THIS IS MY 110TH BLOG ON UNDERSTANDING MONEY
TOOLS
In this blog we are going to hit upon a few financial issues
that affect everyone so we will call the blog “stuff”. Please don’t forget I write this blog
to the layman and keep the information in simplistic format so it is
understandable, and yet you hopefully learn something from it.
On December 14th,
2016 the Federal Reserve raised the discount rate 25 basis points,
which means 1/4%. Does the economy
deserve that rise? My answer is
not really in terms of the health of the economy and average worker, but they
needed to in order to halt inflation and show a rise in rates. Rates have been
too low for too long only assisting big corporations and the wealthy. The older generation that used bank
savings and fixed income investments like bonds have really been penalized the
past 6-7 years.
What impact will this rise have? In a brief answer, 1/4 % won’t have much affect. The Feds
say they may raise interest three times in 2017, we will see. This has caused
our US dollar to further increase in relation to other world currencies. Our large corporations exporting goods
will see some sales slowing. It
will be more expensive for other countries to purchase American made goods,
e.g. China lowered the Yuan, the Euro is drifting lower as Italy has major
governmental problems and debt issues they don’t know what to do with. France has continuing problems, and
their elections possibly going conservative and to the right will prove
interesting for Europe and the EU.
For people here it is a benefit with foreign travel and purchasing goods
made elsewhere.
What affect will the increase in interest rates have on real
estate mortgages? Here I will give
you only facts, not suppositions.
The average US home buyer holds their home 7 years, so the rates are
more related to the 10 year bond and perhaps 30 year. Yes, it is better then to go for a 30 year mortgage if you
are now a buyer before rates go up.
If we slip into a recession which I have seen coming for a few years
now, rates won’t go up, and you could look at a 5 year ARM (adjustable rate
mortgage) as the rate is lower than a 30 year mortgage and you have 5 years to
determine what you want to do.
Stock markets?
Insanely high and only gone higher with the election of Mr. Trump. The raise in rates pulling the normal
money out of stocks and more into new bonds hasn’t happened. I have a far better financial and
analytical background than most, and this is all crazy and confusing. There is
no such thing as traditional analysis of an income statement and balance sheet.
As mentioned before the markets are all driven by volume, trends and trading
using computers with fraction second trading. (I am not sure most people realize that when you buy a stock
with something like an 80 price to earnings ratio, P/E, it means it will take
80 years to pay back the original investment! Better have incredible growth potential.) In general, with a strong dollar look
at companies doing business here on staple goods with high/strong history of
dividends, not US companies selling into international markets. The younger generation is still
bouncing in and out of high tech companies, good luck if you have a software
program that can parallel the best or beat Wall Street. If you have been in currency ETF’s
(Exchange Traded Funds) holding US dollars you probably saw a conservative
return between 4 and 5% this year, which isn’t bad.
Next on to Globalization, which I am not an advocate
of. I will give you my pro’s and
con’s. Many say it is here to stay
and will come about no matter what.
Let’s keep this in short statement format.
Con’s:
- Average
worker pay in the USA and top G-20 countries will be lowered
significantly. I had to do some
research on these figures, but here is what I came up with. 1/3 of the world’s workers make less
than $2.00 per day. I don’t want to work for that! Another group in a pay-scale above that one would be
$1200-1400/month in G-20 countries, however you need to look at the varied
degrees of cost of living around the world. That figure will not go far to live
on in the USA and European countries.
- Diseases. Once many diseases that no longer
existed in the G-20 countries like TB are now back with the influx of
immigration. Same for drug
resistant bacteria strains.
- As
the world has become more global with manufacturing and trade since the 1960’s
inequality around the world has only become worse, not better.
- Globalization
is really being pushed by the “propaganda machine” of the big corporations and
wealthy. Once outside the USA and
Europe your work standards and legal repercussions for safety, health, hours
worked are essentially eliminated.
- Total
“fat cat” and “big brother” controls worldwide. It has already started with
Google and Facebook and will only get worse. You are being tracked and
monitored every hour of the day.
- World
control by the world’s wealthiest 1/2% of population and large
corporations. Total political
control to the dominating wealthy.
Sounds like an old James Bond movie!
- No
longer unique cultures and nationalism.
- More
intermarriage will create one race in the long term.
Pro’s:
- More
global economic growth.
- Commercial
trading done quickly and easier e.g. currencies, borders.
- Easier
access to products.
- Rise
in incomes for the poorest, providing the wealthy feel the social need to
share!
- Easier
travel and between borders.
- Better
world mass communications.
- Less
chance for wars, as the wealthy and large corporations control the world. There will always be the young, under
30 years old who have the energy, to rebel and seek changes.
If you can refer to the European Union as a mini-example of
Globalization you can see how financial disparity doesn’t work. The Euro is falling apart; first
Greece, Britain’s exit and now Italy’s governmental and financial
problems. Perhaps France next.
I tend to favor my roots and uniqueness from my grandparents
and before, so hope I will not see Globalization for the reasons I mention
above.
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