Don’t Quit Your Day Job – Personal Finance, Economics and Investing

The way the financial community seems to be covering it, we are currently attending the funeral of Asset Allocation. Long live Asset Allocation!

A common topic on financial pages world wide web wide (a cheer for alliteration?) is about the supposed death of asset allocation. Asset Allocation is the idea that the best retirement play for most investors is to allocate financial resources among a number of investment baskets. Supposedly by spreading one’s investments across a diverse set of asset classes it is possible to catch the hot performance in any corner of the market while absorbing any shocks in other corners. Of course, the uninspiring performance of asset classes during the ‘Great Recession’ seem to throw this theory into question. Read on and decide for yourself if we need to find some pallbearers for this financial heavyweight.

What explains the difference in returns between stocks and bonds?

One theory is that the difference in returns is due to the safety of bonds when consumption declines (the so called ‘risk premium’ is built into stock returns). One of the issues with testing this hypothesis is that the most commonly quoted measure of consumption, the National Income and Product Account, is too nonvolatile to explain the risk premium on its own. Alexi Savov, a grad-student at Chicago, has produced a fascinating look at using residential garbage production in order to take a closer look at the correlation between stock returns and consumption.

Before I read this article, I could not imagine a scenario which would lead a company to sue itself. Yes; you read that correctly. Wells Fargo is suing itself in Florida in order to facilitate the foreclosure of a property in which it has multiple liens.

Investing in real estate? Too Soon!

Just kidding. Real estate investing is not limited to house ‘flipping’ or becoming a landlord. There are other ways to play real estate – to the downside or the upside. Real estate investing can cover much more than simply buying residential property to rent or resell. Read on for a look at a few of those ‘other’ forms.

Reverse mortgages are a relatively new financial product.  Generally, if you are close to (or in… the minimum age is 62) retirement, you can take out a reverse mortgage on the equity in your home.  Just like the product’s name, you would then get a payment from the bank which holds the reverse mortgage.  Sound [...]

Our article, “Investing in the 79th Element”, is hosted over at Man vs. Debt for the Carnival of Personal Finance! Go check it out, the theme is New Zealand!

Gold, the 79th element in the periodic table, is perhaps the most controversial of any investments. Every investor seems to have an opinion on the metal. Some people, particularly enamored with the constitution, read into it the necessity for the government to only issue gold (and silver) coins.

Regardless of your viewpoint on the legality of fiat currency, perhaps you have decided to invest some of your hard earned funds into the stuff. There are many ways to approach investing in gold; I will lay out a few approaches to gold investing in this article.

Nature is a fickle host. Between hurricanes, earthquakes, tornadoes, tsunamis and other natural disasters, she throws plenty of challenges at mankind. I’ve written previously about the false belief that a public option in health care reform won’t quickly crowd out private companies from the insurance market. I present to you a cautionary tale from the other side of the fence… a Republican Governor (and possible Presidential candidate in 2012) who is playing pickle with nature.

One of the provisions for receiving government funds through TARP caps executive salaries at $500,000. Companies argue that setting caps in that way leads to a talent drain – top employees who can receive a greater salary elsewhere will go do that. These predictions are coming true; TARP companies are losing talent to boutique firms that don’t have compensation limits. Is this the best effect on companies trying to pay back public money?

This is part two of a two part series discussing cigarette laws and pigovian taxes. Pigovian taxes are excise taxes placed on a market to correct a market income, presumably because a negative externality such as health risk or pollution that is inherent in the good traded.