I gave a short discussion of quantitative easing in the second post of my Inflation/Deflation series. I learned recently that the Financial Times web site has a nice explanation of how quantitative easing works to check deflation; if you’re a visual learner, you might find it helpful. You may have to register at the FT site to view it, but registration is free. The piece explains the risks of quantitative easing and makes an important point: although many economists believe that too much quantitative easing could be very bad and that too little easing won’t check deflation, no one …Read More
Life insurance companies, normally thought of as bastions of stability, have come under greater scrutiny from concern that their holdings of mortgage-backed securities and aggressive annuity guarantees may put their financial stability at risk. Where can you go to determine the strength of your insurer?
According to a report in yesterday’s Wall Street Journal, the Treasury Department will soon announce that TARP funds will be made available to insurance companies that own banks.
Although life insurers are closely regulated, there’s growing evidence that some insurers hold significant amounts of low-rated mortgage-backed debt. Financial Planning magazine cites data indicating that of …Read More
Above is a chart that compares the S&P 500 earnings performance during the current economic recession (the red line) to that of the tech bubble recession (the gold line) and the average recession dating back to 1936 (the blue line). As you might expect, the current decline in earnings has been significantly worse than during the average recession, and is now worse than during the bursting of the tech bubble.
Note that earnings bottom out and start to improve near the 18 month mark during both the average recession and during the recession of 2001-2002. How far into the current …Read More
Many employer-sponsored tax-deferred retirement plans, including 401(k)s, offer a unique investment option called a “stable value” fund. If you’ve invested in such a fund, you should take a close look at what’s inside – its value might not be as stable as you think.
For years, I’ve had some of the money in a 401(k) plan with my former employer invested in something called the “fixed income fund.” The fund documents describe it as a conservative cash-like investment with a $1.00/share price. Over the years, the fund has always yielded more than a money market fund; its current yield is …Read More