Irrational Exuberance

I know, I know. I was supposed to make an entry yestreday. Ah, well.

Anyway, S and I were thinking about buying a couple big-ticket items. I mean, we keep hearing about how bad the economy is, but so far the downturn doesn't seem to have affected us. Her employer is doing quite well, and I had no trouble at all finding a new job in November. We have money in the bank. We're getting a nice tax return from the feds. We live within our means. So why not buy something nice?

Then I got to thinking.

The other day, our local NPR station did a report on the "rainy day" funds of the various cities in our county. Some cities were down to almost nothing. Some had a healthy reserve. One city had an entire year's operating expenses salted away.

The part of the report that interested me the most was the city council that started preparing for this economic downturn two years ago. At that time, their analysts became concerned about the trends of some early economic indicators. They brought their concerns to the city council, and the council requested a study of the implications. The study recommended that certain steps be taken--mainly, strengthening the city's rainy day fund--to prepare for the possibility of an economic crisis.

And--here's the good part--the city council actually followed the recommendations of their analysts. So now that the crisis is upon them, they have the resources on hand to survive it.

So all that got me thinking. I figure, there's about three things that city council (and their analysts) did right: They saw the early warning signs, they took a good look at what those signs meant, and they responded promptly and responsibly to what they saw.

Now, like I said, the economic downturn hasn't really hurt us.

Yet.

See, I'm thinking there's going to be at least a couple more waves of contraction, before things really start to get better. I see cell phone sales are down, and cell phone manufacturers are reporting losses. This means companies like Qualcomm, that sell goods and services to cell phone manufacturers, are probably going to start reporting losses soon as well. Things like that strike me as warning signs. We could be affected by the next wave, or the wave after that.

Like that city council, I'm thinking maybe now is a good time to take certain steps. Before the crisis hits us. So we'll probably end up postponing any major purchases for a while; build up our rainy day fund instead.

Meanwhile, we'll continue to spend money on the important stuff: family, health, etc. But that new TV? It can wait. The HD cut-over has been postponed until June anyway.

I'll put up a picture to go with this post a little later today.