Some observations about Wall Street Journal and the stock market

who admittedly doesn't know much about it.

About the pundit's satisfaction over the stock market gains, I am reminded that if it looks too good to be true... and as more people buy into the republican-generated fear that social security is a goner and get into their company's stock buying portfolio/option business on the side that stock prices will tend to reflect the fact that more people are buying stock rather than companies producing widgets.

In my opinion, Kudlow faithfully reproduced all the republican buzz words, slogans, and mantras. More interestingly, someone from Google (McNamee?) was much less optimistic and sounded more well...sane ...realistic.

If they do move to eliminate social security and force people to move into the stock market and barring crash of the dollar or some other outside disaster, I suspect the stock market may continue to defy reality and rise solely from the force of more money being put into it but at some point I think, as McNamee said, the train is going to stop.

The workers in a business can be getting very bad wages as the CEO and stock owners makes money on their goods. Some where, I guess, we will have to face the fact that maybe the workers can not buy the goods. Even if the goods are some thing like a tank some one has to produce it and buy it for the whole system to keep working. Keep working I would say is the important thing. As a family can not forever live on spending more then it makes either can a country. Guess we will see what happens.

I've been trying to cut expenses wherever I can.

I am more of less cheap in spending but I find I always want what I want when I want it. I had to make a game of not even buying books it was so a part of my life and I loved the things so. On a fixed income I found days of buying books at up to 35 a pop 3/4 times a month had to be stopped. What if it had been cars and travel? Buying is fun even if it is books, and our govt. likes planes and ships.

The market has been losing value since 1999. It should be approaching 14,000, indexed to inflation. It was overvalued in 1999. It's undervalued right now. Add to that the declining value of the dollar, itself, and you've got about a 40% decline. That doesn't apply as long as you stay in this country, but if you think you're going to retire elsewhere, choose carefully!

The market may drop in the next deep recession (which is what we'll get if we're lucky), but the continued flow of dollars into it from pension plans and 401Ks will keep the landing a soft one.

In any economic collapse, folks need to follow the debt to find out where the collapse will come from. Most people have the bulk of their debt in their hyperinflated houses. Those who bought at the peak of the market are going to lose what they've put into them. The truly unlucky will lose everything, trying to chase those ever increasing ARM payments by selling their other assets to keep their homes.

The second largest debt load is on plastic. Since the sky is now the limit on interest rates on that debt, people will be forced into selling their assets to cover that, too.

The 1929 stock market crash killed that economy because people had all their debt creating the stock market bubble. When people are left with debt greater than their assets, they stop spending. As the consumer market dries up, unemployment soars and it becomes a vicious cycle.

The wealthy never quite realize that starving the people in the bottom 90% and forcing them to assume debt beyond their expectation of earning enough to pay it off will kill an economy stone dead. They never quite realize that the consumer economy is supporting them, too.

In other words, don't look to the stock market to collapse like it did in 1929. If a collapse is coming, look where the debt is to find out what will cause it.

That post sounded very intelligent (at least to this financial neophyte). May I ask you something I am considering?
I rent, don't own and I have zero credit card debt. Basically my only bills are the normal recurring monthlies. Here's what I'm thinking of doing:
I currently put 20% of my pay in a respected 403(b). I am going to raise this to 35% at the first of the year. My question: Would it make more sense to put that 15% in a savings account instead of the 403(b)? Thanks in advance for any info.
dumpbush

So I can't tell you whether to buy stocks, buy gold, stuff the money in a mattress, or open a Swiss bank account. I wish I could.

I do tell people to look around their area and see what rents are doing. If they're rising rapidly, then buying a very modest house with a fixed rate mortgage may be a good hedge against rent inflation, and I think with so many foreclosures on the way, rents will rise. Yes, you'll lose some paper equity. You may even lose that down payment (which should be a small one), but you'll get the tax break along with the rent hedge. Interest rates are still low enough that it could possibly be a very wise thing to do.

Then again, my lack of a crystal ball may be failing there, too.

Just realize that the stock market will head down as the economy stalls and sours completely. You are going to take a hit no matter where your money is.

We can only hope the down is neither protracted nor especially hard. With other countries changing their demand for Euros instead of Dollars for oil purchases, this will hurt. With the insane credit card debt Dimson has saddled this country with over the last six years, paying that down will hurt. Hopefully, we have enough safeguards in place that another 1929 cannot happen, although another 1987 may well occur. Thank you for your honesty, and Happy Holidays to you and yours!
dumpbush