A Dark and Dangerous World?

For years I’ve felt like a lonely optimist in a dark and dangerous world.

In 2007, the U.S. economy was booming. House prices soared, unemployment was rare and anything seemed possible.

Then came the Great Recession, stock market collapse and the world financial system’s near failure. No one knew what to do.

Since that scary winter of 2009, the U.S. economy has rebounded. Car sales have doubled and housing starts quadrupled. The unemployment rate is half the recession peak.

Anecdotally, the pickup is dramatic. Help wanted signs have sprouted in store windows, trucks clog highways and realtors occasionally smile. The stock market has nearly tripled. For the first time in years, U.S. energy independence is possible.

Yet most Americans believe the country is on the wrong path. Only a month ago, the stock market plunged amid a weakening economy and troubles in China.

While problems never disappear, perspective is in order. U.S. GDP is up $3 trillion from the recession low to $17.4 trillion. The number of people with jobs in the U.S. is up by 10 million from 2009 to 148 million now.

Is everything perfect? No. But gloom and doom are overstated. After a scary drop in late August and September, the stock market rebounded and is flat for the year.

An investor must be an optimist and it’s possible they are at least partly right.


Budget Deficit Shrinking Fast

During the tumultuous political climate of the last five years, nothing has been more contentious than the U.S. budget deficit and government spending.

While Congress and the Administration have been fighting tooth and nail over this, shutting the government on several occasions and forfeiting the country’s AAA bond rating, something surprising has happened.

Both sides are bracing for a possible government shutdown again this fall and no one seems to notice that the deficit is fast disappearing.

Today, The New York Times reported in a small, single column story on the bottom of page B6 of the business section, that the deficit will shrink by 15 percent this year and by 75 percent since the first year of the Obama Administration.

As the economy healed from the Great Recession, taxes rose and spending has slowed and in some cases declined. A deficit that had reached a mind boggling $1.6 trillion is headed for $425 billion this year, down from $483 billion last fiscal year (the government year ends Sept. 30).

While still humongous in dollar terms, it’s not bad in an $18 trillion economy. After six years of spending austerity, the budget is now rising again, but still slower than revenues.

It’s not that there aren’t fiscal issues — entitlement spending still needs big changes and the government debt needs to be extended — but the fiscal crisis has ended long before the wrangling stops. http://www.nytimes.com/2015/08/13/business/economy/us-budget-deficit-rose-in-july-but-8-year-low-is-expected-for-year.html?smid=tw-share


Financial Affairs — Much More Complex Than Most People Realize

Do it Yourself? — Not!

I run into a lot of do it yourselfers who manage their financial affairs adequately, even capably.

But many run into issues and by the time I am called in, it is often too late or significant damage has already been done.

Recently, I’ve been brought it to work on the financial affairs of several people where the need arose unexpectedly. I had to guess the clients’ wishes and scramble for clues to piece together their financial pictures. If we’d had the opportunity to talk for even a short time, the process would have been much more successful and much easier. Other times I’ve come across mistakes where the do it yourselfer didn’t realize he was in over his head.

There’s no buzzer that goes off telling you that you have to make a significant decision or you should look into something that hadn’t occurred to you.

Most people manage their financial affairs one piece at a time without even a list of all the pieces that are required. Each piece, in and of itself may be fine, but the overall structure can collapse if even one critical piece is missing.

Personal finance is much more complex than most people realize. I encourage everyone to learn and be involved with their financial affairs. But I also strongly recommend calling in professionals before the crisis hits.