Tricky Times for Baby Boomers

The Baby Boomer generation is known for their careful financial planning, frugal savings and determination to experience a relaxing retirement that is free from financial worry. However, the current financial situation has introduced new concerns regarding a boomer’s financial planning. While many people have already retired, others are just entering retirement and discovering that several common life events can suddenly pose a challenge to their financial plans. 

For this reason, it is important to be aware of several major life events that can cause a boomer to need to make changes in their financial strategy so that they can continue to live out their retirement in peace.

Selling a Business 

Self-employed Baby Boomers who are entering retirement must first contend with selling their business. This can be particularly tricky as the legalities of business sales are often complicated. However, legal fees are often expensive and can easily take a large chunk out of the profits that can be gained from selling a business. For this reason, boomers are encouraged to learn as much as they can about the selling process and carefully research real estate agents and lawyers before making any major decisions. Staying involved throughout the selling process is vital to emerging from a business sale with a substantial profit.

Divorce

No one ever wants to imagine that divorce can happen to them, but after the kids leave the nest many boomers are discovering that their marriage has come to an end. Splitting assets during a divorce, coupled with legal fees, can wreak havoc on a person’s retirement plans. 

For this reason, it is important to seek out the advice of people such as Walter Wisniewski Paragon Capital financial planner who have dedicated their careers to helping people to plan for their financial future. Because divorce is often an emotional time, it can be difficult for a boomer to think clearly about their financial plans. Therefore, a qualified financial planner can be an important asset to ensure that a person’s financial affairs are in order throughout the entire divorce process.

Losing a Spouse 

Divorce is not the only hardship that can occur within a person’s relationship during retirement. Baby Boomers must also face the concern of losing a spouse. When a spouse dies, grief can cloud financial judgment. If the surviving spouse was financially dependent upon their other half, then there is also the concern about how the estate will be divided. 

For this reason, boomers are encouraged to plan for their estates before a crisis has occurred. A qualified financial planner can help to ensure that a legal will has been established that will designate how possessions should be distributed in the event of the loss of a spouse.

Medical Bills and Lawsuits 

Finally, as boomers begin to make their way into retirement age, health can become a major concern. Even in the event of a minor illness or injury, medical bills can quickly skyrocket and begin to deplete a person’s savings. In order to avoid a person’s retirement funds being depleted by medical bills and lawsuits, boomers should look into purchasing the best insurance plans that they can afford. Long-term insurance plans can offer excellent packages that will ensure that unexpected problems do not become a financial burden.

While Baby Boomers have planned their entire lives for their retirement, it is possible that they may need to make a few changes to their financial plans if they experience a major life event. Because medical mishaps, divorce or the loss of a spouse could occur to anyone without warning, it is best to be prepared before they ever happen. For this reason, a qualified financial planner can be a Baby Boomer’s best ally when planning for their post-retirement financial future.

5 Growth Sectors Worth Investing In

One of the hardest parts of investing is finding a growth sector that you can believe in. Talk to any stock market 'specialist' and he or she will tell you about buying in early to an industry that is about to take off. The Internet and financial circles are full of tips and premonitions regarding stocks and markets that are about to fly into the stratosphere, but the truth is most of this is thinly disguised guesswork, deductions based on smatterings of evidence and hearsay. Sometimes the best investing guide is to look at macroscopic trends in society, over-arcing patterns that are effecting the economy in multiple ways. What industries are actually growing and what factors are there that could impede this growth? If you can find no logical roadblock to stop an industry that's growing by leaps and bounds, it could make for a lucrative investment. That's why the following industries are considered by many to be extremely promising growth sectors: Life sciences The advances in the life sciences field have been nothing short of remarkable in recent years. Improved micro-arrays have increased our ability to study the human genome and fashion new pharmaceuticals. So has microfluidics and gene therapy. Biotechnology applications have also used artificial selection and hybridization in order to improve the domestication of animals and the cultivation of plants. The growth of life sciences has seen the evolution of findings that used to be contained in Ivory Towers leak down to have extremely valuable real-world applications in everything from agriculture to health care. The government has even invested in life sciences in order to ramp up its efforts to protect against bioterrorism. As advances continue to be made in the pharmaceutical, biotechnology, agrochemical and industrial chemical fields entrepreneurs who make a considerable life sciences investment are likely to see good to great returns if they are prudent and look for smart value plays. Green engineering Green engineering jobs are expected to see meteoric growth in the coming years as more and more homeowners and businesses renovate and upgrade their houses and office buildings in order to be more energy-efficient. Alternative energy is also expected to be a major growth sector, but picking out specific companies in this field will be a harder to do because of the political uncertainties inherent in the industry. On the other hand, green engineering projects don't require an entirely new infrastructure and are likely to be heavily invested in by both private firms and federal agencies because of their ability to both produce jobs and save money. Additionally, new regulations mandating certain CO2 emission levels will force many businesses to commission new installations. Many engineering education programs are now focusing intensely on green engineering, attempting to train a new generation of engineers to take seriously the challenge of energy efficiency and sustainable city planning. Digital information You don't have to look far to see the wide-ranging impact of digital information technology. Smartphones, high-speed Internet, GPS, and cloud services are now taking over our professional landscapes, changing the way businesses operate and the way people communicate with each other. It's no longer necessary for some colleagues to even be in the same room in order to have business meetings anymore; students can earn their degrees remotely; investors can organize their portfolios and move their money around while in transit. While a long term investment may be difficult in the digital information field—due to its ever-changing nature—short term goals could reap a significant harvest. Augmented reality, VoiP services, open source online education tools, and place-based messaging apps are all popular right now and are expected to grow in the near future. In particular, mobile Internet use is expected to continue to flourish, adding to the lure of companies who are building up 4G LTE network connections and other high-speed broadband systems. Clean technology Clean technology has seen a considerable uptick in funding since President Barack Obama was elected and we can expect that trend to continue if is he is reelected. Even before Obama was elected, the clean tech train was in motion. In 2007, $148 billion was invested in clean technology. This includes federal subsidies for renewable energy, information technology, green transportation, electric motors, and a wide range of projects attempting to reduce environmental pollution. By 2018, biofuels, wind power and solar photovoltaics will be $325+ billion dollar industries, making it one of the more promising fields for venture capitalists. Clean technology stocks in China and India have grown steadily for years now because of considerably federal investments. If similar efforts are made here, it is possible that clean technology could become one of the most promising investments on the market. Advanced technology Advanced technology is generally defined as the use of innovative technology to upgrade or improve a product or commercial process. In recent years this has included advances in computer technologies, high performance computing, high precision technologies, robotics, automation control systems, sustainable technologies, and new industrial technologies. Advanced technology can be hard to pin down, which at first could make it an unattractive investment. But the government, including the White House, has been enthusiastic about this field. Obama even put forth a $1 billion dollar proposal for the National Network for Manufacturing Innovation, which would create a network of institutes all across the country working on advanced manufacturing projects. The President has also recently submitted a budget for the National Institute of Standards and Technology that would significantly increase funding for the research facilities working on these projects. While no investor can be 100% certain that a particular company's stock will rise exponentially, following the trends in a particular growth sector can be a worthwhile strategy. It will also be necessary to track a company's financials over the course of many seasons, assessing the way it adapts to change. It may behoove you to invest in a mutual fund, which encompasses a wide-ranging portfolio of stocks in a certain industry. Therefore, your money is not dependent on the performance of any one company, but rather the overall growth of a network of technologies and processes. A mutual fund in any of the preceding industries would be highly likely to accrue value over the course of time and is much safer than buying a single stock. But this requires the investor being able to keep the money in the market over many years, possibly even a decade or more. If you're looking for short-term earnings, you will have to wing it like the rest of us. But at least you'll be starting in a verdant field that is primed for growth.

Talking with Danielle Rodabaugh on How Sureties Work with the Financial Industry

We're shifting to the mortgage industry today, a topic I've covered here and there over the last 2 years. After having some neighbors of mine go through problems with their mortgage provider, I reached out to Danielle Rodabaugh, a journalist / surety expert who covers the industry. My question to her: "How does your industry deal with mortgage brokers and companies that act illegally? How does the surety protect the consumer?" Here's what she laid out for me, posted here in full. Thanks Danielle!

How to make a claim on mortgage professional's surety bond

Countless instances of unethical lending practices in the past decade have motivated government agencies to strengthen mortgage industry regulations across the country. A crucial aspect of the crackdown has been stricter surety bond requirements for mortgage professionals. If a bonded mortgage originator, broker or lender performs dishonestly when helping clients with their mortgages, injured parties might qualify for reparation paid out from professionals surety bond funds. Those who are adversely affected by a violation of the professional's performance can make a claim against the bond. This includes consumers, third-party providers and state authorities in charge of mortgage industry licensing. When it comes to the mortgage industry, the surety claims process varies greatly depending on

   
• the obligations outlined in the bond
   
• the jurisdiction in which the bond is active
   
• the parties bound to the contract's terms

To collect reparation, though, the injured party must make a valid claim against the professional's surety bond. To do so, injured parities should follow these three steps.

1. Verify that the mortgage professional actually violated the bond's terms.

If you believe a licensed mortgage professional you've been working with has violated industry regulations, you might be able to gain reparation. For a valid claim to be made against a bond, however, the mortgage professional must have violated its terms.  Some problematic practices that could result in a claim against a mortgage professional's bond include:

   
• intentionally targeting vulnerable or at-risk borrowers
   
• pressuring clients to buy certain loan products such as high-risk loans or loans with higher interest rates
   
• basing clients' interest rates on anything other than credit history
   
• approving clients for loans they cannot afford to repay
   
• charging clients unnecessary or additional fees
   
• encouraging clients to use fraud when applying for a mortgage

Before you try to make a claim against a surety bond, you or your lawyer should verify whether the mortgage professional actually broke the bond's terms.

2. Get in touch with your attorney.

A number of legal issues could arise during your attempt to make a claim on a bond. The best way to handle potential problems is to get in touch with your lawyer right away and explain the situation. Not to mention the fact that mitigation is typically handled better with the help of a lawyer. You should always discuss your claim with an attorney before taking legal action because, unfortunately,  the amount you'll be able to collect might not be worth the time, money and effort that will be required to make a successful claim.

3. Contact the mortgage professional's surety.

Effective communication is crucial when trying to make a claim against a bond. To find out who the surety is, contact whatever state agency regulates mortgage professionals. The department can provide you with the name of the licensed mortgage professional's surety bond provider. Then contact the surety underwriter and follow its required procedures to make your claim. Oftentimes surety underwriters have personnel that deal exclusively with the claims process. Bond claims against mortgage surety bonds must typically be filed within one year of the date of the act that causes the claim. The duration of the surety bond claims process varies among underwriters. The surety underwriter will have to verify the claim is valid before paying reparation to injured parties. Sometimes mortgage bond language requires a county court ruling against the principal for a claim to be considered valid. Whether or not you have to take legal action against the mortgage professional to gain reparation depends on the bond's contractual language. Too many people have learned the hard way that the housing market and mortgage industry can be extremely risky to get involved with. Armed with an understanding of surety bonds, however, current and future homeowners can protect future investments from fraudulent mortgage professionals.
. . . A little more about Danielle: Danielle Rodabaugh is the chief editor for SuretyBonds.com, a nationwide surety bond producer. As a part of the company's educational outreach program, Danielle writes about mortgage industry developments since they're often intertwined with the surety market.

Choosing the Right Bank to Manage Your Business Finances

Banks and businesses are invariably connected. When businesses earn money, owners store their earnings in the bank. Owners can also borrow money from banks in order to start a business or to prevent its downfall. Hence, banks and businesses rely on each other for survival, but how can you be sure that this partnership is not detrimental to your business and lead you to success instead? One of the determinants of the success of a business is its good partnership with its bank so, you need to carefully choose the bank that is suited for your business needs.

Hundreds of banks may be present in your area but only a few can offer the services you need. When starting a business, the common notion of business owners is to go to the large banks immediately. While large banks have all the resources to support your business, they may charge higher fees for that. Business owners can always go to community banks where card and ATM fees are not that high.

In addition, some large banks charge monthly maintenance fees and these fees, when summed up, can amount to significant loss in your profit. Always be vigilant about extra fees and if you are unsure why your bank charges you with such fees, you should not hesitate to ask them about it. You can also opt for a type of account that incurs little or no fees.

If you are looking to borrow money, check whether the bank is capable of granting it to you.

Smaller banks or internet banks may not have the resources to help you out on big loans such as larger banking institutions could, but they are more likely to offer your customized services which can be highly beneficial. But, this does not mean that your loans will be immediately approved since they will have to consider your business credit. Larger banks often apply the formulaic approach when deciding on which loans to approve since reviewing the local market where your business operates is not feasible for them. Smaller community banks, on the other hand, can review your credentials to determine the financial state of your business.

Also, check the quality of their services and offerings. The bank manager must always be ready to respond to your queries and give you full assistance on your needs. Every business is unique in its own way so personalized services that can cater to your specific needs would be very great features. Tools and other products that can help you manage your finances, interest rates, foreign exchange transactions are likewise valuable.

US Census Infographic

Interesting infographic on the US Census comparing 1940 with 2010. It is amazing how much can change in 80 years.

Via: Home Insurance Guide

Prepaid Cards On The Rise

Traditionally, prepaid cards have been used by people without bank accounts (which describes one in five Americans) and federal agencies giving out benefits. But prepaid cards are one of the newest financial trends, with use of them rising 68% from 2010 to 2011, making them the fastest growing payment method in the nation. And it's not just lower-income sections of the populace using them now. Many middle to upper class consumers are looking at pre-paid cards as a way to ensure they don't trudge in the murky waters of debt. They're also frequently being used to fund students studying abroad.

Many issuers are looking to incentivize consumers to utilize prepaid cards by eliminating overdraft fees, as is the case with the Green Dot prepaid card. Green Dot, which has more than 4.3 million cards in circulation, receives a large amount of its new customers from ex-bank account holders at their wit's end. Indeed, many consumers are also looking at prepaid cards as a welcome respite from the exorbitant fees being charged by banks, although ironically more and more banks are relying on prepaid cards to generate extra revenue.

Accordingly, many issuers have also eliminated maintenance, reloading and activation fees, which have all been traditional caveats to prepaid plastic. While the cards can't help you to build financial leverage with a credit bureau, as is the typical draw of a credit or debit card, some people are looking at them as a small step toward financial responsibility, as they essentially force you to limit your own spending ability beforehand.

Prepaid card funds are insured by the FDIC, just like other payment methods, but do not run up the traditional interest of a credit card. This may be one of the catalysts for the swarm of consumers looking to purchase them. In 2011, $70 billion dollar was placed onto prepaid cards. That number is expected to hit $120 billion, nearly double, this year. What's the message here? Well, there's probably a few. One is that the economy is still weak, and consumers are reluctant to accrue more debt on a credit card. Another message is that merchants should make sure their credit card processing systems are configured to transact purchases from prepaid cards or risk losing some major business—approximately, their slice of a $100 billion dollar pie.

Perhaps the third and most important message to be gleaned from the rise of prepaid cards is that Americans may finally be starting to think about lessening debt, although only time will tell how serious we are about rising to that challenge.  

Big Banks, Smaller and Smaller Loans

There is great debate over how big of role of big banks have in spurring economic growth with small business loans. Some analysts argue they're doing enough, while others point to the hefty federal bailouts the nation's biggest banks have received and ask why more of that money isn't being flushed back into the system in order to create job growth and healthy small businesses. We can list some facts, but must keep in mind that facts bend and can be used by virtually anyone to prove a point. First, let's define what constitutes a small business. On a purely financial basis, small businesses or usually thought of as businesses with a revenue of $20 million of less. These businesses depend on banks for loans so they can expand their services and infrastructure and invest in new business models, like e-commerce, cloud services, and virtualization. Without loans, most small businesses can't grow into big businesses.

Unfortunately, recent numbers released by the FDIC paint a dismal picture of the role big banks play in supplying money to small businesses. The top 5 banks in America—Bank of America, J.P. Morgan Chase, Citigroup, Wells Fargo, and Goldman Sachs—only contributed 16% of the nation's small business loans, even after these same banks took in a combined $151.59 billion in TARP bailout funds and sit on 40% of the nation's deposits. As a result of these poor loan figures, many small business owners who need loans are not even requesting them. Many financial analysts feel this is not the kind of entrepreneurial atmosphere that will trigger economic growth.  

On the other hand, one can also look at these numbers as signs that financial institutions are practicing more stringent oversight. We've seen what can happen when millions of loans are issued to people who can't repay them. This resulted in the crash of the housing market that contributed greatly to our economic stagnation. While small businesses originally benefited from this inflated consumer confidence, they are now suffering from an epidemic of stingy lenders. Is it that the big banks are trying to prevent a similar crisis from delinquent small business owners by encouraging better credit and more responsible loan delegation? Or do we have reason to think that the institutions who have been deemed “too big to fail” don't feel the same way about America's collective entrepreneurial spirit? After all, if banks are too big to fail, so are the people who invest their money in them.

The "Buffett" Rule

Warren Buffett, the billionaire magnate, investor and philanthropist, has been getting a lot of face time in the news these past couple years. He made waves all across the media with his assertion, in a New York Times op-ed, that the super-rich in America were getting “coddled” and should be expected to pay more in taxes. Famously claiming that he wanted to pay more in taxes, Buffett has been a strong adversary to the Bush-era tax breaks for rich people and corporations, calling for higher rates on investments.

President Barack Obama's 2013 budget proposal will pay tribute to Buffett with something called the “Buffett” rule, which will replace the alternative minimum tax that was originally established for the purpose of limiting the deductions rich taxpayers could use to reduce their taxable income. The rule calls for a tax increase of $1.5 trillion over the next decade (around $36.7 billion a year) in a plan that will effectively end the Bush era tax cuts and mandate anyone earning more than $1 million a year to pay 30% in income taxes.

In what will almost assuredly result in a fiery election year showdown with Republicans, Obama's proposal specifically calls for a reduction in tax breaks to the wealthiest Americans and U.S.-based multinational corporations. In his budget message, Obama said that Americans earning “$50,000 a year should not pay taxes at a higher rate than somebody making $50 million.”

Opponents of the plan say it will cause investors to dial down their spending, which will effectively stifle innovation and business growth. Most of these critics want deficit reduction to come from a reduction in funding for “entitlement” programs like Medicare, Medicaid and Social Security. The major points of contention revolve around the marginal tax rate, or tax bracket, which affects how much someone will be paying in taxes after deductions and credits.

Theoretically, an investor such as Warren Buffet is currently protected from a top 35% rate by the accumulation of capital gains, dividends, and other forms of interest enjoyed by hedge fund managers. This “carried interest,” as it is called, essentially amounts to untaxed investment funds paid to managers by private equity. This is also known as a “performance fee,” from which most wealthy investors receive a great deal of their annual income. Fiscal conservatives don't consider performance fees to be entitlements.

We can expect a mighty congressional showdown later this year over the “Buffett” rule. In the meantime, we'll be treated to more rhetoric and number-crunching by politicos attempting to wrangle the facts of the tax code to fit their ideologies.

Even With New Greek Debt Deal, Europe Faces Long Road Ahead

It sometimes seems as though every day we are treated to a new twist or turn in the roller coaster that is the European debt crisis. While it appears as though the worst is passed, that the Euro is safe and that the EU powerhouses will finally pull the continent through the economic downturn, news from Europe continues to put a wrench into any rosy forecasts. Most recently, negotiators in Greece agreed to severe austerity measures in exchange for a 130 billion Euro bailout package from the IMF and the EU. This is the good news. The bad news is what came after the deal was announced – a widespread uproar and infighting among Greece’s political order, and calls for yet another 2-day strike by the country’s angry citizens.

While such a reaction was not unexpected, the situation nonetheless calls Greece’s bailout hopes and stabilization prospects into question once again. In order to implement the EU deal, Greek Prime Minister Lucas Papademos will likely need to restructure his cabinet, a move that could spell a collapse for the unity government and another round of elections. Of course, Papademos will also have to address the turmoil in the streets and the grinding halt in the workforce if he wants to assure government ministers to vote for the austerity measures in the face of widespread opposition. The measures include pension cuts, minimum wage reductions, widespread layoffs, and collective bargaining impairments. Although they are still demanding over $400 million more in cuts in the long term, eurozone finance ministers sent global stock markets higher by agreeing to the measures in principle.

Greece has a debt that stands at 160 percent of its GDP. Its unemployment rate, meanwhile, hovers somewhere between 20 and 25 percent. European leaders want to see both of these numbers substantially slashed.

Even if Greece can get austerity cuts passed and make turn a bailout package into reality, a few larger questions looms on the horizon. Will the Eurozone recover? Can the continent handle another debt crisis? Considering the rapid pace at which government debt is rising relative to GDP in several countries – chief among them Spain, Portugal, and Ireland – it’s not inconceivable that the Greek debt crisis will quickly give way to a Spanish and Irish incarnation. Will those countries be able to successfully implement austerity measures without threatening political and social disorder? It’s a question that few European finance minister are willing to ask but one that many have probably considered.

All signs suggest that Greece is not the final roadblock in the EU’s effort to emerge from the financial turndown. It is likely that future bailouts and austerity plans are in the future for several other countries. While Greece may have shouldered most of the burden this time around, there’s little doubt that, the longer this issue persists and the more widespread it becomes, the more likely all of Europe is to descend into a period of mid-term stagnation. Furthermore, many analysts predict that large-scale austerity measures will only initiate a negative feedback loop that stifles recovery and pushes Europe further into a new recession.

In Europe, recovery and growth will both depend highly on the power of state resources. Too much austerity, and growth will be difficult to spark. Too little, and spiraling debt will only further exacerbate budgets and markets. In order to move forward, then, as a strong and unified continent, Europe needs to forge an appropriate path between the two – in Greece as well as in Spain, Portugal, and Ireland. Until that happens the global economy will continue to feel its reverberations.

How to Maintain Your Credit Score

Whether you're buying a vacation home or just buying a fun retirement car to roll around town in, you've probably picked up that your credit score has become one of the most important numbers in your life. While you probably aren't going to be taking out 30 year fixed loans, sometimes you want to pay for part of your large purchase with a loan so you can keep that hard earned cash on hand. Having a good credit score is paramount.

First, what is a good credit score range? According to Fair Isaac Corporation, originatore of the FICO score, anything above 760 is fantastic. Anything above 700 is great. If your score is lower, you might want to improve it before taking out any large loans.

In retirement, chances are you can do little to affect your credit history. Whatever you've done, good or bad, has been done and has marinated in your credit report. There are, however, still some things you can do to affect positive change.

Check your credit reports for errors. Errors and omissions on your report are not uncommon, so use AnnualCreditReport.com to review your credit reports. The most common credit report errors are erroneous accounts, inaccurate personal information, outdated information, and improper collections and chargeoffs.

Keep inquiries to a minimum. Anytime you apply for a card, the company makes a hard inquiry of your credit report and it'll cost you a few points. If you plan on taking out a loan, avoid this at all costs.

Keep making payments on time. If you have any outstanding debt, like credit cards or a mortgage, just keep making payments on time. Missing a payment will hurt your wallet, in fees, and your score, in a late payment record.

Keeping your credit score high, especially if you have a nice long history of good behavior, should be fairly easy. You can knock out some of the low hanging fruit by disputing errors on your credit report but otherwise just keep doing the right thing and you'll do fine.

Taking a Long View of the Housing Market

The current recession has had a tremendous impact on the nation’s psyche and on its economic future. Americans have learned to invest more cautiously, to not expect perpetual growth or guaranteed returns, and to appreciate more the employment opportunities that they have. On an economic front, the recession has insured that, even as unemployment figures continue to fall, it will be years if not decades before many corporations higher at their previous rates. Even as home sales begin to stabilize and rise, it will be a long time before many American buy a home that they cannot afford and expect its value to double during the term of ownership.

On that last note, the housing market is where the recession’s impact will likely be most visibly and permanently felt. Foreclosure signs show no indication of going away. Developments will continue to sit vacant. And residential construction projects will probably happen only in trickles and spurts. There’s no question about it: as far as housing is concerned, the recession stands to literally change the national landscape for years to come.

On a micro and economic scale, this change means tighter mortgage restrictions, lower rates of home ownership, and more conservative real estate investments. But the impact on the physical landscape also means changes on a more societal level – changes of which any long-term investor or home owner should be aware.

Here are the biggest of these overarching changes and trends:

-Unpredictability on the coasts. When the next housing bubble grows and then inevitably pops, its impact will likely be largest felt in the Sunbelt and in the coastal metropolitan regions of the country. These are the places that rose the highest and fell the hardest over the past several years. For those who invest in homes in places like St. Louis, Kansas City, and Minneapolis, returns over time can be much more predictably positive.

-Metropolitan areas are looking inwards. On a metropolitan level, urban residential parcels have far outpaced suburban and exurban developments in value and resale strength during the recession. Although downtown condos have suffered alongside suburban housing developments, the former has more successfully weathered the downturn in all but a few cities. This reflects the importance of surrounding infrastructure and amenities in tampering the effects of a dismal market.

-Transportation matters. On a similar note, experts have long predicted that growing cities and populations would, over time, increasingly favor residences with good transit access. We saw this play out over the past few years, as developments and neighborhoods with less convenient train and highway access have seen their values suffer more. We can only expect this discrepancy to be greater during future economic downturns.

These are just a few of the main ways in which the current housing market reflects – and predicts – long term trends in America’s built landscape. While homeowners across the country have seen their investments lose value over the past few years, not all areas are created alike. It’s a lesson best kept in mind as we recover from last decade’s bubble and begin to move forward.

Economic Factors, Micro and Macro

There are four main factors that contribute to the returns your company can expect to garner in terms of equity. These factors range from topical, local, and highly specific issues related to the internal workings of a company to macroscopic international factors that affect the entire global economy. Here's a quick informational breakdown of the major economic factors that affect equity returns:

The Strength of the Company
The strength of a single company depends on countless factors: the costs of resources and resource allocation; whether or not the company is a non-cyclical, defensive industry that remains relatively unaffected by economic factors; the company's debt burden, by which analysts can look at its capital and the history of its debt ratio divided by total assets; and whether or not the company offers healthy dividends to its investors. All these elements combined will tell you the story of a company's financial health.

The Strength of the Industry
Even if a particular company is flourishing as far as sales revenue, a down time in its particular industry can lead to adversities in the market that will bring down its stock value. For example, in the past year or so the rise in energy prices led to sluggish growth in the manufacturing sector. While some manufacturers, particularly ones specializing in overseas computer sales, reported good overall quarters, the industry as a whole has been stagnant, causing many industry leaders to call for expanded efforts to increase innovation and strategic partnership across the board.

The Strength of the National Economy
The relative strength of our national economy affects everything from currency exchanges, stock markets, interest rates, and the ability of banks to loan money. Even a well-run company in a flourishing industry can face financial crickets if the country's economy is weak. This is because weak economic conditions create an atmosphere of tepid investment, weary banks, and frugal consumers. On the other hand, if the national economy is thriving, credit lines open up again and both investors and consumers pour money into the markets.

The Strength of the Global Economy
The global economy affects all national economies the same way global climate change affects all the planet's ecosystems. In fact, an economy is a kind of ecosystem, and it can be affected by something as little as a trade embargo and as big as an earthquake. The global economy affects how countries contribute to international markets and geopolitical conditions determine how markets react to industry changes. And vice versa.
These are the four major economic factors that determine equity returns. The circles of influence overlap and change overnight, which can make it virtually impossible to predict growth or decline with any kind of certainty. This is why market analysis is such a valued profession.  

Learning From The Economic Downturn

To say we've been through some tough financial times recently as a nation would be an understatement. Almost any financial advisor will tell you we're in unprecedented times right now, a decade of economic instability not imagined since the Great Depression. Analysts issuing financial advice must now reevaluate the new landscape and that seems to be the case across the board. Clearly, it's necessary for us to be boldly confident as we move forward, otherwise we risk relegating future generations to even more economic uncertainty. But it's equally critical that we take a look at the reasons for the precipitous decline of America's financial engines so that we can learn from the mistakes made. Here are the reasons for the situation we're in:

The housing bubble popped and sent our financial institutions crashing and burning. For decades, a confluence of factors built like volcanic magma beneath the sea floor. Easy credit conditions, bad underwriting, and predatory lending (like sub-prime lending) created the biggest housing bubble in American history. When these bloated, toxic loans weren't paid back or purchased it led to both historic foreclosure rates and the massive instability of our financial institutions, causing the collapse of AIG, Merrill Lynch, Goldman Sachs, Fannie May, Freddy Mac, Stanley Morgan, Washington Mutual and the Lehman Brothers. The result of this has been the lowering of the US credit rating and the epic devaluation of what used to be the symbol of the American dream—the home.

Wall Street is faced with a new regime of regulations and lower returns. This time it may not be part of the cycle. Many stock market analysts say the proverbial train has gone off the track and may not ever return to its previous course. Because of new rules enforced after the bursting of the housing bubble, banks now have to producer higher levels of equity in order to balance risky assets. Most options for doing this will result in significantly lower returns, leading to many major corporations to embrace job cuts, outsourcing, deleveraged assets, and weaker markets. Even if Wall Street does make an epic return, the age of 'the market' being seen as the great economic stabilizer is over.

If we treat these as teachable events, it's possible to use the recent economic downturn as a way to redirect the future. The innovation and ingenuity of American entrepreneurship has bailed us out before and it can again if we take seriously the reality that markets require a constantly shifting balance between regulation and freedom. There's no silver bullet here, but that doesn't mean we shouldn't reload—our economy, that is.

Europe’s Debt Crisis Causes Fluctuations in U.S. Treasury Bonds

The twists and turns of the ongoing European debt crisis, coupled with the knowledge that its outcome will have considerable implications for economies worldwide, has had a direct impact on American financial markets. When hopes of a deal are high, and one appears close, the U.S. stock market rises in approval. Conversely, whenever the situation starts to looks especially bleak, the stock market responds with an accompanying fall.

The same has been true of U.S. Treasury bonds. Whenever Europe appears hopeless and the stock market is down, Treasury bonds serve as a haven for worried investors and rise accordingly. This process was on full display this past week: after a meeting of European finance ministers was cancelled, speculation swirled that the major leaders in the Euro zone were not on the same page. As a result, bond prices immediately responded and began to trade higher. The 10 year note went 1 2/32 higher to a yield of 2.111%, while the 30 year bond jumped 3 1/32 to yield 3.13%. The two year note had a more moderate 2/32 rise to 0.255%.

When the European crisis hasn’t been hitting the news, Treasury bonds have actually trended downward in recent weeks alongside reports of an improving U.S. economy. With rises in job and consumer confidence data, the stock market showed signs of health at the expense of Treasury bond yields. But these improvements are still being stymied by an overall lack of investor confidence, and analysts predict that Treasury bonds will continue fluctuating until the European crisis is resolved.

At the core of the European debt crisis is the dire financial straits of the Greek government. Europe has already given Greece one bailout, and now it looks that the country is going to need another. But there are other problems as well: the Portuguese and Italian economies are also greatly struggling, European banks are burdened by national debt, and some countries are questioning their membership in the Euro zone in the first place.

As is often the case, politics has played a role in the negotiations. Although Germany and France – the two most important economies in the talks – have put their weight behind a plan that sets up emergency funds, supports the Italian economy, and restructures the Greek debt, there are many small points of disagreement and countries that are unwilling to go along. In Italy, Prime Minister Silvio Berlusconi is mired in a political struggle and has refused to make the commitments that Germany and France seek.

The outcome of the European crisis, then, is still to be determined. All we can say at this point is that U.S. Treasury bonds will continue to fluctuate alongside the roller-coaster negotiations.

Junk Bonds are Back in Business (For Now)

For individuals just struggling to get an honest list of the best checking accounts offers in a bad economy, junk bonds probably sound like a bad idea. Generally speaking, they'd be correct; the potential yields of junk bonds, otherwise known as high-yield bonds, are far from the safe assurances of certificate of deposit rates. In fact, these particular bonds belong in their own class solely because they're rated below investment grade and are therefore too risky to pool with other bonds. In typical economic tough times, experts tend to advise investors to stay away from high-yield bonds – the risk for struggling entities failing to oblige to the returns is just too great.

But these are not typical economic tough times.

No doubt about it – it's tough right now. But it's a different kind of tough. It's so different that nobody really knows where the market is headed, and that's reflected in the wily way in which we've seen investor confidence fluctuate in recent months. Europe in particular is fighting to avoid economic calamity on a historical scale. Up until now this has resulted in major abandonment of junk bond dealings in favor of the much safer alternative – U.S. Treasuries. Both foreign and domestic investors have flocked to Treasuries, which has resulted in a lowered yield, creating an unprecedented gap between Treasury yields and those of high-yield corporate bonds.

Typically, such a gap was bad news for junk bond enthusiasts. But as it turns out, the European safeguards against high-yield default are much more bearish than what analysts say is necessary. Current buyers of junk bonds linked to the Euro are being compensated for a 7% default scenario, a much higher rate of default than experts believe is going to be the case in the European high-yield market. Even lower anticipated rates of default exist in the U.S., encouraging investors to give junk bonds a second glance, at least in the meantime.

That means that, for now, junk bonds are looking like a sure bet to many investors. The current trend is to descend on the best-rated of these bonds – those rated B or BB. But if the division between Treasuries and bonds stays true while European debt fears subside, you may even start to see investors brazen enough to buy up lower-rated bonds, although experts caution that these riskier junk bonds are bound to come with higher default rates.

Will small-time investors and those used to CDs suddenly become junk bond aficionados? Probably not. But at a time when uncertainty is the only sure thing, speculative bets on risks – and the benefits of enough bond buyers doing that – might just become the next big thing for amateur financiers.

The Real Cost of American Oil

The Real Cost of American Oil

Americans tend to act like a group of addicts when it comes to certain things. We are never going to give up our massive addiction to fatty foods, as seen by protests against trans-fat bans in major cities. We are always going to want lower taxes and more freedom, as seen in the Tea Party demonstrations, even though we don't really know the cost of it. We are also working more than most of the other countries on the planet, and often getting less accomplished while we are there.

But the biggest addiction we face as a nation has to be our reliance on automobiles and the internal combustion chamber. We have always had an unhealthy relationship with our personal transportation devices, but the obsession has grown to staggering new heights. The aftermarket car parts industry accounts for $257 billion of our economy, which comes after the initial vehicle purchases. While the automotive industry makes great money, the oil industry profits from continuous fuel-injections.

When we think of the skyrocketing prices of oil in America, it is easy to conjure up images of terrorists and unstable dictators in the Middle-East. While the media tells us that people like Muammar Gadaffi and Saddam Hussein needed to be killed in order to tap into their strategic oil reserves, about 36 percent of our oil is produced domestically. Texas, California, Oklahoma, the Gulf of Mexico, and even North Dakota are some of the largest producers of oil in the US.

While a good portion of our oil comes from domestic sources, you would think that there is still 64 percent that must come from the Middle-East. Think again. Most of our foreign oil comes from places like Mexico, Russia, and our neighbor to the north, Canada. Only about 11 percent of our foreign oil comes from OPEC countries.

The price of oil is so high in this country because of the simple law of supply and demand. We are craving the product so badly that the oil companies have more reason to exploit the need and collect profit from it. We rely on the black stuff for just about everything. Getting to and from work is just the tip of the iceberg that gasoline keeps frozen. All of the shipping, delivery systems, and lawn and construction equipment we use relies on it as well. If we took it out of our economy, America would fall straight on its face.

Another reason the prices of oil are so high in America is because of corrupt speculators on Wall Street. CNN reports that a group of five oil speculators were charged with manipulating the price of oil futures contracts and making a profit of $50 million. These investors place their money on oil in hopes that it will continue to raise in price, while they simultaneously manipulate the markets in their favor.

The next time you are complaining about President Obama not keeping the price of oil down because he wants to pull out of Iraq, you should reconsider your criticism. Instead, draw your attention to those protesting the bailouts of big banks who get us into this trouble to begin with.

Europe: Not Big Enough Not to Fail?

Last week was filled with news that European leaders were slowly but surely sorting their debt crisis out – inciting a massive sigh of relief among international investors. This was reflected by big rallies on Wall Street. But with news this week revealing that deep-seeded differences among European leadership remains in the way of a successful compromise, investors, financial experts, and economic analysts alike are once again holding their breath when trying to postulate the future state of the global market. This is reflected by big losses on the stock market that have reminded everyone that there's still no end in sight to the uneasy European economy.

There is virtually no European country currently invulnerable to the threats of a potential financial meltdown on a continental and ultimately global scale. Even Germany – which most people consider the strongest and most financially secured European nation – is at-risk for catastrophe if troubled Eurozone nations such as Italy go belly up. Indeed, as long as a country is tied to the unifying Euro, they surely play a major role in the current crisis, either as a detriment or as a potential source of a solution. It's a failure for these nations to responsibly dish out the proper punishment to each other and collect the correct amount of assistance from one another that's keeping a rescue plan from being carried out.

It sounds all too familiar – we're basically witnessing the aftermath of the 2008 crisis in the U.S., only instead European leaders have the luxury of acting before the catastrophe occurs. It might sound proactive, but there's one primary difference between the way the United States handled it's crisis and the way European leaders are wanting to handle theirs: we bailed our big boys out, and they're trying everything they can to avoid that.

Germany and France are determined to avoid bailing banks out, and just about any other institution at risk for default, countries included. This inability to commit to a last-ditched solution, even if it's under the condition of being “just in case”, is what has the world so shaken up by the European debt crisis. When the United States economy was at risk of collapse over three years ago, the world watched and waited as we doled out the cash necessary to prevent a second Great Depression. Seeing that the United States clearly avoided such a catastrophe through bailouts, investors and economists are eager for Europe to commit to the same thing. But so far, they are not.

Perhaps they have, on some level, negotiated a backdoor strategy for solving sovereign debt crises attached to the Euro, which most certainly would involve major bailouts. But since such news would be helpful in solving day-to-day market strife, the lack of a plan being spoken of is an indicator that one unfortunately does not exist. In the meantime, European leaders race to figure out a unique way to fix their economic crisis, something that avoids the alleged pitfalls created by the quick actions of the American government when it bailed out banks and beyond.

Europe has the luxury of being able to anticipate their oncoming disaster and therefore thwart it. While this makes the continent's leaders determined to take their time and come up with a refined solution, they must understand that when it comes to the global economy, a continent is definitely too big to fail.

Take a Hint from China: U.S. T-Bonds are Sure to be Safe for Decades

Doubts about the fidelity of United States Federal government debt is all the rage these days. At the center of debates that cover the future state of our collective collection and spending of capital is the way American lawmakers plan to solve our looming super-debt. Simply put, some people are seriously doubting the US' ability to solve its debt crisis in the long-run. If the US were to fail to balance its books, then the once-considered invincible and immortally secure value of the US Treasury Bond, which in essence is an investment in future American success, will disintegrate into just another piece of paper.

But those who should be the most worried about such an event occurring, are the ones who continue to commit actions that only make sense if they believe the US long-term situation is a good one. The Chinese government has not ceased their faithful purchasing of US T-Bonds even during the worst period of the Great Recession, and as we veer near a potential double-dip they still haven't stopped. In fact, China has bought over a trillion dollars worth of T-Bonds since they started doing so when our two countries expanded our relationship with one another in the late 20th century.

The only way China can ever expect to see a benefit to their 1.1 trillion dollar investment in the American government is if the United States continues to prosper for decades. Looking at the maturity rate for the bonds they've purchased there's simply no other way around it. Yet despite official criticism regarding the way American lawmakers have been playing with fiscal fire, China has not shown any indication that they've hit the panic button, or that such a button even exists.

China is no stranger to just about anything when it comes to managing the economy of an empire and international relations. The world's leading power does not invest more than a trillion dollars into a military and economic competitor without reinforced assurances that the transaction functions on the terms that were agreed upon.

What does China see, exactly, that makes them so confident? Maybe it's the two trillion dollars of top-level American corporate and private citizen revenue that gets horded inside banks every year instead of being spent like it should. Perhaps it's the countless tax loopholes for big businesses that have yet to be closed, but could be to net more government capital. Or it could just be the fact that as long as the United States continues to possess the world's most powerful and technologically advanced military China feels like they have a reliable business partner under no immediate threat of default.

And even if our government does default on its debt, for some reason China is certain that the US Treasury will always make good on its monthly coupon payments out for bonds. While this is a little scary to think about, it says enormous things about China's confidence in the American public sector to eventually get done what needs to get done.

So long as the private sector of the United States plays along, everything about our current debt crisis is sure to become a thing of the past. China certainly believes so, and with more than 2,000 years of continual existence, you can count on them to always see the bigger picture.

VP Biden Attempts To Ease Chinese Concerns Over American Debt

The markets took a beating recently when a deal to raise the debt ceiling was finally reached. The bipartisan compromise came down to the zero hour as government officials argued up to the last minute on how to effectively map out a repayment strategy. When the deal was finally reached, America's triple A credit rating was downgraded, for the first time in history, to a double A status. This has many concerned about American's economic viability, especially China. It's for these reasons that Vice President Biden traveled to China to placate fears that America could default on it's debt.

The American economy isn't new to economic troubles, but everything hit the fan when news of Standard and Poor's downgrade of the US Sovereign Credit Rating was released. The S&P 500 has long held the economic standard and credit rating for the world market, and issued a warning, not to the private sector, but to political officials.

A warning was issued to the U.S. Government that if America couldn't find an effective strategy at paying down its debt, there could be consequences. Standard & Poor has been worried about America's borrowing practices for some time now and after a contentions debate in Washington over a deal, the market has lost faith in the country’s ability to make effective and sound economic policies. After the announcement, the entire market went into a state of flux and China, the largest holder of American debt, is voicing serious concern over the way we're doing business.

The past two weeks have shown incredible volatility in the market as, after debt deal was reached, the Dow lost more than 200 points before recovering ground later on in the trading day. Ever since then, three digit swings in the market have become a daily occurrences, and almost expected. This, however, isn't as much of a concern for investors, like China. The biggest issue that's concerning the world market is the state of U.S. Bonds, long considered one of the safest investments in the world. Bonds and treasuries haven't been hit yet but, if this were to happen, the entire market could head towards something worse than any of us could imagine. This is why VP Biden is making the rounds and trying to reassure China over the viability of the American market system.

Chinese officials, who have long been surprisingly silent as the American economy has slumped ever further into recession, are now speaking up. They're now openly criticizing the political players in the government. You could consider China much like a shareholder in America as it holds over 1 trillion dollars of America's debt. This makes them the largest shareholder in the game and they've become increasingly concerned, like everyone else, about American's poor borrowing decision and partisan squabbling. It was Biden's aim to ease these tension with his most recent five day visit what some are calling America's “ Charm Offensive.”

Vice President Biden struck a much different tone on his most recent visit to the world's fastest growing economy. America, a long-time advocate of political rights and change in the region, was far more subtle than in the past. VP Biden tried to underscore the important ties that the two world powers have in shaping the future of our planet. It was a PR campaign to try and ease tensions and soften China's increasingly negative opinion of the American system.

It's not clear yet whether or not Vice President Biden's visit will prove positive, but it's not just China that the country has to worry about. There is serious and legitimate doubt regarding whether or not the country can make sound and effective decisions for the greater good of the entire country, and world for that matter. Americans, as well as the world, will be looking very closely at the country during the election coming in 2012. It's hoped that a new tone can be set, one of compromise and intelligence.