wearmanyhats

[Due to technical difficulties with our service provider and the internet, this blog has been unable to be written daily in the past two weeks.  Thank you for your patience.]

A casual glance in the supermarket would probably not make most people cringe.  Prices took a big drop in the past eight months, and although food still may seem high to some people, it truly has dropped a bit in price.  Eggs, which had been as high in the upper Midwest as $2.00/dozen, sunk down during the time of deflation to $1.50/dozen and less.  Milk, before inflation, was fetching dairy farmers $22 per hundred weight. Last week, I was told that the same hundred weight was getting $9.

All this will change as the price of gasoline goes up. Shippers will impose higher fees to cover their delivery price.  That is more money out of the pockets of regular every day people.  It means higher prices in every store.   People can’t spend their money at a local store if they have to put their money in the gas tank.  It sets up a chain reaction where many small businesses could go under.

This inching up of fuel will set back the economic recovery that is underway.  While there has always been a time in American history when individuals have had to have wage increases to match the standard inflation that is going on, this is an exceptional time.  First, the number of available, excellent candidates is much higher than jobs available.  Employers don’t have to pay more to get good workers.  Second, when choosing between having a job or not having a job, most people will agree to the job without a pay increase just so they can put food on the table.  At this time, most Americans can not absorb an increase in fuel prices at all.

Martin Weiss, the ultra-conservative financial adviser, is warning that the market’s recent gains may be completely wiped out by another topple in the market.  He feels this is time to get out of the market if you have not already done son.

If one looks at the Dow Jones technical charts, it certainly looks as though the market is in a downhill trend.  Normal ups and downs in any market may account for the recent upward climb.  Weiss argues that the soft monetary base of the banks, the struggling of the average Americans, and the debt of the U.S. government makes another drop in the stock market quite likely.

If Weiss is correct, and it looks like the market could crash one more time some time in the next eight months.  Therefore it is critical to for all investors to balance the time they have to recover if they choose to stay in the market with the time before the money they are investing is needed.  If, for example, this money is for a child’s education and college is six years away, a steady balance of EE bonds with a small stock investment might be a better mix than the fully stock invested portfolio that was the standard ten years ago.  

Watch the price of fuel as a good indication of the health of the economy in the next ten months.  And adjust your investments accordingly.