Showing posts from September, 2009

4 low-risk inflation strategies

Margarette Burnette

Inflation should be a top concern for investors, especially among people facing retirement, says Michael Kresh, a Certified Financial Planner and author of "You Can Afford to Retire."

"When you are trying to accumulate money long-term, you have to try to beat the rate of inflation," Kresh says. "That means real (inflation-adjusted) growth in your portfolio, not just nominal growth."

The following are expert tips to help savers balance the desire for financial safety with the need to outpace inflation.

1. Strike balance between safety and return

Investors can easily protect themselves against the risk of loss of principal by choosing safe, low-yielding investments. However, that "safety" may be a mirage.

Parking money in such accounts makes it vulnerable to the risk of loss of purchasing power that comes with inflation, Kresh says.

4 inflation-fighting tactics

1. Strike balance between safety and return.
2. Add TIPS to list of p…

The period of insane market volatility is over

By Paul R. La Monica, editor at large

Wall Street will celebrate a not-so-happy anniversary on Tuesday.

A year ago on Sept. 29, the Dow Jones industrial average suffered its worst point drop in history, plummeting nearly 778 points, after the House of Representatives rejected the first draft of the $700 billion financial rescue plan. The S&P 500 and Nasdaq each plunged about 9% that day.

Of course, the controversial Troubled Asset Relief Program, or TARP, ultimately wound up passing the House a few days later after the Senate approved a modified bill. Some politicians who initially voted against the bailout even attributed fears of another big sell-off as a reason for changing their minds.

The market chaos didn't end with the passage of TARP though. Over the next few months, the Dow suffered its second-largest, fourth-largest and fifth-largest point drops ever -- but also its biggest, second-biggest and third-biggest point gains in history.

Looking back, it truly is a…

How much is a burger worth?

IF SINGAPOREANS feel they cannot afford to buy as many things as they could a few years ago, they are not imagining it, according to a survey by Swiss bank UBS.

The proof, so to speak, is in a burger.

The survey shows Singapore workers have to slog longer to earn enough money to bite into a Big Mac. Its price is equivalent to about 36 minutes' worth of work, 14 more than three years ago.

It is, however, just one ingredient in the survey which covered the prices of 122 goods and services.

While a burger index is hardly a scientific study of purchasing power, it does provide some meat to the argument that workers here are getting a tougher deal than those in some other countries.

Singapore's worsened placing on the burger index - a proxy for the cost of goods and services - highlights two possibilities: either that consumption has become more costly, or pay packets have become lighter.

Both are worrying trends which could have crept into the country, serving a double whammy to residen…

Singapore: Keeping cool in the heat

Pauline Goh
Managing Director
CB Richard Ellis Singapore

THE measures are aimed at cooling the market by lowering demand and increasing supply. On the demand side, the removal of the special payment schemes will effectively encourage homebuyers to reassess their cashflow position carefully before they make purchase commitments. Those who have sufficient funds only for the upfront 20 per cent downpayment and are relying on the future sale of their existing homes to help finance their new purchases may now be encouraged to hold back on newly launched projects and possibly look instead to the secondary market including projects that are close to TOP.

On the supply side, the re-introduction of the confirmed list back into the government land sales programme will provide better visibility to the market on the pipeline of future supply.

These measures should help to moderate, to more sustainable levels, the current sales momentum which has escalated since March and looks set to easily exceed the…

cnbc M&A Is Back and May Bring Big Opportunities for Investors

After missing in action for much of this year's stock rally, mergers and acquisitions are making a big comeback.

On Monday alone, Xerox (NYSE:XRX - News) announced plans to buy Affiliated Computer Services (NYSE:ACS - News) in a deal valued at $6.4 billion. And Abbott Laboratories (NYSE:ABT - News) agreed to buy the drugs unit of Belgian conglomerate Solvay for $6.6 billion in cash.

Kraft (NYSE:KFT - News) also is reportedly poised to launch a hostile bid for Cadbury (NYSE:CBY - News) valuing the British confectionery business at around 11 billion pounds ($17.6 billion).

On top of that, Disney (NYSE:DIS - News) agreed earlier this month to buy Marvel (NYSE:MVL - News) and eBay (NasdaqGS:EBAY - News) is moving ahead with plans to sell a majority stake in its Skype unit.

Stocks opened sharply higher Monday as investors cheered the growing wave of M&A activity.

"It reflects an improvement in investor psychology," says Curt Lyman, managing director at HighTower Advisors in P…

$1 million going further in many housing markets

By ADRIAN SAINZ,AP Real Estate Writer

A million dollars doesn't buy you what it once did. In most U.S. neighborhoods, it now gets you a lot more.

During the housing boom, prices rose so high and so fast that even cookie-cutter homes in the paved suburbs of South Florida and California could cost a cool million. In Santa Clara, Calif., a high-tech hot spot, the median price hit $836,780 in 2007.

That was a long way from the days when a million-dollar home evoked images of marble columns and swimming pools with vanishing edges. Subprime loans allowed more people than ever to buy houses that were once above their means. Higher demand fueled ever-higher prices until the spigot of cheap money was turned off and the housing bubble burst. The recession forced many well-heeled buyers into unemployment lines. And sales of homes over $1 million cratered by more than 50 percent from the peak four years ago.

"Everyone has less money than they once had," said Amy Wright, an agent with T…

Stocks a poor indicator: Stiglitz

NEW YORK - NOBEL economist Joseph Stiglitz said on Friday a rising stock market is not a good indicator of how the economy will fare, saying falling wages may help corporate profits without spurring increased demand for goods and services.

Mr Stiglitz, a Columbia University professor, told a corporate governance and securities regulation conference events of the last year have created distorted markets that are 'tilted' in favour of companies deemed 'too big to fail'.

The conference marked the anniversary of Lehman Brothers Holdings Inc's and the first bailout of the insurer American International Group Inc. These have become signature events that helped drive the United States, and much of the world economy, into what is widely considered the worst financial crisis since the Great Depression of the 1930s.

US stocks have recovered well over half their losses following Lehman's Sept 15, 2008 failure.

Unlike increasingly voluble analysts who believe the gains have…

3% global growth, 2010: IMF

PITTSBURGH - THE International Monetary Fund foresees a stronger than anticipated recovery from the economic crisis, with global growth approaching three per cent in 2010, world leaders said on Friday.

The IMF had estimated in July a global contraction of 1.4 per cent in 2009, followed by sluggish growth of 2.5 per cent in 2010, but was more upbeat as Group of 20 leaders met in the US city of Pittsburgh.

'The IMF estimates that world growth will resume this year and rise by nearly 3.0 per cent by the end of 2010,' the Group of 20 developed and emerging economies said in a final statement to conclude a two-day summit.

Leaders of 19 rich and emerging nations plus the European Union pledged they would work together to help the world economy reach robust growth.

Asia-led growth has lifted the world out of the doldrums and France, Germany and Japan have all now officially climbed out of recession with the United States, the world's biggest economy, expected to follow later this…

Employment may keep falling

LONDON - BRITAIN'S economy appears to be stabilising after the downturn but it could be a while before employment levels start picking up again, Bank of England chief economist Spencer Dale was quoted as saying on Saturday.

In comments that reiterated remarks in a speech earlier this week, Dale said employment had not fallen as much during the current recession as might have been expected and could therefore take longer to recover.

The number of people out of work has been climbing and is expected to hit 3 million by next year, even though the economy may already have started growing again.

'Going forward we may well see employment levels continue to remain low, or fall further, before we start to see a pick up, so I do think the pick up in employment may well be relatively slow and gradual,' Mr Dale told the Exeter Express & Echo newspaper while on a visit to south-west England.

'This is in part because the falls off in employment haven't been so great, so there&#…

Normal Recovery or Not? Having Your Cake and Eating It Too

The comments which follow from Larry Kantor - head of research at perma-bullish Barcap (Barclays Capital) - are cited in this short piece at the FT Alphaville site.

In our view, the main risk to the current bull market in stocks and corporate bonds is not that the global economic recovery will falter. Rather, we believe that it is the strength of the recovery itself — or at least the recognition of it — that provides the greatest source of risk to the continuation of the market rally.

Once investors embrace that a “normal” recovery has arrived, they will quickly conclude that the current “crisis” settings for policy — such as near zero interest rates — are no longer appropriate. That — along with the impending withdrawal from direct purchases of duration by central banks — will drive interest rates higher and make it much more difficult for stock and corporate bond prices to keep rising.

In other words, the good news that the patient has recovered will shift toward the more…

Five Reasons Why The Market Will Moderate

By Matt Phillips

A worse-than-expected report on durable goods sent S&P futures lower early, putting markets on course for a third-straight down day.

But according to the tape-readers over at Ned Davis Research, there’s little reason to worry about a sustained turndown in stocks. “Considering that the economy is now recovering with inflation and interest rates still contained, and with our sentiment and valuation indicators far from threatening, the risk of another bear market is limited right now,” they wrote in a note that fluttered into our MarketBeat inbox last night.

Still, the market is not going to crank like it has been over the last six months. After all, the Dow Jones Industrial Average is up 48.3% from its 12-year close low of 6547.05 hit on March 9. The S&P is up 55.3% since March 9, and the Nasdaq is up 66.1%, according to Dow Jones number crunchers.

Any trader’s gut would likely tell them that sizzling gains like that can’t last. But Ned Davis’ researchers offer five…

The Fed has to worry about inflation eventually

By Paul R. La Monica, editor at large

he Federal Reserve is going to keep interest rates near zero for the foreseeable future. That much is certain.

What isn't so clear is whether this will create an inflation headache down the road for the Fed -- and consumers.

So far, inflation is not a problem. According to the most recent figures from the Labor Department, overall consumer prices have decreased during the past 12 months. Core consumer prices, which exclude the costs of food and energy items, are up just 1.4% over the past year.

What's more, there's no evidence of inflation in the labor market. Many economists argue that inflation is only an issue when the economy is humming along. That's because unemployment tends to be low, workers are getting steady pay increases and companies can afford to raise prices as a result.

But the unemployment rate is at a quarter-century high. Average weekly wages are up only slightly from a year ago, according to the Labor De…

Protecting Your Portfolio from the Next Market Downturn

By Nadia Papagiannis, CFA

Prior to the 2007 crash, many of us thought that as long as our portfolios were diversified among several standard equity and fixed-income asset classes, a dip in one would be balanced out by another, and it wouldn't be too long before we'd be back on track in working toward our investment goals. Still, most of us lost big chunks of our nest eggs in the recent financial crisis. As the S&P 500 Index and core-type large-blend funds, on average, lost 55% between October 2007 and March 2009, every other major asset class, with the exception of government bonds, also swam in red ink. Thus, even "diversified" portfolios experienced major losses.

Even though many funds have recovered the same percentage they lost since March 2009, they still have a long way to go before their investors are made whole. Simple arithmetic says that when you lose half of your money, you must double it (that is, earn a 100% return) to break even. That recovery can ta…

etfguide $1,000/oz Gold - New Reality or New Bubble?

By Simon Maierhofer

'Gold represents tangible value, that's why a gold bubble is simply impossible.' If you think along those lines, you may want to consider the following:

1) After reaching a record high of $850/oz in January 1980, gold prices fell over 40% in two months. It took gold 28 years to reclaim the $850 level.

2) Many thought there could never be an oil bubble. Oil, similar to gold, is a limited resource. Oil production, just like gold production, has peaked. Therefore, oil prices were supposed to consistently move higher. Contrary to conventional wisdom, however, oil prices fell more than 77.5% from their July 2008 top to their February 2009 bottom. A similar drop would equate to a $229/oz gold bottom.

What is causing the gold rally?

Just as a car mechanic would want to find out what is causing a certain problem before making an estimate, investors should find out what caused the recent gold spike before making a buy/sell decision.

Deciphering the cause/effect equat…

Most ominous indicators:Insider selling still accelerating

While legions of U.S. market-pumpers insist that all that lies ahead for U.S. markets is an “economic recovery,” and a continuation of this absurd rally, they deliberately ignore one of the most ominous indicators of the future direction of markets: insider selling.

For the entire duration of this hype-fueled rally, insider selling has been steadily increasing. As we enter what has historically been the two worst months for U.S. markets, a CNN article had this to say:

Corporate officers and directors have been selling shares at a pace last seen just before the onset of the subprime malaise two years ago.

Let me repeat this. U.S. insiders are dumping stock with the same intensity last seen just before the worst market crash since the Great Depression. For those who can recall that period, this was when “Helicopter” Ben Bernanke had finally stopped insisting the U.S. had a “Goldilocks economy” where markets would never turn lower. He had just begun to push his new propaganda slogan: the “s…

Why Small Businesses See a Gloomy Future

By Rick Newman

If small businesses are the backbone of the U.S. economy--as politicians routinely claim--then we're in worse shape than a lot of people realize.

Most economists, including Federal Reserve Chairman Ben Bernanke, believe the recession is technically over and the economy is growing again. But the news apparently hasn't trickled down to the people who run delicatessens, plumbing outfits, and Web start-ups. A recent survey by the nonprofit Kauffman Foundation found that 68 percent of entrepreneurs do not believe the economy is beginning to recover, and 61 percent think the economy's on the wrong track. Only 13 percent believe a recovery is underway.

Entrepreneurs are usually optimists inclined to believe things will work out, which is why they're willing to try something as laborious as starting their own business. But the recession has put them in a foul mood. A startling 94 percent said the recession will last at least another year. Only 3 percent believe the…