New Money
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The Ultimate Scare: Wall Street Halloween Costumes
Continue reading… 0 CommentsIf you're still searching for a Halloween costume, check out Forbes' annual selection of Halloween masks. Each of "the Scariest People of 2008" comes with printing instructions and a cutout (see this one of Ashley Dupre).
The collection includes Eliot Spitzer, Julia Allison, Chris Matthews, Ben Bernanke, Henry Paulson, the presidential hopefuls, and my favorite, Rick Astley.
If you don't have a color printer, head on down to Kinko's.
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Fed Rate Cut: Future Stop, Zero?
Continue reading… 1 CommentNow that the Fed has slashed rates by a half-percentage point, big leaguers are already asking if that's enough to prop up the flagging economy.
Former Federal Reserve governor Laurence Meyer thinks the federal funds rate may drop all the way to zero next year. According to Real Time Economics, he and former Fed economist Brian Sack expect the Fed to cut rates 0.5 percent again, in December.
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Treasury: Check Into the 'Bad Credit Hotel'
Continue reading… 0 CommentsCheck it out. The Treasury's trying to get us to swallow the bitter pill of credit education with an interactive game!
It's called the Bad Credit Hotel, where you "check in and learn the basics of maintaining good credit." At first, I got excited because I thought it might be like Choose Your Own Adventure. And it may well be. But either I'm not good at this game or I'm missing something, because after the hotel clerk ushered me into the parlor, a man in a top hat asked me to find his spectacles, and I gave up after clicking on everything on the page. Luckily, I can check out anytime I like!
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More of Us Are Living to 100: How That Affects Our Finances
Continue reading… 4 CommentsBy 2050, the number of people in the United States living to 100 will be 14 times what it is today, or nearly 850,000, according to a recent Nielsen study. And making it to the century mark might be easier than you think, according to this story.
If you live to 100, that means you need your money to last, and most financial professionals say the only way to do that is to keep a good portion of your nest egg invested in stocks. Like me, you may not be anywhere near retirement, but it's not a bad idea to get an idea of what your investments should look like when you get close (many planners say keeping 40 to 60 percent of your portfolio in stock funds is a good bet). Here are some sample portfolios.
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Tripping the Circuit Breakers: 'Limit Down' and Trading Halts
Continue reading… 1 CommentWhoops—it looks as if we tripped the premarket circuit breakers. Ahead of trading this morning, stock futures fell 6.5 percent and hit "limit down," a built-in safety net that suspends futures trading until the start of the trading session (9:30 a.m. in New York). According to Investopedia, limit down is the maximum the price of a futures contract can decline in one trading day.
Now, let's talk trading halts.
Says the Kirk Report:
We're currently in crash mode and all but the most stubborn bottom callers will get flushed out in this move. As you might expect, they're already talking about trading halts that may occur today in response to the selling. In addition, Fed Funds futures are pricing in a larger rate cut for next Wednesday and there are already rumors of an emergency rate cut this morning as well.
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Greenspan: It's Not Just a Crunch, Folks; It's a 'Credit Tsunami'
Continue reading… 3 CommentsGrab a life raft. Former Fed chief Alan Greenspan didn't mince words today when he characterized the financial crisis as a "once-in-a-century credit tsunami" in testimony before Congress.
What caused the tsunami and how policymakers can shimmy the country out of it were the focus of the House Committee of Government Oversight and Reform's hearing. Greenspan said he's in a "state of shocked disbelief" and admitted a flaw in his thinking about the free-market system. "I was going for 40 years or more on the perception that it was working well." (During his tenure, he opposed tight regulation of financial companies.) Today, he called for tighter regulation. He also said he was "partially wrong" about credit default swaps.
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Money Market Funds: Fed to the Rescue
Continue reading… 2 CommentsIn the latest move to unclog the credit markets, the Fed said today that it's providing help for money market funds. (That's on top of the Treasury's guarantee to insure money market funds that pay a fee.)
Money market funds have been strained by investors cashing out and moving their money into government IOUs, which pay less but guarantee safety. The funds have had a tough time selling assets to satisfy redemption requests from investors, the Fed said in a statement. About $500 billion has flowed out of prime money market funds since August, according to Bloomberg.
To help money market funds meet redemptions, the Fed is setting up the Money Market Investor Funding Facility, which will be made up of five units run by JPMorgan Chase & Co. These units will buy money market instruments (such as certificates of deposit and bank notes) held by money market funds. By facilitating the sales of these instruments in the secondary market, the MMIFF "should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments," the Fed said. In other words, don't lose confidence in money market funds.
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All Ready for a Raging Bull
Continue reading… 4 CommentsHere's diving into a down market. Just in time for my 30th birthday a few months back, I finally got my finances in order enough to open my first brokerage account. I should mention that I'm a faithful 401(k) contributor, but I don't count on seeing that dough for another 35 years or so.
Money I won't see until my late 60s doesn't really seem like money. And I have to admit, charting my course with a supermarket-worthy selection of stocks, funds, and exchange-traded funds just felt more Working Girl (or, better yet, The Secret of My Success).
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The Beige Book's Grim News
Continue reading… 1 CommentThe latest Beige Book is out, and it's quite a gloomy read. (The book, published by the Federal Reserve eight times a year, is a roundup of "anecdotal information on current economic conditions" by each Federal Reserve regional bank, as well as "interviews with key business contacts, economists, market experts, and other sources," according to the Fed.) Highlights from the information gleaned in September:
Consumer spending: weak, with declines in retailing, auto sales, and tourism. Some districts noted lower sales on big-ticket items and increased activity at discount stores.
Residential real estate: weak. In addition, commercial real estate activity slowed in many districts.
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Libor Loosens Up: Why You Should Care
Continue reading… 4 CommentsLibor—the London interbank rate—is on the decline, thanks to the government's rescue package. Translation: Rates for borrowing between banks are falling. Why should you care? Because many consumer loans are tied to it, including more than half of U.S. adjustable rate home loans. Many small-business, student, and auto loans and home-equity lines of credit also take their cues from Libor. The higher the rate, the tougher consumers have it.
Libor rates for three-month dollar loans are currently 4.55 percent, down from 4.64 percent on Monday. Some context: After the House of Representatives rejected the bailout bill at the end of September, Libor rates shot up to 6.88 percent, and a month ago, rates were less than 3 percent, according to the AP.
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Maxing Out the National Debt Clock
Continue reading… 278 CommentsAre you surprised? Times Square's National Debt Clock, which has been tallying up money owed by the U.S. government since 1989, is running out of spaces.
In September 2008, the digital dollar sign was eliminated to make way for an extra digit—the "1" in $10 trillion (the national debt is currently $10.2 trillion). Now, a new clock is in the works that will make room for a quadrillion dollars of debt, according to the Associated Press. Anticipated completion is early 2009.
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How the Fed Cut Affects the Prime Rate
Continue reading… 5 CommentsThe Federal Reserve's key rate cut today aims to steady the markets and stem the financial crisis. But it also changes the rate consumers are charged for loans.
For consumers, it's all about the prime lending rate, which is used for everything from car loans to home equity loans. Banks typically take cues from the Fed, which means the prime lending rate often moves in tandem with the fed funds rate.
Case in point: Bank of America, Wachovia, and Wells Fargo all said Wednesday that they're lowering their prime lending rates from 5 to 4.5 percent, which matches the 0.5 percent fed rate cut.
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Bogle’s Take on the Market Crisis: ‘Speculative Orgy’
Continue reading… 0 CommentsVanguard pioneer John Bogle, who said last month that the U.S. government appears "punch drunk" on its proposals to rescue the financial system, told NPR last weekend that the current crisis is a "speculative orgy like nothing we have ever seen before in the history of the United States."
"Turnover in the stock market is...more than twice as high now as it was in 1929. We've become a market dominated by speculators and not by investors," said Bogle. "And Wall Street plays a big role in this, simply because they like to get out 'new products,' and they don't pay much attention to the quality of those products. They're trying to do all this complex innovation to make money for themselves...and they sell it to people who ought to know better who are just looking for more yield."
Listen to the entire interview here. And click here for a market take from Vanguard's new CEO, Bill McNabb.
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European Markets: Desperately Seeking Rate Cuts
Continue reading… 1 CommentFollowing a brutal day in which the pan-Europe Dow Jones Stoxx 600 Index slid to its deepest decline since 1987, European stocks showed a sign of life Tuesday on hopes of interest-rate cuts from the world's leading central banks. Those hopes are high, given the Reserve Bank of Australia's surprise 1 percentage point rate cut overnight.
Here's what the pros have to say:
Morgan Stanley says the Fed may cut rates before its next scheduled meeting (October 29-30), and although coordinated action isn't likely, moves are "probable" by several G10 central banks. The firm sees 2009 global growth at 2.7 percent, a forecast that's down 0.8 percent from last month:
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Dow Below 10,000: A Psychological Downer
Continue reading… 2 CommentsFor the first time since 2004, the Dow Jones industrial average skidded below 10,000, a "psychological barrier," as some would say.
After the Dow first cracked 10,000 on March 30, 1999, Jeremy Siegel, a professor at the University of Pennsylvania's Wharton School of Business, was asked why that barrier is significant:
It's arbitrary to the minute in terms of when you take the prices of the stocks. But all that aside, I don't deny the tremendous psychological impact of the Dow getting into the 10,000 area. It is the world's most famous average. It's the way people think about stocks and conceptualize the market. As a result, it has tremendous psychological import.
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The Best Money Market Deal
Continue reading… 2 CommentsThis isn’t a great time for cash investors when you figure the rate of return you’ll get after the inflation bite. But currently, bank products are the best of the lot, says Greg McBride, senior financial analyst at Bankrate.com, who also writes a Fed blog.
“Investors are focused on hunkering down and preserving principal that they’re looking at cash regardless of its after-inflation return,” says McBride. “If you’re going to do that, look at CDs, bank savings accounts, and money market accounts.”
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Investors Ease Back Into Money Market Funds
Continue reading… 1 CommentThe run on money market funds looks to be changing. Investors have steadily been pulling cash out of their money market funds over the past few weeks on news of the implosion of the Reserve Primary Fund.
But new data indicates they may be regaining confidence in the funds. For the week that ended September 30, assets in money funds rose $12.4 billion, according to iMoneyNet. Institutional investors were responsible for $9 billion of that gain, and $3.4 billion flowed in from individual investors.
The Treasury Department's money-fund bailout is most likely responsible for the asset inflows. Announcements from major fund companies that they'll participate in the guarantee program presumably played a part as well.
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Wells Fargo Deal: Better for Wachovia Shareholders
Continue reading… 5 CommentsUnder the Citigroup takeover, Wachovia shareholders would have gotten a pretty raw deal. The Wells Fargo acquisition (read the full text here) is an improvement: Each share of Wachovia common stock will be exchanged for 0.1991 shares of Wells Fargo common stock, which comes to a value of $7 per share (based on Wells Fargo's closing stock price of $35.16 a share on Thursday). The Citi deal would have paid $1 per share.
Here's what Wells Fargo's chairman, Richard Kovacevich, said in a statement: "This agreement is an outstanding opportunity for Wachovia common and preferred shareholders and debt holders, team members and customers, for the Charlotte and St. Louis communities and indeed all of the communities that Wachovia serves, and for the U.S. government and our banking system."
According to the Winston-Salem Journal, some shareholders are considering individual or class-action lawsuits based on statements made by Wachovia executives this year. One such is former CEO Ken Thompson's decree in January that Wachovia was not going to cut its dividend. Since then, the bank has cut its dividend twice, from 64 cents in February to 5 cents in July. One investor in the story, who has lost roughly $150,000 on Wachovia shares over the past year, said: "I bought 2,000 shares of Wachovia stock at $36 a share based on that statement because it helped restore my confidence in a Wachovia rebound."
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Cheers: Wine and Liquor Keep Flowing Despite Sour Economy
Continue reading… 3 CommentsWine and spirit maker Constellation Brands may have posted a loss in its fiscal second-quarter profits, but the company also reported swift sales of vodka and premium wines.
Constellation, which holds the crown of world's largest wine producer, said net sales rose 7 percent in the quarter to $1.24 billion, mainly on the strength of its wine brands (including Wild Horse and Woodbridge by Robert Mondavi) and spirits (big gains were had by brands including Svedka Vodka and 99 Schnapps).
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Playboy Wants Laid-Off Wall Streeters to Bare All
Continue reading… 2 CommentsHeadline writers are having a ball with Playboy 's announcement that it's looking to photograph current and former employees of the financial world for an upcoming credit crisis-themed feature, "Women of Wall Street."
Here are a couple of zingers:
