Source: http://www.boomerandecho.com/whats-new-around-the-blogosphere-may-11th-2012/
woensdag 30 mei 2012
What’s New Around The Blogosphere: May 11th, 2012
Do 20-something’s have it tougher today than they did 25-30 years ago? Rob Carrick wrote a column in the Globe and Mail looking at the economic situation of today’s young adults compared to back in 1984, when he graduated. He notes that tuition, cars and house prices have increased far beyond the typical 2% annual...
The maxed out CPP/EI “raise” is here!!!
There’s few things quite as exciting as seeing an automatic payroll deposit in your account that’s higher than you expected. I haven’t been on a traditional payroll for a few years so had forgotten how awesome it is to get a ~ 7% raise mid-year.
If you’re wondering when you’ll reach the the max annual employee [...]
If you’re wondering when you’ll reach the the max annual employee [...]
Source: http://singlemomrichmom.com/the-maxed-out-cppei-raise-is-here/
My struggle with GDSR and TDSR
I’ve heard these terms thrown around by a few financial institutions from time to time. Here is a quick look and my quick take on them: Gross Debt Service Ratio (GDSR) – % income required to pay basic housing costs. Under the “basic” banner: mortgage payments (including principal and interest), condo fees (if you [...]
Source: http://feedproxy.google.com/~r/myownadvisor/CsCc/~3/B_rJgskuDZ4/
Payout or Pension?
Shortly after I moved to my current residence, I switched jobs. My previous line of work was slowly coming to a close, and I needed to make sure that I wasn’t left jobless, so I kept my eyes open for new employment. When the opportunity came, I took another job that offered longer term employment. While...
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Why I Have No Faith in Market Timing
Earlier this week I described the market timing strategy outlined in Mebane Faber’s book The Ivy Portfolio. I chose not to editorialize too much, preferring instead to simply explain the strategy to readers who may have been unfamiliar with it. So let me make my opinion on this clear now: I do not recommend this [...]
Affluent Investor Confidence Drops for Second Consecutive Month
The Spectrem Affluent Investor Confidence Index (SAICI)SM dropped seven points to a neutral reading of -5, the second consecutive monthly decline. The Spectrem Millionaire Investor Confidence Index (SMICI)SM dropped five points to a neutral reading of 3, the lowest reading in four months.
The declines are reflected in Affluent investors’ investment preferences in May. There was anincrease of those who invested in cash, while more Millionaire and Non-Millionaire households than last month opted to “Not Invest.” While Millionaire investment in stocks did rise in May, it was not enough to compensate for declines in other investment options.
The Affluent Household Outlook, a survey of attitudes toward financial factors that impact their daily lives, dropped dramatically after five consecutive months of gains. Though each of the four components remained in positive territory overall, each posted losses over the previous month.
Millionaire and Non-Millionaire households expressed a decline in confidence in household income, household assets, company health, and the economy. The Millionaire Outlook was more positive than in Non-Millionaire households, which posted a reading that was almost 20 points less.
We asked Affluent investors this month which news story is having the most impact on their economic outlook. International problems, particularly the ongoing European Union economic crisis, and its impact on the global economy, topped the list, followed by unemployment and the political environment.
Source: http://www.millionairecorner.com/article/affluent-investor-confidence-drops-second-consecutive-month
Preparing For A Greek Exit, In 3 Easy Steps
What if your job were to protect your country's financial system in case Greece quit the eurozone?
A Breakout Is Likely -- but in Which Direction?
Filed under: Economy, Investing, Market News
A variety of technical signals are suggesting we're at a crucial decision point for the stock market: Either the bull recovers from its recent swoon and moves decisively up toward new highs, or the market reverses trend dramatically and moves down.Although many market observers dismiss technical analysis as unscientific speculation more akin to astrology than math-based quantitative analysis, those skeptics are missing the point: Technical analysis isn't rooted in brute-force matching of curve sets, it's rooted in human psychology. Levels of resistance and support are not mathematical certainties -- they reflect the human psychological tendencies toward greed and fear.
When the market finally recovers a key level, for example, those investors who have grown weary of being underwater simply want their initial capital back, so they sell. This creates resistance. When the market declines, those who have reaped gains from buying during previous dips will jump in and buy more stock at what they perceive as "bargain" prices. This creates support.
And proponents of number-crunching quantitative analysis shouldn't be too cocky about their tool of choice: Quant analysis is based on past price action and patterns just like technical analysis. Just because a math-derived curve set matches recent price action does not preclude the unexpected from happening. This is why quant-based funds such as Long-Term Capital Management tend to self-destruct when markets trend strongly in unpredictable ways.
There are a lot of crosswinds in the market right now. Gains in retail sales and jobs are trends that support a bullish stance, while rising oil prices, food inflation and geopolitical uncertainty are giving credibility to a more cautious or even bearish perspective.
Warnings from Carl Icahn and Bill Gross
Small investors often look to highly successful "superstar" investors for hints on where the market is heading, and two recent news items about such big names have provided solid support for the bear camp: Legendary investor Carl Icahn has dissolved his hedge fund and is returning its capital to shareholders, citing the risk of another financial crisis. And famed bond manager Bill Gross has reduced the Treasury bond holdings of the world's largest bond fund, Pimco's Total Return Fund, to zero. The amount of cash the fund holds has swollen from $11 billion to more than $54 billion, its largest cash position ever.
There isn't any other way to interpret this except as a multibillion-dollar bet against the Federal Reserve's reassuring stance that inflation will remain tame for years to come. If you fear inflation might accelerate, the last investments you want to own are long-term, low-yield bonds that will instantly lose money if interest rates start rising.
Some analysts also interpret this move as an expression of doubt that the Fed will launch a massive third round of quantitative easing in June when the current QE2 campaign is scheduled to end. The Fed's ongoing $600 billion quantitative easing program is widely regarded as having strongly supported the rising equity markets.
As for the rising retail sales numbers, part of those "gains" can be attributed to rising costs: People and businesses are paying more than before for the same goods. If households are spending borrowed money again, that's not a sign of strength -- it's a sign of weakness in the household balance sheet. Consumers turned on the credit card spigot again in December, and they've loaded up on car loan debt this year.
What analysts should be looking at is whether household incomes are rising. Unfortunately, the answer is clear: Wage earners aren't benefiting much from the recent strong gains in productivity.
In an economy based on consumer spending, stagnant household incomes don't provide a strong foundation for future spending increases.As for stock valuations, by at least one analyst's reckoning, many stocks are at all-time highs. Does the underlying economy support sky-high stock valuations? That's an open question, and one the market is obviously pondering.
To round out the backdrop for the market's current indecision, let's look at these two log-term charts of the S&P 500 and the Nasdaq.
The Nasdaq has retreated from the highs last reached in 2007, following a pattern that looks a lot like a classic "double top."
The S&P 500, meanwhile, traced out a massive double top pattern earlier in the decade. Its rapid ascent from the 2009 lows has been far more robust than the recovery in the overall economy, a disconnect that the current market queasiness reflects.
Now let's look at the daily chart of the broad-based S&P 500 (SPX).
The push and pull of hope and doubt is visible in the wedge (also called a flag or pennant) that has been traced out over the past three weeks. This is a classic wedge of lower highs and higher lows as prices are squeezed into a narrowing band of volatile swings.
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Wedges are typically broken by big moves either up or down. A collapse in oil prices or a strong jobs report might provide the catalyst for an upside breakout, while accelerating inflation, a further rise in oil prices or a weaker-than-anticipated jobs report might trigger a breakdown and a trend reversal.The 1,300 level offers both a psychological and technical support -- a round number and the 50-day moving average. Any sustained break below 1,300 would signal a possible trend reversal.
The bull has stumbled recently. For it regain its footing, the market would need to climb above the 20-day moving average (MA) and then retest recent highs around 1,343.
The two-month chart of the Nasdaq offers an interesting technical snapshot of indecision: As fear that the rally is over takes hold, the market drops significantly. Then as "bargain-hunting" and hopefulness return, it moves back up to the 2,800 level. But then by day four or five, doubt returns with a vengeance, and the market plummets again only to retrace back up to the 2,800 zone of resistance a few days later.
Now that pattern is breaking down: Price has failed to climb back above the critical 20-day moving average even as it has turned down, and is now clinging precariously to the key 50-day moving average. A break through the 50-day MA would be technically significant.
Nobody knows what the market will do tomorrow, much less three months or three years from now. But to the degree that markets reflect the emotions and calculations of its human participants, the current indicators of doubt and indecision deserve careful watching.
Disclosure: The writer has a small position in ProShares UltraShort QQQ (QID), an inverse ETF on the NASDAQ 100.
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Source: http://www.dailyfinance.com/2011/03/10/stock-market-breakout-likely-but-in-which-direction/
Property Tax: Housing Bubble’s Lamprey
After yesterday’s post on Financial Psychology of Money, there was a good comment on how Property Taxes can add an interesting twist in my statement: ” … the only time the price of your house matters is when you sell it … “. Property Taxes (or millage tax), is the only tax where you have to pay a [...]
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Source: http://feedproxy.google.com/~r/CanadianFinancialStuff/~3/8k3uKIPvbK8/
JPMorgan Outsmarted: The Hunch, the Pounce & Kill
Azam Ahmed, NYT
One beneficiary was Boaz Weinstein, a hedge fund manager who saw a price anomaly that signaled an opportunity. At a conference, he advised betting against it.It was last November, and Mr. Weinstein, a wunderkind of the New York hedge fund world, had spied something strange across the Atlantic. In an obscure corner of the financial markets, prices seemed out of whack. It didn’t make sense.
One beneficiary was Boaz Weinstein, a hedge fund manager who saw a price anomaly that signaled an opportunity. At a conference, he advised betting against it.It was last November, and Mr. Weinstein, a wunderkind of the New York hedge fund world, had spied something strange across the Atlantic. In an obscure corner of the financial markets, prices seemed out of whack. It didn’t make sense.
dinsdag 29 mei 2012
Tales of usury
Did you know that usury was actually illegal at one point?
My son is charging interest… to his coworkers… like a payday loan. That’s better than anything I could make in the market.
According to wikipedia, back in the day (and we’re talking another century):
Moneylending during this period was largely a matter of private loans advanced to [...]
My son is charging interest… to his coworkers… like a payday loan. That’s better than anything I could make in the market.
According to wikipedia, back in the day (and we’re talking another century):
Moneylending during this period was largely a matter of private loans advanced to [...]
Facebook's IPO Debacle, Day 3: Un-Friended and Dis-Liked on Wall Street
Filed under: Technology, Morgan Stanley , Facebook, Market News
It's day three of the Facebook (FB) valuation debate and the world is, once again, falling apart.As the stock's value continues to drop -- it closed Tuesday at $31, down 8.9% on the day, and down 19% from the IPO price of $38 -- lead underwriter Morgan Stanley (MS) is being attacked for its 11th-hour cut in estimates of Facebook's revenue forecasts. SEC Chairman Mary Schapiro, has claimed that "we need to look at" issues related to the IPO, and analysts are criticizing everyone from Nasdaq to Facebook itself, desperate to find someone to blame.
In a particularly poignant vignette, one outraged hedge fund manager, a self-described "blue collar Wall Street guy" is livid because his $100 million investment in the company has headed south.
The Problems of Valuation
While there's ample evidence to suggest that Morgan Stanley may have colored outside the lines, the bigger problem is that, as the market is trying to determine the actual value of Facebook, it's becoming increasingly clear that many of the traditional valuation rules don't apply. The company has minimal infrastructure, doesn't produce a tangible product, and is still groping its way toward a solid monetization strategy. When it comes to advertising, a standard valuation question for a media stock, Facebook is disappointing: As the economic bloviators have endlessly pointed out, the site's advertising revenues are unimpressive. And, to make things worse, there's Facebook's claim that the move to portable devices has made it even harder to create a stable revenue stream.
(Of course, it's almost impossible to find a website with a good advertising-based business model, but those kinds of big-picture, systemic flaws aren't really interesting to the jittery buy/sell crowd that is currently complaining about Facebook.)
When it comes to determining the actual worth of Facebook, value investors will have to focus their attention on two somewhat intangible factors: the website's CEO and its place in the social media market.
The Big Boss
Regarding the first, there are the image problems faced by Mark Zuckerberg himself, a somewhat self-conscious 28-year-old college dropout who has been far from impressive in his few public appearances. The Facebook valuation problems don't seem to have hit him too closely, although his worth -- on paper -- has dropped by $3 billion since Friday. In fact, some finance writers are trying to coin the word "Zucked" to describe a paper billionaire who loses a huge chunk of his supposed wealth. Personally, I prefer "Fulded"; then again, my long-term memory stretches all the way back to 2008.
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But, as any student of Zuckerberg's tenure can attest, the young man in question has a firm vision for the future of Facebook, coupled with a willingness to learn, a strong eye for talent and an iron grip on the wheel. In eight years, he has transformed a college project into a social network that connects more than one-seventh of the world's population. And, when it comes to Facebook's unimpressive revenues, it's worth remembering that "unimpressive" in this context means a mere $1 billion in profit last year. Regarding the second factor, Facebook's place in the social media market, few analysts noted that, even as GM announced plans to stop paying the site for advertising, it was doubling down on its use of Facebook's fan pages. In fact, counting its distributors, dealers, factories, suppliers, and other associates, GM operates hundreds of fan pages, without paying Facebook a penny.
This factor suggests a clear revenue route to revenue for the site. Facebook currently has over 900 million users, and is on track to hit a billion later this year. Millions of companies, institutions, and artists use the site to create fan pages that they use to connect to customers. In fact, fan pages are on track to become a cottage industry of their own, with an ever-growing cadre of marketers offering to build pages, maintain pages, and advise customers on how to use pages. As yet, Facebook hasn't monetized this feature, but it isn't hard to imagine how they could.
How Much Is It Really Worth (Again)
So, to recap, Facebook's paper value dropped from $104 billion to $93 billion in three days.
This didn't happen because of any major moves on the part of the company and wasn't a response to any big market forces. The site's founder and CEO, the guy who built it and has a vision for its growth, is still in the driver's seat -- what's more, with 57% of the company's voting stock under his control, he isn't going anywhere.
As for the future, Facebook still has big plans, and now has a very fat war chest that will make some of them possible. Admittedly, it has a somewhat questionable advertising-based revenue stream, but it is sitting on a potential gold mine. In other words, for the long-term investor, it looks like a great deal. The only question now is how much of a drop should we wait for before buying in?
Inside the DFA Global Balanced Fund
Long-time readers will know that I’ve written before about Dimensional Fund Advisors, an innovative investment firm that builds low-cost, widely diversified funds. I enjoy keeping an eye DFA, because their strategies are based on academic research (there are a few Nobel laureates in the family) that all investors can learn from. The one downside of [...]
Why People Do Bad Things
We talk to a guy who started out as an upstanding businessman, and went on to commit bank fraud involving millions of dollars.
Source: http://www.npr.org/blogs/money/2012/04/17/150815268/why-people-do-bad-things?ft=1&f=127413671
Why You Need to Update Your Beneficiaries
Estate planning issues aren’t a lot of fun, but they are necessary if you don’t want to cause a great deal of stress and expense for those you leave behind. Whether you are trying to figure out who should get that great collection of stamps, or whether you want the contents of your RRSP to...
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Source: http://canadianfinanceblog.com/why-you-need-to-update-your-beneficiaries/
May 29, 2012 Fact of the Day
Seventy-three percent of investors with $5-25 million in net worth (not including primary residence) use an advisor to some extent.
Source: http://www.millionairecorner.com/article/may-29-2012-fact-day
Lessons for Retirement from Kodak
It could be argued that in the past, company pensions were the backbone of retirement planning. It wasn't long ago that every father and grandfather worked at steel mills or other large corporations, and had their future already figured out thanks to the guaranteed income that a pension would provide. In other words, they had it good.
Unfortunately, company pensions aren't nearly as secure as they once were. More employees than ever before are now finding themselves on the receiving end of bad news concerning their company pensions. If you'd like to know more about this phenomenon, and what retirement advice you should follow if you become one of these unfortunate pension holders, read on...
Pay attention to what happened with Kodak.
Like many companies before it, the Kodak Corporation recently announced that they had filed for bankruptcy. As usual, a huge focus has been on the number of jobs that may be in jeopardy, depending on what ultimately happens with the company. While this is obviously a huge concern for many people and their families, what typically isn't discussed is what happens to employee pensions. Many employees may find themselves not receiving the full pensions that they have been promised after years of dedicated work.
Kodak employees are not alone.
As previously stated, many employees over the years have lost their jobs and/or their company pensions due to businesses going under. Judging from experts in the field, they are not alone and more will very possibly follow. Between 2010 and 2011, approximately 300 underfunded company pensions from the private sector shut down. This doesn't bode well for the future, as this trend is expected to continue.
The Pension Benefit Guaranty Corporation can help.
The good news is that private companies are insured by the PBGC. What this means is that, in the event that a company fails to meet its pension obligations, insurance coverage will kick in. In other words, your pension will still be in effect; it will simply be from a different source.
However, there is a cap to what the PBGC will cover.
Although the Pension Benefit Guaranty Corporation can help in the event that a company's pension dissolves, there is a cap to what will be paid out. So while you would still receive a guaranteed income during your retirement, that amount may be sizably cut. While it should be noted that most pension plans are below the maximum amount dictated by the PBGC, many individuals will be affected by the cap.
Much worse if you're several years away from retirement.
If you're still several years away from retirement and your company pension shuts down, you may find a drastic reduction in your benefits, since you won't have those extra years to accrue more income. For example, if your company pension was to shut down 15 years before your expected retirement, you could lose nearly two-thirds of your yearly expected retirement income.
Retirement advice for those affected.
If you have a company pension, it doesn't matter whether you think you're safe or not. This is your future we're talking about. The best course of action is to prepare for a worst-case scenario. This means that you should create a greater savings by way of other types of retirement accounts. If you have access to a company-sponsored 401k, that would be a great choice. Or you might want to invest in CD's, IRA's, or a variety of other products. For the best retirement advice that will allow you to prepare for such an event, it would be wise to seek the help of a financial expert.Source: http://firstsecurityfinancialshow.com/blog/bid/115028/Lessons-for-Retirement-from-Kodak
April Summary
While April wasn't the best health month for me, it had some greate things happen financially.
DS did a great job of not overspending on his Europe trip. As promised, I let him keep half of what he came home with. He now has his $300 for his vehicle plates (insurance) which is due Mid July. Now mom needs to get her part done.
I didn't add anything to savings, but I did kick debt's butt quite well, IMHO. My loan was at $2842 at start of April and I brought it down to $1372. It was great to see it fall so wonderfully and know that the end of that was near.
I read a bit but not tons. I need to curl up and figure out my new plan of action and my budget for when the loan is paid off on June 5th. Kind of exciting to be able to :-)
DS did a great job of not overspending on his Europe trip. As promised, I let him keep half of what he came home with. He now has his $300 for his vehicle plates (insurance) which is due Mid July. Now mom needs to get her part done.
I didn't add anything to savings, but I did kick debt's butt quite well, IMHO. My loan was at $2842 at start of April and I brought it down to $1372. It was great to see it fall so wonderfully and know that the end of that was near.
I read a bit but not tons. I need to curl up and figure out my new plan of action and my budget for when the loan is paid off on June 5th. Kind of exciting to be able to :-)
Source: http://shakingthemoneytree.blogspot.com/2012/05/april-summary.html
Affluent Say 'Raise Social Security Age'
Earlier this year, Bank of America conducted a study entitled the Merrill Lynch Affluent Insights Survey. This study, which began in 2009, focuses on a variety of subjects each year, with an overall goal to provide a bit of insight into the financial and retirement needs of the American public. For 2012's survey, they asked questions regarding the current state of retirement and Social Security.
Mark 2022 on Your Calendars
One focus of the survey conducted by Bank of America was regarding Social Security. As you may have heard, the Social Security is currently being threatened. This is because the gap separating the amounts being collected and the amounts being paid out is widening. At some point, the collected amounts will overcome the checks being sent out. According to estimates, this will happen in the year 2022. Once that happens, it is possible that the amounts that people receive (which are already very low) will decrease. This is why many people believe that changes must be made to the system.
An Older Workforce
Statistics from 1993 show that 29% of the United States' workforce was older than 55, according to the Labor Department. Last year, their newest survey showed that the number had risen to 40%. These results demonstrate that an increasing number are not retiring simply because they reach a certain birthday. Yes, this is how things worked in the past, but the American sentiment has changed. Now people are retiring not because of their age, but simply because they are ready and/or feel that it is the right time.
Survey Backs Up Older Workforce
Bank of America's survey backed up the above sentiment. The results show that, of the individuals surveyed who were under 62 years of age and had not yet retired, 62% were not planning to retire early. Instead, a number of them planned to put off their retirement for as long as possible, both for financial and personal reasons. In addition to this, the survey also showed that not quite 15% of those over 50 stated that age would be a main reason concerning their decision of when to retire. These results show that, for one reason or another, the average American worker is more than willing to keep working, and that number is likely to continue increasing.
Affluent People Say "Raise the Retirement Age"
The study from Bank of America shows that affluent individuals believe that the retirement age should be raised in order to affect change to the current Social Security outlook. In fact, of those with at least $250,000 in assets, 59% felt this way. If the retirement age was increased to match our increased life expectancy, it could fix the problem of the widening gap between the amount being collected and the amount being paid to retirees, at least for quite a number of years. The only thing missing from the survey was a specific age that respondents would consider having the retirement age raised to, though adding on at least a few years would probably be acceptable.
Different Study Shows Concern For the Deficit
Toward the end of last year, Wells Fargo had its own survey completed. The results showed that 47% of respondents with assets totaling at least $100,000 believe that a cut in benefits, whether from Social Security or Medicare, would help lower the U.S. debt. However, the study also indicated that only 23% of a person's retirement funds would come from Social Security. This indicates that other sources of continuing income during retirement are necessary, despite concerns of the deficit.
Source: http://firstsecurityfinancialshow.com/blog/bid/154640/Affluent-Say-Raise-Social-Security-Age
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