Economic impact on you?

[haraldo]

I already have standing invitations for Halon, Stratman, markw.....
You would be welcome too for some Norwegian beer, goats, cheese, salmon and Ukrainian borsch and kvaz

 

[MidnightSensi]

I'm glad American people aren't hated. I was worried about that.

I bought a quad from my grower this morning and he said his fertilizer, lights and equipment costs have been going way up and he had to charge me an extra 10 bucks.

I've now been officially impacted. Feelin' the crunch, feelin' the crunch...

 

[Exit]

My Bad

Mort,

Got arround to looking at your Hoover link. I just breezed through a high school textbook, and you are into historical references and such. Looks like I gotta punt on this one, but I still like FDR, especially for his strategic leadership of WWII. I was just trying to find a similar situation to today's economic situation as a framwork for understanding. I guess there is always more to a situation than meets the eye and maybe the Great Depression I versus Great Depression II analogy is not the best one to make.

 

[MidnightSensi]

Mort,

Got arround to looking at your Hoover link. I just breezed through a high school textbook, and you are into historical references and such. Looks like I gotta punt on this one, but I still like FDR, especially for his strategic leadership of WWII. I was just trying to find a similar situation to today's economic situation as a framwork for understanding. I guess there is always more to a situation than meets the eye and maybe the Great Depression I versus Great Depression II analogy is not the best one to make.

What changes things now is that we don't have an "unlimited" supply of cheap energy anymore. The first Great Depression was largely solved by building roads and power grids. "Green" energy would be our equivalent now, but we don't really have the technology yet to build a lot of labor jobs off of it.

 

[haraldo]

Well at least there is something changing all over the world, and also in the us... "Green" products are getting sold and the fact that a product is green as means of consuming less power and as such being more energy efficient is being stated as a competitive advantage.

I think much of the technology already is here, it's up to consumers as to what we demand, the power is in OUR hands, if we are many enough......

 

[Exit]

McCain Middle Class Tax Increase Update

I refined the McCain Middle Class Tax Increase Model and it is located in this forum.

http://forums.audioholics.com/forums/showthread.php?t=48742

It is under the heading, "Look Closer at McCain's Tax Plans".

Considering the new tax increases on health benefits and taxes on his new social security substitute plan income, minus a tax cut, plus the cost of a new social security substitute plan; it looks like a middle class family making $66,354 annual income will be paying at least an additional $6,359 every year under McCains new tax policies. Thats a 9.6 % tax increase for the average Joe Six Pack that ought to shove him from the 25% tax bracket to a 34.6% tax rate. How do you think that is going to play in Peoria, or should I say Wasilla? Don't most Joe Six Packs you know have $6,359 sitting around doing nothing in the tool box of their pick-up trucks right behind the gun rack?

 

[Davemcc]

I would want to hear from the Canadian members here about that. I don't think your statement is true.

I've had some health issues this year. It took me 7 months to see specialist. I have more tests scheduled, closest possible date at the end of November or beginning of December. Maybe I'll just have an autopsy for Christmas. At least it's free. I am seriously considering going to the US and pay out of pocket for the tests I need and I know of others that have. American medical clinics actually advertise in our local newspaper.

I also have a neighbor that needs to see a different specialist. He cannot get an appointment because that specialty is so severely under-represented, only critical, life threatening cases are seen. He is disabled and unable to work but since he is neither bed-ridden nor in danger of imminent death, he cannot see the doctor that can fix his issue. Yet he is still in no condition to work and support his family.

Medical waiting lists are a political issue and dependent upon the government's willingness to fund specific areas of medical treatment. Those persons on these waiting lists for treatment have a good chance of dying while still waiting for treatment or at the very least, having their disease advance to a more critical stage while waiting to see a specialist. The other problem is that so many Canadian doctors graduate medical school and head straight for the US, where they can practice their specialty, make money and keep it after taxes. We've lost so many Canadian trained doctors to the US that our government is considering ways to fast track the licensing of doctors trained in India, Pakistan, Iraq, Syria, etc to practice medicine in Canada to make up the shortfall.

 

[Exit]

“It’s the Economy Stupid”

In the first post I posed the question does anyone see an impact because of the economy? That was kind of the present tense and everyone was great about it. Now the question is what about the future tense?

In this election I think it is not so much a question of which presidential candidates you are voting for, but which tax increase proposal you are voting against.

In another Audioholics thread there was this link to the washingtonpost.com website: http://www.washingtonpost.com/wp-dyn/content/story/2008/06/09/ST2008060900950.html
which lists Obama’s and McCains tax policies and impacts.

I took an average middle class income of $66,354 dollars as a example. For Obama there is a projected savings of $1042. A benefit no doubt, but it probably isn’t enough to really change that much for that middle class family. McCain is also credited for a $319 tax savings for that family. Again not a deal maker or breaker.

I did however watch the debates and I caught a few proposals out of McCains rhetoric which I took a look at financially, and it is different than the washingtonpost.com comparison. Below is a short analysis of the McCain Middle Class Tax Increase Proposal based on his comments during the debates. This is not comprehensive as is it based on basically three comments that struck me during the debate, so there could be more taxes than this.

For McCain, consider the new tax increases on health benefits and on his new social security substitute plan “income”, minus a token tax cut, plus the cost of the new social security substitute plan. From my calculations below, it looks like a middle class family making $66,354 annual income will be paying at least an additional $6,359 every year under McCains new tax policies. Thats a 9.6 % tax increase for the average family that should raise them from a 25% tax bracket to a 34.6% tax rate.

You have to be in an average middle class tax situation, and know your family budget well, to fully understand what this tax increase means to the family budget, but I will try to give you some idea of the impact. These taxes will suck up any middle class discretionary income that may be left and put middle class families in a deep financial crisis. Imagine trying to pull the economy back from the brink of depression without middle class and poor consumer spending.

If you want a hint of what average families will have to do under a McCain presidency, they will have to ferret out each expense and determine if it is essential or not. All non-essential expenses will have to be cut. I predict most average families will have to stop buying houses, cars, capital goods such as appliances, eating at restaurants, going to movies, renting DVDs, lawn care services and home improvements to name a few. I believe mothers and daughters will have to stop making trips to the malls and stores as recreational activities because they invariably buy something that can be done without. I predict middle class families will run up additional credit debt and draw down any savings. Middle class families will have to begin making cuts in expensive and non-essential groceries such as beverages, junk food, snacks, meats, fish, premium foods, pet foods, non-seasonal fruits and vegetables, premium vegetarian foods, desserts, premium health foods, televised diet foods, etc. I predict cutbacks will have to be equally drastic in other areas of consumer spending and I still don’t think the average family will still be able to reach a balanced budget. If those cuts shut down businesses or put them into red ink, then it is part of the downward spiral chain reaction that starts with McCain’s tax increase policies. I don’t think many people realize it right now that these types of cutbacks will have to made, but eventually middle class America will figure it out. So will McCain and the economists, but by then the damage will have been done.

A Closer Look at McCain Tax Plan For an Average Income Wage Earner ($66,354)

Health Plan Expense: Employer’s contribution (est. $8,000) X Personal Tax Rate (25%) = $2,000 additional tax

Health Plan Expense: Employees contribution (est. $2,407) X Personal Tax Rate (25%) = $601.75 additional tax

Flexible Spending (FSA) ($2,000) X Personal Tax Rate (25%) = $500 additional tax

McCain Soc Sec Substitute Plan Funding Income ($5,000) X Personal Tax Rate (25%) = $1,250 additional tax

$4,352 additional tax total

less $319 Proposed McCain Tax Decrease (washingtonpost.com data)

Net Total = $4,033 additional tax per year

(Note: There could be more taxes than these few taxes I found at first glance.)

Additional Soc Sec Substitute Plan Expense (est current soc. sec cost of $6,076/yr)
$5,000 plan funding income
-$1250 tax at 25%
$3,750 available funds

$6,076 plan cost
-$3,750 funds available
$2,326 additional funds due

$4,033 additional tax per year
+$2,326 additional funds due
$6359 additional minimum total “taxes” due for an Average Middle Class Family under the McCain Middle Class (and similarly Poor Class) Tax Program

In summary, I think a middle class tax increase like the one above would definitely put the hurt on middle class families, but also a lot of other sectors of the economy as well and would accelerate a downward economic spiral. I don’t think taxing the higher income people more will help things either, but a hit like this to the middle class will be devastating indeed. I can’t support McCain’s tax policies because of the severe negative impact. I strongly urge Democrats to back off of their tax increases too, if they were somehow able to listen, although it doesn’t do much good to say it in an Audioholics forum, when the only thing that will count is which way you vote.

 

[Mort Corey]

All non-essential expenses will have to be cut. I predict most average families will have to stop buying houses, cars, capital goods such as appliances, eating at restaurants, going to movies, renting DVDs, lawn care services and home improvements to name a few. I believe mothers and daughters will have to stop making trips to the malls and stores as recreational activities because they invariably buy something that can be done without. I predict middle class families will run up additional credit debt and draw down any savings. Middle class families will have to begin making cuts in expensive and non-essential groceries such as beverages, junk food, snacks, meats, fish, premium foods, pet foods, non-seasonal fruits and vegetables, premium vegetarian foods, desserts, premium health foods, televised diet foods, etc.

Don't look now, but I think it's already beginning to happen....regardless of any candidates tax and spend (or borrow and spend...depending on the party) policies that may come to fruition in the future. Government(s) are not going to be able to fix the problem(s). There's a good chance that policy intervention may make things worse. I'm sure we're gonna find out in due time. It may get reaaaaaaly interesting.

Mort (whose ticket for this show is getting more expensive by the day)

 

[Exit]

You Gotta Be An Innovator In These Times!

The only reason I can predict those cuts is because I have already started making them. I have analyzed my budget and those are some of the areas I found that I can squeeze out a few dimes to put towards my kids college education. I have to wait for things to get a little worse before I can convince my family we need to do all the grocery cuts. Grocerys are the biggest cost category for us and cuts there produce the biggest results. I have stopped all lawn service and home improvement/maintenance projects already. I got two high MPG cars this year in preparation for much higher gas prices, so I will not be buying a house, a car or an appliance (our stove has two damaged burner controls, but we will get by). Our furnace is rusting out and the repair man says it is cheaper in the long run to replace it, but we will get by and make temporary repairs if needed. One of my cars is due for new spark plugs, but it is still working so I am going to wait until it definitely has problems. I am still having oil changes, but any other car maintenance is being put on hold until something stops working. The inside trunk release cable on our Echo broke, but the trunk still opens with the key so that is not getting fixed. I have not rented or bought a DVD in a year and a half. I had been getting free rentals from Blockbuster using Diet Coke reward points, but that deal got screwed up and I am going to stop buying sodas anymore and drink home-made ice tea because it is a lot less money to waste. I am thinking about dropping AT&T DSL service and going back to dial up because I don't really download large files anymore or use video streaming. That should save about $35 a month. The kids really wanted to go to Florida this Christmas and see Disney and Seaworld, but I think we will be putting that one off and our kids can take their future kids down there someday if things get better by then. Like I said before, this economy needs innovators and I am going to squeeze out a lot more savings than this so I can pay Mr. McCain's new middle class income taxes. I am just getting started. Cutbacks in every spending category is the rule of the day, regardless of who gets hurt! It is every one for themselves and may the best budget slashers win. As our income goes, so goes our budgets.

 

[Exit]

Foul Smells from the Economic Undercurrent

I started making family budget cuts a couple of years ago for college tuition purposes, but I hope I am the only one. If everybody starts doing this, we are in for a big economic downward spiral, and that hurts everyone including me. Slashing the family budget really is another way of saying we are lowering the middle class family standard of living further, which is what McCain and the wealthy elite really want us to do to shoulder increased tax burdens. I guess I should avoid the appearance of conspicuous consumption by not having my son drive his 86 Nova to college anymore, although it does get about 24 MPG city so he is being green, which is something worth displaying. I think 24 MPG is about the same MPG as a typical new SUV hybrid, only I paid $600 for it plus $1,400 semi-restoration. I figure I saved about $35,000, and new all-season radial tires were only $19.95 each.

I think we should try to buy American made goods if you can find them anymore, which is why I bought the Chevy Nova and Toyota Corolla. They were both made at the same Toyota/GM joint venture plant in California by American union autoworkers, only 23 years apart in time. They are as high in reliability and quality as Japanese-made cars, so that gets rid of the myth that American workers are the problem for poor reliability and quality in the American auto industry today. (If it is not the American workforce to blame, who does that leave? Management - the wealthy elite?)

Japanese Toyotas, Hondas, Subaru’s and even Korean Hyundai’s and others, all (not all models) are being made with high reliability and high quality in the USA today while more and more “American” cars are being made out of the country. Why is that? Is anyone able to rationalize that? Is it basically UAW labor and benefit costs versus non-UAW costs in non-northern parts of the country? My last new “American” car was a 94 Chrysler Sebring Convertible, and guess where that was made? Mexico. Thank Washington for NAFTA. My wife gave the Chrysler a vote of no confidence after a couple of years and we dumped it after two or three sets of front brake pads every 20,000 miles or so. I think it is just the hassle of taking off your precious few vacation days from work all the time to sit in a car dealership all day while your car is being fixed for premature failures, that sours us on the “American” car buying experience. Also the buying experience is a totally low-life stressed-out affair. You would think all automakers would have reliability engineers and accelerated wear life testing so their customers wouldn’t be plagued with unacceptable “systematic or recurring” failures all the time. As we all know, the cost of failures is very high. The cost of anything involving labor other than yourself has gotten so cost-prohibitive, that is why so many potentially repairable goods are now throwaway.

As I said, I am pro-American worker and I even bought an expensive (for me) SVS Ohio-made subwoofer this year to prove it. (I grew up in Northwest Ohio but I left because there were no jobs, so - go SVS.) So I did my share of spending to keep the economy afloat this year, but don’t count on me for next year cause the well is running dry. That was my last great splurge for the next eight years. It is negative budgets for the next eight years while I try and get my kids through college, because all the non-college jobs are disappearing except minimum wage jobs where you become one of the working poor. I feel like the college costs are a shotgun pointed against my head saying “give me all your life savings or your kids will be poor and destitute the rest of their lives and it will be your fault.” Who do you think is holding the shotgun? Yea, you guessed it, the wealthy elite.

The really bad thing about current college costs is that a lot of the jobs you get with the degrees really don’t pay that much to cover the costs of the college expenses. From MBA School and consulting experience, in business you typically don’t make an investment that doesn’t have a two-year payback or less. College payback periods are in decades. It all makes me feel average American families are being ransomed into making poor investments in college education so that the wealthy elite can have college educated employees at a bargain basement salary - at middle income families’ expense. Not everyone has the disposition to pick only the highest paying college careers, and even those are expensive with long paybacks compared to the 70’s when my generation went to college. Economic situations for the middle class have been in a decades long decline and there is no sign of relief on the horizon. I know for me, it is a shotgun approach - a roll of the dice for college scholarships - and what the result will be nobody knows. What a great way to plan the future, and when the money runs out, the money runs out.

A Tribute to Colbert (he hasn’t said this yet – I think):

So the middle class is in economic crisis? So what. Who cares? Who needs them? They can pay a little more. If they were smarter, or took more risks, or worked harder they would be part of the wealthy elite and wouldn’t be in such sad shape! Let the free market and survival of the fittest sort it out. We can live without the family unit and consumer consumption. Besides that, I will believe it when they bust!

 

[MidnightSensi]

What concerns me is that the stock market is supposed to be forward looking ... so that means to me that the economy really hasn't taken its big punch yet.

 

[aberkowitz]

What concerns me is that the stock market is supposed to be forward looking ... so that means to me that the economy really hasn't taken its big punch yet.

Not really true... the stock market is generally a lagging indicator of the actual state of the economy. It can be anywhere from 6-18 months behind the true health of the economy at any given time. Given the drops in the past month, that actually makes sense. The economy has been truly troubled since the middle of last year, yet the market kept going up. Only now have the full effects of the credit crunch finally been felt in the stock market. If you look at many of the credit indicators (LIBOR, t-bill yields, CP rates) these things have started to get a bit better, although there's still plenty of weakness, while the wider indicators of the market continue to get destroyed. I cannot say with any certainty how much further the indexes will fall, but given the way some of the credit markets have started to loosen there's definitely some hope for the future- defining future here as a minimum of 6 months away.

 

[Exit]

"No New Taxes on Anyone"

With all due respect, the stock market’s normal behavior is leading the economy by about six months. Investors look at yesterday’s and today’s news and make their investments based on where they think markets will be six months from now, where they hope to make their money. That is the basis for stock trend charting and computer models that dominate wall street. I doesn’t make sense looking at the stock market vs. economy relationship in the other direction. At least that is the way it has always been presented to me in literature from my MBA program and the American Society of Individual Investors literature that I have been reading for the last 30 years. I think we very well could be in the calm before the storm regarding the stock market’s more recent gyrations and the lagging impact on the economy. Not to rain on anyone’s parade, but these are also not normal stock market times so what may happen in the economy is up for grabs. I think it is a bad idea to increase anyone’s taxes and take money out of the economy at this time, yet both candidates are proposing this, but with impacts in different income brackets. My readings indicate to me that you don’t take money out of an economy that is already on shakey ground, and I hope both of the candidates revise their positions on this approach. However, it is so late in the presidential game and it truly is “The Economy Stupid” that I don’t think either candidate would change their economics plan now even if by magic this “no more taxes” idea were planted in their heads. Maybe after the election we may see a change to a no new tax position.

 

[MidnightSensi]

That's how I always thought it worked too... but I have no formal training in it... just reading.

 

[Exit]

Thanks,

Lets hope I know a little more on economics than on Herbert Hoover history.

 

[aberkowitz]

With all due respect, the stock market’s normal behavior is leading the economy by about six months. Investors look at yesterday’s and today’s news and make their investments based on where they think markets will be six months from now, where they hope to make their money. That is the basis for stock trend charting and computer models that dominate wall street. I doesn’t make sense looking at the stock market vs. economy relationship in the other direction. At least that is the way it has always been presented to me in literature from my MBA program and the American Society of Individual Investors literature that I have been reading for the last 30 years. I think we very well could be in the calm before the storm regarding the stock market’s more recent gyrations and the lagging impact on the economy. Not to rain on anyone’s parade, but these are also not normal stock market times so what may happen in the economy is up for grabs. I think it is a bad idea to increase anyone’s taxes and take money out of the economy at this time, yet both candidates are proposing this, but with impacts in different income brackets. My readings indicate to me that you don’t take money out of an economy that is already on shakey ground, and I hope both of the candidates revise their positions on this approach. However, it is so late in the presidential game and it truly is “The Economy Stupid” that I don’t think either candidate would change their economics plan now even if by magic this “no more taxes” idea were planted in their heads. Maybe after the election we may see a change to a no new tax position.

Let me clarify the argument- the prices of individual stocks can be considered leading indicators in under rational markets, but the stock market as a whole cannot be used in the same way. (and right now there is nothing rational about the way the market is acting)It may seem that way to the common retail investor who has a minimal understanding of what is actually going on in the market, but the data is just not there to back it up.

The S&P 500 hit an all-time high last October- was that a good indicator of where the market was going???? Last October the really smart people (e.g. the hedge funds that are still making money) were already starting to pull out a wide variety of sectors. At the S&P's highest value credit was so tight that it was impossible to get any short-term financing longer than overnight. Term financing had to be issued at such a high cost that it was scaring issuers away. Even my current company, who has a several hundred billion dollar investment portfolio, recognized that a downturn was likely and started taking the necessary steps to protect themselves. It took nearly a year for the market as a whole to catch up to what most of us in the industry already knew- that things were going to hell in a handbasket. You'll notice that over that period individual names (such as financials) took a very large hit, but the market itself remained stable.

By the way, real investors don't look at anything in the way of today's or yesterday's news to make investments- they look at cashflows. A company's stock price, quantitatively, is simply a function of it's discounted future cash flows. Serious investors will model out a variety of assumptions about a company's future and see how it affects cashflows to get an understanding of value. Institutional investors could normally care less about what happened yesterday, they are more focused on understanding what could happen tomorrow.

 

[Exit]

I will grant that an individual investor is less well informed than an inside institutional investor than is a subprime mortgage lender before the exposure; and the view of the market probably looked different from each place at the same time. However, the viewpoint for individual investors, while at a disadvantage, has traditionally been that the market leads the economy. However, anything can change in this economy and if you are an industry insider and you say it is different, then your view should prevail for now.

 

[aberkowitz]

However, the viewpoint for individual investors, while at a disadvantage, has traditionally been that the market leads the economy.

And that is one main reason why individual investors often lose more money than they make. You make money by trying to predict where the market is going, not betting off where it has been. One of the most popular explanations of the market is that it takes a random walk (it goes up and down without any normal pattern). Under this theory, you should never bet on the market based on what is has done, because past performance has no indication as to where its going. Another theory is that the market follows some form of mean reversion- in that case if a market goes up for several periods in a row it would be more likely to go down in the future.

Simple example- The people hurt the most by the bursting of the tech bubble were individual investors... people who started buying in 1999 and 2000 after the market hit its top.

Another great example is the IPO market. Individuals never get to buy into popular IPOs at the offering price... once they do get to actually own shares they rarely make any money. There have been several significant studies done over the past few years that show on average individual investors make less than a 5% return on an IPO.

 

[MidnightSensi]

You make money by trying to predict where the market is going, not betting off where it has been.

Isn't that why the market is said to be ahead of the economy?

I don't get your response, I get Exits.