uncertain about my Fidelity IRA and the economy

I have been somewhat nervous about the economy. I feel that if the Iraq war does not end soon, or that the US attacks Iran, the economy may get very bad.
I also have watched some conspiracy stuff on how the federal reserve is actually controlled by the Rothschild family and how Milton Friedman had said that the Federal Reserve caused the great depression and could have prevented it. This seems somewhat chocking, but I have seen a video of Friedman saying that, and although I may not agree with all of his economic ideas, I think there may be something to that assertion of his and others. Bernanke had apparently agreed with what Friedman had said and acted as if it was all a mistake and part of a learning process, though in reality it seems like the Fed in the end is going to protect certain Wall street entities and not the middle class type investor.
The guy at Fidelity Investments discouraged me from moving my IRA into FDIC CD's. He recommended a managed portfolio type account that he says has become popular, maybe it was PAS or something. I am considering putting a large chunk in that to see how it does. He also said that investments are covered with SIPC, but I see that that is a private insurance. With FDIC, I guess the govt can print money if it had to, though that would devalue what you get anyway. He also gave the usual argument that moving to CD's you will get low yields and all, but I think if I hear much more bad economic news I may be prepared to move into CD's, I am somewhat conflicted on this and am afraid that my gut feeling of moving alot of my assets into CD's may be the thing to do, but the recommendation not to leaves me a bit uncertain of what I should do.
He also had said that the S&L crisis in the 80's caused alot of people to think it was the end of the world. I have heard stuff like that on the radio, one guy claiming that the 70's was worst than the depression, but that seems wrong because the depression was a greater hardship for the common man. It seems like economists measure the economy based on how a large corporation would view things and not the average person trying to live a life free from stress and hardships. That leaves me feeling frustrated with many economists, and if you listen to The Electric Politics podcast on the internet, they have an episode that argues that economics has become some high ended mathematical modeling approach that is actually disconnected from the real world to a large extent.
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That's no big secret. It is broadly accepted macroeconomics that the Depression-era Fed really bleeped it up by persuing contractionary policies. Which is a far cry from saying that the Depression-era Fed wanted to cause/prolong the Depression. Only the tinfoil hat crowd believes that.
The modern Fed (and Bernanke, whose PhD thesis was all about what went wrong in the Depression) have learned from that mistake, which is why the Fed is currently turning on all the liquidity taps as fast and hard as it can (which of course has its own set of negatives to watch out for).
-- Rich Carreiro snipped-for-privacy@rlcarr.com
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Larz,
Aside from a lot of speculation, all you told us is that you are thinking of "selling low" and investing in "safe" (read: no growth) investments. "The guy at Fidelity" recommended against this.
Some important questions: How old are you? When do you plan to retire? How much money do you have invested? How much do you plan on needing in retirement?
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When in doubt, go 50% CDs and 50% what you have now. I would bet five years from now your CD half will be way behind your other half. But peace of mind may be worth something.
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Larz, I have to say I share your concern. I watch my IRA plummet and consider taking similar action as you described. As of now I am opting for sitting on the sidelines debilitated by fear. My advisor keeps saying to me that as long as you own, or lend to, quality companies this is the best course of action. Truth is, I don't think anyone has a clue as to how this problem economy will resolve itself.
Michael

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I think you're right Michael, but if no one has a clue, selling could be as incorrect as holding could be.
Even if the doomsdayers are correct and the market does fall, how will we know when the decline is over? The Dow has climbed almost 700 points in the past week. How far does it have to climb before we decide the worst is behind us and it's time to reinvest? It's also back down 150 points right now. Is this a one day "fluke" in our climb to the top or is this further evidence of a downfall?
If you are investing for the long term, and don't anticipate needing the money in the near future, the average investor (me included) has historically experienced much more success by "sitting tight".
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We know that the population of the U.S. keeps buying food, clothing, and shelter, so a market for these and that which goes into making them will continue. We know that universities and businesses continue to innovate new products. We know that only a small fraction of the U.S. population is losing their homes and jobs, much smaller than during the Great Depression. We know that bubbles and their corrections occur. This "problem economy" will pass.
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In article
snipped-for-privacy@gmail.com wrote:

As an example, look back to 1975. We had years of falling DOW, oil shortages, price shocks, and two governments that were unable to do anything about it (Nixon and Ford). As dark as it looked, it would get even worse as interest rates spiked to 20% under the Carter administration.
So, was that time to put everything under the mattress and buy more ammo for the shotgun? Not at all, you would have missed the historic market runs of the 80s and 90s.
Like the reply above says, this will pass. It may be close to done, or it might get even worse. But historically, the best time to get in is when everyone else is getting out, the TV people are predicting doom, and other investors are puking their guts out.
-john-
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Historically, if one was planning to live in a house for 5 years, buying was a no-brainer. For someone who bought at the peak of this bubble, that is not true...even the most optimistic housing analysts are saying prices are expected to keep dropping for the next year. There is no hope that housing will return any where near the peak in 5 years (or perhaps even longer).
There are some very fundamental changes in the way people think about their jobs and careers nowadays as well.
I am not predicting complete doom, but I think things have a bit of a ways to go before we see markets recover. I think we will only start to see the true extent of the current financial mess after the elections.
Anoop
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In article

But I think that has been true every year of my life. I recall back in the 70s when the big steel plants started closing down and we heard the word "rust belt" for the first time. Then we had the big white collar layoffs in the mid-70s. Then regional manufacturing plants started to abandon middle America and go overseas in the late 70s, early 80s. In the middle 80s we saw the far factories start closing as Japanese cars became viable. More recently, we saw all the electronics manufactures leave the US in the late 90s, and the contract manufactures evaporate after Y2K. And now the IT jobs are going to India and the call centers are going anywhere they can find people that speak English.
Rather than gloom and doom, think of the economy as always being in the state of change. It might be for some individuals that it was good up to one point, then an event happens, and then their personal economy is in shambles. But you have to resist trying to look at the economy as a whole based on one or two data points. As a whole, the economy is always in a state of change. Just ask the buggy whip manufactures association what their outlook is.
-john-
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Thanks for the info. It helps to know these kinds of problems have been happening all along with jobs.
There are a few other things that bother me about the current situation: - The way unemployment data are reported has been changed. So the unemployment (using historical methods) is actually much higher than is being reported. - The way inflation is computed has been changed. Again, it is way higher if historical methods are used. - Finally, banks have tons of assets whose worth is unknown (CDOs).
So back to the investing thing...does it make sense to stay invested in the market when we know all of this is going on, or does it make sense to stay out of it until at least some of these issues are addressed?
To me, it looks like the govt is using taxpayer money to plug holes as and when they can no longer be contained. We know there are more holes coming...their existence will be denied and contained for as long as possible. We don't know how many or how big. A number of economists have been warning about these (not just one or two). Should they be disregarded when it comes to investing?
Anoop
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In article

Unemployment is always under reported in the current system. They don't count people who have given up, or have rolled off of the end of the system. The CPI is also under reported because it doesn't include a lot of everyday items that people use.

Whenever you try to time the market, you are guessing or speculating. Studies have shown that slow steady approach of dollar cost averaging into the market is nearly always going to do better than the market timers.
You want to be in when it is low so you can buy more shares at these low prices, and take advantage of splits and distributions at these low prices. Then, when the prices go up later, your account grows in value dramatically.

Like they say, pundits have predicted 27 of the last 3 recessions.
-john-
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rolled off the end of what system?
Xho
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wrote:

Here in Minnesota, you typically only get 6 months of unemployment checks Once you are done, you drop off the system. After a year, you no longer get updates from them, unless you go back and register again. Most people who haven't found a job within a year simply drop of the system after a year, and they are no longer counted as unemployed.
A funny thing happens when the economy does perk up. A lot of these long-term unemployed people come back into the system because there is a chance of getting a job. So, when the economy gets a bit better, unemployment numbers don't reflect the better economy right away. There is a lag period as the chronic and long-term unemployed come back into the system.
-john-
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Eh, no. At least not as it relates to the normal headline unemployment number. The headline number is from the household survey taken by the Feds. They contact a random number of households and ask "Are you employed?" and "If not, are you looking for work?" A person is counted as unemployed if the answers are "No" and "Yes" respectively.
There are statistical adjustments to that base number than tend to overestimate employment in times of contraction and underestimate it in times of expansion. Remember the 2002/2003 "jobless recovery"? That was, at least partially, a statistical anomaly.
But you're also right that people get discouraged and stop looking for work. That drops them off the unemployment statistics ("No" to the second question). When things turn up, they start answering "yes" and start getting counted again.
-- Doug
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Eh, still no. Your correct that the BLS does a current population survey (CPS) monthly to determine the unemployment rate. But the BLS is adamant that they never directly ask whether someone is employed nor are interviewees allowed to decide their own employment status.
for more info see: http://www.bls.gov/cps/cps_htgm.htm
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Sorry. I over-simplified. But that is the essence of the headline unemployment number, not whether someone is registered with a state employment agency.
-- Doug
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The CPS, used to estimate the unemployment rate, is a *survey*. It is unrelated to any states unemployment insurance system.

This is simply not true.
Xho
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Could you please provide some links that give the unemployment rates using the current method and the method that has been used historically? I also want to see a comparison of unemployment during the Depression and today, preferably using both methods.

Same question.

When you buy stocks, do you plan to hold them for the long or short term?
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On Aug 11, 10:45am, snipped-for-privacy@gmail.com wrote:

Elle, is that you? If so, good to have you back with us.
I would also like more details on this, especially regarding inflation. My understanding, in alignment with the Boskin Commission, was that actual inflation is LOWER than reported. The reason we changed from historical methods is that they were INACCURATE.
Even our new CPI measures (CPI-U, CPI-W) do not fully account for the inherent biases (namely substitution, outlet/wholesale, new product, and quality variance).
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