Dunnan on Dollars

  Personal Finance Tips from Nancy Dunnan

Let the Sun Shine
Not So Depressing News

April 18, 2008 - This week's column is based on the assumption that most of you do not read "The New York Sun," a newspaper published in New York City whose motto is: "It Shines For All."

But it also has thoughtful articles about world events, business and the economy. The April 17th issue ran one you should know about. It's written by Amity Shales, a senior fellow in economic history with the Council on Foreign Relations.

Shales' opening line is: "Depressing is the adjective we're hearing a lot when it comes to the U.S. economy."

Then the author goes on to say that the view that we're headed into a depression or near depression is due to the fact that the media (US and UK, primarily) have been spreading the word as gospel. Shales, on the other hand, maintains that this is simply not true...that we're nowhere near the situation America experienced from 1929 through the 1930s. Shales compares our current economic climate as an April drizzle versus Hurricane Katrina and the Depression.

Some facts laid out by Shales in The Sun article:

o The Dow is down about 12% from its record high, reached last fall.

o In the Depression, the Dow fell 80%.

o Unemployment is hovering around 5%.

o In the Depression, it was as high as 25%.

o Only one big bank has collapsed recently.

o In 1931, the number of banks that closed reached 1,400.

So why all the negative hype about our economy? Shales maintains it's because we've had it so good, so very good for so long. Thus we're having trouble coming to grips with a moderate downturn. We've forgotten (or are too young to remember) the bumpy 1970s when mortgages rates approached 20%. And, fewer and fewer families have members who lived through the Great Depression.

Whether or not you agree with Amity Shales, the lowered Dow makes it a good time to look at your portfolio and at least think about recession-resistant industries and dividend paying stocks.

Recession-resistant industries include: beverages, drugs, food, health care & medical supplies, household products, telephone & telecommunications, utilities and waste disposal.

For a continually updated list of the best dividend-paying stocks, known as Standard & Poor's Dividend Aristocrats, go to: www.marketattributes.standardandpoors.com.

- Nancy Dunnan

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New 401(k) Rules for 2008
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If you want to suggest a column topic for Nancy, drop her a line.

Like what Nancy has to say? you might be interested in the new edition of her book:
How To Invest $50 To $5,000: The Small Investor's Step By Step Plan for Low-Risk, High-Value Investing