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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Investing
June 14, 2013 at 10:23 AM

Vote: How did the recession change your behavior?

People who grew up during the Great Depression were forever scarred by the experience and it affected their financial behavior, or so they say. Members of my family who experienced that calamity were horrible with money, the antithesis of the risk-averse, hyper-saving Depression archetype. On the other hand, research does show a substantial cohort was influenced by the event. For example, a Stanford paper indicates it had a “substantial” effect. After the crash of 1929, it was decades before many average investors trusted the stock market again. This time, the market came back quicker and returns on fixed income investments have been horrible. No wonder a Vanguard study showed 401(k) participation returned to pre-recession levels by 2010.

How has your behavior changed — or not. You can make multiple answers. If I left something out or you want to explain further, please use the comments field.

Read on for some of the best stories of the week you might have missed and the haiku.

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Comments | More in Great Recession, Great reset, Investing

April 5, 2013 at 10:00 AM

Vote: Pause or correction in the stock market?

Today’s “disappointing” jobs report shouldn’t be a surprise. Corporations are sitting on record cash, but not using it to add jobs. Most of the gambling in the $600 trillion derivatives market is all about rent-seeking, not creating jobs. Poor earnings and falling wealth for average Americans translates into weaker demand. So does government austerity. As I write, the Dow Jones Industrial Average is down about 110 points and the S&P 500 off about 1 percent. The stock rally has had more to do with abundant money from the Federal Reserve than the underlying condition of the real economy or dangers overseas (the eurozone, Syria, North Korea).

So what happens now?

Read on for the top links of the week and the haiku:

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Comments | More in Investing, Stock market

March 6, 2013 at 10:20 AM

The Dow and our great divergence

The Dow Jones Industrial Index is a great indicator of the great divergence facing America today. The Dow hit a new record on Tuesday — although adjusted for inflation, it’s still below its 2000 level — and was still rising this morning. The index has its critics simply as a market measure, but there’s no doubt that thanks to easy money from the Federal Reserve and record corporate profits, the stock market has enjoyed a good four years. So much for Obama “socialism.” Meanwhile, unemployment remains stubbornly high, middle-class wealth is devastated from the housing crash and years of stagnant wages, while economic mobility is largely stuck. The hangover from the Great Recession includes a $1 trillion gap in output. Nearly 48 million are on food stamps. Political paralysis makes it impossible to engage in the stimulus, especially infrastructure spending, that would help. Instead, we’re doing austerity, which has failed across Europe.  Naked Capitalism comments:

The Fed has been trying to reflate asset values to goose the real economy. What it has done instead is goose the incomes of the top 1% while everyone else is on the whole worse off. But the central bank is suffering from a very bad case of “if the only tool you have is a hammer, every problem looks like a nail” syndrome. It’s unwilling or unable to admit that its program is working only for a very few. It has convinced itself that if it just keeps on the same failed path long enough, things will turn around. As we can see from Japan, “long enough” can exceed 20 years, and it is not clear that the latest Japanese pump priming will finally pull the economy out of the ditch.

Stock ownership is heavily concentrated among the wealthy. About 21 million households own stocks directly. Most own stocks indirectly, through mutual funds, often from their 401(k) accounts, many of them small. According to the Investment Company Institute, an industry group, 44 percent of American households were invested in mutual funds in 2011 vs. a record 45.7 percent in 2000.

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Comments | More in Investing, Jobs/Unemployment, Stock market

October 11, 2012 at 9:50 AM

Turnabout: America heals as the global economy slows

The conventional wisdom held that this time China would lead the world out of recession. That hasn’t happened. China’s growth rate keeps being revised downward — most recently by the World Bank — and the leadership succession in Beijing is causing great uncertainty. Meanwhile, the eurozone crisis grinds on, with much of the continent as well as the United Kingdom in recession. Brazil, India and other hitherto fast-growing emerging markets are struggling.

In the United States, a long-awaited upswing in the business cycle is gaining traction. The unemployment rate fell to 7.8 percent in September from 8.1 percent the month before despite a rise of workers entering the labor force. September foreclosures fell to a five-year low, and evidence continues to accumulate that the housing market is finally hitting bottom. Prices in many areas are rising. Fresh evidence on the housing front just arrived, as Weyerhaeuser hiked its dividend two cents to of 17 cents per share on Nov. 30 to shareholders of record Nov. 9. It said there were signs of an improving housing market. The Consumer Confidence Index improved in September. The stock market rally continues. Inflation is tame.

This is not your father’s recovery, or like any we’ve seen since the end of World War II, but it’s real if very slow and uneven. Many signals are mixed.

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Comments | More in China economy and business, Eurozone, Housing, Interest rates, Investing, Jobs/Unemployment

August 7, 2012 at 10:15 AM

Trapped in a 401(k) and the stock market?

With the Dow back above 13,000, a reader asks, “what options investors really have instead of the market for their 401k portfolios?” He continues, “With so many companies eliminating defined benefit retirement and pushing employees into investment-based plans, that money every payday has to go into something that has the potential to create some growth. That creates a continuing demand for stocks and bonds, despite the risk, and it would seem that the demand keeps the Dow up.”

It’s an interesting theory. But Dow 13,000 won’t survive the next big bump in Europe or an inability in the Other Washington to avoid the fiscal cliff. As to other options, let me give a few caveats. I’m not a certified financial planner. I also believe there are only two personal finance stories: 1) Don’t be greedy, and 2) Don’t be stupid.

That said, we are long past the long bull market of the 1990s. In his latest outlook, PIMCO’s Bill Gross bluntly states “The cult of equity is dying.” From 1912 on, stocks produced a solid 6.6 percent real return. But for a variety of reasons, investors may face much lower returns in the future.

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Comments | More in Investing, Stock market

March 2, 2012 at 10:10 AM

Vote: Are you back in the stock market?

February reportedly enjoyed its best stock-market run since 1998. But the Great Recession revealed Wall Street as a casino where individual investors are prone to be the losers. Amid all the frauds and dodgy “investments” — and this wasn’t the first time, recall 2001 with Enron and its felonious cousins — the ideal of a shareholder nation for the middle class turned to ashes. Millions of average Americans were financially ruined.

Writing in the New York Times, Phil Angelides, chair of the Financial Crisis Inquiry Committee, asked, “Will Wall Street ever face justice?” We know the answer. Lindsay Lohan has done more jail time than all the big banksters that brought on the crash combined. Meanwhile, the Business Insider blog looks at the high incidence of psychopaths among Wall Street traders.

So, today’s poll. You may select multiple answers:

How are you investing now?

Read on for the best links of the week and the haiku:

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Comments | More in Investing, Lindsay Lohan, Stock market


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