Election 2008: the day after

The day after Election 2008: So now what?
That’s what a lot of people are asking themselves this morning, now that the uncertainties of the election is out of the way, Obama is the Preseident Elect, and the Obama’s and Bush’s transition teams are working together to assure a smooth transition, and the Obama-Biden team are recruiting additional team members to lead and manage this wonderful country.
What about you and your situation? You surely cannot ask for help directly to either G.W. Bush, or to Barack Obama. They actually need your help, they need your help keeping the morale up, trust the political and financial institutions that once again prosperity will return to the US soil. If there something that most people have learned is that things are back to basic, wise use of credit, well thought out plans for important decisions like buying a home, a car, or a major appliance; carefully screening of financial advisors and more realistic investment strategies and expected returns.

If you have consumer debt: have a plan to pay it off as soon as possible.
If you have a house with a mortgage: have a plan to pay the mortgage off, sooner or later. If you need to refinance, do so, a home is a long term asset, and a necessary one if you can afford it. Make a plan to eventually pay off the mortgage.
If your financial situation is challenged, take matters into your own hands with a two-prong strategy:

Cut your expenses.
Increase your revenue: get a second job if you have to, or a third one. Clean up your attic and basement and sell all the stuff that you have and no longer use. If you don’t have time, and if eBay or Craigslist is not for you, consider donating your items to charity, and take the tax write off. Consult your tax advisor on that, and remember to get a receipt from the charity for your non-cash donation.

Start or continue saving: no matter how little you think you make, someone else down the street makes do with less than you have: simplify your life, eliminate expenses, cut down on your spending. There’s no alchemy math: living within your means is the new luxury.
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Why is the Stock Market and the US Economy in this state? Whose explanation can we trust?

We are receiving a good deal of inquiries asking us to cover the happenings in the Stock Markets and the economy at large. It’s not easy to address those questions, and in reality, nobody really knows. The “experts” are divided on what caused these events, and what measures should be taken to correct these events in the short term, and how to set up the course for the long term.

Something that we look at when reading press releases or listening to interviews, is “Do these people have a conflict of interest in what they are saying?”. And most time the answer is YES.

When it comes to the stock market, one of the major components of a healthy market is “confidence”, and everyone agrees that the average investor’s confidence is at a low point. Wall Street insiders have a self interest in saying that everything is fine, and people should remain invested and buy buy buy some more stocks, bonds, ETF, Mutual Funds, and any and all financial instruments.
There are a handful of people that we like to listen to, one of then is George Soros (see: Financial crisis: how to make sense of how we got here, and what’s ahead? ), another one is Carl Icahn, the 46th richest man in the world with a net worth of $14 billion (source: Forbes.com), and he got so rich by buying and selling companies that were undervalued or underperforming and turning them around: he knows his stuff.

He is starting to appear in the financial circles, so you can catch him on CNBC and other channels, and you can also read his very insightful blog: The Icahn Report.
If you can get a hold on his interview on CNBC with Larry Kudlow on October 15 (yesterday), watch it and take note.
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Bubbles and crashes: does history repeat itself?

Knowledge vs. Action. Bookworms claim that knowledge is power, bullies state that action is power.
The smart people that we know have both: they take appropriate action with plenty of relevant knowledge; when it comes to personal finance and money in general that is the rule that we subscribe to, anything else is gambling.

There are some classic books that provide a wealth of information related to the cycles of the financial markets and economies, these are our favorites:

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Photo Credits: Jeff Kubina (cc)

October 16, 2008 | Filed Under Books, Economy, Financial Crisis, Investments | Leave a Comment

Financial crisis: how to make sense of how we got here, and what’s ahead?

The global financial markets are highly complex systems, dictated by economic, political, and psychological forces. The crisis that we are experiencing right now has been brewing for quite a while, and it is embedded in the very fabric that holds the various systems together, and renders them dysfunctional.
Listening to the insiders and the politicians is hard, since each one of them has personal and ideological bias, and some have conflict of interests as well.
Among all, there’s one voice that stands out from the crowd, a very smart person, his name is George Soros, who is famously known for “breaking the Bank of England” on Black Wednesday in 1992. With an estimated current net worth of around $9 billion, he is ranked by Forbes as the 99th-richest person in the world.

He has just published a book: The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. If you want to understand how we got here, and what’s ahead, this is the MUST read, endorsed by the staff at Credit Cards Mojo.

Available at Amazon.com: