I think USA Today (a very liberal newspaper by the way) has been smoking some heavy weed if it thinks that the U.S. economy is growing. The key statistic is private sector job growth and in that area this administration has been awful! However the final paragraph is pretty much spot-on (Some advice for investors). The way to jump start private jobs growth – cut business taxes, each state should reduce its payroll taxes, and cut spending.
by Adam Shell
The images of bread lines, dust storms and squatters’ camps are missing in the aftermath of the worst financial crisis since the Great Depression. Stocks have rebounded sharply from the 12-year low hit in March 2009 during the Great Recession. The U.S. economy, while still sluggish, is growing again. And fears of financial Armageddon have mostly faded.
Yet comparisons to the woeful 1930s continue to pop up in Wall Street research reports, newspaper op-ed pieces, doomsday books and the financial blogosphere. There is a nagging sense that the roller coaster ride investors have been on since the 2008-09 financial meltdown may not be over — and that a ’30s-style boom-bust, boom-bust cycle can’t yet be ruled out — as the economy and markets muddle through the difficult post-bubble workout period.
The Dow Jones industrials’ 261-point plunge Friday sparked by a sharp drop in consumer sentiment in July highlights that gloominess persists.
Fueling the angst is fear that the still-fragile, jobs-starved economy will suffer a relapse, or double dip, as government stimulus is phased out. Consider:
•In a recent note to clients, David Rosenberg, chief strategist at Gluskin Sheff, ticks off a slew of similarities between then and now under the heading, “Daring to Compare Today to the ’30s.”
•Donald Luskin, chief investment officer at Trend Macrolytics, penned an op-ed piece, “Why This Isn’t Like 1938 — At Least Not Yet.”
•In late June, Paul Krugman, professor of economics and international affairs at Princeton University and an op-ed columnist for The New York Times, zeroed in on the issue twice under provocative headlines: “That ’30s Feeling” and “The Third Depression.”
Why all the hand-wringing over the ’30s? “To focus people on risk and remind them that it is way too early to declare victory,” Luskin says. “It is prudent to learn from past errors so we don’t repeat them.”
Stock charts that overlay current stock-price action to that of the 1930s look very much the same at similar stages of the recovery. The difference is 80 years ago the market suffered another major down leg. The future will show if the market suffers a similar fate, or whether it stabilizes and powers higher.
“The similarities are scarily similar,” says Richard Suttmeier, chief market strategist at ValuEngine.com. “Essentially, in the ’30s we were in unchartered waters, and we have been in unchartered waters since 2008.”
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Some advice for investors
So how should one manage money in an era of unpredictability and volatility?
Rosenberg advises investors to stay liquid, keep debts low, save more and invest less in risky assets like stocks. He doesn’t advise 100% cash. Buy some gold, high-quality bonds and assets that don’t go up or down with stocks, he says.
“If you were putting a dime in a cookie jar, maybe stick in 20 cents,” Rosenberg says. “If you have the capacity to live a frugal life, do so.”
In periods of great volatility, where stocks have the potential to post huge gains — and huge losses — it makes sense to put only half the money you would normally devote to stocks in the market, Luskin says. Thus, you will be able to book gains if stocks rally. And you will lose half as much if stocks plunge.
Read the rest Comparisons to the Great Depression keep popping up
Tags: Great Depression
