May 19, 2012
Although you may not want to think about the state of your finances, there is no getting away from the fact that money is an essential part of everyday life. This article is full of tips that will help you get your finances under control.
Be sure to include your post tax income. For starters, include all after-tax money that you get each month from your salary, alimony, child support, rental income, or other sources. Make sure your expenses are less than your income on a monthly basis. A great way to consolidate many bills into a smaller payment is by getting personal loans and these loans are typically desired because they offer a much lower rate of interest. You can imagine how much money you will save by consolidating higher interest loans into a personal loan with a lower rate.
To make this process effective, you should compose a detailed listing of your expenditures. You need to also include quarterly and yearly payments. Some of these expenses may be home improvement and repair costs, or car maintenance and registration payments. You need to also write down other, smaller things that you pay for daily or weekly, such as child care or grocery shopping. You should make sure that your list is as comprehensive as possible to ensure you have a true picture of what you spend.
There are always things you can eliminate from any budget. One easy thing you can do is bring coffee from home instead of stopping for expensive lattes on the way to work. Seek out anything similar to this that you can get rid of without difficulty prior to putting together a lasting financial plan.
See what improvements you can make to help you lower your utility bills. Windows can be a weak link in your homes armor by letting out heat in the winter and cool air in the summer. Make sure your windows are properly insulated. An on-demand hot water tank is a good way to reduce spending. Have a plumber come out and fix any leaky pipes you have to help lower your monthly water bill. Be sure to run your dishwasher only when it is full, so you can make the best use of it.
If you can, purchase new energy efficient appliances. These energy-saving appliances help you save on your utilities. Also, when you are not using something, unplug it. You can save both money and energy by doing this.
Some home improvements pay for themselves over time with the reduction in utility expenses. For example, replacing your roof and installing new insulation prevents you from losing energy for both heating and cooling because of insufficient structural materials.
Try to save money by being careful with appliances. Even though you are spending money to repair or replace items, you will see a savings in the long run.
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May 6, 2012
A free rewards card almost cost me $350 and a lot more. Not long after my daughter was born, in anticipation of plentiful purchases, I signed up for several store ‘rewards cards’ at store I knew I would frequent. I promptly forgot all about them.
About two months later, I received a letter from ‘pay it later’ company warning that if I didn’t pay $350 my account was going into collection and would be reported on my credit report. Perfectly reasonable request if I had actually made the purchase. After several phone calls I discovered that someone had used my information to make a purchase online and chosen the ‘pay it later’ option. After reviewing everything in detail with a company representative, we determined that the information used for transaction was exactly the information I used on one of the rewards cards.
The pay it later company was very quick to fix the problem, so quick that I wonder how often it happens. I am glad they sent a bill to my correct address. I am also glad I opened it. Thinking it was a solicitation, I had tossed the first bill in the trash. I was very lucky; most identity theft is much more devastating. I have friends that are still recovering years after the initial theft. The lingering credit dings can be difficult to repair.
Now, I am much more cautious about my mail and my bills. I am striving to be more vigilant about all of the financial tools my family uses. Recently my husband and I reviewed our banking habits and compared the fees and interest rates at our banks. We discovered that consolidating some of our accounts would save a significant amount. Bank fees can add up quickly and many banks offer competitive rates, shop around and see what plan matches your banking style.
Awareness is the key to saving money. Both saving and spending benefit from a watchful eye. No one will care about your money as much as you do. A watchful eye can catch wasteful spending, elusive fees and unexpected or inappropriate charges.
Read the statements you receive. From credit card statements to medical bills, read them all. I’ve discovered simple mistakes that could’ve cost me quite a bit. A few mistakes wouldn’t have cost me anything directly but would’ve charged my health insurance.
After noticing two months of odd charges, I always read the cell phone bill line by line. I called my phone company and Googled the name noted on the bill. I found out the charges were a monthly ‘membership fee’ for a discount service I’d never heard of. It wasn’t hard to cancel, but I still have no idea how it was added to the account in the first place. It was a small amount, but pennies make dollars.
Keeping on top of our money requires vigilance. Review your credit report regularly. It’s not uncommon for mistakes to linger on there for years unnoticed; often only popping up to cause trouble when you are planning a financial change.
By law, you are entitled to one free copy annually. There are several websites that can offer access to all three reporting agencies. One of the sites www.annualcreditreport.com . Several sites will give you access to your credit score for a fee.
Pay attention to the fees and penalties your financial tools charge. Do you know what your regular banking fees are? Does your credit card have an annual fee? What is the annual percentage rate on your credit cards (especially store specific cards)? Bargain shopping isn’t productive I you shop with an inflated interest rate. Oozing money with every overlooked bill or bank statement can undo a lot of frugal living. Review your financial life annually. Be vigilant, it saves you money.
Gena Bigler is passionate about public service and credits her time serving nonprofits in AmeriCorps and Volunteers in Service to America (VISTA.) with teaching her extreme budgeting and bargain shopping. Gena is now CFO of a Kentucky business and serves on the board of the Kentucky RiverKeeper. Gena would be happy to hear from you at lgbigler@gmail.com.
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May 6, 2012
BOSTON, April 26, 2012 /PRNewswire via COMTEX/ –
Accion, a pioneer and leader in microfinance, today released a report providing the financial industry with important recommendations for creating and improving services to rural residents in Latin America.
The study – based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru – provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and microentrepreneurs. The study offers a unique opportunity to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.
Among the study’s findings:
Working capital credit and savings are the best known and most used formal financial services. However, while 80 percent of respondents say they know about these products, only 40 percent use them.
Debit cards, consumer credit and life insurance are rarely used.
Relatively few people save in financial form. Surpluses are used primarily for investment. Many respondents consider that storing idle or “non-working” funds is a poor use of their money.
One in two consumers saves in monetary form, and among those who save, there is diversity in the purpose and use of savings. Some maintain a “static” savings amount as a reserve or back-up fund (e.g., for health emergencies), while others seek to grow their savings over time.
The most significant barriers to formal savings are lack of convenience in operating savings accounts, bank fees and the perception that amounts are too small to deposit.
Although rural residents were not well aware of the potential value of insurance, 70 percent had experienced a shock event in the past three years.
Rural residents often get financial-services information through media such as speakers in the main square, mobile ads in moto-taxis, and leaflets. Key community individuals, such as shop owners, and social, economic and religious gatherings (fairs and parish meetings), are also sources of information exchange.
“The results from this study will prove a valuable tool in designing and marketing appropriate financial products that meet the specific needs of rural residents,” said Elisabeth Rhyne, managing director of the Center for Financial Inclusion at Accion. “The findings can assist in the creation or improvement of products such as new savings models, debit cards, cashless payments or insurance products.”
“Ultimately,” Rhyne added, “the lessons gleaned from this research will help any microfinance institution wishing to better serve the hardworking farmers and microentrepreneurs in rural Latin America. We believe they also hold insights that are relevant to other rural clients worldwide.”
The research was supported by the Inter-American Development Bank and based on survey interviews with people living in rural areas within reach of selected microfinance institution branches. It targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers. The study describes the rural population according to socioeconomic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management. Financial education and awareness and use of formal financial services are discussed.
The report, “The Financial Behavior of Rural Residents,” is available here and at
http://www.centerforfinancialinclusion.org .
About AccionAccion is a global nonprofit dedicated to building a financially inclusive world with access to economic opportunity for all, by giving people the financial tools they need to improve their lives. A world pioneer in microfinance, over the last 50 years we have helped build 62 microfinance institutions in 31 countries on four continents. Those institutions are currently reaching millions of clients. The Accion U.S. Network is the largest microfinance network in the country and, since inception, has served hundreds of thousands of clients with loans and support. For further information, visit
www.accion.org .
Accion® is a registered trademark of Accion International.
SOURCE Accion
Copyright (C) 2012 PR Newswire. All rights reserved
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May 6, 2012
CHICAGO, Apr 26, 2012 (BUSINESS WIRE) –
Guidelines that affirm standards of excellence in the design and
delivery of basic financial tools can fundamentally improve the U.S.
financial services marketplace, according to a white paper released
today by the Center for Financial Services Innovation (CFSI).
“Compass Principles: Guiding Excellence in Financial Services”
outlines aspirational guidelines that encourage the financial services
industry to be proactive, creative, and customer-focused when designing
products and services. By using the Compass Principles, financial
services companies can be profitable while at the same time help
customers make day-to-day progress in the short term and build assets
for the future.
“The Compass Principles were developed out of a need for higher quality
products in the financial marketplace for underserved consumers–but the
ideals of quality are no different for any user of a financial product
or service,” says Jennifer Tescher, President & CEO of CFSI. “We believe
the principles are a way to inspire financial innovation that links
consumer success with provider success.”
Along with the vision and values of the Compass Principles, the paper
highlights in detail each of the following principles:
1. Embrace Inclusion: Responsibly Expand Access
2. Build Trust: Develop Mutually Beneficial Products that Deliver Clear
and Consistent Value
3. Promote Success: Drive Positive Consumer Behavior through Smart
Design and Communication
4. Create Opportunity: Provide Options for Upward Mobility
In the fall of 2011, CFSI released a public draft of the Compass
Principles white paper and sought feedback from providers, consumer
advocates, policy makers, regulators, and other experts. The insights
and feedback collected have enhanced the principles and ensured that the
framework in the final white paper is as robust, comprehensive, and
effective as possible.
CFSI is partnering with a variety of companies to craft formal
commitments to integrate the Compass Principles into their business
through approaches such as making enhancements to existing products and
services, or developing new products and services with an emphasis on
improving the financial lives of their customers. Plastyc, Inc. and Core
Innovation Capital are the first companies to complete CFSI’s
application process and finalize a Compass Commitment pledge. Plastyc is
a leading independent provider of online banking and payment services.
Core Innovation Capital, a strategic partner of CFSI and an investor in
Plastyc, is a venture fund focused on investing in scalable financial
technology companies that serve unbanked and underbanked.
Plastyc commits to the Compass Principle of embracing inclusion by
providing expanded streamlined access to new and existing accounts for
customers. Plastyc will also promote consumer success by fostering
positive consumer behavior through interactive online help functionality
and multi-channel messaging and alerts. “Plastyc is committed to
applying the Compass Principles at a granular level in our products and
services not only because it is right, but because it is good for
business,” said Patrice Peyret, co-founder and CEO of Plastyc, Inc. “The
principles provide an excellent framework for financial service
companies to earn customers’ trust by focusing on improving their
day-to-day experience and long term well-being.”
Core Innovation Capital commits to integrating the Compass Principles
into its investment underwriting process and annual impact audit. “We
believe financial services have a significant role in anyone’s upward
mobility, and millions of responsible, hard-working Americans are stuck
in a vicious cycle where their financial tools erode, instead of enhance
their net worth and financial capabilities,” said Arjan Schutte,
Managing Partner at Core. “CFSI’s Compass Principles initiative is a
bold and critical effort to set a standard for how financial services
can and should function for people.”
To learn more about Compass Commitments and about the Compass Principles
framework articulated in the white paper, register for the webinar
hosted by CFSI on May 8, 2012 at 1:00 p.m. CDT at
http://cfsinnovation.com/content/webinar-compass-principles-enabling-financial-services-be-force-change
The complete white paper is free for download at the Center for
Financial Services Innovation’s website,
http://cfsinnovation.com/content/compass-principles
The Compass Principles initiative is supported, in part, by the Ford
Foundation and Omidyar Network.
About CFSI:
The Center for Financial Services Innovation is the nation’s leading
authority on financial services for underbanked consumers. Since
2004, its programs have focused on informing, connecting, and investing
— gathering enhanced intelligence, brokering and supporting productive
industry relationships, and fostering best-in-class products and
strategies. CFSI works with leaders and innovators in the business,
government and nonprofit sectors to transform the financial services
landscape. For more on CFSI, go to
www.cfsinnovation.com
or follow us on twitter @cfsinnovation.
SOURCE: Center for Financial Services Innovation
Media Contact:
Maris Bish
Specialist, Marketing and Communications
CFSI
312.881.5847
Copyright Business Wire 2012
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May 4, 2012
Social dating network, theComplete.me (www.theComplete.me), has named Braughm Ricke as Interim CFO. Ricke, an experienced financial executive with a focus on seed and early-stage startups, and formerly CFO at True Ventures, will help guide theComplete.me through its startup period and A-round fundraising.
San Francisco, CA (PRWEB) May 01, 2012
Social dating network, theComplete.metrade; (www.theComplete.me), announced today that Braughm Ricke has joined the organization as interim chief financial officer. As an experienced financial executive with a focus on seed and early-stage startups, Ricke will provide theComplete.me with the guidance and financial systems needed to take the organization through the startup period and A-round fundraising process.
Ricke is the Founder of Aduro Advisors and was a founding member and CFO at True Ventures, where he provided financial and operational support to True Ventures portfolio companies. Prior to True Ventures, Ricke was Controller at 5am Ventures and Controller at Sofinnova Ventures.
We are thrilled that Braughm has joined theComplete.me team to help us plan for the rapid growth period ahead of us, said Brian Bowman, Co-founder and CEO theComplete.me. Braughm will help us implement the right amount of financial process, reporting and structure as we scale our business.
I am extremely excited to be working with an exceptional and experienced team, tackling a market that is ripe for innovation, said Braughm Ricke. I look forward to helping theComplete.me grow to a business of significant scale.
theComplete.me public relations contact: trish AT thecomplete.me
Watch theComplete.me video at www.youtube.com/watch?v=ez_6_GIPh5U
About Aduro Advisors
Aduro Advisors is a strategic financial services company, founded by Braughm Ricke, focused on assisting Venture Funds and companies in the seed and early stage community. Products include Fund administration and formation, fundraising advice, strategic financial modeling, basic accounting services, and online accounting and financial tools. The companys mission is to increase the probability of success by building a strong financial foundation for Funds and companies at the earliest phases of development. Through innovation, deep industry relationships, and domain expertise, Aduro will be the premier provider of strategic financial services.
About theComplete.me
theComplete.me is the first social dating network. The site helps singles easily share who they are using their interests, experiences and mutual friends from their social networks, with complete control over who sees what and when. Founded by Brian Bowman (CEO), former VP Product Match.com amp; VP Community Yahoo!, and Shashikant Joshi (CTO), former Founder/CTO Perfode, theComplete.me startup team and Board of Advisors include Fran Maier, Co-founder of Match.com, Trish McDermott, former VP Public Relations Match.com, and other former Match.com and Internet executives. Early investors include: Intel Capital; PlentyOfFish; CrunchFund; Russ Siegleman; Ben T. Smith IV; Social Starts, LLC; Spark Unlimited, Inc.; Parker Coddington; Kevin Henrikson; Ali Jahangiri; William Lohse; and Konstantin Othmer.
Connect with theComplete.me on www.theComplete.me, follow on Twitter @thecompleteme, visit www.blog.theComplete.me
For the original version on PRWeb visit: www.prweb.com/releases/prweb2012/5/prweb9458393.htm
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May 4, 2012
Microfinance Focus, April 30, 2012: Accion a microfinance organization has released a report providing the financial industry with important recommendations for creating and improving services to rural residents in Latin America. This study is based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru and provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and micro entrepreneurs.
The study try to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.
The study findings were as follows: working capital credit and savings are the best known and most used formal financial services. However, while 80 per cent of respondents say they know about these products, only 40 per cent use them.
Debit cards, consumer credit and life insurance are rarely used. Relatively few people save in financial form. Surpluses are used primarily for investment. Many respondents consider that storing idle or “non-working” funds is a poor use of their money.
One in two consumers saves in monetary form, and among those who save, there is diversity in the purpose and use of savings. Some maintain a “static” savings amount as a reserve or back-up fund (eg, for health emergencies), while others seek to grow their savings over time.
The most significant barriers to formal savings are lack of convenience in operating savings accounts, bank fees and the perception that amounts are too small to deposit. Although rural residents were not well aware of the potential value of insurance, 70 per cent had experienced a shock event in the past three years.
Rural residents often get financial-services information through media such as speakers in the main square, mobile ads in moto-taxis, and leaflets. Key community individuals, such as shop owners, and social, economic and religious gatherings (fairs and parish meetings), are also sources of information exchange.
Elisabeth Rhyne, managing director of the Center for Financial Inclusion at Accion, said, “The results from this study will prove a valuable tool in designing and marketing appropriate financial products that meet the specific needs of rural residents. The findings can assist in the creation or improvement of products such as new savings models, debit cards, cashless payments or insurance products.”
“Ultimately,” Rhyne added, “the lessons gleaned from this research will help any microfinance institution wishing to better serve the hardworking farmers and microentrepreneurs in rural Latin America. We believe they also hold insights that are relevant to other rural clients worldwide.”
The research was supported by the Inter-American Development Bank and based on survey interviews with people living in rural areas within reach of selected microfinance institution branches. It targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers. The study describes the rural population according to socio economic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management. Financial education and awareness and use of formal financial services are discussed.
Accion is a global nonprofit that works at building a financially inclusive world with access to economic opportunity for all, by giving people the financial tools they need to improve their lives.
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February 11, 2011
Todays column features an excerpt from my friend Vitaliy Katsenelsons recently published The Little Book of Sideways Markets. Vitaliy is CIO at Investment Management Associates, a value investment firm in Denver, and he is a prolific and engaging writer (you can find and subscribe to his articles at http://ContrarianEdge.com). I had the pleasure of writing the foreword to Vitaliys book, and here is a brief excerpt:
Markets go from long periods of appreciation to long periods of stagnation. These cycles last on average 17 years. If you bought an index in the United States in 1966, it was 1982 before you saw a new high – that was the last secular sideways market in the United States (until the current one). Investing in that market was difficult, to say the least. But buying in the beginning of the next secular bull market in 1982 and holding until 1999 saw an almost 13 times return. Investing was simple, and the rising markets made geniuses out of many investors and investment professionals.
Since early 2000, markets in much of the developed world have basically been down to flat. Once again, we are in a difficult period. Genius is in short supply.
But why? I am often asked. Why dont markets just continue to go up, as so many pundits say that over the long term they do? I agree that over the very long term markets do go up. And therein is the problem: Most people are not in the market for that long – 40 to 90 years. Maybe its the human desire to live forever that has many focused on that super-long-term market performance that looks so good.
In the meantime, we are in a market environment where investors have to be more actively engaged in their investments than before during a bull market when the rising tide lifted all ships. The Little Book of Sideways Markets is a life preserver that will help you navigate these perilous waters. Wear it well and wisely.
In the excerpt that follows, Vitaliy explains the whys and wherefores of bull, bear, and sideways markets.
What Happens in a Sideways Market
by Vitaliy Katsenelson
Most people (myself included) find discussions about stock markets a bit esoteric; for us, it is a lot easier to relate to individual stocks. Since a stock market is just a collection of individual stocks, lets take a look at a very typical sideways stock first: Wal-Mart. It will give us insight into what takes place in a sideways market (see Exhibit 2.1).
Though its shareholders experienced plenty of volatility over the past 10 years, the stock has gone nowhere – it fell prey to a cowardly lion. Over the last decade Wal-Marts earnings almost tripled from $1.25 per share to $3.42, growing at an impressive rate of 11.8 percent a year. This doesnt look like a stagnant, failing company; in fact, its quite an impressive performance for a company whose sales are approaching half a trillion dollars. However, its stock chart led you to believe otherwise. The culprit responsible for this unexciting performance was valuation – the P/E – which declined from 45 to 13.7, or about 12.4 percent a year. The stock has not gone anywhere, as all the benefits from earnings growth were canceled out by a declining P/E. Even though revenues more than doubled and earnings almost tripled, all of the return for shareholders of this terrific company came from dividends, which did not amount to much.
This is exactly what we see in the broader stock market, which is comprised of a large number of companies whose stock prices have gone and will go nowhere in a sideways market.
Lets zero in on the last sideways market the United States saw, from 1966 to 1982. Earnings grew about 6.6 percent a year, while P/Es declined 4.2 percent; thus stock prices went up roughly 2.2 percent a year. As you can see in Exhibit 2.2, a secular sideways market is full of little (cyclical) bull and bear markets. The 1966-1982 market had five cyclical bull and five cyclical bear markets.
This is what happens in sideways markets: Two forces work against each other. The benefits of earnings growth are wiped out by P/E compression (the staple of sideways markets); stocks dont go anywhere for a long time, with plenty of (cyclical) volatility, while you patiently collect your dividends, which are meager in todays environment.
A quick glimpse at the current sideways market shows a similar picture: P/Es declined from 30 to 19, a rate of 4.6 percent a year, while earnings grew 2.4 percent. This explains why we are now pretty much where we were in 2000.
Bulls, Bears, and Cowardly Lions – Oh My
Exhibit 2.3 describes economic conditions and starting P/Es required for each market cycle. Historically, earnings growth, though it fluctuated in the short term, was very similar to the growth of the economy (GDP), averaging about 5 percent a year. If the markets P/E did not change and always remained at its average of 15, then we would not have bull or sideways market cycles – we d have no secular market cycles, period! Stock prices would go up with earnings growth, which would fluctuate due to normal economic cyclicality but would average about 5 percent, and investors would collect an additional approximately 4 percent in dividends. That is what would happen in a utopian world where people are completely rational and unemotional. But as Yoda might have put it, the utopian world is not, and people rational are not.
Exhibit 2.3 Economic Growth + Starting P/E =
The P/E journey from one extreme to the other is completely responsible for sideways and bull markets: P/E ascent from low to high causes bull markets, and P/E descent from high to low is responsible for the roller-coaster ride of sideways markets.
Bear markets happened when you had two conditions in place, a high starting P/E and prolonged economic distress; together they are a lethal combination. High P/Es reflect high investor expectations for the economy. Economic blues such as runaway inflation, severe deflation, declining or stagnating earnings, or a combination of these things sour these high expectations. Instead of an above-average economy, investors wake up to an economy that is below average. Presto, a bear market has started.
Lets examine the only secular bear market in the twentieth century in the United States: the period of the Great Depression. P/Es declined from 19 to 9, at a rate of about 12.5 percent a year, and earnings growth was not there to soften the blow, since earnings declined 28.1 percent a year. Thus stock prices declined by 37.5 percent a year!
Ironically – and this really tells you how subjective is this whole science that we call investing – the stock market decline from 1929 to 1932 doesnt fit into a secular definition, since it lasted less than five years. Traditional, by-the-book, secular markets should last longer than five years. I still put the Great Depression into the secular category, as it changed investor psyches for generations. Also, it was a very significant event: stocks declined almost 90 percent, and 80 years later we are still talking about it.
However, a true, by-the-book, long-term bear market took place in Japan (take a look at the next chart). Starting in the late 1980s, over a 14-year period, Japanese stocks declined 8.2 percent a year. This decline was driven by a complete collapse of both earnings – which declined 5.3 percent a year – and P/Es, which declined 3 percent a year. Japanese stocks were in a bear market because stocks were expensive, and earnings declined over a long period of time. In bear markets both P/Es and earnings decline.
In sideways markets P/E ratios decline. They say that payback is a bitch, and that is what sideways markets are all about: investors pay back in declining P/Es for the excess returns of the preceding bull market.
Lets move to a slightly cheerier subject: the bull market. We see a great example of a secular bull market in the 1982-2000 period. Earnings grew about 6.5 percent a year and P/Es rose from very low levels of around 10 to the unprecedented level of 30, adding another 7.7 percent to earnings growth. Add up the positive numbers and you get super-juicy compounded stock returns of 14.7 percent a year. Sprinkle dividends on top and you have incredible returns of 18.2 percent over almost two decades. No surprise that the stock market became everyones favorite pastime in the late 1990s.
The Price of Humanity
Is 100 years of data enough to arrive at any kind of meaningful conclusion about the nature of markets? Academics would argue that wed need thousands of years worth of stock market data to come to a statistically significant conclusion. They would be right, but we dont have that luxury. I am not making an argument that sideways markets follow bull markets based on statistical significance; I simply dont have enough data for that.
Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble . . . to give way to hope, fear and greed.
-Benjamin Graham
As the saying goes, the more things change the more they remain the same. Whether a trade is submitted by telegram, as was done at the turn of the twentieth century, or through the screen of an online broker, as is the case today, it still has a human originating it. And all humans come with standard emotional equipment that is, to some degree, predictable. Over the years weve become more educated, with access to fancier, faster, and better financial tools. A myriad of information is accessible at our fingertips, with speed and abundance that just a decade ago was available to only a privileged few.
Despite all that, we are no less human than we were 10, 50, or 100 years ago. We behave like humans, no matter how sophisticated we become. Unless we completely delegate all our investment decision making to computers, markets will still be impacted by human emotions.
The following example highlights the psychology of bull and cowardly lion markets:
During a bull market stock prices go up because earnings grow and P/Es rise. So in the absence of P/E change, stocks would go up by, lets say, 5 percent a year due to earnings growth. But remember, in the beginning stages of a bull market P/Es are depressed, thus the first phase of P/E increase is normalization, a journey towards the mean; and as P/Es rise they juice up stock returns by, well say, 7 percent a year. So stocks prices go up 12 percent (5 percent due to earnings growth and 7 percent due to P/E increase), and that is without counting returns from dividends. After a while investors become accustomed to their stocks rising 12 percent a year. At some point, though, the P/E crosses the mean mark, and the second phase kicks in: the P/E heads towards the stars. A new paradigm is born: 12-percent price appreciation is the new average, and the phrase this time is different is heard across the land.
Fifty or 100 years ago, new average returns were justified by the advancements of railroads, electricity, telephones, or efficient manufacturing. Investors mistakenly attributed high stock market returns that came from expanding P/Es to the economy, which despite all the advancements did not turn into a super fast grower.
In the late 1990s, during the later stages of the 1982-2000 bull market, similar observations were made, except the names of the game changers were now just-in-time inventory, telecommunications, and the Internet. However, it is rarely different, and never different when P/E increase is the single source of the supersized returns. P/Es rose and went through the average (of 15) and far beyond. Everybody had to own stocks. Expectations were that the new average would persist – 12 percent a year became your birthright rate of return.
P/Es can shoot for the stars, but they never reach them. In the late stage of a secular bull market P/Es stop rising. Investors receive only a return of 5 percent from earnings growth – and they are disappointed. The love affair with stocks is not over, but they start diversifying into other asset classes that recently provided better returns (real estate, bonds, commodities, gold, etc.).
Suddenly, stocks are not rising 12 percent a year, not even 5 percent, but closer to zero – P/E decline is wiping out any benefits from earnings growth of 5 percent and the lost decade (or two) of a sideways market has begun.
This Time Is Not Different
Ive done a few dozen presentations on the sideways markets since 2007. Ive found that people are either very happy or extremely unhappy with this sideways market argument. The different emotional responses had nothing to do with how I dressed, but they correlated with the stock-market cycle we were in at the time of the presentation.
In 2007, when everyone thought we were in a new leg of the 1982 bull market, I was glad that eggs were not served while I presented my sideways thesis, for surely they would have been thrown at me. In late 2008 and early 2009, my sideways market message was a ray of sunlight in comparison to the Great Depression II mood of the audience.
Every cyclical bull market is perceived as the beginning of the next secular bull market, while every cyclical bear market is met with fear that the next Great Depression is upon us. Over time stocks become incredibly cheap again and their dividend yields finally become attractive. The sideways market ends, and a bull market ensues.
Where You Stand Will Determine How Long You Stand
The stock market seems to suffer from some sort of multiple personality disorder. One personality is in a chronic state of extreme happiness, and the other suffers from severe depression. Rarely do the two come to the surface at once. Usually one dominates the other for long periods of time. Over time, these personalities cancel each other out, so on average the stock market is a rational fellow. But rarely does the stock market behave in an average manner.
Among the most important concepts in investing is mean reversion, and unfortunately it is often misunderstood. The mean is the average of a series of low and high numbers – fairly simple stuff. The confusion arises in the application of reversion to the mean concept. Investors often assume that when mean reversion takes place the figures in question settle at the mean, but it just aint so.
Although P/Es may settle at the mean, that is not what the concept of mean reversion implies; rather, it suggests tendency (direction) of a movement towards the mean. Add human emotion into the mix and P/Es turn into a pendulum – swinging from one extreme to the other (just as investors emotions do) while spending very little time in the center. Thus, it is rational to expect that a period of above-average P/Es should be followed by a period of below-average P/Es and vice versa.
Since 1900, the Samp;P 500 traded on average at about 15 times earnings. But it spent only a quarter of the time between P/Es of 13 and 17 – the mean zone, two points above and below average. In the majority of cases the market reached its fair valuation only in passing from one irrational extreme to the other.
Mean reversion is the Rodney Dangerfield of investing: it gets no respect. Mean reversion is as important to investing as the law of gravity is to physics. As long as humans come equipped with the standard emotional equipment package, market cycles will persist and the pendulum will continue to swing from one extreme to the other.
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February 11, 2011
ST. LOUIS, Feb 07, 2011 (BUSINESS WIRE) —
Lenders
One Mortgage Cooperative, a national alliance of community mortgage
bankers, correspondent lenders and suppliers of mortgage products and
services, announced today the addition of San Diego-based Bank of
Internet USA, a wholly-owned subsidiary of BofI Holding, Inc. publically
traded (NASDAQ:
BOFI |
PowerRating)
as a preferred investor. Bank of Internet USA is a nationwide savings
bank that primarily operates via the Internet and offers its customers
consumer and wholesale banking services.
The jumbo market has been hit hard by the financial credit crunch, and
there are still qualified borrowers who need loans, said Scott
Stern, Lenders One(R) CEO. This relationship with Bank of
Internet USA will give our members the additional financial tools to
effectively serve their customers.
The new partnership offers several advantages to Lenders One members
including special pricing and access to customized portfolio jumbo and
super jumbo loan products.
This partnership is crucial in rebuilding faith in the mortgage
industry and its ability to meet the needs of potential homeowners at
every level, said Bank of Internet USAs president and CEO Gregory
Garrabrants. Lenders One and its members have proven experience in
providing the best products available to consumers, and we are proud to
be a part of their network.
About Lenders One Mortgage Cooperative
Lenders One is a national alliance of mortgage bankers, correspondent
lenders and suppliers of mortgage products and services. The cooperative
was established in 2000 and is based in St. Louis. With more than 150
members originating $77 billion in mortgage loans for 2009, the Lenders
One alliance ranks as the third largest retail mortgage originator in
the US Its mortgage productivity system additionally allows members to
close more loans, satisfy continuing education requirements and market
themselves more powerfully. Lenders One is a subsidiary of Altisource
Portfolio Solutions SA (NASDAQ:
ASPS |
PowerRating). For more information about
membership, contact Tim Stern 866.728.5678 or visit www.lendersone.com.
About Altisource(TM)
Altisource Portfolio Solutions SA (NASDAQ: ASPS) is a provider of
services focused on high value, knowledge-based functions principally
related to real estate and mortgage portfolio management, asset recovery
and customer relationship management. Utilizing our integrated
technology that includes decision models and behavioral based scripting
engines, we provide solutions that improve our clients performance and
maximize their returns. Additional information is available at www.altisource.com.
About BofI Holding, Inc.
BofI Holding, Inc. (NASDAQ: BOFI) is the holding company for Bank of
Internet USA (the Bank), a nationwide savings bank that operates
primarily through the Internet. The Bank provides a variety of consumer
and wholesale banking services, focusing on gathering retail deposits
over the Internet, and originating and purchasing single and multifamily
mortgage loans, and purchasing mortgage-backed securities. BofI operates
its Internet-based bank from a single location in San Diego, California.
For more information on Bank of Internet USA, please visit www.bankofinternet.com.
For up-to-date company information and facts and figures about BofI
Holding, Inc. visit www.bofiholding.com.
SOURCE: Lenders One Mortgage Cooperative
Investor Contact:
Robert D. Stiles, +352 2469 7903
Chief Financial Officer
Robert.Stiles@Altisource.lu
or
Press Contact:
Lenders One
Kristi Kovalak, 314.292.7937
Director of Marketing
Kkovalak@LendersOne.com
For full details on BofI Holding Inc (BOFI) BOFI. BofI Holding Inc (BOFI) has Short Term PowerRatings at TradingMarkets. Details on BofI Holding Inc (BOFI) Short Term PowerRatings is available at This Link.
For full details on Altisource Portfolio Solutions SA (ASPS) ASPS. Altisource Portfolio Solutions SA (ASPS) has Short Term PowerRatings at TradingMarkets. Details on Altisource Portfolio Solutions SA (ASPS) Short Term PowerRatings is available at This Link.
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February 11, 2011
CHERRY HILL, NJ and PORTLAND, Maine, Feb. 8, 2011 /PRNewswire/ — As saving and money management continue to be an important priority for consumers, TD Bank, Americas Most Convenient Bank, is introducing its TD Payment Plus(SM) Credit Card, which helps customers who carry a balance manage their money by offering rewards for responsible credit card payment behavior. In addition to granting a standard interest rate, the card gives users the opportunity to receive a monthly credit provided they make a payment of at least 5% of their outstanding balance by the payment due date. The new product emphasizes TD Banks commitment to offering smart financial tools and tailored programs to consistently meet customers needs.
(Logo: http://photos.prnewswire.com/prnh/20081031/NEF005LOGO-a )
The new TD Payment Plus Credit Card benefits consumers by:
- Helping them to take responsibility for interest charges and debt obligations
- Providing flexibility they can choose to make a larger payment and get an interest-charge savings without getting locked into payment terms that may not be right for their budget
- Rewarding them for paying down balances
The TD Payment Plus Credit Card allows customers to have control over how much they choose to pay each month, while offering them the convenience of automatic rewards if they make a payment larger than the minimum balance. A person who pays 10% or more of their balance will get a statement credit for 50% of that months interest charges, and consumers who pay off 5% – 9.99% of their balance will receive a statement credit worth 25% of that months interest charge.
Savings will be applied as a credit on the following months statement. With no-annual-fee, the card promotes TDs commitment to providing simple and easy solutions that motivate, educate and incent customers to save.
Its all about promoting financial fitness and giving customers the choices they need to help them better manage their money, said Michael Copley, TD Bank Executive Vice President. TDs Payment Plus Credit Card empowers consumers to take responsibility for their interest charges and current debt obligations, while rewarding them for doing so.
Todays economic environment has influenced consumers interest in finding new ways to save money. TD Bank is working to offer customers choices for their money management, added Copley. The hassle-free card is a unique credit card that helps customers save money, while also paying down their monthly balance.
Consumers can apply by visiting TD Bank or simply by calling 1-888-339-5228 or 1-888-561-8861. For more information, visit www.tdbank.com/creditcards.
The TD Payment Plus Credit Card is powered by Paymentflex Technologies LLC.
About TD Bank, Americas Most Convenient Bank
TD Bank, Americas Most Convenient Bank, is one of the 10 largest banks in theUnited States, providing customers with a full range of financial products and services at more than 1,250 convenient locations from Maine to Florida. On September 30, 2010, The South Financial Group, Inc. was acquired by TD Bank Group, and its subsidiary Carolina First Bank merged with TD Bank. Carolina First Bank will continue to operate under the trade names Carolina First Bank in North and South Carolina and Mercantile Bank in Florida until conversion and rebranding in 2011. TD Bank is headquartered in Cherry Hill, NJ, and Portland, Maine. Carolina First Bank and Mercantile Bank are trade names of TD Bank, NA For more information, visit www.tdbank.com/paymentplus.
TD Bank, Americas Most Convenient Bank, is a member of TD Bank Group and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top 10 financial services company in North America. The Toronto-Dominion Bank trades on the New York and Toronto stock exchanges under the ticker symbol TD. To learn more, visit www.td.com.
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February 11, 2011
Good financial habits start early. The very best last well into old age. For those somewhere in the middle and still trying to figure it all out, theres help. No matter what stage of life, a person can always take steps to improve his or her finances, says Julie Jason, president of Jackson, Grant Investment Advisors in Stamford, Conn. Here are tips on what family members need to think about and plan for at all stages of life, from childhood to retirement.
Children
If little ones start to learn the basics of money management as they grow, perhaps they can avoid the debt and exuberant spending habits that plague many adults. Its important to teach children that every dollar they receive is not a dollar they can spend, says Manisha Thakor, personal finance expert for women and author of Get Financially Naked. Kids should learn to divide allowances into three buckets: one for savings, one for charity and one for spending. Thakor recommends parents help children allocate 10 percent for savings, 10 percent for charity and 80 percent for spending.
Help kids learn to save: Fiddle with the online allowance calculator at www.threejars.com to come up with a weekly sum thats reasonable, based on the age of the child and the parents own experience.
Teens
As kids approach their teenage years, they can start to grasp the truth in the old adage money doesnt grow on trees. Thakor tells teens to think about how many hours they would have to work to earn enough to buy an item they want. This way, they begin to understand how much labor really goes into an iPod or Xbox purchase. Encourage a teen to find a part-time job and share your views on money matters and what youve learned about saving and spending.
Required reading: Jean Chatzky, award-winning financial journalist, wrote Not Your Parents Money Book: Making, Saving and Spending Your Own Money to help start teens on a path to financial success.
College students
The average college-age credit card holder carries a balance of more than $3,000, according to Sallie Mae. Fortunately for frisky, young credit users, credit card reform measures that started rolling out in 2010 make it more difficult to overload on credit and debt, requiring anyone under age 21 to show proof of income or get parents to co-sign in order to get a credit card. College students shouldnt avoid credit cards completely, however. A student should get one credit card in his or her name, monitor his credit record at the three major agencies and pay off the bill every month. Used responsibly, a credit card can help young adults build a strong credit profile.
Newlyweds
A new couples main financial goal should be to build a solid foundation that includes an emergency fund to cover three to six months of living expenses, Thakor says. However, this should happen only after each partner pays down any debts they may have accumulated before marriage. Thakor urges newlyweds to conduct financial check-ins on all assets at least semi-annually. Couples should save 20 percent of their income, Thakor says.
Investment smarts: If your employer offers a tax sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy.
Married with a family
Once the storks start dropping baby bundles at the doorstep, its time to think about life insurance. Whole life insurance is expensive and unnecessary in Thakors opinion. She suggests acquiring term life insurance instead, which provides coverage for a set time period — usually five to 30 years — at a fixed rate.
Keep retirement saving in mind, despite the focus on children. You can put $5,000 a year into an Individual Retirement Account (IRA) and delay paying taxes on investment earnings until retirement age. If you dont have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your IRA contributions.
College planning: The College Savings Plan calculator at the financial education website www.mindyourfinances.com, can help families develop or fine-tune a college savings plan, factoring in number and ages of children in the family. Click on Financial Tools.
In your 30s and early 40s
The challenge as you enter into these years is to avoid lifestyle creep, Thakor says. Its very easy to start living beyond your means. This presents a big problem for savings for a couples retirement and their childrens college education. Thakor has noted another dangerous trend in this age bracket: risky investments. An investment portfolio at this age should be a low-cost, high-quality mix of stocks, bonds and mutual funds that grows conservatively over time, she says.
In your 50s …
Fifty is the time of preparation and a time of opportunity, says Julie Jason, author of The AARP Retirement Survival Guide: How to Make Smart Financial Decisions in Good Times and Bad. Make catch-up contributions, an extra amount those over 50 can add to 401(k) and other retirement accounts. At age 59½ you will no longer be hit with tax penalties on withdrawals from retirement accounts, but leaving money in means more time for it to grow.
Imagine youre retiring on Monday and need to calculate how long your funds will last. Jason says this scenario forces people to look at their expenses, savings and income sources outside of work. If you do the analysis, you can adjust your savings and investing, she says.
In your 60s …
The minimum age to receive Social Security benefits is age 62, but delaying to a later year will mean a bigger monthly benefit. Generally, government-sponsored Medicare health insurance is available to those age 65 and older.
At 66, those born between 1943 and 1954 are eligible for full Social Security benefits.
Jason says that those at age 65 must realize that theyre targets for every ambitious financial advisor. Put on a skeptics hat, she says.
In your 70s …
Now is the time to review assumptions and make adjustments to your cash flow and to your investments, Jason says. At the outset of retirement, people assume that health care will be their greatest expense. It turns out that the largest expense is most often taxes. Plan to begin taking minimum withdrawals from most retirement accounts by 70½ or you may be charged a penalty.
80s and beyond
Health care and legacy planning should come into the picture around age 85, Jason says. Long-term care for husbands and wives should be determined. At a certain point you have to bring in your spouse and see if youre in sync with each other, Jason says. She reminds retirees to include the desire to leave an inheritance in their planning.
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February 10, 2011
The Problem: Highway Trust Fund revenues only cover about 44 percent of the transportation system’s needs.
The Solution: an alphabet soup of funding and financing mechanisms (they’re different!) which, if used optimally, could supplement gas taxes and tolls and boost transportation investment.
The American Association of State Highway and Transportation Officials (AASHTO) just came out with the report from their September 30 conference on “Funding and Financing Solutions for Surface Transportation in the Coming Decade” [PDF]. As Congress prepares to start crafting a new transportation authorization and the Republican majority in the House has taken a hard line on spending cuts, it’s an appropriate moment to talk about where the money’s going to come from for a new bill – even the modest one that is likely to emerge.
After all, as AASHTO points out, “Without three intra-governmental transfers from the general fund of the US Treasury, totaling $34.5 billion since 2008, balances in the Highway and Mass Transit Accounts would have fallen close to zero over the course of the last several years.” The current Congress will be loathe to authorize further bailouts of the Highway Trust Fund, which supplies nearly 90 percent of federal surface transportation funding, including transit and bike-ped projects.
In turn, nearly 90 percent of the HTF funds come from motor fuels. Fuel efficiency and less driving – while both good things – have contributed to the crisis in transportation funding, as gas tax revenues have dropped. The recession was a heavy blow as well, since truck sales declined and, along with them, HTF revenues derived from a sales tax on new trucks. And lawmakers on both sides of the aisle have rejected repeated calls from experts to raise the gas tax or move to a vehicle-miles-traveled fee. Right now, the highway trust fund balance is growing at less than half the rate of inflation.
Participants in the September AASHTO forum agreed, according to the report, that the gas tax will continue to be a key source of transportation funding, though they were excited about a VMT fee too. But a main theme of the conference was exploration of other alternatives.
The authors distinguish between financing and funding:
Funding means revenue available to pay for investment in transportation assets or programs. Financing relates to the use of financial tools or techniques to leverage project revenues, accelerate project development, and match the costs and benefits of long-lived assets.
Federal transportation spending from the Highway Trust Fund dipped last year due to hesitation about the future of funding given the delayed reauthorization, as well as the use of recovery act dollars to fund transportation projects. Next year could see greater pressure on the HTF, with stimulus money gone and state DOTs ready to get started on projects that have built up in their pipelines.
In addition to traditional funding sources, ideas for future funding included freight-related taxes, a national sales tax, and annual transfers from the general fund. A variety of road pricing techniques, from traditional tolling to congestion pricing, are options, as well as value capture strategies to encourage beneficiaries of transportation investments to help pay their costs.
As for financing, in addition to existing tools like TIFIA and Build America Bonds, the report authors see potential in tax credit bonds and a national infrastructure bank.
Tax credit bonds currently exist for forestry conservation and new school construction, among others, but not for transportation. The bonds would have the federal government pay some of the interest in the form of tax credits, reducing costs for the borrower.
They also held out hope for greater private sector participation. This is a page out of Transportation Committee Chair John Mica’s playbook. He’s a big fan of public-private partnerships (P3s) as a way to leverage public money and bring in private industry.
AASHTO’s report doesn’t take sides in the conversation about funding and financing tools. They take more of a spaghetti-to-the-wall approach – just try everything and see what sticks. In order to get a surface transportation bill with adequate investment for the wide range of needs in this country, it will need to be paid for – one way or another.
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