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Old 10-15-2008, 02:09 PM   #76
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Confidence is only slightly improved given the events of the weekend, but I don't think that confidence is made of steel.

Good call - the confidence was definitely shaky. Markets are down over 5% again today. Retail sales declined more than expected last month.
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Old 10-16-2008, 01:40 PM   #77
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Good call - the confidence was definitely shaky. Markets are down over 5% again today. Retail sales declined more than expected last month.
Yeah, what I should've done was sold on Monday the stocks I'd bought the week before, and then bought some of them back today....or in the next few days, as I expect we're going to keep dipping.

Visa, which I'd bought a few days after its IPO this year, is killing me. I know it'll get back up there in time, but it's going to be a while.
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Old 10-16-2008, 10:04 PM   #78
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YouTube - 10/13/2008 - Peter Schiff On Glenn Beck: Inflation Nation?

Civil unrest, potentail future Martail Law cited.

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Old 10-16-2008, 10:54 PM   #79
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Civil unrest, potentail future Martail Law cited.

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Some of this is okay. I think it's premature to assume that we will go as far as the Weimar republic, but I'm glad someone mentioned that we need the economy to work itself out and that the government gives incentives for spending money and borrowing via low interest rates, and little for savings. The conservative government won in Canada thereby insuring we will get our savings plan that allows us to save 5,000/yr and not pay taxes on the income derived from those investments. Hopefully people will take advantage of that. Savings has been targeted as bad by Keynesian economists up to now. Monetarists tend to value savings more.

When a person saves they are increasing their standard of living over time. The money we save goes into the bank and the bank lends to companies who then buy capital assets (machinery, equipment, buildings) and hire people to use them. When the output increases there are more goods and services available to the people so prices go down and so the percentage of household spending you have is capable of buying more goods without diminishing your savings percentage. We need a ratio of savings and spending based on what people feel they need in the future to retire. It will be hard to get people to do this if they are addicted to spending so it's ultimately up to us to educate ourselves on personal finance and get cracking.
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Old 10-17-2008, 01:03 AM   #80
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Some of this is okay. I think it's premature to assume that we will go as far as the Weimar republic, but I'm glad someone mentioned that we need the economy to work itself out and that the government gives incentives for spending money and borrowing via low interest rates, and little for savings. The conservative government won in Canada thereby insuring we will get our savings plan that allows us to save 5,000/yr and not pay taxes on the income derived from those investments. Hopefully people will take advantage of that. Savings has been targeted as bad by Keynesian economists up to now. Monetarists tend to value savings more.

When a person saves they are increasing their standard of living over time. The money we save goes into the bank and the bank lends to companies who then buy capital assets (machinery, equipment, buildings) and hire people to use them. When the output increases there are more goods and services available to the people so prices go down and so the percentage of household spending you have is capable of buying more goods without diminishing your savings percentage. We need a ratio of savings and spending based on what people feel they need in the future to retire. It will be hard to get people to do this if they are addicted to spending so it's ultimately up to us to educate ourselves on personal finance and get cracking.
We use to believe those principles in our country too.



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Old 10-17-2008, 08:24 AM   #81
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In times like this, people get sussed up when the government starts spending money. But I believe that there needs to be a dichotomous approach: The government needs to spend money to stimulate, while encouraging the average person/family to save for themselves.

Looking at the Great Depression, FDR's policies of government spending and nurturing--policies that would be labeled as "socialist" by today's American conservatives---played a huge role in getting America back on its feet. FDR-created institutions like the Tennessee Valley Authority and the Works Progress Administration created thousands of jobs and helped build America's structural and social infrastructure. They cost wealth of dollars at the time---but they gave citizen-employees both money and dignity in a time when they needed both. They also left us with a greatly improved infrastructure in areas in which it was sorely needed.

I've said before & I'll say again, Obama's plans on creating an American "green" industry, as well as his service corps plans, are strikingly similar to the ideals and philosophies of FDR in the Great Depression.

Granted, WWII played a huge role in plucking us out of the Depression, as well...and we're currently seeing that we can't rely on war to do the same for us today.

So, I think that government spending is crucial in times of national and global financial crisis. It's not necessarily the government that's hurting---but it will be if the citizens continue to do so.

That said, I do strongly agree that there needs to be a strong persuasion by the government to encourage---and reward, if need be---its citizens to save for themselves. It's not just that it's the only way that people can truly dig themselves out and stay afloat, but it's really a culture that we need to re-adopt here in America.


Purpleoscar--how does your 5,000/yr tax-free plan work? Is it similar to a Roth or traditional IRA (Roth is taxed as income, but earnings and withdrawals are not taxed as long as the account's existed for 5+ years and you're 59 1/2; traditional IRA contributions are tax deductible, but earnings are taxed at withdrawal)? Or is it neither, and it's tax-free all around?
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Old 10-17-2008, 08:47 AM   #82
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IT makes me sick to my stomach the amount of money people are losing in the stockmarket. My mother for instance at age 75 is lucky to be living as comfortably as she is in her retirement years since my father saved and retired "smart" before he died and left it all to my mother who then inherited a nice sum from her mother when she died. My Mother has an excellent Financial adviser and they wisely diversify investments here and there, monitored closely, but this recent stock market activity has been devastating. It shocks me to hear my mother say things like "Well, I lost $54k this week" or most recently "I lost $160kso far this month" in the Stockmarket alone. Yikes! Here's to hoping it and she recovers.....that's my sister's and my inheritance!!!
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Old 10-17-2008, 08:54 AM   #83
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Here's to hoping it and she recovers.....that's my sister's and my inheritance!!!
Ouch--that sucks! I'm a believer that money set aside for possible healthcare down the road should only be in minimally- to unrisky investments, and that money set aside for inheritances should start to be doled out while you're still alive. The older generation in my wife's family, for example, is starting to pass away. We and my mother-in-law have benefited from some generous inheritances over the last few years. But the thing is, my mother-in-law could really have used that money 15 years ago when she was a single mother raising two kids, one of whom with cerebral palsy---not now that we're all grown up and taking care of ourselves.


Hopefully, though, if your mom can lose $160K in a month, she has enough in there that it'll all be good in the end anyway. Fingers crossed for you!
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Old 10-17-2008, 10:14 AM   #84
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Warren Buffett's buying stocks:

Buffett gives investment tips in op-ed - Oct. 17, 2008

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"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," said Buffett. "And most certainly, fear is now widespread, gripping even seasoned investors."
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Old 10-17-2008, 11:05 AM   #85
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Well that's sorta easy for him to say and do..

I'll take some of his money to buy some if he's offering
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Old 10-17-2008, 11:16 AM   #86
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In times like this, people get sussed up when the government starts spending money. But I believe that there needs to be a dichotomous approach: The government needs to spend money to stimulate, while encouraging the average person/family to save for themselves.

Looking at the Great Depression, FDR's policies of government spending and nurturing--policies that would be labeled as "socialist" by today's American conservatives---played a huge role in getting America back on its feet. FDR-created institutions like the Tennessee Valley Authority and the Works Progress Administration created thousands of jobs and helped build America's structural and social infrastructure. They cost wealth of dollars at the time---but they gave citizen-employees both money and dignity in a time when they needed both. They also left us with a greatly improved infrastructure in areas in which it was sorely needed.

I've said before & I'll say again, Obama's plans on creating an American "green" industry, as well as his service corps plans, are strikingly similar to the ideals and philosophies of FDR in the Great Depression.

Granted, WWII played a huge role in plucking us out of the Depression, as well...and we're currently seeing that we can't rely on war to do the same for us today.

So, I think that government spending is crucial in times of national and global financial crisis. It's not necessarily the government that's hurting---but it will be if the citizens continue to do so.

That said, I do strongly agree that there needs to be a strong persuasion by the government to encourage---and reward, if need be---its citizens to save for themselves. It's not just that it's the only way that people can truly dig themselves out and stay afloat, but it's really a culture that we need to re-adopt here in America.


Purpleoscar--how does your 5,000/yr tax-free plan work? Is it similar to a Roth or traditional IRA (Roth is taxed as income, but earnings and withdrawals are not taxed as long as the account's existed for 5+ years and you're 59 1/2; traditional IRA contributions are tax deductible, but earnings are taxed at withdrawal)? Or is it neither, and it's tax-free all around?
It may be similar to IRA but it's not a tax deductible savings plan. We have an RRSP (Registered Retirement Savings Plan) which is tax deductible and when you withdraw it at age 69 you pay tax on it, but the compounding of interest and dividends is not taxed while you were contributing over the years. Now we will also have a TFSA (Tax Free Savings Account) which means the money has been taxed on your pay cheque but income you save in this account is not taxed and you can withdraw without penalties and put back in the total amount of your room one year after the withdrawal. Any incentive helps. Increasing taxes means less money to save and slows down the process.

Again none of these programs work if the population doesn't save. The savings rates in the western world are far below China and Singapore. We are at close to 0%. This is the reason why the middle class is shrinking. If Obama wants to get some extra votes he needs to continue the Bush tax cuts. If he lets them expire the taxes will increase on everyone.

Most capitalist economists of the past had a religious moral background that looked askance on consumerist attitudes and believed in frugality. They also wrote books about morality along with their economic books and understood that both go hand in hand. Moral disciplines of religion and/or philosophy taught people self control so they could handle their shopping and consumerist addictions. Habits are very strong.

http://www.slice.ca/Shows/ShowsPage.aspx?title_id=93097

This is a show the government is pushing to try and show people how to get out of debt. We've had liberals for so long it's nice to see some tax payer money going to something worthwhile that conservatives understand.

Now your comments on FDR need to be tempered by what Hoover did. The increase of taxes and massive trade barriers are the reason a steep recession turned into a depression. What conservatives fear is that the Democrats want to push for a Keynesian demand side economics which push people to spend instead of save. We need people to save and pay down debt so we can start investing in the economy. The current government's bailout will do little for that since it's all paper. The reason for government trying to intervene is that recessions are not popular for governments even when they are necessary. They always exacerbate the problem and when the economy gets on it's feet again they take credit for what the general population did.

What liberals in our country said of Harper (conservative leader) was that he was a do nothing leader. They all pushed for deficit spending and increased taxes on the productive classes (this is "doing" in their minds). Thank god Harper is an economist and explained quite well to the public that raising taxes, and increasing deficits doesn't help the economy. We have to save at least 20% per person on the average to get back on track and individually we have to look at our retirement goals and try and meet them. I've seen retired people who live in basically a hole in the wall small one room apartment because they splurged their entire lives on a "standard of living" and their lives are so cramped they can hardly afford anything. We have people now retiring on mortgages which means no inheritance for children (an important part of keeping a large middle class) and dying bankrupt.

All the government can do is tax the economy and redistribute it. Once a recession comes in companies start losing money and they naturally pay less taxes and the government gets less revenue. This is usually when they go into deficit because they often have spending levels based on a growing economy and can't cut spending fast enough to balance the budget.

Obama is right in saying that the government can't turn off the television when your child needs to do their homework, but this also applies to the economy. If people won't save for retirement they will be shocked to see how little the benefits there will be when they do retire.

I'm glad you're talking about FDR and the depression because people are still debating on what was the cause and the solution was. Conservatives believe it is keeping taxes low, spending in check, and less trade barriers. The population has to save and invest and treat the markets as a long-term attitude. If people go back into gambling again the cycle will return again and again.

Liberals think that the government needs redistribution programs and protectionist policies to keep jobs at home. This is some of the reason why some conservatives want Obama to win so he can get unpopular with his policies and a "Reagan" will save the day. I think that's a lot of mess to clean up so conservatives better wake up or they will be extinct. Conservatives will conserving what was considered liberal in the past.

Some conservatives are ignorant and believe that government regulation is the problem. It is and isn't. It depends on which regulation. Certainly the Community Reinvestment Act (CRA) is BAD regulation, but we need to update it to cover the new scams that exist today, and eliminate the CRA. It's no different than have law and order when criminals abound, and they do. Good regulation that punishes the right people is instrumental in having a good economy. People have to save for down-payments and hold a job to get a mortgage just like it's supposed to be.

The population needs to be risk averse (less gambling) and that's what capitalism used to be about. You need to save money to be a capitalist, and be risk averse. That means earning lower returns on safe investments over your lifetime. The world right now is "consumerist" which has to do with keeping interest rates VERY low which punishes savers and rewards borrowers until they can't borrow anymore. When people slow down in spending because they can't borrow anymore and their salaries can't keep going up then the recession comes in.

So whatever your political point of view I hope people of all stripes change their spending habits because it's worth it in the long run. Anyways I know what to do so I'll be okay, and so will my family.

For those interested in reading more I would suggest a great American economist that could explain things very clearly:

Henry Hazlitt - Wikipedia, the free encyclopedia

I especially recommend Economics in one lesson and Foundations of Morality. Light bulbs were turning on in my head reading these books.

Most economists are Keynesian so reading this man will give you an idea of what most economists think today:

John Maynard Keynes - Wikipedia, the free encyclopedia

Marginal utility is an economic principle that looks at how subjective prices and values can be. This is the main reason why communism fell. How can you plan an economy when so much subjectivity is involved? The labor theory of value is unfortunately still popular amongst planners.

Marginal utility - Wikipedia, the free encyclopedia

There's lots more reading to do guys. It's faster to teach ourselves than just rely on politicians to figure it out for us. It's also fun for us keeners.
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Old 10-17-2008, 11:24 AM   #87
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There's lots more reading to do guys.

There was enough reading just in your post! Thanks for it, though.


On the savings account notion----I wonder if the best way to encourage people to put money away into a savings account would be to have a certain amount that wouldn't be taxed at all. Consider letting people take up to $5,000/year pre-tax, put it into an account, and then have no tax at all on what you take out of it. One part of me thinks that that may ultimately end up as a huge missed opportunity for government revenue, but I'm not sure that that would necessarily be the case.
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Old 10-17-2008, 11:40 AM   #88
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Well that's sorta easy for him to say and do..

I'll take some of his money to buy some if he's offering
People with mortgages and credit card debt should pay that off first because investment income will hardly cover the interest people are paying. His advice is for people who have a house paid off and little debt and are saving in their last 20 years of their work lives for retirement. There are good opportunities for those people. Most people should be risk averse and not lose their capital by gambling for capital gains in the short term. People like Buffett have money they could lose and still be independently wealthy. The average person can't afford to gamble. A lot of people are selling in the current market simply because they need it to pay off debts that they were accumulating.

Another thing to look at is fees charged on your investments. Unless you have lots of money to invest you will have earnings eaten badly by fees, especially in mutual funds. People should be looking for safe interest income for most of their portfolio. In the long run you will make more because you didn't lose a whole bunch during periodic recessions. That means during a boom you will look bad and during a recession you will look good. Overall you'll get there like the tortoise and hare.

1. Pay off high rate debt and mortgages
2. Maximize contributions to tax savings accounts
3. Save outside tax savings accounts until retirement.
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Old 10-17-2008, 11:42 AM   #89
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Interesting article by Buffett. I guess there's a real battle going on between buyers and sellers, so the volatility will probably last for a while. On the one hand, the buyers are taking advantage of bargain stock prices. On the other hand, there is forced selling by massive hedge funds going out of business and mutual funds getting redemption requests. I think I read something like 50% of hedge funds will go out of business. A lot of baby boomers (who are just starting to retire) will also be leaving the stock market.
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Old 10-17-2008, 11:57 AM   #90
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There was enough reading just in your post! Thanks for it, though.


On the savings account notion----I wonder if the best way to encourage people to put money away into a savings account would be to have a certain amount that wouldn't be taxed at all. Consider letting people take up to $5,000/year pre-tax, put it into an account, and then have no tax at all on what you take out of it. One part of me thinks that that may ultimately end up as a huge missed opportunity for government revenue, but I'm not sure that that would necessarily be the case.
That's why they limit it to 5,000/year. There is less government revenue. But if people rely more on their own savings and less on government programs the government will have less demand to supply retirement services for the whole population. You are simply shifting responsibilities on yourself instead of the government. Why pay bureaucrats to manage your money when you can do it better yourself? I believe government programs should be only for those who really need it. Catastrophic health insurance, feed people who can't feed themselves, retraining, and basic education. Yet people like my Dad who earned low income was able to sacrifice and still make it. Though at low incomes it is VERY hard. It's like a race and the more disciplined people succeed. That's why making a budget and planning your expenses helps keep you on your goal and if you follow it a midlife crisis will be avoided.

Harper is also able to cover some of the lack of revenue by paying down debt with surpluses. The interest we save when we pay down debt frees up more surpluses which can lead to a combination of choices (pay down more debt, spend in certain areas, and future tax breaks at the same time by allocating a percentage to each).

If Obama abandoned his increase in spending and used the increase of taxes (as crappy as they would be) to balance the budget and started paying down debt that would be a HUGE political benefit for him because they could safely reduce taxes later. I prefer just cutting spending which is faster and looking for waste in government programs, which there's lots; but either way a balancing of the budget is what is needed first and foremost and considerable payment of the debt to reduce interest payments. If Obama doesn't reduce spending the lack of revenue the government gets during a recession will just increase the deficit no matter what the tax rate is and 4 years from now his presidency will be challenged.
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