008

US in a Recession?

A Million Dollar Question Today is "Are We In A Recession"?

All of us have been grappling with this situation and are caught in the 'official definition' as opposed to 'what we feel is reality'. At the end of the day, I believe that we have sectors that are in full recession, others that are entering recession, and finally a third that are not in a recession. The government stats reports that the economy (US GDP) is expanding at a 1.9% average annual rate. And it takes the National Bureau of Economic Research–the official arbiter of when and if the U.S. economy is in recession–between 6 month to 18 months after a downturn begins to label it as a recession. So, no matter what, we are only going to find out (officially) recession or not, almost 'after the fact'. This has been the case, and will be the case for the foreseeable future when it comes to US Recessions. Other countries might look at it differently!

The market of jobs still has 94.5% people employed......By any measurement, that does not bode well to call this a doom and gloom, or call this an on-coming depression. When that number goes weaker, I will change views, but 94.5% people employed is a huge number. Of course, you may ask 94.5% of 'what total number'. People that are unemployed beyond 26 weeks are not even counted in this stat (I am pretty sure of this). People who move to open some consulting business, home-based-business, sell real-estate or candles or make-up product are not counted in that number, even though at one point in time they were part of the overall economy, overall employment-measurement and part of a healthy job market.

In reality, layoffs are hitting more industries than just home, construction and home-improvement. Home prices keep spiraling lower in certain areas, whilst in others they have stabilized. They have stabilized simply cause it is home-buying-season. As soon as we have Sep-Oct-Nov roll around, things will start slowing. Lawyers, Home Improvement Contractors and Home Inspectors have told me that there was a 40% cut in their business this summer, esp. when markets are supposed to be hot and demanding. The credit turmoil in the financial system has been spreading, most recently reaching the insurance and credit card market. Consumers are still strapped for cash due to the higher energy and food prices, and 'transportation costs' being slapped on the bottom line of every non-consumer purchase, which then gets eventually passed on to consumers. Of course, due to the weak dollar the one engine that keeps on humming is the Export market. This is almost a savior of our current economy.

The ironic part of everything when it comes to recessions is that government rushes to publish a GDP forecast, which then gets revised later, and even later, it gets revised again. With these 2-3 revisions, the fun-fare associated with the announcement is mainly there with the 1st number, with the other revisions pretty well ignored by Wall Street. That is true until some chief economist or fed-watcher starts publishing in a report that gets widely publicized by CNBC, CNN, FOX, BusinessWeek, Times or story.

Finally, if it smells like the bottom of the economy, then we will see Barrons, Times, Business Week, Wall Street Journal, Money, FT and other major publishers put out headlines......Once you see most of them with those headlines, we know it is the bottom.

At that point, what should we do? Capitalize on it and start doing ETF purchases, Dollar Cost Averaging into great funds and also pulling money from the sidelines and jumping into the 'fast moving sectors' . I am underlying here that I am not saying get into the dogs (worst performers). Washington Mutual is under $5, and has more value in the land of its bank locations (hot corner locations) than the goodwill in the business. But, how many cockroaches does it still have hidden in its closests is the biggest question that even the CEOs/CFOs/CIOs don't know......

So, until then......Stay safely on the sidelines, not investing any new money.


Friday, August 1, 2008

Beat Inflation with Smart Deals

Beating Inflation in Your Own Smart Way.......

From Live Royally, Spend Smartly.....Jul 21st,2008

Folks, we have all experienced a rise in price of everything from bread, cereal, fruits, vegetables, movies, airlines, cars, car-rental, hotels, vacations, fuel, shipping, postage etc......Not much that anyone can do about the rise except:

1. Break the mold, and aggressively shop where you have never shopped before. What does that mean? Have you bought a book online? Have you bought a gift through eBay? Have you shopped at the Vegetable-Fruit-Markets instead of the big chain stores? What About Me> I am experiencing a deflationary environment with my aggressive shopping techniques, even though it takes a bit more time to search, shop and find.

2. Break the mold, and open up credit card accounts that offer "free money". This includes Discover, Chase, Citibank, American Express and other big institutions. I am not even close to recommending to go deeper in debt, but actually trying to get you to get new credit cards, get free money if you charge one time or $100 or $500 in first x months. In addition, get 0% APR if you credit is good so that you can transfer any balances from your old debt. After you are done with the card, close the card and wait for the next offer. What About Me> I have been opening and closing Credit Cards and experiencing a deflationary environment with my aggressive moves by getting 10K ThankYouPoints that get me $100 of free gasoline cards, even though it takes a bit more time to search, shop and find.

3. Break the mold, and open bank accounts that offer $25 free, to $125 free, to $250 free (getting rare) with a deposit amount of $25 to $100. Close the account after 3-6 months, and then wait for the next offer. What About Me> My wife just received $125 for a Chase account that she opened with $100, and before I close it, I will have her refer me to get $25 referral fee, and I will get $125 for opening the account.

4. Break the mold, and start collecting stuff that you do NOT use at home, of a decent value. Wireless Mouse that you do not use anymore that is still in great condition, and can be sold on eBay/Craigslist/Amazon/etc for $10 to $50. Laptop charger/adaptor that you do no need anymore since you just upgraded your laptop, or have a spare that you do not use anymore. Unlocked cell phone, novels, study-guides, text-books, Computer Games, PS2 Games etc. What About Me> Just sold my old memory for $98, all of my 3 spare adaptors of my old laptop for $60, and some books for $28. Getting ready to sell some PS2 games and Game Boy DS games on eBay.

5. Break the mold, and look at the credit cards that you have and replace them with the ones that offer you 5% cash for purchases at Gas Stations, Drug Store and Groceries. Read the terms carefully (words like upto will be critical). Also, make sure they do not class the Sam's Gas Station as a regular store (and not a gas station). What About Me> My wife and I have been using the 5% cards which nets us a pretty penny since our average credit card usage per year is $30K, and we carry ZERO balance on our cards.

6. Break the mold, and start aggressively shopping for CD rates so as to build a small ladder. What About Me> I am no where close to retirement, but have been dealing with a bank that will match ANY rate in Chicagoland for the term I choose. This makes my job a LOT easier, and keep my personal information protected by keeping the accounts only at one bank.

7. Break the mold, and start aggressively saving money for yourself and your significant other. This simply translates to sacrifice. Avoiding the dumping of products from the 'easy to grab locations near checkout', or 'buying that expensive coffee', or 'going out to lunch everyday' or 'buying 32 oz gulp drinks' or 'getting groceries from gas station convenient stores' or 'whatever.....'. We are Americans that show that we do NOT have time, but have MONEY. It is really the opposite. We have ample time and should go the extra mile to avoid those 'high margin purchases', and stick that money in a kitty for the future. We are our own worst enemy in stealing our own future from ourselves, but spending 'tomorrow's money today'. What About Me> No way.....Never. We have been drinking water at McDonalds/Burger-King/Taco-Bell/TGIF/Bennigans/etc restaurants for 10+ years now, and just recently, America has caught on to the craze of drinking water. Can you imagine the number of $1 and $2.50 worth of drink-money that is sitting in our pockets!

America, it's time to Sit down and Compute the quarters/dollars like the Indian, Chinese, Koreans, Japanese and many other countries are doing today. That is precisely why their savings rates (in their nation) are in double digits, and ours barely approaches a positive number!!!!!

Hope that this helps you go 'hmmmmmmm'......What About Mua?

Enjoy That Weekend (but watch that wallet!)