We’re the Kids in America
by ilene - September 12th, 2010 12:43 am
We’re the Kids in America
Courtesy of Joshua M Brown, The Reformed Broker
"Avoiding risk may feel sensible to a generation whose financial coming-of-age has been bookended by the dotcom bubble and the subprime-mortgage meltdown."
When you talk to a Gen-Yer or a Millennial about stocks, you sense a vague connection between the subject at hand and a ride on Disney’s Splash Mountain beginning to form in an almost-tangible, cartoon thought bubble above their head.
18 to 34 year olds (I’m one of them) have seen virtually nothing but Death and Dismemberment from the stock market overall, despite the new NASDAQ highs of 10 years ago and Dow 14,000 top of ’07.
Our psyches are collectively scarred by the devastating crashes that stocks are capable of. The index highs of our generation’s recent memory barely seem to register at all compared with the ‘Nam Flashbacks of job losses and bankruptcy that stock sell-offs have meant to young adults so far.
Our connection to the stock market is as follows:
"Stocks go up, Mom and Dad buy a lot of stuff."
"Stocks get killed, college tuition has now disappeared, our house is on the market and there won’t be any job for me anyway."
In my discussions with people of my own age group and slightly younger, this feeling is fairly prevalent. There’s a kind of irony in the fact that the young are now more cautious than their Baby Boomer parents when it comes to investments.
Stock market volatility has meant hard times in real life for young adults, not just lighter brokerage statements. It has meant shock layoffs, career changes, and the dismantling of whole industries like mortgage, banking, real estate, media and advertising.
Several studies quantify this phenomenon (as collected by Newsweek):
In 2010, only 41 percent of 18- to 29-year-olds reported working full time, compared with 50 percent in 2006, according to the Pew Research Center. Millennials were more likely to report losing their jobs than workers over the age of 30, and many recent college graduates have had a hard time finding a toehold in a tight labor market, even as the national unemployment rate rose Friday to 9.6 percent. If the 18- to 34-year-olds feel more cautious about investing, it’s partly because they have less money to spend and little economic security.
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Preserve and Protect: Mapping The Tipping Points
by ilene - August 21st, 2010 1:50 pm
Preserve and Protect: Mapping The Tipping Points
Courtesy of Gordon T Long of Tipping Points
The economic news has turned decidedly negative globally and a sense of ‘quiet before the storm’ permeates the financial headlines. Arcane subjects such as a Hindenburg Omen now make mainline news. The retail investor continues to flee the equity markets and in concert with the institutional players relentlessly pile into the perceived safety of yield instruments, though they are outrageously expensive by any proven measure. Like trying to buy a pump during a storm flood, people are apparently willing to pay any price. As a sailor, it feels like the ominous period where the crew is fastening down the hatches and preparing for the squall that is clearly on the horizon. Few crew mates are talgking as everyone is checking preparations for any eventuality. Are you prepared?
What if this is not a squall but a tropical storm, or even a hurricane? Unlike sailors, the financial markets do not have the forecasting technology for protection against such a possibility. Good sailors before today’s technology advancements avoided this possibility through the use of almanacs, shrewd observation of the climate and common sense. It appears to this old salt that all three are missing in today’s financial community.
Looking through the misty haze though, I can see the following clearly looming on the horizon.
Since President Nixon took the US off the Gold standard in 1971, the increase in global fiat currency has been nothing short of breath taking. It has grown unchecked and inevitably has become unhinged from world industrial production and the historical creators of real tangible wealth.
Do you believe trees grow to the sky?
Or, is it you believe you are smart enough to get out before this graph crashes?
Apparent synthetic wealth has artificially and temporarily been created through the production of paper. Whether Federal Reserve IOU notes (the dollar) or guaranteed certificates of confiscation (treasury notes & bonds), it needs to never be forgotten that these are paper. It is not wealth. It is someone else’s obligation to deliver that wealth to the holder of the paper based on what that paper is felt to be worth when the obligation is required to be surrendered. It must never be forgotten that fiat paper is only a counter party obligation to deliver. Will they?…
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INNOVATION: What made America great is now Killing her!
by ilene - August 12th, 2010 8:20 pm
INNOVATION: What made America great is now Killing her!
"Creative Destruction is Secular not Cyclical"
Courtesy of Gordon T. Long
What made America great was her unsurpassed ability to innovate. Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to.
This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America. Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is. It is called Creative Destruction.
It turns out that what made America great is now killing her!
Our political leaders are presently addressing what they perceive as an intractable cyclical recovery problem when in fact it is a structural problem that is secular in nature. Like generals fighting the last war with outdated perceptions, we face a new and daunting challenge. A challenge that needs to be addressed with the urgency and scope of a Marshall plan that saved Europe from the ravages of a different type of destruction. We need a modern US centric Marshall plan focused on growth, but orders of magnitude larger than the one in the 1940’s. A plan even more brash than Kennedy’s plan in the 60’s to put a man of the moon by the end of the decade. America needs to again think and act boldly. First however, we need to see the enemy. As the great philosopher Pogo said: “I saw the enemy and it was I”.
THE PROBLEM IS NOT CYCLICAL, IT IS SECULAR.
The dotcom bubble ushered in a change in America that is still reverberating through the nation and around the globe. The Internet unleashed productivity opportunities of unprecedented proportions in addition to new business models, new ways of doing business and completely new and never before realized markets. Ten years ago there was no such position as a Web Master; having a home PC was primarily for doing word processing and creating spreadsheets; Apple made MACs; and ordering on-line was a quaint experiment for…
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Double Dip In Home Prices; Kohn Wins “Neanderthal Award”
by ilene - March 25th, 2010 2:29 pm
No love lost here.
Double Dip In Home Prices; Kohn Wins "Neanderthal Award"
Courtesy of Mish
Zillow claims Home Prices Have ‘Double Dip’ in 12 U.S. Cities
Twelve U.S. cities, including Boulder, Colorado, and Providence, Rhode Island, are showing extended declines in housing values, reversing signs of a sustained recovery last year, according to Zillow.com.
The number of markets in a “double dip” jumped in January from five in December, data released today by Seattle-based Zillow show. The real estate information provider defines a double dip as five consecutive price drops after at least five straight monthly increases. The gains must be preceded by a period where values fell in at least 10 of 12 months.
Home prices nationally dropped 0.6 percent in January from the prior month, the Federal Housing Finance Agency said yesterday. Government efforts to bolster the market spurred a 4.9 percent rise in home sales last year, the first annual gain since 2005, according to the National Association of Realtors.
The double dip through January also was seen in Colorado Springs and Greeley, Colorado; Augusta, Georgia; Columbus, Ohio; Harrisburg and Lancaster, Pennsylvania; Little Rock, Arkansas; Green Bay, Wisconsin; Greensboro, North Carolina; and Lincoln, Nebraska, according to Zillow.
Ten other markets, including Boston and Denver, “seem poised for a double dip,” the company said. Zillow still expects home values to bottom out by June, said Humphries.
Bottom Out In June? Why?
What possible reason can anyone have to think home prices will "bottom out in June? Perhaps a better question is "June of what year?"
There is a massive amount of shadow inventory, the job market sucks, we had a housing bounce because of $8,000 tax credits, that bounce is dead, and home prices are still way above rental prices and wages.
But hey, it could happen. Just don’t bet on it or even predict it.
Good Riddance to 40-Year Fed Veteran Donald Kohn
When it comes to housing bubbles, the Neanderthal Award must go to Donald Kohn for his statements on combating bubbles.
Federal Reserve policymakers should deepen their understanding about how to combat speculative bubbles to reduce the chances of another financial crisis, the central bank’s outgoing vice chairman said Wednesday.
Donald Kohn said the worst crisis to hit the country since the 1930s points to the need for more research on how higher interest rates can be used
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site