US Economy and Your Investments
Normally in my blog, I’m “Mr. Motivation” and uplifting. Today, I’m just sharing an economic truth and a concern for your financial fitness. If you have concerns for your financial future… read on.
I believe the banking problems and the sub-prime debacle is just the tip of the ice berg. Countries are off-loading greenbacks and have billions in reserve. If oil de-pags from the dollar, the world will re-peg to the Euro or Sterling (or Saudi Riyals). With no artificial ‘props’… how low will it go? On top of that, the USA owes $50 Trillion as of last year to US Citizens in Social Security, FICA, etc with a $14 Trillion GDP. The US is now almost $10 Trillion in debt to banks, (Debt after the longest running boom time in history?)
The average US citizen has $10k in credit card debt on average and $30k in debt for people in their 50s when they should have savings for retirement… and most of those have a 2nd or 3rd mortgage. 10 years ago 1% of the population owned 40% of the US wealth and today it’s 1/2 of 1% who own 50% of America’s wealth.
There are more homes for sale in the USA than ever before in the history of the country… and very few buyers. Prices have fallen up to 50% in some areas. Many Americans owe more than their home is worth. The courts are seeing 2000 bankruptcy filings per day which should hit 1,000,000 bankruptcies by the end of the year. (There were 2 million bankruptcies in 2005 and then they changed the laws to make it harder to file.) This means 1 in 300 Americans and 1 in every 120 households will file for bankruptcy this year. With about 7 million Americans already in bankruptcy (a 5-year period), that is 1 in every 43 Americans and 1 in every 17 households IN BANKRUPTCY! (2.5 people per household)
- American Bankruptcy Institute numbers:
http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=53103
In this depressing bit of ‘news’, I’m just encouraging family, friends and you my readers to be debt free, liquid and to spread that liquidity in currencies other than USD.
My bride and I are spread out in BRICKS (Brazil, Russia, India, China, Korea-South), Singapore dollars and only have our life insurance exposure to USD (can’t change that). After the Olympics and elections… 2009 / 2010 could be two very ‘interesting’ years. If the war in Iraq winds down and 220,000 reservist service personnel return to the USA expecting jobs to be waiting, who will employ them AND the people doing the job now? In most cases, someone has to get laid-off. Throw in another ‘Katrina’, 911 or pandemic flu, who knows??? A cash rich country can handle it. A debt ridden one?
Smile maker: The inevitable end to the bull run
A stock/share broker was cold calling about a penny stock and found a buyer. “I think this one will really move said the broker, it’s only $1 a share.”
“Buy 1000 shares for me.” said the client.
The next day the stock was at $2. The client called the broker and said, “You were right, give me 5000 more shares.”
The next day the client looked in the paper and the stock was at $4.
The client ran to the phone and called the broker, “Get me 10,000 more shares said the client.”
“Great!” said the broker.
The next day the client looked in the paper and the stock was at $9.
Seeing what a great profit he had in just a few days, the client ran to the phone and told the broker, “Sell all my shares!”
The broker said, “To whom? You were the only one buying that stock.”
