I’m in the library today, hitting the books. To tide you over until we get back to our regular high quality postings, here is another good video from Kiplinger. The clip gives you some pointers for paying off debts.
For what its worth, we agree with Suze Orman. With the awful economy, if you don’t have an emergency fund you probably should be building one up rather than paying off your debts. Building up your emergency fund can help you buy time if you really get stuck in a rut. However if you do have emergency savings and want to pay off some of your obligations, by all means check out the video.
I just had to get this up. In case you haven’t seen the article, the AP is reporting that Treasury Secretary Timothy Geithner has been unable to sell his expensive New York home and is renting it at a loss (AP).
Geithner is quickly gathering a number of unflattering nicknames on the internet. These include “Turbo Tax” and “Timmaayy” and the even less flattering “bozo”. The name “Timmaayy” is after the developmentally disabled character on the popular television program South Park.
For those of you mystified by the term “quantitative easing”, the Financial Times has a great explanation of the term. Essentially it refers to the processes whereby central banks put money into the economy. This can create inflation, which affects all of our wealth, so I would highly recommend at least understanding the basics of central banking. See the link after the picture.
Yet more evidence that the recession is hitting home.
This from craigslist:
IN DESPERATE NEED OF CAMP TRAILER FOR MY FAMILY (Beaverton) Reply to:sale-t5gmy-1200914696@craigslist.org [Errors when replying to ads?] Date: 2009-06-01, 9:18PM PDT
We are getting evicted and have until next Monday at midnight to be out. We have two little kids and nowhere to stay but I could definitely find somewhere to park a camp trailer. I am particularly interested in a tent trailer because we have a small SUV and can’t two a whole lot with it, but a tent trailer would be ideal. I can come up with about $400 cash to pay and can offer my services as a skilled laborer as part or whole trade for it. If someone would be willing to part with one they don’t use anymore and help out a struggling family, please give me a call and let me know. I don’t mind if it needs some work, but prefer it to be mostly in decent working order and condition. The work I do is mostly landscaping, but have done a LOT of other skilled labor, such as furniture building, construction framing and foundations, roofing, siding, painting, general clean-up, small tree and bush removal… you name it, I have either done it already or something like it. I have a lot of useful skills and would be happy to work in trade for a camper. My phone number is 503-995-1867. Thanks, Jake
Well, its turning into an eventful Monday. Now that General Motors has finally gone belly up its time to count the costs. The Detroit News has an interactive map that shows the global extent of the company. If you play around with it, you’ll see that GM has a huge network of suppliers, retirees, plants and dealerships globally. A lot of people’s wealth is going to take a major hit.
A major goal of Geithner’s maiden visit to China as Treasury secretary is to allay Beijing’s concerns that Washington’s mushrooming budget deficit and ultra-loose monetary policy will undermine both the dollar and U.S. bonds. China is the biggest foreign owner of U.S. Treasury bonds.
“Chinese financial assets are very safe,” Geithner said. His response drew laughter from the audience. (Reporting by Glenn Somerville; Editing by Alan Wheatley) (Reuters).
We certainty aren’t experts, but the Chinese laughing at Geithner is a bad sign (for ALL of us and our wealth). It suggests our monetary policy isn’t internationally credible.
One of the best parts about blogging is interacting with financially successful people. Well, we recently got a note from a reader named Dennis. After saving for the better part of 20 years, Dennis and his wife were able to retire early with significant wealth built up. Here is his explanation of how they were able to do it:
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Dennis’ Story
I was 35 and my wife was 32 and we were both broke. We started saving about 30% of our income. I was a process engineer, she was an insurance supervisor. We put about 1/2 in stocks and the rest in safe bonds. We both retired early – at the age of 55 and 52 about 3 years ago. Last year our porfolio was $2M and today is still worth about $1.6M.
How did they do it?
We are by no means experts in stock or bond choices so we have made some not so good ones over the years. In 1985 I started a spreadsheet to see what would happen if we started aggressive saving a lot of our income and came up with a number of $2M. We got to our goal even though we did not save as much as our goal because our incomes increased faster than I had anticipated. When we quit our jobs 3 years ago we were each making about $75K but our income from our investments was substantial.
Stocks-(60%) Until recently we diversified 401K stock money through the company S&P 500 index and IRA money into growth and income, international, life science, and small cap funds. Then in 2007 we concentrated all of our stock money into just 5 growth stocks like – Apple, Google, Monsanto, Genenteck, and Slumberger because it is money we can afford to loose but the growth potential compounded is tremendous!!!
Bonds – (40$) In the beginning we had Ginne Mae funds and bond funds in the 401ks. We even bought US Savings bonds on a regular basis through payroll deduction. Last October because of the banking crisis we temporarily moved our bond money to Vanguard Treasury Money Markets (O% interest!) until the current crisis goes away. I haven’t figured out where to put that money yet to get better interest.
I often thought about writing a book but someone beat us- “The Millionaire Next Door” I believe it is called. Basically we cut back on spending everywhere we could and we have been out of debt since 1994 when we paid off our house early! My wife was not an early believer so it took some convincing to change our lifestyle to thrift. But about 15 years ago she started telling others to save more! If we had started saving before age 35 we could have retired even earlier!!
Theres been a lot of talk about General Motors filing for bankruptcy. Well, its official, the grim reaper is on the way. GM shares are now trading at 80 cents. At these prices bankruptcy can’t be far behind. We pray you all did not have significant portions of your wealth invested in GM.
One of the more interesting words in the German language is the term: aussteiger. The term comes from the verb aussteigen, which means literally to get off a bus or train. However it also has a double meaning. An aussteiger is an expatriate who has chosen to leave Germany and live elsewhere, usually because of dissatisfaction with the status quo.
The U.S. has plenty of these. The most public of them is Jim Rogers. Jim Rogers is famous for cofounding the quantum fund along with George Soros. He’s a prolific author, world traveler and news commentator. Most recently he’s chosen to leave the United States and live in Singapore (1).
Rogers’ views have become increasing pessimistic about the state of the US economy. In a number of interviews, he has been openly critical of the Federal Reserves monetary policy (1) and the federal governments recent bailouts (1). As a result, he has been granted less airtime in US domestic media and has been seen increasingly in the less prominent CNBCAsia (1).
Rogers isn’t the only dissident economist in this situation. A similar sentiment has been echoed by Swiss investment advisor and investor Marc Faber. Faber argued that US policy over the past 20 years resulted in “illusory wealth” and in a recent interview said Federal Reserve policy could result in inflation values as high as Zimbabwe’s (1).
Now, neither of these gentlemen get a whole lot of media play. They don’t get the time partly because their views are hugely negative on the state of the U.S. economy. Unsurprisingly this conflicts with statements issued from official Washington. Federal Reserve chairman Ben Bernanke has famously said that “green shoots” of economic recovery will set in this year (1) and President Obama has gone on record saying the economy will get better in 2009 (1). So, part of the reason people like Rogers and Febar don’t make the headlines is because they say the US economy is headed for problems when official Washington has been saying the exact opposite.
It really is a shame. Rogers made over 4700% return when he worked with George Soros on the Quantum Fund. Faber got his Ph.d at exceptionally young age of 24. Both of these guys can offer a great deal of insight into the state of economy as well as Americas role within the global system. Frankly its sad that because their views differ from the official line, they tend to get marginalized in the media. Its even more sad when you consider that the mainstream financial media and DC policymakers utterly failed to forecast last years economic downturn.
So, just to wrap this up, the medias tendency to marginalize dissident economists really does the public a disservice. They obviously have built wealth throughout their careers, so it would be a good idea to listen to them if you want to build your own wealth. Expatriateaussteigers like Rogers and Faber can provide a valuable alternative and to the puffed up public relations nonsense and media group think that sometimes comes out of Washington and CNBC.
Intaxication: Euphoria at getting a refund from the IRS, which lasts until you realize it was your money to start with. ~From a Washington Post word contest
