Market woes....again!

<p>Ever notice that the market always tanks right when tuition is due? Grrrrrrrrrrrrrrrrr.</p>

<p>A-ha! Now we know why the market tanked: procrastinating parents frnatically cashing their stocks in to pay their kids' tuition. On a more serious note, anyone who has to pay a hefty bill needs to move that money out of stocks and into cash at least 6 months prior to the bill's due date. Probably the best investment move I've ever made was to sell D's portfolio the day she got her letter of acceptance to the school she is currently attending. Turns out, it was close to the top.</p>

<p>(Sigh. I paid my bill while the congress was still bickering about paying our country's bills).</p>

<p>We delayed until the debt ceiling was raised, big mistake :( Not sure how much longer to wait now.</p>

<p>We are downgrading... Oops, made an error. Just a few trillions off. Recalculating. Recalculating...</p>

<p>S&P</a> warned White House of imminent downgrade - source - Aug. 5, 2011</p>

<p>Downgraded. Monday will be a bloodbath. Good chances of a great depression now.</p>

<p>Shsss. It's only the great Recession.</p>

<p>Holding tight. Tuitions paid. The bigger bloodbath will be election day.</p>

A-ha! Now we know why the market tanked: procrastinating parents frnatically cashing their stocks in to pay their kids' tuition


<p>Something to keep in mind in December when the next semester payments come due..... if of course there is anything left to lose by then!</p>

<p>I've had tuition in cash for many, many years.</p>

<p>There is one exception on timing: employee stock options which typically have to be executed on a set schedule, so many shares max per year and you don't have a lot of options - but at least they are free!</p>

<p>BTW, hopefully Moody tells us what we need to do and then we get it done.</p>

<p>How can this be? We are the richest nation on earth? Oh, I forgot. Apparently when our economy is funded by debt no wealth is actually created. It's just an illusion.</p>

<p>bad, bad news. perhaps politicians will get serious now and do what needs to be done instead of worrying about their re-election.</p>

<p>S&P didn't downgrade because we have too much debt. They downgraded because of the fear that the debt fight indicated we might decide to refuse to pay the debt, regardless of our wealth. </p>

<p>What I find fascinating is that so many people say that the US should balance our budget the same way families balance their budgets. However those same people want the US to be run like a business. Anyone ever see a business that didn't want "access to capital", i.e., debt?</p>

<p>Families that balance their budget can also employ debt. Too much debt means that the family can't make payments for their expenses and therefore their budget isn't balanced.</p>

<p>Same thing with businesses. Businesses have to be able to service their debt payments but they have additional options like issuing a secondary - this essentially robs their shareholders via dilution so the value comes from someone else.</p>

<p>The fact is that simple analogies do not work in trying to compare a family, or a business, to a country. </p>

<p>But since people still try, how about this analogy: Businesses deal with both expenses and revenue. We seem to want our "business" not to deal with revenue.</p>

S&P didn't downgrade because we have too much debt.


<p>No, they downgraded us because we have too much debt and will be adding another $7 billion due to more reckless spending.</p>

The rating agency said the deal reached by lawmakers to cut the federal deficit by an estimated $2.1 trillion over a decade didn’t go far enough, and “America’s governance and policymaking [is] becoming less stable, less effective, and less predictable than what we previously believed.”</p>

<p>S&P, a unit of McGraw-Hill MHP -0.87% , had said in July that $4 trillion in cuts over a decade would be required if the U.S. were to keep its triple-A rating. The U.S. has over $14 trillion in debt, and, even after the deal reached this week, is anticipated to add another $7 trillion over the next decade.


<p>U.S</a>. triple-A debt rating cut by Standard & Poor?s - MarketWatch</p>

<p>Greed, Greed, Greed. Nearly everyone in America wants something for free from the government. Don't cut my benefit and don't tax me is the motto of the USA. Sad.</p>

<p>Analogies can be useful for purposes of illustration but they typically break down at some point.</p>

<p>Countries have more options than companies and individuals but they have limitations too. Witness Argentina and Zimbabwe for examples. The US has the extreme privilege of holding the world's reserve currency and we've grossly abused it. Like any business or family, we need to balance our books. We elect people to represent us and to run our finances.</p>

<p>Governments aren't like anything except governments. Our country has carried debt since 1789. Debt is a financial tool. Our problem - as S&P very specifically said - is much more political than financial. I'm going to leave it here for others to make comments. If I continue, I'm sure I'll violate the TOS.</p>

<p>Our country has the privilege of being the world's reserve currency. The problem with a gross privilege is that it is incredibly tempting to use it, and then use it again, and then use it again. It's a great go-to thing if you're a politician looking for a goose for your reelection or a central banker looking to get your country out of a recession.</p>

<p>Debt is a financial tool for individuals and businesses too. Our society runs on credit cards - as a convenience tool where we don't have to carry cash or as a necessity to roll over payments because we overspend. But we have to be able to service that debt or else we lose the credit line.</p>

<p>Sure, we have some big political problems. Unfortunately we also have this big bar tab. This is quite like the family argument at the dinner table where finances are a mess and a big bill comes along to push everyone over the edge.</p>

<p>Our debt is far, far too small. Give me a bunch of long-term debt at 3%, with no expectation that I'll ever pay it back, and I'll all you've got.</p>

<p>The problem is what we spend it on. Take away the Bush/Obama tax giveaways to their friends (and to my mother the "job creator") and there's no debt ceiling problem, and deficit is easily manageable.</p>