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I'm Sick and Tired
of being Sick and Tired
By Michael Fredrickson

This column expresses the personal opinions/views of General Manager Michael Fredrickson. If you would like to express your opinions/views regarding the column, write a SIGNED letter to the editor. Names can be withheld by request with a valid day time phone number.

 
...of the economy blame game

...of democrats repeating the ridiculous assertion that President Bush is responsible for the rotten economy. The President cannot affect the world economy and the WORLD is in an economic slow down. The economy has this thing called a cycle. I would be perfectly happy if free markets all grew 3% per year (supposedly the minimum growth rate to keep up with inflation, population, etc. I’m not convinced that is necessary), year-after-year-after-year but, that is not the way things work. We have these little surges and bubbles and “segments of exponential growth” and all these things ebb and flow year-by-year and decade-after-decade. Then we have these little things called corrections, recessions and down right depressions (because of the spikes and bubbles). Our politician’s/government’s job should be only to prevent depressions. No government can prevent bubbles and the bursting of those bubbles.

After our recent stock-market melt-down, Bill O’Reilly referred to the buy and hold strategy as not valid, shouldn’t be used and a “sham” idea of financial planners. He is wrong.

The only bad idea is for someone that is age 60 plus to not have a large percentage (over 50% in my opinion) of their portfolio/retirement in bonds, cash or cash equivalents. I would have thought that by this age almost all your equities should have been converted to bonds and therefore completely safe from any huge swings in the market. I was corrected by an MBA friend of mine that, today, conventional wisdom is that life expectancy is so high that if you do that at 65 you may outlive your cash payments.

I, like the rest of my 401K brethren, have bought stock by dollar-cost-averaging. Over the past 10 to 15 years I have seen my “nest-egg” double or triple due to gains in stock price and then pull back due to the tech-stock meltdown nine years ago. Then my Dow stocks surged and subsequently dropped last month. I’m seeing kind of a pattern here not attributable to any U.S. President.

These stocks pay dividends that are always reinvested. So, my monthly contributions, employer matching and dividend reinvestment has all been buying me less and less stock during both market run-ups. Recently in the past month the average stock price was cut in half. Wow! What a hit, but now my same amount of investment buys me more stock. These same reinvested dividends and monthly contributions will be buying me more dividend-paying shares of stock. I kinda like the lower stock prices.

I don’t live on my retirement account or my insignificant personal Schwab account so it shrinking in value will not affect my financial behavior. What has affected my financial behavior has been the cost of gasoline (by the way...drill here, drill now, pay less). The world-wide economic downturn has even slowed energy use and demand in India and China (or maybe they are just spending less since they aren’t spending the billions of dollars they had been spending preparing for the Olympics).

As I have stated in this column, the U.S. consumes about 20 million barrels of oil per day and half of that is used for gasoline. At 42 gallons per barrel that translates to 420 million gallons PER DAY. Now that gasoline is down AT LEAST $1.50 per gallon nationwide, consumers are keeping more money in their pockets. Actually our poor economic performance over the past year could be largely attributed to all of this money leaving (like being taxed) the consumer’s pockets and even businesses that could not raise prices weekly or monthly to keep up with the inflationary affect of increased fuel costs. This was over $600 million PER DAY or about $18 billion per month in less consumer spending.

The Iraq war may cost $10 billion per month but at least that is coming out of the U.S. Treasury (still the taxpayer) and not posted to my monthly charge card that affects the rest of my spending! Add to this all of the rest of the financial and subprime market problems and no reasonable person could possibly point to President Bush’s DEREGULATION as the root of our poor economy.

 

Michael Fredrickson is the General Manager of the Fort Bend/Southwest Star. He can be reached at michael@fortbendstar.com.

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   Last Update:  November 05, 2008