December 2008 Newsletter
The December Economy
by Guy Baker
Hopefully everyone had a great Thanksgiving celebration, and despite the poor economic news, you are optimistic about the American economy and its ability to survive the disaster we are witnessing.
Whew!!! Here is the latest negative news that came out at the end of November.
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Black Friday Shoppers Signal Consumer Hopefulness
Brian S. Wesbury - Chief Economist 
Robert Stein, CFA - Senior Economist
Date: 12/1/2008
The current recession is unlike any other in the last couple of generations. Usually recessions happen because monetary policy gets tight or tax rates go up. Sometimes, like in the Great Depression, rising trade barriers lead to a contraction in economic growth.
This time around, the recession is not due to tight monetary policy, higher tax rates, or protectionism. It’s due to a sudden and sharp plunge in the velocity of money –
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Home Sweet Home, retiree nest eggs, & more
Home prices are up quite a bit since 1968 but the portions of equity owned by homeowners have declined dramatically, according to the Federal Reserve and National Association of Realtors.
The average home price in 1968 was $20,100; this year it is $190,600 (down from a high of $221,900 in 2006).
But the portion of home equity owned by homeowners has declined from 65.8 percent back in 1968 to 47.9% last year
. . . -READ More-Is it time to give up on a buy and hold investment strategy?
The current bear market is making many investors question their allegiance to a buy-and-hold strategy. Why sit in a portfolio that is taking such a hit? Why not practice a market timing strategy, selling out of stocks when the market appears “high” and buying back in when it appears “low?” . . . -READ More-
How to boost your Social Security
Social Security allows retirees to begin taking their benefits as early as age 62, but that privilege comes at a price: the benefit amount is permanently reduced.
The age 62 benefit is 30 percent less on average than the benefit a retiree would get at full retirement age, and a full 60 percent less than would be the case if the retiree delayed benefits until age 70.
Some workers take the benefit at 62 in order to retire early and later come to regret their decision. Fortunately, there is a way to reverse that decision and come out ahead. . . -READ MORE-
Credit theft is hard to avoid, but you can reduce the risks
A Brooklyn, NY man described as a “trainee dishwasher” stole the identities of Hollywood and Wall Street figures such as Steven Spielberg and Warren Buffett back in 2002 using nothing more than a dog-eared Forbes 400 list of the richest Americans and a public computer in the library.
By the time Abraham Abdallah was caught and pleaded guilty, he had scammed some $80 million through fake credit cards and fraudulent wire transfers.
The scope of his fraud makes Abdallah’s an extreme case, but his methods are the same being used by copycats out to steal your financial identity. . . -READ MORE-
Actively-managed mutual funds fail to beat the indexes
What is the price of active stock management? In general, it means not doing as well as the stock market.
Academic experts have long argued that it is not worth the price to own actively managed mutual funds, meaning those funds whose managers make daily judgments on which stocks to buy and sell. . . -READ MORE-