Category Archives: economy

Why Wall Street Secretly Loves The European Crisis

Posted on by
2

One of my predictions for 2012 was that Wall Street and the financial markets would begin to ignore the European financial crisis, where Greece and possibly others essentially are having a hard time paying all the money that they’ve borrowed throughout the years.  Last year the market would get hammered on days where anybody expressed a smidgen of fear of something bad happening.

I thought that the dust would settle and that Wall Street would move on.

I was wrong.

For a while in the beginning part of the year, the news about Europe was pretty quiet.  Wall Street did actually shrug off a lot of news, but would still have the occasional freak out about Europe.  In the last couple of weeks, the news is suddenly back out and Wall Street has been freaking out in earnest once again.

I believe they actually love it.

Here’s why.

I believe in conspiracy when it comes to the stock market.  I don’t trust people that do trading, and I think that there is dishonesty, manipulation,and insider trading that goes on all the time.  I believe in the efficient market theory on paper, but in practice, there’s no way.

And, I think traders use Europe as a way to cover up the dishonesty that prevails in Wall Street.

Simply put, Wall Street can use Europe as a scapegoat to do anything that they want and blame ‘Europe fears’.

I’ve watched earnings reports pretty regularly.  One theme that I’ve seen happen lately is that a company will blow out earnings.  I mean beyond what was likely priced in, as I know pricing stuff like this in does take place.  I’m talking 40 cents a share where ‘the Street’ might have predicted 12 cents a share.

The stock will even rise for a little bit in pre-market trading and then at the bell.

Look what just happened.  Investors, many whom are likely individual investors (as opposed to institutional investors) just saw great news and they saw the stock start to rise.  They buy in, hoping to ride the wave, not knowing that the sharks on the other side of their high speed trading computers, are snickering and reeling them in.

Suddenly the bottom drops off.  That stock that just tripled expected earnings suddenly gives back the money it made at the open and actually goes down, often by a few percent.

Individual investors just got taken for a ride.  Who do you think took that money and put it in their own pockets?

The crooks on Wall Street.

And when they’re asked about it, they say ‘Well, yeah, they beat earnings, but uh…we’re worried about their growth.  You know, because of the whole Europe situation at all.’

They might not snicker out loud or on the e-mail that they use to publish this, but trust me, they are.

And, that, is why I was wrong about Europe and the effect it would have on Wall Street.  Because while the news might be bad and there might be trouble, Wall Street has latched on as a way to skim (scam) some additional profits off the backs of investors just trying to do the right thing.

Do you think Wall Street operates on the up-and-up? 

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page.This original Money Beagle post Copyright 2012 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive!

7 Predictions For 2012

Posted on by
13

Many bloggers are posting predictions for 2012, so I thought I’d throw my hat in the ring.  Hopefully I’ll remember at the end of the year that I did this and will take the opportunity to look back and see how I did.

  1. President Obama will be re-elected – I don’t think Obama has done a great job while in office.  He ran in 2008 on a campaign of ‘change’ and began a ‘business as usual’ approach the first day he stepped into the Oval Office.  Regardless, the economy has improved, unemployment has gone down, and the Republican party is anything but united, which in my mind will add up to a second term for Obama.
  2. The tide will begin to turn on strategic defaults and underwater mortgages – Last I saw, roughly 22% of mortgages were underwater, and many of those homeowners have continued to choose to give their homes back to the bank.  I see both of these numbers slowing down for a couple of reasons.  First, I think the real estate market has finished it’s free fall.  Prices may not go up for awhile, but a stabilization in prices will take some of the fear of the unknown away.  Second, people that are paying their mortgages are gaining traction.  Simply put, if people make their payments while the value of their home remains stable, they will start getting closer to positive equity.  For those who have stuck with their homes for the last few years, this glimmer of a light at the end of the tunnel will reduce the temptation to ‘walk away’.  Third, low interest rates and an easing of the HARP program will make re-financing a continued option that can allow homeowners to more pay less interest.  Personally, I wish that one stipulation would have been (for those who have not suffered income loss) that in order to take part in this, you had to re-finance such that your monthly payment remained roughly the same, meaning that you would merely shift payment from interest to principle, thus providing more infusion of equity into the housing market.
  3. The Eurozone crisis will not go away but will get less attention – The financial crisis of the Eurozone created an enormous amount of volatility in the stock markets in 2011.  Positive news one day would send markets soaring 3%, only to have that entire gain wiped out the next day when negative news came back to the forefront.  This happened over and over again. I don’t expect the news to change much, meaning that we won’t see a ‘solution’ but we also won’t see any catastrophes, but even though things won’t change, I expect investors to start tuning out the news a little bit, reducing some of the market swings that have been tied to Europe.
  4. Blackberry will be history (or at least RIM will be) – Blackberry was once the darling of the smart phone industry.  You didn’t have a smart phone unless you had one.  Now, they’ve been passed by and many owners (myself included) are merely counting the time until they can upgrade (six months and two weeks!).  I expect that Research In Motion will either sell out or declare bankruptcy.  Carriers will continue support for legacy products and new devices could even roll out if another company purchased them, but I expect that RIM is done by the end of the year.
  5. Apple will either provide a dividend or make a giant, unexpected purchase – Apple is sitting on nearly a hundred billion dollars in cash.  Something has to give.  I expect that they would either start answering to investor pressure to release a dividend, but I have a feeling that they could shock the world with a purchase of a company or technology that nobody sees coming.  I have no speculation on what that might be (and no, RIM wouldn’t count!) but I have a hunch they want to show the world that they plan on continuing to make headlines even after the passing of Steve Jobs.
  6. Unemployment will continue to dip, the economy will continue to improve, the bottom line of businesses will get better, but consumer spending will lag – That’s a lot rolled into one, but I think the first three tie together.  What may surprise out of all that would be the consumer spending element.  Maybe I’m being too optimistic, but I see consumers taking the opportunity to de-leverage (pay down debt) as part of a way to apply the extra income that would result from the other items mentioned (namely the reduction in unemployment).  While not everybody will follow the model, there are enough people who have gotten into debt either because of foolishness (taking advantage of easy credit and getting in over their heads) or necessity (having to charge expenses just to put food on the table), and people will take advantage of an improved opportunity to get out from under the burden of that debt as well as take measures to ensure that it doesn’t happen again so much that consumer spending will not rise as fast as other key indicators.
  7. Discovery will pull the plug on Oprah – Oprah has tried to do something that no other person ever has, make an entire TV network work on the back on her brand name.  It hasn’t worked so far and despite a committment by her to get more involved, I feel it will be too little too late, and the OWN network will be bid adieu by the end of the year.

What do you think of the predictions above?  How would these predictions impact you?  What are your predictions for the rest of 2012?

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page. This original Money Beagle post Copyright 2012 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive!

I Still Can’t Justify Walking Away

Posted on by
13

Last year I wrote a post outlining why I think people who haven’t lost their income should pay their mortgages regardless if their home values have gone down.

I’ve seen this topic resurface over the last few weeks.  It seems that more and more people and bloggers are leaning towards saying that ‘It’s OK’.  A lot of this had to do with a financial planner’s story of how he went through this with a Las Vegas home.

Since it’s been awhile, I thought I’d reconsider it and see if my opinion has changed.

Short answer: It hasn’t.

See, Ninja at Punch Debt in the Face wrote how his opinion has changed, largely because he now sees it as the bank and customer entering into a deal, but that people and businesses break deals and end contracts all the time.

If it were that simple, I would be 100% in that corner.

But it’s not that simple.

Because it’s not just about the bank and the customer.  Everybody who walks away from their mortgage impacts much more than that.

If you live in a neighborhood, your walking away affects the value of every single home around you. You’re impacting every one of your neighbors.  Not to mention that a home that might go empty is at risk of falling into blight, something that can spread quickly.

So, you’re impacting all your neighbors.

Plus…

Most likely, if you stop paying on your mortgage, you stop paying your taxes.  That means, everybody that lives in your community is affected by taking in less tax revenue.

So, now you’re affecting everybody in your city, including schoolchildren who get less tax revenue.

And it goes further….

The economy hasn’t gotten a firm boost in almost five years now.  We may no longer be in a recession, but we’re certainly not out of the woods or in a growing economy.  Much of this has to do with the drag that housing puts on the economy.

So, yes, I am putting it out there that walking away hurts every single person in the country.  Maybe even in the world if we want to go that far, since the global economy is here and pretty much every decision is far reaching.

Yes, banks may have ‘started’ it by making stupid loans and letting the bubble get created.

I get that.

But, now the banks are done with that.  Sub-prime mortgages are a thing of the past.  Loans to unworthy customers are pretty much impossible.  Yet the problem continues.  Why?

Well, it’s not the banks right now.  The banks have done their part.  Whether it was forced on them or not, I don’t really care.  But, the problem remains now because people, not banks, are continuing to drive the market down with the vicious spiral that walking away creates.  And, now it’s on the people to stop the madness.  Not the banks.

There are options now.  You can re-finance at historically low rates.  By doing so, you can pay the same amount every month and have your principle payment fall by over twice as much as what you are currently paying.  You will be above water that much faster, all while helping stabilize your neighborhood, your community, and the economy as a whole.

So, please, let’s think about doing the right thing.  If we really allow ourselves to be talked into the notion that walking away is OK, then guess what?  We’ll still be talking about this for years to come.

Nobody wants that, right?

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page. This original Money Beagle post Copyright 2011 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive! -

Dear Government: Shut The Heck Up Already!

Posted on by
2

It’s no secret that one of the biggest causes of our spiraling national debt has to do with the fact that we are fighting a bunch of wars overseas.

These wars are costing us mucho bucks.

The biggest problem with the wars, especially in Afghanistan, is that there is no clear finish line.  World War II, we fought until the Germans, Japanese and their allies surrendered.  They surrendered, we went home.

Not so much with our current wars.  In fact, in Afghanistan, we are fighting next to the government, trying to put down rebel forces.

Sounds all nice and good, but the biggest problem that I’ve been able to see is that the Afghans are fine with letting us do the work.  We can’t leave because to do so would put the country back in turmoil.  The plan has been for us to turn operations over to the ‘locals’ but they can’t seem to pull it together enough to where we feel comfortable leaving.

But, with the way we’re running things and publicizing things, they have no incentive to.

If we’re willing to do all the dirty work, they have no incentive to step up.  That is, until we leave.

We can’t leave simply by publishing a date that we’re leaving.  Why not?  Because we’ve tried that and they know we’re just bluffing.

The way we need to get out?  Just go.

Sneak a few people out here and there.

Picture these conversations:

Week 1
Afghan commander: Hey, where did Bob and Joe go? *pointing to empty bunks*
US commander: Ah, well, their enlistments were up and they decided to go home.
Afghan commander: So, who’s their replacement?
US commander: Well, we have all this paperwork to fill out so it’ll be a while.  Hey, what say we go do that roadside bomb detection training that we’ve been putting off?
Afghan commander: Ah, maybe tomorrow.

Week 2
Afghan commander: Still no replacements for Bob and Joe?
US commander: No, we’re still working on that.
Afghan commander: Hey, how come the US flags are taken off the barracks back there? There were like 20 people in there, right?
US commander: Yeah, about that….
Afghan commander: How’s 2pm for the roadside bomb detection training?
US commander: Sounds good.

This is the only way.  The only one.  Don’t get up in front of a podium and talk about how many troops you’re going to take out next year or the year after.  Do it and talk about it later.  That’s the only way that we will get these other countries to step up and take control of their own situation.

The only other alternative is this: Charge them.  By the day.  By troop.  In barrels of oil.  They want us to stay.  They load oil on our freighters.  They don’t load the oil?  Our troops get on the freighter instead.

Are you sick of these wars already?  Was it really any surprise when they started without a clear endgame that they’d be going on indefinitely?

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page. This original Money Beagle post Copyright 2011 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive! -

Don’t Take Delight In Others Misery

Posted on by
4

I used to subscribe to the news feed for Business Insider.  I always felt that they had a good staff of writers from multiple sources that gave a good feed for the economy, business, and money related issues.  I referenced them here on Money Beagle more than a few times.

But, I recently unsubscribed and will no longer be reading, because of a pattern that I felt was too common and too disturbing:

Too many of their writers are taking glee in the recent rash of economic news, most notably the European debt crisis, the stock market downturn, and the potential for a second recession.

These are all very real problems, and I’m not suggesting for a second that they should be reporting false information or even suppressing information.  That would be disingenuous.

Where I have a problem is when their authors consistently include things along the lines of:
“Markets down 200. SELL SELL SELL.”
“Technical support broken, time to PANIC.”

The bottom line is that the vast majority of Americans are losing market in this stock market.  Many of us have done the right thing and have opened IRA accounts, 401(k) accounts, or other accounts to save for the future.  Watching those balances go down day in and day out is bad enough, but it’s a kick in the face for writers to take glee in this.

The Internet has opened the door for many more voices to be heard.  In the case of Business Insider, that’s proving that it may not always be such a good thing.

So, for those of you who write in a public manner, I implore you, even if you’re right about something, please don’t rub it in.  There’s no call for taking delight in someone’s misery.

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page. This original Money Beagle post Copyright 2011 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive! -

Why Does Standard & Poors Hate America?

Posted on by
4

All the downgrades by Standard & Poors seem a little….I don’t know…over the top.

If Warren Buffet calls you out for doing it, I think there’s something a little strange going on, no?  (S&P responded to this by lowering the credit rating on Berkshire Hathaway, which just proves even more that S&P is on some big out-of-control-nothing-based-on-reality kick.  I mean, really?)

Seems to me that S&P is getting a little anti-American these days.  Which is strange to me because the first thing their Wikipedia entry says is that they are a “United States based” financial services company.

Who apparently hates America.

Do they really think that America is going to walk away from their debt? First and foremost, that’s not going to happen.  Second, that’s not going to happen!

If the question is, does America have too much debt, then the answer is yes.  But, here’s the problem.  Credit ratings have nothing to do with that.  I repeat.  They have absolutely nothing to do with that.

It’s about whether we can pay it back.  That’s the start and finish of what the credit ratings mean.   And there has been no reason to think that we wouldn’t be able to.

Until today.  Or last Friday, to be technical.

I don’t know.  I find it strange.  Here’s what I think should happen:

  1. The SEC should immediately investigate anybody and everybody remotely associated with Standard & Poors.  If anybody shorted the market or went into cash over in the last several weeks, they need to be investigated.  Hard.  It seems to me that someone out there is getting rich off this and it’s not Joe Public.
  2. Let’s call the S&P 500 just ‘The 500′ from now on.  Just cuz anything to do with the name S&P pisses me off right now.
  3. Americans should mail S&P their financial statements.  If we all sent our 401(k) statements before-downgrade and after-downgrade to them with a little ‘Thanks for this’ note, do you think anybody there would get the hint?  After all, pretty much everybody  who invests in their company 401(k) plan got screwed (read: most of the middle class).  Let them see how.

America has a debt problem.  We have way too much of it and there’s no end in sight.  But, there’s a right way and a wrong way to do that.  One of the wrong ways is to elect the same turds over and over again.  Another wrong way is for an agency to overstep their bounds, fiscally and politically, and get involved in something they have no business being involved in.

Don’t we have enough people in Washington already trying to screw us?  At least we can vote them out.  All we can hope for the S&P folks is that they pick up shop and move somewhere else.  Why wouldn’t they?  After all, they do seem to hate America.

Thanks for reading! Please subscribe to my RSS feed, follow me on Twitter, or check out my Facebook page. This original Money Beagle post Copyright 2011 Money Beagle is authorized to appear only on www.moneybeagle.com. Thank you for reading and remember: It’s a great day to be alive! -