The Economy

[Ben Ruset]

So, given that the economy is turning to crap right now, how worried are you about things? I wrote this in my blog last month, and I only see the situation more dire today.

How many of you are worried about your jobs? Your houses?

I haven't been able to sleep without taking a tylenol PM for the last few weeks. I haven't been able to stop worrying about the future. What about you?

 

[pinelandpaddler]

I feel ya, bro. It's easier said than done, but I think the best thing to do is to stop worrying about things we have no control over.

 

[dragoncjo]

I know what your saying Ben. I work as a stock research analyst and this situation is very very bad. However, this is really only the begginning of the mess, as most of the impact has not been felt by the average american yet. Wait until this starts funneling through the system and business start going belly up, or laying off people in large numbers. The one thing you are going to see is significantly lower gas prices which is good for people who like exploring the pines. The people I feel very bad for is the group who is looking to retire in 1-2 years....this has now been pushed back to 10-12 years, as their 401k have seen a drop of 50% which will take 4-5 years at the least to come back possibly much much longer. We are really feeling the effects of the clinton administration and bush deregulating the mortgage industry and allowing people to buy houses with 0 down.....I'm only 27 but living in south jersey I ask myself how in the hell do people who make 75,000 a year buy a 300,000 dollar house with 7,000 dollar a year taxes, and drive a bmw.....the answer is they can't and that is why our economy(and global) is spiraling out of control......it will be 10 years till we see our way out of this one. However the idiot mortgage broker(these guys should be piled up and put in prison) is living in the good life after the bull real estate market of the last few years. Now that all sounds like a pretty bad view.....but is this as bad as the great depression....doubtful. The stock market falling is on panic....buyers are basically on strike. The stock market is normally a good barometer of how the economy is doing...but in this case it is really not well correlated as panic selling has occurred with no true reflection of the economy.....the economy is bad but not as bad as the media and stock market is reflecting.....over time it could get worse though if immediate actions are taken by the government to bring the people running these financial institutions to justice...trust needs to be restored. And I read your blog Ben, that 700 billion bailout package is really just to pay off overseas investors who basically were asking to be made whole or they would basically go on strike against lending to american companies......once again the taxpayer being penalized for the poor and greedy decisions of the executives of financial institutions........ok I'm done.

 

[long-a-coming]

I've lost a nice chunk of my retirement plan. I stopped checking it. I'm riding it out though.

 

[Ben Ruset]

My 401(k) is down 20%. Not that I care, I hopefully have another 35 years before I retire. Still, I make decent money and still never feel like I can get ahead. I have a 1200 sq ft. ranch in Brick Township of all places, with $3200/yr in taxes and still can't seem like I can get ahead. Meanwhile people seem to be able to buy multi-acre estates in Jackson or other places in the pines and get ahead. I wish had the connections that some of these people had. I'm happy to pay all of my bills each month.

 

[Teegate]

with $3200/yr in taxes

I wish mine was that low.My taxes are almost double that. The towns around me are triple that and more. So from a tax point of view you are doing okay where you live if you get decent services for that amount.

Guy

 

[Sue Gremlin]

I have adopted a head-in-sand approach. But honestly, if I do allow myself to go there in the middle of the night, I am toast. My 401K has lost an ungodly amount of money, and that is with the safe investment strategy. But like you said, Ben, I am trying to see the big picture and not the here and now. I will be ready to retire in 14 years. Lots can happen in 14 years. Right? RIGHT?!
I work in an industry that is largely one of luxury, (veterinary medicine), so I am worried that my company is going to tank. There will always be a need, but in a bad economy, not a lot of people are going to care if their cat has fleas.

 

[dragoncjo]

Ben being down only 20% is quite an achievement being that the stock market was down 20% just this week alone. Most 401k's will come back over time just make sure you are positioned properly for the upswing when it happens in maybe 2-3 years. Just be ready for more stock market loses in the short term.....the market probably will settle in around 7000 at some point so your looking at possibly another 15-20% loss. Hopefully the bill buying into large firms like Morgan will stop the bleeding a bit....but buyers are still on strike.

I agree with Guy too as we live in the same town. My next door neighbor pays 11,000 a year and my family pays about 7 ish.....and we get very little for our taxes. 3200 hundred is quite reasonable in all honesty.

Sue, I think you will be ok in the vet med industry. People have a tendency to take care of there family and pets first and foremost.....Luxury goods like shoes, cars, watches will take a hit, but taking care of pets which bring comfort to most will still continue....hopefully.

And Ben, your thought about how some people are buying mult acre estates is a question I ask myself often. Keep an eye on those house they may be for sale soon.....or you can bet that they are probably someone who worked in an industry that was booming....real estate....their time in the sun could be ending for a while.

 

[Ben Ruset]

I work in technology. I was hit badly by the .com bubble popping in 2001. I'm afraid of something like that happening again, even though there's no tech bubble now.

I don't know how most people live in New Jersey. We're a single income family, which I guess is a rarity now.

I can't imagine $11k in taxes. Nearly $1k each month in money just out the window. My mortgage payment is $1600 and change, and that includes my homeowners insurance and taxes. We'd like to get into a bigger house, but I can't see spending more than $2k a month for a mortgage. $2k/mo does not buy you much.

 

[gipsie]

This whole economy thing is hitting my industry really bad. I am a union rep for Local 54 and we deal mainly with the casinos. It is bad, really bad. While, through contracts, our members are pretty well protected, but the at will employees are being cut first. And they are seriously getting cut. Lay-offs are everywhere. They are cutting heads like crazy. It is only a matter of time before our members start getting laid off as well. It is in the air. City Council delayed the smoking ban for a year because they are afraid it would do more damage to the already dwindling customer base. Our members are going to work every day not knowing if this is the day the axe is going to fall. It is a somber atmospehere. I am the rep for the non-casino world (convention centers, Seaview and some smaller restaurants and hotels) and we are really feeling the crunch. Work is scarce. I have negotiaitions coming up with four properties and we are aspiring high, and I am afraid of what I am asking for because the money just may not be there. Hopefully things will straighten out some by the time we get to the table, but it is not looking good...

 

[dragoncjo]

Ben, I think tech industry is the place to be this time around. What is happening now in the financial industry is similar to what happened in the dot.com bubble....

I love NJ and would love to live out in Chatsworth, but with one salary that is impossible. Although house prices are going to tumble probably.....but coming up with 30% or any lending will be tough....

 

[Tom]

I think we are witnessing the end of the Republic. When you take all the legislation that has been passed since 9/11:

USA Patriot Act - A 342 page document presented to Congress one day before voting on it that allows the government access to your bank and email accounts, as well as your medical and phone records with no court order. They can also search your home anytime without a warrant.

USA Patriot Act II - This one allows secret government arrests, the legal authority to seize your American citizenship, and the extraction of your DNA if you are deemed a potential terrorist.

Military Commissions Act of 2006 - Ends habeas corpus, the right to an attorney, and the right to court review of one's detention and arrest. Without this most basic right, all other rights are gone too since anyone can be detained indefinitely. Now anyone may be arrested and incarcerated and nobody would know.

NSPD 51 - A directive signed by George W. Bush on May 9, 2007, that allows the President to declare martial law, effectively transforming the U.S. into a dictatorship with no checks and balances from the Legislative or Judicial Branches. Parts of this directive are considered classified and members of Congress have been denied the right to review it.

Protect America Act of 2007 - Allows unprecedented domestic wiretapping and surveillance activities with a reduction in FISA court oversight. Probable cause is not needed.

John Warner Defense Authorization Act - Signed by George W. Bush on October 17, 2007, this act allows the President to declare a public emergency and station troops anywhere in America without the consent of the governor or local authorities to "suppress public disorder.

Homegrown Terrorism and Radicalization Act - Passed overwhelmingly by Congress on October 23, 2007, is now awaiting a Senate vote. This act will beget a new crackdown on dissent and the Constitutional rights of American citizens. The definitions of "terrorism" and "extremism" are so vague that they could be used to generalize against any group that is working against the policies of the Administration. In this bill, "violent radicalization" criminalizes thought and ideology while "homegrown terrorism" is defined as "the planed use of force to coerce the government." The term, "force" could encompass political activities such as protests, marches, or any other form of non-violent resistance.

And now that the 3rd Infantry’s 1st BCT is now active here at home, which would have been in direct violation of Posse Comitatus, execpt our legislatures scrapped that too: http://www.armytimes.com/news/2008/09/army_homeland_090708w/

Something big seems afoot.

 

[MarkBNJ]

Great thread, Ben. People need a place to let all this crap out. I think being interested in history has helped me with this, because I can easily look back and see that everything has a cycle. This ain't the fall of the Roman empire, and one thing you absolutely can't do is take _any_ context from the yammering media.

Still, I'm where you are mentally, when I allow myself to recognize it. I have three teenaged daughters, a house, etc. I work in software development, for a consulting company (bad), that focuses right now in retail (worse!), and has most of it's current revenue coming in from a home improvement retailer (winner!). I hope we hang on. We work on core point of sale stuff, so I am hopeful we will, but it's dicey. For what it's worth IT up to now hasn't been very hard hit by this, but if it broadens and lasts a long while we'll be on the front lines with everyone else. We were a one income house for a long time, because that's what we wanted to be while the kids were young, but my wife recently graduated from nursing school and started at a hospital so that eases my concerns a little as well.

Right now I think fear has far outstripped reason in the reaction to economic conditions. So from that perspective you're helping if you decide to ignore it and live your life normally. Equity values are paper values, so waking up every morning and checking the number doesn't make much sense anyway.

 

[Ben Ruset]

I suppose one of the hardest things is to wake up each day and see nothing but bad news everywhere you turn. I can hardly read the APP.com site because all I hear about is how corrupt our local politicians are. I read cnn.com and see how much the rest of the world hates us, how the global economy is failing, and how many soldiers are dying in what I believe are two useless wars.

I've looked back at history thinking that the first few administrations ran this country in an ideal way. When I look back I see corruption and greed, and the twisting of laws to suit personal needs. But never on a scale like this, and never to the point where the American public are rolling over and allowing a 1984-esque society to be built around themselves.

I don't know who to blame. I can say career politicians, who do nothing but groom their lives for public "service" and the perks it entails. I can blame the media, who instead of warning us just shove down more "Reality TV" down our throats. I can blame the people, who are so disinterested in what's going on around them - or are actively willing to give up their freedom (FREEDOM ISN'T FREE ) - that they have no idea of what the world is turning into.

Or, I could just be extremely paranoid. I haven't really lived through any major economic downturns besides the tech crash of 01, which hurt, but I escaped better than a lot of other people. I was maybe 6 or 7 when the S&L failure of the 80s happened. I don't even really remember that affecting my family.

All I know is that every day I wake up and expect more bad news, and it's just terrifying to have to live like that.

 

[Tom]

For anyone who is interested in the Federal Reseve's role in our current crisis, I highly recomend reading G. Edward Griffin's The Creature from Jekyll Island. It is the most eye-opening book I have ever read. And, not the least bit dry as one might expect from a book about banking.

http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212/ref=cm_cr_pr_product_top

 

[Aaron]

My job is insanely secure, if i loose my job we are all screwed. I really feel bad for alot of people, my cousin is a contractor/construction worker his wife is a real estate agent, needless to say they are getting hit hard. I hope in a few years this passes

 

[suresue592003]

Look, I don't mean to put down anyone, but if you can afford $10,000 a year for taxes and complain...you need to downsize. I can only imagine what kind of house calls for 10 grand a yr in taxes. And what single income supports that? Doctor, lawyer?
It can be done. When I lived in Nesco, I had bought this run down trailer on 1/2 acre for $45,000 in 2000. In 2006 I sold it for $125,000. I paid off bills, saved 30,000 and put 30,000 down on a rowhome in Riverside for 145,000. So now my mortgage is $918.00 a month which includes taxes and homeowners ins. I currently owe 117,000. My taxes are about $2,300. a year. My rowhome was a rehab so everything was like new with all new appliances. My son goes to a great high school which offers JROTC, something few high schools offer. He has excelled in this and is in color guard which has earned him metals.
And my neighbors are pretty decent too. In this area, I have it made. Thank God.

 

[suresue592003]

Now as for the job thing...I am a LPN nurse which scope of practice is limited. Even though nurses are in demand, places are not hiring like they previously did. They too are trying to skim by on the staff they have. I recently read in my nurses magazine, that alot of nurses who weren't working before, have now went back to work because things have gotten so bad...which too means jobs are hard to come by now more then ever where LPNs are concerned. It is a cycle.
Credit card debt is what is killing me now. I just plain owe to much no matter how I shuffle it around. I too am just waiting it out and hoping for the best. Due to an unforseen legal emergency, I have had to dip into my savings...ouch! If things don't pick up soon, I will have to dip in again. Has anyone else had to take from their savings in order to make ends meet ?

 

[Bluetick1]

As a listener + reader of conspiracy stuff, I listened to a few shows in the past 12-18 months or so that were predicting the real estate burst, which would then seriously effect banking, the market, along with the economy and that things could get tough and possibly very tough. One thing that stuck with me was that entering tough times above water was key, going into bad times in a bad situation was not good.

At the time I thought "yea right"...but when a coworker told me that his BIL (who works for a well known home builder) mentioned that people out west were not showing up for settlement and taking a hit on their deposit money due to dropping home prices while the builder was getting stuck with an excess of new homes... I rethought things and decided what could it hurt to cover my bases some? With that, I told my gf that I felt we should cut back and make a strong effort to live well within our means. Which we have. Both of us paid down our credit cards, made sure what we brought we needed, made sure we brought value and made changes to stuff where we felt we were wasting money and basically did without stuff. We were getting overwhelmed with the daily grind and felt anyway we can increase our down time was a good thing anyway. Not that we eat beans + rice everyday, we just watch what we spend and spend money where it does us the best, along with making sure we take the time for us and what's important to us.

As it stands now, I feel we're as well as we could be. I think my job is secure for awhile. I'm a toolmaker by trade and while jobs+salaries have dropped plenty, I can still make ends meet with a lower paying gig. The gf's job is questionable. They are very slow and if history proves right, quick lay offs are the usual way to save the cash there. Home wise, I brought a fixer upper and unless prices drop really far, we'll be fine. The mortgage is $1000 a month with taxes at 3200. Plus I'm pretty far into the mortgage now which helps some. The utilities are ok and we can hunker down if need be come winter. Both cars ('01+'02) are paid for and in fine shape. I had thought about getting a new one but nixed it. We have taken hits on our retirement money but are hanging in there. I do wish I had put most of my money into gold.

Over all, I feel duped by our leaders and have lost faith in them. I can't help but feel we're being played for the gains of a few off the tears + sweat of so many. Toms post about our lost freedoms is right on and I find it disturbing that so many are not aware of it. Something big does seem afoot.

On a lighter note, the talk about high taxes made me smile. When I worked in Princeton my one boss paid a whopping 20k a year in taxes! The joys of living in Hopewell!

Be well people.

 

[long-a-coming]

Yes I have had to dip into savings more and more recently. I moved out to Berlin in 2003 because of the high taxes in the Haddonfield/Haddon Heights area where I grew up. I have heard the housing market will completely bottom out creating big opportunities for anyone able to buy up some real estate. When it does go back up in 7-10 years it will shoot up so high owning a home will be next to impossible for most young people starting out.

Is gold the way to go now?

How about buying up large amounts of traditional blue chip stocks when they reach all time lows?

What does everyone think about these "hired investors" pumping billions into the economy to give it a boost. How do they determine which companies to invest in?