Fixed-income investors are getting more than their fair share of pain in the credit bubble that is sweeping the financial markets. Recently, several large issues from A-rated corporations have produced yields that are so low they threaten to provide investors with negative real returns after inflation.
Several big corporations just released a slew of debt on the short and long end of the yield curve. Johnson and Johnson, for example, sold $4.4 billion of issues with rates at .7%. That’s well under the 3.2% annual rate of inflation..
Even Google, which has more than sufficient cash, decided it would seek out a $3 billion loan from investors. Never mind that the company has $30 billion in cash, and had virtually zero debt before the newest offering.
When it bursts
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Bonds
bond bubble, corporate bond yields, fixed income, inflation
It would be hard to ignore what’s happening in modern telecommunications. Recently, ATT decided to go after its rival, T-Mobile in what would be a multi-billion dollar deal. In doing so, it effectively removed one of four of the still remaining cell phone companies in the United States. We’re now left with ATT, Verizon, Sprint (which is in serious financial trouble).
So what’s this mean for consumers? It means we’re going to get screwed. What’s it mean for ATT shareholders? They’re going to clean up!
What Makes ATT So Attractive
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Stocks
acquisition, ATT, cell phone stocks, dividends, market share, merger, T, Tmobile, VZ
Relatively speaking, real estate isn’t always an asset that is easy to liquidate. While we may often discuss how small cap stocks are hard to buy and sell thanks to their limited pool of traders and investors, homes are harder to sell by an order of magnitude.
That is, where it requires only capital to purchase a share, or many shares, of stock, you have to live in your home. You have to pay property taxes on it, and if it has a yard, you have to mow it. That’s a lot more than just money—it’s responsibility.
Foreclosures vs. Home Prices
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Real Estate
comparables, foreclosures, real estate investing, real estate prices
A report from the US Pentagon asserts that a number of countries may have allied together to create the financial crisis of 2008 for economic gain. The paper says that at the height of the selling spree, banks in Venezuela, Russia, China, and other countries sold off securities in mass quantities to launch a near financial Armageddon.
The paper, however, does lack in substance.
Financial Terrorism in Equity Markets
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Economy
BRIC, financial crisis, financial terrorism, recession
Gold, gold, gold, gold, gold—everyone wants to own gold! Gold IRA accounts, those which allow investors to buy gold bullion and collectable coins inside an individual retirement account for future retirement costs, aren’t all they’re made out to be.
In fact, investors who buy gold IRA accounts may find that they’re losing far more than they could ever possibly make. We’ll explain why gold IRA accounts aren’t the right way to go.
Gold and Government
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Precious Metals
bullion, gold, individual retirement account, ira, palladium, platinum, premiums, silver, spot price
The financial media is abuzz with stories about how LinkedIN’s IPO went sour. According to these stories, LinkedIN sold stock too cheaply to investment banks who would take it public the next day, selling its shares for only $45 just one day before the stock popped 100% to more than $90 per share.
Extrapolating out the sales price vs. the price on the open market during the IPO, it’s easy to see that LinkedIN lost millions of dollars in selling their shares cheaply, but did they really?
Why LinkedIN IPO’d Perfectly
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Investing
founder, IPO, LinkedIn, share float
Medallion Financial Corp. (TAXI) might not have an exciting name, at least, not until you find out what exactly the Medallion is all about. Medallion Financial Corp (TAXI) makes loans to taxi drivers in metropolitan areas to secure a permit from the local government to operate a taxi service.
In a lot of places, New York especially, the cost of starting a taxi service is as high as $1 million. Yes, just for the right to drive people around the city for money, you’ve got to pony up $1 million. The car, on the other hand, might set you back only $15,000.
Easy Money
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Investing
Investing, specialized finance, stock, taxi
Retail stocks are traditionally highly-levered to the general economy; when the consumer is weak, real estate gets pummeled, but when the consumer comes on strong, retail stocks experience a revival.
This past week, one unlikely company reported smashing success.
Even though retail spending has been weaker, especially on the higher-end luxury and mid-to-high priced clothing category, Dilliards reported year-over-year growth in profits of 57%.
Dillard’s Secret to Success
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Economy, Investing
consumer spending, dillards, Investing, reits, retail stocks
Wall street runs counter-intuitive to everything we’ve ever known. There isn’t much wisdom on Wall Street, save for the fact that Wall Street knows nothing, even when it knows everything.
That’s the difficulty with the modern Wall Street, in the short-term it is as much of a casino as it is a sound investment, but in the long-term, things usually clear up. We don’t know the fair value of a stock, bond, or commodity until well after we have invested, or until news is priced into the market.
When everyone believes it, it stops becoming true
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Investing
bubbles, Investing, Keynes, wall street
Investors face a new reality that they have to prepare for their retirement by investing in the best possible investments with reasonable risk to reward ratios, but they’ll also need to be tax code savvy.
Few things change as much as the tax code, but one thing certainly hasn’t changed: the necessity of tax strategies and their relationship with your 401k and IRA. Read more…
Investing, Mutual Funds, Stocks, Taxes
dividends, fixed income investments, retirement, retirement accounts, tax strategy
Last year this blog profiled GameFly, a then small videogame rental service which worked very much like Netflix. That post, published last October, followed GameFly’s announcement that they would be going public to raise funds. As an investor, I couldn’t be happier. The model is great, the business is great, and it is certain that Wall Street would send it roaring during this current dotcom boom.
But where are we now?
GameFly IPO in 2011? Doubt it.
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Investing
GameFly, IPO, redbox, stock, videogames
Skype prides itself as a free internet “telephony” service, which allows people to talk via text, voice, and video over the web. While many of its services are free—you can make calls, conduct online conversations, and use video at zero-cost—Skype is a nearly-profitable company thanks to some of its paid services. We’ll run through Skype’s revenue-generating services, and discuss how Skype makes money in the article below.
Skype’s Money Making Model
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Business
how Skype makes money, Skype, Skype services
The Wall Street Journal reported over the weekend that the average college graduate who left school in 2011 left school saddled with $22,900 in debt, a record high. After breaching a new high for almost a decade straight, some are wondering if it even makes sense to invest in a college degree.
Do College Degrees Make Sense?
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Economy
bachelors degree, college, college bubble, education, good colleges
There’s been plenty of talk about the future of credit in the United States and whether newly-created dollars are reaching Americans with the ease they’re reaching Wall Street. To put it simply, credit for everyday Average Joe American is easy to find—it’s just from the worst sources.
Credit Economy
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Investing
cards, consumer, credit, FED, line of credit
So Greece is in turmoil, and the markets have realized it. The country spent far too much on social programs and other spending and now has a very serious deficit. The deficit, though, is further compounded by a much greater problem in that Greece doesn’t control a central bank.
Central banks produce money, the engine of the modern economy. In Europe, the Euro is the currency and it is controlled by the European central bank. The European Central Bank sets monetary policy for the whole of the region, and thus many different countries are affected when the ECB changes monetary policy.
Greece vs. US
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Stocks
It is starting to look like there is great weakness in the silver and gold bubble that started nearly one decade ago. Recently, the price of silver has plummeted, which commentators have said is partly to do with the COMEX (CME Group’s) margin hikes. An increase in the cost to buy silver on the futures market means the most aggressive buyers and sellers alike have to unwind their positions.
Is the silver bubble bursting?
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Precious Metals
bubble, commodities, silver, SLV
Wall Street is on a tear, commodities are surging, and everywhere you look it’s as if the world is borrowing like it’s 1999 again. Money is cheap, and there is little reason not to take out a loan when the net cost to you, after inflation, is just about zero. This much is reflected in the reality that more and more money is flowing into negative carry assets.
But what about the average Joe? Are things as good on Main Street as they are on Wall Street? Read more…
Economy
food stamps, jobs, middle class, transfer payments, unemployment, us economy
Have you guys noticed? Wall Street is partying like it’s 1999! While I’m loving the enthusiasm, I’m starting to think that it might be time to cull back some winners and rebalance into the losers. The S&P earnings ratio is looking mighty high at 15 years income…
Long Term trends
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Economy
earnings, market rally, pe ratios, sp500, Stocks
