Some energetic insight
Posted by Mike
I've been wondering recently about energy investments, and BP in particular. Not to undermine the tragedy of the oil spill, but it may have a number of immediate and long term effects in the energy market. My environmental side hopes this helps push alternative energy sources a little further into the mainstream.
In any case, Fortune magazine recently interviewed T. Boone Pickens, a successful financier and energy investor. Check out the interview - if nothing else, it offers some insight into the fact that even the most experienced investor still isn't sure what to do with your investments in the short run.
Jumbo savings for jumbo mortgages
Posted by Mike
If you're in the market for an expensive home, now may be the time to buy. The Wall Street Journal reports that large home loans are at their lowest since 2003 - even lower than during the peak of the credit crunch:
Just a year ago, the average rate on a 30-year jumbo mortgage—a loan of more than $729,750 not backed by government-sponsored agencies Fannie Mae or Freddie Mac—was 6.86%, according to Greg McBride, a senior financial analyst at Bankrate.com. Now it is 5.48%—a rate that rivals those available during the height of the credit bonanza.
As expected, the number of applications for these loans has risen accordingly, so the question is, how long will this last? In fact, Manhattan, "the nation's most expensive large housing market," according to CNN Money, has seen a rise in sales this quarter from last year, and the median housing cost has already recovered half of the 20% it lost. It's hard to know how things are going to go, but it does look like it may be worth investing now if you're planning on it...
Any thoughts?
Financial news from the blue chips
Posted by Mike
I know that a registration is required to read articles from the Financial Times, which is why I tend to avoid posting them, but a few articles came out over the last few days that seem pretty interesting. In particular, one piece of news published today seems worth mentioning:
First, NTP, a software company that famously sued Research in Motion (RIM - the manufacturer of Blackberry smart phones) for patent infringement, has filed suit against - get this - Apple, Google, HTC, LG Electronics, Motorola, and Microsoft for the same reason. They claim the companies are infringing on their patents, and are suing them for licensing fees.
The new suits don’t seek a specific amount of damages. But [a settlement negotiator] said that the trial judge in the RIM case had decreed before the settlement that NTP was entitled to royalties of 5.7 per cent of the revenue from the hardware at issue.
It will be interesting to see how this pans out - although the RIM lawsuit took years to complete. No doubt this could have profound effects on the future of NTP, although I would guess less so for the companies it's suing...
Update: CNN has also reported on this, albeit with a little more bias.
Dying to save on taxes?
Posted by Mike
CNN Money reports today on the estate tax, currently 'on hold', which is set to return with a vengeance on midnight, Jan 1.
The roots go back to 2001, when Congress cut the estate tax rate to 45% from 55% and increased the exemption gradually over a decade. From its 2001 level of $675,000, the exemption rose to $3.5 million per individual by 2009.
Thanks to legislative sausage making, the rules got extreme after that: The tax disappeared altogether in 2010, but was programmed to revert in 2011 to a $1 million exemption with a top 55% rate.
Everyone's hoping that Congress will go back and review the law before the end of the year, but they aren't optimistic:
Many Washington insiders are betting Congress won't act this year because of an overflowing to-do list, the fall election and fewer than 40 working days left in 2010.
On the other hand, looking at the law may be a good way to score some extra votes...
What does this mean to you? Look at your options when it comes to leaving your assets behind - you want to gift your assets early on. It's a morbid thought, but it may be well worth it if you pass away after 12:01 am.
Taking debt collection too seriously?
Posted by Mike
I just read something that disturbed me a little. I guess this happens most days to many people, but this was particularly surprising.
Apparently, harassment complaints against debt collectors have skyrocketed since 2007, rising 50% last year alone, and already aiming for a another 13% increase this year. Now the fact that complaints has risen doesn't bother me. In fact, it doesn't surprise me, given the financial situation we've been in. What bothers me is that complaints of threatening - or using - violence rose to over 2,500. Now I understand that debt collection can be a frustrating job, but if you can't do it without being violent then I think you should consider a new line of work...
In any case, if you find yourself in a situation where you're being harassed, then you may be able to retaliate through the legal system, according to the article linked above. Of course, one debt collection industry rep. claimed that this is exactly why complaints have risen - and I'm not surprised he did.
Have you had any violent experiences with debt collection? Tell us about them...
Don’t want to bank on banks?
Posted by Mike
A few days ago, I posted about Mint.com, and I wanted to follow up with a few other online services that I've seen that may be useful. Most, if not all of these have been written up in a recent New York Times article, which has some useful information.
Now these aren't like mint.com in that they work as banks. Mint.com doesn't let you move any money - you can only see your accounts - but these services are online alternatives to your everyday checking and savings accounts. I'm not going to go into the deep details of each service, partially because I don't have first hand experience with each, and partially because Murphy's law states that any details will be changed as soon as I publish this, but here's a slightly annotated list.
SmartyPig: SmartyPig is meant to be a savings account replacement, offering relatively high interest rates (currently 2.15%) , as long as you keep a low balance. If you save more than $50 000 with them, your interest rate falls to 0.5%.
PerkStreet: PerkStreet offers you an alternative to your everyday checking account. They offer free checks and no-fee banking, and you can even get cash back on debit card purchases. Check out all the details though - and shop around. This may be one that looked good to me, but it also may not be the best one out there.
ING Direct: Perhaps the original online banking option, ING offers just about everything any other bank would, but with higher interest where you want and lower interest where you don't.
Bank Simple is an up-and-coming online bank option that seems to have the right philosophy - happy customers means loyal customers. They have a little info about how they'll work, as well as an interesting blog that may inspire a few future posting here. I'll let you know as soon as I see they're up and running.
That's it for me - do you have any other suggestions?
Save yourself from any flation…
Posted by Mike
Although a few months old, an article I just read offers some interesting tips to protect yourself against either inflation deflation. Now it's true that this was written a few months ago, but their points are still valid:
Basically, the market hasn't recovered from the financial crisis - we've seen in the news this past week that unemployment is a major concern, and that housing sales have dropped since the federal tax credit expired. As people continue to avoid spending, we may see prices drop, which would lead to a deflation of the American dollar. On the other hand,other's say that recent government spending (and a $13 trillion debt!) may cause just the opposite - a high inflation rate.
So the question is, how to avoid trouble in either circumstance. Their suggestions are to invest in:
- Stocks with pricing power
- Cash-rich blue chips
- Emerging-markets stocks
- Inflation-indexed bonds
- Foreign bonds
- And commodities and real estate
Check out the article for a more details on each (same link as above).
The state of real estate
Posted by Mike
Not surprisingly, home sales have dropped since the government tax credit deadline passed recently. but it's been reported that this drop was much worse than expected. In May, the number of signed sales contracts (not completed sales), dropped 30% - the worst drop on record.
Now this is bad news for sellers, but if you're thinking of investing in property, now might be the time. Prices are lower on account of this drop, and you may be able to pick up a foreclosed property at a reduced rate, if the trend continues.
The volatility of volatility
Posted by Mike
An article in the Wall Street Journal today talked about how markets closed at the end of the second quarter this year - exactly as people hadn't predicted. Overall, US stocks fell and European stocks outperformed them.
As usual, the markets made a monkey out of anyone who had been certain about what had to happen next.
What's interesting, though, is the discussion that follows about volatility, and whether it can be used to predict anything:
[W]hile volatility provides a close mirror image of current returns, it is a poor forecaster of future returns. Robert Engle, a finance professor at New York University who shared the 2003 Nobel Prize in economics for his research on volatility, warns that "there really isn't any predictability in that direction." He explains, "Even though volatility tends to be high in bad markets, that doesn't mean the market is going to keep going down—it just means the market has been going down."
Despite Rob Engle's opinion, he's worked on an interesting project called VLab, which can be used to look at the volatility of certain stocks over a period of time. I'll admit that I don't fully understand the application yet, but I'm going to play with it a little more and try to fill in some more details tomorrow...
UPDATE: Ok, so I spent a little more time looking at this tool, and it's interesting, but I think it's a little more intense than the average trader would like to bother with. The tool looks at a list of data series that can help give you an idea of the volatility of your portfolio through your stocks or the markets they're traded under. I've tried to look at the math a bit, and it begins with an easy look at variance, but quickly goes above my head - my specialty isn't in statistics. Let me know if you have any insight to their methods.
Unwanted early retirement
Posted by Mike
Sorry about the brief posts I've put up over the past few days - I've just finished moving , which has proven more time consuming than it should have been...
In any case, news today has talked about a bit about unemployment rates. June has reported a drop in unemployment, but at the same time, a large number of jobs are disappearing, and the federal reserve expects the unemployment rate to stay rather high in the foreseeable future.
I didn't want to talk about the unemployment rate as such, but I did I want to bring attention to an article about Pat and George Breaul, a couple that has found themselves in an unplanned early retirement, as I imagine a number of people may be finding themselves in similar positions. The article explains a little about the Breauls, but also offers a few tips on how to deal with finding yourself in their situation. In brief: try to gain some income, and don't spend too much. Perhaps it's not the deepest advice, but maybe it will help clarify where you stand.