6 Outrageous Billionaire Purchases

It's easy to make fun of the uber-rich. Partially because we're a wee bit jealous (oh, what we could do with just 5% of their yearly income) but, often, because they just make it ever so easy. When the billionaires of the world are out dropping huge amounts of money on things like a racing pigeon, we really do think we could handle the money better than they do. (Reducing the amount you spend is the easiest way to make your money grow. Check out 5 Money-Saving Shopping Tips.)


1. The $200,000 PigeonPigeon racing may not be on your list of the top ten rising sports, but in Asia it's kind of a big thing. And while most of the fans and participants aren't of the billionaire class, a few are. Consider one Chinese buyer who paid $200,000 for a single racing pigeon; a highly pedigreed pigeon, of course, but the non-billionaires among us can't forget we're talking about a pigeon.
2. The $11M WatchTime is money, we're told. And maybe if we had the billions of dollars that these purchasers do, we'd understand how important it is to keep track of time with a really, really expensive watch. This watch was designed and built by Patek Philipe, and took eight years to complete. In 1999, a wealthy and apparently time-conscious purchaser paid $100 million for it. Worth it? Only time will tell...
3. The $1B HomeThat's B as in Billion; for India's richest man, purchasing the world's "most expensive home" cost him $1 billion dollars. Apparently he thought it was worth the investment, with 9 elevators, a 50-seat theater, a two-story recreation center, and not one, not two, but three helipads on the roof. You know, for those times when you really need to be able to have three helicopters landing simultaneously. (Don't let buying a home bust your budget. Make sure the house you choose is worth the price you pay. See 10 Tips For Getting A Fair Price On A Home.)
4. The $18M CarCars - fancy, fast, expensive cars - have long been a luxury of the rich, and one of the items most of us can relate to spending a large sum of money to own - at least a little. Some people don't kid around about the "large sum" part of the equation, as in the 2010 purchase of a Ferrari 250 GTO from the 1960s by British radio host Chris Evans. Evans reportedly paid 12 million pounds for the car, which equals about $19 million dollars.
5. The $6M Divorce SettlementOf course, not everything the rich spend money on is pleasure spending. They have to pay taxes, bills, and, oh yes, divorce settlements. In the case of the 2005 divorce of billionaire Charles Brandes and Linda Brandes, the original settlement came to around $150,000 per month. That wasn't quite enough for Ms. Brandes. Mr. Brandes, apparently, concurred and increased the pay-out to $6 million per year, or $500,000 per month.
6. The $390,000 RewardNo matter the income level, there's probably not a parent alive who can claim (truthfully) to never have bribed or rewarded a child to get good behavior. But in the case of the very rich, the rewards come in numbers that are mind-boggling. Consider the recent purchase of a limousine by Sean "Diddy" Combs. This particular limousine cost $390,000 and was a reward for Combs' 17-year-old son Justin, who made the honor roll. Certainly education is important, but at this rate, getting Justin to earn those A's all through college could become quite costly. 
IN PICTURES: 5 Self-Made Female Billionaires
The Bottom LineOf course, excessive purchases tend to make the news. There are many billionaires who have earned their money through financial smarts and continue to make purchases that, at least on some level, make sense. For the rest of us, at least we get free entertainment from the not-so-frugal billionaires. (Don't assume all prizes are free. Many come with enough costs to render them worthless. Check out Winning The Jackpot: Dream Or Financial Nightmare?)

 

 

Alternative Ways To Hold Your Net Worth

Although the economy is showing encouraging signs of recovery, it has left disaster in its wake. From the professionals to the everyday investor, everybody lost money during the recent recession and many are still far from restoring their net worth.

Looking back at the past few years, most are now looking forward and asking themselves what they should do with their investments in the future. For those who have saved a substantial amount, they don't want their net worth wiped out by the next financial crisis that could occur within the next few decades. (Without this risk-reduction technique, your chance of loss will be unnecessarily high. See The Importance Of Diversification.)


DiversificationDiversification is one of the most important rules of a safe portfolio. Stock investors often use diversification to mean investing in different stock sectors. A diversified stock portfolio may have a healthcare, oil, technology and industrial stock. Diversification can also mean investing in stocks, bonds, cash, CDs and real estate.
Not all aspects of your portfolio are diversifiable, though. Market or systemic reactions like the stock market tumble of recent years affected all asset classes.

CashIs cash a good way to preserve net worth? Even with interest rates at a historic low and inflation nearly non-existent, staying in cash is still netting a small gain but that's not why investors like cash.
Cash and cash equivalents (checking, savings, short-term CDs and treasury bills to name a few) are in the portfolios of nearly every professional investor. In fact, it is estimated that 5% to 10% of an investor's portfolio is left in cash.  They keep cash on hand in order to have funds available to finance a seemingly "can't-lose" investment opportunity but you may want it for a different reason.
The value of the dollar may fluctuate but keeping cash in your account instead of investing it is not only safe from investment market crashes, but the FDIC insures your cash up to $250,000. Cash isn't going to earn much as an investment but it is safe, and safety should be a part of any portfolio.

GoldNot just gold but silver, copper and other precious metals have become an investment of choice for those wanting to preserve wealth. Gold and silver have seen a huge run up in recent years. In fact, if you had invested in gold five years ago and held on to it until the present day, you have seen a 23% annualized return. This is largely because of the perceived safety of the metals while also giving the investor a large scale gain.
Paper money, regardless of which country it comes from, is representative of something. The paper it's printed on holds no true value, which is why paper currency has a long of history of going extinct but gold does not. Gold has held value for thousands of years and as monetary concerns heat up around the world, gold may only be at the beginning of its run up in value. Beware, though: if gold is experiencing a false "bubble" like the tech bubble of the '90s, it could see a dramatic depression in value. Gold has been used by investors for years to preserve net worth.

Foreign BondsSeeing the amount of debt that the United States currently has, it may be tempting to invest in foreign bonds, but be careful. Foreign bonds come with not only the risk of default but also currency risk, and with the U.S. dollar being affected by a variety of different factors including QE2 and interest rates, foreign bonds may not be the best way to diversify your portfolio in order to protect your assets.
In addition, with countries like Greece and Ireland having serious financial problems as of late, The United States and all of its debt still seem more attractive than many foreign bonds. (Historically, international investing has worked out well for investors, but this may no longer be the case. Check out Does International Investing Really Offer Diversification?)

The Stock MarketThe stock market may be the world's scapegoat when something goes wrong in the economy, but it still has a consistent history of success. For an investor who invests in a stock with a track record of safety and a reasonable dividend, the stock market can produce gains of 6% in dividends alone. By setting automatic stop- loss sell orders to trigger when a stock falls below a certain amount, the investor can hold on to their net worth and feel safe in the stock market.

Real EstateBargain hunters are seeing the depressed real estate market and thinking of buying up foreclosed homes for rock bottom prices, but should you do this as a way to further diversify? Over the past 10 years, home prices have seen an average annualized return of only 2.2%, lower than the average rate of inflation - and remember that most homeowners are paying an average of 5% in interest to own the home. Then there's care and maintenance.
With the housing market flirting with another recession of its own, it's hard to see real estate as a good way to preserve wealth over time. In a few years, that may change, but for now, buying an asset that very few want is probably not a good idea.

The Bottom LineThe best way to preserve wealth is the same tried and true methods. Invest in stocks and bonds while keeping some money in cash accounts. This allows for diversification of your portfolio which has saving many for devastation. (This investing strategy retains its charm as a protection against random events in the market. See Diversification: Protecting Portfolios From Mass Destruction.)
For the latest financial news, check out Water Cooler Finance: Anti-Government Protesters Rock Egypt.

Gsg Forex Club

Gsg Forex Club

 A new vision to invest money

GSGforexClub is a small group of investors and traders who has a common passion. Foreign exchange market. We decided to create an informal Club to share our passion and profits with other investors. As many Club we set up some rules which have to be accepted before join

RULES

Registration:

• The future member must accept the rules and fill all the required fields. Once the registration complete the new member must wait the confirmation from the support to login.
• Only one account is allowed for each member.
• The Club reserves the right to deny a registration without any specifications.

Investment:

• Minimum: 250usd and then by multiples of 250usd: 250, 500, 750, 1000…..
• Funds have to be deposited for 4 weeks starting from the first business day of the next week (we accept deposits until Saturdays 11,00 am GMT). The first business day is the Monday of the week following the deposit on GSGforexclub Liberty Reserve account. If this day is a holiday the first business day will be Tuesday.
• The principal will be paid back after 4 weeks with the last interests earned, if not differently asked.
• The member must inform the Club about his intention to reinvest the interests. Without notification interests will be automatically paid every 2 weeks.
• A penalty of 10% will be applied in case of disinvestment before the planned date.
• All fees concerning the transfer to invest and to withdraw are in charge of the member.
• Before adding funds the member must advise the support of his intention to do it and, after agreement, the member will proceed as a first investment.

Notice: At the moment, the period of investment is limited to 4 weeks. In a near future, to simplify the work of accounting and payment done manually, this period will be extended to 8 weeks, then 3 months. These changes will be limited to the investors concerned at the date of their new investment. Every change will be notified on the website.

Profits:

• Profits are calculated and every 2 weeks through Liberty Reserve. All payments are done manually till every Monday.
• Profits are available to reinvest. See compound.
• Rates:
• Plan A: From 250 to 750 weekly about 1.8% variable.
• Plan B: From 1.000 to 2.250 weekly about 2% variable.
• Plan C: From 2.500 to 4.750 weekly about 2.2% variable.

Important Notice:
To preserve funds invested and to keep a low level of risk, these are average rates and they can be modified accordingly to the results.

Compound, transfer between members:

• Compound is available on request. The member must advise the Club when deposit. In case of compound the interests will be paid at the end of the 4 weeks with the principal.
• Transfer between members is not allowed.

Referrals:
Any member with active investment is free to refer the Club to another person interested by. The introducer will receive 2% each member referred with an active investment. Commissions are paid manually via Liberty Reserve. Self referral is not allowed.

www.gsgforexclub.com

 

The Pros And Cons Of A Strong Loonie

 Last year was a strong one for the Canadian dollar (loonie). After a 16% gain against the U.S. dollar (USD) in 2009, it added another 5.5% last year. This is the strongest it's been since 2008, and that strength is directly tied to rising prices for crude oil and commodities. Canada's vast supplies of natural resources provide solid support for the currency as prices for commodities have risen across the board in the past year. Also, the United States imports more oil from Canada than any other country. (For more, see Canada's Commodity Currency: Oil And The Loonie.)

On December 31, 2010, the loonie closed at 99.8 cents to the USD, the first time it's finished a year above parity since 2007. Additional support for the currency came in November when Russia began purchasing the loonie to diversify its foreign exchange reserves. The loonie gained against seven other major currencies during the past year. It performed best against the Danish krone (+13%) and worst against the Japanese yen (-8%), according to Bloomberg.
IN PICTURES: Break Into Forex In 12 Steps
HistoryAfter the loonie was floated against world currencies in 1970, it became a benchmark and global reserve currency. There has always been a close relationship between the movements of the loonie and USD, and the relative economic conditions in both countries. The link between the tandem has decoupled over the past 10 years, primarily as a result of the rise in oil and other commodity prices.
The importance of the relative strength of the two currencies can't be overstated since the countries are major trading partners. Over three-quarters of all Canadian exports go directly south of its border, and over half of Canada's imports come from the United States.
Buying PowerFor Canadians, the higher loonie is a drag on exports because they appear more expensive to importing countries. If demand for gasoline in the United States was highly elastic, this would hurt Canadian crude exports. The reality is that, at current prices, gasoline demand is relatively inelastic so the rise in the loonie has not negatively impacted Canada's oil exports. Data from the U.S. Energy Information Administration shows that imports of oil from Canada averaged 1,919,000 barrels per day during the first 10 months of 2009. In comparison, an of average 1,962,000 barrels per day were imported during the first 10 months of 2010.
Canadian companies that import raw materials, machinery and other American products benefit from the stronger loonie. Retailers that specialize in American imports have the option of lowering prices and increasing sales volume, or maintaining prices and increasing margins. The reverse is true for American importers since they pay more for Canadian products.
The stronger loonie is good news for American exporters who have struggled through the recession of the past few years. Their products appear cheaper to Canadian companies and consumers, helping their bottom lines. American exporters also have the option of reducing their prices with the goal of increasing sales revenues through higher export volume. (To learn more, check out our Economics Basics Tutorial.) 
IN PICTURES: 5 Investing Statements That Make You Sound Stupid
Doing BusinessCanadian businesses that want to expand into the United States now get more bang for their investment buck. The stronger loonie provides them with more purchasing power for potential acquisitions. It also helps Canadian companies that do business in Canadian dollars but pay salaries in USD, such as Canadian sports franchises that operate across the border (think professional hockey teams).
Going ForwardBased on a Bloomberg survey of 29 economists, the loonie is expected to trade between parity with the USD and C$1.01 for the rest of this year. Much depends on the state of the U.S. economy, which has been battered by the implosion of a housing bubble and rising government debt. The monetary policies of the Federal Reserve are widely viewed as being inflationary, which could put further downward pressure on the USD. While the Fed could raise interest rates to fight that trend, this could stall or derail an already weak economic recovery which would likely spill over into Canada.
The Bottom LineThe key fundamentals that have strengthened the loonie are investor risk tolerance, a stable and growing Canadian economy, a good fiscal balance sheet, higher commodity prices and a search for investment currencies that will hold value in the future. (To learn more, see Why Things Are Getting A Little Loonie.)

The World's Most Powerful Bankers

During the Goldman Sachs trial, Lloyd Blankfein, Goldman Sachs' CEO, became arguably the most well-known banker in the world. Prior to this SEC hearing, most people probably didn't know who was running the most powerful banks in the world - if they gave it any thought at all. Blankfein became the face of the subprime crisis' after-effects, whether he deserved to or not. In the large scheme of things, though Goldman Sachs is one of the largest banks in the U.S., there are still bigger banks stateside and much bigger banks worldwide. We'll take a look at these huge banks and the powerful bankers that run them. (To learn more, see Goldman Sachs: By The Numbers.) 
IN PICTURES: Top 7 Biggest Bank Failures
The Public Face
Goldman Sachs is far from the largest bank in the world, but it is considered by many to be the preeminent investment bank in global finance. Lloyd Blankfein is currently the CEO and chairman of the board for Goldman Sachs and has been since 2006. Despite some people's opinion of Blankfein's maneuvers during the financial crisis of 2007 to 2009, the Financial Times named him “person of the year” for 2009. Blankfein received a $9 million (all-stock) bonus from Goldman in 2009, but he grew up in Brooklyn housing projects before making his way to Harvard, where he earned his B.A. and J.D. Blankfein's been working for Goldman since 1981, and he may be most known, aside from the SEC trial, as the banker who claimed he was doing "God's work."
Europe's Biggest Banks and Bankers
The largest global bank in the world is France-based BNP Paribas, which was named largest bank this year by Bloomberg, with assets of $3.2 trillion. This bank was formed through a merger of two of France's biggest banks, Banque Nationale de Paris and Paribas, in 2000. The CEO of this megabank is Baudouin Prot. Prot graduated from the Ecole des Hautes Etudes Commerciales (HEC) and Ecole Nationale d'Administration, and he took a number of positions with the French government before joining BNP in 1983. Prot became CEO of the world's largest bank in 2003. BNP Paribas is different from its large North American counterparts as it emerged from the financial crisis relatively unharmed when compared to their counterparts, and Prot's strategy for the company is seen as one of the reasons that the bank did so well.
Another of the world's largest banks is Munich, Germany's Deutsche Bank, which had assets in excess of 1.5 trillion euros in 2009. Deutsche Bank was founded in 1870 and today is listed on both the Frankfurt and New York Stock Exchanges. The CEO of this German behemoth is Josef Ackermann. Ackermann is originally from Switzerland and has been CEO of Deutsche Bank since 2006. He has also worked at Credit Suisse and served as a guest professor at the London School of Economics. Businessweek reports that Ackermann received compensation of nearly 10 million euros in 2009 at Deutsche Bank.
IN PICTURES: World's Greatest Investors
The U.S.'s Big PlayersTurning back to North America, we'll look at one of the most powerful bankers in the U.S. Jamie Dimon is the CEO of JPMorgan Chase, the largest bank in the U.S. by market capitalization. JPMorgan Chase has assets in excess of $2 trillion, and Dimon has been the CEO since 2004. Dimon got his undergrad in psychology and economics from Tufts University before getting his MBA from Harvard in 1982. Before becoming the CEO of JPMorgan chase, Dimon was one of the people responsible for forming Citigroup, and he was head of Bank One before it was bought by JPMorgan. Dimon and JPMorgan Chase were criticized during the TARP payments of 2008, as many questioned if JPMorgan really needed to be bailed out, but still accepted the TARP bailout, which it later paid back.
The largest bank in the U.S. by assets is Bank of America, with Brian Moynihan as its CEO. Moynihan graduated from Brown in 1981, and then received his Juris Doctorate (JD) from Notre Dame. Moynihan joined Fleet Boston in 1993, and Fleet Boston merged with Bank of America in 2004. Moynihan served in various positions at BofA before becoming CEO in 2009.
Dimon may have helped form Citigroup, but it is going on fine without him at this point, being helmed by Vikram Pandit since 2007. Pandit was born in India but moved to the U.S. when he was 16, doing his schooling there before becoming a professor at Indiana University and eventually joining Morgan Stanley in 1983. He became CEO of Citigroup in 2007, shortly before Citigroup felt the brunt of the subprime crisis and had to receive a large bailout from the U.S. government in 2008. Citigroup has assets of nearly $2 trillion and is one of the Big Four Banks in the U.S, along with Bank of America, JP Morgan Chase and Wells Fargo. (For more, see Banking Has Changed: What Does It Mean For Consumers?)
The Bottom Line
Along with Wells Fargo and its CEO, John Stumpf, these are the biggest banks and CEOs in the U.S., and some of the biggest banks and CEOs in the world. The men mentioned above usually keep a low profile, but they are partially in control of unbelievable assets and hundreds of thousands of staff.
Find out what happened in financial news this week. Read Water Cooler Finance: Steady Stocks, Big G's And Madoff News.

Top Mobile Banking Dangers And How To Avoid Them

You are about to board a plane when you suddenly realize that you have a measly $5 in your account for your trip. That's when you pull out your smartphone and, in a matter of seconds, magically deposit the needed cash into your checking account. From big national chains to smaller regional outposts, banks have improved the functionality of mobile banking so that consumers can transfer funds, pay bills or check balances whenever and wherever they may be. However, before making mobile banking part of their routine, consumers should know that this convenience comes with one hiccup - a lapse in security. Here we look at a few mobile banking pitfalls and steps you can take to prevent becoming a victim of mobile scams. (For more, see Mobile Money: Using Your Cell Phone To Transfer Funds.) 
IN PICTURES: Top 6 Mindless Money Wasters
1. InterceptionsText messages are not encrypted (a method of securing data in transit), which means using a text message to receive updates or communicate with your bank is more susceptible to interception. And experts say that in the event a phone is stolen, sophisticated hackers could retrieve text messages, even if you have deleted individual messages. A good way around this threat is to refrain from corresponding via text when the information being transmitted could be potentially detrimental to your financial security if it falls into the wrong hands.
2. Unauthorized  AccessBecause mobile platforms aren't equipped with the same security layers as websites or ATMs, they are more vulnerable to fraudsters, who repeatedly change their identities and gain access through a series of quick attempts. Fortunately, users can take extra steps to increase their protection, such as adding additional passwords and encryption barriers that aren't provided by your bank. For example, you should set up the password-protect option on your phone and when it's not in use, lock it. Where available, another idea is to install security software on your mobile phone.

IN PICTURES: 8 Financial Tips For Young Adults

3. Password TheftOnce someone has discovered your banking password and hacked into your account, there isn't much you can do. But in advance, you can protect yourself from this debacle by installing remote-wipe options, a way to erase the information on your phone without physically having it in your possession. You can activate this if our phone goes missing. Select banks offer remote-wiping as a free, downloadable application. Similarly, the MobileMe service allows Blackberry and iPhones users to buy this feature. (To learn more, check out 5 Money Transfer Technologies And Their Risks.)
4. Fraudulent AppsWhile applications, or "apps", are what allow you to check your account balance or move money to another account from your cell phone, they also are an added risk for your mobile security. Some have called fraudulent apps the next generation of phishing scams; if you download a fraudulent application, it could be used lift account and other sensitive information from your mobile device. For example, last January, Google removed 50 applications available for the Android phone due to concerns they may be virulent. To protect your mobile security from an application scheme, don't click on pop-ups that advertise apps. You can also check with your bank about the validity of any financial app you are considering, or if possible, download the application directly from your financial institution's website. (Learn more in 5 New Phishing Scams To Watch Out For.)
5. Dropped CallsMobile phones are small, compact and portable, but the downside is that they are easily lost or stolen. A criminal who hacks into your cell phone can retrieve personal information, account passwords and proprietary texts. In the event that your phone is stolen, you should also call your bank; this way, the bank can closely monitor your account.
One Last Tip Remember, the best defense is to be your own activist; always keep track of your bank account and watch for atypical or suspicious activity. Setting up automatic electronic alerts from your bank may also help you stay on top of monitoring your fiscal situation. (For more tips, check out our Banking Tutorial: Safeguarding Your Accounts.)

 

The Unseen Taxes That You Pay Every Day

The old joke says that nothing is certain in life but death and taxes, and medical science has done a lot to forestall the former. Although nobody enjoys paying taxes, most people probably do not realize how they permeate our daily lives. Simply put, one way or another, we pay taxes on almost anything and everything we do.
To illustrate how the tax burden can be spread around, consider the "tax trail" on a few common daily items (For help with filing your taxes, check out 6 Sources For Free Tax Help.)
GasolineThe taxes on a gallon of gas start as soon as the oil comes out of the well. Although negotiated contracts, sweetheart deals, kickbacks and cross-cutting legislative actions can dramatically muddy the waters when it comes to assessing an "average" royalty in many countries, the fact is that companies like Exxon Mobil (NYSE:XOM) and BP (NYSE:BP) owe the landowner and/or the state money whenever they remove oil and natural gas. In the United States for instance, companies pay a royalty of 12.5% on oil taken from onshore Federal lands, and that is an addition to so-called "bonus bids" that are paid upfront.
IN PICTURES: 9 Ways To Use A Tax Refund
If that oil travels through a pipeline to reach a refinery (and much of it does), there's more taxation there - states and municipalities will charge property tax on the pipelines, and some also charge tax based on the volume of oil or gas sent through the pipeline. What's more, pipeline tariffs are often restricted by law, which is in effect a tax as well.
Once the oil gets to the refinery, there's still more taxation that figures into the final pump price. Although excise tax is collected at different times and at different levels, the federal tax on gasoline amounts to a little over $0.18 per gallon, with states tacking on more tax (ranging from $0.07 to $0.30 per gallon depending upon the state). Don't forget, too, that many states tack on their regular sales tax every time you buy gasoline.
As the infomercials say, "but wait, there's more!" From the wellhead to the filling station, employers have to pay taxes on their employees' wages, property taxes on facilities, corporate income taxes and other incidental taxes like vehicle registration. While some of this does not necessarily pass on to the consumer (many economists have demonstrated the employees pay for their employer's taxes in the form of lower wages), most of it does. (For everything you need to know about the different types of tariffs and their effects on the local economy, see The Basics Of Tariffs And Trade Barriers.)

TobaccoThe tax trail for tobacco is similar in some respects to that of gasoline. Like gasoline, governments at all levels see tobacco as a honeypot for guilt-free taxation. As a result, the federal government charges an excise tax of $1.01 for each pack, while state taxes range from $0.17 (in Missouri) to $4.35 (in New York). Additionally there can be city taxes, which sits at $1.50 per pack in New York City. Along the way, of course, are the regular taxes that go into business - taxes on employee wages, taxes on property, taxes on income, taxes on diesel fuel and vehicles, and so on.
What makes the case of tobacco a little bizarre, though, is that money flows in two directions. The government as a subsidy program in place for tobacco farmers, a subsidy that paid over $200 million to farmers in 2009. That money, then, represents a tax on all citizens to pay farmers to grow a product that is then heavily taxed at federal, state and sometimes municipal levels. (Read more in Paying Uncle Sam: From Tobacco To $1 Trillion.)
BreadWay back in 1975, Ronald Reagan commented that there were 151 taxes that went into the price of a loaf of bread, and that those taxes made up more than half of the cost. While much has changed since then, and I could not independently confirm all of the taxes that currently go into a loaf of bread, that quote is still true in spirit if not in detail.
Farmers may be eligible for subsidies, but they pay property taxes and income taxes. The trucker who takes the grain to market pays taxes for his license, his rig and his fuel. The grain elevator has property, employment, income and sales taxes. The miller, the bakery, the store and every other link in the chain has its own taxes as well, whether they are assessed on property, sales, income, wages, fuel or what have you.
IN PICTURES: 10 Ways To Cut Your Food Costs
The Bottom LineOf course, it is juvenile to ignore the fact that taxes are necessary and governments need funds to pay for a wide variety of goods and services that typically cannot be fulfilled by private operators. However, many people do not realize just how much they pay in total taxes and how ubiquitous those taxes are. Income tax is tough to ignore every April and anybody who has paid a hotel or cable bill lately has seen how taxes inflate their total bill. But how often do people consider how much of the price of a gallon of gasoline goes into government hands, or how many taxable "steps" there are in getting from a wheat field to the bread aisle of Wal-Mart (NYSE:WMT)? Taxes certainly are unavoidable in a modern economy, and they are in fact almost anywhere or everywhere you care to look.
For the latest financial news, check out Water Cooler Finance: You're Never Too Old To Work.

 

5 Investments That Are Better Than Oil

Finding the right time to invest in oil is a very difficult exercise. Like any other commodity, it doesn't generate income or cash flow. As such, its price is based purely on what an investor is willing to pay for it, which is based on uncertain demand and supply conditions that are extremely challenging to predict with any certainty. It's still not an easy exercise, but investing in assets that generate cash is much more straightforward. With that, here are five investments that throw off cash flow and look more appealing than oil right now. (For related reading, also take a look at 3 Investments On The Rise In 2011.)

IN PICTURES: Top 6 Uses For Bonds

1. StocksStocks have had a difficult decade, but history shows that the 10-year period after a prolonged rough stretch tends to be above-average. Stocks also went through two extremely volatile periods in the last 10 years from the bursting of the dotcom bubble and credit crisis. This has scared off many investors that now think stocks are too unpredictable and risky.
   But over long time periods, the ups and downs that stock returns exhibit have proven to be worth it. Over the past 100 years, stocks have trounced other investments such as bonds and cash. Additionally, the vast majority generate earnings and many pay dividends, which makes them income-producing. Finally, they are a decent hedge against inflation because companies can largely pass higher costs on to their customers in the form of higher prices.
   
2. Municipal BondsBonds have performed well since the 1970s as interest rates have steadily declined over the past 30 years. Lately though, worries have arisen that bonds issued by state and local governments have become extremely risky. This is due to a number of factors, such as falling tax revenue during the current recession and pension worries as retirement packages have grown generous for many government workers and Baby Boomers start to flood the system as retirees.
   Certain states are definitely risky and include California and Illinois. But, in general, worries have sent yield up by levels that suggest municipal bonds are worth the risk. Bond giant Pimco has selectively been buying munis, as have other investment professionals that specialize in this space in the bond market. The coupon that bonds pay qualify them as income-producing assets. (To learn more about these bonds, see The Basics of Municipal Bonds.)
   
3. Convertible BondsConvertible bonds possess features of both stocks and bonds and can be appealing. They let investors capture upside from the stock-return component but allow for downside protection from the bond component. Upside is somewhat capped as convertible bonds won't go up as much as a pure equity, but that means the downside risk is also capped.
   Given the characteristics of convertible bonds, they can be appealing when the stock market gets overheated. They can also have appeal on an individual company basis if an investor would like some upside potential but may be worried that the stock could fall substantially. The income-producing requirement is met both from the cash flows that companies generate and the coupons that these bonds can pay investors.    

IN PICTURES: What Is Your Risk Tolerance?

4. Venture CapIn similar fashion to stock market returns, venture capital investing has had a difficult decade since the bursting of the dotcom bubble. Venture capital consists of investing in start-up companies or others that are very young. As such, it can be extremely risky, but the rough stretch has caused many VC investors to close shop and means the space has become less competitive. This could boost the returns of the asset class going forward. Additionally, social networking companies are breathing new life into the venture capital community and have already led to big returns for early investors. The cash flow component of this class is also met as investors look for the companies in their portfolios to eventually generate earnings.
   
5. Real EstateThe most recent bubble to burst was in residential real estate and also spread to many commercial real estate properties. Continuing the theme to invest in asset classes that are out of favor and generate income, this class qualifies on both fronts. Rental income is the cash-flow stream, and dismal returns over the past five years could reverse course once long-term demand comes back into balance with supply.
   Brave investors may want to search for real estate opportunities in California, Arizona and Florida, or those that were hardest hit when the housing bubble deflated. Commercial real estate investing is best left up to deep-pocketed experts, but both segments of the market can benefit from the rents that can be earned from any real estate property. (For related reading, see How To Assess A Real Estate Investment Trust.)

The Bottom LineFinding specific investments that have appeal in the above asset classes is a final step that is needed to achieve satisfactory returns, but should be an easier endeavor than trying to time investments in oil and commodities in general. Art and other collectibles also fall into this camp as they don't generate cash flow.
For the latest financial news, check out Water Cooler Finance: You're Never Too Old To Work.

 

Top New Trends In Airline Travel

New pat-down procedures at U.S. airports have been all over the news for the past few months. Pat-downs aren't the only new trends in airline travel. Here are a few other airline developments that have made news, and in some cases, have made waves with the traveling public. (For a related reading, see 7 Air Travel Perks That Used To Be Free.)
IN PICTURES: Vacation Savings Tips
Overbooked FlightsNormal airline practice is to overbook flights to offset no-shows, so even a seat reservation doesn't guarantee you'll board your flight. The airline must attempt to find volunteers for a later flight, usually accompanied by the inducement of a flight voucher or cash rebate. If enough volunteers don't come forward, the airline is required to compensate bumped passengers with $400 to $800 depending on the length of the delay or the value of your ticket, whichever is lower. However, you have the power to negotiate your own deal that exceeds the airline's offer.
While the Department of Transportation is exploring increasing the compensation to as much as $1,300, a seat auction may be a better and more efficient way of attracting volunteers. While some airlines will increase the value of the free voucher if there aren't enough takers, other airlines will not. If the auction approach was implemented across the board, it would produce volunteers at free market rates that aren't constrained by outside forces and would likely keep everyone happy. 
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Delayed or Canceled FlightsSchedules aren't guaranteed and airlines aren't responsible for bad weather and air traffic delays beyond their control. Each airline sets its own policies for delays and what form of compensation you might receive. There is no federal requirement for airlines to do anything for passengers who experience delays or cancellations.
If an aircraft is stranded on the airport tarmac while awaiting takeoff or after landing, U.S. domestic flights must return to the terminal within a three-hour limit. This limit can be waived by the pilot if there is a security or safety risk with returning to the gate or if air traffic control can't accommodate the return due to ongoing airport operations. International flights must adhere to their own tarmac waiting guidelines.
After two hours, all flights on U.S. airlines must provide food and water to aircraft passengers while still on the tarmac. Working lavatories must be available and medical attention must be provided whenever necessary.
New Baggage RulesThe current rules on baggage count, weight and size vary widely among the airlines. Most allow at least one carry-on bag and one smaller personal item. Some airlines permit one or two checked bags at no additional cost, while others charge for all bags. International flights may subject you to different weight limits when you have a stopover in a foreign airport.
What you can put in your baggage has undergone evolutionary change ever since September 11, 2001. The heaviest restrictions apply to carry-on baggage and the following items are currently prohibited: Many sporting goods, sharp objects, most tools, guns and firearms, explosive and flammable materials, disabling chemicals, martial arts and self-defense items, and other hazardous items. Nonflammable gels, liquids and aerosols are permitted in containers not exceeding 3.4 ounces (100 milliliters) in a single, clear, quart-size bag. Medications and baby formulas may exceed these limits but must be personally inspected at security checkpoints. (For more, see 4 Reasons Why Airlines Are Always Struggling.)
Security ScreeningsPat-downs at security checkpoints aren't new, but are more intrusive and aggressive than they were in the past. Whereas screeners previously used the back of their hands to brush for hidden objects, they now use fingers and palms to probe and search sensitive and private areas of the body.
The pat-down is used on passengers who refuse to pass through the new advanced imaging technology (AIT) scanners that present a nude image to the screener. They are also used in cases where metal detectors are triggered and detect possible dangerous or prohibited items, or if a person exhibits suspicious behavior. The average operating cost per passenger is approximately $1 per trip through a checkpoint, and a majority of the scanners were funded as part of the economic stimulus bill.
Concerns have surfaced about the potential danger of repeated exposure to the radiation emitted by AIT scanners. The units project low-level X-rays over the body using backscatter technology, and the resulting image is viewed by a TSA official about 50-feet away. According to the TSA, the images are deleted once they are viewed and are not stored or saved. The TSA claims the scans are completely safe and that the exposure is equivalent to the radiation experienced in a two-minute airplane flight at an altitude of 30,000 feet. (For a related reading, see Dead Airlines And What Killed Them.)
SurchargesIn the good old days, you bought your ticket and everything was included. Not anymore. In order to keep ticket prices as low as possible, most airlines are now charging fees for a wide range of a la carte services. The fee for the first checked bag ranges from zero (JetBlue, Southwest) to $25 with several major airlines. For the second checked bag, the fee ranges from zero (Southwest) to $35 for several of the majors.
The airlines are further padding revenues by charging for additional bags, overweight bags, and oversized bags. You might also pay an additional fee for meals, snacks, beverages, pet travel, an unaccompanied minor and preferred seat selection. Some airlines have also upped the mileage requirements for frequent flier redemptions. (To learn more, see The Industry Handbook: The Airline Industry.)
The Bottom LineWhile there has been much controversy over many of the changes to air travel, it doesn't seem to be having a negative effect on the bottom lines of the major airlines. Profits for the first nine months of 2010 for U.S. airlines exceeded $7 billion, topping the full-year profits for every year going back to 1999. Load factors were consistently high all year and reached 86.9% in July, a record for that month.
Data for the entire year promises to be very positive as the last quarter saw airports jammed with passengers throughout the holiday season. That's quite a recovery from just two years ago when a loss of $5.5 billion was booked as demand fell off a cliff and oil surged to almost $150 per barrel.
For the latest financial news, check out Water Cooler Finance: You're Never Too Old To Work.

 

Biggest Shopping Trends For 2011

As the world changes, so does the way the world shops. In 2010, a number of tech-related buying trends were introduced. As we look ahead to a new year, we should see the following buying movements pick up more steam. (For related reading, also take a look at Coupon Shopping: Clip Your Way To Savings.)
IN PICTURES: Top 6 Mindless Money Wasters
Mobile Coupons and Online Discount CodesWhile some rural areas struggle just to get the hang of internet-generated coupons, the more savvy shopping meccas are already on to bigger and better things. Coupons that arrive in your mobile inbox are hot right now, giving shoppers a less cluttered way to ask for a discount. Sites like Coupon Sherpa not only share big discounts for travel, jewelry, books and more - they also have their own iPhone app. Just flash your iPhone display to the cashier to redeem dozens of member-only perks or one of hundreds of savings offers that are available to the public.
If you're shopping online, keep an eye out for discount codes that can be entered for instant savings, free shipping or add-on gifts. Sites like CouponMountain collect these codes for you, and can save you a lot of money.
Did you know that you can text to save? Many companies reward customers with coupons and even gift cards when they text to a special number. Text messaging charges may apply, however, so be familiar with the details of each promotion (and your data plan) before you participate.
Group Buying
The influence of crowds is one of the hottest new developments in deal-finding, with Groupon leading the way in this daily offer category. By focusing on just one spectacular savings special per city each day, buyers can net a total savings of 50% or more on a variety of services, gifts, or merchandise. In 2010, a number of sites followed Groupon's lead, creating dozens of destinations for the high-pressure, one-day-only events. Since the playing field is only expected to get more competitive, aggregates like 8coupons.com have become invaluable in narrowing down the possibilities to only what you can afford.
Do you feel like you're stuck with a group buying deal that you no longer want or can't use? Both CoupReCoup and DealsGoRound let users get cash for their unwanted daily deal certificates. They are also great places to check if you missed out on a fabulous past deal!
IN PICTURES: 9 Ways To Trim The Fat From Your Spending
Subscription Incentives
Just as we struggle to keep our inboxes clear of clutter, there are now shopping sites that require subscriptions to have access to the best deals. For those consumers who are determined to never miss a deal, the email subscriptions can add up to big savings. 
Super shoppers are encouraged to set up a separate email account for newsletters and deal alerts - especially if they are checking deals from work - to keep their emails from loved ones from being lost in a sea of "Christmas in July" sale offers.
Bar Code Scanning Software 
Price comparison sites are popular, but they can be difficult to access on the go. Since most buyers find themselves curious about a good deal while standing in the store aisle, the development of smart phone apps such as ShopSavvy give you up-to-date pricing in an instant. Just use the camera feature on your phone to scan the UPC code on most any product. Prices for the same product at stores near you or online will be displayed, giving you the chance to see if you are really getting a good deal.
The scanning and saving doesn't have to end when you get home. Applications like CoupSmart award prizes and freebies to users who use the same type of bar code scanning technology with their online platform.
The Bottom LineThere are already many predictions about the buying habits of shoppers in 2011. Without a doubt, many shopping trends will involve technology, but as always, the most popular ways to save will be the offers that provide the best bang for your bucks. (For additional reading, also see 4 Coupon Sites Worth Checking Out.)

 

Water Cooler Finance: Anti-Government Protesters Rock Egypt

It's been a turbulent and fast-paced business week. Most notably, the Arab world's most populace country is in a political upheaval that has markets reeling. Closer to home, a mainstay U.S. retailer announced significant restructuring plans. There were several large initial public offerings (IPOs) for investors to consider, a shocking lawsuit involving mystery-meat allegations and the NYSE issued an illegal-gambling reprimand. 
IN PICTURES: 10 Biggest Losers In Finance
Protesters Seek to Unseat Egyptian PresidentProtesters in Egypt have organized a strong effort to unseat current Egyptian President, Hosni Mubarak. Protesters have numerous grievances and allegations, including human rights violations and rigged elections. Internet and social media have been cutoff at times during the conflict and a 6pm to 7am curfew has been implemented in a few major cities. With the Egyptian market closed since the protest began, investors are looking to pullback from the conflict in other areas. The Dubai Financial Market's benchmark index fell 4.3% to open trading this week, and Emaar Properties, the Dubai real estate developer who built the world's tallest building, saw its shares fall 8.3 percent. With Egypt being in the heart of Middle-East oil production and transportation, many oil companies took losses, including Emirati natural gas producer Dana Gas (down 9.9%). The price at the pumps hasn't risen yet, but analysts suspect that a long-term conflict will mean a big boost in gas prices. (For more, see How Does Crude Oil Affect Gas Prices?)
JCPenney Trims Operations and Adds AckmanHave you ever eaten so much that the weight gain scared you into starting a diet and joining a gym? That may resemble the case for JCPenney. In 2009, the retailer announced it was bucking the recession and opening 17 new stores, only to realize in 2011 that it had gotten too big to be attractive to investors. This realization resulted in JCPenney closing six unprofitable stores, phasing out catalog and outlet businesses and trimming the call center operations and decorating business. The retailer also played the poison pill to block investors from purchasing more than 10% of the remaining stock. In the same announcement, JCPenney named investor Bill Ackman to its board. Ackman, who owns 16.5% of JCPenney stock through his Pershing Square Capital Management Fund, is known for his winning record in shaking up companies, and he seems to have investors on board.
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Private Equity IPOsLately, Wall Street has had an influx of IPOs from companies backed by private equity. PE IPOs have a history of creating high returns, so these latest public offerings are worth watching:

1. Neilson Holdings NV – The company famous for tracking the ratings for what we watch and buy opened on the market at $24.75 per share, up 7.6% from its IPO price of $23. Neilson generates $4 to $5 billion in revenue per year, but its growth is near-stagnate. Longstanding relationships with Coca-Cola (NYSE:KO), Nestle and Proctor and Gamble (NYSE:PG), combined with 70% of annual revenue coming from committed contracts, give Neilson, and investors, some stability.  
   
2. Demand Media Inc. – This popular how-to content company, which generates most of its revenue from online advertising and domain registration sales, opened on the NYSE at $23.50 per share – up 38% from its $17 IPO price. The huge price gain comes as a surprise, given that Google (Nasdaq:GOOG) just announced measures to reduce the effectiveness of sites that are designed to get hits from key-word searches, such as Demand's eHow.com.  
   
3. LinkedIn – This business-social media company (AKA Facebook for professionals) is joining the growing list of tech companies that are going public. Although all the figures haven't been disclosed, LinkedIn's IPO is expected to value the company at $2 billion dollars. Patience will be a must for prospecting investors, though, as the company revealed it doesn't expect to be profitable next year by U.S. GAAP standards.  

Taco Bell Gets Rung For Selling "Barely Beef"Yum Brands Inc.'s (NYSE:YUM) Taco Bell had the integrity of its meat put into question last week, as a false-advertising lawsuit alleged the fast-food chain's filling doesn't contain enough beef to be classified as such. The suit was filed by a California woman, Amanda Obney. Obney wants to see Taco Bell start a "corrective advertising campaign," cease referring to its product as ground beef and pay for any legal costs from the suit. Taco Bell is fighting back, taking out full-page ads in major U.S. papers, saying "Thank you for suing us. Here's the truth about our seasoned beef." Taco Bell promises to file a counter-suit against the plaintiffs. It seems much of this story is being overblown, as the substances in the filling that were identified as "not meat" are mostly binding agents and flavorings, such as oats and spices.
NYSE Crackdown on Illegal GamblingIt's too early for April Fools', so we'll assume the NYSE wasn't kidding when it sent a notice to remind its members that gambling is prohibited on the trading floor and is "a criminal offense in New York." I'm not suggesting that the exchange should tolerate brokers taking over/unders on the nature of Steve Job's illness, but in a world where the economy is predicted by men's underwear sales and stocks prices are often tied to unproven rumors, even the Pinball Wizard could find the irony in this memo. (For more, check out Going All-In: Comparing Investing & Gambling.)
The Bottom LineLast week's major stories are only starting to unfold. The outcome of the protests in Egypt will affect the entire world, as smooth (i.e. less costly) production and transfer of oil from the Middle East is tied to peace in the region. And while JCPenney and the newest IPOs are being well received by investors, time will tell whether these companies can thrive under their new business structures. Sadly, time may never tell if Taco Bell's filling contains enough beef to carry the official meat moniker, but it may be wise to heed the NYSE's warning and not bet on it.

 

What Is The U.S. Government's Credit Score?

 

Although the U.S. government has the luxury that the market for its debt is the single largest securities market in the world, there is growing concern about the creditworthiness of the government and its ongoing ability to borrow. What would happen if the federal government were subjected to the same standards as its citizens and assigned a credit score? (For related reading, also take a look at Can You Hit A Perfect Credit Score?)
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While the credit rating agencies jealously guard the formulas by which they calculate credit scores, a few general concepts are widely acknowledged as major factors. Let's look at how the United States would stack up for each element that goes into a credit score.
Are Bills Paid on Time? Paying on time is good, paying late is bad. Having a debt go to collection or discharging debts through bankruptcy is very bad.
Generally speaking, the United States has a very good record of paying its bills on time. The national government has defaulted on its debts just twice - back in 1790 (under the huge burden of debts incurred in the war for independence) and again in 1933 when the government explicitly changed the rules and unilaterally decided it did not have to honor the obligation to repay its debts in gold.
Along the way, the federal government has faced a few moments where creative accounting had to be employed. Nevertheless, for all of its faults and flaws, the United States scores well in terms of paying what it owes in interest and principal and doing so on time.
How Much is Owed? The larger the amount of outstanding debt, the worse the score, though this is mitigated by a borrower's ability to pay.
By absolute standards, the United States has a huge amount of debt (over $14 trillion at the national level). However, looking at public debt as a percentage of GDP, the U.S. clocks in at about 59% - in the upper third of countries, but much better off than the likes of Japan, France, Singapore, Canada and even Germany. It should be noted, though, that this figure refers to debt held by the public, and does not include external debt.
How Much Can Be Borrowed? Lenders are hesitant to loan money to applicants with a large percentage of their credit capacity being used, such as someone who has several maxed out credit cards.
Debt capacity is an area where the U.S. government likely cannot score well. Although it is true that there are legal debt limits imposed by Congress, a simple vote can increase them. To that end, the U.S. debt ceiling has ballooned from $6.4 trillion in 2002 to over $14 trillion in 2010.
In other words, there really are only minimal limits on how much the government can borrow - it would take an almost unthinkable amount of borrowing for the United States to truly max out its borrowing ability. (For more, see What Fuels The National Debt?)
IN PICTURES: 7 Tips To Bounce Back From A Credit Score Disaster
The Length of Credit History and Mix of CreditThe longer someone borrows and repays money, the better. Successfully managing multiple kinds of debt (installment debt like a mortgage or student loan, or revolving credit like a credit card) adds to a lender's confidence and will improve a credit score.
The U.S. government seldom borrowed from its own citizens on a regular basis until the First World War made it impractical to borrow from foreign governments. However, the U.S. government has used debt to fund projects and wars since the very founding of the republic. Consequently, while it does not have the credit history of a nation like France or the United Kingdom, the United States would score well on this metric.
New Applications for CreditIf a potential borrower is actively seeking credit, it could be a sign of financial distress that does not yet appear.
Given the creativity of the federal government, and its willingness to try new products like the inflation-protected TIPS, it is probably fair to assign a reasonably high score to this metric. One potential problem, though - and one that the credit rating agencies do not openly discuss in terms of its significance - is that the United States has rarely paid its debts in full. Instead, the government expands its borrowing capacity and rolls over old debt with new debt offerings.
The Treasury holds regular and routine debt auctions, so an outside observer could credibly argue that the U.S. is effectively always taking new applications for credit.
And the Final Score Is…Using some of the online credit score estimators, and making some assumptions about how to translate government performance into numbers that make sense for applications designed for regular people, it is possible to at least estimate a score. In particular, it was assumed that the United States would have a tremendously large amount of outstanding debt and debt instruments, but a long history of paying on time.
Perhaps shockingly, most of these estimators come up with a score of around 650 (with a range of 625 to 720). That is basically in the middle of the range, and consistent with the recent rating on U.S. debt of A+ by China's Dagong Global, the only non-U.S. credit rating agency that seems to draw much interest or credibility. By comparison, countries like Norway, Switzerland and Singapore score an AAA from Dagong, and the United States is largely on par with Japan, France and Britain in Dagong's scoring.
The Bottom LineTo some extent, notions of credit scores just do not apply to countries. The U.S. government has an advantage that most debtors do not - if the U.S. government needs to pay its debts, it can simply print the money to do so. If you or I tried that, we would soon get a visit from the Secret Service and our credit scores would no longer be of much concern.
By the same token, nothing lasts forever. There was a time when Britain was the unassailable global financial titan and those days are long past. If the United States does not begin to tackle its debt load, its persistent deficits and its ongoing expansion of services and obligations, there will be a time when debt ratings do matter and the United States may find it cannot get all the debt it wants on easy terms. (For additional reading, check out The Road To The Worst Credit Score Ever.)
For the latest financial news, check out Water Cooler Finance: Anti-Government Protesters Rock Egypt.

 

5 People Blamed For The Financial Crisis

Whenever anything goes wrong in view of the public, attention quickly moves to rooting out those who should be blamed for whatever it was that went wrong. Given the enormous and far-reaching magnitude of the housing bubble, and the credit crisis and recession it produced, naming and shaming those responsible has turned into something of a cottage industry. (Take a look at the factors that caused this market to flare up and burn out, check out The Fuel That Fed The Subprime Meltdown.)
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While finding those to blame would be impossible and it does not resolve a crisis, it is nevertheless part of the catharsis and the recovery process. With that in mind, let us examine some of those who have drawn scrutiny for their roles in the crisis, as well as a few who may have unfairly escaped their share of blame.

1. Realtors
 David Lereah, former chief economist of the National Association of Realtors, was an outspoken promoter of the investment virtues of housing throughout the bubble. Penning books with titles like "Why The Real Estate Boom Will Not Bust" (2006) and referring to housing skeptics as "Chicken Littles", Mr. Lereah dismissed the notion of a bubble and may have helped to stoke an already too-hot market.

2. Lenders
 Many bank CEOs deserve blame for aggressively steering their companies into bad lending practices, but Countrywide's Angelo Mozilo may deserve an extra share. Countrywide was such an aggressive underwriter of subprime loans that it has created a multi-billion dollar headache for Countrywide's acquirer Bank of America (NYSE:BAC) as it resolves bad loan put-backs with Fannie, Freddie and private purchasers.

3. Investment Banks
 Investment banks picked up the baton from the commercial banks, buying their ill-considered loans, packaging them into investment securities labeled AAA, and then selling those to pension funds, hedge funds and other institutional investors for a tidy profit. There's plenty of blame to go around here, from joint commercial/investment banks like Citigroup (NYSE:C) to investment banks like Goldman Sachs (NYSE:GS), and they certainly helped funnel enormous sums of money into the housing market (while taking their cut, of course). (Credit rating agencies have a long history in this country. Learn about what they do and how were they developed, check out A Brief History Of Credit Rating Agencies.)

4. Ratings Agencies
 For their role as rubber-stampers of AAA ratings on piles of dreck, Standard & Poor's, Moody's and Fitch all deserve healthy doses of blame. If these ratings agencies had done better research, questioned their assumptions more aggressively and avoided the moral hazards of working so closely with the issuers that paid them, the bubble may never have gotten as large as it did.

5. Homebuyers
 It would be remiss to completely excuse the "regular people" for their role in the mess. Liar loans required a willing liar to sign the loan, and millions more spent far above their means in the late '90s and early 2000s, leveraging up to do so. A lending bubble can't occur without the co-operation of borrowers, and the American public in general seemed all too willing to believe in the fantasy of the housing bubble and easy credit.


6. The Overseers
 Bill Clinton and Congress
During his presidency, Bill Clinton pushed for stronger enforcement of the Community Reinvestment Act (a decades-old law) and increased bank lending to low-income areas. This did not create the subprime mortgage market, but it seemed to foster lower credit and down payment requirements across the board. At the same time, a deregulatory mood among both parties in Congress led to less regulation and oversight of banks and new financial products like credit default swaps.
Treasury Secretary
Henry Paulson, President Bush's Treasury Secretary from July of 2006 through to January of 2009, seemed to be late in dealing with the crisis and did the market no favors when he failed to prevent the messy and chaotic bankruptcy of Lehman Brothers. That said, Paulson may ultimately get some credit for advancing bailouts that at least quieted the markets during a period of incredible chaos.

Federal Reserve Chairman
Alan Greenspan seems to deserve a larger-than-average share of blame. While Mr. Greenspan has been blamed for his policy of maintaining unusually low interest rates during the bubble period, it was actually his hand-off approach to regulation that may have been more problematic. The Federal Reserve exists at least in part to regulate and oversee banks, and under 1994's Home Ownership and Equity Protection Act, Greenspan could have directed regulators to force banks to curb some of the most egregious practices concerning liar loans and excessive lending, but he chose not to do so. (Confused by the Fed's lingo? Find out what it can tell you and learn how to decipher it, check out Translating "Fed Speak" Into Plain English.)

Though he was left holding the broom as Greenspan exited the stage, there is little to suggest that Ben Bernanke was hawkish about regulation or higher rates prior to that. At this point, his role in the financial crisis is still being written – did moves like the "rescue" of Bear Stearns, TARP, various other bailouts, exceptionally low rates and so on help lessen the severity of the crisis, or have they simply extended or worsened the day of reckoning?

Treasury Secretary
Last and not least, we must consider current Treasury Secretary Timothy Geithner. As a member of the FOMC and President of the New York Fed, it is not clear that Geithner was more inclined to crack down on bank excesses than anybody else in the Fed at the time. Geithner had been a strong advocate for bailouts and restructurings in the beginning that many now feel have been too generous to the banking industry. Though supporters will argue that the U.S. needed functioning banks to avoid the recession turning into a depression, others will argue that socializing the foibles of commercial banks and Wall Street firms failed to hold the wrong-doers to full account.

History Will Be the Final Judge
 It will probably be another decade or two before a full accounting and understanding of the housing bubble and its financial fallout is really possible. Although it is clear now that there were many wrong-doers, it has yet to be seen whether those who have claimed to help solve or ease the crisis did in fact make things any better. Suffice it to say, financial journalists and historians will likely be arguing over this one for a long time to come.

Investment Grade

What Does Investment Grade Mean?

 
A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such as Standard & Poor's, use different designations consisting of upper- and lower-case letters 'A' and 'B' to identify a bond's credit quality rating. 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ('BB', 'B', 'CCC', etc.) are considered low credit quality, and are commonly referred to as "junk bonds". 

 

 Investopedia explains Investment Grade

 
Investors should note that government bonds, or Treasuries, are not subject to credit quality ratings. These securities are considered to be of the very highest credit quality. In the case of municipal and corporate bond funds, fund company literature, such as the fund prospectus and independent investment research reports will report an "average credit quality" for the fund's portfolio as a whole.

Investors should be aware that an agency downgrade of a company's bonds from 'BBB' to 'BB' reclassifies its debt from investment grade to "junk" status with just a one-step drop in quality. The repercussions of such an event can be highly problematic for the issuer and can also adversely affect bond prices for investors. Safety-conscious fund investors should pay attention to a bond fund's portfolio credit quality breakdown.