Tag Archives: economy

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Daily Dollar Briefs

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Investors, “Don’t Despair”: Knight Kiplinger shared several ideas with NPR’s Linda Wertheimer about how people can steer clear of Wall Street meltdowns and investment scandals. – npr

Just another job cut Monday… Textron said it will cut 2,200 jobs, or 5.5% of its world-wide task force. The cuts are expected to save $100M in 2009 — WSJ

1 Million More Cuts: The job market in 2009 is going to be tough, about 1 million job losses tough. Be prepared, and make sure to network now whether or not you think you’ve got a stable gig — Market Watch

Un-Luck of the Irish: As Ireland attempts to recapitalize, investors remain cautious of the country’s banking system, and with good reason — Financial Times

Quick – Short Your Way to Millions: In a down market, it’s tough to make a buck playing the stock market the normal way. Shorting when the market is down is a risky, yet potentially lucrative investing style — Examiner

Still Seeking Retirement Dreams: Older Americans can’t afford a retirement due to the housing market crash and stock market nosedive. What should retirees do when all their options for a comfy retirement have backfired? — WSJ

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The Spending Diaries

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Ok, so I’m about two years late to post this, but it’s still fairly relevant. NY Magazine did a series in 2006 called The Spending Diaries about 6 different people at different income levels, with a breakdown of where their money goes each week and how much they spend.

It’s a bit annoying that their “poor” representative is a MFA candidate whose parents pay for his tuition AND housing. He’s getting by on $20k just fine in various income sources above and beyond a free education and apartment.

Crazy how much all of them spend per week. I dream of being a millionaire, but if I was, I can’t imagine spending as much as these people do.

Then again, I don’t live in New York.

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Economy and Jobs: California 3rd Worst. (How are you faring?)

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Yesterday, the state of California posted an 8.4 percent jobless rate, the third highest in the U.S. According to The Los Angeles Times, The state lost a net 41,700 jobs in November. The rate is at its highest level since 1994 and puts the state behind only Michigan and Rhode Island.

Last month, U.S. employers slashed 533,000 jobs – the most in 34 years – as unemployment rose to a 15-year high of 6.7 percent, reports the San Francisco Chronicle. With the high rates of job loss in my state and elsewhere, everyone is watching their piggy bank. Closely. For workers who lose their jobs, health insurance options are limited. The San Francisco Chronicle reports that (As most of you know, I’m fortunately employed, but as a freelance worker with pre-existing health conditions, my options for health insurance are fairly non-existent.)

It isn’t helping matters that in California, the state’s financial crisis means that traditional safety-net options, such as public health programs and clinics, are being cut back or threatened by the state and national budget crisis. It’s true California’s estimated $41.8 billion budget deficit needs to be fixed somehow, but with the current state of the economy and rates of job loss in Cali, it’s a tough time to go cutting public health programs.

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Economy Woes

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Some people, some people who have a family to support, have lost their jobs. By those standards, I’m doing fine. I’m doing great! But it still sucks to see business opportunities, especially fairly stable ones, in the middle of the fiscal crossfire.

For the last two years or so, I’ve been providing copy to my uncle’s one-man marketing firm. It started out as a gig writing some article summaries, and I made $50 a month. Over time, we upped it to more writing assignments and a $400 retainer. That was when times were good. Now, some companies are cutting back on their e-marketing budgets, which means they’re cutting back on him. And he has to cut back on me.

The good news is that I still have my day job. Well, it’s a day job on a contract that expires Jan 22. And my company is also, howdoyousay, skimming the fat from the company. Contractors are the first to go. We still have a good runway of VC bucks behind us, but they’re now concerned that even with that, we won’t make the revenue we need through advertising and other means because the economy is vacationing in the gutter. I’ve only been working there a year and a month, but in that year the world has changed. I may not have a job come Jan 22, and that’s freaking me out.

Chances are, if I do my job well – and i need to do my job well – they’ll keep me on as a contractor. I’ve been pushing for a full-time gig (which basically means I’ll get some employee-pays-a-little health benefits and won’t have to pay self-employement tax) but they’re pushing back, saying that they need to be really careful about new hires. Of course, I’m supposed to work from the office 4 days a week and 40 hours a week, which seems legally to be an “employee.” But what do I know?

I recently took advantage of my contractor status by traveling and working remotely for about 2.5 weeks. It’s a double-edged sword, because they could very easily use that against me when deciding whether or not to hire me full time. I probably should be in 5 days a week if I really want to get hired on. I guess when it comes down to it, I’m not sure I’m thrilled with the idea of trading in my one-day-a-week work-from-home gig for health benefits. Sounds stupid, but with my anxiety disorder I need a day to just be away from people and focus on my work.

So… my uncle hasn’t gotten back to me on how much I’ll be making a month now that one company cut their monthly newsletter to quarterly. But it won’t be $400. That $400 really put me in a comfortable salary point given my cost of living. Plus, if I ever want to actually save up for year one of grad school before I go, then I need the money. That doesn’t seem possible either, though.

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Economic Ignorance… No Longer Bliss

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I still can’t get over the fact that when capitalism fails, it must be recused with socialism. As my friend put it, it’s “socialism for the rich, capitalism for the poor.”

A long time ago I asked my dad if “The Great Depression” could happen again. He said no, that the government had a system in place now that would make it impossible. Well, now it seems that “system” is more like bailing out the banks when they’ve taken too much risk and screwed themselves over.

Listening to the news these days is scary. All the “financial crisis” this and “Next Great Depression” that. I don’t know how much of it to believe, but I admit, I’m scared. Scared because history doesn’t always repeat itself, and while the markets always tend to trend up over the long run, well, it’s still possible that the Great America could collapse. Isn’t it that we’ve borrowed trillions of dollars from China, a country that is fast taking over as a great superpower? How long can capitalism, American capitalism, withstand the weight of the world moving forward?

The other night, when I was listening to CNN around 4:30am, with the news going back and forth between the economic crisis and the Prime Minister of Iran speaking to the UN, the following thought popped into my mind:

What doesn’t kill you, makes you stronger. What makes you stronger, kills you.

Is America as we know it coming to an end? Or is everyone just way overreacting?

Investing

The Economy is in The Pooper

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Driving home after I picked up lunch late this morning, I was listening to right-wing talk radio, which I do often these days, and the host was bitching about how we need to use our own resources for oil since our avoidance of this is causing lots of commercial establishments to go out of business.

Here’s the big news about 36 retail stores closing their doors…

“Information technology related companies that are closing stores include CompUSA going out of business, Sprint Nextel closing 125 locations, Movie Gallery closing 560 movie rental outlets, and bankrupt Sharper Image shutting down 90 to 180 stores.

Other retailers shutting down shops are: Ann Taylor, 117 stores; Eddie Bauer, 29 stores; Cache, 20 to 23 stores; Lane Bryant, 150 stores; Talbots, 100 stores; Gap, 85 stores; Foot Locker, 140 stores; Wickes going out of business; Levitz going out of business; Zales, 105 stores; Disney, 98 stores; Home Depot, 15 stores; Macy’s, 9 stores; Pep Boys, 33 stores; Ethan Allen, 12 stores; Wilsons, 158 stores; Pacific Sunwear, 228 stores; Bombay Company, 384 stores; KB Toys, 356 stores; and Dillards, six stores.” — http://www.theinquirer.net/gb/inquirer/news/2008/06/24/retailers-close-hundreds-stores


Yikes!!!

Guess those rebate checks didn’t work. Big surprise. I finally cashed mine. It’s going to pay off what I spent in Israel. Sorry Bushie.

The economy is really f’d up right now. I’m sure you’ve figured that out for yourself. I don’t know enough about economics to determine if this is a normal downswing in the cyclical pattern of the markets, or if we’re kind of screwed ala 1929.

What I do know is that my Sharebuilder and Vanguard accounts are suffering. I know now is really a good time to get in on investing because the economy is in the dumps, but it’s still hard to watch the little money I have turn into even less money!

I’ve been tracking my investment accounts separate from my liquid cash for about a year now. That includes all accounts my money lives where some risk of losing that money is involved, plus my CDs because I’m at some point going to move them into my Roth IRA or some other investment account.

The problem in really figuring out what the numbers mean is that I’ve added money to my investment account throughout the year, and while I could go back and calculate just how much I’ve added I really don’t have the time to figure that out. What’s more telling is my individual ETF and stock investments, and even more so my Vanguard funds where I pretty much know how much I’ve invested.

So a year ago on 6/21/2007 my total investment account was worth $21,014.57.
I liquidated about $5200 of a CD and moved that into my cash accounts, so that brought the account down to $22531.18 after it had increased to $27552.65 (not because it was performing well, but because i had been investing more aggresively than in the past and actually saving some money).

At the moment, my total investment account is worht $22,511, but I have some debt in my cash account because I spent like a mad woman on vacation. Luckily all should balance out next month when I’m paying just $550 for rent & storage in between moving and finding a new place to live.

So my investments are pretty much staying at the same base point. That’s mostly because the CDs and prosper account and monthly deposits have kept that stable. I’m sure I’ve actually lost more money in those accounts than what it looks like at first glance.

This is maybe more telling…

My Roth IRA account that I started, like, two years ago, was at $4019.73 on 6/21/07
I did not add or subtract any money from that specific acccount since then.
That account, the Vanguard Retirement 2050 account, is at $3759.84 at the moment.
I’m pretty sure I invested $4000 in that account, so it’s down, and it will likely keep going down as the economy flushes down the toliet.

Looking at my Sharebuilder funds, I can see that they’re all doing shitty. I was updating my spreadsheet a few times a week previously, but since I was gone for a month I had not updated it at all. I also did not invest anything more in that month.

Here is the value of each fund on 5/19 versus 6/15…

COMV: $56.48 / $52.24
EWZ: $308.16 / $273.94
KOL: $149.1 / $164.4
MCD: $206.55 / $196.1
PBD: $298.85 / $384.11 * ($100 was invested automatically in this account when I was gone)
GLD: $518.94 / $507.80
WFMI: $89.08 / $78.86
EPI: $183.74 / $144.81

As you can see, only my Coal ETF is making me any money. But it’s not enough to balance out all the other losses. I really don’t have a great deal of money invested in Sharebuilder because I’m starting small, it’s my Vanguard accounts that have the most of my money. And they are performing better, albeit not much better, than my individual ETF and stock picks.

I’m just going to leave the money in my sharebuilder account. I plan on investing slower, about $50 a month, in the clean energy ETF and the coal ETF, back and forth, because i figure either we’re going to get the energy we need from coal or cleantech, or both, but in the long run they’re probably pretty good bets. My Brazil and India funds are suffering, but if I ever get a raise I’d like to push more money into those while the economy is sucking. My coal ETF gives me enough exposure to Asia, though, as does my clean energy ETF. I’m a little confused as to Gold’s performance right now, as it had been going up before when the looming recession/depression was its own media gold, but now the ETF is kind of sitting there. I’m curious what will happen to it 20 or 30 years down the road. It just sucks that it’s going to be taxed as a collector’s item. I really need to get some of the gold ETF in my Roth so I don’t have to deal with that crappola.

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What Recession?

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Every other day the media is telling us that we’re either in a recession or the government has miraculously saved us from entering one. I’ve even heard talk about an upcoming depression, despite plenty of safety nets in line to prevent another 1929.

These are the times when I really wish I knew more about the economy and what it all meant. I watch my stocks go up and down… and down again, but understanding why is a whole other matter.

The latest AP article I read on the subject explained that Federal Reserve Chairman Ben Bernanke just said that a recession is possible.

Seems like he’s late to the game, doesn’t it?

Ok, so he’s in charge of the Federal Reserve, which must have some significance, economically speaking. He said that policymakers are “fighting against the wind” in trying to steady the economy.

I guess earlier this year he tried to give a pep talk on how great the economic future was looking for this country and now he’s going for the surefire glass is half-empty approach in case of a meltdown. Better to say I told you so late then I never told you so at all.

This is where the tricky economic babblygook comes in and I get lost. The GDP (or gross domestic product) will not grow much over the first half of 2008 – and could contract slightly.

Sounds like a bad situation. Growth is good. Shrinkage is bad.(Just ask a porn star.)

Apparently under a rule someone wrote somewhere, six straight months of declining GDP means we’re in a recession.

So Bernanke thinks that the stimulus package will help economic growth in the second half of this year and into 2009.

Uhm, I’m still under the impression that a $600 tax “gift” is not enough to encourage most folks to run out and spend. Or maybe I’m just so caught up in this personal finance world that I forget how most people spend their money.

If I were the government, I’d give out larger chunks of money to random people, with a weighting on lower income families. $600 is not enough to encourage spending, but maybe $3000 is. So don’t give it to everyone or just limit to really specific demographics and viola, you have more consumer spending. $600 is usually just enough to pay off credit card bills, if you’re frugal with your credit.

Maybe what the government is doing for businesses will help more, as well as those interest rate cuts that I’m still unclear on. One of the key interest rates was cut to 2.25 percent to “spur buying and investing by individuals and businesses.”

I’m not sure how that spurs buying and investing. All I know is that my ING Direct account savings interest % is lower than it’s been in a long time and that makes me less likely to spend any of my money.

I guess homeowners and people who have larger loans benefit from this. I certainly don’t.

Will the Fed drop its interest rate again when it meets at the end of April? There’s plenty of speculation, but no one knows for sure. It seems that stocks will certainly be following the news closely.

Still – most of the trouble seems to stem from banks loaning out these unfixed interest loans to people who wanted to buy houses who just couldn’t afford them. Now those people, and those banks, are figuring out their screwed. I didn’t go to Harvard or anything, but does it really take a calculus scholar to figure out that equation doesn’t work?

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State Income Taxes: Why California Sucks

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When I headed west and moved to California a little over two years ago, I was fresh out of college and not at all worried about taxes. All I wanted was to move away from Chicago’s bitter cold and into the Cali sun. At that point in my life I figured I’d be lucky to ever make $20k a year, and being in such a low income bracket, the income tax amount from state to state didn’t make much difference.

Actually, at the time I didn’t even realize that there was a difference per state in terms of income tax levels. I just thought that everyone in any state paid the same amount for state and federal taxes, just that the state taxes went to the state you lived in and federal went to Bush and his war.

Apparently – that’s not correct at all. (Duh, me.) Each state has its own state income tax. Just my luck, California is the worst for income tax rates at my level of earnings.

Even New York and my home state of New Jersey would be cheaper when it comes to state taxes (although they’re both ranked highly in the list of “expensive income taxes.”)

For a yearly income of $50k – $60k (which is about what I expect to bring in over 2008)…

My state income tax rate & fee,
assuming an annual income of $55k:

California — 9.3% or $5115
New York — 6.85% or $3767.50
New Jersey — 5.525% or $3038.75

I’m surprised at how expensive it is to live in Maine. 8.5% for anyone making $17k or more. Yikes. Who really wants to live in Maine anyway?

Investing

You Can’t Scoff at Deal or No Deal if you Play the Stock Market

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Have you ever watched Deal or No Deal? If so, how frustrated do you get when the contestant is offered a really good amount from the banker and then the contestant goes on to play against the odds and ends up with a measly ten bucks?

Watching the show it’s easy to think, gee, this person is an idiot. But how different is that from playing the stock market?

Of course, stocks have a lot more math to them. The odds aren’t so clear cut. Each company has its own risks and it’s own potential for success.

But when it comes down to it, you either believe in a company or you don’t. You believe that in box #1 there is a goldmine and you stick to your gut or you change your mind and hope you’re right.

Obviously you can’t control the stock market, but I never realized just how vulnerable it (and the American dollar) was until recently with this huge recession going on.

I can’t figure out if my stock investments are bad choices or if the recession will just have to work through my piggy bank before my stocks can start growing, and hopefully returning to their investment value and exceeding it. Still, I have my doubts I’ll see that money again.

As I’ve said earlier, my Sharebuilder account is where I can play the stock market for the long term. I’m not day trading… which maybe is a bad thing, given the recent performance of my GLD holding. It was up to over $100 a share just a day ago and now it’s down to $93 a share. My $49 profit has widdled away to $6, and I wouldn’t be surprised if it goes negative soon either.

Meanwhile, all of my other funds are performing miserably. One of the other reasons I started my Sharebuilder account is to diversify my portfolio internationally. I’ve got random bits of stock in Brazil, India and the rest of Asia (coal and cleantech stocks) — all ETFs. I’m hoping that if the US crashes and burns maybe these other economies will survive and even grow. I believe that the future for the US economy may not be so bright. China and Asia are gaining power by the millisecond. I can’t imagine that the US will be able to keep up. I think over the next century the US is going to lose some of its superpowers, for better or worse. I believe there’s going to be a big war at some point down the road that’s going to hit all of the world’s economies much worse than the Iraq war. There will probably be more attacks on America, and there will be a third world war. I just don’t see how it’s possible to avoid it. Scary, but I think it’s probably true.

Of course war times, historically, are usually good for the economy, right? Well, except this Iraq war doesn’t seem to be living up to that. So I don’t know. I can’t really guess the future, but the way the world is right now, and the way people are so stupid and stubborn and violent, I can’t see us avoiding some huge conflict for much longer.

I’m not sure how that will effect my stocks. If I survive through such a war… maybe a diversified portfolio will be a good thing to have?

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Question of the Day: Can Wealth Be Fair? – from Brip Blap’s Blog

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Blogger Brip Blap poses the question “can wealth be fair?” The blogger goes on to list three different scenarios where in order for people and a country to build wealth, others might have to suffer. The blogger does not say that (s/)he agrees with these scenarios. In fact, Brip Blap goes on to explain how (s/)he is upset but each of the scenarios discussed.

#1 — A college graduate basically decides to save nothing and spend all his money throughout his life. Is society responsible to pay for his medical expenses and basic necessities later in life when he can no longer work?

Brip Blap Says: “I detest this attitude. His attitude will take money out of my pocket when he is older…. (still) I doubt anyone is prepared to see senior citizens sleeping on the streets.”

I say: I think financial education should be a required, ongoing class in public school. Each year you should have a different amount of money (income) to budget with, and the idea of the class should teach you about saving money, investing, and why credit card interest rates are the devil. After that, if someone choses to go out and spend all their money right away, especially if they’ve made enough to save, then I don’t see why the government should have to pay anything to them when they’re older. I don’t think the government should be able to “force” you to save your money through taxes, but should provide a clear and easy-to-understand tax incentive for people to save money. It should be income based, maybe in match form, so those who are in a lower income bracket but manage to save 5 percent of their income get a 10 percent match, where those in the upper income bracket get a 5 percent match… or something like that. (Those in the higher income brackets would likely be investing anyway.) For rich people who don’t save, I don’t mind them ended up on the streets. It’s their own fault.

#2: A child is born with 50+ different health problems. Keeping her alive is more expensive than treating dozens of other children. The family is in debt, the health insurance system is hurting because it can’t afford to treat this kid.

Brip Blap Says: “I knew a child like this. She was a lovely, happy and intelligent child who suffered from an incurable genetic condition that meant her chances of living to be a teenager – much less an adult – were minimal. Even if the chances of her living to be an adult are slim, she deserves her chance at whatever life she can have. My higher insurance premiums that may have resulted from that? Please.”

I say: If we are going to have a health insurance system at all, I think it should not be based on the concept of wealth. We should all pay equally into a universal healthcare system and receive the same quality health coverage, regardless of our pre-existing conditions. Those who are well off may wish to also purchase individual insurance for additional benefits. Yes, even a government-run healthcare system has to make some money to pay for the people who work there, but until healthcare leaves the hands of private, profit-seeking companies, it will never be fair.

#3: Is it fair that a middle class married couple pays more in taxes than someone living off their investments, even though they both may be taking in the same amount of money? Is it fair to tax the rich more, but keep taxes on lower-income families low?

Brip Blap Says: “The unfairness in the system – the loopholes, the weak taxation on rich people – may not benefit me now but it will when I am financially free. I plan to be one of the people living off my investments, earning no wage income and avoiding my fair share of taxes. So if I want to build wealth, why should I rail against this system? I intend for it to benefit me in the end.”

I Say: Taxes are never going to make everyone happy. If you live in a society with no taxes and a very limited government, the rich get richer, the poor get poorer, and the middle class disappears. Then the poor start a revolution and the rich get slaughtered. This has happened in history many times. Yes, it’s sounds extreme, but that’s what happens if you make it impossible for the poor to have at least some opportunity to make it into the middle class. The more opportunity you give, the less likely we’ll have another civil war one day. So as much as I hate knowing how much of my income gets zapped from my paycheck due to taxes, I know that at least some of those taxes benefit me (I’m glad the bridges are maintained, as to avoid falling into the East Bay). However, I’m not sure about taxing those living off interest income less than people earning the same amount. It seems taxes should be based solely off of income, regardless of where it comes from.

Brip Blap closes with a great point: “there is no fairness in a capitalistic society. Does anyone want complete fairness? Inequalities in the system are what allow wealth to be built.”

That’s very true. Otherwise we’d live in a communist society where we’d all (supposedly) be equal. We’d all work, get the same pay, have no reason to better ourselves or society. What kind of society would that be?

That’s why I think the role of the government should be to keep wealth in check. To give opportunity to people who are born in poverty and even middle class families. If I had my way, I’d make it illegal for parents to give their children money, and instead they’d put that money into a giant pot that would be divided up evenly amongst all the children in the country. It seems fair for individuals to build wealth, but unfair for their children to profit from such wealth. Yes, I come from a family where I did profit from my parent’s wealth, but at what cost? I’d probably be better off if I learned about budgeting from a young age, knowing that I would be on my own with a few hundred dollars in the back to start off with. Allowing families to pass money down from generation to generation is where unfairness begins.

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