Posts Tagged dollar
Sarkozy Says EU Must Back Greece
Posted by Tetyana Matychak in Favourites, Trading Markets on March 8th, 2010
French President Nicolas Sarkozy said the European Union must support Greece or risk destroying the euro as Prime Minister George Papandreou heads for Paris to lobby support for the debt-laden country.
“If we created the euro, we cannot let a country fall that is in the eurozone,” said Sarkozy, who hosts Papandreou in Paris tomorrow. “Otherwise there was no point in creating the euro. We must support Greece because they are making an effort.”
EU leaders have so far refused to give financial aid to Greece and have ordered the government to cut its budget deficit, the EU’s highest, on its own. While Papandreou says steps taken this past week to slash the shortfall warrant more help from the EU, German Foreign Minister Guido Westerwelle said today that his country is “not going to write a blank check.”
Papandreou is touring Luxembourg, Berlin, Paris and Washington after his government passed a 4.8 billion euro ($6.5 billion) austerity package yesterday. German Chancellor Angela Merkel, who met him yesterday, said the question of a bailout “absolutely doesn’t arise” and the steps taken to cut the deficit make her optimistic that a rescue won’t be needed. Read the rest of this entry »
For Landlords, the Numbers Are Starting to Look Better
Posted by Tetyana Matychak in Investing on March 5th, 2010
Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.
If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.
In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.
But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That’s up from roughly a 5% yield several years ago when prices were higher, he says. Read the rest of this entry »
The Carry Trade Can Be Unforgiving
Posted by Tetyana Matychak in Currency on March 2nd, 2010
Billions of dollars are wagered daily in the “carry trade,” in which traders sell the currencies of countries with low interest rates like the U.S. and Japan while simultaneously buying the currency of countries with higher rates like Australia and Brazil.
These arbitrage opportunities can persist for years at a time. But before you try your hand at the carry trade, be aware that currency values can change in seconds, causing sudden losses. And because currency trading typically involves heavy financial leverage—traders borrow as much as $500 for each dollar they invest to amplify results—the carry trade can rapidly become the scary trade.
That is what happened in the fall of 2008, when traders suddenly rushed to the safety of U.S. dollars during the financial crisis. Those who had sold the dollar and Japanese yen to own higher-yielding currencies quickly piled up big losses as these other currencies sank in value. The losses wiped out several years’ worth of gains in the carry trade.
While amateur traders see the carry trade as a road to riches, “I see it as a way to get broke,” says Amarjit Sahota, chief executive at HiFX Inc., which helps companies and individuals manage currency exposure. Read the rest of this entry »
High Yields Aren’t Always a Good Thing
Posted by Tetyana Matychak in Investing on March 1st, 2010
In the parched landscape of income investing, dozens of closed-end funds yield more than 10%.
Just as wanderers in the desert shouldn’t mistake a mirage for an oasis, investors shouldn’t regard these funds as salvation. Often, the income you earn in the short run mightn’t be worth the principal you lose in the long run.
Like mutual funds, closed-ends are baskets of stocks or bonds. Unlike a mutual fund, a closed-end trades like a stock; you can buy shares only from other investors. Thus the price isn’t set merely by the value of a closed-end’s investments, but by the whims of those who trade its shares. When investors pay more than the portfolio’s net asset value, that is called a “premium.” When the shares trade at less than NAV, that is a “discount.”
As of last week, 11 of the roughly 650 closed-ends tracked by Lipper Inc. traded for at least 20% more than their portfolios are worth. In many cases, investors are paying those big premiums in pursuit of high yields.
Buy such a fund, and you may double-dose on risk. A yield that looks stable can crumble; then the premium may collapse as panicked investors dump the fund. That leaves you with less income than you expected—and a big market loss to boot. Read the rest of this entry »
Credit-Card Fees: the New Traps
Posted by Tetyana Matychak in Budget, Favourites on February 26th, 2010
A new federal credit-card law that takes effect Monday could erase billions of dollars a year in fees and interest charges paid by consumers. But card issuers are already deploying new tactics that could prove costly for even the most cautious cardholder.
The law made some important changes. Card companies must now tell customers how long it would take to pay off the balance if they only make the minimum monthly payment. Customers can only exceed their credit limit if they agree ahead of time to pay a penalty fee. And unless a cardholder misses payments for more than 60 days, interest-rate increases will affect only new purchases, not existing balances.
Banning these and other profitable tactics is expected to cost the card industry at least $12 billion a year in lost revenue, according to law firm Morrison & Foerster. This has sent the industry scrambling to find new sources of revenue. So get ready for higher annual fees, higher balance-transfer charges, and growing charges for overseas transactions.
“There are countless fees that can be introduced and rates can go through the roof,” says Curtis Arnold, founder of U.S. Citizens for Fair Credit Card Terms Inc., a consumer-advocacy group.
Consider the new offer from Citigroup Inc. The bank will give cardholders a credit of 10% on their total interest charge if they pay on time. That sounds enticing, except that if you don’t pay on time, your interest rate is 29%. Read the rest of this entry »
Study shows why it is so scary to lose money
Posted by Tetyana Matychak in Budget on February 11th, 2010
The study of two women with brain lesions that made them unafraid to lose on a gamble showed the amygdala, the brain’s fear center, activates at the very thought of losing money.
The finding, reported in the Proceedings of the National Academy of Sciences, offers insight into economic behavior and suggests that humans evolved to be cautious about the prospects of losing food or other valued possessions.
Benedetto De Martinoa of the California Institute of Technology in Pasadena and University College of London and colleagues were studying why people will turn down gambles that are likely to lead to gain.
“Laboratory and field evidence suggests that people often avoid risks with losses even when they might earn a substantially larger gain, a behavioral preference termed ‘loss aversion’,” they wrote.
“For instance, people will avoid gambles in which they are equally likely to either lose $10 or win $15, even though the expected value of the gamble is positive ($2.50).” Read the rest of this entry »
If You’re 50 and Haven’t Saved A Dime
Posted by Tetyana Matychak in Budget on February 9th, 2010
You’re 50, recently laid off, and now forced to figure out what work you’ll do for the next 15 years or more and how you’ll ever retire.
You’d dreamed of leaving your job at 65, vacationing in Tuscany, taking a trip around the world, or perhaps spending your afternoon on the golf course. But the reality is the economic downturn has tripled the number of unemployed wokers ages 55 to 64 over the past two years, compared with a doubling in the overall unemployment rate.
That means right now, for you, Job Number One is figuring out the next career you’ll embark on. This is the “new retirement” that many Baby Boomers (born between 1946-1964) must now envision.
The rise in job losses, grim prospects for Social Security benefits, and paltry personal savings has created a situation where many Boomers must put off retirement from the workforce because they simply cannot afford it. Even before the recession, the Congressional Budget Office predicted the Social Security Administration would be doling out more money than it took in by 2020, which would deplete the trust fund and cause a severe cut in benefits by 2043. Read the rest of this entry »
China’s boom to end soon
Posted by Tetyana Matychak in Favourites, Trading Markets on January 25th, 2010
After more than a quarter century of rapid growth, China’s factory-to-the-world economy could now be set for a major slowdown, even as it tries to spend its way to strength, according to an expert on the causes of the global financial crisis.
Noted economist and author Richard Duncan said that, faced with sluggish global growth and a tapped out U.S. consumer, there’s little hope that China can keep its factory-geared economy in motion much longer.
“China has followed an export-led growth model for the last 25 years, and it has just hit a brick wall when the U.S. economy went into crisis,” Bangkok-based Duncan said in an interview with MarketWatch.
Duncan is the former London-based head of global investment strategy at ABN Amro. In 2003 he authored “The Dollar Crisis,” which warned that imbalances in global trade would lead to a meltdown of the financial system.
Duncan now believes China is caught in a jam created by excessive credit. Years of easy lending and booming investment inflows have saddled its economy with surplus industrial capacity to the point where China out-produces what it consumes. Read the rest of this entry »
Reducing U.S. debt: Ideas from the Hall of Lame
Posted by Tetyana Matychak in Budget on January 11th, 2010
Only in the world of federal debt do tens of billions of dollars amount to little more than rounding errors.
Yet it’s the rounding errors that many lawmakers reach for when making impassioned speeches about reducing the debt.
Whatever merit their ideas may have, they don’t have a prayer of generating sizeable savings.
Sure, every little bit counts.
But “a little bit” doesn’t really move the needle when you’re talking about $12 trillion in accumulated debt, several trillion more expected over the next decade and tens of trillions more on top of that due to long-term shortfalls in Medicare and Social Security. Read the rest of this entry »
How much you’ll need in retirement
Posted by Tetyana Matychak in Budget, Favourites on January 8th, 2010
Conventional wisdom says you need 80% of your pre-retirement income. But ensuring a comfortable retirement will take more than just a rule of thumb.
Question: I always heard that you will need 80% or so of your working salary to live on in retirement. But is that a percentage of your gross income or your take-home pay? –Mary Taylor, Chalfont, Pennsylvania
Answer: This rule of thumb has long confused many people who are trying to get a handle on their retirement planning. But the question of how much income you’ll need to live comfortably after calling it a career has taken on a special urgency the last year or so as retirement account balances wilted during the market’s meltdown.
After all, if you earn roughly $100,000 a year and take home, say, $80,000 after taxes, the difference between requiring 80% of your gross income ($80,000) and 80% of your net income after taxes ($64,000) is substantial. Unless you’ve got a pretty sizeable nest egg, the difference between coming up with $80,000 a year (plus inflation increases to maintain purchasing power) and $64,000 can have a significant impact on whether your money can support you the rest of your life. Read the rest of this entry »
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Credit-Card Fees: the New Traps
26 February 2010
Credit regulations aim to help students
23 February 2010
The worst is yet to come
17 February 2010
Afflictions of liberty
8 February 2010
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