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Archive for December, 2008

Turn the page into 2009

Wednesday, December 31st, 2008

First of all, Happy New Year to all of the Moola Mania readers out there. I sincerely hope that 2009 is a prosperous one for you and your family.

Now that the new year is just about here the main question on many minds is, will things get any better or will it be the same old ugly mess that is the American economy and stock market of 2008? Quite frankly 2008 has been absolutely miserable for the stock market with the broad S&P 500 finishing the year with losses of about 38%. One also has to remember that in late 2007 things were very ugly as well, so the market itself is down about 50% from its high set in October of 2007.

Not to be outdone by the stock market, the economic data points have just gotten uglier and uglier by the month in 2008. The job market is the worst in at least 30 years, and consumer confidence is sliding lower than it has ever been measured before. The credit markets have yet to become unfrozen and the housing market is showing no signs of improvement. The best thing that can be said about 2008 is that it is now over with and it is time to turn the page.

While it would be easy to simply see things from a 2008 standpoint, you would be much better off trying to give your savings and investment plans a whole new starting point in 2009. I understand that 2008 has probably set you back substantially, but sitting back and pouting about 2008 won’t get you anywhere now. The economy is still in a terrible slide and the stock market is still very uncertain, but you need to prepare yourself and your personal finances for 2009. Don’t look back on the mistakes that have been made with disgust, but rather use them to your advantage in the future. Bring in the new year with a wise financial plan for your personal savings and investments.

Bottom Fishing

Tuesday, December 30th, 2008

For last three months, stock market bottom has been elusive. Many investors and traders tried to find the market bottom, bet millions on it and ultimately lost the money. Traders used to play with the market, now the market is playing with them.

There were many days in the recent past, where the sudden rally looked like the bottom was definitely in place. I compared those days with October 9, 2002 when I discussed with my colleagues. October 9, 2002 was the ultimate bottom before the short bull market began in 2002. However, there is no true bottom this year. Every bottom turned out to be black hole for the traders that dumped the money hoping that they are buying really low.

Bottom picking is always a dangerous game because you are assuming that stock market carnage is over, at least temporarily. Just when you think like that, another bank fails and everything goes back to square zero. Bottom picking might work when we have orderly market and free credit flow. All our analysis tools are based on certain assumptions.

One of the major assumptions is that we have healthy credit market. We have completely unhealthy credit market. Fed reduced the rate to zero; still the banks are putting lot of restrictions for the loans. Another assumption is that good companies (like GE, CSCO, IBM, etc.,) make money and grow their businesses. This assumption is also not true now. Even GE is losing money. On top of all these, fear is everywhere in the market. Every trader is worried about deflation, depression and the coming failure of other banks.

If you truly want to pick the bottom of the market, you should be familiar with technical analysis. If you are not, do not try to pick the bottom. You should look for technical indicators such as VIX, volume and moving average of major market indexes. It’s almost impossible to pick the bottom accurately. In the current situation, it’s better being two days late to the game rather than trying to get in the game one day earlier.

The real estate market is in a vicious downward spiral

Friday, December 26th, 2008

First of all, I hope all of the readers of Moola Mania had a very Merry Christmas and Happy Holidays!

I’m sure as you are reading the title of this post almost all of you are saying “of course it is.” Obviously the information I am saying about the real estate market being in the doldrums is no breaking news. The question that I have, which is an important one for our economy, is at what point does the vicious cycle end?

Right now we are in an environment where there is huge amounts of inventory, no demand, and the value of homes is declining faster than it has in the last 40 years. Sounds pretty bleak huh? Well it truly is. There is no way to sugar coat what is going on in the housing market. There are very few buyers out there, and the buyers that are out there are in a wait and see mode because they strongly believe that the prices will get even cheaper the next month. After all, who are we to blame them because they want the best price?

There has been a lot of talk about what exactly will stimulate the real estate market and the credit market. One issue is, even those who want to buy a house are having a hard time getting a loan. There have been ideas tossed around regarding the government getting involved and providing tax breaks for buyers of homes or even buying some mortgages, but nothing has been set in stone yet. I understand that the government has to do something to help reward home buyers, but I hope the government doesn’t get too involved in this. In the end the largest reason we are in this real estate market bubble is that prices got way ahead of themselves and they are correcting, which is a healthy but very painful process. In the interim I think the government should go after the greedy schemers who put people in homes they knew they couldn’t afford and provide some incentives, but remember that simple supply and demand will eventually win out.

Is there any job available?

Wednesday, December 24th, 2008

First, Merry Christmas to all our readers!

If you look around, you will hear news about unemployment and layoffs all over the place. When we turn on TV everyone is talking about thousands of layoffs. All newspapers write about how people are struggling to survive with unemployment at its high.

Is there any job available at all? Is everyone just eating wood for the breakfast?! There are hundreds of thousands of jobs lost all over this country. Still, some jobs are available in industries that are recession proof.

Health care, Insurance, Legal, Education and Security industries are still hiring. If you are qualified to join any of these industries then go for it even if you need to relocate. Wall Street Journal reports that even companies like SRI International plan to add 100 new positions next year. Companies like Merck and Novartis also plan to hire more people next year.

It’s time to polish your resume and send it to the employers that are seriously looking for people to hire.

Patience is a virtue and you’ll need it in this economy

Wednesday, December 24th, 2008

The old saying that patience is a virtue is one that is commonly used, but it couldn’t possibly be more true in the economy and the market that we are now faced with. Over the next few weeks and as we get into the new year you will hear many different analysts trying to pinpoint exactly when things will get better for the economy and the stock market. I strongly urge you to take their calls of a bottom in the economy or the market with a grain of salt, because no one truly knows just how bad it could get.

When uncertainty reaches the levels it is currently at, there simply isn’t a quick solution to make things better. No matter what is done to help stimulate our economy or the marketplace it will take quite some time to work its way into the economic numbers. As more and more people lose their jobs at a faster rate, it is highly unlikely consumers will be becoming any more optimistic anytime soon.

You’ll hear many people saying that certainly our economy will turn around and the market will as well, which I believe is definitely the truth, but that doesn’t necessarily mean it will be anytime soon. These things don’t go away quickly, and you are kidding yourself if you think they will.

The point is you are going to have to be very patient with this economy and the stock market in the coming months and possibly even years. A recovery will definitely come, but probably not as fast as many predict and certainly not as fast as we would like. The economic data doesn’t lie, and things are simply getting worse instead of better. Your guess is as good as mine for when that trend will end, but be prepared to have your patience tested!

Santa may not come to Wall Street this year

Tuesday, December 23rd, 2008

Things are still looking gloomy even after the zero percent interest rate. There are not many reasons to be enthusiastic about the economy or stock market. Economists warn that GDP could fall 6% for this quarter. If that happens, you can expect the market to go even lower. S&P 500 is struggling to close above 50-day moving average since June. If GDP plunges further, S&P 500 may not recover for many months to come.

There may be a brief rally in the next 7 days. But, that may be short-lived. I don’t have hopes for usual December-January rally. This year is going to be different, because the recession we are in is deep and nasty.

If you are going to put new money in the market, be careful and choose your investments wisely. If you are not sure, it’s better to stay in the sideline and just watch the market.

Is using coupons really worth it? Yes!

Tuesday, December 23rd, 2008

For many years a great deal of consumers shunned coupons as too time consuming and simply not worth it. In recent months the economy troubles seems to have led many to reconsider as recent studies have shown that coupon usage is up since the economy turned south.

Where is the greatest growth? Online coupons are definitely the area where consumers are becoming much more comfortable. It seems that the younger age groups have found the Internet a particularly interesting way to print coupons, while older generation seems to like to stick with the newspaper and magazines more often than not.

Precisely how you get your coupons isn’t the thing that concerns me, but the fact that you use coupons, especially on items you consistently buy, is very important. There are many manufacturers coupons that can save you $1 or more just for buying a couple of boxes of cereal. If you’re going to buy the cereal anyways, why not get $1 back? Also, many grocery stores double coupons up to a value of $1, meaning if the coupon says 50 cents off you will get $1 off.

When I have been at grocery stores in the past I have seen some pretty hardcore coupon users. They have their folders all divided up and use coupons and $25 or more each time they go to the grocery store. Obviously, being this organized would take some time and not everyone can do that, but they certainly are on to a good idea.

The point here is that whether you print free coupons online, clip coupons from the Sunday newspaper, or find them in a magazine at some point, they are most certainly worth your time and effort. Coupons are a great way to save money on things that you were going to buy anyways. Next time you think coupons might not be worth the effort, sit back and realize that it is the real money you could certainly use!

Even Ultra-rich cut their spending

Monday, December 22nd, 2008

AP reports that even the ultra-rich people are scaling down their expenses. Luxury retailers are responding to it and offering 70% to 80% discount. When I saw this discount percentage, I thought that I can finally afford to buy something from Neiman Marcus.

No chance! Fur coats are marked down from $13,000 to $6,500. You call it discount?! Ok, for the super wealthy people, it is. See more on this here.

When the super affluent people are cutting down their expenses, it’s time that we save even more aggressively.

Can you save some money on your monthly cell phone bill?

Monday, December 22nd, 2008

I’m always amazed how many people think that the fact they are “only” spending $100 a month for cell phone service is a great deal. I’ll preface my comments by saying that if the cell phone is your home phone and/or you use your cell phone for business and emails quite often, then maybe you need a powerful do everything plan that costs something like that. On the other hand, I believe there are quite a few people who are paying far more for their cell phone service than they really would have to.

Cell phone companies are far from immune to the horrible downturn the economy has taken in the last few months, so there are clearly some special offers out there right now. Several of the major cell phone carriers are trying to offer special introductory rates to keep their subscribers on board in these tough times. Sprint is offering special plans for those who love to send text messages as well as those who typically receive incoming calls rather than calling out to others. T*Mobile is still offering the MyFaves plan that allows you to have unlimited minutes to 5 of your closest friends.

Are you paying for things that you could be getting cheaper? A prime example is text messaging services. Companies like Verizon, Sprint, AT&T, all offer plans that give you a certain amount of text messages for a reasonable amount monthly. The amazing thing to me is that there continue to be so many users who simply pay 20 or 25 cents for every text message sent and received.

I urge consumers to check their credit card bill and see if there is anything you could cut back on. Even if you are only paying $50 a month, if you could get a similar plan for $40 you could save yourself $120 in a year. Every little bit matters in today’s economy!

Where is my money?

Monday, December 22nd, 2008

The government took our money and gave it away to greedy banks that lost billions in sub-prime crisis. So far, U.S. Government gave away $250+ billion taxpayers money. How did the receiving banks spend that money? What are they really doing with that? Are these banks’ executives buying $6000 bathroom curtain with our money? Are they buying corporate jets with our money? No one knows. Associated Press tried to find that out, even they couldn’t find an answer — apparently. See the related article here.

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