Stock Market

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The stock market has been great for me lately. I just got my quarterly statement in the mail yesterday for the July-September period, and my 401k jumped by over 16%! It's actually gone up each of the last three quarters, and I now have more money in my 401k fund than I had before last fall's meltdown. Of course, I have also still been buying into my 401k over the past year, so it's not completely a case of my investments fully recovering. This new high-water mark is at least partially due to my continued investment.

I also agree that we may not be out of the woods just yet. While it's great to see the DJIA back to a 5-digit number, and that the economy is definitely better than it was a year ago at this time, it's not necessarily all smoth sailing ahead.

Most people predict that the unemployment rate will exceed 10% by early next year. Right now, a lot of retail stores are hiring help for the holiday season. (Not many people start Christmas shopping this early, but most retail places hire in the fall for back to school, and maintain that higher work force uintil January.) It's been those new hires that have kept the unemployment rate fairly flat over the past couple of months.

However, that's the thing about temporary workers - they're temporary. Most of these people cannot reasonably expect to maintain their jobs past January. A lot of them are just hoping they maintain their current job for 16 weeks so that they once again qualify for unemployment benefits. (Under current federal guidelines, you can collect unemployment benefits for one year after losing your job. That's actually an increase - it used to be six months. After that, you must be employed for 16 consecutive weeks before you can collect benefits again.)

Lastly, there's still a lot of houses foreclosing. When you look at all the "bad loans" out there, these continued to be written through 2007, often times with low introductory rate periods of 3-5 years. While 2008 and 2009 will have the most foreclosures, there are still some of these toxic loans that will reset in 2010, and continue that way throughout 2012. I expect home prices to remain low for the next several years, as continuing foreclosures will contribute to large supply of houses.

 

I agree about the homes Aldeth. My wife and I had a 5 year plan in motion when we bought our house, which I bought form my in-laws dirt cheap for about $84,000 3 years. When we re-financed last year to lower our rate by about 2 points, my appraisal was for $132,000. We have dumped a bunch of our savings into that refinance, making ownership a real certainity in 2 years if we continue to make double payments every month. It's tough, but we are really cutting back most of our spending to do so. We plan to sell then and buy something bigger at the lower price, with a nice, fat down payment from the sale of our current home. I have a bunch of stock that I would really like to dump to make it easier, but my losses would be immense. So we are holding our portfolio still until after the purchase of our new home in the future. Hopefully by 2011/2012, the market will stabilize and we can make a nice bit of cash.