The Forgotten CAPS Player and Funny Cartoons
As someone who visits The Motley Fool and plays CAPS you are probably like myself, a person who works very hard but is not at the very, very top or at the bottom of the economic food chain. We are the forgotten men and women in this whole mess and it makes me sick. We work hard, in households who have two full-time working parents...many of whom have multiple jobs, we saved our money and made a decent down payment on a reasonable home, we save for retirement, and unlike many in the new administration we pay our taxes.
Where does all of this tax money go? Not to help us out.
All of the government spending that is going on is either being used to bail out the very rich who pocketed millions and millions of dollars in bonuses creating this whole mess, like when Goldman Sachs convinced its cronies in the government to bail out AIG without completely wiping out all of its shareholders and bond holders so that it could protect its investments...
It goes to the most deadbeat, irresponsible Americans who bought more house than they could afford because they were either too greedy to get a smaller home, too impatient to wait until they had saved (what's that?) the down payment that they needed, or too stupid to research and understand the interest-only, negative amortization, adjustable rate mortgage that got into before signing it.
Using the hard-earned tax dollars of current and future generations to prevent the foreclosures of homes that should have never been purchased to begin with is just delaying the inevitable. They might be able to slow the drop some and draw this whole mess out, but home prices are going to continue to fall until the reach an appropriate level of affordability regardless of what Uncle Sam does.
The stock markets will not stabilize until housing does. I told you that the markets were going to fall right through the lows that we saw last year. It didn't take a rocket scientist to figure that one out. The markets and the economy are going to get worse before they get better. We will continue to see weakness throughout 2009 and into 2010 when we will likely finally bottom and sit there for a while.
I have said it before and I have said it again, this is not the Great Depression where the unemployment rate shot up to 25%. The nuts out there who say that unemployment is going to 50% and that half of the companies out there are going to file for bankruptcy, but that things will be fine are completely off-base and have no idea what they are talking about. That sort of over-the-top alarmist drivel is worthless. "PREPARE....don't Fear" HA, you had better be pretty darn afraid if such absurd predictions come true because our society would totally collapse.
I feel better now. I must have had too much coffee this morning. The point of this whole post is this in a nutshell:
- The economy and the stock market are going to get worse before they get better, but we are not all doomed. Things will eventually get better. They always do.
- Don't buy any stocks right now that don't pay dividends with tremendously low payout ratios and good cash flow.
- Even better, invest your money up the capital ladder in preferred stock, or better yet bonds, many of which are paying fantastic yields right now. While fear is a bad thing for consumer confidence and equities, it is a great thing for bonds. Even with the Federal Funds rate as low as it is, I am seeing bonds out there now with amazing yields.
- Don't buy anything that you don't plan on holding on to for a number of years.
That's all I have for now. Thanks for reading. Here are the cartoons that I promised: