Recession, Banks, Debt Ceiling – You Must Believe Me Now

The question is, if it’s said loud enough will it be believed? Because this time it really is true (it is being said very loudly). Or is it?

The discussion about recession has been on-going for some time now. I started writing about recession possibilities over a year ago. The discussion has moved back and forth between how do we avoid one to how do we get a soft landing to what can we do to help those that will likely suffer if the landing isn’t so soft. We may see in the next several months various pronouncements by various talking heads. You notice I didn’t say anything about what phase this is. I don’t know and it doesn’t matter as much as most news personnel would like you to believe from their  strident and every increasing noise. Remember, it is important to keep the fans whipped up. We will be able to look back in several months when the National Bureau of Economic Research (NBER) will state that a recession started at such and such a point, or didn’t. Remember, only the Bureau is recognized as the official group that can declare such and they always include factors that are backward looking, meaning we don’t officially know until after the fact. This also means that we don’t officially know if we have had a soft landing, missed recession or face plant until after the fact either. There are other signs that may give us indications of various outcomes, however. We have been moving toward this point for months and months. It is dragging on longer than a normal news cycle so it gets recycled regularly. Expect to see it to continue. Again, the fans need to be whipped up to keep enthusiasm high. We are getting more comments like JPMorgan Chase CEO, Jamie Dimon (CNBC, Apr 14, 2023 Manie Dimon issues warning on rates: ‘It will undress problems in the economy’) that investors and business should plan on interest rates remaining higher for longer. The Fed still needs to “dry out” the economy, get the excess funds (easy money) out of the system. That hasn’t changed. We still have a recession we are trying to work around or work through depending on what you think may happen. Work around implies a soft landing or just a slowdown; The economy slows down, unemployment rises a bit. Banks tighten their lending policies. A few business and individuals suffer or go under. The Fed is able to get their balance sheet down without the stock and bond market tanking (it slows down, drops and recovers fairly quickly). We stumble a bit and slow down. No or mild recession and we carry on at a more measured pace. Work through implies a recession; we trip or worse, face plant and have to pick ourselves back up. We see bank failures, businesses and individuals declare bankruptcy. The Fed isn’t able to maintain a smooth decrease in its balance sheet or worse doesn’t reduce it. The stock and bond market react to all the uncertainty and failures by tanking. It takes a longer to climb out of the hole.

One of the consequences of the higher rates is the financial sector including banks will feel the pinch. They have to change from an easy money mentality to a more measured lending stance. Easy money implies less diligence in protecting deposits and in shoring up a banks balance sheet. There is little or no profit in protecting deposits (lending them out is where money is made) or doing more than the minimum required or skirting regulations. Most banks try to balance the profits with the safety, we have seen the banks that didn’t. The price for skirting the safety regs in good times is minimal and it is hard to see which banks may be skirting until too late when times turn bad. The best we can do is go with financial institutions with a long record of being conservative. Credit Unions tend to be more conservative by their nature and charter requirements. Still, it’s hard to tell. There is something to be said for spreading money around between institutions. We also have deposit insurance which is helpful but in the Silicon Valley Bank and First Republic Bank failures the Fed stepped in and guaranteed all deposits which stressed the insurance provider FDIC (it almost broke it such that another big hit would cause serious problems). So, things are complicated, of course. By guaranteeing all deposit they essentially gave a green light to the poor practices of the bank. They also prevented a bank run on several similar shaky banks across the country. Whether that was the right thing to do or not should be debated for a long time. The current mentality is that the government can fix everything which makes them responsible. Hence more regulation and laws and more places for shady people to find loopholes. Notice that the defense for many of these funny practices is that the entity did nothing wrong, they were following the rules. It was the rules fault. So, of course, more rules are needed. That is a very bad spiral and you can follow it down to the final conclusion. Watch the financial sector for more stress in general and how they seem to take care of it. Look for more rules and regulations. I am glad I am finishing up my career in finance and not starting it. It is a very different and much more difficult place to work then 30-35 years ago when I was first involved.

                Now the debt ceiling question. I am not going to quote any articles. There have been so many. It is the current hot, hot, hot topic button and the news media are mashing it with their biggest and most massive sledge hammers (gleefully I might add). Do you feel like you have been beat up no, pummeled for weeks on end. Everywhere you turn someone or some organization is talking dire straits, doom, gloom, death, destruction, mayhem, the very end of the world as we know it, the end of civilization, the death of all we hold near and dear, (pause for dramatic breath!!!!!!) AURRRGHHHHHHHH. Why can’t you people see how important this is!!!!!!!!!!!

Sorry…., I got just a little bit carried away.

It won’t happen again (at least until tomorrow anyway.)

                This is the news and financial media at its finest. This it the current news media model and the debt ceiling is the ultimate opportunity to exercise its model to the fullest. The underlying question is the government has set some limits on its spending capability, a good thing. It has come around again that the government can’t manage its input and output. The easy solution is raise the debt ceiling or remove the debt ceiling requirement or better yet get spending under control. Now, granted, the answer is never that easy and that is also part of the problem. The solution is pretty complex but workable. However, we have powerful political forces that are using this debt ceiling to push their various points and agendas.  

As background information. The following is from Wikepedia, United States debt Ceiling;

The U.S. has never reached the point of default where the Treasury was incapable of paying U.S. debt obligations, though it has been close on several occasions. The only exception was during the War of 1812 when parts of Washington D.C. including the Treasury were burned.

In 2011, the U.S. reached a crisis point of near default on public debt. The delay in raising the debt ceiling resulted in the first downgrade in the United States credit rating, a sharp drop in the stock market, and an increase in borrowing costs. Congress raised the debt limit with the Budget Control Act of 2011, which added to the fiscal cliff when the new ceiling was reached on December 31, 2012.

The last time things got too close, government set new rules and they immediately went about figuring out where the loopholes are. And it is continuing. Is it a problem. Yes. Is it the end of things as we know them (as the news is telling us). No. Are there solutions. Yes. Should you be upset. Yes. Should we be acting like Chicken Little. No. It will play out. It will get close. There will be much rejoicing in the media when the “solution” is reached. Then the media will begin the analysis phase which will allow for continued coverage for many months. So it continues. Should you follow all the stories. DEFINATELY NOT. When this crisis passes the media will need something else to keep us tied to them. Look for the recession to come back in vogue. Don’t be lead around. The various financial crisis will continue in the news. You can always find them if you want. I suggest you don’t want to. Keep your finances simple. Keep debt low. Save as you can. Debt is good for some things, housing, education, transportation. Live simply.

                Remember what is important. It isn’t news. It is family, friends, the things you love. It is the beauties around you. It is relationships, the good earth, the joy of interacting. It is game nights, movies together, playing with kids (big and little ones). It is in quite walks, talking in person to friends and family. Meeting new people, a meal together, building something, watching a sunrise and sunset. Tell someone you love them. Share precious things, a hug a kind word, hope.

The Sword of Damocles - Recession Discussion & Related Thoughts

Sword of Damocles
by Richard Westall

            We start the new year with the sword of Damocles poised over the national and world financial markets. The articles are a smattering of comments, commentary and conjecture from market gurus (both national and world) and federal officials tasked with knowing what is going on. Much of the thinking is still relating to recession but a new term is being introduced into the discussion. Additionally, many are discussing just what and when a recession may or may not occur and Powell (Fed Chairman) is trying to keep the Fed focused on is core responsibility. A typical month in the life of the financial world with many pronouncements, much hand wringing and many loud protestations. So, let’s dive into the murky waters and see just what we can see (or not see).

                A new term is being floated to describe the current financial situation, “slowcession”. Apparently the phrase was coined by Cristian deRitis and used by Moody’s Analytics chief economist Mark Zandi. It means economic growth “comes to a near standstill but never slips into reverse [recession].” Every economic downturn and upturn for that matter, is a bit different and past historical data can only give limited help in describing any current situation. We won’t know how this recession or as noted above, slowcession, will look until after the fact. It will probably have several differing characteristics from previous recessions but will meet the basic definition of recession. Do we know how this recession will play out, no. Are there some ideas, yes, many. Will any of the ideas be correct. Maybe. Then again they may all be wrong or at least mostly wrong. Then again, with all the possible ideas and conjectures floated over the past 12 months there is likely to be a couple of the ideas that will hit close to what actually happens. Remember, we have had so many possible scenarios described from the death of the markets to no recession that all possible options have at least been considered. Something has to hit, given enough shots taken. So, we don’t really know but we have some ideas on a recession and its impacts.

                The Guardian (London) collected comments from a variety of international economists and financial gurus and gives us a cross-section of thinking. They suggest from their sources that we should “brace for another turbulent year in the financial markets”. (Nothing new there.) Their comments suggest possible improvement and likely fall of markets, particularly the US. The head of the International Monetary Fund suggests that a third of the world’s economies are in recession which is likely “because the three big economies – US, EU and China – are all slowing down simultaneously”. Some are suggesting a global recession this year. Much of the speculation is based on what economists and other believe will be the response by central banks to the high inflation rate, which will be raising governmental monies interest rates. An interesting side comment, the article suggests that Russia’s economy is already in recession caused in large part by Putin’s failure to find an easy way out of the war.

                I have selected 3 articles on recession comments. The Bond Buyer (1/24/23) brings several analysts’ comments together suggesting recession is necessary. Some economists are suggesting a modest recession (Wells Fargo Securities and others) during 2023, others think more than modest. There is now discussion about the impact of the recession on inflation. Remember, recessions are supposed to kill inflation. Some are suggesting inflation will remain above the Fed target of 2.0% and be in the range of 2.5% to 3.5% for at least a decade. The solution to higher than target rates, the Fed can always move its target upward and declare victory in the war on inflation. That wouldn’t surprise me. Finally, there is some discussion that we will have a split year. Good for half and bad for half. Don’t know which half first. BNN Bloomberg (1/5/23) is a discussion by St. Louis Fed Reserve Bank President James Bullard that Fed Funds Rates are getting closer to high enough to bring down inflation. The thought by many from his comment is that the Fed still has some increases to come. The question is will they be .25% or .50% increases. The market views a slowing increase as positive at this point. Several Fed officials are still concerned that inflation is to high or way to high. That points to bigger increases. The 3^rd article from Reuters (1/25/23) is about the impact of all this to investors. The article warns that many “heavyweights [are] warn[ing] of pain ahead despite market’s recent reprieve”. Even though recent market movements have been positive or optimistic, most are warning that recession is still likely. The article states, “correctly gauging the economy is crucial for investors”. The statement is absolutely correct and impossible to do. Remember that. Don’t try. No one can. Ever. Don’t do it. In spite of what many say especially talk radio financial hosts and slick financial advisors. And of course many believe they know more. Some very few will get very lucky and be correct and you will hear about them and their phenomenal good skills (luck is not a skill). The majority (most) will get it wrong and there will never be any report on them or their numbers.

                Stay your course. Don’t panic or as the British war message stated “Keep Calm and Carry On”. Keep your debts manageable / low. Don’t borrow without careful thought. Save and above all….. enjoy life, friends, family and the beauties around us. Be grateful. I am.

Articles used:

https://www.theguardian.com/business/2023/jan/02/global-economic-forecast-for-2023-a-stormy-start-followed-by-a-ray-of-hope

https://www.cnn.com/2023/01/03/economy/moodys-us-economy-slowcession/index.html

https://www.bnnbloomberg.ca/fed-s-bullard-says-rates-are-getting-closer-to-sufficiently-high-1.1866262

https://www.reuters.com/markets/us/wall-street-heavyweights-warn-against-goldilocks-hopes-2023-01-25/ 

The Whirlwind of Financial News

 

    “Round and Round she goes, where she stops nobody knows.” The phrase was used by the Major Bowes Original Amateur Hour, a radio show that ran from 1934-1948. However, I think it also describes our current economic and financial situation to a tee. I present to you 3 themes from this week’s news feeds that are “round and round” or in my mind, or more of the same. The news themes are; (a) vanishing liquidity and its impacts, (b) impacts of slowing economy, specifically in this article as it relates to investors, and (c) Dow Jones is down… again. However, since it isn’t zero that means there had to have been some ups somewhere.

            Bloomberg is reporting in its article of 9/12/22, titled Vanishing Bond Market Liquidity Bad for Fed Balance Sheet Unwind, that the Fed program to reduce its balance sheet may be headed for the rocks. The article discusses the tightening liquidity in the short term money market and how that may make it more difficult for the Fed to reduce its balance sheet. The article is fairly esoteric but the bottom line is the possible recession is making the drawdown of the Fed balance sheet more difficult and uncertain. The high balance sheet makes it more difficult for actions the Fed takes to have as much impact as it may, i.e. there is little or no room to flex monetary  policy to change the impact or likelihood of recession. With Pres. Biden’s  Inflation Reduction Act which really doesn’t reduce inflation pressures as much as it adds to the balance sheet you can see that the Fed is being painted into a corner. The current Fed policy of increasing Fed Funds Rate to try to tighten spending (reduce it) is being offset by the Inflation Reduction Act which is expanding monetary policy. The Fed’s only possible response is to raise its Funds Rate high enough to put a damper on inflation caused by excess money in the system, which the president just increased by a tremendous amount. This does not bode well for an economic “soft landing” as proposed and suggested by the Fed and pushed by Administration personnel, i.e. the Treasury Secretary, and of course the president, amount others.

            In the second article UBS Bank suggests its clients are becoming more cautious in their money management and involvement. The Reuters article titled, USB CFO sees increased client caution as global economy slows discusses the decreased activity by bank clients in the world financial systems. This would mainly be the large bank clients involved in the world markets. The article discusses how this is putting downward pressure on bank revenues as their revenue tends to be based on transactions, fewer transactions generates less revenue. The important part of the article is that the financial markets impact is worldwide. The bank is attempting to assure bank investors they (the bank) recognize the problem and as with all situations like this, they are not responsible for declining revenue as no one could have foreseen this. This seems like some attempted fancy footwork to distance management from what it sees as a likely downturn in revenue. The bank is betting on economic slowdown at best and, I suspect, recession at worst. They are declaring they are not responsible.

            Finally CNBC is reporting another stock market down record in its 9/13/22 headline, Dow tumbles 1,200 points for worst day since June 2020 after hot inflation report. This is a good article to show the up and down and down and up nature of markets in troubled (meaning uncertain) economic times and the reporting by news organizations on such things. Notice two things about the headline, one, the Dow is moving 1,200 points, in this instance down. That is about 3.9% as reported in the article. The second thing is this is the largest change in 2 years. The first statement implies that 1,200 is a big deal the second statement suggests that it isn’t that uncommon, only 2 years since the last time we had such a shift. Somewhat contradictory statements. The article states the drop erased “nearly all of the recent rally for stocks”. You will not easily find articles on stocks increasing 1,200 points recently but you will and do find many articles on stock decreases.  Part of the reason for not finding articles on increases is they tend to be a bit more gradual. I do believe there have been some recent trading days that were up a lot though they are a bit more difficult to find. It’s important to weigh any major swing reported in the news in light of just how significant it is. One of the definitions of economic upheaval is wild and vicious swings. You should look at this as a general reporting news story. Try to separate the facts and figures from the color commentary.

            In conclusion, stuff happens. Markets, interest rates and prices go up and down, many times violently in an economic upheaval (think pre-recession – recession). If all the negative news of the last little while were added up the Dow Jones Industrial Average would be at zero or below. It is down, admittedly, but not zero and actually closer to its high or sitting at about 31,000. It may fall 10-15% total from the recent high to whatever its low point will be before it recovers. We won’t know until after the fact what the total fall may have been, or when the recession started or when we have officially recovered. We had our annual meeting with our financial advisor a couple of weeks ago. Parts of our portfolio are definitely down from last year but they had been up a great deal previously. Other parts are holding fairly steady and some parts are actually benefiting from the increasing interest rates. So, balance in life and investments is helpful. Hang in there we will make it through this. Live, love, and enjoy life. There is much to be grateful for and thankful for.

Bloomberg article:

https://www.bloomberg.com/news/articles/2022-09-12/vanishing-bond-market-liquidity-bad-for-fed-balance-sheet-unwind

REUTERS article:

https://www.reuters.com/business/finance/ubs-cfo-sees-potential-higher-dividend-next-year-2022-09-13/

CNBC article:

https://www.cnbc.com/2022/09/12/stock-futures-are-higher-as-wall-street-awaits-key-inflation-report-.html

The Art of the Economic / Financial Forecast

 

 

        Have you watched a child finger paint recently. Some start slowly then add more colors or big swirls. Then at some point mix the colors all together and want to start over. That is a good analogy for today’s markets and the forecasts that are being generated by various parties. What can you make from the mess? There are some nuggets in the mess but they may be more related to the process than the actual information provided. Economic / financial forecasting has a sequence to it. As a new problem is perceived the individual members of the reporting community try to grab the initiative on the other community members by reporting something fastest and loudest. There usually isn’t much substance and very little analysis to the first reports / analysis, mainly noise to generate interest. Quick charts and graphs will be added to give substance but may not be of much value. As the issue develops more concrete information is included as it becomes known, statements from officials, past trends that are thought to be similar to the current unfolding situation. Remember, the new problem has not really developed yet so any comparisons to past data are wild and loose. But there will be charts and graphs and comparisons. As the situation develops, conjectures, suppositions, ideas, comparisons and theories will be put forth and discarded at a rapid rate. There should be lots of conflicting opinions and conflicting charts and graphs. As the situation further develops the initial flurry should settle down a bit with more concrete information based on actual current data. Opinions on the meaning of the data will still swing wildly and there will be many interpretations and many conflicting points, still. At some point the data will tend to support a particular analysis. All the other conflicting statements will be forgotten or just dropped and there will be some general pronouncement from some official, governmental or business leader that many if not most will agree with. There will be a short period of quiet or something like a breather then some news group will perceive a new problem and away they all go again with the reporting community trying to grab the initiative. Several new problems may be simultaneously running depending on the particular economic climate. Our current climate is very conducive to the multiple current problem scenarios. The news groups love this type of environment. There are so many possible new problems that many groups have the opportunity to be first on something. This is the time for them to be looking and jumping on and at any and every new piece of information and rumor.

                So, what are you to do. Take it slow and easy on the new news. Wait for a theory or idea to stand some test of time. As an example, I quote from a CNN Politics article of June 1^st ,Treasury secretary concedes she was wrong on ‘path that inflation would take’ and which were also referred to in a Reuters article of June 7^th, Yellen says inflation to stay high, Biden likely to up forecast,

“US Treasury Secretary Janet Yellen admitted Tuesday that she had failed to anticipate how long high inflation would continue to plague American consumers as the Biden administration works to contain a mounting political liability.

"I think I was wrong then about the path that inflation would take," Yellen told CNN's Wolf Blitzer on "The Situation Room" when asked about her comments from 2021 that inflation posed only a "small risk."

The admission was the latest indication that the administration's expectations of a normalizing economy were thrown into disarray by the continuing pandemic and the war in Europe.

"As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn't -- at the time -- didn't fully understand, but we recognize that now," she said.

Yellen and other White House officials once framed inflation as a temporary side effect of the economy returning to normal following the pandemic, pointing to snags in supply chains and demand outstripping supply.”

Yellen has taken more responsibility than is usually done for her comments. The market did call her out on it however. Notice the time frame is 6-8 months,  much too long to wait in the news hungry environment that requires snap statements and quick facts and figures.

                What then are some of the new, new problems that the news folks are jumping on. Stagflation is now starting to show up in articles, recession is much more common and is expected to occur in 2023. The discussion is now when in 2023 for recession, some are saying 2^nd quarter, others late in the year. The shouting has gone from no recession or few saying it was possible, including the governmental officials, to many saying recession is possible even likely. Notice there hasn’t been as much said (or at least not said by the mainstream newsies) about supply chain bottlenecks or the Ukrainian war. Employment figures have become sparce in the last little while. The stock and bond market movements are getting some attention on a periodic basis, mainly when a new high or low is hit. Notice I didn’t specify just how high or low or how relevant it might be. Movement is what seems to be interesting the newsies. Again it comes back to volatility and uncertainty. With uncertainty newsies can make wild statements and maybe they get it right. If they don’t there is very little consequence to being wrong. Remember that, no or very minor consequences for being wrong. Look at Yellen and Powell. No job loss, little or no censure but it is important to have an excuse, the greatest one is “unforeseen circumstances”. In that context everything can be considered unforeseen.

                Good luck and hang in there. Take everything with a grain of salt until some time has passed. Remember the definition of recession requires a look back meaning that we have to have historical data meeting certain criteria before a recession can be declared. It is past tense. We won’t know when a recession has started until after the fact. Many financial situations are like that. It’s not worth getting worked up and panicky about. Enjoy life, family, friends and the beauties around us.  

CNN Article

https://edition.cnn.com/2022/05/31/politics/treasury-secretary-janet-yellen-inflation-cnntv/index.html

Reuters Article

https://www.reuters.com/markets/us/us-faces-unacceptable-levels-inflation-yellen-tells-senators-2022-06-07/

 

How to Maintain Your Financial Health in Unhealthy Times

https://www.bloomberg.com/news/articles/2022-04-26/deutsche-bank-sees-5-6-fed-target-rate-and-deep-u-s-recession

https://www.bloomberg.com/news/articles/2022-05-03/investors-are-so-bearish-on-stocks-that-the-market-looks-bullish

 https://www.bnnbloomberg.ca/yellen-sees-solid-growth-possible-soft-landing-for-u-s-economy-1.1761068#:~:text=(Bloomberg)%20%2D%2D%20Treasury%20Secretary%20Janet,moves%20to%20bring%20down%20inflation

https://www.bnnbloomberg.ca/u-s-stocks-roar-as-powell-quells-fear-of-jumbo-hikes-1.1760681

https://apnews.com/article/business-stock-markets-asia-sydney-hong-kong-c341786b3e475916247b2fcd5c07602f

                There is a concept in behavioral economics called loss aversion. It refers to the situation that a real or potential loss is perceived either psychologically or emotionally as being more severe than an equivalent or equal gain. We feel more deeply for a loss than a gain or the loss of $100 is far greater than the joy of gaining $100. For greater insight into this concept check out Nassim Talab’s book, Fooled by Randomness. I recommend it for this and many other things. This applied to today’s comments on several levels.

                I have included several articles on the recent happenings in the markets and with various statements by banking and governmental officials which need to be read in order listed to show the progression of thoughts and ideas in the last two weeks. I had a discussion earlier this week with someone who wanted to know what they should be investing in. They didn’t think I had given a very satisfactory answer when I suggested they shouldn’t be doing any investing. I would go so far as to suggest that looking at financial news with the intent of investing should not be done right now. Don’t look or follow or even think about financial news, at least not if you are looking for information to help you choose investments or trying out some strategy suggested by a financial advisor or even well meaning friend. Because the only thing that will happen is you will feel rotten or worse, hopeless. Any investment decision you make right now will result in some loss, possibly a lot of loss and remember, loses contain more negative punch than comparable gains. Granted, your current investments may be taking a hit but then you are not following my initial counsel to avoid looking at financial news with the intent to invest. Think back to the first paragraph about loss aversion. Right now the market is so all over the place any gains (feeling some little good) will be massively offset by losses (feeling much more bad). The articles I have included / listed show how in just a couple of weeks we have gone from despair to euphoria to despair (not quite that extreme but you get the point).

                The first article from Deutsche Bank (April 26, 2022) suggests we will definitely have a recession in 2023 and that the Fed monetary policy needs to be very aggressive, i.e. really jumping the Fed Funds rate up a lot and often. The second article from Bloomberg dated May 3, 2022 suggests investors are too Bearish. “Investors have become so negative about the stock market that Wall Street [read smart money] is starting [to] think a rally may be on the way.” They give several technical metrics to support their thinking. The Third article from BNN Bloomberg (May 4, 2022) states Yellen thinks the Fed can make a “soft landing” for the economy. Again, a couple of reasons are listed. We have a very negative article (recession next year) followed by 2 very positive articles (market likely going up and no recession next year).

                The last two articles show what actually happened. The BNN Bloomberg article is from May 4, 2022 the day of the Fed meeting and the AP article is from May 5, 2022 the day after the Fed meeting. The May 4^th article is after the meeting and gives the reaction of markets during the next few hours. Markets are up 3%, joy and jubilation. Several reasons are given including that Chairman Powell says that .75% Fed Funds Rate increases are off the table. All is roses and smells great (an emotional gain). The next day the markets falls 3% (an emotional loss). How could this happen, the fiscal doves had taken over, the world was roses, champagne had been flowing. The talking heads had spoken. We are told in the AP News article that “yesterday’s sharp rally was not rooted in reality and today’s dramatic selloff is a reversal of that misplaced exuberance”. Exactly what does that mean. So, yesterday pundits couldn’t read the signs but today they can? What about tomorrow’s swings, for there certainly will be swings. Will those signs be read correctly? What will be the greater insight and understanding that will allow for reasoned understanding and the ability to plot the market and world economies, especially on a day to day basis. Now do you see why you should not be reading the financial news thinking about investing. The financial noise is so loud individuals can’t hear, let alone think in any kind of reasonable manner. There is little real information in the noise that would allow for reasoned decisions. The financial pundits will never apologize for, attempt to correct nor take any responsibility for any misconception, error or misleading statements . You will find contradictions among the nuggets of truth and accurate information. It is the nature of financial noise because remember, in the markets, information is power and financial noise may contain useful information and….. may not. How do you tell (it is extremely difficult).  

                What should you be doing at this point or any point in which you need to make financial decisions. Think of the tortoise and the hare or slow and steady. Limit your debt to necessities like education, housing (don’t ever consider variable rate financing – too many potential problems) and transportation. Have a diversified portfolio of stocks, bonds, mutual funds. Remember, stocks are usually a longer term investment with the expectation that they will go up and down, mainly up over the longer term. Bonds tend to be a bit more stable and many times move opposite stocks (but not always) and mutual funds, to get more diversity from smaller investments. A mix is good. Look at rebalancing your investments on a regular basis, a good financial advisor can help.

                Hang in there. These are unhealthy times for those that immerse themselves in the dirty waters of too much financial noise (news). Watch from the sidelines. Keep to the regular and steady investing schedules you have established before and don’t think you can time or out smart the market.