I have been keeping my finger on the "pulse" of the economy via news reports. Better put, I'm tracking how the mood of the economy is being reported back to us. I leave tracking actual sales and job and earnings data to the experts. I'm interested in the Reaction to all that data!
In fact, I enjoy reactions in general. When the eight foot tall mouse comes out to hug the b-day boy--all the fun is in watching the kids react! Seeing a three-year-old struggle to keep it together is actually kind of adorable. Or when the seventeen-year-old, tanned, buffed lifeguard (male or female!) walks around to check the pool--all the fun is in watching the reaction of the moms and dads! Hearing conversations end in mid-sentence, seeing men make heroic efforts not to turn their necks! It's not the fascinating object that fascinates me--it's watching how the people react to it that I enjoy. So I don't watch the Recession, I watch the reporters watch the Recession and I read what they write about it.
I'm old enough to be his mother...(when did that happen???)
There is another reason why I do this. I used to work in the stock brokerage industry. I was Series 7 & 63 licensed to sell investment products (same as a stock broker). I worked as an assistant and eventually was hired as a full-time stock broker working out of my house. (I soon gave this up for motherhood!)
Anyway, I worked in the industry for four short years. We listened to news reports about stocks and the economy ALL day, EVERY day. I noticed how emotional stock trading is. There is even a saying for it among day traders, "buy the rumor, sell the news." The market prices in change before it occurs and this is driven by the rumor. This gives the rumor, a lot of power!
Here is a simplified example of how this works. If there is a rumor that company X will buy company Y--you buy company Y right away. Company Y skyrockets as the rumors fly. Then, the morning that Company X announces the big buyout (which is good news)--you immediately sell company Y because the stock is about to tank. You make a big profit and company Y's stock price drops back down to where it should have been all along. (This examples dates me as working during the .com era!)
Here's one more example--you can also sell the rumor and buy the news. Company X is being sued and there is a rumor of a huge settlement coming down the pike. The stock tanks. The day the company announces that they will be paying out a huge settlement (which is bad news)--you buy the stock and make a big profit as the price zooms back up to where it belongs.
One can make a lot of money selling good news and buying bad news! The key is paying attention to the rumors...
I worked during the glory days of day trading. The brokers I assisted were basically gamblers. They were pure salesmen, not Certified Financial Planners. They traded what was hot and sold what was not. It was insane. The energy of it all was like a living pulse--it beat hard and fast, fluttered, chilled or slowed to lifelessness. I have seen brokers cry. I have seen (this sounds so corny), fortunes won and lost. The C.F.P.'s in our office plugged away like turtles--they ignored the hype and emotion. I worked with the rabbits and we all know who won that race!
Long story short, I never forgot how emotional the economy is. So I track the "mood" not the numbers. Economists do the same in a sense when they track "consumer confidence". It's a variable that even pure math cannot ignore. Our economy is driven by people and by spending habits. The reporters are watching us and reporting our moods. Brokers are trading based on our sentiments. While the actual fiscal health of our economy is quantifiable, our perception of it can override the reality of it and, worse, mold it to our beliefs.
Not to be the bearer of bad news, but the current mood has changed for the worse. More reports are coming out every day that the recovery we have "enjoyed" is over. For awhile, there was good news out there and people were spending. There was some optimism in the reporting. People got some aid, some help from the banks, there was a feeling that the foreclosure shake-out was over, the DOW took a little jog uphill, the wealthy loosened their purse strings and a few people painted their homes (amen!).
It's all shifted again. I'm seeing more and more news reports that reflect negative sentiments. I just read that the wealthy--whose spending halted in 2008 and helped drive the recovery in 2009--have tightened their spending once again. The problem is the rumor versus the news. It doesn't matter if we're in a real recovery or not. What matters is how consumers perceive it. If consumers stop spending on fears of a contraction (the rumor), they can cause an actual contraction (the news)!
There are practical numbers that aren't looking so good either. No one likes the DOW dropping below 10,000. It's a barrier number. It's huge to break 10,000 and huge to drop below it. But the DOW isn't the only indicator (or forecaster). Unemployment benefits are running out. Bof A and Google's profits are dropping, vampires have stopped flying first class (did I just write that???). Over the years, economists have used everything from hemlines, to men's underwear, to taxi cab availability as economic forecasters.
My favorite economic forecaster (besides the travel patterns of vampires) is the rumor. This is why I glance at the headlines of lots of different news sources--I'm looking for trends in what the reporters are saying and noticing about us. They are noticing that we are worried once again. They are reporting individual financial horror stories of home losses and job losses--which just whips up our fears. They are reporting our lack of confidence. I am seeing more stories pop up on my homepage each day about fears of an economic contraction. Which means that an actual economic contraction could soon be the news.
I'm no predictor. I hope I'm wrong. I'm also on a 30 day campaign to think only positive thoughts (long story). So this post is a little awkward for me to write but, don't worry, I'll spin the mood in the last paragraph :) My advice is that we all hope for the best and prepare for the worst. I don't think this roller-coaster ride is over yet. I think the second contraction will be worse than the first. Why? Because too many people are at the end of their resources. The rebound might have seen us through last year, but it wasn't enough for people to rebuild their savings accounts.
I think it's time to evaluate the resources you have left, evaluate your job situation, evaluate the health of your vehicles, look into your home loan options, sever unnecessary bills or belongings that cost you money each month and make a plan for the next nine months. I'm not joking. I look around and I see more vacant homes than I did a year ago. I have more friends, not less, starting to hit the financial wall.
I see utility, cable and water bills going up, not down. Camping has become the new normal for vacationing among my friends. Going to the movies has become Family Movie Night at home. Budget cuts in our state will continue for a few more years. Half of our federal government is leaning toward not helping people in a Recession aftershock (due to the deficit). And that's how it will effect us, like an aftershock.
The beginning of the Recession did damage to everyone. Even if your income is the same or higher--your house value isn't, your stocks aren't, your real estate investments aren't, your ability to get a new job isn't. There are cracks in every foundation. And the people who are still suffering from the first economic quake, are even more vulnerable. An aftershock will take out a lot more people.
Ramon and I are as ready as we can be. We cut out all debt through the bankruptcy (except for our home). We applied for and received a modification on our home loan which lowered our payment. We sold our extra vehicles. We've cut out unnecessary bills. We lowered our existing bills as best we could. We've started a new savings account and we're stockpiling every extra dime in it. It's tempting to spend money on our house, there is so much that needs to be done around here, but we're not ready. We want to have at least six months of living expenses in the bank before we do that.
In 2008, I was waiting for life to go "back to normal." In 2009, I just prayed to survive. In 2010, I'm preparing for 2011. I'm no longer waiting for life to go back to normal. I have realized that it wasn't normal to begin with. We were like Charlie and his grandpa in the Chocolate Factory, giddy on the rising bubbles of the housing market. It wasn't "normal".
Willy Wonka and the Chocolate Factory--after drinking Lifting Fizz!
In fact, there is no normal. Life isn't static, it's ever-changing. In spite of the news reports, the hemlines, the DOW, the availability of taxi cabs (what?)--I am feeling optimistic! I have discovered how strong I am. I have new priorities. If we all eat, get our basic bills paid and enjoy each others' company--we have just had a fantastic day!! I could spend a lot of money chasing happiness. I could pay a small fortune to be with my family on a beach in Hawaii and still end up in a big fight with my husband. Money can't buy contentment. Money can't buy quality time. I make those things happen for myself--and they are free!
Money is a good thing. There is nothing peaceful about not having it. I've been there!! I feel for any of you who are there now. It's horrible! I'm just saying, if you haven't done it already, lighten your load and stay on your toes. I think this aftershock is going to be a big one. Once it shakes out, I believe we'll begin a true recovery. We all just need to hold on for one more round.
It's going to be okay. It will end.
In the meantime, enjoy your health if you have it. Enjoy your loved ones. Don't let stress change you. If you lose everything, don't let it ruin your relationships too. Your kids need you, stay focused on them. Exercise, enjoy nature, give lots of hugs, recycle, pray, work hard, help the people around you and eat as healthy as you can afford to eat. When this ends, we'll all want to be in good shape to enjoy the Recovery!
Love to you all, Jennifer
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