The Online Investing AI Blog

We’ve heard the ole “Shit happens” mantra many times. Recent history has been a chorus of “shit happens” that have echoed from around the world.

Over the past couple years, we’ve also heard of Murphy’s law.

And we’ve heard the “that’s typical.”

We’ve had our share of black swans, too.

The media have circulated these messages almost continuously for nearly a decade. (Actually, a heck of a lot longer than that.)

As much as it’s true that shit happens, good shit happens, too. Turn-arounds are possible. In fact, with every bad day, they become more probable.

If you’ve faced tough times, just remember that.

Turn-arounds can happen in a few different categories.

National Turn-arounds

The country’s economy — and maybe even the entire world economy — can improve. This is a national economy. How will this help you? Well, it’s the “every boat rises in a tide” theory. If the country’s economy improves there’s a better chance of your own personal financial situation turning around.

But, you don’t have to wait for the country to turn-around.

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We looked at one depression solution last week: lower or suspend capital gains tax.

The common thinking about the recent economic collapse is that financial instruments, like derivatives and quantification formulas, were the reason for the collapse. This might be like blaming the fuel tank for running out of gas.

To solve our economic malaise, we need more financial innovation, not less.

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Investing, Money, Online Investing AI, US Economy depression, derivatives, economy, financial derivatives, innovation, recession, solutions

pic from jacreative @ Flickr

Another day, another Dow drop.

It’s obvious that all the maneuvering and stimulating have done little to stave off rapidly deteriorating global economic conditions. Like injecting a heart with adrenaline, the programs designed to re-start the economy gave it a boost, but only treated a symptom temporarily and never addressed the disease.

Why? Government money is too diluted. It probably takes almost as much money administering stimulus funds than the actual amount that will seep into the economy.

Austerity programs will only stunt or retract an economy. It’s a great gesture, but growth is the key.

To promote growth, governments should drastically cut, if not totally suspend capital gains tax.
The move would:

Instantly boost the market.
You could reasonably expect a 10 to 20 percent rise in the stock market. You could also expect new companies striving for initial public offerings to come out in full force.

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pic by woodleywonderworks @ Flickr

To say that pessimism reigns in the market misses the mark.

Fear and panic is a better description.

Conventional theory states that cool heads prevail in periods of excessive fear, just as hot heads lose during stretches of irrational exuberance.

There are essentially four scenarios of how this economy will play out over the next few years. At least one of them will flout the conventional notion that bad economies are time to make money.

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Pic from alancleaver @ Flickr

Taxation with representation turns out to be pretty bad, too. And Investors and traders have enough to worry about in the taxation categories. They also have enough to complain about.

There’s capital gains tax and income tax for starters.

Then, there’s the ever-controversial double taxation of dividends.

According to an article from Yahoo, governments are just getting warmed up and while investors won’t necessarily bear the brunt of most of these taxes, they won’t escape them either.

In the ever-expanding need to buoy struggling governments, politicians are discovering some weird ways to bring in money.

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pic by mmmOU812 @ Flickr

Recent information indicates (to me, at least) that the U.S. is gearing up for a modest recovery. But can we sustain a recovery without learning critical economic lessons?

This upswing is perhaps part of a cyclical recovery pattern. Severe downturns lead to growth–because, basically, how far down can we go, right?

But, that’s not the vibe on Main Street. Most people think the economy is in the tank and will stay there for a long time. What’s with the disconnect?

One reason, our economy hasn’t appeared to come up with any solutions to the problems of the poor economy. We had the software revolution to lead us out of the 70s stagnation. We had the internet boom in the 90s.

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Depression is more than just a name for sliding GDP numbers. True, it may be an economic condition; but, it can also be a mass psychological effect that turns into an dire economic feedback loop.

People are depressed and the economy suffers; the economy suffers and people get more depressed. And so on. Think of Japan in the 1980s.

Forget profits and jobs. We know they have been damaged. What is more frightening–and far more devastating–is that the psyche has been damaged because of the recent financial turmoil. Factories can be rebuilt and jobs can be created, but when people stop believing, the chances for recovery are slim.

There’s one more sign that our collective conscious is slipping into a deeper funk.

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Ms. President @ Flickr

The rose-colored glasses aren’t always on.

We’ve talked about the current economic problems and possible future ills… here and here.

But that doesn’t mean that the bad times are here to stay. There are some fundamental reasons to be positive about the future.

As we covered recently, recessions teach. Once we’ve cleared this dip–or double dip–we have it in our power to have an even stronger economy. This isn’t guaranteed. We can flub things up for a long, long time, but eventually markets self-repair. If you let them.

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sneakerdog @ Flickr

I’m not a big fan of spinach.

It doesn’t looks good. It doesn’t taste good. It rarely smells good.

But I can’t deny the healthy boost it gives you.  (And I’m not even referring to the power it gives under-sized Popeye the power to take on over-sized bullies.) It has lots of protein and vitamins. No denying it.

Sometimes it’s necessary to put up with short-term pain to create long-term strength. Same thing goes for your financial health.

In the world of personal finance, there’s no more willing taskmaster than a recession. A recession is painful and stressful. But it might also be the impetus that leads to our long-term financial freedom and well-being.

Here’s how.

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