If Stock Market Analysts seem to be wrong, why do we believe them?

I am just wondering if we all have some sort of sick pathology.  For crying out loud, why do we believe people who are perpetually wrong.  I read a story on Yahoo news, where they quote the chief strategist from Wachovia Bank.  Wachovia is at $5.45 a share.  In February of 1989, as far back as the yahoo charts will go for me, they were at $11.31.  Remind me again whey these guys are such good strategists?  If the best financial advice you can offer is, “Take the company that I am the chief strategist for, and short it”, you shouldn’t be offering too much advice.

The equivalent of this would be my brother coming to me and telling me he was broke because , and asking if I had an extra few k lying around.  Then, after he takes the loan, he tries to give me financial advice.  Aren’t these brilliant strategists the same ones that asked for a mere 700 Bil?  That is over $2,000 for every man, woman, and child in America.  Wow.  They certainly have some cojones.

I guess I look at all these people saying that we are going to have a recovery in the next six or so months.  That is what they were saying about a year ago.  And things definitely aren’t better.  I guess we will have to see, but I think we should still see the inflation riding back on the “we love the printing press” policies of the of the Fed.

Good luck


Auto Bailout Crash

Well, we have another example of people wanting a buck. Or maybe $25 Billion. This seems like a really small figure compared to the magnitude of the Big three problems. They ran through $18 Billion in the last quarter. The last quarter included July, and we didn’t see the big downturn until August. What that is saying to me is that it took two months plus a bit of horrible economy for them to lose $18 Billion.

Compare this with what they are asking for. Wagoner said they could be bankrupt by Christmas if they don’t get cash. If the economy stays where it is at now, no better or worse, the Big Three will burn through that money by the end of March. Does anyone think that we will have a massive economic turnaround by then? I don’t. $25 bil will just ward off bankruptcy for 3 months.

GM has been losing market share to the Japanese for a long time. When the economy was flush, they were just getting by. How can the UAW president say the company and the union are fine, it is just a tough economy? GM has been stumbling down the street dead drunk for years. The fact that it is falling is not the curb’s problem. They have a program that is like AA for business. It is called chapter 11. The Unions rode steel into the ground, and now the Big Three are crumbling also. Nucor came out of the steel collapse. Hopefully we will see something similar come out of this disaster.

By the way, I don’t own an American car. There is a great non biased magazine called Consumer Reports. When GM’s cars come up on the reliability reports favorably for a few years, I will be interested. Until then, sorry.

Traditional IRA’s looking better and better.

When you look at whether you would like a traditional IRA or a Roth there are basically three considerations.

  1. Do you expect to be in a higher or lower bracket when you retire (making more or less money)
  2. Do you expect overall taxes to be higher or lower when you retire
  3. Do you have extra money to put in (putting in dollars after tax effectively lets you put in more)

Lets look as these issues one at a time, based on the current financial disaster

Will you be making more

In this instance, I am looking at what the feds are doing as far as monetary policy. By injecting huge amounts of dollars, they are going to cause massive inflation. It is economics 101. According to this story, we are already into it about $1.8 Trillion. Assuming a population of 300 Million, we end up with about $6,000 for every man, woman, and child. Um, Mr. President, could you exclude me from the plan and just send me the $30k for my family? Especially seeing the spectacular results so far, I wonder how much more money we will send in with questionable results. All of these dollars are going to inflate our currency. Result? Inflation and earnings (not real earnings) go up.

Will Overall taxes be Higher or Lower

I will give you a hint. We were already looking at a mess when we had social security and medicare with a healthy economy. With the coming economic crisis, taxes will have to go even higher just to keep the leviathon from tumbling. The other part is that next year they will try to lower taxes on middle and lower income people. This might be your chance to put in money at very favorable rates before the spike.

Do you have extra money to put in

This is all up to you. I would just recommend having a nice nest egg in case things get even worse. We thought things wouldn’t get worse a couple weeks ago. Good old Cramer called the bottom of the market at 11,500. Looks live we have slipped a bit since then. It can always get worse, but if you are prepared, it isn’t all that bad.

Good luck, and take another serious look at the traditional IRA. Due to shifts, it could be right for you.

You Were Right to be Worried

My son just came up to me and told me he hurt his bum.  He wanted me to kiss it better.  Does anyone else feel like this is what we have done for the banks?  Why would we do something that doesn’t seem to be making the banks feel any better and seems to be making us about 700 Billion poorer.

I don’t know if anyone else has taken a look at the situation, but the market is getting crushed again today.  I remember the happy days when 3% was a steep decline.  The S&P, the broadest measurement, is down over 9%.  That isn’t a steep decline.  That is falling off a damn cliff.  It is carrying the senior citizens down with it. The suicides are starting up.  It is tragic, and I can see it getting worse.  The news today was that retail sales took a massive dip.  This is not the time to be working at the Buckle.

Everyone is looking for the big event around the corner, be it rising unemployment, more welfare for the banks, more welfare for everybody.  Mccain and Obama are going to have a real treat when they are done with the campaigning.  The prize is to be at the helm of of a ship that is on the rocks.   I know that my retirement funds have dwindled down to pitiful levels.  I am 29, and it is not a huge problem.  But this could be the end of free enterprise as we know it.

The time has finally come for the US to pay the piper.  It is going to be tough for the baby boomers, and there are only so many Walmart greeter jobs out there.  The next 5 years are going to show massive changes to welfare.  I hope we can handle the increase in tax rates.

Pelosi hosed it up

Let’s be clear right away.  I am not saying that the bill would have passed if Pelosi hadn’t spoken, but the chances would have been better and the excuses even flimsier.  First of all, let’s get some facts straight.

The bailout reeks of big government, and the republicans are supposed to be against that, and some of them truly are deep down inside.  Another problem is that it removes the moral hazard (idea that poor consequences follow poor decisions).  The last of all, a lot of people don’t even think it will work.  I know I think we are in huge trouble, and a big painful cleanse might be what we need.

On the other side, how much can we risk.  If the banks go downhill, Detroit, the home market, and utilities will follow, along with many businesses that need credit to operate smoothly (almost every decent sized business).  That is a lot of layoffs and a lot of problems.

I am willing to bet that there were some representatives that were weighing the two sides in their minds, and had trouble deciding.  They got a call from the minority leader and were told, “This is a bipartisan thing.  Let’s join hands and do it.  It is a good chance for us to rise above the fray.”  They weren’t really sure what to do (constituents were calling at and emailing against it), but they decided that it would help things run smoother in DC, and there is a lot of work to do and they might be able to call a favor in.

Then Pelosi gets up and ends any idea of bipartisanship.  Meanwhile the representative is getting more pressure from his constituents.  Those two things do not push anyone to vote for a bill if they are on the fence, especially when both factors are pushing one way.

If Pelosi could have kept here partisan mouth shut there would have been two possible outcomes.

1.  Bill passes.

2.  Bill fails and Republicans look more like obstructionists and very politically motivated.  (although they do a lot already)

She spent some political capital with her venting that she did not have to spend.

By the way, Barney Frank’s comments were brilliant.  They framed the problem just as the Democrats wanted.  After hearing that republicans were offended, he said, “I’ll make an offer. Give me those 12 people’s names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they’ll now think about the country.”  When you mumble so badly it is hard for me to understand you, you have to be endowed with incredibly quick wits to get as far as Frank is.

New column at my new blog

Just posted another post on the Housing bill, link here.

I am writing from a new address now

Here it is.