There's something about the idea of doubling one's money on an investment that intrigues most investors. It's a badge of honor dragged out at cocktail parties, a promise made by over-zealous advisors, and a headline that frequents the cover of some of the most popular personal finance magazines. Where this fixation comes from is anyone's guess.
Perhaps it comes from deep in our investor psychology; that risk-taking part of us that loves the quick buck. Or maybe it's simply the aesthetic side of us that prefers round numbers - saying your "up 97%" doesn't quite roll off the tongue like "I doubled my money." Whatever the source though, it is both a realistic goal that investors should always be moving towards, as well as something that can lure many people into impulsive investing mistakes. Knowing some of the most trusted avenues to doubling your money is something that all investors should have in their toolboxes.
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The Classic Way - Earn It Slowly
Investors who have been around for a while will remember the classic Smith Barney commercial from the 1980s, where British actor John Houseman informs viewers in his unmistakable accent that they "make money the old fashioned way – they earn it." When it comes to the most traditional way of doubling your money, that commercial's not too far from reality.
Perhaps the most tested way to double your money over a reasonable amount of time is too invest in a solid, speculative portfolio that's diversified between blue-chip stocks and investment grade bonds. While that portfolio won't double in a year, it almost surely will eventually, thanks to the old rule of 72.
The rule of 72 is a famous shortcut for calculating how long it will take for an investment to double, if its growth compounds on itself. According to the rule of 72, you divide your expected annual rate of return into 72, and that tells you how many years it takes you to double your money.
Considering that large blue-chip stocks have returned roughly 10% over the last 100 years, and investment grade bonds have returned roughly 6%, a portfolio that is divided evenly between the two should return about 8%. Dividing that expected return (8%) into 72, gives a portfolio that should double every nine years. That's not to shabby, when you consider that it will quadruple after eighteen years, and octuple (8 times) after 27.
The Contrarian Way – Blood in the Streets
Even straight-laced, even-keeled investors know that there comes a time where you've got to buy. Not because everyone is getting in on a good thing, but rather, because everyone is getting out. Just like great athletes go through slumps when many fans turn their backs, the stock prices of otherwise great companies occasionally go through slumps because fickle investors head for the hills.
As Baron Rothschild (and Sir John Templeton) once said, smart investors "buy when there is blood in the streets, even if the blood is their own." Of course, these famous financiers weren't arguing that you buy garbage, at any price. Rather, they were arguing that there would most surely be times where good investments become oversold, which presents a buying opportunity for brave investors who have done their homework.
Perhaps the most classic barometers used to gauge when a stock may be oversold, is the price-to-earnings ratio and the book value for a company. Both of these measures have fairly well established historical norms for both the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors will smell an opportunity to double their money.
The Safe Way
Just like how the fast lane and the slow lane on the freeway eventually lead to the same place, there are both quick and slow ways to double one's money. So for those investors who are afraid of wrapping their portfolio around a telephone pole, bonds may provide a significantly less precarious journey to the same destination.
But investors taking less risk by using bonds don't have to give up their dreams of one day proudly bragging around the lunchroom about doubling their money. In fact, zero-coupon bonds (including classic U.S. Savings Bonds), can keep you in the "double your money" discussion.
For the uninitiated, zero-coupon bonds may sound intimidating. In reality, they're surprisingly simple to understand. Instead of purchasing a bond that rewards you with a regular interest payment, you buy a bond at a discount to its eventual maturity amount. For example, instead of paying $1,000 for a $1,000 bond that pays 5% per year, an investor might buy that same $1,000 for $500. As it moves closer and closer to maturity, its value slowly climbs until the bondholder is eventually repaid the face amount.
One hidden benefit that many zero-coupon bondholders love is the absence of reinvestment risk. With standard coupon bonds, there's the ongoing challenge of reinvesting the interest payments when they're received. With zero coupon bonds, which simply "accrete" or grow towards maturity, there's no hassle of trying to invest smaller interest rate payments or risk of falling interest rates.
The Speculative Way
While slow and steady might work for some investors, others may find themselves falling asleep at the wheel. They crave more excitement in their portfolio and are willing to take bigger risks to earn bigger payoffs. For these folks, the fastest ways to super-size the nest egg may be the use of options, margin or penny stocks.
Stock options, such as simple puts and calls, can be used to speculate on any company's stock going up or down. For many investors, especially those who have their finger on the pulse of a specific industry, options can turbo-charge their performance. Considering that each stock option potentially represents 100 shares of stock, a company's price might only need to increase a small percentage for an investor to hit one out of the park. Be careful and be sure to do your homework; options can take away wealth just as quickly as they create it.
For those who want don't want to learn the ins and outs of options, but do want to leverage their faith (or doubt) about a certain stock, there's the option of buying on margin or selling a stock short. Both of these methods allow investors to essentially borrow money from a brokerage house to buy or sell more shares than they actually have, which in turn, can raise their potential profits substantially. Again, this method is not for the faint-hearted, since margin calls can back your available cash into a corner, and short-selling can theoretically can generate infinite losses.
Lastly, extreme bargain hunting can quickly turn your pennies into dollars. Whether you decide to roll the dice on the numerous former blue-chip companies that are now selling for less than a dollar, or you sink a few thousand dollars into the next big thing, penny stocks can double your money in a single trading day. Just remember, whether a company is selling for a dollar or a few pennies, its price reflects the fact that other investors don't see any value in paying more than that price.
The Best Way to Double Your Money
While it's not nearly as fun as watching your favorite stock on the evening news, the undisputed heavyweight champ of doubling your money is that matching contribution you receive in your employer's retirement plan. It's not sexy and won't wow the neighbors at your next block party, but getting an automatic 50 cents to $1 for every dollar you deposit is tough to beat.
Making it even better is the fact that the money going into your 401(k) or other employer-sponsored retirement plan comes right off the top of what your employer reports to the IRS. For most Americans, that means that each dollar invested really only costs them 65-75 cents out of their pockets. In other words, for every 75 cents, most Americans are willing to forgo out of their paychecks, they'll have $1.50 or more added to their retirement nest egg – not too shabby!
Before you start complaining about how your employer doesn't have a 401(k) or how your company has cut their contribution because of the economy, don't forget that the government also "matches" some portion of the retirement contributions of taxpayers earning less than a certain amount. The Credit for Qualified Retirement Savings Contribution reduces your tax bill by 10-50% of what ever you contribute to a variety of retirement accounts (from 401(k)s to Roth IRAs).
If It's Too Good to Be True…
There's an old saying that if "something is too good to be true, then it probably is." That's sage advice when it comes to doubling your money, considering that there are probably far more investment scams out there than sure things. While there certainly are other ways to approach doubling your money than the ones mentioned so far, always be suspicious when you're promised results. Whether it's your broker, your brother-in-law or a late night infomercial, take the time to make sure that someone is not using you to double their money.
Unemployment Rate
Jobless rate tops 10 percent in 15 states, DC
Jobless rate tops 10 percent in 15 states and DC, endangers economic recovery
By Jeannine Aversa, AP Economics Writer
On Friday July 17, 2009, 7:59 pm EDT
Buzz up! 447 Print
WASHINGTON (AP) -- Fifteen states have crossed a painful threshold: 10 percent unemployment. More states, and the nation, likely will follow, one of the biggest dangers to an economic recovery.
How consumers behave in the face of rising unemployment will figure prominently in shaping a broader rebound. If they go back into hibernation and sharply cut spending like they did at the end of last year, the recovery could cave in. More likely is that consumers will stay cautious, making for a fragile and slow-moving national economic turnaround, economists said.
The Labor Department on Friday said unemployment topped 10 percent in 15 states and the District of Columbia last month. And the jobless rate in Michigan surpassed 15 percent, the first time any state hit that mark since 1984.
The Federal Reserve this week projected that the national unemployment rate, currently at a 26-year high of 9.5 percent, will pass 10 percent by the end of the year. Most Fed policymakers said it could take "five or six years" for the economy and the labor market to get back on a path of long-term health.
"With so much uncertainty, companies will stay in cost-cutting mode and consumers will watch their spending," said Steve Cochrane, managing director at Moody's Economy.com.
The news was not all bad. North Dakota, helped by the oil business, reported the lowest unemployment rate of 4.2 percent in June. It was followed by Nebraska at 5 percent and South Dakota at 5.1 percent, supported by farm businesses. None of those states ever got carried away with the housing boom, either, so their residents didn't suffer as big a hit to household wealth.
Still, the state unemployment report underscored the damage that the longest recession since World War II has inflicted on companies, workers and communities, and the challenges the economy faces getting back on its feet.
A common theme running through states suffering from high unemployment was heavy layoffs tied to the troubled auto industry and the collapse of the housing market. Workers in manufacturing, construction, retail and finance have been the hardest hit.
"A lot of older industries are having to shut down and many of these jobs will never come back," said Bernard Baumohl, chief global economist at the Economic Outlook Group.
Take Michigan, ground zero of the recession.
Home to the nation's struggling auto makers, Michigan has been clobbered by lost factory jobs. Its jobless rate of 15.2 percent in June was the nation's highest. It was the first time in 25 years that any state has suffered an unemployment rate of at least 15 percent.
If laid-off workers who have given up looking for jobs or have settled for part-time work are included, the state's jobless rate was 22.5 percent, according to Michigan's Department of Energy, Labor and Economic Development. Nationwide unemployment by that measure was 16.5 percent in June, the highest on government records dating to 1994.
"In Michigan and elsewhere, the unemployment rate is just the tip of the iceberg of the extensive adverse impact of this 'Great Recession,'" said economist Lawrence Mishel, president of the left-leaning Economic Policy Institute.
Many workers have seen hours trimmed, their pay cut and have lost benefits. Combine that with a dismal housing market making it difficult for people to sell their homes and move to other places to find work, some jobseekers are trapped.
The other states where unemployment topped 10 percent last month were: Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Nevada, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee. In May, 13 states plus the District of Columbia watched their jobless rates surpass 10 percent. Alabama and Georgia joined the list in June.
Rhode Island had the second-highest unemployment rate in the country in June at 12.4 percent. When including people who stopped looking for work and those forced into part-time jobs, the state's unemployment rate was 22.7 percent, Mishel estimated.
Oregon had the third-highest unemployment rate at 12.2 percent, which was 21.6 percent by the broadest measure. South Carolina's jobless rate of 12.1 percent jumped to 22 percent when underemployed workers were included. It was followed by Nevada with a jobless rate of 12 percent, or 21.6 percent by the broadest measure, Mishel said.
The June jobless rates for Nevada, Rhode Island and South Carolina were the highest ever for those states in records dating to 1976. Other record-highs: Florida at 10.6 percent, Georgia at 10.1 percent and Delaware at 8.4 percent.
Associated Press Writer Tim Martin in Lansing, Mich., contributed to this report.
Jobless rate tops 10 percent in 15 states and DC, endangers economic recovery
By Jeannine Aversa, AP Economics Writer
On Friday July 17, 2009, 7:59 pm EDT
Buzz up! 447 Print
WASHINGTON (AP) -- Fifteen states have crossed a painful threshold: 10 percent unemployment. More states, and the nation, likely will follow, one of the biggest dangers to an economic recovery.
How consumers behave in the face of rising unemployment will figure prominently in shaping a broader rebound. If they go back into hibernation and sharply cut spending like they did at the end of last year, the recovery could cave in. More likely is that consumers will stay cautious, making for a fragile and slow-moving national economic turnaround, economists said.
The Labor Department on Friday said unemployment topped 10 percent in 15 states and the District of Columbia last month. And the jobless rate in Michigan surpassed 15 percent, the first time any state hit that mark since 1984.
The Federal Reserve this week projected that the national unemployment rate, currently at a 26-year high of 9.5 percent, will pass 10 percent by the end of the year. Most Fed policymakers said it could take "five or six years" for the economy and the labor market to get back on a path of long-term health.
"With so much uncertainty, companies will stay in cost-cutting mode and consumers will watch their spending," said Steve Cochrane, managing director at Moody's Economy.com.
The news was not all bad. North Dakota, helped by the oil business, reported the lowest unemployment rate of 4.2 percent in June. It was followed by Nebraska at 5 percent and South Dakota at 5.1 percent, supported by farm businesses. None of those states ever got carried away with the housing boom, either, so their residents didn't suffer as big a hit to household wealth.
Still, the state unemployment report underscored the damage that the longest recession since World War II has inflicted on companies, workers and communities, and the challenges the economy faces getting back on its feet.
A common theme running through states suffering from high unemployment was heavy layoffs tied to the troubled auto industry and the collapse of the housing market. Workers in manufacturing, construction, retail and finance have been the hardest hit.
"A lot of older industries are having to shut down and many of these jobs will never come back," said Bernard Baumohl, chief global economist at the Economic Outlook Group.
Take Michigan, ground zero of the recession.
Home to the nation's struggling auto makers, Michigan has been clobbered by lost factory jobs. Its jobless rate of 15.2 percent in June was the nation's highest. It was the first time in 25 years that any state has suffered an unemployment rate of at least 15 percent.
If laid-off workers who have given up looking for jobs or have settled for part-time work are included, the state's jobless rate was 22.5 percent, according to Michigan's Department of Energy, Labor and Economic Development. Nationwide unemployment by that measure was 16.5 percent in June, the highest on government records dating to 1994.
"In Michigan and elsewhere, the unemployment rate is just the tip of the iceberg of the extensive adverse impact of this 'Great Recession,'" said economist Lawrence Mishel, president of the left-leaning Economic Policy Institute.
Many workers have seen hours trimmed, their pay cut and have lost benefits. Combine that with a dismal housing market making it difficult for people to sell their homes and move to other places to find work, some jobseekers are trapped.
The other states where unemployment topped 10 percent last month were: Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Nevada, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee. In May, 13 states plus the District of Columbia watched their jobless rates surpass 10 percent. Alabama and Georgia joined the list in June.
Rhode Island had the second-highest unemployment rate in the country in June at 12.4 percent. When including people who stopped looking for work and those forced into part-time jobs, the state's unemployment rate was 22.7 percent, Mishel estimated.
Oregon had the third-highest unemployment rate at 12.2 percent, which was 21.6 percent by the broadest measure. South Carolina's jobless rate of 12.1 percent jumped to 22 percent when underemployed workers were included. It was followed by Nevada with a jobless rate of 12 percent, or 21.6 percent by the broadest measure, Mishel said.
The June jobless rates for Nevada, Rhode Island and South Carolina were the highest ever for those states in records dating to 1976. Other record-highs: Florida at 10.6 percent, Georgia at 10.1 percent and Delaware at 8.4 percent.
Associated Press Writer Tim Martin in Lansing, Mich., contributed to this report.
Higher Earnings
Earnings season has put some luster back in the stock market, but it may have a tougher time scoring gains in the week ahead.
Nearly 30 percent of the S&P 500 and 40 percent of the Dow 30 report in the week ahead. That includes such major companies as Caterpillar, McDonald's, Microsoft, Coca-Cola, Morgan Stanley, Merck, Boeing and Apple. Markets will also be watching testimony from Fed Chairman Ben Bernanke on the economy and Fed policy before Congressional committees Tuesday and Wednesday.
From 'Fast Money':
Your First Trade for Monday, July 20
Despite some steep profit and revenue declines, investors latched onto every bit of heartening news they could find in the past week's earnings reports, pushing major indices up about 7 percent. Major banks, technology and drug companies, as well as economic bellwether General Electric [GE 11.65 -0.75 (-6.05%) ], reported profits above forecast, but typically on big drops in revenues and not without serious cost cutting.
"I would be happy with not giving much of it back next week," said Art Hogan of Jefferies, of the market's gains. "We're not going to see anything great in earnings. It's just a question of whether they're going to be better than expected, and that's the best we can hope for."
The Dow raced ahead by 597 points, or 7.3 percent to 8743, while the S&P 500 jumped 61, or 7 percent to 940, and the tech-driven Nasdaq soared 7.4 percent to 1886.
The bond market in the past week saw selling, and the dollar weakened against the euro, losing a percent to $1.4099. The dollar gained 2 percent against the yen. Many commodities were higher on the week, with gold gaining 2.7 percent to $937.20 per troy ounce and oil jumping 6 percent to $6.56 per barrel.
This earnings season is particularly important because of corporate America's ability to give a fresh view of the economy, in comments about the outlook, orders, spending, inventories and costs. For the most part, traders are looking to the tech sector to deliver the best news on future earnings.
"The key question the market is looking to find the answer to is when and if there's a turning point for earnings," said Deutsche Bank U.S. equities strategist Binky Chadha. "That's not going to happen this quarter or next quarter. The macro economic forecast is for a long slow recovery. I think it's likely more in the fourth quarter."
When earnings turn, year-over-year comparisons will look positive. The deep drop off in the last year's fourth quarter profits, and improving profit picture has many looking at this year's fourth quarter as a time when there will be a difference in the complexion of earnings.
"There comes a point where top line stops falling, and they've cut costs too much, and in a sense margins start to improve. You're going to see a big pickup in margins," he said.
Chadha said there is also a high level of uncertainty about earnings in certain sectors that has to change before the market can really move higher. He said that shows up in the high levels of "dispersion" in analysts' estimates for financials, materials, energy and consumer discretionary stocks. In other sectors, the dispersion is close to historical averages. Dispersion is calculated by looking at the standard deviation of analyst estimates, he said.
For financials, for instance, the dispersion is usually about three to four percent, but it is currently at 37 percent, showing a lot of disagreement among analysts on financial company earnings. That was apparent in the big beats by Goldman Sachs [GS 156.84 --- UNCH (0) ], JPMorgan Chase [JPM 36.89 0.76 (+2.1%) ] and Bank of America [BAC 12.89 -0.28 (-2.13%) ] this past week. Currently, earnings surprises have been positive for an average 71 percent of the 55 S&P 500 that have reported so far.
"Sequential earnings (quarter-to-quarter) are going up but they are going up very modestly. That implies modest upside for equities until later in the year. Then things could change," Chadha said. He said he is neutral equities and has a target of 1,060 on the S&P this year.
Bonds: 'We Have Not Seen All of the Sellof"
Treasurys were under pressure in the past week, and that trend could persist in the coming week, says Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital. He said some data improvements, including housing starts and jobless claims, as well as better bank earnings worked against bonds. The yield on the 10-year was at 3.645 percent late Friday, compared to the 3.29 percent yield of a week earlier.
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Current DateTime: 01:38:36 18 Jul 2009
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"We have not seen all of the selloff," said Rajadhyaksha. However, "bank earnings so far have been positive. Next week, the regionals start to report, and they do not have the benefit of investment banks to offset profits ... As investors look at regional bank earnings, and if they see things are still pretty bad in a large part of the banking sector, you might see some support for Treasurys."
Another important discussion for the bond market in the week ahead will play out on Capital Hill when Fed Chairman Ben Bernanke gives his semi-annual update to a House Committee Tuesday and Senate Committee Wednesday. A big emphasis could be on the Fed's "exit strategy," or the unraveling of the programs it has undertaken to bail out the economy and financial markets. "It depends on what he says about a time line," he said.
Tony Crescenzi, market strategist and portfolio manager at Pimco, said Bernanke may give more information on the direction of the balance sheet, which is expected to expand more before it starts to shrink. He too said there could be more detail on the timing, of great interest to markets.
"He could lay out what the Fed could do. There are well known ways to exit—to raise the interest rate on reserves, to sell securities, to raise the Federal funds rate, to absorb balances by the Treasury Department. Treasury could sell T-bills and deposit money at the Fed," said Crescenzi.
Bernanke may also explain why the Fed believes growth will pick up so much in 2011, to a projected level of 3.8 percent to 4.6 percent. "What gives them the confidence in that? Does he expect to be stimulating it til then?"
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Crescenzi said Bernanke will shy away from political statements during the testimony, and it's not likely his reappointment will be broached in the hearings. This is Bernanke's final testimony before his term expires in January. "The thinking is markets will know by September whether he's been reappointed. September or October. I can't see how in he midst of all this they have a changing of the guard. It's still a fragile situation. He's got built-up credibility," he said.
Econorama
Besides Bernanke in the week ahead, markets are watching a few economic reports, including leading indicators Monday; FHFA home price data Wednesday; weekly jobless claims and existing home sales Thursday, and consumer sentiment Friday.
Crescenzi said he is watching the inventory element of the housing data. "The inventory story is really important even though we want to see if inventories continue on the downtrend because in both new home sales and existing home sales, we've seen supply numbers move downward, especially for new homes, which are at a decade low," he said. In May, the inventory level was 3.798 million, down from a peak of 4.57 million in July, 2008. Crescenzi said a normal level would be 2.5 million.
"As supply starts to shrink, the bidding dynamic would start to improve," and prices would improve, he said.
Crescenzi said he is also watching the jobless claims, which have been affected by the shutdown and, now, restarting of auto production. Jobless claims showed an improvement in the past week, to 522,000 for the week of July 1. "Most of it's a distortion but there's something going on there potentially," he said, adding it would take several weeks of numbers.
Nearly 30 percent of the S&P 500 and 40 percent of the Dow 30 report in the week ahead. That includes such major companies as Caterpillar, McDonald's, Microsoft, Coca-Cola, Morgan Stanley, Merck, Boeing and Apple. Markets will also be watching testimony from Fed Chairman Ben Bernanke on the economy and Fed policy before Congressional committees Tuesday and Wednesday.
From 'Fast Money':
Your First Trade for Monday, July 20
Despite some steep profit and revenue declines, investors latched onto every bit of heartening news they could find in the past week's earnings reports, pushing major indices up about 7 percent. Major banks, technology and drug companies, as well as economic bellwether General Electric [GE 11.65 -0.75 (-6.05%) ], reported profits above forecast, but typically on big drops in revenues and not without serious cost cutting.
"I would be happy with not giving much of it back next week," said Art Hogan of Jefferies, of the market's gains. "We're not going to see anything great in earnings. It's just a question of whether they're going to be better than expected, and that's the best we can hope for."
The Dow raced ahead by 597 points, or 7.3 percent to 8743, while the S&P 500 jumped 61, or 7 percent to 940, and the tech-driven Nasdaq soared 7.4 percent to 1886.
The bond market in the past week saw selling, and the dollar weakened against the euro, losing a percent to $1.4099. The dollar gained 2 percent against the yen. Many commodities were higher on the week, with gold gaining 2.7 percent to $937.20 per troy ounce and oil jumping 6 percent to $6.56 per barrel.
This earnings season is particularly important because of corporate America's ability to give a fresh view of the economy, in comments about the outlook, orders, spending, inventories and costs. For the most part, traders are looking to the tech sector to deliver the best news on future earnings.
"The key question the market is looking to find the answer to is when and if there's a turning point for earnings," said Deutsche Bank U.S. equities strategist Binky Chadha. "That's not going to happen this quarter or next quarter. The macro economic forecast is for a long slow recovery. I think it's likely more in the fourth quarter."
When earnings turn, year-over-year comparisons will look positive. The deep drop off in the last year's fourth quarter profits, and improving profit picture has many looking at this year's fourth quarter as a time when there will be a difference in the complexion of earnings.
"There comes a point where top line stops falling, and they've cut costs too much, and in a sense margins start to improve. You're going to see a big pickup in margins," he said.
Chadha said there is also a high level of uncertainty about earnings in certain sectors that has to change before the market can really move higher. He said that shows up in the high levels of "dispersion" in analysts' estimates for financials, materials, energy and consumer discretionary stocks. In other sectors, the dispersion is close to historical averages. Dispersion is calculated by looking at the standard deviation of analyst estimates, he said.
For financials, for instance, the dispersion is usually about three to four percent, but it is currently at 37 percent, showing a lot of disagreement among analysts on financial company earnings. That was apparent in the big beats by Goldman Sachs [GS 156.84 --- UNCH (0) ], JPMorgan Chase [JPM 36.89 0.76 (+2.1%) ] and Bank of America [BAC 12.89 -0.28 (-2.13%) ] this past week. Currently, earnings surprises have been positive for an average 71 percent of the 55 S&P 500 that have reported so far.
"Sequential earnings (quarter-to-quarter) are going up but they are going up very modestly. That implies modest upside for equities until later in the year. Then things could change," Chadha said. He said he is neutral equities and has a target of 1,060 on the S&P this year.
Bonds: 'We Have Not Seen All of the Sellof"
Treasurys were under pressure in the past week, and that trend could persist in the coming week, says Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital. He said some data improvements, including housing starts and jobless claims, as well as better bank earnings worked against bonds. The yield on the 10-year was at 3.645 percent late Friday, compared to the 3.29 percent yield of a week earlier.
RELATED LINKS
Current DateTime: 01:38:36 18 Jul 2009
LinksList Documentid: 31960033
Euro Shares Get Lift From Banks, Commodity Firms
Asian Markets Rise, But Jakarta Blasts Cap Gains
Dollar Recovers Ground After Mixed Earnings
Oil Settles Above $63 on US Housing Hopes
"We have not seen all of the selloff," said Rajadhyaksha. However, "bank earnings so far have been positive. Next week, the regionals start to report, and they do not have the benefit of investment banks to offset profits ... As investors look at regional bank earnings, and if they see things are still pretty bad in a large part of the banking sector, you might see some support for Treasurys."
Another important discussion for the bond market in the week ahead will play out on Capital Hill when Fed Chairman Ben Bernanke gives his semi-annual update to a House Committee Tuesday and Senate Committee Wednesday. A big emphasis could be on the Fed's "exit strategy," or the unraveling of the programs it has undertaken to bail out the economy and financial markets. "It depends on what he says about a time line," he said.
Tony Crescenzi, market strategist and portfolio manager at Pimco, said Bernanke may give more information on the direction of the balance sheet, which is expected to expand more before it starts to shrink. He too said there could be more detail on the timing, of great interest to markets.
"He could lay out what the Fed could do. There are well known ways to exit—to raise the interest rate on reserves, to sell securities, to raise the Federal funds rate, to absorb balances by the Treasury Department. Treasury could sell T-bills and deposit money at the Fed," said Crescenzi.
Bernanke may also explain why the Fed believes growth will pick up so much in 2011, to a projected level of 3.8 percent to 4.6 percent. "What gives them the confidence in that? Does he expect to be stimulating it til then?"
More From CNBC.com
Get After-the-Bell Dow 30 Quotes
Credit Spreads and Libor Data
Futures and Pre-Market Data
Currency Data
Crescenzi said Bernanke will shy away from political statements during the testimony, and it's not likely his reappointment will be broached in the hearings. This is Bernanke's final testimony before his term expires in January. "The thinking is markets will know by September whether he's been reappointed. September or October. I can't see how in he midst of all this they have a changing of the guard. It's still a fragile situation. He's got built-up credibility," he said.
Econorama
Besides Bernanke in the week ahead, markets are watching a few economic reports, including leading indicators Monday; FHFA home price data Wednesday; weekly jobless claims and existing home sales Thursday, and consumer sentiment Friday.
Crescenzi said he is watching the inventory element of the housing data. "The inventory story is really important even though we want to see if inventories continue on the downtrend because in both new home sales and existing home sales, we've seen supply numbers move downward, especially for new homes, which are at a decade low," he said. In May, the inventory level was 3.798 million, down from a peak of 4.57 million in July, 2008. Crescenzi said a normal level would be 2.5 million.
"As supply starts to shrink, the bidding dynamic would start to improve," and prices would improve, he said.
Crescenzi said he is also watching the jobless claims, which have been affected by the shutdown and, now, restarting of auto production. Jobless claims showed an improvement in the past week, to 522,000 for the week of July 1. "Most of it's a distortion but there's something going on there potentially," he said, adding it would take several weeks of numbers.
5 dumbest thing in stock market
Sergey Aleynikov's dream was to be a big-shot trader. Turns out he may have traded away a lucrative career at Goldman Sachs(GS Quote) for a prison cell.
Aleynikov, who was paid $400,000 a year as a computer programmer for the investment bank, was arrested by the FBI July 3 and charged with "theft of trade secrets." Specifically, the 39-year old Russian immigrant is accused of stealing codes used for Goldman's highly sophisticated, rapid-fire stock and commodities trading and then uploading them to a computer server in Germany. He was released Monday after meeting his $750,000 bail.
Aleynikov told authorities his plan was merely to gather "open source" files on which he had worked, but he "later realized that he had obtained more files than he intended," according to an FBI affidavit filed in the case. Goldman declined to comment, but a Reuters source said the firm was unharmed by the computer breach.
Aleynikov worked at Goldman from May 2007 until June 5. On July 2, he started working at Teza Technologies, a Chicago-based hedge fund focused on high-volume trading. Teza has since suspended him without pay, according to Bloomberg, after learning of the allegations.
We here at The Five Dumbest Lab fully subscribe to the rule of innocent until proven guilty, so we won't officially condemn Aleynikov until a jury weighs in. (Hey! We may be snarky, bordering on obnoxious, but we do have our principles.)
That said, we do operate on a dumb until proven not dumb protocol. And in this case, Aleynikov is undoubtedly guilty on all counts of grand stupidity.
Based on analysts' 2009 earnings forecasts, Goldman is on track to pay out as much as $20 billion this year, or about $700,000 per employee. So Aleynikov was in line for a huge pay day just by sticking around till bonus time. And whether or not his intent was criminal, only an idiot would screw around with Goldman's top-secret trading recipe so close to leaving the firm.
Once the government gains access to the German server, prosecutors will be able to determine if Aleynikov transferred other confidential data. If the feds can prove Aleynikov planned to use the code at his new company, then it's likely his once-golden goose will be cooked.
Aleynikov, who was paid $400,000 a year as a computer programmer for the investment bank, was arrested by the FBI July 3 and charged with "theft of trade secrets." Specifically, the 39-year old Russian immigrant is accused of stealing codes used for Goldman's highly sophisticated, rapid-fire stock and commodities trading and then uploading them to a computer server in Germany. He was released Monday after meeting his $750,000 bail.
Aleynikov told authorities his plan was merely to gather "open source" files on which he had worked, but he "later realized that he had obtained more files than he intended," according to an FBI affidavit filed in the case. Goldman declined to comment, but a Reuters source said the firm was unharmed by the computer breach.
Aleynikov worked at Goldman from May 2007 until June 5. On July 2, he started working at Teza Technologies, a Chicago-based hedge fund focused on high-volume trading. Teza has since suspended him without pay, according to Bloomberg, after learning of the allegations.
We here at The Five Dumbest Lab fully subscribe to the rule of innocent until proven guilty, so we won't officially condemn Aleynikov until a jury weighs in. (Hey! We may be snarky, bordering on obnoxious, but we do have our principles.)
That said, we do operate on a dumb until proven not dumb protocol. And in this case, Aleynikov is undoubtedly guilty on all counts of grand stupidity.
Based on analysts' 2009 earnings forecasts, Goldman is on track to pay out as much as $20 billion this year, or about $700,000 per employee. So Aleynikov was in line for a huge pay day just by sticking around till bonus time. And whether or not his intent was criminal, only an idiot would screw around with Goldman's top-secret trading recipe so close to leaving the firm.
Once the government gains access to the German server, prosecutors will be able to determine if Aleynikov transferred other confidential data. If the feds can prove Aleynikov planned to use the code at his new company, then it's likely his once-golden goose will be cooked.
The Best Credit Card for You
The Best Credit Card for You
by Ismat Sarah Mangla
Wednesday, July 1, 2009
provided by
All credit cards are not created equal. Here are a few we like.
Simmons First Visa Platinum
Courtesy: Simmons First
Why we like it: Very low rate
If you're looking for a low rate, you can't get much better than 7.25%, but you must have excellent credit to be approved. Bonus: There are no balance transfer fees, though transferred balances don't get a teaser rate -- they go right to 7.25%.
Interest rate: 7.25% variable
Grace period: 25 days
(http://www.simmonsfirst.com/, 800-272-2102)
Schwab Invest First Visa
Courtesy: Schwab.com
Why we like it: Great cash-back rewards, no foreign transaction fees
You earn 2% unlimited cash back on every single purchase you make. You must have a Schwab One brokerage account, but there are no fees to open or maintain the account. Bonus: If you're traveling abroad, this is the card to take with you -- it charges no foreign exchange transaction fees.
Interest rate: 13.24% variable
Grace period: At least 25 days from the statement closing date
(http://www.schwab.com/, 866-724-9223)
Citi Forward
Courtesy: Citigroup
Why we like it: Shrinking APR
Citi Forward just might be the model for all credit cards in the future: Stay under your credit line and pay at least your minimum amount due on time three billing periods in a row, and your purchase APR will be reduced by 0.25%. It can be reduced a maximum of eight times for a total reduction of 2% during the lifetime of your account.
Interest rate: 12.24% variable
Grace period: At least 20 days if you pay the total balance in full by the due date every billing period. If you do not, you will not get a grace period.
(http://www.citiforward.com/, 800-456-4277)
Pentagon Federal Visa Platinum
Courtesy: PenFed.org
Why we like it: Cash back for gas guzzlers
The rewards on this credit union card are hard to beat, especially if you're a road warrior. Earn 5% back on all gas purchases, 2% on supermarket purchases, and 1.25% on everything else. You must join the credit union to apply, but if you don't meet membership requirements, you can join the National Military Family Association -- open to anyone -- for a one-time fee of $20. PenFed is also promoting a great balance transfer for life rate -- 2.99%. (Balance transfer fees are 2.5% of the loan, capped at $100.)
Interest rate: 13.99%
Grace period: 25 days on average
(http://www.penfed.org/, 800-247-5626)
Clear from American Express
Courtesy: AmericanExpress.com
Why we like it: Free from fees
If you're looking for simplicity, go with this card. It charges no fees of any kind -- late, over-limit, balance transfer, or cash advance fees. You earn an unlimited 1% back on every purchase; you automatically receive a $25 American Express shopping card for every $2,500 you spend.
Interest rate: Starts at prime + 8.99%
Grace period: 28-31 days if the previous balance shown on each billing statement is paid in full by each respective due date.
(http://www.americanexpress.com/, 800-223-2670)
Blue Cash from American Express
Why we like it: A lot of cash back
Big spender who pays down your balance each month? This is the card for you. After you spend $6,500 in a year, you earn 5% back on all purchases at supermarkets, drugstores and gas stations and 1.5% back on everything else. (Before you reach $6,500, you earn 1% and 0.5%, respectively.)
Interest rate: Starts at prime + 7.99%
Grace period: Up to 20 days, if the previous balance shown on each billing statement is paid in full by each respective due date.
(http://www.americanexpress.com/, 800-223-2670)
by Ismat Sarah Mangla
Wednesday, July 1, 2009
provided by
All credit cards are not created equal. Here are a few we like.
Simmons First Visa Platinum
Courtesy: Simmons First
Why we like it: Very low rate
If you're looking for a low rate, you can't get much better than 7.25%, but you must have excellent credit to be approved. Bonus: There are no balance transfer fees, though transferred balances don't get a teaser rate -- they go right to 7.25%.
Interest rate: 7.25% variable
Grace period: 25 days
(http://www.simmonsfirst.com/, 800-272-2102)
Schwab Invest First Visa
Courtesy: Schwab.com
Why we like it: Great cash-back rewards, no foreign transaction fees
You earn 2% unlimited cash back on every single purchase you make. You must have a Schwab One brokerage account, but there are no fees to open or maintain the account. Bonus: If you're traveling abroad, this is the card to take with you -- it charges no foreign exchange transaction fees.
Interest rate: 13.24% variable
Grace period: At least 25 days from the statement closing date
(http://www.schwab.com/, 866-724-9223)
Citi Forward
Courtesy: Citigroup
Why we like it: Shrinking APR
Citi Forward just might be the model for all credit cards in the future: Stay under your credit line and pay at least your minimum amount due on time three billing periods in a row, and your purchase APR will be reduced by 0.25%. It can be reduced a maximum of eight times for a total reduction of 2% during the lifetime of your account.
Interest rate: 12.24% variable
Grace period: At least 20 days if you pay the total balance in full by the due date every billing period. If you do not, you will not get a grace period.
(http://www.citiforward.com/, 800-456-4277)
Pentagon Federal Visa Platinum
Courtesy: PenFed.org
Why we like it: Cash back for gas guzzlers
The rewards on this credit union card are hard to beat, especially if you're a road warrior. Earn 5% back on all gas purchases, 2% on supermarket purchases, and 1.25% on everything else. You must join the credit union to apply, but if you don't meet membership requirements, you can join the National Military Family Association -- open to anyone -- for a one-time fee of $20. PenFed is also promoting a great balance transfer for life rate -- 2.99%. (Balance transfer fees are 2.5% of the loan, capped at $100.)
Interest rate: 13.99%
Grace period: 25 days on average
(http://www.penfed.org/, 800-247-5626)
Clear from American Express
Courtesy: AmericanExpress.com
Why we like it: Free from fees
If you're looking for simplicity, go with this card. It charges no fees of any kind -- late, over-limit, balance transfer, or cash advance fees. You earn an unlimited 1% back on every purchase; you automatically receive a $25 American Express shopping card for every $2,500 you spend.
Interest rate: Starts at prime + 8.99%
Grace period: 28-31 days if the previous balance shown on each billing statement is paid in full by each respective due date.
(http://www.americanexpress.com/, 800-223-2670)
Blue Cash from American Express
Why we like it: A lot of cash back
Big spender who pays down your balance each month? This is the card for you. After you spend $6,500 in a year, you earn 5% back on all purchases at supermarkets, drugstores and gas stations and 1.5% back on everything else. (Before you reach $6,500, you earn 1% and 0.5%, respectively.)
Interest rate: Starts at prime + 7.99%
Grace period: Up to 20 days, if the previous balance shown on each billing statement is paid in full by each respective due date.
(http://www.americanexpress.com/, 800-223-2670)
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