The stock market – that supposed great predictor of our economic futures – continues to rise and I wish I could assume it meant good times ahead. Not only am I made nervous by the words of Rupert Murdoch, I am haunted by my reading of Amity Shlaes’ The Forgotten Man: A New History of the Great Depression, a book I seem not to be able to get out of my head. There were many stock markets spikes during the 1930s, Shales reminds us, but the economy itself never pulled itself out the mega-doldrums. Finally, the big crash came in 1937, eight years after the crash they told us brought about the Great Depression. Only WWII lifted us out of it. So I’m not resting easy with the temporary minor rise in my retirement portfolio as I watch Obama continue to spend money at rates unimagined by any of us. I keep wondering when to cash out – but then what will the cash be worth.
Oh, well, perhaps I’ll buy an iPhone 3GS in a couple of weeks, to distract myself from reality for a couple of hundred bucks. Evidently, they have a program in them that automatically reorients your map when lost – a good thing to have in the bleak future.
Last September was the time to cash out, Roger, or as I painfully remember it, about 45 grand ago. My advisor correctly told me to stay in, even during the dog days of early March, and the returns have been much improved over the last few months. While encouraging, it’s difficult to stay optimistic for very long when many of the old rules no longer apply. With the Fifth Amendment being trashed, capitalism under assault at every turn, (f)unemployment(!) climbing to record levels, and the ominous commercial real estate time bomb ticking away, the waters still look pretty choppy. Sadly, all of this is before most of the tax hikes and massive inflation have even kicked in. Most of us (that aren’t Chrysler bond-holders, anyway) have not yet begun to render unto Caeser.
Change!!!
Good point. I was wondering why the heck anyone would need a compass in their iphone.
Compass in an iPhone = turn-by-turn directions that are accurate because it knows which way it is pointing (it already knew where it was).
Lightnin’ Hopkins: The only thing you forgot was the impending retirement of the Boomers (of which I am one). Late last summer, I cashed in some investments to put a massive (and very cool) sunroom on my house. At the time I felt like I was doing something foolish, now I feel like a seer.
We Boomers have rippled through the economy for some 60 years now; that ripple is about to become a tsunami.
Tsunami party at my place, in the sunroom!
“The only thing you forgot was the impending retirement of the Boomers”
Great, one more reason to drink heavily.
Roger- I don’t know exactly how old you are but based on your bio I’m guessing mid- late- sixties, right? Well, no offense, but at that near-retirement age you should be pretty much phased out of stocks and in bonds / money markets / etc. Even in the best of times (which this is obviously not), stocks are too volitaile in the short term when you’re past sixty or so. I mean, that’s financial planning 101…
Roger–It seems to me you and Pajamas are in a good position to help educate folks about the great depression and the conventional wisdom that the recovery came with WWII. Yes, the recovery did coincide with WWII. But, a more complete explanation would reveal the major truth that folks need to understand. During the twenties and going into the thirties, folks became manic about debt and the consumer debt service costs achieved highs (much as today) relative to consumer incomes. WWII brought on massive savings as folks put all efforts toward the war. Consumer debt levels DROPPED and debt service costs DROPPED significantly relative to consumer incomes.
IMO, that is exactly what we need today. Not a war. But massive saving to redress the imbalances of manic borrowing. It will take time. Sadly most folks, and most Dems and certainly President Obama fail to understand. The stimulus and the massive borrowing will be a disaster. I am as upset with GWB as I am with BHO.
Watch the bond market. Notice the declining value of the dollar. Notice the increasing price of oil. It is not that the demand for oil is going up; rather that the length of the dollar is getting shorter. Here is a major truth: inflation can be adequately described not as a price increase, but rather is the erosion of the value of the USD. In other words, the yardstick gets shorter.
Roger, please use your position to help folks see into the future. I think the country depends on it. Thanks. Palmer Hinsdale
Dear Roger,
Thank you for the mention of TFM! Right now I see more similarity to Japan in the 1990s for the U.S. than to our own past in the 1930s. But the crisis of the dollar that lurks behind the current downturn could become serious. This week in the Bloomberg I wrote on the question of whether the US even knows how to do social welfare well, the way Germany does. To become a social welfare/corporate welfare state does not become us.
with kind regards, Amity Shlaes
Senior Fellow,
Council on Foreign Relations