Well, I arrived back from DC only to be turned around and issued a ticket to New York yesterday. Now I'll be in NYC all week monitoring fallout from financial crisis. It's an eerie mood here in lower Manhattan; you can definitely tell most people had a horrendous weekend/start to the week. The market absolutely plunged today and folks around here don't think its hit the floor. I ran into a guy that buys investments that payout based on failed bonds. I think he was the only happy person I've seen all day.
Anyways, given this financial massacre, it's important to explore the underlying cause. I'll keep it on a macro level: The government sponsored two companies (fannie and freddie) to give out mortgage loans to people that normally wouldn't qualify in order to boost home ownership. The private industry, unable to compete with fannie and freddie (offering mortgages at unprofitable rates) distorted market risk and pushed financial institutions into making bets on more lucrative, albeit riskier mortgage investments. When the housing market declined, mortgages backed by freddie and fannie (to people that never should have had them) failed and subprime mortgages (to people that never should have had them) failed. This is causing the enormous devastation that's seen in the housing and financial markets. If you get the flu, you don't just want to mask the symptoms, you want to get rid of the flu. In similar fashion, while it might be easy to blame people now (such as the leaders of Lehman) its important to drill down to the cause.
Well, I've got to get back to scouring the floor for buying opportunities. If you're an individual with some free cash, I might advise you to do the same...
We'll see how tomorrow shakes out. Definitely empty tables and full bars in and around NYC tonight. Until then!
Monday, September 15, 2008
Tuesday, September 9, 2008
Bailed out
In DC this week. Typing this whilst looking out my hotel window with a beautiful view of the Washington monument gleaming in the distance. Absolutely spectacular. Talk around here is all about the bailouts of Fannie Mae and Freddie Mac. I can't even begin to sum up how horrible this all is. I still need some time to cool off. The big question on my mind (as well as everyone else I had dinner with this evening) is who's next? The political modus operandi right now seems to be "socialize profits and privatize losses." If you can't comprehend how horrible that is, it might be time for you to quit reading this blog...
In other news, I spoke with a couple of Wall street folks and it seems as though a major bank and major investment bank are on their last breaths. And that's excluding Lehman Brothers. I'll post about anything else I hear whilst in DC this week. Until then!
In other news, I spoke with a couple of Wall street folks and it seems as though a major bank and major investment bank are on their last breaths. And that's excluding Lehman Brothers. I'll post about anything else I hear whilst in DC this week. Until then!
Monday, September 8, 2008
Rescuing something that never should have happened
What a shame: http://www.marketwatch.com/news/story/us-government-takes-control-fannie/story.aspx?guid={C99D796B-CB3C-47A8-8A56-284A9A4D5C85}
On deck: GM, Ford and Chrysler
In the hole: The New York Times
Nothing quite like blowing a few trillion dollars of someone else's money...
On deck: GM, Ford and Chrysler
In the hole: The New York Times
Nothing quite like blowing a few trillion dollars of someone else's money...
Friday, September 5, 2008
Countdown to November 4th
I just noticed on the countdown on the top of the blog that there's now less than 60 days until the election. Crazy!
What a dive...
For the light of heart, now would not be the time to check the stock market. I'll leave it at that for now and reiterate that you probably shouldn't check in on the market until next year.
As I said previously, I'd like to dissect the differences between the tradition and Roth IRA. With the Roth IRA contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. With the Traditional IRA contributions are often tax-deductible, contributions are made with pre-tax assets, all transactions and earnings within the IRA have no tax impact, and withdrawals at retirement are taxed as income (except for those portions of the withdrawal corresponding to contributions that were not deducted). There are also various other types of IRA's, but the traditional and Roth are by far the most widely used, so we'll stick to those for now. The maximum contributions to an IRA changes from time to time and varies depending on your age. Obviously the IRA was founded and exists to encourage savings and investment by offering a reduced tax consequence.
Contributions to a Roth IRA are not tax deductible, but at withdrawal, all contributions and earnings can be withdrawn tax-free. With a traditional IRA, contributions are tax deductible, but all withdrawals are subject to being taxed. Currently, since dividends and capital gains tax rates are generally lower than an individual's marginal tax rate, using a traditional IRA for long term investing doesn't make sense in a majority of cases. Furthermore, the Roth IRA has the advantage of certainty. By paying taxes now on contributions, you are assured of having a certain tax liability, whereas it is impossible to tell where tax rates will be in the future. For some persons, this provides an additional peace of mind. Of note, all contributions to an IRA are, for all intents and purposes, locked in until you reach the age of 59 1/2. Consider this carefully if you foresee needing a certain amount of liquidity in the future. Of course, the best piece of advice is to always treat your personal situation as unique. No one strategy is best for everyone. The introduction of the IRA and its related investment mechanisms has been one of the better things Congress has given us. Companies are beginning to offer a Roth 401(k), a blended version of the 401(k) and IRA. Look for more variants of these exceptional investment strategies in the future.
I ended up making a mid-week trip to Phoenix and was tied down for a couple of days. Speaking with several banks and investment houses there, it became all the more clear that banks are in serious entrenching mode to ensure they have very little exposure to insolvency. That being said, it was beautiful in Phoenix and I was far removed from any of the hurricanes or conventions, though I did tune in along with 40 million others to watch Palin deliver her speech. As a former hockey player, it's nice to see the sport get some recognition. Hehehe.
Hope everyone has a great weekend. I'll talk more about bank liquidity and whatever else happens over the weekend. This looks to be a pretty boring one in college football. Until then!
As I said previously, I'd like to dissect the differences between the tradition and Roth IRA. With the Roth IRA contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. With the Traditional IRA contributions are often tax-deductible, contributions are made with pre-tax assets, all transactions and earnings within the IRA have no tax impact, and withdrawals at retirement are taxed as income (except for those portions of the withdrawal corresponding to contributions that were not deducted). There are also various other types of IRA's, but the traditional and Roth are by far the most widely used, so we'll stick to those for now. The maximum contributions to an IRA changes from time to time and varies depending on your age. Obviously the IRA was founded and exists to encourage savings and investment by offering a reduced tax consequence.
Contributions to a Roth IRA are not tax deductible, but at withdrawal, all contributions and earnings can be withdrawn tax-free. With a traditional IRA, contributions are tax deductible, but all withdrawals are subject to being taxed. Currently, since dividends and capital gains tax rates are generally lower than an individual's marginal tax rate, using a traditional IRA for long term investing doesn't make sense in a majority of cases. Furthermore, the Roth IRA has the advantage of certainty. By paying taxes now on contributions, you are assured of having a certain tax liability, whereas it is impossible to tell where tax rates will be in the future. For some persons, this provides an additional peace of mind. Of note, all contributions to an IRA are, for all intents and purposes, locked in until you reach the age of 59 1/2. Consider this carefully if you foresee needing a certain amount of liquidity in the future. Of course, the best piece of advice is to always treat your personal situation as unique. No one strategy is best for everyone. The introduction of the IRA and its related investment mechanisms has been one of the better things Congress has given us. Companies are beginning to offer a Roth 401(k), a blended version of the 401(k) and IRA. Look for more variants of these exceptional investment strategies in the future.
I ended up making a mid-week trip to Phoenix and was tied down for a couple of days. Speaking with several banks and investment houses there, it became all the more clear that banks are in serious entrenching mode to ensure they have very little exposure to insolvency. That being said, it was beautiful in Phoenix and I was far removed from any of the hurricanes or conventions, though I did tune in along with 40 million others to watch Palin deliver her speech. As a former hockey player, it's nice to see the sport get some recognition. Hehehe.
Hope everyone has a great weekend. I'll talk more about bank liquidity and whatever else happens over the weekend. This looks to be a pretty boring one in college football. Until then!
Tuesday, September 2, 2008
Alaska is a big state
Well, I hope everyone had a fabulous holiday weekend. Sandwiched in between the two party conventions was a 3 day weekend and a hurricane aimed at New Orleans. All's well that ends well though and the markets are certainly responding. Oil plunged below $110 as Gustav caused minimal damage to Gulf oil rigs. For all the beating the oil companies take, it is simply amazing to consider the oil rigs floating in the Gulf. Hurricanes Katrina, Rita, Gustav et al., have plowed through the Gulf in recent years and the damage to offshore rigs has been trite. Simply amazing.
The plunge in oil prices, a recent strengthening of the dollar, 3.3% growth in Q2, the impending end to this election cycle and what I think is the bottom of the housing market have me thinking the second half of 2009 and 2010 are going to be stellar for the market, if and only if the next president's administration doesn't do too much to get in the way. The worst thing for the housing market right now would be for the government to interfere with the housing market by bailing out failed entities. This would only cause the housing markets doldrums to continue.
As I review my own savings and investments, this year has been turbulent but fun (at least for me). For those of you who's portfolio's have taken a beating, take heart, the market is poised well for a recovery; this again has the caveat that the next administration's policies don't send everything off track.
I had a few people ask me about IRA's over the weekend, so I think I'll dedicate my next post to talking about their differences and how best to play them in an overall tax strategy. Until then!
The plunge in oil prices, a recent strengthening of the dollar, 3.3% growth in Q2, the impending end to this election cycle and what I think is the bottom of the housing market have me thinking the second half of 2009 and 2010 are going to be stellar for the market, if and only if the next president's administration doesn't do too much to get in the way. The worst thing for the housing market right now would be for the government to interfere with the housing market by bailing out failed entities. This would only cause the housing markets doldrums to continue.
As I review my own savings and investments, this year has been turbulent but fun (at least for me). For those of you who's portfolio's have taken a beating, take heart, the market is poised well for a recovery; this again has the caveat that the next administration's policies don't send everything off track.
I had a few people ask me about IRA's over the weekend, so I think I'll dedicate my next post to talking about their differences and how best to play them in an overall tax strategy. Until then!
Thursday, August 28, 2008
College Football
Also, college football starts tonight and in earnest on Saturday. I recommend watching the Illinois v. Missouri game, with Missouri winning. Either way, college football is here and all is well.
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