Financial News

[BigSqwert]

I agree with this:

 

http://www.nytimes.com/2011/08/15/opinion/...s&seid=auto

 

Holy cow. You CAN be a reasonable person.

[Jenksismyhero]

Holy cow. You CAN be a reasonable person.

 

[Balta1701]

Another exciting day at the dog track I see.

[Balta1701]

Treasuries broke the October 08 low!

US Treasury bond yields plunged Thursday, with the 10-year yield hitting a record low as worries about a new recession in the United States and Europe battered stock markets.

 

The 10-year Treasury yield fell to 1.974 percent, lower than the previous record during the US "Great Recession," before recovering slightly to 2.007 percent, while the 30-year hit 3.337 percent before rebounding to 3.371.

[SoxFanForever]

Very tempted to close my mutual fund and roth IRA accounts with the way things have been going with this market lately.

[Jenksismyhero]

Very tempted to close my mutual fund and roth IRA accounts with the way things have been going with this market lately.

 

Yeah, just remember people did this 3 years ago and lost out on the rebound. Plus your Roth IRA is gonna take a tax hit if you take it out unless you're 59+

[Balta1701]

If you're invested in mutual funds, I'd imagine you're something of a long-term investor?

 

It might not be the worst thing ever to move some funds from that Mutual fund to Treasuries right now, despite how expensive they are, if you're concerned by the possibility of additional losses.

 

If you're investing for the 20-30 year horizon, then this is just a buying opportunity.

[NorthSideSox72]

Very tempted to close my mutual fund and roth IRA accounts with the way things have been going with this market lately.

That would be an epic mistake. Don't do that.

 

If you are a shorter term guy - in terms of mutual funds that must mean a few years - you will miss any rebound that eventually occurs. If you are a long term guy, you miss out on that and more. Unless your plan was to cash out within the next few months, I would not even think about that. Even if you were planning on cashing out in the next few months, it may not be a great idea. Since it is an IRA, there is no tax reason to take the losses really, and you may get penalized too.

 

[southsider2k5]

That would be an epic mistake. Don't do that.

 

If you are a shorter term guy - in terms of mutual funds that must mean a few years - you will miss any rebound that eventually occurs. If you are a long term guy, you miss out on that and more. Unless your plan was to cash out within the next few months, I would not even think about that. Even if you were planning on cashing out in the next few months, it may not be a great idea. Since it is an IRA, there is no tax reason to take the losses really, and you may get penalized too.

 

Selling after a sell off is classic mistake #1 for an investor. You sell at highs, not lows.

[NorthSideSox72]

Selling after a sell off is classic mistake #1 for an investor. You sell at highs, not lows.

And if you are a long term investor, you sell on plan, not based on a market fluctuation of any kind. Maybe at the very end of the planned period, if it seems inflated, you pull back a little early... but that's it.

 

[SoxFanForever]

Well, I'm definitely not trying to be reactionary I made the bright idea of investing in the late spring/early summer of 2008 right before the market took a crap. I decided to not move any of my assets as the market bombed and things rebounded to basically back where they were when I began investing earlier this year.

 

Obviously now those numbers are a bit down. My interest in pulling out is two-fold. One, I'd like to possibly buy a place in the near-term and would prefer to not lose any more of my funds with a market tank job. The second reason is that I really don't trust my investment adviser. I met with him a few months ago to get suggestions on what we can do with my funds for the future. He suggested moving into a number of other funds through Oppenheimer. I have kept an eye on them over the past two months. If I had listened to him I would have taken a much larger hit. This is after he gave very little advice during the downturn and basically went into duck and cover mode.

 

 

[bigruss]

Well, I'm definitely not trying to be reactionary I made the bright idea of investing in the late spring/early summer of 2008 right before the market took a crap. I decided to not move any of my assets as the market bombed and things rebounded to basically back where they were when I began investing earlier this year.

 

Obviously now those numbers are a bit down. My interest in pulling out is two-fold. One, I'd like to possibly buy a place in the near-term and would prefer to not lose any more of my funds with a market tank job. The second reason is that I really don't trust my investment adviser. I met with him a few months ago to get suggestions on what we can do with my funds for the future. He suggested moving into a number of other funds through Oppenheimer. I have kept an eye on them over the past two months. If I had listened to him I would have taken a much larger hit. This is after he gave very little advice during the downturn and basically went into duck and cover mode.

I suggest moving them into another fund, such as Vanguard; they have low fees and really have been one of the best performers. That said, if you get a big tax hit it may not be worth moving them at all, and using other sources of funds for a large purchase may be incredibly smarter.

[SoxFanForever]

I suggest moving them into another fund, such as Vanguard; they have low fees and really have been one of the best performers. That said, if you get a big tax hit it may not be worth moving them at all, and using other sources of funds for a large purchase may be incredibly smarter.

I'll definitely take a look at my options. The majority of my cash was invested into mutual funds. Only a small amount was actually put into the Roth.

 

I appreciate all of the advice. It definitely gives me something to think about before making any decisions.

 

 

[southsider2k5]

Well, I'm definitely not trying to be reactionary I made the bright idea of investing in the late spring/early summer of 2008 right before the market took a crap. I decided to not move any of my assets as the market bombed and things rebounded to basically back where they were when I began investing earlier this year.

 

Obviously now those numbers are a bit down. My interest in pulling out is two-fold. One, I'd like to possibly buy a place in the near-term and would prefer to not lose any more of my funds with a market tank job. The second reason is that I really don't trust my investment adviser. I met with him a few months ago to get suggestions on what we can do with my funds for the future. He suggested moving into a number of other funds through Oppenheimer. I have kept an eye on them over the past two months. If I had listened to him I would have taken a much larger hit. This is after he gave very little advice during the downturn and basically went into duck and cover mode.

 

Watch the fees. That is probably why he wants you diversify. Honestly if you have google, you know as much as they do. If you can drop the adviser and move into a discount broker, do it. Full service brokerage is a complete waste of money. You can get into ETFs that mimic any fund you could find, and at a small fraction of the extra costs.

[SoxFanForever]

Watch the fees. That is probably why he wants you diversify. Honestly if you have google, you know as much as they do. If you can drop the adviser and move into a discount broker, do it. Full service brokerage is a complete waste of money. You can get into ETFs that mimic any fund you could find, and at a small fraction of the extra costs.

I've definitely been looking to have a little more control of my own accounts and do it through a discount broker. I emailed the guy this evening trying to find out what penalties, if any, I would incur for closing out my accounts. Hopefully I'll have a better idea of the direction I want to move tomorrow.

 

Thanks for your advice. Any suggestions as far as alternatives to full service brokers?

[southsider2k5]

I've definitely been looking to have a little more control of my own accounts and do it through a discount broker. I emailed the guy this evening trying to find out what penalties, if any, I would incur for closing out my accounts. Hopefully I'll have a better idea of the direction I want to move tomorrow.

 

Thanks for your advice. Any suggestions as far as alternatives to full service brokers?

 

If you have retirement money, don't close them out. Really even if you don't have retirement accounts, don't close your account. You can transfer them somewhere else with no penalties or fees. In this day and age, if you can operate on your own, find the cheapest big named broker you can and go with them. They are harder to get someone on the phone, but they also allow you to use a chat to ask questions too. I love that function.

[bigruss]

I've definitely been looking to have a little more control of my own accounts and do it through a discount broker. I emailed the guy this evening trying to find out what penalties, if any, I would incur for closing out my accounts. Hopefully I'll have a better idea of the direction I want to move tomorrow.

 

Thanks for your advice. Any suggestions as far as alternatives to full service brokers?

For mutual funds/ETFs I suggest Vanguard. I know a few others on this site also use them.

 

For my own actual trading, I use Optionshouse. It's a decent service (gives me everything I need, actually is better than Schwab imo) while only costing you about $4 a trade (which is like half the price of any other big name place).

[Jenksismyhero]

I've been pretty happy with Scottrade since I opened up a Roth and my own portfolio a few months back. A lot of no fee/no load funds, they have promos for 10+ free trades (and cheap thereafter), and I like the research/screener section of their site. And they don't really bug you. I've gotten two calls, basically saying "hey thanks for opening an account" and a few months later "hey any questions?"

[Y2HH]

As bad as all of this seems, with the market being down -- you want this. Everyone that has a 401k actually WANTS this...in 20-30 years, let the market go up, in the mean time buy up these funds while they're low...you want to buy when things are LOW, not when they're f***ing high and everyone else wants them.

 

This mentality in the market is baffling to me. Right now, every idiot is trying to buy gold...that ship sailed. You needed to be buying gold when nobody else wanted it and it was worth 300/oz...buying it now while it's high, because it's the thing to do is ass backwards thinking.

 

The same applies to the stock market. You WANT to buy when nobody else does...you want stocks to be low when you're buying them...and high when you're selling them. When you invest, you do not follow the pack...the pack is mob mentality stupid. In 1998-2000, everyone was buying tech stocks...I was selling my tech options and buying the dirt cheap blue chips nobody wanted. For the last decade, those bluechips doubled/tripled in price AND paid dividends the entire time.

[StrangeSox]

Everyone with a 401(k)....except the 60-65 year olds who have already had a lost decade.

[Balta1701]

To be fair though, by the time an investor is in his or her late 40's/early 50's, then it's about time to be moving larger shares into things that are unlikely to lose value, like Treasuries, rather than keeping them in the volatile parts of the casino that are covered nightly on the news.

 

Of course, that doesn't seem to happen very often.

[Iwritecode]

The second reason is that I really don't trust my investment adviser.

 

I just recently re-connected with a friend of mine that I knew in grade school and lost touch with. Turns out he's a financial advisor now. He's been helping me the past couple of years and he's pretty good.

 

He's based in the Rockford area but I can give you his info if you want.

[Y2HH]

To be fair though, by the time an investor is in his or her late 40's/early 50's, then it's about time to be moving larger shares into things that are unlikely to lose value, like Treasuries, rather than keeping them in the volatile parts of the casino that are covered nightly on the news.

 

Of course, that doesn't seem to happen very often.

 

^^ This.

 

When you get into your 50's, you are supposed to start moving everything into lower risk investments, IE, don't keep it in funds/stocks. Those that didn't do this didn't do it right...so again, this goes back to people doing things backwards or wrong...which is their own fault.

[southsider2k5]

^^ This.

 

When you get into your 50's, you are supposed to start moving everything into lower risk investments, IE, don't keep it in funds/stocks. Those that didn't do this didn't do it right...so again, this goes back to people doing things backwards or wrong...which is their own fault.

 

You are supposed to have 1% in cash for every year old you are until 50. Then after 50, you are supposed to really ramp back if you plan on retiring at 65. Once you get into that window of less than 10 years away, you should have a minimal amount of risk, especially if your plan has you needing those funds to live, versus being extra funds outside of those.

[southsider2k5]

http://finance.fortune.cnn.com/2011/08/19/...id=HP_Highlight

 

Will Europe come tumbling down?

By Shawn Tully, senior editor-at-large August 19, 2011: 5:00 AM ET

 

The debt crisis that started in Greece now threatens to topple the whole continent -- and kill the weak recovery in the U.S. Inside the race against the clock to fix the euro economy.

 

FORTUNE -- At first glance, Yiannis Boutaris would seem to be an unlikely free-market reformer. The 69-year-old mayor of Thessaloniki, Greece's second-largest city, has tattoos decorating his forearms and knuckles, short-cropped white hair, and a face creased like worn leather. As we sit and talk in his drab office on a sweltering summer afternoon, he's chain-smoking unfiltered Camels and wearing jeans, a gold stud earring, and black high-top Keds sneakers with no laces. Boutaris was a businessman before he got into politics, and he still owns one of the country's leading wineries (although, as a recovering alcoholic, he can no longer drink his own vintages). But he's hardly a political conservative. He was originally elected to Thessaloniki's city council as a member of the Communist Party.

 

Even Boutaris, however, has reached a breaking point with his nation's Homeric economic failures. "The Greeks borrowed and consumed recklessly, and got totally uncompetitive at making things and providing services like tourism," he says angrily, jabbing the air with his cigarette for emphasis. "If you want to start a business, you'll do better going to Bulgaria!"

 

The frustrated mayor is battling to end policies that block Thessaloniki, the industrial center of northern Greece, from becoming what it should be -- a principal port for the world's cruise lines, a favorite resort for European retirees, and a transit hub for the Balkans. Fed up, Boutaris is taking matters into his own hands. For instance, he's threatening to take the radical (for Greece) step of privatizing the city's dysfunctional waste collection business. "The unions are 'striking' against my reforms by picking up one can out of three," grouses Boutaris. "I'm thinking about hiring contract workers. We could save 50% on every ton of garbage!"

 

The mess that Boutaris is tackling -- and the overwhelming need to take action now -- epitomizes the problems facing Europe. As you've no doubt heard, the continent is trapped in an escalating debt crisis. It began in Greece in early 2010, but in recent weeks it has spread to Italy and Spain, nations that are simply too big to bail out. Those countries -- as well as Portugal and Ireland -- suffer from either crushing debt loads or gigantic current deficits that are piling on new debt, a legacy of their reckless overspending during the past decade. Today investors worry that these nations are so chronically uncompetitive, they can't grow fast enough to pay the future interest on that debt. As a result, global pension funds, insurers, and banks are dumping Spanish and Italian bonds, threatening to drive rates to ruinous levels.

 

How Washington is destroying the economy

 

The growing fear that those bonds will plummet in value, or even default, is roiling financial markets. Indeed, the recent plunge in U.S. stock prices -- and the manic volatility -- is as much about the contagion in Europe as the S&P downgrade of U.S. sovereign debt. Rumors are rife that French banks, which own tens of billions of euros in Italian and Spanish bonds, may be struggling to maintain the short-term financing that's their lifeblood.

 

Even if Europe's banks don't face a liquidity crunch, a drop in the value of sovereign bonds would severely deplete their capital, forcing them to halt new lending. The credit crunch would probably throw Europe into a severe recession. That in turn could kill the U.S. recovery, since the European Union accounts for 21% of U.S. exports. Even a truly apocalyptic outcome -- where one or more weak nations abandon the euro, causing gigantic defaults and a Europe-wide banking crash -- can no longer be dismissed.

 

What's certain is that growth in Europe is already slowing sharply and will probably keep weakening. The reason: Interest rates will be far higher than predicted, and banks, worried over their capital levels, will be increasingly reluctant to lend. "The rates on corporate and consumer loans all depend on what it costs the government to borrow, and that number is rising fast," says Uri Dadush, an economist at the Carnegie Endowment. "All the uncertainty makes companies wary about making new investments and hiring people. Their plans go on hold."

 

Most of all the debt crisis represents the stunning failure of the European Union, and especially the 17-nation eurozone, to deliver on its promise. Launched in 1999, the euro currency was designed to bind nations into a tighter economic union so that weaker members such as Greece and Italy would draw strength from their prosperous partners and close the gap in growth and productivity.

 

What was lauded as the EU's crowning achievement -- its bid to remake Europe as an equal of the U.S. and Asia -- didn't succeed. Instead of liberalizing their markets, countries such as Italy, Spain, and Greece left almost all of their worst, anticompetitive practices in place -- from centralized wage bargaining to restrictive licensing that supports cartels in retailing. Now the only thing keeping the eurozone from collapse is the willingness of rich countries such as France and especially Germany to provide big bailouts and of the European Central Bank to roam far from its charter to support the weaklings. In mid-August the ECB agreed to buy Spanish and Italian bonds to ease the pressure on those countries.

 

It's impossible to know how long the emergency measures will last. Hence the debt crisis has driven Europe to a historic inflection point. After dawdling for years, governments must race to beat the clock. The challenge is twofold. First, the debt-ridden nations need to close their big budget deficits rapidly so that debt won't continue escalating. Second, they need to prove they can grow fast enough to service, then lower, the debt they have now. That will require a rapid and difficult campaign to modernize their economies by ramming through market-opening reforms they should have imposed decades ago.

 

I recently traveled to the nation that best symbolizes all the poor choices and lost opportunities that are now haunting Europe -- Greece. The Greeks are dazed that years of prosperity turned so rapidly to disaster. "We recognize that Greece is bankrupt, and if we don't change it's over," says Barbara Vernicos, CEO of the department store division of Notos Com, one the nation's largest importers of luxury goods. But Greeks deeply doubt the ability of their politicians to face down the unions and cartels and deliver. And if they can't, the country that invented democracy might plunge a whole continent of governments into chaos.

 

From a cheap country to a very expensive one

 

The Athens Metro system was built in the early 2000s, amid the euphoria of joining the eurozone, heralding that Greece was joining the big time. And it's still an object of awe. Even as rioters crowd central Athens and taxi workers strike, Metro passengers race at 48 mph from the Port of Piraeus to the far suburbs. The cars and platforms are immaculate. Entering the station at Syntagma Square downtown, one gets the calm, ordered feel of a cathedral. Unfortunately, the Metro is just about the only thing left in the country that works.

 

The problems that befell Greece as a eurozone member resemble those of Italy, Spain, and other weaker economies: a consumption boom that masked big flaws in the economy, a substantial loss of competitiveness, and the madcap government borrowing that created today's crisis. When Greece adopted the euro at the start of 2001, it appeared to reap a gigantic windfall as rates on everything from car loans to mortgages dropped from over 15% in the late 1990s to the mid single digits, in line with those in Germany. The cheap credit ignited an explosion in consumer spending. For the next seven years the economy expanded at a strong annual rate of 4.2%.

 

But the spending did little to increase Greece's capacity for building durable wealth by selling goods and services to the rest of the world. Instead the euros flowed mostly toward imports of everything from German cars to French TVs. Both the government and private sector rapidly increased wages, helping push inflation well above the average in France and Germany. "Our salaries in Greece doubled in seven or eight years," says Tawfic Khoury, EVP of Consolidated Contractors of Athens, the civil-engineering giant. "Greece went from a cheap to an expensive country very quickly." Greek exports of fish, vegetables, and medical equipment lost ground to products from northern Europe and the Balkans. The big tourism sector was hit especially hard because rising prices made its sun-drenched islands far more expensive than resorts in Turkey or Tunisia.

 

The high growth rates also blunted any effort to reform the thicket of regulations hurting competition in everything from pharmacies to trucking. And low interest rates encouraged big public spending that first matched, then far exceeded, the growth of the economy. From 2001 to 2008 public employment surged 15%. Tax evasion, always a major problem, became absolutely rampant in the mid-2000s when the Conservative government eliminated the aggressive core of tax collectors known as the "Rambo" contingent. By 2008 public debt surged to over 110% of GDP and kept climbing.

 

When the credit crisis struck in 2008, Greece's sudden descent from a fast-growing to fast-shrinking economy made it impossible to service that Olympian debt. In May 2010, the "troika" of the International Monetary Fund, European Commission, and European Central Bank essentially agreed to loan Greece the money to keep operating by providing a $160 billion bailout package. It wasn't enough: On July 21, 2011, the troika pledged a similarly sized package to support Greece through mid-2013. By then, the plan prescribes, Greece will implement a draconian list of reforms that will enable it to start paying down debt.

 

The reform plan has two main parts: radically lowering deficits and elimination of barriers to true free trade. On the former, Greece has shown progress under Prime Minister George Papandreou, lowering its budget deficit from 15.5% in 2009 to 10.4% last year, and aiming for less than 8% in 2011. The toughest part, just as it will be for Italy and Spain, is shedding a maze of rules that strangle competition. So far Greece has been erratic in showing either the will or the skill to get it done.

 

A case in point is cruise lines. For decades it's been virtually impossible for big carriers such as Princess to begin or end journeys in Greece, since the law requires that they employ at least 20% Greek sailors on their vessels, at extremely high wages. As a result the big lines start and finish in places such as Genoa, Haifa, and Istanbul rather than in Greece. Last year the Greek government passed a law that waived the requirement to hire the Greek sailors but instead demanded the cruise lines sign three-year contracts guaranteeing numbers of cruises and destinations, as well as a big tax going to the Greek sailors' health care and unemployment fund.

 

When the EU strongly objected, the government pledged real reform. The job falls to Maritime Affairs Minister Haris Pamboukis. In an interview with Fortune, Pamboukis pledged to fully open the market. "The big international cruise lines are talking about starting their cruises in Greece. We're going to get rid of the restrictions on that contract and make it happen," he says. Another potential boon is a new law that for the first time effectively allows developers to build planned resort developments and sell villas to European retirees, a change that could make Greece the Florida of Europe.

 

Given the government's halting, uneven record on reform, it's hard to predict if the new rules will truly work. The problem is that even big steps toward genuine free trade won't produce the revenues Greece needs to service its gigantic debt, slated to reach 172% of GDP by 2012, according to the IMF. "It's impossible for Greece, or almost any country, to carry debt that big," says former IMF executive board member Miranda Xafa. Fortunately Greece can fund itself for two more years on cheap borrowing from the troika before it faces restructuring that debt. But it almost certainly has to happen -- and bondholders will need to take a substantial loss. The hope is that by then the crisis will be over, and Europe's banks can absorb the damage.

 

Too big to bail out

 

By contrast, Italy and Spain, which pose a far bigger risk to the eurozone, don't have the luxury of time. The rates on sovereign debt for Italy and Spain have recently jumped, hitting 6.3% for 10-year notes, until the ECB intervened to wrestle them back down. The relentless pressure on rates raises a double danger. First, it could cause a banking crisis by hammering the value of bonds owned by lenders. "The Italian banks have large holdings of Italian government bonds," warns economist Dadush. "If they decline enough, the banks will become even more nervous about lending, and they're already extremely nervous." Second, unlike Greece, Italy and Spain are paying part of their bills by floating new bonds, and if rates stay at over 6%, they can't possibly cover the interest on their debt. The only option would be a catastrophic default.

 

The challenge for Italy is the sheer size of the public debt, a staggering $2.7 trillion, the third-largest number globally, behind the U.S. and Japan. Italy has a relatively small budget deficit at around 4%. But even if rates return to near-German levels, Italy doesn't grow fast enough to keep that debt from increasing, largely because its economy is shackled by many of the same restrictions that are killing Greece.

 

In Spain the problem isn't the current debt load but where it's heading: Spain is saddled with a huge, 9.2% budget deficit. A housing collapse following the worst bubble in Europe severely weakened its lenders, raising fears of the need for banking bailouts. Prime Minister José Luis Rodriguez Zapatero has pledged to lower the deficit to 6% this year. He's also promising the same kinds of free-market policies that are moving forward in Italy and Greece, including reforms to the centralized wage-setting system for private companies that raises pay faster than inflation.

 

The brewing crisis for Italy and Spain exposes a striking weakness in the structure of the European Community. The EU lacks a lender of last resort, an institution with virtually unlimited resources to guarantee the survival of the euro. So far the ECB has been going far beyond its mandate of maintaining price stability, with the grudging assent of the Germans, to buy Italian and Spanish bonds. But the ECB is unlikely to veer from its mission for long. The fund created for the Greek bailout, the European Financial Stability Facility, is being granted new powers to buy sovereign bonds. But the EFSF, even with $620 billion at its disposal, is far too small to counteract a sustained attack on either Italian or Spanish bonds, let alone both.

 

It's possible that the crisis will become so severe that the EU will be forced to issue euro bonds, guaranteed by all the member nations, to cover the debt. That would place a big burden on the taxpayers of the wealthy countries, especially Germany, that pay most of the EU's costs. It's a solution that Germany dreads but may need to shoulder if the only alternative is financial Armageddon.

 

By far the best remedy is rapid reforms that restore the confidence of investors, a reversal of the runaway spending of the bumper years, and the long-overdue liberation of markets. That's what the EU was supposed to do at its founding. Then it lost sight of the basics while pursuing supposedly loftier goals.

 

Today a new breed typified by Mayor Boutaris of Thessaloniki are seizing the moment. "Believe it or not, the crisis is very helpful," says Boutaris, lighting another Camel. "We'd never even be talking about these reforms if we didn't have a near-death experience." In this land of mythic tales, it's time for some new heroes to step forward.

 

This article is from the September 5, 2011 issue of Fortune.