Investing Curiouscatblog

Category: Personal finance

  • Curious Cat Investing and Economics Carnival #6

    Welcome to the Curious Cat Investing and Economics Carnival: we highlight recent personal finance, investing and economics blog posts we found interesting.

    • 5 Financial Milestones to Aim for By Age 30 – 1. Contribute to a Roth and a Traditional IRA… 2. Build Six Months Worth of Expenses in your Emergency Fund… 3. Make the Credit Card Companies Hate You…
    • USA again the leading manufacturing country, data of the Largest Manufacturing Countries in 2008 by John Hunter – The USA’s share of the manufacturing output, of the countries that manufactured over $185 billion in 2008, 28% in 1990, 28% in 1995, 32% in 2000, 28% in 2005… 24% in 2008. China’s share has grown from 4% in 1990… 10% in 2000… to 18% in 2008.
    • Afraid to stay in but scared to get out? Join the club by James Jubak – “If you have to keep $60,000 in cash so that you can sleep at night knowing that you’ve got your financial bases cover, then the loss of a potential gain on that money is, in my book, worth it. I’ve sold into this rally to sock away my kids’ tuition for 2010 and my 2010 tax payment.”
    • Invented, Completely New Meaning of the “Invisible Hand” by Gavin Kennedy – “In fact, Stigler explicitly criticises ‘legends’ of the ‘naïve doctrine’ that Smith should be associated with notions that ‘whenever a person seeks to serve his own ends, he invariably serves the ends of society’.”
    • The Quiet Danger of Non-Inflation-Adjusted Stock Returns by Stephen Dubner – “the ‘real-real’ value of stocks does make you appreciate how so many people got so jazzed about the spike in housing prices over the last decade: it’’ exciting to see inflation working in your favor day after day…”
    • Think You Don’t Need Health Insurance? Think Again – “Very bad medical problems can and do happen to many of us – maybe even you. Those very bad medical problems can be very expensive and potentially ruin one’s financial future if they do not have adequate health insurance.”
    • Don’t Be Suckered By Stock Market Rally In 2010 – “For those who do not want to invest, it is best to save up your money and wait for better opportunities since valuations are high right now… I suggest fixed deposits as the best option to preserve your principal.”
    • Resolving U.S. Indebtedness: Various Scenarios by Arnold Kling – “Some major technologies, probably either wet or dry nanotech, produce so much economic growth that the ratio of debt to GDP stays under control. I give this a 20 percent chance… Inflate away the debt with moderate inflation… I gives this a 15 percent chance….”

    Related: Curious Cat Investing and Economics Custom Search Engine – Curious Cat Investing and Economics Carnival #2

  • Finding a Credit Union

    NCUA logo

    I have discussed the advantage of using credit unions over trying to cope with a bank since so many banks constantly try to trick customers into paying huge fees. Here are some resources to help:

    • Find a local credit union (site broke link so I removed the link) – with an overview of services offered
    • Find a local credit union from (NCAU) with links to Financial Performance Report data.
    • Credit Unions have National Credit Union Share Insurance Fund (NCUSIF) (“backed by the full faith and credit of the U.S. Government”) instead of FDIC. The limits on the share insurance are the same as the limits on FDIC, currently $250,000 per individual account holder. Use the link to make sure your credit union provides NCUSIF coverage.

    You can also get credit cards through your credit union. In general credit unions are much more interested in trying to provide the customer value instead of trying to stick them with huge fees. But don’t just trust your credit union, check out the rates and fees they charge and comparison shop for the best credit card.

    Related: posts on banking – FDIC Study of Bank Overdraft Fees – Credit Unions Slowly Fill Payday Lenders Void

  • Home Prices Increase for 5th Straight Month

    Home Prices in 20 U.S. Cities Rose for Fifth Month

    The seasonally adjusted 20-city index has been rising on a month-to-month basis since June, the first gain since it started dropping in June 2006.
    …
    “The tax credit had the intended impact of drawing buyers in and lowering inventory,” Lawrence Yun, the real-estate agents group’s chief economist, said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.”
    …
    Foreclosure filings in 2009 will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc., the Irvine, California- based company said Dec. 10. This year’s filings will surpass 2008’s total of 3.2 million.

    The housing market seems to have been stabilized with the tax credits, previous declines, continued low mortgage rates and a somewhat better credit environment. The market is still far from healthy. And the credit environment is still very tight. But housing may have hit a bottom nationwide, though this is not certain. I do expect mortgage rates to increase in 2010 which will put pressure on housing prices.

    Related: House Prices Seem to be Stabilizing (Oct 2009) – USA Housing Foreclosures Slowly Declining – The Value of Home Ownership – Your Home as an Investment

  • Investing – My Thoughts at the End of 2009

    In December 2008 I decided to substantially increase my investments in the stock market. This turned out to be quite successful. As I said at the time, the economy continues to struggle and the prospects for 2009 did not look good. And I even guessed the stock market (in the USA) would be lower 12 months from now. But, I also said I was far from certain, in that guess and that I had been increasing my stock investment and would continue to do so.

    At this time my retirement contributions are going 100% to stock investments (if I were close to retirement I would not do this). I am likely going to reduce the contributions going forward (maybe 75% stocks – 25% money market). Unfortunately my retirement fund does not have great alternatives – it has very good real estate options but I am not ready to start putting new funds there (though I likely will during 2010, at some point).

    I did sell reduce my equity exposure in a retirement account that I am not adding to this month. It reduced my overall equity exposure of my portfolio by a couple percentage points, at most. It is still significantly higher than a year ago, due to the incredible gains for 2009 in my stock investments.

    Last year I fully fund my Roth IRA, in January and bought Amazon (AMZN), Templeton Emerging Market Fund (EMF) and PetroChina (PTR). I will fully fund the Roth IRA in January again. I am leaning toward some combination of Templeton Emerging Market Fund (EMF), Vanguard Emerging Markets Stock (VWO), Toyota (TM) and maybe Danaher (DHR). I purchased all of those in my non-retirement account in 2009.

    Investing well is not easy. Saving money is though, sometime people get these confused. You need to save money for retirement – aim for 10% of your income and invest that conservatively if you do not wish to focus on investing. I have no question fully funding your Roth IRA is a wise move for almost everyone. How to invest once you do that is a bit trickier but funding it is not a difficult question to answer. It was not easy to increase investments into stocks last year, when so many others were selling (and the press is full of stories reinforcing the bad news, bad prospects and risks). You can get great opportunities when others are panicking, but things do not always recovery so nicely.

    What the next year holds, again for 2010, if very difficult to see. The economy looks to be in much better shape than a year ago. But it is far from strong. And the recovery in the stock market means the higher prices stocks command today leave more downside risk for stocks, if things do not go well. I am more concentrated in stocks now than I was a year ago, but I am not comfortable with that. I don’t see bonds, even short term bonds, as an acceptable alternative. The risks are not at all justified by the returns in my opinion. I am happy with my real estate investments and may even look to increase that area though I think it may be too early for commercial real estate. I think individual companies may well prosper even if the economy falters – such as Google, Amazon, Danaher, Toyota, Tesco (though Amazon’s price increases may already have more than accounted for this) – all of these are in my 12 stocks for 10 years portfolio.

    Related: Save Some of Each Raise – It is Never to Late to Invest – Does a Declining Stock Market Worry You? – Uncertain Economic Times

  • Anytime is the Season to Help Deserving Entrepreneurs

    I made several more loans using Kiva today to entrepreneurs in: Mongolia, Costa Rica, Kenya, Togo and Peru. One nice improvement they have made to the layout of the site is to show the “portfolio yield” (which is their form of APR – to provide an idea of the fees an entrepreneurs must pay).

    Since I am making loans on Kiva to help others out one of the big factors for me is the cost to the entrepreneur. I just would much rather provide funding for loans where the entrepreneurs gets a reasonably low rate. I understand there are costs the lenders have to cover. I have no problem with that, but if my choice is helping an entrepreneurs get a loan at 20% or 40% I am going to take 40%. I figure the odds that the entrepreneurs benefits will be much greater with lower costs. I also prefer loans where I see how the loan will let them be more productive, for example by purchasing a machine to help improve productivity.

    I wish Kiva would let me selected lenders I like and then have the results shown only for those lenders (as one option).

    I encourage you to join me: let me know if you contribute to Kiva and I will add your Kiva page to our list of Curious Cat Kivans. Also join the Curious Cats Kiva Lending Team.

    Related: 100th Entrepreneur Loan – Creating a World Without Poverty – Financial Thanksgiving – MicroFinance Currency Risk

  • Elizabeth Warren Webcast On Failure to Fix the System

    Elizabeth Warren is the single person I most trust with understanding the problems of our current credit crisis and those who perpetuate the climate that created the crisis. Unfortunately those paying politicians are winning in their attempts to retain the current broken model. We can only hope we start implementing policies Elizabeth Warren supports – all of which seem sensible to me (except I am skeptical on her executive pay idea until I hear the specifics).

    She is completely right that the congress giving hundreds of billions of dollars to those that give Congressmen big donations is wrong. Something needs to be done. Unfortunately it looks like the taxpayers are again looking to re-elect politicians writing rules to help those that pay the congressmen well (one of the problems is there is little alternative – often both the Democrat and Republican candidates will both provide favors to those giving them the largest bribes/donations – but you get the government you deserve and we don’t seem to deserve a very good one). We suffer now from the result of them doing so the last 20 years. Wall Street has a winning model and betting against their ability to turn Washington into a way for them to mint money and be favored by Washington rule making is probably a losing bet. If Wall Street wins the cost will again be in the Trillions for the damage caused to the economy.

    Related: If you Can’t Explain it, You Can’t Sell It – Jim Rogers on the Financial Market Mess – Misuse of Statistics – Mania in Financial Markets – Skeptics Think Big Banks Should Not be Bailed Out

  • Bond Rates Remain Low, Little Change Over Last Few Months

    chart showing corporate and government bond yieldsChart showing corporate and government bond yields from 2005-2009 by Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve.

    Bond yields have remained low, with little change over the last 4 months. Earlier in the year, yield spreads decreased dramatically, and those reductions have remained over the last 4 months. The federal funds rate remains under .25%.

    Data from the federal reserve: corporate Aaa – corporate Baa – ten year treasury – fed funds

    Related: Continued Large Spreads Between Corporate and Government Bond Yields (April 2009) – Chart Shows Wild Swings in Bond Yields (Jan 2009) – investing and economic charts

  • Credit Card Debt and Delinquencies Decline

    The credit card delinquency rate (borrowers 90 days or more delinquent on one or more of their credit cards) dropped to 1.10% percent in the third quarter of 2009, down 6 basis points from the previous quarter. Year over year, credit card delinquencies remained essentially flat from 1.09% in the third quarter of 2008.

    Credit card delinquency was highest in Nevada (1.98%), Florida (1.47%) and Arizona (1.35%). Credit card delinquency rates were lowest in North Dakota (0.66%), South Dakota (0.70%) and Alaska (0.73%).

    Average credit card borrower debt decreased to $5,612 from the previous quarter’s $5,719, and $5,710 for the third quarter of 2008.

    “At end of the 2001 recession, the national bankcard delinquency rate had increased to a high of 1.69% as that recession came to a close (in November of 2001),” said Ezra Becker, with Transunion.

    The slight declines in credit card debt are an encouraging sign that more people are taking the right action to eliminate their credit card debt.

    Related: USA Consumers Paying Down Debt – Consumer Debt Down Over $100 Billion So Far in 2009 – Families Should not Finance Everyday Purchases on Credit – Some Movement on Regulating Credit Cards Companies

  • If you Can’t Explain it, You Can’t Sell It

    Over the last few years Elizabeth Warren has become one of my favorite leaders. She is a leader in economic thought, ethical society and the law (she is a law professor at Harvard Law School). Far too many on Wall Street, Washington and in C-suites are leading us down a very bad path. She is a voice we need to heed.

    If you can’t explain it, you can’t sell it

    “We need a new model: If you can’t explain it, you can’t sell it,”
    …
    The 1966 high school debate champion of Oklahoma may get what she wants. The House of Representatives will vote in December on her idea. She suggested a Financial Product Safety Commission in a 2007 article in the magazine Democracy [Unsafe at Any Rate]. President Barack Obama proposed it to Congress in June as the Consumer Financial Protection Agency.

    Warren won’t discuss whether she may be a candidate to lead the authority, which would have the power to regulate $13.7 trillion of debt products. A Warren nomination would tell banks that Obama is determined to force reduced checking-account fees and limit lender claims in mortgage advertising, among other measures the industry opposes, said Thomas Cooley, dean of New York University’s Stern School of Business.
    …
    In her role overseeing the TARP, Warren has been critical of the administration, accusing the Treasury Department of undervaluing the stock warrants that were supposed to compensate taxpayers when banks repay their bailouts. A lack of transparency about how TARP functions “erodes the very confidence” it was to restore, her committee said in a report.

    I hope she can take her attempts to reduce political favors being granted huge financial institutions and those institution be forced to follow sensible rules to protect individuals and our economy. With a few more people like there we will have a much better chance of a positive economic future.

    Related: Bogle on the Retirement Crisis – Bankruptcies Among Seniors Soaring – Don’t Let the Credit Card Companies Play You for a Fool – http://investing.curiouscatblog.net/2009/04/08/the-best-way-to-rob-a-bank-is-as-an-executive-at-one/

  • Up to $6,500 Credit to Reduce Your Energy Bills

    The Federal Weatherization Assistance Program has been around for decades and funding has been increased as part of the stimulus bills. This type of spending is better than much of what government does. It actually invests in something with positive externalities. It targets spending to those that need help (instead of say those that pay politicians to give their companies huge payoffs and then pay themselves tens of millions in bonuses).

    The Depart of Energy provides funding, but the states run their own programs and set rules for issues such as eligibility. They also select service providers, which are usually nonprofit agencies that serve families in their communities, and review their performance for quality. In many states the stimulus funds have increased the maximum funds have increased to $6,500 per household, from $3,000.

    The weatherization program targets low-income families: those who make $44,000 per year for a family of four (except for $55,140 for Alaska and $50,720 for Hawaii).

    The program provides funds for those with low-income for the like of: insulation, air sealing and at times furnace repair and replacement. Taking advantage of this program can help you reduce your energy bills and reduce the amount of energy we use and pollution created. And it employs people to carry out these activities.

    The Weatherization Assistance Program invests in making homes more energy efficient, reducing heating bills by an average of 32% and overall energy bills by hundreds of dollars per year.

    Weatherization is also often a very good idea without any government support. If you are eligible for some help, definitely take a look at whether it makes sense for you. And even if you are not, it is a good idea to look into saving on your energy costs.

    Related: Oil Consumption by Country in 2007 – Japan to Add Personal Solar Subsidies – personal finance tips – Kodak Debuts Printers With Inexpensive Cartridges – Personal Finance Basics: Dollar Cost Averaging
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