By 2 Cents on August 30th, 2010 | Category: Economics | Numbing the pain for a while will make it worse when you finally feel it.
~Albus Dumbledore, Harry Potter and the Goblet of Fire
Is the Federal Reserve a hero or a villain? You can find plenty of Nobel Laureates, pundits, and civilians like myself on either side of that debate. Nassim Taleb, author of The Black Swan has been saying for quite some time that the Fed steered us into the ditch and that it’s shameful that the same group that got us here is still in the driver’s seat. Perpetual overspending and record low interest rates have not only failed to solve our problems, but are the major causes of them. It is therefore ridiculous to turn to them to solve our current challenges.
Paul Krugman is probably the most vocal Nobel Laureate who supports the Keynesian spend-till-you-drop/debt-levels-don’t-matter viewpoint. He has been a supporter of [...]
Read on and enjoy … Will the Fed Save the Day?
By 2 Cents on August 27th, 2010 | Category: Book Reviews | If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are.
~ Carmen Reinhart & Ken Rogoff, This Time Is Different
The subtitle of This Time Is Different indicates that the book covers “Eight Centuries of Financial Folly”, but its release date (September, 2009) makes it extremely relevant to our most recent and ongoing bout of financial folly. In fact, the authors devote the final four [...]
Read on and enjoy … Book Review: This Time Is Different
By 2 Cents on August 25th, 2010 | Category: Investing | Accidents, and particularly street and highway accidents, do not happen – they are caused.
~Ernest Greenwood
Accidents in the financial markets do not just happen either. They often result from conditions that persist for quite some time before some seemingly insignificant bend in the road causes us to veer off course and wind up in a ditch. How long did a chorus of critics warn of a bubble in the U.S. housing and structured finance markets before it actually popped?
In traffic parlance, a rollover accident is one in which a vehicle ends up on its roof or side, usually as a result of one of these factors: excessive cornering speed, tripping, collision with another vehicle or object, or traversing a critical slope, such as when a vehicle crosses a ditch.
Rogoff and Reinhart, authors of the book This Time Is Differentobserve that “what one does [...]
Read on and enjoy … Is the Market Headed for a Rollover Accident?
By 2 Cents on August 23rd, 2010 | Category: Economics | When the elements of deflation combine in the right order, the central bank can print a boatload of money without bringing about inflation. And we may now be watching that combination come about.
~ John Mauldin
Update: This article was featured in the Canadian Personal Finance & Investing Carnival posted at Investing Thesis. Thank you!
I’m officially back from a 2-week vacation today, although I sort of cheated and put up a new post on Friday. It’s great to be back. I’d like to thank those who filled in for me with their thoughts and insights in my absence. In the meantime, however, the financial world went on without me while I caught up on some reading. I learned a lot as a result, and I’ll be sharing some of that with you over the coming weeks.
The inflation vs. deflation debate [...]
Read on and enjoy … The Periodic Table of Deflation: How Many Elements Do You See?
By 2 Cents on August 20th, 2010 | Category: Investing | Torture numbers, and they’ll confess to anything.
~Gregg Easterbrook
Update: This article was featured in the Carnival of Financial Planning 08-27-2010 posted at The Intelligent Speculator. Thanks!
I hadn’t planned on posting today since I’m supposed to be on vacation. But I saw an article last week that I just had to comment on, so I decided to put up a little Friday Food for Thought today. The article in question claimed to explain Why the Economy is Not Relevant to Investing.
Some of you will read that title and immediately decide that the premise is ridiculous. Still, if you’re as curious as I am, it’s just ridiculous enough to make you want to read what the author has to say. I’ve written before that economic information is like a financial weather forecast and I’ve done my best [...]
Read on and enjoy … Why the Economy Most Certainly Is Relevant to Investing
By 2 Cents on August 18th, 2010 | Category: Collections | About a month ago, Darren Rowse at Problogger challenged bloggers to offer their readers a selection of past articles that fit into various categories. The idea here is to introduce newer readers to some past articles and just have a little fun. Since I am on vacation this week, I thought this would be a good time to take up the 7 link challenge. I hope you enjoy these articles!
1. First Post: Balance Junkie started out on December 1st, 2009 with a not-so-creatively titled post called Introduction to Balance Junkie.
2. A Post I Enjoyed Writing: I’m not sure if you would say I enjoyed writing Ignorance Makes You a Better Investor and Other Money-Losing Fallacies, but I definitely found it cathartic.
3. A Post with a Great Discussion: A more recent article that generated a [...]
Read on and enjoy … The 7 Link Challenge: Balance Junkie Edition
By 2 Cents on August 16th, 2010 | Category: Retirement | The following is a guest post by Frank Wiginton CFP, FMA, CIM, FCSI.
I want to start off by saying that I am not advocating anything that could get you put away! What I am recommending is that you speak with your parents about saving them thousands in taxes throughout retirement. Those who are in retirement may be paying too much in taxes on money they will never use!
The big question most people in retirement have is “Will I run out of money?” There is a great calculator on the home page of my website at www.frankwiginton.ca that will tell you whether you will run out of money, and if not, how much you will still have left as an estate. It will also tell you approximately what your lifetime tax bill will be. You will likely be surprised by the numbers – many are!
So [...]
Read on and enjoy … Get Your Inheritance Early – And Other Ways Your Parents Can Save Thousands in Taxes in Retirement
By 2 Cents on August 13th, 2010 | Category: Investing | This is a guest post by Ian, who was kind enough to share his responses to our recent investor sentiment survey, in which I asked Have You Lost Faith in the Markets? These are his responses to the 10 questions I asked:
1. Do you feel differently about investing than you did 5-10 years ago?
Yes. I once felt that stock markets were too large to be manipulated – until the crash. The lack of enforcement of regulations means just about anything goes, especially in an environment where the self interest of the power players comes first.
2. If you are new to investing, are you reluctant to get started?
Not new to investing.
3. Have the market crashes of the past 10 years changed your view of investing?
Read on and enjoy … Investor Sentiment Survey: Ian’s Response
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