Finance Matters

Posts Tagged ‘recession’

Lakshman Achthan, the man behind the Economic Cycle Research Institute, is sticking to his controversial recession call on the U.S. economy.

He recently sat down for an interview with Morgan Stanley Smith Barney’s Charles Reinhard.  The whole transcript can be found in this months’s On The Markets.

Here are some highlights:

CR: Has that recession already begun in the US?

LA: The median recognition lag after a recession begins is about half a year. After the last recession began, it actually took nine months before the consensus view accepted the reality, especially since we had clearly positive real-time GDP readings for the first half of 2008 that were later revised downward.

When we review the year-over-year growth rate of the US Coincident IndicatorIndex, which includes broad measures of output, employment, income and sales, we find it to be in a clear, cyclical downturn. That is an authoritative indication that overall US economic growth is actually worsening, not reviving.
…
CR: What do your indicators say about US home prices, going forward?

LA: What we are seeing looks like an upturn in the year-over-year growth rate of our US Leading Home Price Index. The implication is that home- price growth will turn up in fairly short order, meaning that the level of home prices is then likely to start stabilizing.
…
CR: What about inflation?

LA: Inflation is fairly tame. The US Future Inflation Gauge remains clearly below the highest [rate] seen last spring.

Notwithstanding high gas prices, underlying inflationary pressures are relatively restrained.

SEE ALSO: 11 Uber-Bearish Predictions That No One Hopes Come True >

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Lakshman Achthan, the man behind the Economic Cycle Research Institute, is sticking to his controversial recession call on the U.S. economy.

He recently sat down for an interview with Morgan Stanley Smith Barney’s Charles Reinhard.  The whole transcript can be found in this months’s On The Markets.

Here are some highlights:

CR: Has that recession already begun in the US?

LA: The median recognition lag after a recession begins is about half a year. After the last recession began, it actually took nine months before the consensus view accepted the reality, especially since we had clearly positive real-time GDP readings for the first half of 2008 that were later revised downward.

When we review the year-over-year growth rate of the US Coincident IndicatorIndex, which includes broad measures of output, employment, income and sales, we find it to be in a clear, cyclical downturn. That is an authoritative indication that overall US economic growth is actually worsening, not reviving.
…
CR: What do your indicators say about US home prices, going forward?

LA: What we are seeing looks like an upturn in the year-over-year growth rate of our US Leading Home Price Index. The implication is that home- price growth will turn up in fairly short order, meaning that the level of home prices is then likely to start stabilizing.
…
CR: What about inflation?

LA: Inflation is fairly tame. The US Future Inflation Gauge remains clearly below the highest [rate] seen last spring.

Notwithstanding high gas prices, underlying inflationary pressures are relatively restrained.

SEE ALSO: 11 Uber-Bearish Predictions That No One Hopes Come True >

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Join the conversation about this story »

While research by the Alliance Trust suggests that an economic boost generated by the Olympics will help Britain out of recession, rating agency Moody’s is warning that any benefit will only be short term.

Alliance Trust suggests that ticket sales for the event and other consumer spending on Olympic related retail products will cause a surge in economic growth.

Tickets to the value of around £300 million have been sold and this is expected to boost GDP figures for the third quarter of 2012.

This figure equates to 0.1 per cent of GDP, enough to have a significant effect on growth figures for the summer according to Alliance Trust.

A fall in GDP of just 0.2 per cent last month was enough to push the UK into a double-dip recession.

Shona Dobbie, head of the economic research centre, at Alliance Trust, suggests that the UK economy will grow by around 0.3 per cent in 2012, with much of the improvement generated by the games.

James Carrick, economist at Legal & General Investment Management, is also predicting that Olympic-generated growth in the third quarter will be enough to lift the UK out of recession.

“There may be a slight dip in the second quarter as we lose an extra day for the Queen’s Jubilee.

“But there will be a boost in the third quarter, it will be positive growth that will decisively pull the UK out of recession,” he said.

However, Moody’s said that the Olympics was ‘unlikely to boost’ the economy.

The ratings agency said that investment on infrastructure for the event has already had its effect on GDP figures and any further benefits will be short-term ones.

According to Moody’s, increased visitor numbers for the duration of the event could boost sales of retail and consumer products, but longer-term benefits will come from the increased visibility of brands rather than additional sales.

Richard Morawetz, senior credit officer at Moody’s said: “We expect the net impact of the Olympics on UK tourism will be positive overall, but far less than gross visitor numbers would suggest.”

The agency also warned that disruption to businesses during the Olympics could offset the economic benefits of the event.

Meanwhile the CBI’s latest quarterly economic forecast suggests that the UK economy will return to growth in the second half of 2012.

It has downgraded its economic growth forecast for 2012 to 0.6 per cent, from its earlier forecast of 0.9 per cent.

This is a guest post from Belinda James. Belinda is currently attending Trident Online University and earning her master’s degree in business administration. In her spare time she writes automotive articles for Nissan Minneapolis.

A few years ago I had a regular administrative 9-to-5 job working for one of the three credit bureaus. It was an okay job with an annual pay of around $33,000 a year. In 1998 that was more than enough to pay for a tiny studio apartment, take care of monthly bills, and pay for my shopping sprees at Forever 21 (I still shop there, actually).

However, everything changed when I bought my first computer and started fiddling around the Internet. Somehow I ended up clicking a “Webmasters Click Here” link on a website and figured out that it was possible to make money online. After I received my first $20 commission check I was pretty much hooked.

It took a lot if trial and error but by 2006 I was pulling in around $10,000 a month from promoting affiliate programs online. I had high-traffic websites and would generally earn $30 or $35 every time a web surfer made a purchase through my affiliate link. In a great month I would make around $13,000 or $14,000 and in a “bad” month maybe $8,000. At one point I had more than $80,000 in the bank!

But I made a lot of mistakes that cost me everything. Eventually, my income dwindled so much due to the recession and industry changes that I was forced to look for a job again. Here are my hard-learned lessons that might save you a lot of grief if you’re running your own business (or think about starting one):

1. Pay your quarterly taxes on time
When you are self-employed you generally receive 1099s from the companies that you work for, and it’s your responsibility to file your taxes quarterly. I used to file mine yearly; I was making a lot of money so financial penalties (even in the thousands!) didn’t bother me.

One year I really overspent and I was wiped out once I paid taxes at the end of the year and never was able to recover from it financially. My income continued to plummet every year, but I was still responsible for income taxes for previous years. Paying your quarterly taxes in a timely manner ensures that you won’t get caught behind, because once you do it can be nearly impossible to catch up.

2. Find a good accountant
Having a qualified CPA in your corner is crucial if you want your business to survive. I never incorporated so I was responsible for self-employment taxes. I never found a solid accountant that I could trust. One CPA charged me $650 an hour and didn’t do anything for me that I couldn’t have done for myself. I was told that it wasn’t worth the extra paperwork for me to incorporate because my earnings weren’t high enough.

3. Don’t tie up a large chunk of your money in a car
When I was making a lot of money I bought a used Mercedes. It was certified pre-owned car, and I paid around $43,000 for it, in cash. Was it the smartest decision ever? No. But do I truly regret it? I would honestly have to say no (even though I know most people will disagree).

I like to enjoy life, and I’m not going to lose sleep over a purchase I made a long time ago. However, if your goal is to really get rich slowly, you will probably want to buy a used car instead.

4. Nothing lasts forever
When I was making six figures a year I was convinced that it would last until retirement and that I was financially set for life. Call it naivete or “sticking my head in the sand”, but I never thought that the money would run out. The truth is that nothing lasts forever, so enjoy it while you can.

Hindsight is 20/20
What else would I have done differently? I would have worked harder and smarter. I would have rented office space and ran things more like a real business. I would have hired employees to do the grunt work. I also would have expanded my business and not concentrated solely on doing the same thing over and over. My goal at the time wasn’t to get rich slowly, but to enjoy life, and that I did.

I do have a few regrets, but I still had a great run while it lasted!

Not all of us can afford a lavish wedding, but the thought of going into debt to finance one sounds like a terrible idea. 

Yet Canadian brides now have the option of signing up for Royal Bank of Canada’s MyProject MasterCard, which Globe and Mail’s Rob Carrick is calling “a novel borrowing alternative to conventional credit cards” and “a sign of how debt has become the great facilitator in our lives.” 

Carrick explains how it works: “You can spend up to $40,000 on it and pay nothing for the first six months. At the end of that period, your card debt converts into a loan that you repay over a period of five to 15 years.

Currently, there’s a variable-rate option on the loan at 7.99 per cent (prime plus 4.99 percentage points) and a fixed rate option at 8.99 per cent. Conventional credit cards charge in the range of 20 per cent these days.” 

This sounds well and good on the surface, but as Carrick points out, it could do a number on your finances, leaving you in debt for quite some time. 

Not only is Gen Y is facing exorbitant college debt, inspiring countless reporters to dub them the “Boomerang Generation,” but a number of factors—notably the jobs market—have put them behind the retirement planning 8 Ball. 

Not only did the recession scare them away from investing in stocks, many don’t understand what it means to be truly self-sufficient and can barely afford their rent let alone a thousand dollar wedding tab. 

Planning a wedding of your own? Learn about marriage and finance here > 

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