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May 28, 2008

Investing: Think about what's going right....

I'm off for a few days, to celebrate my niece's high school graduation with the family. I want to leave you with an interesting thought. And I'd like to hear your reaction.

James Paulsen, chief investment strategist at Wells Capital Management, which is a unit of Wells Fargo, is one of those feet-on-the-ground kind of people. He lives in the same reality I do, not some strange stratosphere that the investment community thinks makes sense. And he doodles all over his reports, a sign of ideas breaking out all over.

He’s bullish right now. He doesn’t have a dim view at all of the situation facing investors precisely because of two things. One is, everyone seems pessimistic. And the other, that pessimism doesn’t match the reality, in his opinion.

“For most people, their biggest asset is their job. And 95 percent of the people who want a job have a job. Inflation is close to the lowest in 40 years. Stocks are within 9 percent of their all-time highs. Commodities are at all-time highs...” he said, ticking off his list.

South Florida inflation, true, is higher than the norm. But his point is that it’s not the inflation of the 70s or 80s, which was double-digits.

If in the second half of this year the economic stimulus rebates kick in to make consumers feel better, if lower rates from the Fed work their way through the system and make borrowers feel better, if the Fed’s moves to shore up investment banks make the financial system feel better, it could call fall into place.

That's the way he sees it.

POSTED IN: Investments (11)

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May 26, 2008

Investing? Consider the world beyond the U.S.

The message just keeps coming.

The rest of the world, especially the developing world, is where the best-performing investments can be found.

The world's best stock in 2007 was Inner Mongolia Yitai Coal Co. Ltd. It's a Chinese stock that produced a more than 1,017 percent return for its investors.

Inner Mongolia?

Not a single U.S. stock was in the top ten last year. Of the 100 best stocks around the globe, six were U.S. companies. Otherwise, it was all China, India and Hong Kong that produced the winners.

Russell Investment Group, which publishes global market indexes, this week said the U.S. share of the world’s investments has shrunk some more. In 1999, U.S. stocks were 59 percent of the Russell Global Index. Today, they are 42 percent.

U.S. stocks have grown in value in that period. Stocks from the rest of the world have too, but more.

Which brings me to the number of the day: The non-U.S. companies in Russell’s Global Index grew in market value from $8.7 trillion in 1999 to $21.6 trillion last June. By comparison, the U.S. stocks grew in value from $12.6 trillion to $16.8 trillion.

As you manage your investments, make sure you have a stake beyond the U.S. We can debate how much and whether emerging markets have any fizzle left and whether the developing non-U.S. world is where you want to be. The point is to be broad in your thinking. That’s the starting point.

POSTED IN: Investments (11)

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May 22, 2008

Is there a way you can profit because gasoline is so expensive?

When everyone's afraid, when everyone's selling, someone isn't. Someone's buying.

Which leads me to wonder, what investments benefit from $4-a-gallon gasoline? And $139-a-barrel oil?

I have a few unusual answers. More than simply buy Exxon Mobil or buy commodities. I'll share my ideas in a future post.

For now, I'm wondering what your ideas might be. Where could you put your money to profit from pricey gas?

POSTED IN: Investments (11)

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May 19, 2008

Is it time for a sunny forecast yet?

They could be wrong, but the National Association of Business Economists' May Outlook, released today, says this is one short recession or downturn that we're in.

They also predict that we'll go through the downturn without actually recording a decline in the nation's Gross Domestic Product. Pretty neat trick. Typically, a recession is defined as six straight months of decline in GDP.

The group says the downturn should be ending either in the second or third quarter of this year. That's September at the latest.

Why? Because the credit crisis is ending. Because the Fed's actions to shore up the financial system are doing just that.

The troubling part of the monthly survey, as I see it: One out of five of these economists don't expect we're going to get a break from serious inflation this year or next.

What do you think?

POSTED IN: Economy (42)

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May 16, 2008

What's legit and what's not

Whenever there's money, there's someone trying to get it from you. They're working the emails right now, trying to separate you from your economic stimulus rebates.

What's legitimate: A letter from the IRS mailed to anyone who filed a tax return and who is owed a rebate payment. In the upper right-hand corner, it says Notice Number: CP 1378.

This tells you the amount you can expect for your rebate and how it was calculated.

They are arriving about the same time as your rebate payment, the IRS says.

What's not legitimate: An email or a call. Even an email from the "Treasury Department" or the "IRS." Or anyone calling to say you have a refund or rebate owed. Anyone saying they are an IRS employee.

"The only communication you'll receive from the IRS is by mail," said IRS spokesman Michael Dobzinski. "As you well know, tjere are some alleged scams involving phising or email."

And they promise money. Only thing is, they'll take yours.

If you get a call or email that is suspicious, notify


POSTED IN: Taxes (41)

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May 15, 2008

Stimulus Snafu

Wow. I'm amazed at how many of you didn't get your rebates yet.
Hope you read the story I wrote, from your stories, on the front page Friday.
If there's more to tell, more stories of rebates that didn't arrive and the hardships that has caused, please do post them in the comments section below.
If you want to read other people's rebate woes, look at the comments below my May 13 post.

Tax Season, Part Two, the Stimulus Snafu.


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Our paychecks could use a little inflation

The numbers tell this one:

In the last five years, there was only one time that wages in in all three South Florida counties beat inflation, according to figures from the Bureau of Labor Statistics.

In 2007, South Florida’s inflation rate was 5.8 percent. Median hourly wages, on the other hand went up 3.2 percent in Broward county, 4.6 percent in Palm Beach county and 4.2 percent in Miami-Dade county.

In 2006, inflation, up 4.1 percent. Wages, up 3 percent in Broward, 3.6 percent in Palm Beach, 5.6 percent in Miami-Dade. That was the one-county exception to the trend.

In 2005, Inflation, up 4.7 percent. Wages, up 2.6 percent in Broward, 3.9 percent Palm Beach, 0.7 percent in Miami Dade.

In 2004, Inflation up 3.9 percent. Wages up 2.5 percent in Broward, 2 percent in Palm Beach, 0.2 percent in Miami-Dade.

The year when it didn’t work this way was 2003, when inflation was a weak 2.1 percent. Workers managed to get a bit more, 3.1 percent in Broward, 3.5 percent in Palm Beach and 2.6 percent in Miami Dade.

Why does everyone feel like they’re barely getting by?

“And the answer is, because they are squeezed. Next question,” quipped economist Jared Bernstein, author of the recently released Crunch: Why Do I Feel So Squeezed?.


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May 14, 2008

DOW is surging, but Inflation is a real issue

Wall Street is so happy that inflation has moderated.

Wait, it moderated?

The inflation you and I are feeling at the gas pump and the grocery store is not moderate. Yet stocks are surging right now because the overall consumer price index went up only 0.2 percent in April. That's less than 0.3 percent rise in March. The Dow's up more than 120 points at lunchtime.

The real cost of living is soaring, no matter what the CPI says. And we're all trying to adjust.

POSTED IN: Economy (42)

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May 13, 2008

Got your rebate yet?

If there's anybody else out there who thought they were going to be getting a rebate check by now and did not get one, I'd like to hear from you.

'd like to know when you filed your return. Did you use a tax preparer? if so, which one?

If you used TurboTax, I'd like to know that, too.

I'm looking for people to use in a future story about these rebates, which have people massively confused. And, I suppose, waiting for their money.

POSTED IN: Taxes (41)

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May 12, 2008

How many flags would your next investment get?

I found a fun quiz, courtesy of Finra.

Finra is the Financial Industry Regulatory Authority. It looks over the shoulders of brokers and tries to keep them in line, along with other regulators at states and at the Securities and Exchange Commission.

The quiz is the Scam Meter. I took it and my results were Four Red Flags waving at me that the investment might be a fraud. All I had to do was to answer a few questions about who was selling it and what kind of promises were made.

There are other fun things going on at Finra’s site, You’ll find Finra alerts there – these are useful bulletins that let you know which investments you should make you wary. There’s discussion of the psychology used in selling and how you can fight against it. There’s even an audio clip of some of the sales pitches for bad investments.

Think you won’t fall for investment fraud?

A Finra-funded research report says college-educated, above-average income and financially sophisticated people are prime targets for investment fraud. That might mean you.

POSTED IN: Investments (11)

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May 8, 2008

Where's my rebate?

Step up to the bank and get your electronically deposited economic stimulus rebate.

Today’s the day for folks whose Social Security numbers end in 21 through 75. The IRS is clicking along with its refund/rebate/get-the-money-out-of-the-door program.

If you had known how they were going to send out the money before you filed your return, you might have arranged to get your money sooner. But the IRS didn’t announce this Social Security number system early enough for many people.

The IRS is sending the rebate checks out according to the last two digits of the filer’s Social Security number. On a joint return, the number that matters is the first one listed. By today, May 9, the IRS planned to direct-deposit payments for those whose numbers end in 21 through 75.

Zero to 20 got theirs last week.

And all the rest, next week.

That’s for those smart enough to have filed early (Your return had to be processed by April 15) and to have opted for direct deposit. If you did both those things, then you’re on the schedule I mentioned above.

If you didn’t request direct deposit, you could be waiting up to six weeks longer than the others. The IRS plans to send out checks to those whose numbers end in 19 through 75 between May 30 and June 27.

Want to know where your money is? For rebates, you can check the schedule at Or just count on the money showing up in a minimum of six weeks after you filed, the IRS says.

For tax refunds, call the IRS Refund Hotline at 800-829-1954 or go to Where’s My Refund on

POSTED IN: Taxes (41)

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A bad bet on inflation

Ya know, I really did like inflation-indexed U.S. savings bonds. I liked them even when the fixed rates on them fell down. Now I think they’re ridiculous. Not a friendly little way to keep your money safe anymore.

Here’s how they work: Inflation-adjusted savings bonds pay you a combination of a fixed rate and a variable rate that is based on the rate of inflation. Twice a year, each May and November, the Treasury tells you what the new rates will be, based on changes in the consumer price index and what’s happening in the credit markets.

But you must understand that these are 30-year bonds. So whatever the Treasury sets as the fixed rate is what you’ll get for the life of the bond in addition to that variable rate, which changes twice a year.

So, if the fixed rate is 2 percent, that’s what you get on top of the inflation rate, for 30 years. The fixed rate on bonds sold between last November and April 30 was 1.2 percent.

Then last week, the Treasury said the new fixed rate would be zero. Nothing.

I don’t know how they came up with that. The credit markets may be not working well, but people still pay interest, far as I can tell. I’m sure they have a formula, just as I’m sure it makes no sense.

So if you buy a bond now, you get the inflation-adjusted rate and that’s all. That’s 4.84 percent, which is a nice rate. But going forward, if inflation drops, you get less.

Buying these savings bonds now is a bet on inflation going up and up and up. That’s the only way buying and holding one of these things is attractive at all.

How ridiculous. To tie savings to prices blowing up.

POSTED IN: Savings Bonds (1)

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May 5, 2008

Cut your

Maybe you don’t think too much of it when the Federal Reserve cuts interest rates by a quarter of a percentage point, but I’d say you’re wrong.

The Fed has sent you a message: Get up and get going now, to cut your costs of borrowing.

If you have a home equity line of credit, for example, that rate should be lower today, not just by this week’s quarter-point cut. The Fed has actually been cutting rates drastically since last September. It has slashed a total of 3 and a quarter percentage points off a key short-term rate.

Which means that even if you took out a home equity loan just a few months ago, you could lower your interest rate significantly by refinancing it now.

If you have a revolving line of credit tied to your home equity, your payment may drop. Or you could move that debt over to a fixed-rate, fixed term loan. Lock in the lower rate and you’ll pay back less overall.


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May 1, 2008

"But this never happened before": The auction-rate security mess

I’m hearing from so many of you who have money locked up in Auction Rate Securities, which I wrote about in my column last Sunday.

Those were funds that were marketed as a safe substitute for money market mutual funds, but it turns out they were not at all. The long-term bonds these funds invested in suddenly aren’t selling any more. So investors can’t cash out. And they thought they’d bought a liquid investment!

From those whose money is gone I know the shock is great. Some say they were talked out of FDIC-insured certificates of deposit. Some say the yield wasn’t all that good. Some brokers say they had no idea these funds could blow up this way.

On one side, I do believe that honest brokers didn’t mean to sell explosive funds. On the other, I know these readers didn’t know what they were buying, because the explanations were, to be kind, incomplete. And in the middle, is the money lost.

Never, ever ever buy an investment unless you understand it. And never accept the explanation at face value.

The market for auction-rate securities had never before blown up. Just as the market for subprime loans had never before exploded.


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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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