The purpose of our blog is to provide ethical and endlessly curious views into the world of money and investing. Hopefully, as you read our blog posts, you will increase your knowledge about the use of money, improve your investment results, and reduce the risks and costs associated with the use of money. Our commentary is not crafted to support any political agenda, but will comment on the potential consequences of both current and projected actions of our Government (and others) on the economy, investments, and the efficient use of money.
We are neither focused on the individual investor, nor riveted on the professional. We will strive to deliver highly evolved commentary, fully digested concepts and rational projections in plain straight forward language that is easily palatable and useful to all.
We also strongly encourage all well-reasoned and civil-tongued readers to comment, question, and enlighten us with their knowledge and experience. Persistent synergistic discussion has the power to enrich us all.
The European Sovereign Debt Crisis has taken hold of the markets in the last several days. And this is a real concern for investors everywhere. We are taking this situation very seriously.
First of all, some background. For decades, Greece has not balanced its government and municipal budgets and their sovereign debt (the debt floated by the government) has grown dramatically while their ability to service the debt has shrunk. Greece’s national debt is about $400 billion Dollars or about 113% of GDP (the size of their economy). Greece has an overly large portion of their workforce working for the government at all levels. The Greek public sector is about 40% of the economy. To put that into perspective, we will offer a loose example …one could say that you have three private sector workers working to support two public sector workers. And this just cannot work economically. The demonstration of this is that Greece’s government deficit was almost 15% of GDP in 2009.
Does the small cap asset class make up a sufficient portion of your stock portfolio? If not, you may be missing out on a crucial segment of the market, as highlighted in the Wall Street Journal article “Small Caps Loom Large.” While many financial commentators refer to the past ten years as the “lost decade”, they are doing so based on the lackluster performance of popular benchmarks such as the S&P 500 Index or Dow Industrial Average. During that same decade, the small cap asset class performed much better.
While Wall Street’s biggest stocks have lost ground since the decade that began Jan. 1, 2000, small-capitalization stocks have soared. The Standard & Poor’s 600, a small-stock index, gained nearly 100% during the period, producing an annualized return of 7.1%. The large-cap S&P 500, by comparison, fell nearly 18%, representing a loss of almost 2% a year. — WSJ Article
For all those who believe that the spirit of the American people is dead and that innovation is dead in America, and for those of us who don’t… the following presentation from TED is a must see.
Winner: The Insurance Companies: There will be more of us who will be forced to buy coverage because the central provision of the new healthcare law mandates that ALL individuals be insured. The health insurers have already beaten the Obama administration’s feeble attempts to hold back rate increases by already raising rates. Insurance premiums will continue to increase. Watch insurance profits and large company prices rise dramatically in the face of the legislation! Larger companies will command slightly greater premiums than previously experienced, and demand lower prices from providers. The inability to underwrite will drive the smaller out of business because they cannot negotiate the same lower prices from the Providers.
Last week, I met a CPA who works for a client of ours. During the meeting, she expounded over and over again on what a great investment municipal bonds represent. She repeatedly asserted, “as long as you hold them to maturity, you will never lose money, and you would have been far better off in the last ten years to make 5% tax free than risking your money in the stock market.” I have also heard this same type of “analysis” from numerous wealthy investors … has it worked? Up until now, it has … but it may be time to sell your municipals and look for safer investments. Yes, safer … it may seem like blasphemy, but many, if not most, municipal bonds are very speculative at this point. Losses may exceed 40% in the coming years… regardless of the economic expansion.
The people at ThinkBigWorkSmall.com have offered a very interesting look (see video) at how poorly some U.S. Government regulations have been crafted… allowing those who acquire failed bank assets to make a fortune with no risk… and its your money they are stealing!!
I was fortunate enough to be present for a live interview of Presidents Bush and Clinton sponsored by TD Ameritrade. Frankly, I almost skipped the event, trying to convince myself that I had “better things” to do, but I went anyway, and left the interview totally overwhelmed. Though the group in attendance was far from intimate (approximately 1500 people), I was fortunate enough to be seated physically very close to them…close enough to see fine details of their facial expressions that one would not see on a flat screen. I have a long history of being exceeding critical of each of their Presidencies…and though the substance of my criticism has not changed, I am embarrassed at the tone I have taken in the past.
At the beginning of 2010, the market moved up the first six days consecutively. The underlying fundamentals in the US economy continue to improve, but these have been trumped by global macroeconomic concerns over potential Sovereign Debt defaults by Greece, Spain and Portugal…sending the markets to a 10% correction Friday before bouncing back over 2% from the lows. Technically speaking, this market correction should be over.
Many of us listened to President Obama’s State of the Union speech last night. The overwhelming desire was to hear what Government was going to do to get the economy started again. This seems to indicate a certain loss of confidence in the possibility or probability of a classic cyclic rebound based on pent up demand. Still, while Congress dithers, our population grows, wages slowly increase and inflation eats away at the sting of too much debt, whether held by individuals, corporation or government.
In his January 23, 2010 Op-Ed piece in the New York Times, Thomas Friedman offers some advice to President Obama. The advice targets job creation and while the author exhorts Obama to abandon the backroom politics of Congress and revitalize “the amazing, young, Internet-enabled, grass-roots movement he mobilized to get elected,” Friedman misses his own point.