Hmmm; intersting and thought provoking thread.
I definately would advise that people be cautious; but I wouldn't be taking any financial advise from some broke guy(s); no offence intended to anyone here; but seriously, if someone couldn't make any money over the past few years, well then, they just weren't trying were they?

How in the world do you expect to make a buck in the upcoming economy, if you couldn't make a buck over the last few years? People don't plan to fail; they just fail to plan!

Many people can be influenced by others; I made a decision many years ago that I would take my influence from people who have what I want...... happy family, good businesses, cash in the bank, etc. I'm not going to take advise from some guy thats all show, but no dough. Why would I take advise from some guy that makes all kinds of money, but has no value system or meaningful family relationships? I wouldn't.

All this doom and gloom; so what! How are you gonna make some money in the upcoming years, based on the current economy; that's what you should be asking yourself. Meanwhile there's alot of people getting rich, and I mean alot!

Well, I think the rooster is getting a little fat and lazy, but hey, more power to 'em.

SmileWavy:D

911, is it really just about making money? Can there not be a rational discussion about the economy? If there is truly an imbalance in market sentiment, it will eventually find level. Perhaps, gloomers and doomers will suffer and perhaps not, but to cast aside such opinion may be foolish.

Remember this is a self fullfilling prophecy.
We need to stay positive and everything will be alright!!SmileWavy:D:D:D

the numbers came out today, 3.7 percent GDP growth last quarter, not exactly a bad sign...

what needs to happen is that we need to all save more and spend less.

"Do you think we are headed into the Recession of 2008?"






Inflated Fears?
by Bernard Condon

Anyone who's been to the grocery store lately or gotten a full tank of gas has been blown back by sticker shock. Milk and eggs, cell phone service and the electric bill--ordinary things cost more than they did a year ago. So do luxury goods, whether laptops or convertibles. But the Bureau of Labor Statistics reports that inflation is in check, with consumer prices up only 2.8% for the 12 months ended in September. The so-called core rate of inflation, excluding food and fuel, was 2.1%.

What gives? The problem may be the way the government calculates inflation. "The numbers are so below what people are actually experiencing that they no longer have credibility," says Walter J. Williams, an iconoclastic economist who has no academic appointment but can at least claim an M.B.A. from the Tuck School of Business at Dartmouth. His Shadow Government Statistics newsletter, he says, draws 1,000 online readers every month, and has a bit of a paranoid edge. Williams contends that inflation is really running at 10%--more than triple the official rate.

There's some method to his reasoning. First, as he correctly points out, the CPI offsets price hikes with the value of product improvements. If your kid's chemistry textbook has more color photos than the one you had in high school, then the quadrupling of the price doesn't really count. Your newest computer has 32 times the power of the one you had a decade ago; if the price tag hasn't changed, then in some sense the cost of living well electronically has gone down.

Williams also points out a distortion in the way the feds treat housing costs, which get a sizable 25% weighting in the CPI. It relies on what a house could hypothetically receive in rent, disregarding the fact that roughly two-thirds of Americans own their homes. In any event, the government says that imputed rent has risen 3% a year over the last six years through August. Median home prices, as calculated by the National Association of Realtors, rose 6% annually during the same period. (Remember: The calamity in the market is pretty recent.)

The third fallacy Williams points to is the assumption that if prices rise for one staple, like sirloin, consumers will automatically switch to a cheaper one, like ground beef. Lots of people undoubtedly do so to economize. But with this presumption, the CPI has created a built-in deflator; it's no longer tracking the cost of a constant standard of living but a declining one. Williams claims that a more accurate reckoning without the substitution discount would lift inflation to 6%.

Williams thinks the official underestimates are deliberate. Reporting accurate figures would cost the government more in Social Security benefits, which are pegged to the CPI, and more in interest on its inflation-protected bonds.

"Absurd," says Labor Statistics spokesman Patrick Jackman. A strong whiff of inflation in the price hikes of cars and computers, he says, is offset by an increase in quality. Home sale prices tend to exaggerate inflation, Jackman argues, when people treat their homes as an investment like stocks or gold. And when beef prices fall, he says, people buy more steak than burger, and the CPI reflects that by rising. "For years academics were saying we were overstating inflation," he sighs. "Now you have people saying we're understating it."

People will argue over these facts--and the assumptions that underlie them--until the sun finally burns out. We all know that we're paying more for just about everything. Of real concern is when those prices rise quickly enough for the Federal Reserve to act, maybe even to raise interest rates. Keep an eye on guys like Williams

because there have been too many years of cash bonuses for stupid people to have more children.

Shaun is wrong about the intellectual property thing , because China does not honor any patents.

If we all save more and spend less, we get a recession. . . :)

Think about it - when personal savings goes up and spending goes down, companies' profit margins drop, stock prices slide and companies feel obligated to correct by slashing the only things they can - typically payrolls. Unemployment rises, making everyone else uneasy and less likely to spend and more likely to "save for the impending layoff". This results in less spending, which results in lower corporate earnings, which results in more layoffs. . .

The problem is we've created a monster of our economy, where it requires people to be constantly whipped into a frenzy of consumption and the expectation is that personal savings rates are around 1% of total. Anything more and corporations start wondering what they're doing wrong and start getting jittery and start looking to fire people. Ingrained stupidity. You can thank our parents' generation for helping to establish that one.

or worse. ;)

I don't see many people saving right now though. I see people spending well beyond their means then being unable to pay the bills. Wouldn't this lead to a recession or worse as well?

I have not been spending too much but I see what friends and other peers are doing and its scary. What ever happened to living within ones means?

Worse. We can only "ward off" recession by spending and consumption for so long if it's not done sustainably. As you (correctly) state, many people are living and spending beyond their means. In particular, I've seen an orgy of spending in recent years as people watch the run-up in housing prices and think that this somehow equates to an increase in real value which they can cash out and spend without consequence. The reality is far from this rose-colored perception.

As housing prices correct to levels more commiserate with their real values (about 40-50% less than where they're priced currently) and people realize "holy schit Batman! you mean I can't bank on 20% return a year from my 1938 600 sq. ft. bungalow that I bought for $550,000?!?!?" they panic. Predictably, spending drops, foreclosures rise, retail spending slumps, corporate profits drop, etc. If you've been watching durable goods orders and new car sales, they're in the tank compared to a year ago. The warning signs are there.

All of this was/is predictable. People are almost laughably stupid when it comes to their spending habits.

To address your original point however, the bigger problem is in trying to ward off recession with spending by borrowing. You can only do this for so long - sooner or later, the piper needs to be paid. When the economy finally "hits the wall" and creditors start doubting they're going to ever be able to collect, the system starts to collapse like the Ponzi Scheme that it is. This is far worse than a recession - this is a long-term correction, more likely a full-blown depression.

So the choices (as I see it) today are:

1) Spend like crazy, borrow to support it until the whole thing collapses under its own weight
2) Save like crazy, create recession pressure.

I think #2 is the way to go. At least it's sustainable and eventually the expectations and corporations will adapt to peoples' new savings patterns if given enough time. Problem is, as soon as they start to "feel good" about things again, start hiring, etc. people will (predictably) start running up tabs on credit and spending like drunken sailors again, setting the stage for the next recessionary cycle.

People are simply too stupid to prevent it.

I would venture that many on this board do indeed "live within their means" despite our outrageously expensive (not) 911s, but we're not "normal" :)

I am not "normal" either :eek:

3) Bomb our way to prosperity.

Be a patriot, PoP.

POP, your just a nervous nellie, wait till U bin around the block a coupla times buddy. Then come back and talk to us.

I have always been interested in the psychological component of what are known as recessions.

During the last good one in the early 90's I had a friend who was incredibly wealthy in their own right. Old Money and lots of it. And work for her was going very well. When the subject came up if her buying a new car, she said she was "putting it off, the economy is not going well, you know...". A new car for her was like buying lunch for most of us - but still she put it off..

Also, with this topic coming up more and more in chat groups and now in the media it is creating a self fulfilling situation. Oil prices, Bush exiting, the real estate debacle - all the triggers are there. We are going to get one, that is for sure.

BINGO NOW YOU GOT WHY 911 COULDA BROUGHT THE SYSTEM DOWN...it spooked the American people and if spooked they don't spend. Thats why the Government is so intent on waging a war on terror so that the American people don't get scared and stop spending. The medias job is to keep everybody preoccupied so that they just don't notice what is rteally going on around them.

Well sheeey-yit. Why didn't I think of that. Silly me. Give me a flag to wave and an M-16 and I'll go kill me some Ay-rabs.

this is one media psych item discussed by Brian Wesbury



http://www.ftportfolios.com/Commentary/EconomicResearch/2007/8/9/Fair_but_Unbalanced_-_Wall_Street_Journal_Op-Ed_by_Brian_S._Wesbury

So the Fed cuts 25bp yday and today we have these news:

*CITI MAY HAVE $30BLN SHORTFALL ON ASSETS
*GOLDMAN TO BE INVESTIGATED BY SEC ABOUT SUBPRIME TRADING
*MERRILL TO BE ASSESSED BY SEC OVER SHAREHOLDER INFO PROVISION
*RUMOUR OF UBS REVEALING ANOTHER $8BIO IN WRITEDOWNS
*EXXON BIGGEST QUARTERLY PROFIT DROP IN OVER 3 YEARS
*US HOME FORECLOSURES DOUBLED IN Q3, REALTYTRAC SAYS
*RADIAN (3RD LARGEST US MORTGAGE INSURER) LOSS 8X ANALYST EXP'S
*CHRYSLER TO CUT 10K JOBS
*NY STATE ATTORNEY GENERAL TO ANNOUNCE "MAJOR DEVELOPMENT" IN
ONGOING MORTGAGE INDUSTRY INVESTIGATION. 3PM LDN TIME


The stock mkt is taking it on the chin (down 1.3% right now). The rates mkt is reacting as if we'll be in deep trouble for a while (the futures mkt is predicting the Fed to cut at least another 50bp by Q1 2008).

If they put a gun to my head I would stay with the rates mkt...

Tomorrow we have the Non Farm Payrolls.... rumors are out of a downward revision of the previous numbers....

Stay tuned

Not that this is a direct link to this conversation, but I thought this was funny:

There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.

This Global expansion is built upon the straw foundation of the US consumer's propensity to continue spending. If they slow down the global economic boom slows down. You can quote P/E's all day long they are all based on the idea that the us consumer continues to spend. The US consumer makes up 70% of the GDP, and they consume the vast majority of the products that foreigners are building infrastructure for. So I think a global recession tips on whether or not US consumers mind continuing to make minimum payments on credit cards.