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Question of the Day – What’s Your Outlook on the Economy?
By JLP | March 18, 2008
Today’s question of the day is most likely a topic that is on everybody’s mind:
Over the very long-term, I’m optimistic. But,… over the next year or so, I’d have to say I’m pessimistic. I just don’t see how we can sail through all these troubles without a significant downturn. No, I’m not an economist but I just don’t see how the fed lowering rates is not going to cause inflation to continue. I realize that inflation is on the fed’s back burner because they just want to get through this credit meltdown. However, I’m concerned that one move to fix something is only going to cause a problem elsewhere.
My strategy?
Don’t worry about it. My wife and I are pretty well diversified and we can use this opportunity to invest at lower prices (maybe much lower prices in the future). In the long-run, this could be the best thing to happen for us.
What about you? What are your thoughts?
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Topics: Question of the Day | 17 Comments »
March 18th, 2008 at 9:47 am
I’m very pessimistic about North America in general. Just think . . . In China there are more Honour Students than there are students in North America. That’s not even counting all of Asia.
As soon as information and training become really cheap and easy (IE, with $100 laptops for instance) I think we’re in a whole heap of trouble over here.
March 18th, 2008 at 9:51 am
I agree with you 100% – but I’m young. And I didn’t have any Bear Stearns stock.
I think that inflation is going to be our next big problem. Lowering the target rate isn’t going to solve existing credit issues and banks aren’t passing lower loan rates down to the customers that really need them.
There seems to be no safe place for pre-retirees to put their money – bank deposit rates are going to bottom out and the market is a pretty unstable place to risk 30+ years of retirement savigns. My heart goes out to all of the fixed income retirees out there trying to live on CD interest.
March 18th, 2008 at 10:21 am
I think we are going through a “cycle”. Long term the economy will be O.K., but we will still see more foreclosures, loss of jobs, etc… in my humble opinion.
March 18th, 2008 at 11:12 am
I think the approach that you and your wife are taking makes sense. You wrote a post a few days ago detailing a diversified approach made up of 7 or 8 different ETF’s that faired relatively well so far this year (if I recall). IMO, if markets continue to falter, and you have the ability to add to something like that, it will put you in good shape for the long run.
And I would be very skeptical of those that preach investing in US based companies (or indices and ETF’s made up of US companies) is a bad idea.
March 18th, 2008 at 11:41 am
I’m pessimistic, but I also don’t believe there’s anything to be gained by worrying about it. People should get some emergency savings, use this as an opportunity to buy low, and just ride it out.
March 18th, 2008 at 11:42 am
I’m optimistic for the next year and even further out.
March 18th, 2008 at 1:48 pm
Economy:
Short term- pessimistic (we have started tightening the belt a bit)
Long term- optimistic
Stock Market:
Short term- optimistic (this does not mean I am calling a bottom, ha, I simply have slowly started to shift my cash into the market for the first time in over a year)
Long term- optimistic
But I do not know anything… really I don’t…
March 18th, 2008 at 4:27 pm
My opinion, be realistic and optimistic at the same time. There are many reason to be cautious and frugal with gas, food, and health care inflation. Add to that deflated home prices, low savings rates, high consumer debt, and the sub-prime mortgage crisis.
In 30 years I’ve witnessed inflation, stagflation, recessions, saving’s bank and junk bond crisis of the 80’s, 2 housing slumps, but somehow we got through it all. Don’t put your head in the sand, but at the same time focus on being optimistic – you can only control your behavior (e.g., spending) and attitude. Things may get worse, who knows for how long – but they always get better.
March 18th, 2008 at 5:29 pm
Personally,
I choose not to participate in recessions and I believe that all healthy Americans can make that same choice. We just so happen to have had a confluence of events in the last several years that have us where we are currently. It’s not the first time and it won’t be the last. The real estate and mortgage issues are national and don’t help matters – at least short term.
By the end of the year, things should begin to impriove.
Incidentally, this is an excellent blog. I wish you had the plugin that would notify me of new comments so I could more easily participate in ongoing discussions without having to check back as new comments would then be emailed to me automatically. It helps to keep the conversation flowing.
March 18th, 2008 at 6:48 pm
Hmm, I just wrote about that for tomorrow. Outlook is that pretty much anything can be lived through. I don’t think it’ll get as bad for the ordinary person as living in a lot of other parts of the world. But I also think that if people there can manage to live, we can too.
In the long run, I’m feeling fairly optimistic.
March 19th, 2008 at 12:32 am
Interesting post; I agree with the rest of the comments, pessimistic short term, optimistic long term. Ultimately markets are cyclical and it’s always interesting to see people panicking on either side of the curve. Overall I think you have to be an optimist and see opportunity to buy when things get cheap, opportunity to sell when things get expensive. That helps to take action at the right time and not be paralyzed by fear because there’s always plenty going around.
March 19th, 2008 at 10:12 am
I’m pessimistic in the short term, but optimistic long term. I’m not sure that the “economic stimulus” is going to do much other than fill the SUV tank a few times, or push foreclosure off another month. Actually I’d love to see if there’s a blip in foreclosure stats because of it.
I don’t like the softening rates plus inflation thing. My money in the bank is not earning interest as fast as my groceries are going up. But I live in a cold place, and I think there will be some bounce locally as the weather warms up and folks have more money to spend on other things.
March 19th, 2008 at 10:31 am
I think the US economy is already in recession and all of the things that are being done to shore it up aren’t going to do very much in the long run. As to if I’m pessimistic or optimistic about it? I’m actually optimistic since this is merely a correction and the economy isn’t in a state of complete collapse.
Opportunities are still out there and smart money management and investment rules will still get you a good return.
March 19th, 2008 at 5:27 pm
I agree with Ryan Ward – this isn’t the first recession and it won’t be the last one, even though it’s the first one for me.
Personally, I view it as a great opportunity to buy stock of my favorite companies at a discount. On the other hand, though, I’m graduating from college in 2 months and it seems like I’ll have a hard time finding a job. 
March 20th, 2008 at 3:07 pm
recession, blah, blah, blah. i’m about as tired of all this recession and credit crisis talk as i am about the u.s. national election. i’m a firm believer that the economy isn’t as bad as the media is fueling it out to be. yeah, so what if bear or anyone else falls through? i’m optimistic, despite falling share prices. too many short sellers in the market. there needs to be some serious regulation, though. all these hedge funds shorting, these CDOs and other mortgage backed securities that have no real ability to determine asset value, should all be severely regulated. so i’m pessimistic that people are focusing too much on the effects rather than establishing preventive measures for the future.
March 21st, 2008 at 5:51 am
my opinion is pretty indifferent. On one hand, you have chicken little in the press saying “dig a cellar and buy an uzi, the sky is falling!”, but when i go to walmart and cant find a place to park, the Texas RoadHouse has a 2 hour wait for a table, gas prices hit a near record here last week yet, all four pumps at the station have cars sitting next to them refueling (mostly SUV’s), all the available salespeople at Advanced Auto Parts have at least 4 or 5 people in their line while they’re trying to balace the phone on thier ear to talk to a customer while trying to look up a heater core for the guy standing in front of them, the economy is still moving pretty good based on how far i have to walk in the parking lot, and how long i have to wait in line to buy something.
Since i have no debt, a fully funded emergency fund of 6 months worth of expenses, a fairly secure job (im still having to work manditory overtime to keep up with sales order backlog as they call it at work), Im not too worried about the economy at this point. What DOES bother me is the way price of everything is starting to spike tho, and in my opinion, its getting to be really expensive to buy worthless overpriced junk, that we dont really need just to impress people we dont really like. and RAISE that damn interest rate.. dropping RATE isnt working, since THAT isnt the problem. the Fed needs to BUTT out and let the market correct and fix itself.. everything the Fed is trying to do is just SLOWING the process of the market fixing itself and just making this “recession” take LONGER to cycle thru.
March 26th, 2008 at 11:21 am
I am ridding the fence. I don’t see a “full recovery” happening any time soon just as I don’t see most of America living on the street. The current situation will ebb into opportunities that will once again carry us to the next downturn, which will carry us to the next up-tick.
I live out in the sticks, and in a matter of 2 years saw vacant undeveloped land go from $2k per acre to over $12k per acre. It was a buying frenzy with folks thinking this area (20 miles NE of McKinney, Tx) was the next big boon.
The 4500 sq ft house next door isn’t even finished built – and is in foreclosure.
That being said – of course I have tightened the belt. I even cut the yard lights back to 4 hours instead of dusk-to-dawn. I am staying alert and attempting to position myself so that when the opportunities present themselves – I’ll be ready.