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Anyone really worried? I am...
Old 04-18-2007, 08:25 PM   #1
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Anyone really worried? I am...

Anyone subscribe to "retiredinvestor.com"? Interesting site...with much more analysis and substance than the bubbly yee-ha folks at MSNBC and Bloomberg who say the markets are forever headed to the moon.

From the April edition - economic outlook:

"Our first feature article is our quarterly Economic Update. Our base case scenario for the world economy has not changed. The United States currently accounts for 19.7% of global economic output. Private consumption expenditure represents 70% of that amount. A further 6.2% of GDP is devoted to gross fixed capital investment in housing. That means that the U.S. consumer currently accounts for about 15% of global economic output. Unfortunately, much of this consumption binge has been financed with loans that were based on rising housing values. With housing prices falling at a quickening pace, this game is coming to an end.

The main counterpart to U.S. consumption and housing investment has been an unprecedented investment boom in China, where investment spending amounting to 45% of total demand. A substantial portion of this investment has been made in export industries whose sales are made to U.S. consumers. With China accounting for 15.1% of global GDP, Chinese investment amounts to a further 6.8% of global GDP. As U.S. housing prices head south, this second motor of global economic growth is also at risk, as China cannot increase its private consumption quick enough to offset the coming downturn in the United States. We're not sure how this process will evolve (e.g., will it be deflationary or inflationary? Will it be characterized by international cooperation to limit its harmful effects, or by intensifying political conflicts that will make things worse? We're not sure about the answers to these questions. But we do believe that the next few years will be very challenging ones. If we had to pick asset classes that seem undervalued in the face of this outlook, we would point to timber, real return bonds, equity volatility and non-U.S. dollar government bonds."

From the Chinese Premier, at the recent National People's Congress - "not the time for complacency, with respect to the economy", which he characterized as "unstable, unbalanced, uncoordinated and unsustainable".

$2/pound. $1.36/euro. $1 trillion/year sent overseas. Equity markets - virtually all - at all time record highs. The enormous foreign exchange reserves have supported the US with the largest-ever buyer financing program.

As in the 2000 "correction", where the NASDAQ recovered briefly before the big fall, was the 9% drop in China in one day - and the resulting drop here at home - just the first crack before the real damage gets done?

Highly recommended reading (and a heck of a bargain!) - with not just a US perspective, but worldwide...
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Re: Anyone really worried? I am...
Old 04-18-2007, 08:34 PM   #2
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Re: Anyone really worried? I am...

Hey - I think the population of Earth is at an all time high also! - Can't last forever!
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Re: Anyone really worried? I am...
Old 04-18-2007, 08:42 PM   #3
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Re: Anyone really worried? I am...

I've heard similar for years...
Consumer spending driving the US & World economy is threatened by:
Sub prime loan defaults
Stock Market downturn
Higher credit card interest rates
Fed Raising rates
Oil
Stock Market going lower
Recession coming
Weaker dollar
Middle class jobs going to China
------
I think that site feeds a little fear and then charges you for their solution.

Nothing new
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Re: Anyone really worried? I am...
Old 04-18-2007, 08:54 PM   #4
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Re: Anyone really worried? I am...

Very good...only two problems...

The site advocates indexing, low costs and broad diversification - that is, the same as the vast majority of people here.

The second is, for those that snicker at bad markets - that the NASDAQ is worth 1/2 what it was in 2000 - 7 years later, and the Nikkei is worth <50% what it was 17 years ago!

So yeah, I agree - alls great...record trade defecits don't matter, a housing slump doesn't matter, a negative savings rate doesn't matter - we're gonna get 10% returns forever...



Quote:
Originally Posted by dex
I've heard similar for years...
Consumer spending driving the US & World economy is threatened by:
Sub prime loan defaults
Stock Market downturn
Higher credit card interest rates
Fed Raising rates
Oil
Stock Market going lower
Recession coming
Weaker dollar
Middle class jobs going to China
------
I think that site feeds a little fear and then charges you for their solution.

Nothing new
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Re: Anyone really worried? I am...
Old 04-18-2007, 08:59 PM   #5
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Re: Anyone really worried? I am...

Quote:
Originally Posted by cyclone6
So yeah, I agree - alls great...record trade defecits don't matter, a housing slump doesn't matter, a negative savings rate doesn't matter - we're gonna get 10% returns forever...
I get the sarcasm but Everything will be ok in the long run. The question my friend is how long do you have? If you have 25+ yrs none of it matters. I bet 2007 will not even register when you look back in 2030.

-h
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Re: Anyone really worried? I am...
Old 04-18-2007, 09:07 PM   #6
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Re: Anyone really worried? I am...

Quote:
Originally Posted by cyclone6
Very good...only two problems...
The site advocates indexing, low costs and broad diversification - that is, the same as the vast majority of people here. [/quote]
Then why pay for it?

[/quote] The second is, for those that snicker at bad markets - that the NASDAQ is worth 1/2 what it was in 2000 - 7 years later, and the Nikkei is worth <50% what it was 17 years ago! [/quote]
That's why you diversity. I saw that you have 6 years of expenses in CDs - that is one strategy to ride it out.

[/quote]
So yeah, I agree - alls great...record trade defecits don't matter, a housing slump doesn't matter, a negative savings rate doesn't matter - we're gonna get 10% returns forever... [/quote]

You and I forgot terrorist and global warming.
If you really want to get scared look at this.
http://www.angelfire.com/or/truthfinder/index22.html
http://www.thelongwaveanalyst.ca/cycle.html




[/quote]
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Re: Anyone really worried? I am...
Old 04-18-2007, 10:14 PM   #7
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Re: Anyone really worried? I am...

Quote:
Originally Posted by dex
Then why pay for it?
Well, at $29 for 6 months, I appreciate a non-cheerleading assessment of economic conditions around the world. They also have some interesting - and different - asset class definitions that aren't all that common.

One of my favorite quotes, cited occassionally in retiredinvestor, but also in the book "The dollar crisis", is "things that can't continue eventually don't continue".

With our gutless leaders, inane economic policies, unsustainable imbalances and a populace spending more than they make and not willing to sacrifice a thing - I believe that eventually it won't continue. In other words, I believe we're close to or at the peak of our power and wealth and have much more downside potential than upside going forward...
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Re: Anyone really worried? I am...
Old 04-18-2007, 10:26 PM   #8
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Re: Anyone really worried? I am...

If you want a non-cheerleader, it's hard to beat Bill Fleckenstein.
Here is an index of his articles.
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Re: Anyone really worried? I am...
Old 04-18-2007, 10:32 PM   #9
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Re: Anyone really worried? I am...

Quote:
Originally Posted by cyclone6
Well, at $29 for 6 months, I appreciate a non-cheerleading assessment of economic conditions around the world. They also have some interesting - and different - asset class definitions that aren't all that common.

One of my favorite quotes, cited occassionally in retiredinvestor, but also in the book "The dollar crisis", is "things that can't continue eventually don't continue".

With our gutless leaders, inane economic policies, unsustainable imbalances and a populace spending more than they make and not willing to sacrifice a thing - I believe that eventually it won't continue. In other words, I believe we're close to or at the peak of our power and wealth and have much more downside potential than upside going forward...
Sorry to be rude, but the time might be better spent at the library (How you spend your money is Not My Business). You might want to start with Gibbons Roman History and work down to the British Empire. Empire's tend to die very slowly even when they do fall and inertia in the system is a very big factor which will keep the things going for a long time after the fall. A free and willing citizenry of an empire will find a way to keep going.

-h
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Re: Anyone really worried? I am...
Old 04-19-2007, 06:48 AM   #10
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Re: Anyone really worried? I am...

[MODERATOR EDIT]

I don't see great things for the US economy in the short term, mostly because I think that we haven't felt the full force of housing yet. But China and India (and Russia and Brazil) continue to grow at a torrid pace. And there is an obvious solution to US economic weakness: the Fed will cut rates. That will ease credit, but it will also help nudge the USD down, which makes US manufacturers more competitive vs. other countries (highly economically stimulative).

So position yourself accordingly.
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Re: Anyone really worried? I am...
Old 04-19-2007, 07:11 AM   #11
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Re: Anyone really worried? I am...

Quote:
Originally Posted by brewer12345
I don't see great things for the US economy in the short term, mostly because I think that we haven't felt the full force of housing yet. But China and India (and Russia and Brazil) continue to grow at a torrid pace. And there is an obvious solution to US economic weakness: the Fed will cut rates. That will ease credit, but it will also help nudge the USD down, which makes US manufacturers more competitive vs. other countries (highly economically stimulative).

So position yourself accordingly.
Bingo ! (except for the piglet stuff...)

We've all seen these "the sky is falling" opinions for 20 years. And it may be falling soon. We don't know. But I believe it is more risky to take an extreme defensive position versus "stay the course".

The amount of "diversification access" we have now with different countries, asset classes, and currencies is amazing - use it to "sleep at night".

Japan tanked - I lost money there. Nasdaq tanked - I lost money there. But being broadly diversifed meant that these events didn't "sink the ship". Time to go play golf......
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Re: Anyone really worried? I am...
Old 04-19-2007, 08:33 AM   #12
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Re: Anyone really worried? I am...

Right on target Brew (as usual). DDave makes a good point. I too had a few Japan and tech losers but broad allocation, not to mention a fat cash position kept the ship shipshape.

For those researchers out there, go check estimated increases of the annual income for the average citizen in China. Over the next decade.... well, think from rice bowl to meat and potatoes. Then they will spend that income!

Time for me to go check the sump pump :P



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Re: Anyone really worried? I am...
Old 04-19-2007, 10:29 AM   #13
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Re: Anyone really worried? I am...

You'll drive yourself nuts worrying about things like the sky falling (figuratively speaking). In Steven Covey's 7 good habits of successful people he advocates that you should know your circle of influence, work on what you can change, and don't worry about things outside your control.

As you say, the site tells you do just that.
Quote:
Originally Posted by cyclone6
The site advocates indexing, low costs and broad diversification - that is, the same as the vast majority of people here.
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Re: Anyone really worried? I am...
Old 04-19-2007, 10:40 AM   #14
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Re: Anyone really worried? I am...

I am not going to waste my time worrying about something that I can not change...

I invest for the most likely outcome, which is that the markets will continue to go up...
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Re: Anyone really worried? I am...
Old 04-19-2007, 11:16 AM   #15
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Re: Anyone really worried? I am...

Quote:
Originally Posted by cyclone6
The main counterpart to U.S. consumption and housing investment has been an unprecedented investment boom in China, where investment spending amounting to 45% of total demand. A substantial portion of this investment has been made in export industries whose sales are made to U.S. consumers. With China accounting for 15.1% of global GDP, Chinese investment amounts to a further 6.8% of global GDP. As U.S. housing prices head south, this second motor of global economic growth is also at risk, as China cannot increase its private consumption quick enough to offset the coming downturn in the United States.
Let's see, a centrally-controlled economy where making quota is more important than making a profit, in a country whose rapidly-growing demand for resources is coupled with widespread copyright/patent violations, corruption, graft, & fraud.

No, I'm talking about China.

It's hard to understand how analysts can soberly predict disaster when the numbers they're quoting haven't been validated. Even if they're valid, trade balances have been out of whack for years without perceivable problems. You have to wonder if the analyst is truly objective or if there's an agenda.

Oh, waitaminnit, the analyst's website is selling subscriptions!
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Re: Anyone really worried? I am...
Old 04-19-2007, 11:22 AM   #16
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Re: Anyone really worried? I am...

Quote:
Originally Posted by Texas Proud
I am not going to waste my time worrying about something that I can not change...

I invest for the most likely outcome, which is that the markets will continue to go up...
If the majority share this view, then we're in very serious trouble.

Cyclone, most ideas at first are met with ridicule, then strong opposition, and ultimately regarded as self evident.
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Re: Anyone really worried? I am...
Old 04-19-2007, 11:37 AM   #17
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Re: Anyone really worried? I am...

Quote:
Originally Posted by alphabet soup
Cyclone, most ideas at first are met with ridicule, then strong opposition, and ultimately regarded as self evident.
Any data to back up the concept that most ideas end up being correct

Only teasing
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Re: Anyone really worried? I am...
Old 04-19-2007, 12:11 PM   #18
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Re: Anyone really worried? I am...

Quote:
Originally Posted by alphabet soup
If the majority share this view, then we're in very serious trouble.

Cyclone, most ideas at first are met with ridicule, then strong opposition, and ultimately regarded as self evident.
Why?
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Re: Anyone really worried? I am...
Old 04-19-2007, 01:10 PM   #19
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Re: Anyone really worried? I am...

Quote:
Originally Posted by Texas Proud
Why?
It's a essentially a question of your time frame. If you're looking out 15-30 years, then your thinking is correct. However, for those living off their portfolio, as I am, the very seriously rotting financial infrastrucyure in the US is very worrisome.

To Brewer: My reference was to unpopular ideas or positions that are later proved correct. You're cooperating by providing the ridicule part.

Let's see who's laughing in the next 18 months or so.
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Re: Anyone really worried? I am...
Old 04-19-2007, 01:26 PM   #20
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Re: Anyone really worried? I am...

Quote:
Originally Posted by alphabet soup
It's a essentially a question of your time frame. If you're looking out 15-30 years, then your thinking is correct. However, for those living off their portfolio, as I am, the very seriously rotting financial infrastrucyure in the US is very worrisome.

To Brewer: My reference was to unpopular ideas or positions that are later proved correct. You're cooperating by providing the ridicule part.
Ahh Alphabet - you don't understand - theres an infinite amount of money. Markets can go up forever - everyone will get rich - over the whole planet. Don't have any cash to pay your bills? Take out a HELC. Can't afford a house? Interest only loans. Can't make it to payday? No problem - payday loan stores on virtually every corner.

We all know real estate never goes down, markets just up, and that its our right to have everything we want, costs be damned...

So join the bandwagon - drink the kool aid! Never mind the things that can't continue, we're all going to be rich!
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