Posts tagged with "money"
Sunday, 13. September 2009, 17:12:59
futures, financial advisors, money
I just learned that some people dear to me whose financial needs are stability and security were persuaded by their financial advisor to invest in a fund trading in futures! A high risk investment that might do very well or might just as well lose much of their stake. But not a fund for security and stability.
This is just another reason why I will
never, never, never use a financial advisor to handle our finances. If there has been any lesson from the past few years' debacle in the financial markets, it's that there are no experts because the system itself, is, like the weather, inherently unpredictable in the short term. I continue to believe that, long term, stock investments are wise. But I avoid all derivatives like futures because I don't understand them, and it is clear what from what has happened that even those who are supposed to know about them don't understand them either. So I stick with very low expense mutual funds (mostly index linked) investing in stocks - i.e.
real companies and not imaginary constructs. Add to that bonds and healthy cash balance in case of emergencies,
no debt, and I believe we have a sound financial grounding.
OK, end of rant.
Friday, 15. May 2009, 01:34:44
self-destruction, relationships, debt, money
...
Fascinating, in a rather sickening way,
article by a New York Times economics reporter detailing how he, despite full knowledge of the economic abyss awaiting, made a series of decisions that mired him in debt and foreclosure.
What's striking to me is that most of his decisions were made over a base of emotional turmoil. He had recently divorced after a lengthy marriage and found a new love. His desire to create his own personal dream vision of his future relationship, a desire that flew in the face of financial common sense, was overwhelming and at that time, 2004, there were plenty of lenders willing to help him down the road to ruin. Pocketing chunky commissions all the way, of course.
The article attempts to spin the personal crisis in terms of the easy lending available at the time. Certainly, that played a big role. But, more fundamentally, it reveals the levels of self-delusion that we are capable of embracing when family and inter-personal relationships are disrupted, broken or made anew.
We are not very rational creatures at the best of times. Throw that type of emotional turmoil into the mix, and it is easy to see how supposedly savvy people make the most bone-headed of choices. I wonder if this man went through any counseling or analysis at the time of the break-up of his first marriage. Maybe that might have grounded him more. Maybe it might have even saved that first marriage.
All speculation, as we get little meaningful background from the story. Maybe the book it is clearly designed to promote will be more insightful.
Sunday, 22. March 2009, 03:25:48
greed, bonuses, money, AIG
Why is the
current fury about the A.I.G. bonuses only happening now?
Not two years ago when the whole collapse began, or even four years ago when the biggest profits, largest fortunes and riskiest behavior were the rule.
Ironically, many of the people who made the worst decisions and set up the system for its current fall got out a while ago, bonuses and fortunes intact. Yet, despite the clearly obscene level of salaries these folks were making for simply shifting real - and imaginary money - around, very few people seemed concerned at all.
It upset me alright. Nice to see the rest of America catching up.
Better late than never.
Thursday, 23. October 2008, 01:43:46
money, frugality, ways of living, economy
...
The Frugal Teenager, Ready or NotIndulged. Entitled. Those labels have become hot-glued to middle-class and affluent teenagers born after the last major economic downturn, in the late 1980s. They were raised in comparatively flush times by parents who believed that keeping children happy, stimulated and successful, no matter the cost, was an unassailable virtue. A 2007 study by the Harrison Group, a market research firm in Waterbury, Conn., found that nearly 75 percent of parents caved in to their children’s nagging for new video games, half within two weeks.
Sometimes I wonder if I'm middle-class at all. It's not just that my son is perhaps the most unacquisitive teenager I know, making do with very little and maximizing his use of what he enjoys most, but his mum and dad are pretty much the same way. My weakness is camera bits, but I space those out over months, usually waiting for a sale or rebate. Nothing in the least bit house-filling though.
So when I read articles such as these, my jaw tends to drop because such an overtly materialist existence seems simply
weird to me. On some level I can understand why it might be attractive, yet I have never followed up on these fleeting emotions. Perhaps I am lacking something? Clearly a shopping gene has gone amiss because, apart from grocery shopping (that I love), I view a trip to a store as a less-than-pleasurable experience.
Oh well. I think part of my conundrum is that I got used to getting by with very little when I was a student and unemployed post-college and that way of thinking set the pattern for the rest of my life. In these troubled times, I feel this is just as well.
Saturday, 11. October 2008, 17:50:53
money, financial crisis, crash
Look, Jane, Look! Noooooo!
Nightmare on Wall StreetNEW YORK, Oct. 10 -- There was a time -- four weeks ago, to be precise -- when you could check your portfolio without having to screw up your courage. You could drop by every few days, often just to gaze with some mix of hope and pride, like a parent at their kid's school play.
But at some point, the stock market went from national casino to national crisis, and the country acquired a new way to tell people apart: There are those who can bear to look and those who avert their gaze; those who follow the nose-diving value of their investments and those who want to close their eyes and hum until the noise stops. This is what happens when the financial news gets truly grim.
I looked - and not just at last month's mailed mutual fund balances. I plugged in the numbers raw from Wall Street last week.
And I gasped and was amazed. So much money lost. Swept back four years in terms of household wealth.
But you know what? It doesn't really matter. It's all on paper. Makes no difference at all to my current life. By the time I really need it, ten or fifteen years from now, things will be very different.
I lived through the dismal 1970s, the 1987 crash and the fall after the dot-com boom at the beginning of this century. This is worse than any of those, but not that much worse. It may yet deteriorate a bit more or it may begin to recover. Regardless, it cannot go down forever.
So don't be afraid to look. It will get better.
Saturday, 20. September 2008, 17:01:10
bailout, government, crisis, LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PUR
...
The document proposing the largest financial bailout in U.S. history is refreshing concise. You can read it
here.
It gives the Secretary of The Treasury enormous power:
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
but the taxpayer is considered:
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Note that the taxpayer is #2 on that list
And an awful lot of zeros are postulated:
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
As we well know, any amount set in a government document is usually only a starting point, and I am sure this will balloon as well.
Oh well. A pretty mess we are in.
Saturday, 20. September 2008, 02:49:26
crisis, Wall Street, economy, nationalization
...
I'm listening to Liszt's "
Mephisto Waltz No. 1", something of concert and piano competition standard and not really my favorite Liszt, but it makes a very apt soundtrack for the extraordinary events on Wall Street this week.
There is a wedding feast in progress in the village inn, with music, dancing, carousing. Mephistopheles and Faust pass by, and Mephistopheles induces Faust to enter and take part in the festivities. Mephistopheles snatches the fiddle from the hands of a lethargic fiddler and draws from it indescribably seductive and intoxicating strains. The amorous Faust whirls about with a full-blooded village beauty in a wild dance; they waltz in mad abandon out of the room, into the open, away into the woods. The sounds of the fiddle grow softer and softer, and the nightingale warbles his love-laden song
This is the program note to the piano piece, and substitute Wall Street for Faust and greed for the Devil (is there really any difference?) and you have just about got it. The nightingale that steps in to soothe us - well, that is the U.S. Government and the 500 billion to 1 trillion dollars of
its our money.
Well, we'll see next week if the song is still sweet. It's clear even now that we've lived through a week of financial upheaval that rivals that of 1929, although, so far, with a happier outcome. No mass panic, people jumping out of skyscrapers and ashen-faced acknowledgements of ruin.
Personally, I think this bailout should have come months ago, but, as in the case of the addict who does not realise the extent of his condition until he or she reaches rock-bottom, perhaps such upheaval was necessary first. Unexpected things are going to continue to happen, but I sense that this was indeed the bottom. The government saw the abyss up close and chose to act. Better that by far than the alternative (although already the dedicated free marketeers are upset - well, they have reason to be, the housing finance industry in the U.S. has been almost wholly nationalized now). That a Republican administration should be behind this is simply boggling, but, as always, political expediency - not to mention being backed completely into a corner - wins out whatever the ideology in the end.
Thursday, 18. September 2008, 01:46:25
finance, economy, money, hard times
...
Bailout Fails to Stem Global Stock Slump
Dow Falls by More Than 440 Points in Jittery Trading
To be expected, really. We're in a new and uncertain world built on shifting perceptions and confidences, and it seems like the rule book has been tossed out of the window.
Funny thing is, apart from being unnerved by this
money market failure, I feel relatively optimistic about the long term prospects. I have certainly felt
more optimistic in the past, but I sense what we are seeing here is much needed consolidation as the air whooshes out of the bubble. Banking businesses are either going to go out of business, be bought or merged, and in a year's time the big finance companies on Wall Street will be quite different from what we see today.
Necessary, I feel. The most necessary thing right now is the realistic valuation of all these dreadful mortgage-derived assets, and that's starting to happen by default as Lehman Brothers' bankruptcy in particular flushes out a true market price.
Yes, masses of money is going to be lost, but the house will cleaned. At least, until the next generation of greedy and so-clever-they-are-stupid financiers takes charge again. Hopefully that will be long enough into my retirement that I will not care at that point!
Wednesday, 13. August 2008, 12:39:01
irritation, money
Given the international economic collapse that has been brought about by the greed and avarice of much of the financial industry - as evidenced by the creation of evermore esoteric and hard to value investment products designed to maximise financial company income at the expense of overall financial stability - I have a very dim view of the financial industry as a whole. A largely immoral industry, dedicated to generating absurdly oversized salaries for simply shuffling numbers and paper around.
Such feelings tend to be reinforced by high-handed behavior in companies dealing with our own finances. While we were in England, The Bank of New York liquidated an investment vehicle gifted to my wife as a child, giving so little notice that the letter of notification and the liquidation act itself were sent and done in the four weeks we were away. (I noted the company seemed to have merged at this time with Mellon Bank - I suspect this liquidation was the result of the elimination or a cut-back in the The Bank of New York's trust dept.) Thus some very large checks arrived in the mail that we have made no tax provisions for and will have to scramble to cover.
Naturally, of course, the liquidation occurred while the shares were at a very low valuation too.
Well, it could be worse. It's going to be pain to work out the cost basis of much of this stuff, and there will substantial capital gains to pay. But at least the money is in our hands. At this point, that is the best place for it and we can reinvest it in a company (such as Vanguard) that bucks the general trend towards high expenses and greed.
Friday, 27. June 2008, 02:25:53
recession, money, depression, economy
U.S. stocks tumbled, sending the Dow Jones Industrial Average to its worst June since the Great Depression, as record oil prices, credit-market writedowns and a slowing economy threatened to extend a yearlong profit slump.
And as went the United States, so went the
rest of the world.
Gloomy times indeed, with people facing large price increases and rapidly declining assets. If indeed they have any assets given the level of indebtedness in this country.
Curiously, though, I still feel sanguine about all this. Perhaps it is because, as
Doug Kass puts it, I am still breathing. Things may well get a lot worse, but if the economy tips into a full-blown recession, some of the current inflationary pressures will ease simply because demand will drop for a lot of stuff. Oil is a prime candidate for a big fall, particularly because China has greatly reduced its subsidy for the commodity thereby inevitably reducing demand in that huge market. High prices worldwide are having a similar effect.
Of course, this is all fine and good but it is not nice seeing your standard of living decline before your eyes in the meantime. Not nice, but perhaps a good thing. It's time we started to shake ourselves out of the assumption that we are always going to be better off than those who came before us.
Wednesday, 7. May 2008, 21:16:10
stock market, SEC, money
SEC to Make Banks Reveal Capital, Liquidity LevelsThe stock market, particularly financial companies, took a dive today, and I wonder how much of that was due today's announcement by the SEC.
The U.S. Securities and Exchange Commission will require investment banks to disclose their capital and liquidity levels after the agency was criticized for regulatory failings in the wake of the Bear Stearns Cos. collapse.
As it clear by now from the ructions of the past year, financial institutions have been playing a shell game with the mortgage industry. This ruling should force even more nasties into the limelight - although I suspect that a legion of corporate lawyers are working right now to set up yet another dodge.
Tuesday, 6. May 2008, 13:25:05
loans, nuttiness, credit, money
...
Jerry Tao, a part-time lawyer and spokesman for Evofi One's parent company, lost access to his $50,000 Countrywide line despite earning more than $500,000 last year and having a credit score he says was between 750 and 770.
Though he never accessed the line, Tao, 40, said he'd hoped to redo his backyard and replace his 1995 Nissan Pathfinder.
You read the
most extraordinary things in the business press where some mortals seem to roam an alternate universe.
This article, essentially about Countrywide abolishing home equity lines of credit in areas of precipitous property value decline (e.g. Las Vegas, Chicago etc.), threw this little 'human interest' tid-bit in.
What makes no sense to me is how Mr. Tao, having earned half a million dollars last year, finds it necessary at all to borrow to replace his car (a commendably aged vehicle) and fix his backyard.
This suggests to me that either he did not really make as much as the article quotes, or that he spends an astonishingly large amount of money in his daily life. Or maybe his backyard is 100 acres.
He lives in Las Vegas - perhaps that is the clue...
In any case, stories like this are so far outside the realm that I inhabit that I just have to shake my head at the nuttiness of it all.
Tuesday, 24. July 2007, 01:01:07
USA, debt, bad government, money
...
Every now and then - and with increasing frequency in all areas - I come across truly cogent articles elucidating in painful detail exactly why George Bush and his calamitous government has wrecked a great country. In
this case, a financial analysis based on the thoughts of Robert Hormats, vice chairman of Goldman Sachs (International). A pertinent quote:
The truth is, America's leaders have already squandered "Hamilton's gift" (a policy of paying off war debt), and along with it, more than two centuries of experience, replacing it with a new "faith-based" policy: "Deficits don't matter."
No wonder Main Street Americans have a "gut instinct" that we're a disaster waiting to happen. Not only are we "transferring an inordinate burden to future generations," says Hormats, Washington's undisciplined spending and total lack of a financial repayment plan is undercutting our national security and exposing America to the worst-case scenario: Another domestic terrorist attack that would trigger a "massive disruption of our economy" and a meltdown of America's credit rating throughout the world.
Friday, 20. July 2007, 01:27:31
TV, money
Nothing like an economic incentive
"How to Earn $1 Million by Not Watching TV" You can quibble with the figures about the actual costs of equipment etc., but the point that Jeffrey Strain makes about advertising is very pertinent. Those ads do work, and they will make you buy stuff that you would otherwise go without.
So glad I gave it up!
Wednesday, 14. February 2007, 01:50:53
debt, money, sub-prime mortgages
Interesting and worrying news in the world of finance over the past few days. Essentially a number of financial institutions, most notably HSBC Holdings PLC, are reporting
far higher losses from their US sub-prime mortgage loan business than was hitherto anticipated or expected. Indeed, as of today, no less than 21 financial institutions have collapsed since December 2006 as a result of bad house loans, as detailed on
Implode-O-Meter.
Is this the beginning of a greater crash as debt overwhelms increasingly more home owners? Who knows. You can argue that the sub-prime market - those high-risk borrowers with slender means and poor credit - are a relatively small proportion of total loans. But how many current borrowers classed as prime are slipping down the debt slope?
Turbulent times ahead?
Tuesday, 19. September 2006, 23:21:03
Hedge Funds, money
Hedge funds - as their name implies - are supposed to be multi-faceted investment vehicles for the very rich to become richer with minimal risk. Sometimes this goes
wrong.
The hedge fund Amaranth managed to lose $5 billion last week, a sum that is surely greater than the gross domestic product of most third world countries. All done, apparently, by a 32-year old trader who happened to bet the wrong way on natural gas prices.
As I
read about this, I found this amusing quote:
Amaranth's collapse, however, strengthens the sceptics, who share the belief of the great investor Warren Buffett who, after observing the lavish salaries hedge fund managers paid themselves, said these funds were no more than a compensation structure dressed up as an industry.
Not being one whose personal fortune (what personal fortune?
) has been decimated by this latest bout of financial mismanangement, I could smile at that one.
Monday, 8. May 2006, 01:30:06
money, photography
A rather surreal evening at the home of the former President of the
Ralston-Purina corporation, William Stiritz, all in honor of a retiring head of the Women's Studies department at Washington University.
A charming man, worth about $120 million in 2001 according the St. Louis Post Dispatch. Does being that rich confer superhuman properties on anyone? I think not. So if he is clearly not that different from me, why the need to accumulate so much cash?
The short answer is because he can. Does that make it right? Debatable. The house was decorated with original modern artwork, commissioned portraits of the family, and clearly the finest quality items throughout. Even an electronically controlled player-piano. Did I feel envious? Curiously, not in the slightest. Give me my low-key, unassuming home anyday.
Monday, 6. March 2006, 01:12:39
consumer finances, saving, money
Every three years the U.S. Federal Reserve releases a
survey of consumer finances. This is an attempt to gauge family wealth in the United States, and is based on an in-depth analysis of the finances of 4000 households.
The most recent report was released last month, and it is sobering reading. As the
Washington Post summarises:
Meet the typical American family.
It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can't manage to pay off a $2,200 credit card balance.
The report is disturbing in a number of ways. To quote the report itself:
The survey shows that, over the 2001–04 period, the median value of real (inflation-adjusted) family income before taxes continued to trend up, rising 1.6 percent, whereas the mean value fell 2.3 percent. Patterns of change were mixed across demographic groups. These results stand in contrast to the strong and broad gains seen for the period between the 1998 and 2001 surveys and to the smaller but similarly broad gains between the 1995 and 1998 surveys.
Essentially, that tells us that the strong American GDP over the past years is not translating into wealth for the American in the middle of the wealth spread. Much of this failure to thrive economically can be attributed to debt:
As debt rose over the period, families devoted more of their incomes to servicing their debts, despite a general decline in interest rates. Also, the fraction of families with large required debt service payments relative to their incomes rose a small amount, and the fraction of families that had payments that were late sixty days or more in the year preceding the survey rose more substantially. These increases affected mainly the bottom 80 percent of the income distribution.
More debt means less saving, and with the savings rate currently standing at
minus 0.7%, it seems clear that Americans are living further and further beyond their means. As the Washington Post article points out, most Americans are woefully underfunded for retirement, or indeed for any crisis such a lost job or an unexpectedly heavy medical expense.
It's hard not feel that this is all going to end in tears. Sooner or later you have to pay the piper and it's not going to be pretty.
Monday, 20. February 2006, 15:37:09
government, debt, money
...is about the amount that the current
U.S. national debt of $8.18 trillion works out per person! That's a lot of money.
As thestreet.com article points out:
The U.S. will spend $217 billion this year to pay interest on the publicly held portion of the debt, according to the Congressional Budget Office, and that is more than will be spent on homeland security, education and transportation combined.
Something is not right here. Although I am very liberal in my social views, I tend to be highly conservative when it comes to cash. My family has been debt free for six years now (ever since we paid off the house, which we did in 7 years!) , and I don't see why governments can't do the same. If that means raising taxes, well so be it. Just throwing money away paying interest is a mug's game.
Wednesday, 8. February 2006, 04:27:46
money, envy
Every now and again I come across one of those salary reviews - IT-related ones are particularly common on the web - that make my heart sink. My skimpy wages don't even seem to reach entry-level for these idealized jobs, and this with a Master's degree and decades of experience. I wonder where did I go wrong, and why aren't I living in a mansion in the suburbs with two flashy cars?
It takes about 10 minutes for the spell to wear off. Essentially, all I am responding to is envy, and envy of no more than that magical $$$$ sum that seems to define a person's worth. This is such bogus thinking, even if it is seductive.
I do what I like, am liked and respected, and gain great ethical satisfaction from my work. My advanced degree has allowed me to place myself exactly where I want to be, and my intelligence and knowledge allows me to manage what I do make in a wise manner. I live a full life. I lack for nothing that is meaningful to me.
The truth is that to get caught up in the money envy trap is enter a never-ending spiral of avarice, because there will always be someone better off. As I am, I am more fortunate than billions and billions of human beings on this planet, and it makes a lot more sense to think of them and the real poverty that afflicts so many.
WIDGETIZE