• Most of the banks are underperforming resulting in lower profits. Wachovia is the latest.

• Oil price increases are running up fuel cost including home heating oil.

• Hundreds of thousands of homeowners are defaulting on their loans and face foreclosure as their sub prime loans reset.

• Home prices are falling.

• Fewer homeowners are refinancing to make big ticket purchases like RVs and automobiles or remodeling.

• Many financial service firms like Merrill Lynch and Morgan Stanley are taking billion dollar write downs.

• New home construction is way off.

• There is a huge inventory of unsold homes.

• The dollar is plummeting on the world stage.

• Retailers are projecting slow holiday shopping results.

Wow. These are just a few of the bigger problems. This sounds awful. Ready to toss in the towel? Ready to cash out and move? Hold your horses.

As I have said many times before, we need to keep a long-term perspective. We need to look out 20 years, not 20 days or 20 minutes. The nightly news would have use react with a two- minute snippet. Don’t believe it.

On the positive side:

• With the cheaper dollar, U. S. exports are thriving. The euro, the British pound, and even the Canadian dollar buy more U. S. goods.

• Foreign tourist are flocking to the U. S.

• Many U. S. companies with an international presence are doing quite well.

• Housing is becoming more affordable for qualified buyers.

• Mortgages are much lower and will probably go even lower.

• Employment in the U. S. is extremely strong. There are plenty of jobs for those who want to work.

• Many corporations are reporting record earnings and profits.

• Americans always spend big during the holidays. They will again.

Everyone says it is different this time and we are in for economic chaos. It is not different this times. We have always had economic challenges. Some of the current problems are just variations of problems we have seen before. That’s all.

We live in the most successful economic system in the world. Other economies would love to have our system-problems and all. American business people are the most resilient and creative in the universe. Don’t worry, they will adapt, modify, create and make it work.

Trust the free enterprise system. Incentives work. Capitalism works. Much of the world is catching on.

Our economy rewards resourcefulness and punishes bad decisions and mediocrity. Don’t give up yet.

 

 Notable quote:

 “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”— Warren Buffett

Tom Mills is a Registered Investment Advisor and Certified Financial Planner®. If you have questions or topics, call or write him at 1030 Seminary St., Suite D, Napa CA 94559, 254-0155, fax 254-0158 or e-mail suntrm@aol.com