Posts Tagged ‘Economy’

Optimistic Outlook on US Economy from TRP Chairman & Why US Bonds are way to go?

A week ago I received an email update from TRP(TRowePrice) Chairman on the current market condition since lots going on these days. We all witnessed the wild roller coaster of the stock market last month after debt crisis in Europe, dead lock condition in the house on rising debt limits, slower economic growth and unexpected employement report.

Even this week, the market is still shows lots of sign on further downward dip with no great news on the jobs growth and expectation from President to come out with magic plan to solve the issue.  While we hear lot of negative news and feel pessimistic about the future market condition, TRP chairman’s optimistic outlook with lots of evidence for slower future growth does give little bit of hope for investors to keep on moving in chartered path instead of trying to find short term profits.  Here is the snapshot of his message,

  • The economy continues to face a number of headwinds amid struggling consumers, a mediocre housing market, and profound fiscal challenges at the federal, state, and local levels.

  • Although the current environment is not without risk, it is different than the massively overleveraged environment that existed in 2008. Banks have recapitalized, Wall Street and consumers have reduced their debt, the housing market has stabilized, and corporate balance sheets are lastly improved.

  • As a result, we believe that a “growth recession,” characterized by low economic growth and persistent unemployment, is more likely than an outright return to negative growth, or a so-called double-dip recession.

Although investors are understandably concerned about the markets and the economy, we believe that current fundamentals do not warrant some of the extreme risk aversion, and we expect markets will return to normal conditions in the next 12 to 24 months. To read the full message, Click here.

Why US Bonds are way to go?

With the above message on the back drop, Investors like you and me don’t have lot of options to put your money without shacky outlook for short term. Stocks, Funds and ETF’s depends on securities which are going to be bumpy ride for sometime. If you are long term investor, go ahead and continue your path on investing in securities and diversifying your portfolio regularly since market will come back eventually. But if you want to invest for short term to achieve your short term goals, only few options are available like High yield CD’s and I series Bonds and REIT’s.

Check out this
article from one of my favorite financial writer and CFP, Kevin McKinley who talks about basics of financial planning to help out  ordinary individual. In this article, he goes over why Bonds are good for anyone not just for Grandpa’s and Grandma’s. With the current uncertainity in the financial market, Bonds are still valid investment path with decent return and at sametime it helps to reduce or eliminate taxes. He also shares how EE saving bonds which are still available can be used as savings for kids education.

May be it was coincedence, I also came across a blog post from which also talks about Bonds outperforming stock market in the last decade. See the below chart posted at, it shows how I Series Bonds actually beat the Stock market over the last10 year period since 1999. I was surprised but it’s true fact. Even though Stock market performed well in certain periods, I-series bonds stayed the course to yield a steady return for the overall period. 


In conclusion, taking the above things into perspective, investors should always plan and invest properly by diversfying in the right assets to stay positive and make few bucks more than the inflation so you can reach your long term goals. So just look out for opportunities to invest in value stocks and don’t forget to diversify in Bonds, REIT’s as well.

Stay Positive and Stay float to weather this rough economic conditions!!!

$1 billion one dollar coins & Fed wasting Tax payer’s dollars

Below is the picture published by NPR(National Public Radio) this week on the millions of $1 dollar coins being sitting idle in Federal reserves all over nation and doing nothing. I was really shocked and frustrated.

When the nation is in the crisis mode, congress and President is fighting over increasing the debt ceiling, these $1 dollar coins are laying in the federal reserve and numbers continues to grow every quarter as they continue to make these $1 dollar coins nobody really wants to use, thanks to government program authorized by Congress in 2005.  

According to the NPR story, around 2.4 billion coins have been minted since 2007 costing $720 million of tax payers dollars. Only 1.4 billion coins are sold to public so far and government made $680 million profit out of it. The pile of idle coins, which so far cost $300 million to manufacture, could double by the time the program ends in 2016.

As per the program, coins were made with former presidents face changing every quarter followed by the success and famous of 50 states quarter coin series which attracted many Americans. So government expected similar response to these $1 dollar coins compare to the bills. Also government was planning to make profit by making the coins for less of 30 cents and sell it to public for $1 but it didn’t work out. It turned out goverment has to spend $1.5 dollar to put $1 in circulation.

At the same time, many of us don’t like to keep coins in our wallet and bills are much more easier and convenient. With advances happening everyday in the electronic world which is moving towards plastic cards, smartphone shopping and so forth. I don’t think coins would be good choice to many Americans in coming future.

Like me, I am sure many of you are really not happy to hear this story from NPR While many Americans are just making few dollars a day in this bad economy to make their living, these $1 billion one dollars are sitting in the vault doing nothing for the economy.

To read the full story, click here to go to NPR.


Economic Indicators & Your Investment

Many of you might have heard about reports like Customer Price Index, Unemployment claim report, Personal Income and Spending report which come out every month. These reports are called economic indicators, bringing lots of data to shedslight on conditions which has impact over current economic condition and financial market.  There are two types of this kind, leading indicators and trailing ones. Depending on type of indicator, it either gives assurance or prediction of the economic growth path.

Lately even an ordinary person is closely watching these reports to get idea on how we are doing as a country in different fronts, more importantly employment and customer sentiment towards the economy. Overall, we all waiting to hear some good news to flow in the markets both main street and wall street to pedal the country in the postive growth path.  It is crucial for investors to keep track of these reports to make investment moves accordingly by considering different data points to predict the direction of the market.

This month magazine from TRoweprice has a good article which showed how certain reports gives indication on condition that impacts stock and bond market.  Let me give some for example,

1. Employment Situation Summary – Published by Bureau of Labor Statistics which gives idea about the employment numbers around nation. Lower unemployment means higher stock prices and rising unemployment reduces market sentiment bringing stocks down. It’s other way around for bond as bond prices goes up on rising unemployment because lower interest rates by Fed to keep the economy going.

2. Consumer Price Index –  Bureau of Labor Stasticis measures the cost of basket of consumer goods and services. It gives indication about the economy whether it’s in the inflation or deflation trend depending on the price index. This can help the Fed to tailor the future moves to drive the economy and Investors to make decision on their future investments.

In general these economic indicators are just a snapshot and shouldn’t be used soley to make any decision to alter your financial goals or portfolio. It should be one of many criterias which helps to make decision on your asset allocation to your portfolio.

Wanna read the article in details, check it out and try to be financial saavy investor.