Change
I asked my wife a question tonight. One that I have pondered a lot over the last year. I asked her, “What should we do for our family if we have a high inflationary environment?” This is an important question for sure, but it led me to analyze something else. Why would we have high inflation? Also, what does the world look like today?
So, I said to her there are 3 things I want you to consider. We can invest in the stock market. We can buy oil. Last, we can buy gold. I don’t want to hear anything from my friends about BONDS. I know that is another important asset class, but now is not your time. I asked her to look at the differences between these 3 things (things I would invest in possibly). I said, “The DOW is about the same as it was over 11 years ago. I sold Diamonds on the DOW at 8600 back when I was a broker. Oil is a great way to deal with currency changes as it pertains to the US dollar and we all know that you buy gold in an inflationary environment.” She said, “Ok, My head is hurting now, and I can’t remember if I took Macro or Micro economics. What should we do?”
So, I started to think about these facts and how they apply to my family and our economy. I believe no matter how much you hope things will get better they won’t. I feel very confident that you can’t talk the economy into a recession any better than you can talk yourself out of one. To make a point, I know that Affiliated Foods went bankrupt. Now that they have a chain of stores named Cranford’s is done for because they can’t get merchandise (they have already closed stores as of today). Chrysler is in bankruptcy this has meant dealers are being shut down. I know that Crain Dodge Chrysler is effectively out of business because Chrysler said so. I know that I see TONS of commercial real estate up for lease. Heck, I know at least 5 guys who have accepted a 20% or greater pay cut to keep their job. All of this has happened in the last 4 or 5 months. Those types of things DO NOT affect the economy instantly. Whether or not you believe it EVERYONE does not spend all their pay check on the Saturday after they got it on Friday. These poor people who have lost their jobs are going to make it by for as long as they can no matter what. If you can agree with that logic that it will take time to see what happens more than a few months, let me take you to where my mind went next.
The world stage. The global economy. How does America affect it or does it affect us? I do believe that these things are intertwined, but I do believe that they can’t swing as fast or as hard as our local economies. What I do see are wars in Iraq and Afghanistan. What I do see are Iranian ships moving unopposed into international waters as a show of strength. What I do see is a North Korean Military detonating nukes and shooting off missiles. I see a country, Israel, that others countries want gone from the earth. I see countries like Japan being threatened by their neighbor with nuclear arms. It would be like Mexico detonating a nuke within a few hundred miles of our border. I see dictators like Hugo Chavez change the constitution of his country so he can stay in power longer and do it with no problem. I see all these things happening and that leads me to the question. Is it an economic question?
I have studied and been a little informed on history because it is something I like. I know some, if not all, of you have heard the statement…”WWII got us out of a recession.” I think I have even heard, “The wars have always turned our economy around.” These ideas, I believe are out there, and I also believe that some tried to apply it to the Bush administration. Here is the question though. What if the “great leaders” of their times didn’t get into wars to save their economies? What if they got into wars because of their economies? That is the question. This is my question. As I go through life worrying about social issues (but not getting involved), I always do everything thinking of my children and my beautiful wife. How can I serve and protect them? I think of school, nice clothes for the girls, and treats for my lovies. This is now my question. What if the leaders of our country and the world cannot stop the powers of math and science? I don’t believe they can. I am most confident that you will see unemployment in the 18% – 20% range. I know that Social Security will fail. There will be no universal health care or anything like that. I know that most of you will be worse off than your parents…. What a sad thing.
I am sad to tell you that the power of math is too great to stop. I am sad to tell you that your dreams of retirement will never come to fruition. I am very sad to maybe have you realize what all this means I am saying. I know I have always been a voice of optimism and hope. I know that my mother will be very disappointed in me for sharing this. She always said, “Share good stuff Dan.” I have always tried to do that. I talk serious but always focus on the positives. So I will do that now. There is a chance for us to come out of this, but only if we have any leaders left. This will only be solved by a leader. I know that there are none in Washington. If your hopes are on them, you are not in a very good spot. So let us pray for a leader. In the mean time, love your family. Be good to people and try to make the world the best place you can make it. Change is coming for a while, and it’s not the kind of change anyone of us will want. 5.27.09
May 27, 2009 at 5:35 pm |
I think gold might be a bit overvalued right now. While it is traditionally a good bet during an inflationary period, Washington is printing so much money at an alarming rate that they are undermining the value of gold. Once hyper-inflation sets in I wouldn’t expect an equal rise in gold. I think the best long term investment is real-estate, and in particular, land. However, I wouldn’t put it past this administration to instate a new tax on land owners who have made out OK.
May 27, 2009 at 5:43 pm |
True. I am curious if anyone else has some ideas. I do believe my answer is in the blog. I will rebutt my opinion after the discussion. So you say land, but a possible tax risk. I will ponder that.
May 27, 2009 at 10:03 pm |
Recently I asked a Vietnam veteran “how much food water and supplies do you have for your family to get by on and for how long if all power water and heat were gone for an undetermined time? This man was a retired colonel from West Point. He replied “managing well, 3 months. Now every person in the united states could not do this do to finances and IQ. I do believe we are lacking common sense if we have not invested in this first for our families. New supplies used and changed out regularly would be a small investment. However I have seen canned goods go up dramatically. Positive no, smart, yes.
May 29, 2009 at 1:19 pm |
Our grandparents told our parents the same thing. Our parents told us the same thing. Problem now is we need to tell our kids that, and this time it is for real barring a miracle (or the right kind of leader.)
June 14, 2009 at 4:30 pm |
I read and hear about the economy everyday but must admit I don’t see it’s effect at all. The stores and resturants are full of people, unemployment here in San Antonio is less than 6% the same was true in Fort Worth. I feel bad for those who are suffering but it has yet to hit any where I have lived the past 4 years. It seems TX is holding its own.
June 14, 2009 at 5:27 pm |
I am glad to hear you are doing so well. Texas is “holding its own.” It currently only has a 6.7% unemployment rate and that is below the National average of 8.6%. Texas has been affected quite a bit in this current economic downturn. To put this into perspective you must look at what your unemployment looks like currently as compared to last year. Here are the stats:
San Antonio had an unemployment rate of 3.7% in April of 2008. Its unemployment rate for April 2009 was 5.4%. That is a 45% increase to the unemployment rate in San Antonio in one year.
Dallas/Ft.Worth had an unemployment rate of 4.1% in April of 2008. Its unemployment rate for April 2009 was 6.6%. That is 61% increase to the unemployment rate in Dallas/Ft.Worth in one year.
The US had an unemployment rate of 8.6% as of April 2009. The US’s unemployment rate has increased 79% in the same time period.
While comparatively speaking, Texas, as well as Arkansas, is doing far better than most of the rest of the country, it is the trend that you must look at. Also, if you look to the blog, I am more interested telling you what is coming and how to prepare for it. I am only dealing in the facts. Also, you must ask yourself, “When is an unemployment rate too high?” Is 7% too high? How about 10%? Maybe 15%? San Antonio is doing better than most of the country, so that is good. The rate at which San Antonio’s unemployment rate is increasing is much lower than most of the country. So, if it just stays in that shape here is what San Antonio’s unemployment rate could look like in April of 2010 (7.83%) April of 2011 (11.35%) April of 2012 (16.35%).
Also, know that the numbers came from http://www.bls.gov/news.release/pdf/metro.pdf. This is from the USDL Bureau of Labor Studies. Once they officially post the more recent numbers the rate of unemployment has increased a little. I also know that currently the State of Texas still has many jobs provided by Oil. As you can well see at the gas pumps they are hanging in there making money. Oil at this time tends to be a lagging indicator with big moves. So, if I am correct, your economy’s unemployment rate will probably get more in-line with the national rate at some point in the future.
One more stat that you might find interesting is Texas lost 173,000 jobs from April 2008 to April 2009. The only state to lose more was California. So, for every 2% increase in unemployment for your state 200,000 more jobs are lost. I just wanted to explain the facts I have found. I hope this sheds some light on my blog.
I would also like to add the following link http://thepage.time.com/2009/06/14/stimulus-apologies/
This is from today.
May 29, 2011 at 5:52 pm |
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