The Economy, stupid

[mr_genius]

DOW losing lots of ground, again.

[lostfan]

No, but he's not going to "get us out of Iraq" quite as easy as he says he is. Better yet, when he "brings them home" ON HIS WATCH he can claim "victory". You watch. It's exactly what this guy's going to do.

No such thing as victory or defeat/surrender... I'm sick to death of hearing politicians do this too.

[bmags]

No such thing as victory or defeat/surrender... I'm sick to death of hearing politicians do this too.

 

Naw, Ford won Vietnam right?

[bmags]

 

 

 

Soooooo, double post.

Edited October 15, 2008 by bmags

[southsider2k5]

There are some good points there, and I agree with you in general. but one clarification - the bottom bracket (44% or whatever the number will be) will not be paying INCOME taxes. They will still be paying all sorts of other taxes.

 

Income taxes are by and far the biggest revenue source of the federal government, which just so happens to be the largest employer and landowner in the United States. Most of the other taxes you are looking are either asset based, which again skews towards the middle and upper classes, or usage based. Either way, you can't convince me that someone in the 40th income percentile doesn't need to be paying income taxes. It is literally a massive redistribution of wealth when almost exactly half of the country will be paying zero or near zero in income taxes. My biggest problem with it all is that in the midst of the this redistribution, we as the half of the country left paying taxes, will be losing an estimated 10-15% of that purchasing power by the waste factor of our federal government ineffeciencies up and down the board. It would be smarter just to walk over to a neighbors and hand my income tax portion over to someone who is collecting as much as I am paying.

 

 

[kapkomet]

Income taxes are by and far the biggest revenue source of the federal government, which just so happens to be the largest employer and landowner in the United States. Most of the other taxes you are looking are either asset based, which again skews towards the middle and upper classes, or usage based. Either way, you can't convince me that someone in the 40th income percentile doesn't need to be paying income taxes. It is literally a massive redistribution of wealth when almost exactly half of the country will be paying zero or near zero in income taxes. My biggest problem with it all is that in the midst of the this redistribution, we as the half of the country left paying taxes, will be losing an estimated 10-15% of that purchasing power by the waste factor of our federal government ineffeciencies up and down the board. It would be smarter just to walk over to a neighbors and hand my income tax portion over to someone who is collecting as much as I am paying.

Don't think that the Democrats realize this. In fact, it's brilliant. They know that if half the country will never pay income taxes, because they enacted it, they will forever get 50% of the vote no matter what they do. They are creating their own nanny state that will always back them - and it starts with the current younger voters and will last a lifetime, because they will never get out of the lower brackets due to lack of growth - but they won't know any better, so they'll just accept it.

 

I also don't think it's a coincidence that the margin of the polls are 12 points, which is just about 56% of the people who will be being paid by the other 44%. Free handouts work every time, but what people don't realize is, the gravy train is going to cost millions their jobs. We want to be like France? OK, their unemployment rate is in the 15% range. Germany? Same thing. And yet, apparently America yearns to be just like them. They can have it, but unfortunately, I don't get a choice because 20% of the 56% of RSO backers are delusional if they think RSO will do better for our country with every socialistic policy under the sun.

[NorthSideSox72]

By the way, Dow down nearly 8% on the day, S&P down 9%. So much for that 11% we picked up recently.

 

[Balta1701]

By the way, Dow down nearly 8% on the day, S&P down 9%. So much for that 11% we picked up recently.

According to the Depression historian they had on the Daily Show the other day, something like 6 of the 10 (Now likely 11) biggest percentage gains in the Dow's history happened during the depression. The problem wasn't that the market couldn't go up. It would go up, but it was incredibly volatile and would constantly knock itself down.

 

Heck, I think one of Nouriel Roubini's "God why is this guy always right" predictions for how the housing market would implode specifically called for a huge amount of volatility on the way down.

[NorthSideSox72]

Interesting overview of the plans for cap gains taxes from each candidate.

 

Now, I've said before, I don't agree with any raising of the cap gains tax, especially when the markets need more capital. I've also said that cutting them from the current 15% doesn't make much sense, though, when we are in dire financial straights and are fighting 2 wars.

 

The good news is, neither candidate is proposing anything drastic. For Obama, this is a shift - he was talking going closer to 30% again at one point. Now its 20%, which is a much smaller increase. Still not good, but not as bad as I thought. He also includes an exception for startup investments, which is actually an interesting and positive idea.

 

McCain wants to cut the 15% in half to 7.5%, but only for a two year period (2009-2010). This is good in that ultimately, more capital goes in. Its bad though, in that you create an artificial market horizon when you specify an end date like that.

 

As the article states, neither plan is likely to have a HUGE impact. I would prefer we just leave it where it is.

 

[NorthSideSox72]

Oh, forgot to add... I don't like that Obama's plan is 20% specifically over a certain income level. I think that tying one kind of tax (investments) to another (income) is dangerous - it tends to create loopholes and problems. It also makes a hard line on income levels that creates a "sticky point" for salaries. That may actually keep salaries more depressed, which isn't good. Income tax has brackets, but the differential rates are applied on monies over certain lines. Its not, going from 20% to 25% on ALL income if you make over a certain amount - its 20% up to a certain amount, then 25% for each dollar above the line, if I understand correctly.

 

[southsider2k5]

This is your chance. This is the guy who knew the crash was coming after the internet bubble and made a bunch of money during the 2001-2002 when the markets fell apart.

 

Buy American. I Am.

By WARREN E. BUFFETT

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

[StrangeSox]

I wish I had 1/100th of the investment knowledge that Buffet has. I try to follow his advice often, and got myself back into the market with my "side money" on Monday. It's not a lot right now (only $1k), but its something.

 

My parents got themselves out of the market about 9 months ago. Not terrible timing considering where we've gone over that period, but now the problem is convincing people like to reinvest now.

[ChiSox_Sonix]

I wish I had 1/100th of the investment knowledge that Buffet has. I try to follow his advice often, and got myself back into the market with my "side money" on Monday. It's not a lot right now (only $1k), but its something.

 

My parents got themselves out of the market about 9 months ago. Not terrible timing considering where we've gone over that period, but now the problem is convincing people like to reinvest now.

 

 

I'm about to receive some money from a will any day now (about $2K, so not a lot) and I plan on putting it all directly into stocks. I'm going to follow some advice I found online about a 6 month plan over 10 stocks and change every 6. I figured since i've never really had the money, its kind of like getting into the market for free. Hopefully, like Buffet is hinting at, I can catch some of these stocks on their low end just before they start to rise. He is right though that in the long run the stocks will go up. So with the market down right now it does make sense to jump in. But then again, I'm just a couple years out of college with very little market history or experience so what do i know

[lostfan]

I'm about to receive some money from a will any day now (about $2K, so not a lot) and I plan on putting it all directly into stocks. I'm going to follow some advice I found online about a 6 month plan over 10 stocks and change every 6. I figured since i've never really had the money, its kind of like getting into the market for free. Hopefully, like Buffet is hinting at, I can catch some of these stocks on their low end just before they start to rise. He is right though that in the long run the stocks will go up. So with the market down right now it does make sense to jump in. But then again, I'm just a couple years out of college with very little market history or experience so what do i know

That's how I got my mutual funds. My aunt and uncle started custodial accounts for all of us (me, my brother, and my 1st cousins) when we were kids back in 1992, but they never told us they were doing it. Years pass and they eventually get divorced, they both forget about it, meanwhile the thing is worth like 10x the amount they put in it originally. A year or so ago they send my aunt's ex (who I guess technically isn't my uncle anymore) a letter saying they have to release all the accounts because we are all over 21 now, so I get a random call from my mom one day like "hey, did you know you have a nice chunk of change to your name and you've had it for 15 years?"

 

That was a good day.

[southsider2k5]

I wish I had 1/100th of the investment knowledge that Buffet has. I try to follow his advice often, and got myself back into the market with my "side money" on Monday. It's not a lot right now (only $1k), but its something.

 

My parents got themselves out of the market about 9 months ago. Not terrible timing considering where we've gone over that period, but now the problem is convincing people like to reinvest now.

 

Well you just got a great piece of historical advice!

[southsider2k5]

I'm about to receive some money from a will any day now (about $2K, so not a lot) and I plan on putting it all directly into stocks. I'm going to follow some advice I found online about a 6 month plan over 10 stocks and change every 6. I figured since i've never really had the money, its kind of like getting into the market for free. Hopefully, like Buffet is hinting at, I can catch some of these stocks on their low end just before they start to rise. He is right though that in the long run the stocks will go up. So with the market down right now it does make sense to jump in. But then again, I'm just a couple years out of college with very little market history or experience so what do i know

 

If you want to mimic the stock market buy the ETFs on the diamonds or the QQQQ's. With limited knowledge the indexes are the safest thing out there until you start to learn what you want to trade specifically.

 

If you want more info, drop me a PM or email.

[Cknolls]

I wish I had 1/100th of the investment knowledge that Buffet has. I try to follow his advice often, and got myself back into the market with my "side money" on Monday. It's not a lot right now (only $1k), but its something.

 

My parents got themselves out of the market about 9 months ago. Not terrible timing considering where we've gone over that period, but now the problem is convincing people like to reinvest now.

 

 

Bank it in a CD. Rates will be low for at least a year and returns on stocke too will be weak. Bear markets chew you up and spit you out. I would go no longer than 2 year cd's and try to get as close to 4% as possible.

[lostfan]

Bank it in a CD. Rates will be low for at least a year and returns on stocke too will be weak. Bear markets chew you up and spit you out. I would go no longer than 2 year cd's and try to get as close to 4% as possible.

How much money do you generally need to do a CD?

[NorthSideSox72]

How much money do you generally need to do a CD?

No minimum for some, but the rates are then very low.

 

There are online-only savings accounts at places like E-Trade and Citi, that pay 3 to 4%, and have no time commitment like a CD. So, really, why bother with a CD?

 

I still think, long run, this is a generally good time to buy equities.

 

[Cknolls]

How much money do you generally need to do a CD?

 

Usually $500 minimum. But higher amounts for the larger yields.

[NorthSideSox72]

Usually $500 minimum. But higher amounts for the larger yields.

CD's are silly, I'm surprised anyone uses them anymore. When you can get the same type of rates, but in a savings account with no minimum and no withdrawal penalties and no tiem scale, CD's become dinosaurs.

 

[lostfan]

No minimum for some, but the rates are then very low.

 

There are online-only savings accounts at places like E-Trade and Citi, that pay 3 to 4%, and have no time commitment like a CD. So, really, why bother with a CD?

 

I still think, long run, this is a generally good time to buy equities.

I just checked and if I put 1000 bucks into a CD for 12 months with my bank (USAA, seriously they are awesome) the rate is 3.90%. I might do that with some of the excess GI bill money I have since my classes are less than what the payouts from the VA are.

[southsider2k5]

I just checked and if I put 1000 bucks into a CD for 12 months with my bank (USAA, seriously they are awesome) the rate is 3.90%. I might do that with some of the excess GI bill money I have since my classes are less than what the payouts from the VA are.

 

Just for fun we should all bookmark this post and come back to it in a year.

 

$1000 at 3.9% will get you $1039 in a year. It will be interesting to see what the Dow or the SP does and see which one wins. As I post the Dow is at 8900 and the SP is 947.50.

 

Bets on which one ends up with a higher rate of return in a year?

[lostfan]

Just for fun we should all bookmark this post and come back to it in a year.

 

$1000 at 3.9% will get you $1039 in a year. It will be interesting to see what the Dow or the SP does and see which one wins. As I post the Dow is at 8900 and the SP is 947.50.

 

Bets on which one ends up with a higher rate of return in a year?

Heh. If the economy shrinks, then the margin probably ends up being pretty big.

 

I just looked at my Chase rates and they are at around 2.0% for the same time/amount. USAA's rates are much more competitive.

[NorthSideSox72]

I just checked and if I put 1000 bucks into a CD for 12 months with my bank (USAA, seriously they are awesome) the rate is 3.90%. I might do that with some of the excess GI bill money I have since my classes are less than what the payouts from the VA are.

USAA gives better rates than most - we have our insurance and car loan through them, luckily.

 

If you know you won't need it at all during 12 months, then yeah, looks good. If you aren't 100% sure (and I never am), then I'd rather take the 3.5% from Citi or E-Trade without the penalty. The $4 over a year on $1000 is worth it to me to be able to get it out if needed.