Personal Financial Advice from a former Certified Financial Planner
Everyone is worried about if and when the Federal Reserve will raise interest rates, even though the Fed itself continues to say that it is not considering doing so. That is what happens when interest rates are so low (basically just above zero) that everyone knows the only way they can go is up.
There are plenty of other things Yahoo gets from buying Associated Content, not the least of which is a big fat swath of Internet real estate that ranks obscenely high in Google search results and Bing search results. A great deal of the traffic generated from these high ranking searches is monetized via, you guessed it, Google AdSense which pays content publishers based upon ads placed by Google on those websites. Yahoo, can now switch out those Google Ads and replace them with their own Yahoo Ads.
Dow Jones Indexes publishes lot of averages and indexes. They are best known for the Dow Jones Industrial Average and the Down Jones Transportation Average. Personal financial planning on FinanceGourmet.com The Dow Jones Industrial Average is featured on most stock market news reports and makes an appearance on the nightly news. It is often referred to as just The Dow, or Dow Jones. The Dow Jones Index is composed of the stocks of 30 big U.S. companies which are supposed to represent the majority of the US economy and industry, with the exception of the transportation industry; they have their own index. Dow Jones Industrial Average Components The Companies In the Dow Jones Industrial Average 3M Company (MMM) Alcoa Inc (AA) American Express (AXP) AT&T (T) Bank of America (BAC) Boeing (BA) Caterpillar (CAT) Chevron (CVX) Cisco (CSCO) Coca-Cola (KO) du Pont (DD) Exxon Mobile (XOM) General Electric (GE) Hewlett-Packard (HPQ) Home Depot (HD) Intel (INTC) IBM (IBM) Johnson & Johnson (JNJ) JPMorgan Chase (JPM) Kraft Foods (KFT) McDonald’s Corp (MCD) Merck & Co (MRK) Microsoft (MSFT) Pfizer (PFE) Procter & Gamble (PG) Travelers Companies (TRV) United Technologies Corporation (UTX) Verizon Communications (VZ) Wal-Mart Stores Inc. (WMT) Walt Disney Company (DIS) …
You’ll forgive me if I don’t give a flying leap about whether or not Abby Joseph Cohen thinks the recession is over. The Goldman Sachs perma-bull was famous for being “right” about the ever rising stock market of the 1990s. Too bad she has never been right about a single declining stock market. Imagine you had a warning light that would light up red whenever the market was going to decline. Imagine that light was broken and could never light up. That light would be exactly as accurate as Abby Joseph Cohen has been since the 1990s. Compare the light to Cohen and you’ll find they have the exact same track record. Cohen Always Predicts Bull Markets The recession may actually be over. In which case, her apologists will trot out this proclamation as another example of her being “right.” Just keep in mind, the warning light is always making the same prediction.
Ok, here it comes. After the government released the results of its stress tests, banks are scrambling to come up with ways to raise huge amounts. It seems that the government money that was a much vaunted and absolutely necessary lifeline to banks has become tainted now that it comes with, horror of horror, strings on how the money can be spent. As if the banks ever handed out a huge loan to anyone without some sort of control on the collateral. Be that as it may, banks want out of TARP and they want out now. Even banks that would be much better off holding on to their TARP dollars are looking to buy back the government shares of preferred stock that they had to put up in order to their money. Seems there is a feeling that the banks that do keep their TARP funds will be viewed as sickly or less stable than their counterparts who repay, regardless of the cost or wisdom of doing so. The only way for these banks to raise the kinds of dollars being thrown around is by selling off assets, which is fine if they are not part of the core …
People are always asking me how safe municipal bonds are. The answer is: They’re Safe. Note that we are talking about BONDS here, NOT Notes, which are a whole different deal. Unless you are an expert or near-expert bond trader, you should stay away from any and all notes of any kind except those from the US Treasury. But, that can’t be the end of it. After all, there are some examples of muni bonds going sour, most notably Orange County’s default on some of its muni bond debt. And, of course, various municipal bonds which were pegged to specific projects or revenue streams have gone belly up. Of course, it is pretty easy to spot which ones have that kind of risk. Bonds fully backed by the state, county, or city are generally as safe as you can get without investing in a US Treasury. Also pretty safe are bonds back by utilities (water and sewer especially) since people have to pay for those one way or another. The ones you have to watch out for are the ones that are for building a specific project and then funded with the revenues from that project. Common examples are things …
To no one’s surprise, all of the major stock market averages ended January down for the month. This has drawn out the media to file their annual (when the market is down in January) stories about how sometimes January being up or down can predict how the year goes as well. This is about as accurate as which conference wins the Superbowl, the AFC or NFC, predicting how the stock market will perform for the year. That is, not accurate at all. The flaw in both is a fundamental misunderstanding of the nature of mathematics and statistics. Just because something is true 75% of the time in no way makes it a reliable predictor of anything, and yet, here we are. I’ll write up an article on this later, but for now just keep in mind that smart investing is about facts, not old wives tales, and arthritic knees predicting the weather. Watch the numbers, not the headlines. By the way, don’t expect February to be any better, but after that…well, we’ll just have to watch the numbers.
The SEC became concerned that financial reporting and disclosure was in need of some smoothing out and improvement, so in true government fashion, it formed an advisory committee to explore ways to improve financial reporting for investors. You may recall that I mocked the whole thing based on the fact that A LOT of that complexity is actually the fault of the SEC and other assorted regulators who insist on constantly adding requirements of dubious value. However, making the system better is making the system better and I welcome the SEC advisory committee’s report even if most of what it does is to undo things the SEC has done before. So, without further ado, I will download the Advisory Committee’s report elegantly entitled: FINAL REPORT of the ADVISORY COMMITTEE on IMPROVEMENTS to FINANCIAL REPORTING to the UNITED STATES SECURITIES and EXCHANGE COMMISSION After quickly reading over the document I will report the recommendations here and … wait a second — So, the report is 120 pages long and then there are 48 pages of appendixes. Hmmm. Well I’ll get back to you a little later. I guess we won’t be improving things by making them any shorter and easier to …
Ok, technically, it isn’t greenmail, but the actions of Carl Icahn in regards to Yahoo! have been very reminiscent of the old strategy. Basically, Icahn used his fortune to buy up a large amount of Yahoo stock and then complained loudly in the media about the Yahoo board, specifically about their decision not to sell to Microsoft claiming that shareholder value was not maximized. What Icahn really means is that his short term investment has not paid off in a way that he would like and instead of admitting that perhaps he made a mistake, he blames Yahoo’s board for not selling out to Microsoft so he could squeeze a profit out of his position. But, is he right? Yahoo’s Value and Microsoft’s Offer Let’s be frank, Wall Street has never been a hyper-accurate barometer of a company’s true worth on any given day, but that inefficiency is what theoretically creates the profit potential in the markets. By finding and investing in a company that is improperly valued, you can reap the rewards when everyone else realizes that the company is wrongly valued and the price moves to make up for it. But, there in lies the rub. Everyone else …
Today’s inspiration comes courtesy of All Financial Matters (a solid blog with good hard numbers data) who notes that a Money Magazine article called “The Mole” discusses how just because a financial advisor says he puts his clients first doesn’t mean he does. Really? Did I miss something? If it says “I put my clients first” on an attorney’s website does that mean that he does, or does it depend on the attorney? Are there doctors who over bill your insurance company to boost their income? Does a waiter ever suggest a more expensive wine to increase his tip? I’m shocked, shocked, to find out there is gambling going on in here! All of this, of course, is why you need a good trusted financial advisor in the first place, but that is not why we come here today. I want to show you something from “behind the scenes” as the Mole says. Financial Advisors and Commissions Let’s make up a fake client with a $500,000 account to be invested. Let’s ignore all taxes and legal implications for the sake of simplicity and concentrate on commissions. We’ll also assume that the account value stays the same over the years for …