Tag Archives: national debt

Are The Good Times Really Over For Good?

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For someone in their twenties it is hard to think of a time which has been harder economically than right now. But I do know that this is not true. There have been many booms and busts before, times much harder than this. Rationing, world wars, the great depression.

But what of the future? My generation seems to have gotten the muddy end of the stick. The OECD, a respected British think tank, said that Britain has slipped into a double dip recession and more pupils than ever are getting free school meals, the governments indicator of a child growing up in poverty. Tube drivers might be raking it in, getting paid £500 just to show up for work each day during the Olympics, but the rest of us are struggling.

Are the good times really over?We have become generation rent, unemployment is high, we not only have a harder time getting our dream job, but getting any job at all. I have friends that are moving out of West London where I live because they cannot afford it, struggling to find jobs and even if they have one, struggling to survive the squeeze.

Not getting to the nitty gritty. Tuition fees are up to a staggering amount, 9K a year for an education, transport costs go up above inflation every year; the Oyster caps at £10 per day in London. Then there is the fact that if you get an unpaid internship these days you are one of the lucky ones. It seems everyone is taking everything from the young. I am luckier than most. My education days are behind me and so are my internships: but if the children really are the future, then what of it? Are the good times really over for good? Everything from stamps and food is going up. Petrol is so expensive people cannot even get to work and the government is looking shifty after the cash-for-access scandal. Never mind the fact we don’t have any privacy anymore and they are trying to bring in web-monitoring.

Government debt is at a £988.7 billion. And who is going to have to pay that off? The decent, hard working people of Britain. Oh well. We can always print some more money.

What good will come from this? Lessons maybe. We lived in a society that saw the word ‘credit’ and did not take in the fact that actually means ‘debt’. Above all we will do what the British do: keep calm and carry on. You may want to cross your fingers too.

 

Why the Economy Could Take Another Downturn—and What the Average Investor Can Do To Protect Themselves

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Why the Economy Could Take Another Downturn—and What the Average Investor Can Do To Protect Themselves

The following article was written by Daniel A. White, CLU, ChFC , President, Daniel A. White & Associates:

To the casual observer, the economic headlines look promising. To be fair, there are a few positive indicators. Unemployment figures are gradually improving, retail sales are on the upswing, corporate profits are up and consumer confidence is surging. Unfortunately, the reality is much more complicated. To many financial advisors and investment professionals–myself included at Dan White and Associates–there are reasons to be cautious. A closer look at historical comparisons and advanced metrics behind the rosy headlines reveal cause for concern.

Trouble looming?

One of the biggest underlying reasons I suspect we might be headed for another 2008-type bubble in the not-too-distant future—is my skepticism regarding the pace of the current recovery and the factors driving it. Standard and Poor’s (S&P) earnings are on pace to hit $91/share by August; up nearly 13 fold from the March of 2009 lows of $7/share and surpassing the all-time high of $90/share in the 3rd quarter of 2007. There is nothing wrong with profits, but why are we seeing those profits?

The short answer is pretty simple: the government is printing more money as part of a strategy called Quantitative Easing (QE2); monetizing the national debt by purchasing securities and turning government bonds into circulating money.

So what happens when the government turns off the spigot? We can get a pretty good idea by looking at other government incentive programs. Whether it was a home-buying tax credit or a “Cash for Clunkers” promotion, the markets dropped off sharply when programs ended. It’s also worth noting that after the last round of Quantitative Easing–in the months after April 2010–the market plunged.

PE ratios and commodity oddities

Since QE2 began last August, the price of Silver is up 70%, crude oil and coal are up close to 40%, and a number of other commodities are up sharply. And when you see the U.S. Dollar down 10.6% at the same time, that’s a recipe for trouble.

Perhaps most concerning, is the historical pattern of the price to earnings (P/E) ratio and what it means to investors. When you get in the market at a low P/E ratio, things tend to work out well, and when you get in when the P/E ratio is high, that doesn’t bode well. The current S&P 500 P/E 10–is at about 24. It has only been at 24 a handful of other times in history.

What can you do?.

* Be conservative. Investing in healthy companies with large cash reserves is fairly safe, but commodities and other risky assets are a bad idea.
* Plan ahead, be cautious and don’t get overextended. The first sign of trouble is likely to be short-term interest rates starting to tick up. If you see that happening, reduce your exposure.
* If you are retired or almost retired, all of this is particularly relevant. Be extremely vigilant and pay close attention to the subtleties of the marketplace.

Founded in 1987, Glen Mills, Pa.-based Daniel A. White & Associates is a financial planning firm specializing in asset protection and transitional and retirement planning. Through a team of knowledgeable experts, Daniel A. White & Associates provides comprehensive financial planning for retirees and pre-retirees in estate planning, asset protection, wealth management and wealth transfer strategies.

www.danwhiteandassociates.com