The Sky Is Falling!!
Americans are afraid. That’s certainly not breaking news. We live in a world where millions of people are just plain paranoid to begin with. We can’t fit them all into rubber rooms at Bellvue, and there aren't enough straight-jackets to go around, so take a close look at your neighbor when you get home tonight.
As the story goes, Chicken Little ran through the streets shouting, “The sky is falling! The sky is falling!” If Chicken Little did that today, Obama would be there in a flash throwing billions of our tax dollars up in the air, trying to prop up the sky.
Unfortunately, Chicken Little wasn’t the chicken who cried wolf this time around. The jobless rate is going through the roof. Chrysler dealerships are being shut down faster than you can say “Fix It Again, Tony (FIAT).”
The public is a bit slow on the uptake. The major obstacle to reality is always getting past denial stage - “Gee, it couldn’t happen to me.” Experiencing job losses and the foreclosures first hand has finally had an affect. People are having garage sales to make the mortgage payment. These poor people selling their prized Elvis juice squeezers just to pay credit card interest.
There is a silver lining to this whole mess. Those caught between Barak and a hardplace are downsizing their lives. Shares of stock in dollar stores have doubled since January. Folks have moved from Quarter Pounders to the $1 menu. These are desperate times.
DO PEOPLE CHANGE?
I believe that people don’t really change. They are who they are. Behavior may be temporarily modified, but, at the end of the day, they usually revert back to “start.” Pleasantly surprising is word that people (the ones that are still working) have actually begun to save money.
A recent Wall Street Journal article reported that, “Americans are saving more of their paychecks than at any time since February 1995.” The Commerce Department said savings, in March alone, are up 4.5% -- well above the zero savings rate reported just a year ago. People are showing signs of self-discipline.
That’s the good news. The bad news (you knew this was coming) is that, in order for the economy to rebound, people have to spend. On one hand, responsible people are building their own safety net by saving and living within their means. On the other hand, the government is encouraging people to buy. They’ll give you $4,500 on your clunker to get you to buy a new car. They’ll give you $8,000 to buy a house. It’s a mixed message. Live responsibly, but go into debt anyway.
Let’s not rush to give the public too much credit for changing. As a matter of fact, giving the public too much credit is what caused this mess in the first place. In the past, being able to fog up a mirror was the only requirement to get credit. Now, credit is a lot tougher to come by. People can’t spend like they did before. Granted, there are other things on which they can piss away their money, but the credit crunch has removed some major temptations.
WHAT TO DO WITH YOUR MONEY
We’re all saving for that rainy day. Look out the window, sports fans. That tornado is a lot closer than you think.
Ideally, you should have an emergency fund of three to six months of living expenses – just in case Obama can’t save your job. With CDs and money markets paying only slightly more than that mayonnaise jar in your freezer, there aren’t too many good choices of what to do with those funds. They need to be in something liquid (no, not a Johnny Walker bottle) so you can have easy access – without having to pay any withdrawal penalties or commissions.
Do some research. Check out the banks in your area to find a high paying money market account. Be aware, though, that those rates are not locked in. Sometimes, they are promotional rates. If you want to look for money market or CD rates outside your area, a couple of good sites to check out are www.bankrate.com and www.money-rates.com.
As a country, we’re stepping in more crap than a blind guy in a petting zoo – and it’s our grand children who are going to be stuck cleaning it off our shoes. Who is going to lead us out of the petting zoo? I don’t think we’ve met him yet.
(Mike Parnos has been writing about personal finance and teaching stocks and option trading for 15 years. Mike is the author of "Option Profits: The Naked Truth." Mke also writes a highly successful options newsletter at www.Mike-Parnos.com.)
