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In the pause: More data on our national economy

As a follow-up to my post a few days ago (Leading Economic Indicators We All Need to Watch), I had a conversation with one of my former business professors. I wanted to get his perspective on my concerns and about the economy to see if there were other indicators I should be watching. He mentions a few here and details some of his very real concerns as well. He is someone who constantly watches the global and national economy, as well as the stock market, so I trust his advice, guidance, and thoughtfulness. I hope this is helpful to you as well.

“Christa:

Nice to hear from you!

Like you, I’m feeling a bit uneasy about the stock market right now. Very high P/E multiples. To justify those prices will take an extraordinary breakout of growth in the US (and world) economy. The saving grace is that the financial industry still looks fairly stable—bigger capital bases than in 2007, more conservative lending, etc. If there is a downturn in the next year or so, I don’t think it will have the force of 2008. But still, a downturn is a downturn and something to be prepared for.

Your blog post offers some very good advice. I encourage people to keep 12-18 months’ worth of living expenses in fairly safe and secure investments. And I remind them of the old adage that there are two ways to be rich: one is to have a lot of money; and the other is to have simple needs. Avoid running up debt balances (except for education and a home mortgage). And the most important asset one has is between one’s ears: keep learning so as to stay valuable to your employer—that’s the best defense against a layoff.

Hope these comments help.

Be well.”

 

In the pause: Leading economic indicators we all need to watch

Buried deep in the Business & Finance sections of media channels, there are some leading economic indicators that we all need to watch. I have to admit that I’m getting very nervous. I’m beginning to feel like it’s 2007 so I’m making plans with my money. You’ll find a mini-action plan at the bottom of this post. I hope it helps. Please feel free to share this post with anyone whom you think would be interested. I don’t have a crystal ball. This is just what I’m seeing, reading, hearing, thinking, and doing. I put links below for you to reference:

  1. Executives at Wall Street’s largest banks are dumping stock, and I mean dropping shares like they’re hot potatoes. They have sold nearly $100 million worth of stock since the election. And it’s not just some of them. It’s all of them! Bankers dump stock because they think now is the best deal they’re going to get for a good long while. They’re smart as hell when it comes to these kinds of predictions so pay attention to them. Yes, the Dow hitting 20,000 is a big, flashy story. But honestly, that’s all it is. Don’t think that means good times are ahead. The Dow is going to seesaw like it’s on an elementary school playground for years to come. In July 2007 the Dow hit a record 14,000 and then it plummeted to 6,547 in March 2009. Those were dark times filled with panic. There is a high degree of volatility in our economy right now, and by all accounts that volatility is going to continue to a frightening degree.
  2.  Emerging markets are selling debt at record numbers. Argentina’s finance minister explains why in an interview with the WSJ: “Nobody knows what’s going to happen to U.S. interest rates with Mr. Trump as President. We have to reduce the level of uncertainty that there is now. The right decision is to minimize financing risks.” Again, finance ministers in foreign countries are seasoned professionals who spend their waking hours watching economies and policies. This is all they do, so when they make statements like this, it’s very significant. We need to listen to them.
  3. Contrary to all of the hoopla from the West Wing this week, American corporations are not investing in their businesses. They are stockpiling cash to the tune of $1.9 trillion, the most cash they have ever held. Ever. This isn’t rainy day savings. This is flat-out hoarding. Why would they do that? The same reason you would stockpile cash—because they are worried about what’s ahead. By having cash on-hand, they will be able to make adjustments and survive. In a difficult economy, cash is life (literally!) Accountants and finance professionals help companies manage and hedge their risk. Again, they know what they’re doing.

Look, I have no desire to relive those frightening years of 2008 – 2012. They were awful. But please understand that in the case of global economics, there is very little that ordinary individuals like you and I can do to impact this outcome. This is an issue that is truly in the hands of fiscal policy makers and elected officials. Trump’s volatility and foreign policy decisions will move markets. I wish that weren’t the case, but it is. So here’s what I’m doing to protect myself:

  • Increasing my cash savings. I’m still savings for retirement in my 401K and IRA, but I’m not making any significant purchases that will put me behind the 8-ball financially. I have a lot of friends who bought houses, cars, and the like in 2007 just after we graduated from business school. Some paid dearly for those decisions for years. I have an emergency fund if my job evaporates or I have a medical emergency. Liquidity will be the name of the survival game if our economy goes belly up again like it did in 2008.
  • I’m continuing my side hustles as a freelance writer and I don’t spend any of that money. I save it. The extra income really helps.
  • I have a plan if lose my job tomorrow. I know it is scary to think of things that way. I know it isn’t optimistic. I know it sounds like Doomsday is on our doorstep. No one wants to think about this. But we must. Please. Just have the plan ready to go, and then get back to work.
  • Now is the time to up your skills and make yourself more marketable. I’m now thinking of ways to do that through volunteer work and free or low-cost trainings. Now’s the time to break out our jack-of-all-trades game faces.
  • If you are in a job that looks shaky now, I would strongly encourage you to look for a new job and get out ahead of the storm. If your company is unstable now, it will only get more unstable with a rocky economy. Don’t cross your fingers and hope everything will work out alright. Now is not the time to preciously cling to feeling badly about leaving your company, or your boss, or your coworkers. The only one who’s going to make things alright for you is you, and remember a company will protect its own survival before it protects your job. When their backs are up against the wall, people become line items. I know that’s painful to hear; it’s also truthful. I watched 10s of 1000s get laid off from my company from 2008-2012. It was harrowing. I still feel sick about that time. Companies are survivalists so we must be, too. Take care of you.

I wish this were a sunnier post. I wish like hell that I had great news for you when it comes to the economy. But listen, knowledge is power and protection. I would be delighted to be completely wrong about all of this though I’m of the belief that it’s better to have a plan you never need rather than needing a plan you never have.

And if you need help, please let me know. I am not a finance expert by any means so please don’t take this advice as such. I do read a copious amount of information on a daily basis in dozens of channels. I try to stay as informed as possible on a wide variety of subjects. As I learn and understand more, I will of course share it. Together, watching out for one another, we are stronger and more resilient. If last week is any indication, we’re in for quite a ride for at least the next 18 months until the midterm elections. At least we’re all in the same boat. Now let’s row in the same direction.

Wonder: Taking action to get more kids into and through college at 826DC

Last night, I volunteered at 826DC to help teens with their college essays. It turned out that the essays were the least of their issues. The student I was helping turned to me at one point and said, “I’m so overwhelmed. I know I need to do this and I don’t know what I’m doing and I don’t have anyone to help me.” She’s the first person in her family to go to college, she doesn’t have a guidance counselor who cares, and she feels a lot of pressure from her family to make this happen.

This interaction brought back all those feelings for me. I was incredibly fortunate to have a guidance counselor, Mr. Weary, who did so much to help me. I knew he was in my corner and he was rooting for me every step of the way. (When I didn’t get into Princeton, my first choice school, he called their admissions office and gave them a piece of his mind. That’s how invested he was!) He was a gift and I knew it.

Not everyone has a Mr. Weary so in that moment at 826DC, I decided that I needed to play that role for this student. We each took a deep breath, and we went through the online application step by step. It wasn’t difficult to explain the parts of the application; this student just needed someone, anyone, to be in this with her.

Then we got to the financial section and she got really nervous. She doesn’t want to take loans. To her, debt is a frightening prospect. And I get that, too. I started working at 14 to help my family, and then I put myself through college and grad school thanks to financial aid of every conceivable kind and a lot of part-time jobs in college. I know debt is scary though when it comes to college, it seems to be a part o every solution in which parents aren’t paying outright for college. I don’t know if I convinced her to reconsider this idea, but at least I could offer myself as an example of someone who was in her shoes and worked hard to get into and through school.

As I walked home, I thought about what I could do to help more students and parents, particularly ones who feel overwhelmed by all of it. And then I got myself caught in the train of thought that senior year is too late. Student need to have their eyes on the prize of college in late middle school and early high school. They need to learn about how to get in, how to stay in, how to graduate, and how to pay for all of it while keeping themselves healthy and sane during an insanely stressful time in their lives. Education, writing, yoga and meditation, finance, technology, and healthcare. I have all that professional experience, and I’ve been where those students are. And I know what it’s like to climb the mountain and then enjoy the view you never even dreamed was possible.

If you have ideas of how I could do more for students like the one I helped at 826DC, I’d love to hear them.

Wonder: Getting my health and wealth in order thanks to Fidelity

Yesterday, I attended a lunchtime webcast about health and wealth for personal and professional reasons. I want to make sure I’m doing everything possible to take care of my finances and my health. It was run by Fidelity and featured personal finance journalist Jean Chatzky and Dr. Mike Roizen from the Cleveland Clinic. It was incredibly helpful so I wanted to share the highlights that they sent in a presentation at the end of the webcast. I hope it’s as helpful to you as it was to me.

fidelity_health_and_money_webcast

 

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