The most recent unemployment report set the rate at 9.8%, an understated number. However, the stock market shrugged off this report because Ben Bernanke has promised to keep the market up. How will he do this? By printing as much money as is needed. This is why gold and silver are moving into new highs. As those of you who have been reading this site for some time, I have been preaching about hard assets and the need to protect yourself against the Fed’s loose money policy. We are seeing the effects of this policy in the precious metals market. Some sliver mining stocks were up notably this week. The mining stocks are in “catch up” mode trailing the bullion prices. These companies are generating huge amounts of cash and profit at these price levels and they appear to be at the early stages of this secular bull market.
Each of us probably has friends who are unemployed or underemployed, or we may unemployed as well. The media continues to paint a rosy picture about the economy but it is not consistent with what we see at the local level. Restaurant waiting lines are minimal versus two years ago. Prices are soft for capital goods and houses. Those flat screen TV’s are getting cheap. However, the perceived wealth of the citizens of the U.S. is dwindling. The equity in the home is shrinking on a monthly basis. A million dollars in the bank will only yield up to $35,000 in a year versus $50,000 thirty-six months earlier. Inflation is eating away the purchasing power of the retired.
For the past 60 years, the growth formula has included leveraging your future earnings in order to acquire an asset today. Remember the 36 month new car loan? It then went to 48, 60, and finally 72 months. Unfortunately the buyer’s asset depreciated quicker than the loan balance. I’ve known families who have been making perpetual car payments, unable to get out of the leverage spiral. Dave Ramsey has built a business (or ministry) on counseling families in the area of debt reduction. “Act your wage” is a great reminder that we should not buy what we can’t afford.
If you are out of debt and the stock market crashes, you will not lose sleep the next night. But, if you are in debt and your future earnings may be at risk thus placing your house and cars at risk, then you can look forward to some sleepless nights. For the last 30 years, I have been preaching that “cash is king” relative to personal money management. During that time I have seen people suffer bankruptcy, businesses evaporate, and once wealthy people live in the past and in denial of the present. Look in the closet and find those things you could not live without. Were they really that important to your life?
“Relationships” is what life is all about. It is not about your house, your car, your position in the community, your job, it is about blessing others. Look around and see if there is someone hurting and in need. Let the Love of Our Heavenly Father be seen in your face. Give with an attitude of gratitude.