Christian Finance

A look forward...

Now that we are solidly into 2010 (day 2 LOL), I want to share my thoughts on what I believe is necessary if we, as Americans, are to make this decade better - from a financial perspective - then the one we just came out of.  Some of these themes will be familiar to regular readers, but I believe they are incredibly important and thus worthy of speaking about again.

Thus, I present to you five things that will make or break this decade for us all:

1.  An increased savings rate - in order to make the investments that are required for our economy to succeed (think infrastructure and business expansion), an increase in our savings rate is needed.  While this has been improving through the course of the recession, it will have to continue - otherwise we will continue to indebt ourselves to foreign creditors - which of course results in us exporting money to service such debt - leaving even less money for reinvestment at home.  It is a terrible merry-go-round that is next to impossible to get off without getting hurt, once it is spinning too quickly.

2.  Fiscal responsibility - governments at all levels are going to have to make a strong commitment to balancing budgets and living within their means.  Failure to do so will result in mounting debt levels, which in turn lead to higher interest rates; a high interest rate environment is not one that spurs economic growth.  Fortunately an increased savings rate will help finance government debt internally - and stop the export of our dollars to foreign creditors.

3.  Belief, innovation & hope - America has an innate ability to continually reinvent itself.  Think about it: how many times over the past fifty years has it appeared that America was floundering - and how many times did it come roaring back stronger than ever?  We are in one of those times again - fortunately this is the exact situation when we exhibit the best of what we are - and can demonstrate it yet again.

4.  Reduced consumer spending - look around your house and notice all of the junk that you probably don't even need.  Turn over some of it and see where it came from - likely not the USA!  Every dollar needed to manufacture those items - along with the manufacturer's profit - was directly exported from the USA to the country where the item was made.  And what happens when dollars leave the USA?  They are not available for re-investment in our economy, along with our roads, bridges and other things that keep us connected and together.

5.  Keeping focussed on God - while I listed this point last, it is obviously the most important.  Without a focus in Him, our nation will not succeed.  The one solace that can be found is that people have a tendency to turn to God when times are difficult - there is no doubt that we are in such a time right now, so perhaps the economy will be a catalyst for revival in our nation.

We are fortunate to be alive in these exciting times - I believe the innovation and excellence that will occur over the next ten years will restore our nation and rebuild it in ways that we have not yet conceived.  Hang on - it's going to be a fun ride!

A day to shop?

Having purchased what I wanted online, I didn't have a specific reason to 'celebrate' black Friday today.  Out of a sense of curiosity however, I did roll out of bed at 6:00 AM and trotted off to a couple of stores just to see what was going on.

Of course by that time, all of the 'door crasher' deals had been snapped up (both stores I visited had opened at 5:00 AM). Admittedly however, I was absolutely amazed at the crowds and the very full shopping carts.  Anecdotal news reports indicate this is turning out to be a much better kickoff to the Christmas shopping season compared to black Friday 2008.

Are today's brief observations an indication that people are turning back on their pledges to save and pay off debt, and instead return to a consumer driven economy? While it is too early to make that conclusion - and it would be discouraging if this indeed was happening - it was at least encouraging that many people felt confident enough in their financial lives that they were able to go out and spend a few dollars today.  

And in case you're wondering, I didn't buy a single thing this morning.

Black Friday 2009

Running hand in hand with the Thanksgiving holiday is the annual Black Friday shopping day, where millions of Americans turn out in search of good deals on electronics, clothing and other items.  It is often referred to as the kick-off to the Christmas shopping season.

With the economy being what it is right now, I have a feeling that a lot of people are reconsidering their normal Black Friday routine.  After all, no matter how good a deal may appear to be, if one's finances do not grant the ability to pursue a good deal, then it may as well never happen.

While I seriously doubt that Black Friday will be a bust in 2009, I do expect that it will be a little more subdued than in years past.  This would foreshadow a poor Christmas shopping season, and of course demonstrate that the economy - even though it appears to be in the stages of weak recovery - may still be limping along for quite some time.

In today's economic data release...

The catalyst igniting the strong stock market rally today was news that existing home sales in October were at their highest level since February 2007.  A major reason for the large jump was likely due to the recently extended homebuyers tax credit.

While this is good news, it is unfortunate that a large number of homes sold were those in foreclosure proceedings - 30% to be exact.  The only positive light from this is that 'excess housing inventory' is being worked through and gradually being reduced.  We can only hope that this trend continues.

Healthcare Reform in the United States

By now, you've likely heard of yesterday's vote in the United States Senate where the senate version of the healthcare bill 'won' with a vote of 60-39.  What exactly happened however?

The United States Senate, being a very old institution, has some very arcane rules and procedures.  One was the procedure yesterday - a vote for "cloture" to begin debate on a bill. Cloture is a vote that effectively ends a process - in this case, the process of debate on whether the senate should even debate the bill.  I know it sounds kind of unusual - a debate on whether something should even be debated - but that is indeed what happened.

The unique part about cloture votes is that they require a super-majority of 60 out of the 100 voting US Senators, rather than the usual 51 required to pass legislation.

So has the healthcare bill passed?  No - it has not.  As I indicated above, this vote was only to allow debate (and amendments) to proceed on the full bill.  Another cloture vote will be required to end debate on the bill - and bring it to a final vote for passage.  This second cloture vote is important for both sides because without getting another 60 votes to end debate, the bill will have become filibustered and die on the senate floor.

No matter which side of the healthcare debate you are on, this is a very important process going on right now.  If you want your voice to be heard, contact your United States Senators and let them know what you are thinking.  They represent you and are accountable to you.  Healthcare reform is a very significant fork in the road for our nation right now - and there are effects no matter what form the legislation passes (or doesn't pass).

How is your economy?

There's an old saying particularly relevant to our economic times - a recession is when your neighbor loses his job, while a depression is when you lose yours. While I hope that you don't find yourself in this situation, there is a good possibility that you know somebody who is in the middle of their own economic depression because they are without a job.

I want to share some thoughts with you so that you are prepared in case the jobless situation does affect you. In economic times like these - where we really are unsure about which direction the economy is heading - it is important to be economical and prudent with your resources.

Think very carefully about any discretionary spending before you open your wallet.  For example, do you really need to see the new movie on opening weekend - with popcorn and sodas of course - easily running up a tab of $50 for two people, or instead can you rent a DVD and save around $45?

How many choices like these to you encounter - whether it be with entertainment dollars, clothing dollars, or even your choice of transportation.

If you made the prudent choice, how much could you save every month?  Let's try this example:

• Avoiding going to the movies once per month: $45
• Eating dinner at home rather than a restaurant: $40
• Taking public transit to work rather than driving (no parking or gas): $150

With three small changes, you've managed to save over $200 per month!  If you were to put this into your savings account, after a year you would have over $2,000 saved - a small but reliable buffer against a personal economic depression.

Spending changes do not have to be dramatic, but they do have to be made. Small wasteful purchases can add up to hundreds of dollars per month - and this is money that you worked hard for!  Be wise - and you will be prepared.

Thoughts on September

Notwithstanding the fact that many market corrections (and crashes) have historically occurred in October, September has traditionally been the worst month for stock market returns.

Recall my posting regarding the old saying 'sell in May and go away' in which I predicted that this may a good year to ignore the traditional advice.  No doubt it turned true - the period of April 30, 2009 through August 31, 2009 had the S&P 500 index increasing almost 17%!

Keeping that in mind,  I have been compiling my thoughts on the history of September to determine whether I should invest the balance of my 2009 Roth IRA contribution now, or wait another month or so in hopes of obtaining mutual fund shares at lower prices.

Yesterday's start to the month (almost a 200 point drop in the Dow Jones) reinforced my opinion that it may be best to wait a little longer before investing any extra dollars right now.  There are signs that the economic growth we had been experiencing earlier this year may be slowing down - basically, a stagnant recovery may be occurring (this is where the economy isn't shrinking any more, but it's not growing much either). 

While market timing should not be a major consideration when investing your cash, it is still wise to be aware of current market strengths and weaknesses in order to obtain the best value for your investing dollars.  Ask yourself this: why pay a higher price today for something that you can get on sale a little bit later. The same philosophy holds true with your investments too!

From Spenders to Savers

Through recent economic times, the U.S. Consumer has accounted for about 70% of economic activity within the nation - and thus the prevailing wisdom stated that until consumer spending started to increase, that the U.S. economy would remain in recession.

But how's this for a thought: what if consumers do not start spending?  Rather, what if they continue to save in ever increasing amounts - just like they have been doing for the past year?

I have given this a lot of thought over the past several months, and it is my opinion that if this trend continues, that we will have a fundamental change in our economy - however, I believe this change will be for the good.

Increased saving will allow the following to happen:

1. Debt issued by the U.S. Treasury will increasingly be purchased by Americans rather than foreigners.  This has many positive effects, the greatest of which is keeping our money within the United States rather than exporting it to other countries.
2. The trade deficit - the difference in the value of exports versus imports - will decrease (it is already about one-half of what it was just last year).  This also has the effect of keeping money within the United States.
3. The value of the U.S. dollar will rise - this will have the effect of lowering the price of imports which may sound contradictory to point 3 - but
4. The price of imported oil will decline - since oil is priced in U.S. dollars, its price is affected by the value of our dollar - if the value of the U.S. dollar drops, the price of oil will automatically go up.  And if the price of oil goes down, then the trade deficit (point 2) also goes down since foreign oil forms a large part of our total annual imports.  Furthermore, the lower price of energy tends to spur investment in various parts of the economy, and this will obviously benefit all of us.
5. Inflation will stay low - with minimal pressure on consumer prices (due to decreased demand) and lower energy prices, inflation will not spiral out of control.

Of course, all of these positives will have some negative effects: big box stores will decline in popularity, and employment in retail sectors will decline.  However, this type of economic transition - which we may very well be going through right now - will ensure long-term prosperity for our nation, and reduce our reliance on foreigners to provide the means for economic stability in our economy.

Unemployment Reality

There is a very big fall fair every year close to where I live.  According to the local news, they hire about 3,000 people every year for its two week run.

Over the past couple of days, they have been hiring for these - mostly minimum wage - temporary positions.  I did the math and figured that most people could expect to take home no more than $750 for their two weeks of employment, and yet the line-ups for these positions were unbelievable.  On the first day that applications were accepted, there were several thousand people in line, and even the police were required to keep the peace and ensure that there was no cutting of lines, etc.

One woman was interviewed, and what she said particularly stuck me.  She said that she was there because she was a single mother and that she was swallowing her pride out of pure desperation.  

This made me think about when God often becomes the most real to people - for many, it is when we are at the utter most desperate times in our life - and oftentimes, hitting that bottom will be the catalyst to restore our faith in Him.  I don't know if that was going through the mind of that woman yesterday, but I did pray for her - and everybody else lining up that matter.  I really hope that through these hard times that they would seek God and let Him become real in their lives.

The Fed - Today

Some relatively positive comments came out of the United States Federal Reserve today. For the first time in about a year, their statement did not refer to the economy in terms of it slowing down or weakening.  Rather, the statement indicated that "conditions in financial markets have improved in recent weeks" and further stated that "... economic activity is leveling out".

While this is in no way a clear sign of positive economic momentum, it does reflect the prevailing view that the economy is no longer getting worse, and signals that some form of recovery may be starting - albeit in a slow fashion.

Coming from the Fed, these types of statements are a big deal and provide useful information on the thought pattern of those who have the ability to affect the economy via policy.  It appears to be time for a collective sigh of relief.  Onward and upward!