Lets Talk Economy............. (Shall we?)

The Sky Is Falling....

It must be true. It’s in the newspapers, on TV and the radio. The economy is in trouble. Stocks, mortgages, banks, insurance companies. All falling and/or failing.

But, falling from where? The biggest economic boom of all time? The biggest housing boom of all time? The easiest loan requirements of all time?

Business is not down, it’s just different. The media, with their mysterious ways of relaying half-truths and impartial information, have impressed upon us to graciously "miss the point", thanks in part to the number 1 controller of our actions: Fear.

For example, when you hear the negative statistic on the news that home sales are down 33%, it actually means that FIVE MILLION homes will be sold this year. The only unanswered question is: Who will get that business? The media portrays gloom when actually there’s still PLENTY of opportunity – just not as much as before.

The low hanging fruit of two years ago is now much higher in the trees.

There’s plenty of business in the marketplace – just not as much as there was during what was the biggest housing and economic boom of all time. As a result, businesses are adjusting to current market conditions. (And this is especially reflected in the stock market, which has been and will always be the leading indicator of commerce... Investors should take heed.)

Since no one can predict the future, and the economic growth or slowdown answers are not yet apparent, senior management must react to present-day situations. Finding those who are doing so should be a primary focus of investment strategy going forward... Survival of the Fittest! and all that jazz...

An Interesting Reflection...

CAPITALISM STILL LIGHTS THE WORLD:

Sometimes images we see pass across our desk make cases for arguments far more perfectly and far more swiftly than any sum of words may or shall. One such is the “map” of the world compiled by amateur astronomers from pictures take from high
above the earth of the earth “at night”. We’ve included that “map” here this morning for the case is made that only the capitalist nations of the world are alight! One can see the US, Europe, Canada, Japan, the large cities of the coastlines of Australia, the lights of New Zealand, the major cities of S. America et al. One is even shocked by the “light” from India, and perhaps most fascinating, Israel stands out rather archly from the rest of the Middle East.

And then one sees the darkness that is most of Africa other than S.Africa and parts of Nigeria in the west. One sees the darkness of the Middle East. One sees the darkness of the “stans” in Central Asia…and one sees the utter and complete darkness that is the People’s Paradise of N. Korea. It is there, made evident by its complete and utter darkness.

(Co Of: Dennis Gartman - 04/28/09)

A Most Insightful Idea... (Courtesy of Brian Tracy)

I felt the following is a great topic regarding the current state of the markets and economy in the US... Great because it is generally looking at a "solution", and not just the "problem". A refreshing read to say the least. (Posted by Brian Tracy on Mar 25, 2009)

There is good news and bad news in our economy today. First, the bad news: We are immersed in the worst economic situation of our lifetimes. As a nation, we have been on a spending binge for decades, spending money that we have not earned on things that we could not afford, and on terms that we could not pay for, to impress people that we don’t care about that much in any case.

Now, it’s all over. As Stein’s Law says, “What can not go on indefinitely, won’t go on indefinitely.”

After several decades of affluence, Americans fell in love with the idea that they were entitled to have the highest standard of living in the world while working at half-speed, wheeling and dealing, flipping properties and generally trying to “get-rich-quick.” Now, it’s all over, and it’s not coming back. We are living in a new reality.

The good news is that the US economy is still the most entrepreneurial in the world. Americans start more businesses per capita, register more patents and copyrights, create more breakthroughs in every field, graduate more students, and are simultaneously more positive and optimistic about the future than people in any other country.

The key to reversing our negative economic situation is for the federal government to allow the business community to “take off the gloves” and begin investing, producing and creating new wealth and new jobs.

The current federal bail-outs and massive spending plans are imposing a huge financial burden on our children and grandchildren. The latest estimate is that each person in America has been saddled with an additional $48,000 in debt that they will have to pay off out of their paychecks and through their taxes in the years ahead. The tragedy is that virtually none of this big spending will do anything to stimulate job and wealth creation.

Almost every dollar has been allocated to pet programs, give-aways, earmarks, pork belly projects, and social welfare. None of the money invested in these areas will create any real jobs. And most of the spending doesn’t start until 2010 and beyond.

Government has no money. The only money government has is the money that it takes away from the private sector, and from individual taxpayers. Government creates no wealth. It merely redistributes wealth away from the people who earn it toward the government sector.

For every job that government creates, it must destroy approximately 1.4 jobs in the private sector.

Government jobs are those jobs that, by definition, nobody is willing to pay for because nobody values the results or outcome of those jobs.

Jobs in the private sector only arise when people produce products and services that people want and are willing to pay for.

The current administration seems to be obsessed with taxing the successful and productive people in America. These people are also the only real “job creators” in America. If you want to create more jobs, reward the people who create more jobs.

There is a simple solution to the current economic situation: abolish corporate income taxes. Abolish capital gains taxes. Abolish taxes on dividends.

Instead of taxing productive people so heavily that they have no money or incentives to invest and create jobs, remove these tax burdens completely.

The result would be a complete turnaround of the US stock market. Companies and their stocks would increase in value overnight. The monies lost in 401(K) plans would be largely recovered and recouped, thereby saving the retirements and dreams of millions of Americans.

Companies do not pay taxes anyway. Companies only collect taxes from their customers, or reduce the wages that they pay to their employees, and pass them on to the government.

Today, very few companies are earning any profits so eliminating taxes on those profits would cost the government almost nothing. On the other hand, it would signal to America, Americans, and the rest of the world that the US is now the most attractive country in the world to start businesses, and to invest and create wealth. The natural energy, ambition and determination of the American people can and will bring us rapidly out of this recession if entrepreneurs, businesses people, investors and wealth-creators are simply encouraged to “take off the gloves.”

Brian Tracy

(I recommend his website to any who are looking for inspirational ideas and insightful opinions: www.briantracy.com)

April... Bear or Bull Rally? Promising Thoughts.

(Please click on the above picture to get a clearer view... It details what, as investors, we should all be focused on... The main reason why staying invested in a portfolio of good quality companies is paramount to capturing this once in a life time opportunity.)

A quick blurb on Professional Active Management:

We're entering a great time for those of us who believe in active management. We will have the opportunity to acquire great businesses at historically low valuations. Mr. Buffett made his career from 1973 to 1975 because at that time picking grossly undervalued businesses was like shooting fish in a barrel. (OF course, this time the barrel is much larger, and finding the highest quality fish that much trickier.)
Successful investing through this near-term market volatility calls for tactical asset management. As the pace of creative destruction accelerates, it's important to own industry leaders with very strong balance sheets: The strong will get stronger, the weak will get weaker.

Pertinent Closing Thoughts (Bill Gross)

In a sense, we are all children of the bull market, although some of us are more mature than others – a bull market of free-enterprise productivity and innovation, yes, but one fostered by a bull market in leverage, deregulation and globalization that proved unsustainable in its excesses. We now must view ourselves as chastened adults, forced into acknowledging a new reality that is dependent upon bear-market delevering and debt liquidation to deliver us to our new and ultimate restructured destination – wherever it lies. Thus, while historians might describe these years as an evolution, for those of us living it day-by-day it most assuredly has the feel of a revolution. Much like Irving Fisher’s “permanently higher plateau” of prosperity that was quickly turned on its head in 1929, those who would forecast a “permanently lower valley” of despair might similarly be off the mark. Yet there should be no doubt that the bull markets as we’ve known them are over and that the revolution is on. Investing is no longer child’s play.