Larry Doyle’s Dollars and Sense “Central Station”

how do you find the show? isn’t is on now? I can’t find it!

Sister,

Any young person has TIME on their side and thus wants to MAXIMIZE savings and MINIMIZE debt.

In regard to where you may look to allocate your savings, I would recommend index funds that mirror the market as a whole.

An index fund has very low expenses, typically only .1 to .2%.

The larger family of funds such as Vanguard, Fidelity, American Funds have a wide array of funds.

I would recommend funds such as

Total Stock Market
Total Bond Market

These funds give you exposure to the entire market across all sectors. I would recommend regular contributions as opposed to a one time allocation. The key principle there is the fact that you will develop the discipline of very regular savings vs looking at the performance and comparing it to when you invested.

Best of luck!!

Sara…Great question and it gets to the crux of the debate that has been the center of our politics and economics for a long time.

The key principle in this stimulus bill and in any fiscal policy is how does it effect the “multiplier.” What is a multiplier? Very simply what happens to a dollar once it is injected into the economy. How often will that dollar be used to generate further dollars by increased spending and investment.

The key that I always look towards is not the actual tax rate but the total tax revenues collected.

Politics enter the equation when people focus on who is paying what vs what they are earning. We won’t solve that problem here.

In regard to cutting projects. Ultimately the bills must be paid and the interest on the deficit must be funded. The risks of increasingly greater deficits is that they drive interest rates up and thus erode future growth potential in the economy.

Hope that helps.

Sunup…

Good point. Tough to invest or trade a market that is so driven by news from Washington versus economic performance of a company or an industry.

One piece of news that did not get much attention but definitely impacted the market on Thursday and friday was the proposal to suspend the “mark to market” rule.

It did not get much press this week but I think we may hear about it tomorrow but I believe Obama’s adminsitration may look for FASB (Federal Accounting Standards Board) to suspend the rule mandating banks to “mark to market” all securities and investments. The relaxation of that rule indicates to me that certain investments have greater losses than banks want to or can possibly recognize. In deference to the system the markets for these investments have totally dried up. All said, though, I think the suspension of mark to market is an indication that the government is looking to buy TIME for the economy to heal. A prolonging of a depressed economy is what occurred in Japan in the 90s.

Sassy…thanks for sharing. There are many parts of the proposed Stimulus Bill that would seem to do less for stimulus than for subsidizing businesses and supporters that backed the Democratic Party. Regrettably that’s politics!!

I think a major challenge for Secretary of State Clinton is going to be dealing with the likelihood of increasing protectionism around the world.

You can see this developing quickly almost everywhere you turn. The economic impact is an increase in the prices of goods…..which means inflation.

Many governments probably would not mind SOME inflation as it is beneficial when one is in debt. (the ability to pay down debt in currency that is cheaper in the future). The issue becomes once the inflation genie is out of the bottle can you get him back in.

The economic mixed with the political and military present real challenges for Secreatry Clinton. Hopefully VP Biden will give her plenty of room to operate.

Tuppence,

I think the critical question for you or anybody else is “if you have the money set aside and if spent on these improvements” do you feel comfortable that you can continue your lifestyle without undue or unnecessary stress. Run a “stress test of sorts”, meaning if joint income drops a certain percentage would you still feel comfortable having spent this money.

I will bet that you could probably get some GREAT deals as far as labor,supplies, etc…Do not be bashful about negotiating very hard. Perhaps the increased savings that you would not have thought possible might make the timing too good to pass up.

Hope this helps.

Lizzy,

Good morning!! The senate did pass the bill as proposed last evening and now it will go back to be worked on by both houses. You are not the only one that feels the bill is not nearly stimulative enough (many economists have made that point). When BO talked about the need to rebuild America’s infrastructure, why aren’t more dollars allocated to that part of this bill.

Regrettably Rahm Emanuel and Nancy Pelosi seem to be the main architects and as RE stated, “you never let a good crisis go by without getting something out of it.” Is that the best that our country has to offer at this time? Ultimately when we REALLY need leaders and statesmen, we get politicians. In a manner of speaking it is similar to the “prisoner’s dilemma” in the world of global trade. I mean that each representative ends up “grabbing the dough ” for their local needs as opposed to truly thinking what is in the nation’s interest.

In regard to the markets, I believe the real focus needs to be on interest rates across all sectors. I do not think that the stock markets are getting away from us, certainly not on the upside. Bonds, especially in the government and mortgage sectors have continued to selloff. The U.S. government has a HUGE auction next week (67bln). Let’s see if our “friends” from overseas show up to buy. IMO this is the BIGGEST factor that will indicate where our markets as a whole are headed.

Great to have you on board!!

Dakinikat…
I agree with your assessment of the equity markets. Although we have been somewhat range bound for the last few months, IMO there is too much emphasis and expectation that the stimulus package will “make this all feel better.” I am not that optimistic. I would still be in the camp of sell rallies in stocks.

In regard to the propsepcts for increased protectionism that is running around the world, BO’s team did not get off to a good start with the “Chinese currency manipulation” and “buy American.” We are seeing social and political pressures applied by worker unions in other countries. France had some significant worker protests this week. Other countries are experiencing the same thing.

The key is China. Let’s see if they participate in our U.S. government bond auctions this week. We’ll be watching!!

Sunup….is it any suprise that virtually every governor in the country has come out in support of Obama’s stimulus plan. WHY?? The states need federal money. I would bet that the initial federal money for states is to address unemployment benefits. I read this morning that South Carolina’s unemployment benefits fund is BROKE. It had $600 million dollars earlier this decade.

It truly is pathetic how pols at both the state and federal levels manage money.

Trixta….sorry but somehow your question got caught in the filter.

I am not a conspiracy theorist in general. I have no first hand experience nor any evidence but based purely on instinct I often wonder as to the intentions and motivations of Georeg Soros. He has left nothing to imagination as to where his political preferences lie. He is HEAVILY involved in MoveOn.org, and he is one of the world’s largest financiers. He made an enormously profitable bet on the decline in value of the British pound in the 90s. He is the one individual I wonder about when it comes to moving markets for political purposes.

That said, the election truly turned on the failure of Lehman Brothers. Plenty of people believe that Lehman should have been saved. I believe that while Lehman’s failure accelarated the decline of our economy it still would have happened.

Some of your west coast riders are left waiting at the station.

Guess I’ll have to remember to post earlier on Saturday.

By the way, I’m suspicious of dropping “mark to market” standard for assets. It seems to be setting the stage for evasive maneuvering per fiscal surprise package to be dropped on Monday.