Investing Curiouscatblog

Category: Financial Literacy

  • The Real Threat Is Decreased Productivity

    The Real Threat Isn’t Housing by Michael Mandel:

    In short, the productivity acceleration of the past 10 years has created a total of $6.4 trillion in extra output since 1995, measured in 2006 dollars. That helps explain why American households, taken together, are so much richer than they were: Household nonhousing net worth, adjusted for inflation and federal debt, has soared by almost $14 trillion over the same period, despite the dot-com debacle that crashed the market.

    The massive amount of additional production is a key reason why the U.S. has not faced upward pressure on prices. And good productivity gains gave the economy enough momentum to fight off the disasters of 2001–the terrorist attacks, the stock market crash, the collapse of Enron–with only a minimal recession.

    But the bonanza starts to disappear if productivity growth drops much further below its current level. Such a decline is a lot more possible than most economists realize or are willing to accept.

    Related: Manufacturing Productivity – Be Thankful for Lean Thinking – Manufacturing Jobs Data: USA and China

  • Credit Card Tips

    It is difficult to imagine trying to live without the convenience of credit cards. Yet many get into financial trouble in part due to their misuse of credit cards. By following a few simple rules you can avoid the missteps and use credit cards to improve you personal finances instead of falling into the credit card traps.

    First, don’t use your credit card for loans. Pay off your balance each month. Pretty obvious advice but way way too many people don’t follow it. If you use your credit card for a loans – 98% of the time that is a mistake and big risk to your personal financial future. Don’t do it. There is a reason pretty much all the advice from financial advisers on credit cards starts with this – it is the most important advice.

    Second, if you don’t follow the advise above pay off your loan as soon as possible. Payment the minimum payment is huge mistake. You should not be making any discretionary purchases if you are not paying down your credit card debt substantially each month.

    Continue reading credit card tips.

  • More Non Bubble Bursting in Housing

    Housing sales drop in 40 states:

    Nationally, sales declined by 10.1 percent in the fourth quarter compared with the same period a year ago. The national median price – the point where half sell for more and half sell for less — fell to $219,300, down 2.7 percent from the fourth quarter of 2005.

    While there is no agreed upon definition of bubble bursting, a almost 3% decline certainly can’t be seen as a “bursting bubble” can it?

    In all, median home prices fell in 49 percent of the 149 metropolitan areas surveyed, the largest percentage of areas showing price declines in the 27-year history of the Realtors’ price survey.

    Again hardly data of bubble bursting proportions.

    Related: Coming Collapse in Housing? – Beginning of the End of Housing Bubble? – Colored Bubbles

  • Mortgage Defaults: Latest Woe for Housing

    The main point of this article is the increasing evidence of problems due to loose underwriting for mortgages of the last few years. Mortgage defaults: Latest woe for housing:

    The rate of subprime borrowers who are more than a month late on a mortgage payment was 13.2 percent in the third quarter of 2006, the latest numbers available, up from a 10.5 percent delinquency rate in the third quarter of 2005.

    The overall mortgage delinquency rate was 4.7 percent in the third quarter, just slightly above the 4.4 percent rate of a year earlier, when it was a historic low.

    The problem of loose credit is real and important. But isn’t it really amazing how 4.4% is the historic low for mortgages over a month late? That seems really high too me. Obviously 13.2% for sub-prime loans shows how risky it is to take out such a loan. In my opinion, the delinquency rate for over 90 days late is a more important figure (but these numbers can serve as a leading indicator).

    Related: articles on investing – investment dictionary – How Not to Convert Equity

  • Kodak Debuts Printers With Inexpensive Cartridges

    Kodak Debuts Printers With Inexpensive Cartridges. I don’t know anything about the printers but normally companies charge exorbitant amounts for ink cartridges. They rely on the tendency of consumers to only look at the purchase price and ignore the much larger operating expenses.

    In rolling out its new Easyshare All-in-One Printers, Kodak said it will “save consumers up to 50 percent on everything they print.” The new Kodak cartridges will cost about US$10 for black ink and $15 for a five-color unit.

    Kodak 4-in-1 Printer with Wi-Fi

    Related: Price Discrimination in the Internet Age

  • Roth IRAs a Smart bet for Younger Set

    There are few investment opportunities as valuable as IRAs (tax sheltered retirement accounts) – nor many more critical to successful personal financial success (for younger or older really). Roth IRAs a smart bet for younger set by Tami Luhby.

    Roth IRAs, as well as the newer Roth 401(k)s, are a smart bet for many people in their 20s and 30s, experts say. Younger workers are more likely to be in a lower tax bracket now than when they retire, making any current tax deductions less valuable, and they have enough years to save to make the tax-free withdrawals very beneficial.

    The beauty of the Roth IRA and 401(k) is that there’s no tax on the capital gains in the accounts, so the longer you have to accumulate those gains, the better.

    Mathematically, if the tax rate in the year of the contribution and the tax rate at the year of withdrawal are equal a Roth IRA and regular IRA provide the same value. However, in addition to earning less money in while young and therefor being in a lower tax bracket there is also the benefit from a Roth IRA of eliminating the risk of an increasing tax rate structure. Since money withdrawn from a Roth IRA is not taxable. This is a huge benefit.

    So add to your IRA for last year if you have not already and add to your IRA for this year now. Also add to any employer matched 401(k) for your long term retirement savings. Few investments will have the long term impact of adding to retirement accounts early and often.

    Related: Saving for Retirement

  • Credit Card Currency Conversion Costs

    Currency conversion costs from bankrate.com:

    Visa and MasterCard have a standard 1-percent charge on foreign purchases; in exchange, Visa or MasterCard converts your foreign currency purchase to U.S. dollars. All Visa or MasterCard cards will carry that 1-percent charge.

    However, your credit issuer or bank often charges an additional fee, usually 2 percent, which adds up to a 3-percent total charge on foreign purchases. Bankrate contacted several credit card issuers, and all refused to explain the reason for the charge.

    Follow the link for a list of how much each company charges. Until the credit card companies compete on trying to serve customers well instead of trying to trick customers well such articles are extremely important. The companies have more resources to invest in tricking you than you have to try and find all of the tricks they use.

    Related: Don’t Let the Credit Card Companies Play You for a Fool – Hidden Credit Card Fees – Too Much Personal Debt

  • Charity Telemarketers

    Give to charity, but do so directly not on calls from telemarketers. Find some good charities. Charity navigator provides statistics and ratings of charities based on how much of the funds raised go to doing the work of the charity versus paying fundraisers, etc.. Telemarketers profit doing charities’ work:

    Brigham’s group is one of many state and national charitable organizations that rely on telemarketing companies for fundraising, and those companies keep the vast majority of the money they raise.
    …
    Then he asked the caller how much money goes to the charity and the caller replied that all of it goes to the charity’s fund, which is technically true. The money is required to be deposited in charity’s bank account – which is how states track charity fundraising – then the charity pays the company’s share back to them. “It’s so deceptive,” he said. “People aren’t going to know that.”
    …
    Borochoff said that nationally, groups that hire telemarketers keep about a third of the money they solicit. The rest goes to the telemarketers, which incur the expense of compiling caller lists, hiring employees, maintaining calling facilities…

    If you want to pay people to call you at home while you are eating dinner, feel free to do so, but if you want to give to charity you should give directly to the charity.

    Related: What To Do When A Charity Calls – Stop Dishonest Telemarketers

  • State of the nation? Broke

    State of the nation? Broke:

    If you want to correct for the $185 billion collected by Social Security as surplus cash flow in 2006 — that is, the taxes came in today to pay for benefits promised in future years — then you have to look at the on-budget deficit, which Walker calls the “operating deficit.” The on-budget deficit came to $434 billion in 2006. The on-budget deficit shrank from 2005 to 2006, just as the unified budget deficit did, but the drop was much smaller: to $434 billion in fiscal 2006 from $494 in fiscal 2005.

    Both of these still understate the size of the deficit. The Bush administration has been adamant about keeping certain costs out of the budget figures. Spending on the war in Iraq, for example, has been included not in budget resolutions but in special emergency spending bills. They are “off budget” in the language of Washington. That spending, estimated by the Congressional Budget Office at $360 billion overall and $95 billion in the fiscal year that ended in October 2006, aren’t in either of these two budget figures. And Iraq funding for fiscal 2007 won’t be included in the budget the president will introduce next month, either.

  • Stop Picking Stocks?

    Stop Picking Stocks—Immediately! by Henry Blodget. I don’t agree totally with his conclusion but the article is a good read. Definitely the kind of information investors need to know. I do agree that most of the time for 90%+ of the population stock picking doesn’t turn out to be the best financial move. Three counterpoints for why it can make sense: 1) tax smart investing (for buy and hold) 2) investor education (if you pay more attention by buying some individual stocks as part of an entire investment strategy) 3) the Peter Lynch buy what you know small cap strategy (buying companies that you understand better than “wall street” – as a part of an investment portfolio). From the article:

    The problem for investors is that even though stock-picking usually hurts returns, it’s extremely interesting and fun. If you are ever to wean yourself of this bad habit, therefore, the first step is to understand why it’s so rarely successful. The short answer is that the overall market provides most investment returns, not particular stock picks, so most stock pickers get credit for gains that came merely from being invested in stocks generally. Second, competition among stock pickers is so intense that it is extraordinarily difficult for any one competitor to get a consistent edge.

    Related: Curious Cat Investment Bookstore including: The Intelligent Investor by Ben Graham with forward by Warren Buffett and Security Analysis by Graham and Dodd