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Equipping people worldwide to learn, apply, and teach God's financial principles so they may know Christ more intimately, be free to serve Him, and help fund the Great Commission.
Today on MoneyLife with Chuck Bentley
Tuesday, October 13, 2009
Rusty Leonard: October Economic Update
But it will also mean less borrowing, which is good. God doesn’t want us to have an economy that grows based on borrowing. It's good that people are coming to their senses and realizing they can’t continue borrowing and spending. I'm excited about the higher saving rate. I'd rather have a long, slow recovery than a fast recovery based on borrowing. Federal policies should mirror this Biblical wisdom of saving for the future. Our guest today is Rusty Leonard. Rusty says stocks appear to be booming and that the recession is over for now. However, we could have a double dip, a second recession. We should always be cautious in the stock market, look for risk especially after a big gain. The baseline conditions for a bull market are in place: low interest rates, a lot of liquidity in the market, earnings and economy are recovering. It would be natural for the stock market to keep gaining for the short-term in such conditions. However, the more jobs you have, the stronger the recovery. A slow recovery is more favorable because a fast recovery would create higher interest rates quickly. Higher interest rates could put the economy back into recession. A gradual recovery would be best but it means jobs would slowly improve. If you were out of the stock market during the recent rise, you missed out on some easy money. Stewardship Partners has beaten the index. The market will probably be bumpier going forward but should keep rising. It's safe to get back into the market but keep expectations realistic, don’t expect to make up what you’ve missed. There are still serious long-term risks. If leaders make poor decisions, could be back into a recession. Some bad decisions have already been made. Greater government involvement means less job and wealth creation. If the federal government stays on the same path it is now, the recovery won’t be what it could be. Overspending is a great threat to the future of the economy. It could cause the dollar to collapse. There's not enough focus in Washington on the economy and jobs. There's still time to make positive economic changes but there's no indication from Washington those decisions will be made. The negative consequences are too far in the distance for politicians. When a government overspends, and the people buying the bonds to finance the spending lose faith, there's trouble. The market will be more volatile than the economy, which is in the early stages of the recovery. The recovery will be strong at first, then moderate. Conditions for stocks are positive, if they continue, the market will continue to gain, but it won’t be as fast as the past seven months. There's no perfect solution for the value of the dollar. If you go to the gold standard, it fixes the amount of money in the system. That creates a non-inflationary system, you must be disciplined to the amount of gold you have, you can’t overspend. But it constricts policymakers from making changes which can help smooth the economy at times. We tried the gold standard in the past. We need benevolent dictator in charge of the money supply making wise decisions, that's hard to find. The gold standard is appealing right now because of the overspending. Biggest risk facing the U.S. economy right now is the erosion of the value of the dollar. Everything is valued in dollars, so it's value affects everyone. Rusty says he's moving his clients into hard assets to hedge against a declining dollar. Hard assets are precious metals, commodities, things that would retain their value in a global market. He's also moving clients into overseas investments, stocks funded by foreign currencies. Move as much as you can into currencies that would benefit from a declining dollar. Politicians may not react until there is a disaster. Citizens should call their representatives and express alarm at the fiscal policies of the government. Threaten to vote them out of office if they don’t stop overspending. Tell them you’re willing to take a little pain to protect the value of the dollar and your wealth. It's always enjoy having Rusty as a guest. He's an accomplished expert in investing and I appreciate him giving of his time to keep us informed about the economy. Rusty is also a perpetual optimist. He admitted there is a lot to be concerned about. I hope you have developed a sense of urgency to get your house in order. Get out of debt, save for the future, diversify your investments into things not affected by inflation. Take action. Let me remind you about the upcoming God Provides™ premieres in Orlando and Dallas. I'll be in Orlando, Thursday, October 15 and in Dallas, on Friday, October 16. We've rented a theater in each city to show Abraham and Isaac on the big screen. See the complete city tour list here. You're all invited to attend this free event, but seating is limited, first come first served. |
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Prosper in a Declining EconomyWe have compiled a list of things you can do to survive or thrive in our current economy. |
Job LossDealing with lay off is not pleasant, but look at the lay off as an opportunity that can be conquered. |
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God's Word for a Tough EconomyToday's economic climate makes it important for Christians to review and practice what God has been telling us all along. |
Fearing the FutureThe most effective method of finding a new job is through contacts—the people you already know or those who know the people you already know. |
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Other Resources: |
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Since our economy is driven by consumer spending, economists want to see people spend more. They're concerned a higher savings rate will cause a slow recovery.
Rusty is the Founder and CEO of
