Is this the best of times or the worst of times that we are in? I’m not sure of the answer to that but it is certainly a confusing time for those of us trying to figure out where to invest our retirement savings. It has not always been so. Five years ago, the U. S. seemed to be doing well. We had overcome a recession in the early part of the decade that could have been much worse. The unemployment rate was low and the stock market had recovered most of what it had lost, inflation rates were low and interest rates seemed reasonable for both borrowers and savers. Europe had formed the European Union (EU) and had adopted a common currency all of which seemed to be going well. There were uncertainties of course. The world was becoming one economy and who knew what that would be like. There were new participants in Asia, and who knew what the Chinese might do next. But there are always uncertainties and these did not seem to be overwhelming.
But the ship or ships seem to have run aground. The U. S. has been in one of the longest recessions in a half century with unemployment at a reasonably high level and interest rates strongly favoring borrowers over savers, without seemingly generating much borrowing. The EU is in crisis, first with the Greeks threatening bankruptcy, followed by several of the larger countries. There seems to be a serious question as to the survival of the EU. If the European Union goes down what are the likely ramifications to a U. S. economy still struggling mightily to regain its footing? Is this a “tale of two continents” or are we a “one-world” economy and all in this together?
In the meantime, the US Fed is trying things that we have not ever seen and even the Chinese seem to have slowed down. For those of us trying to manage the investment of our savings it is difficult to know where to put our money. There is not effectively any interest being paid on cash savings, and bond interest is so low that one can not earn much without taking a lot of risk – the primary one being that if interest rates rise, which one believes they must inevitably do, the price of bonds will go down sharply. Some stocks are paying dividends that are higher than bond interest rates, and with favorable tax rates should be attractive except for a weak, slow growth economy and the possibility of a substantial increase in the dividend tax rates next year. It may not be the “worst of times” , but it is a stressful time. On top of all that we are full into U. S. political season – not one of my favorite times because of the mean and meaningless political rhetoric that is hard to avoid.
Given all this stress and uncertainty, it seemed like a good time to get away for a couple of weeks. A late summer sea cruise seemed like the a good alternative. We haven’t done a lot of Cruises, but the ones that we have done have been interesting, fun, relaxing, and worry free. So we were off over the Labor Day weekend for a two-week get-away. We were signed up for a “Baltic Capitol Cruise” on the Norwegian Sun. We were sailing out of Copenhagen the week after Labor Day and we decided that it might be fun to spend Labor Day Week-end in New York City on the way over. We are Yankee fans, I play tennis and enjoy the U. S. Open, we also enjoy Broadway shows and we have kids and grand kids in New Jersey about an hour out of the City. On top of all that, we had enough Hilton Honors points to get a free room for the week-end. The Baltic Cruise was attractive because – in addition to promising relaxation – it was going to take us to places we had not been, and we would also be with some friends from Tulsa.
It seemed this would be a good end to a hot, stressful summer. Some fun things to do, interesting places to see and friends to do it with – a worry free couple of weeks. As it happened it was most of those things, but “worry-free” might not have been one of them. The people we came in contact with gave us much food for thought. Some of these thoughts I would like to share over the next three or four posts.