Generation $

Generation unending

2005-12-01T22:51:00.000-08:00

People normally compare the economy to a rollercoaster and, as we've seen over the last few months, that's not completely inaccurate.

Sometimes our confidence in the economy's future falls, like when we get reports that imports and the slowly cooling housing market will stanch hiring. Sometimes it rises, like when we see employment levels rising after a scary spell of Katrina-induced joblessness. The rollercoaster analogy is most appropriate, though, in that economic data disorients and frightens far more Americans than it should.

However, when you try to make sense of it all, it can be a thrilling ride. Since I began this blog, we've seen a nation ravaged by natural disasters. We've seen the nation recover from those disasters. We've seen a legendary Federal Reserve Chairman step down, and we've seen another prepare to take his place.

What we're really looking at, it's not a jumble of numbers and graphs. It's really the cycle of life. Things come and go, things ebb and flow, but they never really end. They just float off into the horizon, producing a million and one stories along the way.

Black all over

2005-11-28T20:55:00.000-08:00

The results of Black Friday are in and, even though total sales are .9 percent lower than last year's Black Friday, there are some definite winners in all of this.

Wal-Mart scored big, for one. They got the most customers last Friday, and CNN Money says it helped them garner "a 4.3 percent gain in same-store sales for November."

The sales event also gave a jolt to the stock market. The biggest winners, though, were the fans. That is to say, those who actually did participate in last week's festivities would have noticed a lot more discounts than in the past.

Some 78 percent of retailers increased their promotions from past year, according to Goldman Sachs.

If you missed out, though, don't worry. You're not that tragically unhip. It seems more and more people are waiting for the Monday after Thanksgiving to shop on the internet, and that's far more reasonable than subjecting yourself to the horrors of holiday shopping.

AMT promises

2005-11-21T08:44:00.000-08:00

I hate it when governments spend money they don't have. Despite this, I'm not necessarily angry that the Senate passed a bill containing $60 billion in tax cuts.

That's because $30 billion of that is driven by a change in the Alternative Minimum Tax.

While the AMT was originally intended to get money from the tax-ducking wealthy, it's fast becoming a problem for the middle-class.

The Urban-Brookings Tax Policy Center says the AMT will hit 3.6 million out of the nation's 131 million taxpayers filing for tax year 2005 (filed in early 2006), and could affect 31 million by 2010 if nothing is done.
To give you a sense of just who might get caught, this year only 1.8 percent of married couples with two kids and an adjusted gross income between $75,000 and $100,000 will be subject to AMT. Next year, that number jumps to 73.4 percent.

The highest tax rate under the AMT takes only 28 percent of a tax payer's income --that's 7 percent less than the one in the regular tax system. The tricky part is that the AMT drops deductions like child-tax credits and state income taxes, and that means more income is taxed than it would normally be.

Don't expect this Senate bill to save you, though. The House has its own tax bill, and it makes no mention of the AMT. That means this change in AMT law may not happen.

In the meantime, if you get hit with the AMT this year, MSN Money has some ways to get around it.

Out of the blue and into the black

2005-11-17T22:07:00.000-08:00

Black Friday is coming, and that means fabulous savings for America's consuming public (and sometimes even a free breakfast).

More importantly, though, it means hope for a few faltering retailers.

For instance, Wal-Mart is practically begging for some of that old black magic. Sears and J.C. Penney are so desperate for a hit of Christmas green, they even cut prices early.

And the entire retail industry is watching to see what how it goes. The National Retail Federation does not expect good things, you see.

"A combination of many factors, including energy prices, the job market, disposable income, and consumer confidence will ultimately affect retailers' sales this holiday season,'' NRF's chief economist Rosalind Wells, said in the group's annual holiday sales outlook.

For those out there who are planning on pumping something back into our economy this season, there are some legally dubious scans of leaked Black Friday circulars at this wonderful site.

So yee-haw, good citizen. Now you can save money, help our economy, and stick it to the man all in one fell swoop.

I love this time of year.

Trade gap gains

2005-11-14T21:04:00.000-08:00

Even though America continues to raise the record for the largest trading gap in the history of its existence, Greenspan says it's not all that bad. That is, it's not that bad if it doesn't continue.

While financial markets were not reacting as some had feared to the mounting current account gap, foreign investors would not be willing to fund the deficit indefinitely, particularly as the proportion of dollar assets rises in their portfolios, he said.

In other words, if money keeps on leaving the U.S., countries are going to stop loaning it out to us.

Luckily, the U.S. has been taking measures to improve the trade gap. We've gotten China to unpeg its currency from our dollar. We've inched up costs on Chinese textile imports. We've gotten those pesky oil prices to fall, so we no longer have to rely on European oil.

Because of all of this, our dollar is finally showing signs of life again.

Of course, this isn't the end of our troubles. If you believe that, I've got a bridge I'd like to import to you. Still, it's good to know that Greenspan isn't just understating a problem for once.

The world's saddest roast

2005-11-10T21:00:00.000-08:00

The October budget fell by $10.1 billion this year! Only $47.2 billion to go, and then the U.S. willl actually be spending money it has!

Happy times for sure, even though we're now $8 trillion in debt.

And we can't seem to accept any budget cuts that will lower this debt.

Oh, and we now have the highest U.S. trade deficit of all time. Of course, that really can't be blamed on the fiscal policy of the U.S.

The 11.4 percent increase in the deficit reflected the fact that imports jumped by 2.4 percent to a record $171.3 billion in September, driven by the higher oil bill and a big increase in imports of consumer goods such as televisions, clothing and toys.

So really, the foreigners are to blame. No need to blame any in charge of the U.S. economy.

Instead, let's reward the man who watched over all of this.

Really, though, Greenspan deserves his medal. I just wish someone gave it to him when everything wasn't so obviously falling apart.

Poppycock and the needless flap

2005-11-07T09:39:00.000-08:00

If you've read the news lately, you might be thinking that our goose is cooked.

CNN Money says that the World Bank is estimating the cost of the deadly bird flu virus to be as much as $200 billion for the United States. The deaths, it said, will run upwards of 200,000.

However, while those at the World Bank are running around like chickens with their heads cut off, many are calling the threat of a pandemic overblown.

That hasn't stopped Congress, though. Those stalwart representatives of the American people are always prepared to waste U.S. tax dollars, even if it winds up costing you $8 billion for a widely exaggerated health scare that will amount to nothing.

Remember when Gerald Ford asked congress to put aside $135 million to combat the Swine Flu of 1976? Neither do they, apparently.

The worst part of all this handwringing is that fine American businesses will be hurt. KFC alone is expecting sales to drop by 10 to 20 percent, and only time can tell how bad the panic will be for the rest of the $50 billion chicken industry.

Just know this: If you cook the meat, you can't get sick. So stop being chicken-hearted, America, and start eating chicken hearts. Your economy will thank you.

My money lies over the ocean

2005-11-03T21:00:00.000-08:00

Despite the fact that S&P 500 companies have posted 14 straight quarters of double-digit growth, their stocks have been pretty flat this year.

To quote the great dead English playwright William Shakespeare, "What the hell is going on?"

Well, the Christian Science Monitor has a few theories. People are concerned about high energy costs. People are hesitant to invest after the post-millenium recession. People are worried about baby boomers withdrawing their savings.

The Monitor's most interesting theory, though, is that all this money is going overseas.

Some strategists are shifting their attention overseas, based on the superior growth prospects of foreign markets, and to protect against the possibility of a falling dollar in the long term.

With emerging markets overseas posting huge gains this year, mutual fund investors have been pouring more money into world funds ($9 billion in September inflows) than domestic ones ($1.1 billion for the same period, according to the Investment Company Institute).

So, if I understand this correctly, the fear of an inflating dollar has scared investors away from American companies. That's money that would go back into our economy if it were here...

You think there's something to Greenspan's incessant cries over the state of our national debt?

Headline ruse

2005-10-31T07:58:00.000-08:00

Although Americans are quaking after a terrifying onslaught of hurricanes, they are finally starting to open up their wallets.

CNN Money reports that consumer spending rose 0.5 percent last month. Perhaps that's because post-hurricane insurance payments boosted income by 1.7 percent.

Or perhaps it's because spending didn't really rise at all...

While spending rose last month, the increase was more than accounted for by surging energy prices. Adjusted for inflation, spending fell 0.4 percent after a 1 percent August drop.

In addition, the savings rate percentage was minus 0.4 last month, making September the fourth month in a row that Americans have been spending more than they've been saving.

So it turns out that all this "good news" that CNN Money is reporting is actually not good at all.

And while all this consumer spending has helped push the country's gross domestic product to levels greater than what was expected before the hurricanes hit, I don't know if that means anything to all those people wasting their life savings on the inflated cost of gasoline.

This is fairly strong proof that GDP does not reflect the standard of living.

Sometimes the headlines mislead. Sometimes the numbers mislead. The real story, though, can be found in the details. Today's story is this: America is hurting.

Pension apprehension

2005-10-27T21:52:00.000-07:00

Your company tells you lots of nice things about your retirement, but don't let them give you that gold watch just yet.

It seems that most U.S. pension plans are drastically underfunded.

According to the PBGC, the plans with the biggest shortfalls are underfunded by an estimated $353.7 billion.
For all U.S. companies that offer traditional pension the figure is much higher, about $450 billion, an agency spokesman said.

CBS News says that nearly three-quarters of the nation's traditional private pension plans are underfunded. And that's with the number of people on pension plans dropping by more than 15 percent in the last 15 years.

The lesson here -- if you aren't already past the point of no return -- is that you should ignore traditional pension plans, max out your 401k every year from now on, and then invest or save any money that's left over.

If you don't start saving until you're 50, it's unlikely you'll have enough to retire when you're 65. It's a no-brainer: To get $1 million in 15 years, you'll have to save $3,750 a month and earn 6% a year on your money. To get $1 million in 40 years, you need to save $550 a month.

If you are past the point of no return, well...Maybe this anecdotal evidence will convince you that retirement is overrated.

Pulling up a chair

2005-10-24T18:26:00.000-07:00

There comes a time when we must be brave. There comes a time when we must embrace change.

That time is now, because, on Jan. 31, Federal Reserve Board Chairman Alan Greenspan will step down.

Greenspan has served as chairman for the last 17 years. He guided us through the crash of 1987, the internet stock bubble of the late '90s, and the recession of the new millenium. He's had his critics and he's had his fans, but everyone can agree that Greenspan will be a hard act to follow.

Which brings us to his replacement. There was a lot of speculation about whether or not George Bush would appoint a crony, but it turns out that the new chairman will be the one everyone wanted the most: a man named Ben Bernanke.

Bernanke is currently the chairman of the president's Council of Economic Advisers, and, based on everything I've read, he's the safest pick that Bush could have made.

So don't fear, ladies and gentlemen. Things turned out as well as they possibly could have.

When is the house party over?

2005-10-20T21:58:00.000-07:00

Be it ever so humble, there's no market like the housing market.

Despite the fact that 30-year mortgage rates are the highest they've been in 15 months, home construction has hit a seven-month high.

What's more, this trend doesn't look like it's about to stop.

"It's clearly very strong across the board. There's no evidence of any downturn at this point," said Dean Baker, co-founder of the Center for Economic and Policy Research.

This is good, because our economy needs this housing bubble to last.

Several economists have warned that much of the nation's economy is being driven by the steady rise in home prices, which has buoyed consumer spending.

However, as the Federal Reserve Board keeps on raising interest rates to combat inflation, mortgage rates will go up, and that should impede spending at some point. When that happens, it may push the entire world into a recession.

Perhaps this is the reason why the houses of the future are made of cardboard?

The Munificent Seven's last chapter

2005-10-16T18:47:00.000-07:00

The record number for bankruptcy petitions doubled last week.

This surge in petitions was spurred by an oncoming change in bankruptcy qualifications. The changes will attempt to stop those with above-average incomes from filing for Chapter 7.

The Christian Science Monitor has boiled the changes down to a simple chart:

So why is this important? Because the average American holds $8,000 worth of credit card debt. Credit card companies lobbied for this bill so that they wouldn't have to lose the money to these debtors.

So take note, big spenders. There's no safety net for you now if you're upper middle-class or above. Your time for Chapter 7 is over.

Burnin' through money

2005-10-13T21:15:00.000-07:00

Old Man Winter is coming, and like most elderly, you're going to need a lot of money to take care of him.

CBS News reports that energy prices will be 35 to 50 percent higher than last year. If you've got the money, though, gas suppliers will not run out of the obscenely expensive goods.

If you don't have the money, well...Maybe your state government is doing something about it.

This is a bad situation, no doubt, but the biggest loser in all of this will be the U.S. economy. Economists expect a $100 billion drop-off in consumer spending this winter. If that happens, it wouldn't be out of the question to expect a nice series of Christmas-time lay-offs.

That's why I suggest that you all do really mean things for the rest of 2005. If you're going to get a lump of coal in your stocking, this is the year for it.

I want to sell my BICYCLE! BICYCLE!

2005-10-09T10:58:00.000-07:00

One of the great laws of economics is that every tragedy can benefit someone.

When those planes crashed into the World Trade Center, flag sales rocketed.

When Pope John Paul II died, five papal biographies jumped into the top 20 of Amazon.com's best seller list.

When Princess Di died, Elton John dedicated a song to her called "Candle in the Wind," and 4 million Americans bought the single.

While some may actually consider this occurrence to be an example of one tragedy succeeding another, it nevertheless supports my argument that someone can always make money when bad things happen.

The latest example of this is that the high gasoline prices brought about by Katrina have spiked the number of bicycle sales.

Close to 20 million bicycles are likely to be sold this year, approaching the record hit after a cut-off of Arab oil triggered gasoline lines in the United States.

Now if only the avian flu would hit, I could finally sell off all those SARS surgical masks that are cluttering up my garage...

Here's the story of the hurricanes...

2005-10-06T21:41:00.000-07:00

Retailers are having trouble selling non-essential items.

Of course, this is mostly the fault of Katrina and Rita. With the inflation, the gas prices, the job losses, the falling consumer confidence and the floundering sales industry, Katrina and Rita have become the most destructive duo since Godzilla met King Kong.

What's even worse...this trend of falling sales figures could ruin Christmas.

The good news, though, is that our market will most probably prevail.

"Wall Street is showing surprising resilience in the wake of the hurricanes, soaring energy prices, and the Fed's latest monetary-tightening moves," says Fred Dickson, market strategist at D.A. Davidson & Co., a brokerage firm in Great Falls, Mont.

I know that the news I deliver is often negative, and I know I often make it seem as if the world is about to end. That's why I want to reassure you that, yes, while many unpleasant things have happened, this country is gonna' be just fine in the long run.

At least until next year's hurricane season, that is.

Forget the whales. Save yourselves!

2005-10-02T14:09:00.000-07:00

Katrina is turning into the most expensive U.S. storm ever. The rising cost of energy is pulling up our inflation rates, consumer confidence is at its lowest point in 15 years, and consumer spending is falling steeply.

This drop in spending does not mean that Americans are saving up, however.

Even with falling incomes and spending, U.S. consumers collectively still spent more than their after-tax incomes in August, the Commerce Department reported. It was the third consecutive month that personal savings was negative -- the first time that has happened since the government started gathering such data in 1959.

According to the Christian Science Monitor, the yearly savings rate is on track to being the lowest since the Great Depression.

Economists have many explanations for why this is going on: the savings rate doesn't count capital gains, the savings rate doesn't count money gained from a red-hot housing market, people are checking out pensions they began 20 years ago...but one of the most worrying explanations is that people just aren't thinking about their retirement.

If that's the case, I hope all you folks are learning to whittle. Social Security isn't going to be around, and you're gonna' need a job when you're wrinkled.

A tale of two classes

2005-09-28T07:39:00.000-07:00

There was a record number of millionaires last year! According to a study by market research and polling firm TNS Financial Services, 8.9 million U.S. households can now derive a title from how much money they own. Reports of Regis Philbin's involvement with the status of the 700,000 new millionaires are unconfirmed as of the moment.

Meanwhile, 1.1 million more Americans slipped into poverty, raising the number of impoverished Americans to 37 million. While this may seem to be a worrying juxtaposition, the BBC reports that

[The poverty rate] rose only for non-Hispanic whites, from 8.2 % in 2003 to 8.6 % over the same period. The poverty rate remained unchanged for black and Hispanics.

For those in the very middle, real median household income is the same as it was in 2003, but even that is dubious, since it took more workers to hold the number in place.

The Government Accountability Office thinks there needs to be more taxes for these people, though. Specifically, taxes on home mortgage interest, 401k contributions, employer-paid pensions, employer-paid health benefits and non-business state and local taxes.

From what I understand, these suggestions mostly affect the middle class....which means that, if they're adopted, even more people will fall into the lower class.

Well, whatever. At least someone in the government is thinking about our deficit problems.

Bush's busted budgets

2005-09-25T18:50:00.001-07:00

If you've gone to see the U.S. National Debt Clock recently, you may have noticed that the United States is nearly $8 trillion in debt. If you haven't, go check it out. It's on the right side of this page, all the way at the bottom of the link section.

You know what makes those numbers go up? When the government spends more money than it actually has. When they do that, it creates something called a "budget deficit," and that money adds up to become the national debt.

According to France's finance minister, a floppy-haired number-cruncher named Thierry Breton, Federal Reserve Chairman Alan Greenspan said that "we've lost control" of our budget deficits. While the previous statement is unofficial, I would bet my first-born male child that the following is true:

"We were both disappointed that the management of debt is not a political priority today," [Breton] added.

There are many theories as to why it's not a priority. The Christian Science Monitor reports that it's because Bush is trying to have a big presidency. Slate.com says that it's either driven by congressional pork or a lack of concern.

What's the real reason? I don't know. All I know is, it's not good. Ask Argentina if you don't believe me.

Dolla' dolla' bills fall

2005-09-21T10:53:00.000-07:00

Despite the Fed's most recent interest rate hikes, the dollar has fallen.

Katrina, of course, is to blame (since it has slowed our economy and raised our federal spending). The Feds maintain that this weaker dollar will be temporary, but some have their doubts. Chicago Federal Reserve Bank President Michael Moskow said:

"If we indeed start to see a string of higher inflation numbers, people may begin to expect permanently higher inflation. Such expectations could become self-fulfilling if they become built into the behavior of households and businesses. And this would have adverse effects on longer term economic performance."

To top it all off, another hurricane is coming.

I can only think of one good response to all of this:

Curiosity kills cats, interest kills inflation

2005-09-18T10:41:00.000-07:00

U.S. inflation rates are coming in lower than expected, but just to be safe, the Feds are raising interest rates to 3.5 percent. They say that federal spending is just too high.

I wish other government officials were as responsible as the members of the Federal Reserve Board. Then we wouldn't have had to raise interest rates in the first place.

By the way, just in case you don't know, George Bush is a member of the Republican party. They're the party of fiscal responsibility.

The lord of the lies

2005-09-14T21:30:00.000-07:00

House Majority Leader Tom DeLay recently vomited forth a declaration of victory over wasteful government spending.

Some of his more interesting comments:

"My answer to those that want to offset the spending is sure, bring me the offsets, I'll be glad to do it. But nobody has been able to come up with any yet," the Texas Republican told reporters at his weekly briefing.
[When] asked if that meant the government was running at peak efficiency, Mr. DeLay said, "Yes, after 11 years of Republican majority we've pared it down pretty good."

So let's assume for a moment that DeLay truly believes the ridiculous notions that are rolling out of his fool-head. Let's assume that none of this ever happened, and let's assume that American tax dollars are not paying a man to run this.

Does this mean that DeLay wants to raise taxes? Because I can think of no other way to support a perfectly efficient government that's going to be running more than a $314 billion deficit in 2006.

The world is our money pit

2005-09-13T18:10:00.000-07:00

Check this out, econo-maniacs! The trade deficit is narrowing.

This means that other countries only sapped $57.9 billion dollars out of our economy last July, and that's a little less terrifying than the $59.8 billion the month before.

Sure, the $59.8 billion was the second highest deficit on record, and things are likely to get much worse in the future due to Katrina and the soaring oil prices, but...

But...

Ah...No need to worry about the future. Look at this shiny object that has nothing to do with Sino-American trade relations.

Disciples of the 36 chambers

2005-09-08T12:56:00.000-07:00

Louisiana's number one export is now FEAR.

Southern Americans are preparing a proper welcome for displaced New Orleanians by arming themselves. In fact, gun sales in Mobile, Ala., are up 30 percent. Why, you ask?

"There's a lot of gang people from New Orleans. Didn't you hear they're shooting at police [in New Orleans]? The people are coming here. You've just got to be ready, you know," [Mobile clerk Josh Collins] said.

And yet more Mobile charm:

"I got it. I'm ready," [van driver Henrietta] Brown said. "I'm trying to be nice, but if they come over, it's pow-pow," she said, gesturing as if she were holding a shotgun.

In other news, The Guardian says that the reports of post-catastrophe crime are unsubtantiated.

God bless the American South.

Hot pot on kettle action

2005-09-06T14:30:00.000-07:00

Wal-Mart is calling for an anti-trust investigation to take down Britain's largest supermarket chain, Tesco.

The brutes won't share the market, says Wal-Mart.

"As you get over 30% and higher, I am sure there is a point where government is compelled to intervene, particularly in the U.K., where you have the planning laws that make it difficult to compete," [Wal-Mart chief executive H.Lee] Scott told the Times of London, adding that "at some point, the government has to look at it."

Doesn't Wal-Mart know? The sun never sets on the British supermarket empire.

By the way, when it comes to household items, Wal-Mart commands about 30 percent of the U.S. Market. Wal-Mart: Always low tactics. Always.