Archive for the 'Economy' Category

While the recession was going on, many Americans started doing something interesting for the first time (at least for them): they started saving money.

Now that the recovery is on, are people just spending money again like there’s no tomorrow?

My guess: yes.

This CNNMoney.com article has the question in the blog post title as its title, but reading it says that indeed poor spending habits have returned. Personal income is up, spending is up, and savings is down.

I would like to believe this is a blip–but I doubt it.

(Editor’s note: I intended originally to run this piece on Monday–before Wal*Mart announced earnings–but due to the long weekend and Great Aloha Run I failed to do so. Obviously, Wal*Mart disappointed)

The stock market has been on a tear (let’s not mention those folks who sold when it was early 2009 and now want to get back in), with the S&P 500 up 6.79% year to date with not quite two months done in the year.

This week, Wal*Mart (WMT), the retail giant, gives us a report on its earnings.

Wal*Mart has done somewhat better than the market as a whole over the last few years. Looking at the figures from late February 2008 to date, while the market as a whole has been essentially flat, Wal*Mart has returned more than 10% with a lot less volatility than the broad market has shown.

I’m hoping that Wal*Mart will pull the market higher with great earnings.

The amount of governmental debt that’s accumulating is concerning. Sooner or later, debt needs to be paid back.

Just like the rest of us, the government can’t run up debt indefinitely. Spending is crazy and cuts need to happen on all levels–and are indeed happening. But of course, those cuts come with a price.

Still, we have a choice–we can pay now or pay a higher price later. Or maybe, if we keep spending at this breakneck pace, both.

There’s a need to get spending under control on the governmental level, and just like for individuals, fixing the debt problem will be painful–but we can have pain now, tomorrow–or both.

Today is Super Bowl Sunday (by the time this is read it won’t be). Dallas is the host city this year and, like many cities that host large sporting events–or just have professional or major college sports teams–they were banking on a boost to their local economies.

Sadly, for Dallas, this does not appear to be true this year. Poor weather is keeping visitors away from businesses.

Hawai’i is not immune to this either. The Pro Bowl, which, aside from in 2010, has been in Hawai’i for decades, is considered hugely important to the local economy, yet in 2010 the world didn’t end when it wasn’t here.

How much does sports actually contribute to local economies?

Ryan

Tax Cuts on the Line

We all agree that taxes are not our favorite things, yet I, for one, like things like public schools, paved roads, and home trash pickup, so I’m not opposed to paying them–I just wish they would use the money efficiently.

In times when growth is almost at a standstill, taxes don’t make a lot of sense, but when there are massive deficits to make up, taxes are absolutely a necessity.

Exactly where these will all go is not clear, but things like dividend and estate taxes and the alternative minimum tax all will be looked at closely.

I will keep an eye on this; I don’t want to pay more, but I believe I will need to.

In my parenting class last night we discussed budgeting and one of the things that was involved was interest rates. In this I give a very small economics lesson: interest rates affect decisions about saving money or spending money–and even going into debt. If interest rates are low, as they are right now, it doesn’t encourage saving–it in fact downright discourages saving and makes spending and borrowing more attractive.

The downside to that is we still need at least some savings.

I’m not talking investment–that we need too. In this case what I mean is that we need at least an emergency fund to keep those pesky disasters at bay, a bit of money tucked away in a money market or high interest account that we can access quickly.

So, even if it doesn’t pay hardly anything, just keep in mind that there’s going to be a need to keep a few dollars around in a boring old savings account–even if the interest rates are close to zero.

Housing numbers and job numbers are still in the pits although the economy climbed out of recession mode awhile ago.

At least in terms of numbers. Whether it really feels like it–well, it doesn’t.

Is this a recovery without housing and jobs? If so, where’s the growth?

Housing was propped up at least for awhile by the tax breaks for first time homeowners; now, however, despite record low mortgage rates, there isn’t a lot keeping housing up.

Jobs continue to be lost without a lot of job creation; other than the temporary census jobs which are just about gone, it’s hard to identify many folks who are hiring.

How this recovery will play out is still anyone’s guess.

Ryan

Seriously? Increasing Prices Now?

Although the economy is, at least statistically, recovering, there are still many, many issues (and businesses closing all the time). Inflation is currently non-existent, because people are not spending all that much money.

That’s why I was surprised recently to learn that two places I frequent–a restaurant and a barber shop–had both raised prices.

Granted, this is the first time in years either has raised prices–the hairdresser at least the three years I’ve been going there, and the restaurant posts a sign stating this is the first time they’ve increased prices since they opened in 2004–but it seems an odd time to do so.

Do you find some of your local businesses increasing prices now?

A few posts ago I discussed how that some of the same folks who were complaining about the dollar going south versus the Euro were freaked out when the Euro weakened dramatically. I wanted to add a bit to that–that there’s an upside to what are often seen as financial difficulties, if you’re in position to take advantage of them.

Sure, interest rates are paying next to nothing for CDs and money markets–but interest rates are also next to nothing for mortgages. If the Euro stays week, now might be the time to visit Europe–or buy Euros.

On the other hand, if interest rates go through the roof (maybe in response to wild inflation, which we don’t have at this time), look at getting some long term CDs and bonds. If the stock market bombs, look at it as a buying opportunity.

There’s an upside somewhere.

Over time, the US dollar has lost ground against all kinds of foreign currency. I remember when I was a teenager the Japanese exchange rate was 200 yen for a U.S. buck; now it’s a lot closer to 100 yen to a dollar.

There’s been a lot of talk from the U.S. government for years about how a strong dollar was something that they liked, yet the dollar tended to become more and more devalued versus the yen, Euro, and all kinds of other currencies, often to the chagrin of those Americans who followed it.

Yet in the past few weeks, with the financial crisis in Greece, the Euro has slipped versus the dollar, and many are up in arms about that situation–the exact situation that many were wanting for years.

When the US dollar does well versus other currencies, it means good we import are less expensive for us, but goods we export are more expensive for those countries; on the other hand, when the opposite happens–other currencies doing better versus the dollar–it means goods we export are less expensive for those countries and goods we import are more expensive for us.

When are goods are more expensive for other countries, we’re less likely to have an influx of cash from those countries, and in many ways, we need that, considering, for example, we already export a lot of greenbacks to other countries who don’t really care for us due to three letters: oil.

So it’s a tough situation to be in. It’s hard to win, one way or another.

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