This article on Yahoo finance really got my attention. It’s about how the state of Connecticut is about to run out of money. It’s interesting because many states are in dire financial straits, but most people are, as usual, blissfully unaware.
Recently I did some research about bonds, and was interested in purchasing some. I discovered that municipal funds are supposed to be among the safest bonds that you can buy! I thought, “Isn’t that funny. Many states and cities are going bankrupt, but people think these bonds are very safe.” It sounds like the same game the ratings companies have been playing for decades: give the bond a AAA rating even if it is risky.
Why are municipal bonds more risky in this financial environment?
After reading this article on Yahoo, I really started thinking about how the global economic environment has changed. China is on track to be the biggest and most powerful force in the world. What does that mean for the U.S.?
One thing that I have noticed is that many people like to dismiss China as not being able to compete with America. They say, “Oh, China will never overtake America. Our technology is just too good.” Or some other nonsense. These are the same people who say, “Buy American. We need jobs.”
After reading this article on Yahoo about the ever-growing national debt, I took a look at the U.S. National Debt Clock. Not only are we having record deficits each year, but the debt per American has reached unsustainable levels.
As you can see, the debt has reached $42,698 per American! And, $119,524 per taxpayer. The average savings in America is a small percentage of these figures.
Just when you thought it was safe to start spending and investing again, right?
The recent turmoil in Greece has had a bubbling effect throughout the world. The crisis may or may not have been responsible for about a trillion dollar drop in the stock market, but it was definitely responsible for a trillion-dollar bailout.
But, who cares? Those things are not on your personal financial radar map.
Last week I read When Genius Failed, the fascinating story about the rise and fall of Long Term Capital Management (LTCM). This neat book offers us many important lessons.
For those unawares, LTCM was one of the largest, well funded and “smartest” hedge funds ever launched. In fact, two Nobel Prize winners for their work on options brought their brains. They were Myron Scholes and Robert C. Merton. How much smarter can you get?
There was one small problem. No amount of intelligence could save the fund from its traders, and their Achilles heel: their desires. Like a kid in a candy store, better judgement and moderation were overrun by greed. And it ended in the most spectacular hedge fund blow up in history.
The last 12 months has been filled with economic uncertainty. We have had government spending and bailouts at unheard of levels. People have even said the government is taking over the banking industry. Unemployment is at a multi-decade high. Real estate prices have fallen 50% or more in many areas. Not long ago, some people were even predicting a great global depression.Now that those fears have been alleviated and the economy appears to be on the road to recovery, the pressure to shop is at an all time high. The internet is an outstanding source of information, and sales and shopping information is no exception. Sites like DealNews have been a boon to shoppers everywhere. As Black Friday approaches, the scent of good deals has already thrown many into a buying frenzy.
Recently, as the stock market soars, there has been a large amount of news about how well the economy is doing. They say that the housing market has hit bottom, and that the economy is recovering. However, this article by the Associated Press is about how unemployment is rising.
Regardless of what the newspapers say, it is important to look at the fundamentals that drive the economy. The government has created massive band-aids to prevent a depression, and they seem to have worked. But it is important to understand the difference between a recovery and a temporary band-aid.