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Goldman Sachs cleans up on the second Great Depression

Goldman Sachs

The World Bank predicts that global economic growth will decline by 2.9 percent in 2009. That’s the worst year for the global economy since at least World War II. As measured by a comprehensive set of indicators, the global economy is on pace, so far, with the outset of the Great Depression.

Goldman Sachs, however, is expecting 2009 to be the most profitable year in its 140-year history, reports the Guardian. As a result, Goldman staffers are salivating at huge bonus payments — their biggest ever. (And reason enough that Goldman was in such a big hurry to pay back its $10 billion of TARP bailout money.)

The irony is that overall revenues in the banking and securities industries have fallen significantly in the last few years, but the collapse of Bear-Stearns and Lehman, along with the merger of Merrill Lynch and Bank of America, means fewer companies are dividing up the spoils.

Also good for Goldman: Big government deficits. The more bonds the U.S. Treasury has to sell to fund government operations, the more money Goldman makes as one of the prime brokers authorized to bid for those bonds. (Read more at: salon.com)

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{Image by finance.yahoo.com }

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June 26, 2009 | Filed Under Investments | Leave a Comment

Six Trends to Profit From

Buy Low, Sell High

We’re all familiar with the story about the frog. If you drop him in boiling water, he’ll jump right out. But if you put him in cold water and then heat it to boiling, he’ll adjust gradually to the increasing temperature, be lulled into inaction, and die.

It’s not true; the frog will eventually jump out. But as a cautionary tale, it reminds us that we should be wary of inaction in response to gradual changes in our environment. In other words, as change happens–and it happens every day–you must adapt. If not, you’ll fail to thrive … and you might die. (Read more at: Seeking Alpha)

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June 2, 2009 | Filed Under Investments | Leave a Comment

Is Your Home A Good Investment?

Falling Waters

There’s the usual talk about what the latest Case-Shiller house price data mean for the next short term move in the real estate market. Has housing bottomed? If not, has the rate of decline slowed? And when will we see an upturn?

Human nature likes the short term. Which is why so little attention is paid to something that is probably more important, if less urgent: What the latest data show about the long-term of the real estate market.

And it’s startling.

We have just been through the biggest boom in real estate in American history. The subsequent bust surely hasn’t finished.

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it’s risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair — after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle. (Read more at: WSJ.com)

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{Photography by Phil Romans}

May 27, 2009 | Filed Under Investments, Real Estate | Leave a Comment

Bad year for finance, good year for wine. Investors are looking at liquid assets to make a profit in difficult times.

Pouring Wine

We know the value of sitting back and enjoying a nice glass of vino. It’s just as well, as wine investment appears to be standing up against the ravages of the economic downturn.

With interest rates so low, investors looking to diversify their portfolios are turning to wine as a more profitable option. And the potential for high returns can be impressive. The 2000 Chateau Lynch-Bages Pauillac, for example, was released in May 2001 at £450 per case and is now selling at £1,200 per case. Investors must be prepared to be in it for the long haul, though, as a good vintage takes between 20 and 30 years to mature.

But although the fine-wine market was slow to feel the effects of the credit crunch, there was an impact. “In the last quarter of 2008 we saw a 20 per cent fall in the value of the index,” says Jack Hibberd from the London International Vintners Exchange (Liv-ex), which produces an index tracking the world’s top wines. “Since then, we’ve seen an increase of about 4 per cent, and the market has stabilised, but whether that means the market is going to continue to go up, nobody knows.”

It’s clear that wines are just as capable of falling and rising in value as shares, and those considering making wine a part of their investment plans are advised to limit it to a small percentage of their portfolio. Mark Dampier from independent financial adviser Hargreaves Lansdown argues that people should steer clear if they don’t have a genuine passion for it. “If it doesn’t come to much at least you can drink the stuff,” he says, adding that investors should avoid wine funds, which have high performance fees, and simply buy the wine instead.

Many interested investors prefer to go through a professional wine merchant. Some will charge an upfront fee, typically 5 per cent of the total value of the wine, others may set an annual management charge and all will take around 10 per cent commission when it comes to selling up. (Read more at: The Independent)

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{Photography by The One True Devo}

May 24, 2009 | Filed Under Investments | Leave a Comment

Why we love Jim Cramer

Besides Jim Cramer’s colorful character, we like his ability to take his vast knowledge of finance and investment, and put it in simple terms that most everyone can understand.
He’s also humble enough to admit when he doesn’t know something, and when he’s wrong.
We also appreciate his transparency in his advice, indeed he manages his charitable trust posting on the web trades and positions according to his own advice.
One of his most colorful statements, that now in retrospect most people see as “right on the money”, is his August 2007 appearance on CNBC where when asked to comment on the Bear Sterns situation he states that “. . . [Bernanke] has no idea how bad things are out there, he has no idea . . .” Watch it for yourself.

Other things you might want to know about Jim Cramer**:

Graduated magna cum laude from Harvard College in 1977, where he was also president of the Harvard Crimson;
In 1978, while he was working as a journalist for the Tallahassee Democrat, he was one of the first on the scene after serial killer Ted Bundy attacked four women, killing two of them;
After Tallahassee he worked at the Los Angeles Herald Examiner as a pot news reporter, covering “basically anyone who died violently in California”. While he was covering a shooting in San Diego for the Examiner, a burglar cleaned out both his home and his checking account. For the next nine months, he lived mostly out of his car;
In 1984 he earned a Juris Doctor degree from Harvard Law School;
In 1984 he joined Goldman Sachs as a stock broker;
After Goldman Sachs he opened his own hedge fund, Cramer & Co. (later Cramer, Berkowitz & Co.), with Eliot Spitzer as one of the early investors;
In 1996 Cramer co-founded TheStreet.com, where he is still its largest shareholder;
In the 1990’s he co-hosted the CNBC’s show Kudlow & Cramer with Lawrence Kudlow. Kudlow and Cramer split when Kudlow called Cramer ’sweet potato bull macho’ on the air on October 17, 2002;
Currently Cramer is the host of the CNBC’s show Mad Money.

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Confused about the stock market? Puzzled by Wall Street?

It can be overwhelming! Too many buzzwords, too many conflicts of interests between the people on Wall Street making editorial comments that sound like news, and selling their opinions of buy buy buy as facts, while the individual investors like you are left seeing the stock indices decrease, with the same people who stated buy buy buy yesterday coming up with a new spin on the bad news today.
Our position at Credit Cards Mojo is to never trust the advice from the people who are going to benefit first and foremost by the actions that you are advised to take. Wall Street operators at any levels, from the large investment banks to your personal investment advisors, make money from you no matter what you do: when you buy, when you sell, or when you hold. You can say that you’ve got something good going on.
Keep in mind that investing per se is only a part of overall Personal Finance, and investing in stock, bonds, and other securities, directly or using mutual funds is only a portion of investing. There are other investment vehicles like savings accounts, bank money market accounts, certificates of deposits (all FDIC insured up to $250,000), treasuries, U.S. Savings Bonds.
If you are all set with your overall Personal Finance, and you need help with your investments, we advise you to subscribe to our motto: education is empowerment. Learn the tools, the dynamics, and mechanics of what’s available out there, then you can go ahead and do it yourself or seek help from a professional. And if you choose to seek the help of a professional, we believe that it should be a partnership between you and your advisor, where you have to take a proactive approach, where you have to be knowledgeable and on top of news and development, not a passive and silent partner.
There’s help. Why not enlist Jim Cramer as your advocate and cosigliere?

The Street, Jim Cramer’s company, can provide a plethora of useful information for free, and also a more personal and in-depth paid service. Now for a limited time, when you sign-up for a FREE 14-days trial, you’ll receive a copy of Jim Cramer’s latest bestseller Stay Mad For Life.

To order your FREE 14-days trial and the free book:

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Photo Credits: Rob Young (cc)

October 27, 2008 | Filed Under 401K, Investments | Leave a Comment

Bubbles and crashes: does history repeat itself?

Knowledge vs. Action. Bookworms claim that knowledge is power, bullies state that action is power.
The smart people that we know have both: they take appropriate action with plenty of relevant knowledge; when it comes to personal finance and money in general that is the rule that we subscribe to, anything else is gambling.

There are some classic books that provide a wealth of information related to the cycles of the financial markets and economies, these are our favorites:

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Photo Credits: Jeff Kubina (cc)

October 16, 2008 | Filed Under Books, Economy, Financial Crisis, Investments | Leave a Comment

Funny way math works: the up and down game of gains

Main Street and Wall Street. Most of the times they are linked together by people’s 401K and similar plans, and in the past 12 months, the stock market, measured by the DJIA, S&P 500 or NASDAQ have lost about 35% of their value**, not an easy pill to swallow. Therefore, if you had $1,000 in your account a year ago, you are now left with $650.
What will it take for your account to return to it’s original value? The answer is NOT 35%.
For your account to return to the $1,000 it would be the same as someone investing today $650 and bring that account to $1,000, or a gain of $350. Therefore since 350/650=0.54, the stock market will have to go up by 54% before you can see your portfolio return to its glory days of one year ago.