By John Packard

Underlying economic and banking system fundamentals rapidly are getting worse, not suddenly better as touted in the media tied into Wallstreet. Another tall tale is of the Fed’s valiant fight against recession, while containing inflation. Now that the economy has been turned, the story goes, the Fed can slowdown or eliminate its easing so as to concentrate on its inflation fight. What nonsense! The Fed’s primary concern remains preventing a systemic financial collapse; everything else is secondary. The Fed has very limited ability at present either to stimulate the economy or to contain inflation, despite severe problems in both areas.

It is polite to be positive despite the overwhelming evidence of a deteriorating economy. In fact, one study put together by the peanut gallery suggests that many millionaires (who knows who thes people actually are) are preparing for an immediate recover in 2009. Waren Buffett was quoted to say that the recession will be deeper and longer than anyone currently realizes. I don’t know about you, but I’ll put my money with Warren.

Ben Bernanke made the decision to sacrifice the U.S. dollar and inflation containment months ago. Any move now to a slower pace of interest rate cutting is due primarily to the targeted fed funds rate nearing its practical lower limit. If the Fed kept cutting rates at the same pace as seen earlier this year, fed funds would be at 0.00% before July.

As will be discussed further, nearly all statistics that underlie GDP suggest a first-quarter contraction, but politics likely will keep the number positive. Recent inflation reporting has been understated, yet market recognition is growing of a serious inflation threat. With oil prices hitting new record highs, the outlook for inflation cannot be good.. Inflation pressures also are in play from food supply disruptions, a weak dollar and excessive growth in the broad money supply.

Nonetheless, the equity markets have rallied, as has the U.S. dollar in conjunction with some gold selling. The stock markets rarely are rational, but the currency markets have been subject to heavy central-bank jawboning, which historically usually has been reinforced with covert market intervention. The gold market, in turn, has been hit with overt intervention. Jawboning and intervention tend to be short-lived in impact. The long range outlook remains dismal for the U.S. dollar and extremely bullish for gold.

Banking Solvency Crisis Continues. Little has changed in terms of the banking solvency/liquidity crisis, except for the passage of some time. The news continues to be bleak, as central banks keep pushing liquidity into the system. As shown in the accompanying graph, the Fed now reports non-borrowed bank reserves at something close to $100 billion. These funds obviously have little to do with banks meeting their reserve requirements, but more generally reflect the Fed’s net lending of cash and assets of approximately $140 billion as a liquidity infusion for troubled banks.

The moral of the story is to payoff as much debt as you can. This will be the best investment you can make.

By John Packard

NewsWeek just came out with an article describing a man who sold his business and put it into an investment account with a prestigious investment firm in New York. He had what was reasonably a large sum of money. $10 million to be exact.

The article then described how he received hardly any attention.
The point of the article was to suggest that you are really not financially rich until you have $25 million. $25 million?! You’ve got to be kidding me! Leave it to the media to tell us what it means to be rich and how much money you need to get there!

According to the article, experts suggest that $25 million is what is needed for a “really cushy retirement.� I say baloney.

It is true that great wealth has increased dramatically for a certain few throughout the world. Much of the middle class has been left behind however. I am not trying to suggest class warfare. I believe in capitalism when it is done right. The problem I have with articles like this is that it seems to suggest that no amount of money will ever be enough. There is nothing wrong with trying to excel. But I believe it sends a message that you need to keep up.

Also mentioned was the fact that many millionaires now consider themselves middle class. They don’t feel that they are rich enough. So what is a middle class millionaire? Well, according to the article it suggests that anyone between $1 million and $10 million will fit the bill. Maybe this is true, but it really comes down to what the wealth will produce in terms of income. A net worth of $1 million could generate $100k per year if invested correctly. Is this not enough for most people? Remember, studies have show that once your needs have been meet, more money does not make you any happier.

Only a tiny portion of all Americans meet the articles definition of rich: Just 0.20% of households have a net worth of $25 million or more..

The message of the article also insinuated that your worries will go away once you’ve reached the $25 million. This is absolutely not true. The facts are that most wealth is dissolved and frittered away within the second and third generation. Which means that if you decide to leave your wealth to your kids, it could mean a shallow and hedonistic existence for your kids.

I find it distasteful to continually exhort people to aspire to this level of wealth, that somehow life at this level is infinitely better than one who has secured financial independence on far less.

Remember that true contentment comes within and not worrying about what everyone else has or is.

By John Packard

After years of living large, U.S. households are finally learning what financial experts thought they never would: to live within their means.

Economists have long warned that the U.S. consumer was on an unsustainable spending frenzy and that savings rates were dangerously low. Now, families are being forced into financial responsibility by the housing downturn and a weakening economy.
My question is, why has it taken so long. The media, credit companies, and other culprits have perpetuated this myth that there should be no limit to our spending. Well.. no longer.

The big problem the country is facing is the amount of debt at every level. I.E. government, corporate, and personal. The country call ill afford a slow down in spending, as the consumer drives 70% of the economy.

The powers that be have tried everything to get people to spend, spend and spend some more. We have reached a breaking point. Things will change and it will be painful. The torrid spending spree has stopped, and the adjustment will take time.

The question is not whether we are in a recession, but how long will it be and how deep. It could be rough. Things would not be so bad if our economy was not financed so much by credit.

According to some studies, 30% of consumer spending is discretionary, that is, optional. If this is true, then there is no excuse for us to be in the shape we are in. Individuals have spent their money instead of save it.

Although we cannot control what the national economy does, we can control what are personal economy is. We need to educate ourselves about money management. This is what Prosper is for. We teach our students how to avoid a recession in our personal financial lives.

Most people have never prepared a budget. But people are going to have to if they want to keep their homes.
As a coach, what has been amazing to me is see how many people refuse to cut back on their unnecessary items. What is truly a want is considered essential and cannot be sacrificed. This mindset will be forced to change, and being forced to do anything is not a good thing.

As the U.S. housing crisis deepens, many more Americans will be forced to budget to avoid foreclosure, with serious implications for an economy on the brink of deeper recession.

We are now starting to see the results of the wreckless behavior of both lenders and consumers. Some major supposed reputable firms have either gone under or have been on the verge, Foreclosures are up 60% over last year. One thing I find pathetic is the government is willing to help and bail out the big guy. (the banks) but the people this crisis has hurt the most, former homeowners will get not much more than a token “economic stimulus� check. Does this seem right? I certainly don’t think so. Why should the tax payer be responsible for the dishonest and greedy actions of others?

There are already signs that American consumers are “trading down” in the search for bargains, with February same-store retail sales showing customers favoring discounters like Wal-Mart Stores Inc over higher-end retailers.

One statistic said that in the fourth quarter of 2007, Americans’ household debt almost equaled 140 percent of their after-tax income and that they were spending 14.3 percent of their after-tax income paying down that debt. Which means that means Americans are spending more on servicing their debt than they do on food.

This is estimated to shave off 1% of consumer spending for the next several years. Undeniably, this will affect the economy.
The real question is for how much and how long?

By John Packard

Although I think the economic stimulus package is a joke, it is money and we’ll take it.

Government is expecting all of us good citizens to go out and ’spend’ the money.
The theory is that such ’spending’ will jumpstart the economy back into growth mode.
Forget the fact that the U.S. Federal government is the biggest perpetrator of fiscal
irresponsibility in history. (I will stop here.)

My suggestion is that we send uncle sam a message: That we are not going to spend the money,
but invest it. In our debt to be exact.

Paying your debt is your best investment. If you have high interest credit cards, hefty student loans, or other debts,
then use the IRS refund to paydown credit card debt.

The second best thing you could do is to create a short term emergency fund.
I always recommend at least an amount of $1,500 to $3,000 at all times.

If your debt is paid off and you emergency fund is taken care of, then it may be
prudent to invest in some gold or silver coins. They will be worth something someday.

Once you’ve done all this. Write a letter to your congressmen and tell them to stop spending your
money so irresponsibly.

By John Packard

The US Government is sending a strong signal to pre-retirees. “Get your own financial house in order…� Aside of being hypocritical, it is not the end of the message: “because we can’t seem to do anything right.� Translation: Don’t expect government to come to the rescue when retirement comes around. Congress is sitting idly; they are waiting to pass on the social security hot potato to the next group so they won’t have to deal with it.

Without admitting to blatant incompetence, the government has tried to extend a hand of benevolence by offering a few new items to pre-retirees to help them prepare for ‘no’ social security. One account is the 401k Roth account.

This account allows you to contribute to a plan after tax yet the money will grow free of tax and upon withdrawal, no tax is required. (Knock on wood) The Roth 401(K) is an extension of the original Roth IRA concept started a decade ago.

The Roth 401(k) is an even better deal than the more familiar Roth IRA because you can contribute more each year and there are no income-eligibility limits. If your employer offers a Roth 401(k), you can contribute up to $15,500 ($20,500 for workers 50 and older), regardless of income.

Roth 401(k) contributions are not tax-deductible. The accounts are ideal for people who are expecting to be in the same tax bracket or higher when they retire.

Despite their advantages, Roth accounts are not right for everyone. Middle-aged workers who get a late start on retirement savings are unlikely to be in a higher tax bracket in retirement. As a result, they may be better off sticking with a traditional 401(k) and claiming a bigger tax break now.

Although a Roth 401(k) requires annual distributions once you reach age 70 1/2, you can easily roll over the account to a Roth IRA, which has no distribution requirements. And you can leave a Roth account to your heirs tax-free.

Well, The Roth 401 (k) sounds like a good idea. Thanks US government!

My only question is what will happen to the millions of workers who have faithfully paid into the social security system only to not receive any benefits when they retire?

By Brice Hogan

Marching your way to financial freedom takes a lot of discipline. So I want to impart some wisdom on how to keep a little more money in your wallet when you shop around for things.

Groceries

My wife says that I am the king at grocery shopping, and I am. That is because when I go I try to look for the best deals possible I bring a list and stick to it. Generally I go during the busiest time of the week which is either the weekends or on Mondays. These days the store will have a lot of discounted. So shop on the busiest days. Better Deals. Also if the store has a frequent shopper club join it and you can get additional discounts. The grocery store I shop at, if I purchase a certain amount I can get 5 to 10 cents of gas. These days it’s totally worth it.

Dollar Stores

If you have a dollar store in you area use it. I find it a good place to find household cleaning products, bathroom cleaner, laundry detergents, some food items. Take advantage of these places they also stock some name brand products so it can be an effective way to save on your budget.

Find your Coffee Factor

David Bach has an excellent book called Automatic Millionaire. In it he describes what is called a latte factor. This is basically a vice or habit you spend a lot of money on. It could be cigarettes, eating out, excessive shopping, etc… If you have a vice or habit you spend a lot of money on cut it out completely or scale it way back to save you some coin.

Reviewing Insurance Policies

A great way to save some money is to review your auto insurance. Just by increasing the deductible to a manageable amount you can save $5 - $10 a month and maybe more. So call your insurance agent up and ask.

Bundle Away

You can save a lot of money these days on tv/internet/phone bill by looking into bundles. Companies have made it cheaper for you to buy bundle packages. I have seen packages for $100 in some areas which can save you a lot of money in the long run for you.

These are just some tips that might be able to save you a little money during the month.
Happy shopping.

By Brad Peterson

It was about 2 years ago that I heard an analysis of the EUR/USD and the probability of the pair going to 1.70. Back then the exchange rate was between 1.20 and 1.25. In other words, to buy 1 Euro one would have to pay $1.25 USD. There were some strong technical indicators implying Euro would continue to strengthen. With the current price today nearing 1.60 this analysis has proven to be quite effective.

One has to wonder when the Euro will run out of steam. January of 2009 will mark the 10-year anniversary and it has done quite well in it’s short period of existence. Consider the fact the Euro was at one time as cheap as $.80 USD…today you’ll pay twice as much! Maybe postpone those trips to Europe for the time being and look for those warm destinations in Brazil or Mexico.

Countries throughout the world are jumping on the bandwagon of a strong Euro. Billboards from banks advise depositors to convert their U.S. dollars to Euro’s. One of the world’s foremost investors Warren Buffet has been bearish on the U.S. dollar for years now. The question has to be, are things really that bad? Or, are things really that better in other parts of the world, specifically Europe? We need to keep in mind some of the biggest investors in America are overseas. Take a look at some of the top shareholders of major U.S. companies. Government debt has been financed by foreign countries for years. If the U.S. dollar continues it’s demise it will effect the world as a whole, just just the USA.

The Euro is long overdue for a cooling off session. However, don’t expect a turnaround to be as simple as stopping a sports car on a dime. Visualize an aircraft carrier or cruise ship turning around, it takes time. What’s interesting to note is the USD has strengthened already against other currencies. The GBP/USD hit a peak just over 2.11 back in November 2007 and hasn’t been there since. The same is true with the USD/CAD when the USD weakened to almost .90. Ever since breaking a key psychological barrier of 1.30 the Euro has never looked back. The closer we get to 1.70 the stronger resistance and probability of a turnaround.

In the meantime I’ll continue to watch the EUR/USD and look for opportune entries as it continues to climb. Keep in mind there are two sides of this equation and not much talk has been considered of what is taking place in Europe. Watching key technical levels combined with fundamental analysis from both parts of the world can help lead to a strong USD rally for a period of time.

By Micah Richard

I was speaking to my father-in-law. He is an arbitration lawyer. He has been bothered lately with some of his cases. I got talking to him. He told me payday loans can charge up to 59%, and has seen more and more payday loan representatives suing those who can not make their payments. The main reason people can not make their payments, is because the interests rates are to high to manage for them.

We see advertisements for getting our money now. The lender will pay your bills, or give you an advance on your tax return. Yes, it is true, you can get the money now, and you don’t have to wait for the return and you do not need to wait for any late payment charges to your credit card.

The money needs to be paid back. The industry is not much less than highway robbery for the naive.

Avoid all payday loans! Please do not fall in these traps. They will take you to court, and they will usually win. You sign the contract with them, once they give you the money or check.

Most of all learn to budget and manage your daily expenses. If we can manage what we do in a day, we can manage what we do all yea