2009 Could Be Better Than You Think

[w¡n9Nµ7 §£@¥€r 123]

Here are five good reasons why 2009 could, if you make the most of it, be good for your financial health.

1. This will be a good year to invest in stocks.

No one can tell you exactly when or where the market will bottom. But most business-cycle experts agree that the bottom will be found sometime this year, and that it probably won't be too far below where the market is today.

So a smart strategy will be to put some money in the market today, and keep doing it over the course of the year. If you're still shaken over massive losses from last year, this may be hard advice to swallow. But the biggest mistake you can make as an investor is to ride the market down, lose faith, pull out and miss the upturn.

Even in the Great Depression, the market bottomed out in 1932, with the Dow Jones Industrial Average at 41, down from a peak of 381 in 1929. By 1937, it had climbed back to a respectable 194. That didn't make investors whole. But for those who stayed in, it certainly soothed the wounds.

2. It will be a good year to invest in real estate.

This one's a bit trickier, since real-estate prices are "sticky" on the downside. Homeowners don't like to admit that the value of their pride and joy has fallen by 30%. So they'll put their house on the market at an inflated price and hope some fool will bite.

I was at a Vermont ski resort last month and noticed this oddity: Brand-new condominiums were selling at a price considerably below those of second-hand condos of roughly equal size and location. The reason? I assume it's because the resort owners have a better sense of the market's real value than the average person, still desperate to recoup a bad investment.

But here's the thing: Fixed-rate mortgages are already at historic lows, and the government is going to use every tool in its bag to get them lower over the course of the year. So if you find a piece of property you want, if the seller is willing to recognize how far the market has truly fallen, and if you have good credit -- three big ifs -- you can benefit from a once-in-a-lifetime double bonus of low prices and low interest rates.

This strategy requires some patience. Just as real-estate prices don't fall as precipitously as the stock market, they don't rise as rapidly, either. You may have to wait a decade to reap the full benefits.

3. Americans will learn to live within their means.

Around our house, the crisis is already having a salutary effect. Our teenagers suddenly seem to understand that unlimited dinners out with friends aren't a birthright, and that blue jeans don't have to carry triple-digit price tags.

Multiply that by 300 million, and you have a nation that has rediscovered that you can't spend what you don't earn. Houses are no longer ATMs, and credit cards no longer come with each day's mail.

That sudden realization, of course, is what's causing the economy to swoon. But this reckoning was inevitable, so it's best to get on with it. Let's hope these lessons last for decades.

4. President Obama will have a historic opportunity to reshape public policy.

Speaking at the Wall Street Journal's CEO conference in November, Mr. Obama's chief-of-staff-designate, Rahm Emanuel, said the words that have become his team's rallying cry for 2009: "You never want a serious crisis to go to waste. This crisis provides the opportunity for us to do things that you could not do before."

The Obama team is busily preparing a stimulus package that, when all is said and done, will total between $750 billion and $1 trillion -- far larger than any fiscal stimulus in the history of the world. And with the economy still sliding downward, it's a good bet few politicians will want to stand in the way.

That will give the new president an opportunity to do things his predecessors could only dream about. Roads will be rebuilt, schools will be refurbished, medical records will be computerized, and windmills will be constructed, all across the land.

Will some of that money be wasted? Of course. But the sums involved are so huge that there's a good chance someone, somewhere, will benefit.

5. Your (federal) taxes won't rise.

Never mind those campaign calls for higher taxes on the wealthiest Americans. Truth is, no politician is going to push for general tax increases in the midst of a severe recession.

You may wonder: How is the government going to pay for that trillion-dollar stimulus package? Or the multitrillion-dollar bailout of financial institutions, auto companies and anyone else sideswiped by the current crisis? Or the continued wars in Iraq and Afghanistan? Or the (still) rapidly rising cost of the baby boomers' retirement?

Well, that's the sweet secret of the current crisis. While the American people are learning to live within their means, the new American government has discovered an unlimited (for now) line of credit. The United States may have led the world into this crisis, but the world now seems more than willing to lend us unlimited amounts of money to lead the way out.

This, too, is unsustainable. A reckoning will come. But that's a problem for 2010 and beyond.

http://online.wsj.com/article/SB123103188733751647.html

[aidan80 9]

I couldn't agree more with 3! I and the wife have been burnt by credit cards and banks in the past. Luckily very small amounts and where put off them for good I'd say! We stick to it and live on what we actually bring home. The only payments we have are the basics, food, water, rent, fuels and a student loan.. not too bad considering we could very easily ended up like a lot of others right now.

I mean if we wanted we could go out a get a new car each, buy a nice new house with a pool and a nice yard, get that big HDTV with all the bells and whistles but.. we don't actually need it and don't give a $hite about trying to impress anyone. Plus what if someone lost their job?.. all of a sudden there comes the stress and pressure.

[EstebanTrabajos 7]

For once in years people in general will think twice before swiping their credit cards,

Amen

[LorriQ 0]

All very rational - all, except for the last paragraph. #######?

People will learn to trim the fat and live on earnings - not credit - why can't the government? Credit is what got us into this "recession" (Thank you Bush) - shouldn't our government learn this too!

Large bone of contention with me, how can you be a "public servant", working within term limits and draw a retirement plan that pays your salary for the rest of your days! Senators, Representatives, elected officials in general - should take a major pay cut. If I can't draw my pittance of a Social Security Check when time, why should I continue to pay their salaries/retirements that are far beyond rational wages. I don't mind paying the Secret Service to protect your bottoms, but I would rather pay my police and firemen more than the "annual increase' in the Senate this year.

AARRRGGGHH!

Okay, all better now. Soapbox empty

[mawilson 2,133]

1. This will be a good year to invest in stocks.

No one can tell you exactly when or where the market will bottom. But most business-cycle experts agree that the bottom will be found sometime this year, and that it probably won't be too far below where the market is today.

So a smart strategy will be to put some money in the market today, and keep doing it over the course of the year. If you're still shaken over massive losses from last year, this may be hard advice to swallow. But the biggest mistake you can make as an investor is to ride the market down, lose faith, pull out and miss the upturn.

Even in the Great Depression, the market bottomed out in 1932, with the Dow Jones Industrial Average at 41, down from a peak of 381 in 1929. By 1937, it had climbed back to a respectable 194. That didn't make investors whole. But for those who stayed in, it certainly soothed the wounds.

Maybe.

If 2009 is going to be anything like 1932, we can expect more pain.

For what it's worth, 2008 does look a lot like 1931.

In 1931, the S&P 500 index fell 47 percent. 1932 started with a rally as investors

were convinced that the financial sector’s problems were finally over. By early

March 1932, the S&P 500 was up almost 20 percent. However, by midsummer 1932,

the S&P was down 50 percent from its high for the year (which incidentally turned out

to be the bottom of the bear market.)

[aidan80 9]

All very rational - all, except for the last paragraph. #######?

People will learn to trim the fat and live on earnings - not credit - why can't the government? Credit is what got us into this "recession" (Thank you Bush) - shouldn't our government learn this too!

Large bone of contention with me, how can you be a "public servant", working within term limits and draw a retirement plan that pays your salary for the rest of your days! Senators, Representatives, elected officials in general - should take a major pay cut. If I can't draw my pittance of a Social Security Check when time, why should I continue to pay their salaries/retirements that are far beyond rational wages. I don't mind paying the Secret Service to protect your bottoms, but I would rather pay my police and firemen more than the "annual increase' in the Senate this year.

AARRRGGGHH!

Okay, all better now. Soapbox empty

I agree 100% with you! I work for the government and I'll tell you one thing I've noticed is there is a lot of waste at times. I mean I'm not all for big massive government controlling everything but I think.. sometimes the job I do, being repeated at City, County and State levels.. why? I'd be all in favor of having things run from the top down. Accountable at local level but run from the top not the inside out. They could very easily trim a lot of edges here and there and save a $hit load of taxes for us who end up paying over and over again! Think about it we all pay for Fire, Police, EMS, Schools in some places and what else to the the City/County or both that we live in. Why couldn't they just run it form the State and apply one single tax? Maybe I just used to things being run different back home?

[Hilarious Clinton 452]

I couldn't agree more with 3! I and the wife have been burnt by credit cards and banks in the past. Luckily very small amounts and where put off them for good I'd say! We stick to it and live on what we actually bring home. The only payments we have are the basics, food, water, rent, fuels and a student loan.. not too bad considering we could very easily ended up like a lot of others right now.

I mean if we wanted we could go out a get a new car each, buy a nice new house with a pool and a nice yard, get that big HDTV with all the bells and whistles but.. we don't actually need it and don't give a $hite about trying to impress anyone. Plus what if someone lost their job?.. all of a sudden there comes the stress and pressure.

Amen

[DeadPoolX 9]

If this article is suggesting that it'll be a good time to purchase stocks and real estate, you can guarantee that those in the business already know this and are making steps to corner the market. Unfortunately, by the time the average person is told or made aware of such situations, it's usually too late.

As for living within your means... I'd say most people (Americans or not) live up to their means, not within them.

[rebeccajo 14]

If this article is suggesting that it'll be a good time to purchase stocks and real estate, you can guarantee that those in the business already know this and are making steps to corner the market. Unfortunately, by the time the average person is told or made aware of such situations, it's usually too late.

As for living within your means... I'd say most people (Americans or not) live up to their means, not within them.

Why would you have to be TOLD? People who have the means to purchase stocks and real estate don't have to be told. They are paying attention.

The 'average' person doesn't have the means - they CAN'T do it.

And it would be a whole lot easier to live within your means if every time you went to the grocery store one of the staples you buy hadn't gone up - again. Or if gas wasn't tied to the price of headlines.

And imagine the nirvana if going to the Doctor wasn't a financial decision?

Edited January 5, 2009 by rebeccajo

[DeadPoolX 9]

If this article is suggesting that it'll be a good time to purchase stocks and real estate, you can guarantee that those in the business already know this and are making steps to corner the market. Unfortunately, by the time the average person is told or made aware of such situations, it's usually too late.

As for living within your means... I'd say most people (Americans or not) live up to their means, not within them.

Why would you have to be TOLD? People who have the means to purchase stocks and real estate don't have to be told. They are paying attention.

The 'average' person doesn't have the means - they CAN'T do it.

And it would be a whole lot easier to live within your means if every time you went to the grocery store one of the staples you buy hadn't gone up - again. Or if gas wasn't tied to the price of headlines.

Even people who have the means are often oblivious. They're too wrapped up in their work, family and life in general. They might pay attention to stocks and real estate every so often, but it wouldn't be their main focus.

Yes, the average person does have the means -- to buy stock, anyway. Real estate can be a little tricky, but stock can be bought and sold by anyone.

I agree with you the last comment. Prices are rising above salaries. However, I wasn't really speaking about necessities. I meant items like video games, digital cameras, a brand new car (when the old one works fine) and so on.

[Ban Hammer 13,346]

All very rational - all, except for the last paragraph. #######?

People will learn to trim the fat and live on earnings - not credit - why can't the government? Credit is what got us into this "recession" (Thank you Bush) - shouldn't our government learn this too!

Large bone of contention with me, how can you be a "public servant", working within term limits and draw a retirement plan that pays your salary for the rest of your days! Senators, Representatives, elected officials in general - should take a major pay cut. If I can't draw my pittance of a Social Security Check when time, why should I continue to pay their salaries/retirements that are far beyond rational wages. I don't mind paying the Secret Service to protect your bottoms, but I would rather pay my police and firemen more than the "annual increase' in the Senate this year.

AARRRGGGHH!

Okay, all better now. Soapbox empty

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