Posts Tagged ‘investment’

“An investment in knowledge pays the best interest.” -Benjamin Franklin

“No matter how skilled you are as an investor, upping your savings rate is more powerful to your wealth than either increasing your income or increasing your investment returns.  That’s because it’s a one-two punch… you increase what you have to invest, while decreasing what you spend.  You also learn how to live longer on less money….  Remember that ultimately, how much you save will be the difference between a lifetime of poverty… or one of wealth.” -David Eifrig

The investment-advisory industry is a huge, multi-billion dollar business based on hard work, clever thinking, and sophisticated algorithms….  [T]he unfortunate truth is that the financial establishment rarely looks beyond stocks and bonds.  And if you think about it, why would it want to?  It makes its money by ushering you from one ‘hot’ stock or ‘amazing’ fund to the next….  Because they know that you have heard that ‘diversification of assets’ is good, financial advisers give you the illusion of diversification by filling your stock portfolio with businesses that are ‘diversified’….  But at the end of the day, it’s all invested in stocks or stock derivatives.

Asset allocation is the process by which you spread your wealth across different sorts of investments….  Over the years, I have made hundreds of individual financial decisions….  I could see very clearly that it was not particular buy/sell decisions that accounted for this good fortune.  It was the general decisions about asset allocation that paid off.” -Mark Ford

“You must take responsibility for your future finances and well-being.  This is not something you can just agree to.  You have to review what you’ve done in the past and make a serious personal commitment to change.  After that, you have to curtail your spending, manage your money, and allocate your investments wisely.  Then you must create a plan to increase your income.” -Mark Ford

No matter how skilled you are as an investor, upping your savings rate is more powerful to your wealth than either increasing your income or increasing your investment returns.  The best part is that it doesn’t really matter how much you make.  It only matters how much you save.  That’s the part most people don’t appreciate.” -David Eifrig

“Like the repeated doping of a horse, the boom is kept on its way and ahead of its inevitable comeuppance by repeated and accelerating doses of the stimulant of bank credit.  It is only when bank credit expansion must finally stop or sharply slow down, either because the banks are getting shaky or because the public is getting restive at the continuing inflation, that retribution finally catches up with the boom.  As soon as credit expansion stops, the piper must be paid, and the inevitable readjustments must liquidate the unsound over-investments of the boom and redirect the economy more toward consumer goods production.  And, of course, the longer the boom is kept going, the greater the mal-investments that must be liquidated, and the more harrowing the readjustments that must be made.” -Murray Rothbard

Invest

Posted: August 14, 2014 in Money Matters
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“The best investment on earth is earth.”  – Louis J. Glickman

Blowing Money

Posted: May 26, 2014 in Money Matters
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“If you’re blowing money on things you don’t need, you’ll never build substantial wealth… no matter how well your investments are performing.” –Dr. David Eifrig

Well, here we ago again.  Up until now, most of the “questionable” home loans available since the housing meltdown have been rural development loans offered through the USDA.  The questionable part in my mind are the “no down payment required” and “guaranteed loan” aspects.  But, according to a Reuters article, Wells Fargo is again planning to jump back into the “subprime” market.  Why?  Because they are experiencing a downturn in revenue.  Hmm, does this seem like a sound business decision?  (GM is also selling cars to subprime customers to help their sales).  Does this sound promising?

Some interesting points from the Reuters article makes me scratch my head:

1.  “…loosening of credit standards could boost housing demand…”  Shouldn’t demand for housing be boosted because people can actually afford them?  Isn’t it a false demand by any other standard?

2.  “To avoid the taint associated with the word ‘subprime’, lenders are calling their loans ‘another chance mortgages’ or ‘alternative mortgage program’.”  Does changing the name of something actually make it better?  Does duping people make these mortgages safer?

3.  “If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.”  Seriously, then why do we make the purchaser sign on the bottom line?  That point was missed during the initial crisis; purchasers were simply considered victims.  Everyone wants to blame the bank.  Thank you Dodd-Frank!

4.  “Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed.”  I am sure they thought the same thing last time.  Risk is guaranteed to be risky; a la the recent death of the snake handling pastor.

5.  “The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA.  Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.”  And there we have it!  Guaranteed by the government!  In other words, by the American taxpayer!  Let’s see, what would I provide to the American consumer if the government will guarantee it?  Anything!  The second part of the quote explains exactly what they were doing before, turning them into investments.  Subprime investments,  I’ll pass.

It looks like the strategy must be paying dividends.  According to the Wall Street Journal, “Household debt jumps as banks loosen up.”  Wells Fargo knows what works to get people borrowing.  The interesting thing is that they still haven’t resolved all of their issues with Fannie Mae and Freddie Mac from the original crisis, but see no issues with stepping back into those familiar waters.

All I can say is, good luck with that….

Debt drives demand, in two directions.  It first drives demand upward while folks spend with credit; the economy grows.  Then it drives demand down when credit limits are reached; the economy tanks.

“A healthy economy is driven by savings-fueled demand.  When savings and investment become badly maladjusted, there will be problems….  Since 1992, quarterly adds to home mortgage debt have increased from around $200 billion per quarter in 1992 to more than $600 billion in the most recent quarter.  This is an amazing amount of debt….  And that means an overwhelming majority of people’s income today is going toward taxes, interest, and paying down debts.” -Porter Stansbury