The person-to-person loan website Prosper.com has been talked about in mostly positive ways since it launched a few years ago. Mark Gimein at Slate’s The Big Money says it’s a lot less awesome than you’ve been led to believe. In fact, he says it’s just a microcosm of what happened in the real financial world: “Loans to unqualified borrowers; reliance on mathematical models that turn out to be a lot less useful than they seemed; failed hopes that high interest rates could make subprime loans profitable; sky high default rates [of 39%]—Prosper has it all.” [More]
Liz Davidson at Forbes has an article about ways you and your spouse can fine-tune spending and investment patterns so that your marriage isn’t a financial drain. It’s easy enough to compare financial health before marriage (although lots of couples don’t do it, she notes), but even if your net income increases, your net worth could flatline or drop:
You might be doing well with your expenses as a married couple but making poor investment decisions, causing your financial situation to worsen even though your day-to-day money management has improved. [More]
Think that just because you know what a credit default swap is, you can speak the secret language of money? Think again. Psychiatrist/executive coach David Krueger has studied how we relate to our cash, and has put his research into a new book, “The Secret Language of Money: How to Make Smarter Financial Decisions and Live a Richer Life.” Lesson one from Dr. Krueger: “Money speaks to us and we speak with money. It’s kind of a Rorschach; we imbue it with whatever values or meanings we want.” Uh, okay.
The smaller versions of Madoff are still out there, convincing people to hand over their savings for foolproof investments that don’t actually exist, but every once in a while the authorities nab another one. This week it’s Philip G. Barry, a Brooklyn-based guy who operated out of my own neighborhood and happened to run a pornography business.
If you planned on retiring soon you’ve probably had to readjust your expectations. But even if you’re still on target to take it easy soon, you should reconsider until you’ve paid off your mortgage.
First, let me say that I am furious that I ate my Cheetos from my collectible Cheeto experiment a while back, because Chuck Jaffe at the Wall Street Journal says one with an MJ likeness just sold for $35 on eBay. What that really underscores, though, is the only surefire way to make any money on Jackson memorabilia is to be the one selling the crap to unwise shoppers.
Any sort of federal agency to protect consumers from abuse from the financial industry is months, or possibly years, away, notes Linda Stern of Reuters. That’s why you shouldn’t depend on such an agency to protect you in the meantime. In fact, you can take her advice and use it no matter what happens at the federal level.
“Mr. Madoff is currently 71 years old and has an approximate life expectancy of 13 years,” wrote Sorkin, whose letter was released on Tuesday. “A prison term of 12 years – just short of an effective life sentence – will sufficiently address the goals of deterrence, protecting the public and promoting respect for the law.”
Given the state of the economy today, is it better for me to reduce my 401k to a minimum and use the extra funds to pay off my credit card debt? This is a good time to put money into the markets, based on my admittedly limited understanding, but with interest rates going through the roof (my personal Chase card went from 12.99 to 23.99), I would like to kick down my cc debt (now at around $6,000) faster. I’m currently only putting 6% in my 401k, and I’m fairly young (35). Have you advice for me?
Brett Arends at The Wall Street Journal has compared Case-Shiller house price data to annual inflation rates, and speculates that owning a home may not be a very good investment. “You can often do better on long-term inflation protected government bonds,” he writes.
Seth Green takes you on a tour of his crib in this clip from Un-Broke, a financial program airing next Friday on ABC. “BOOM! That’s math all over your face!”
How do you turn the purchase of a purse with a four-figure price tag into a sound financial decision in a recession? That’s the task luxury brand marketers and fashion magazines have right now, and their solution is to spin luxury purchases as an “investment.” But is it a good investment? Not really.
What impact does the Chrysler bankruptcy have on regular investors who hold bond funds? Most likely little to none, it turns out. Consumer Reports points out that most mutual funds have been avoiding Chrylser, GM, and Ford debt for years now—and if your fund does include Chrysler, it’s probably a tiny portion of your overall investment.
Banks are pushing for a change to banking rules that would allow them to ignore mark to market accounting for assets in markets that they deem “inactive.” In other words, if a bank is loaded with worthless assets but decides that the market for those assets is frozen, they can value those assets higher than the market would. Or to simplify it even more, they can create value out of toxic assets. And it looks like now the Financial Accounting Standards Board, which so far has been against this rule change, is caving in.
Nick Kapur at The Motley Fool says that men trade stocks more frequently than women. This is not a good thing; the result of all this hyperactivity and overconfidence is lower earnings on your investment. He writes, “Worse still (for unmarried guys like me) is that single men trade a whopping 67% more than single women, earning them annual net returns of 2.3% less! The authors cite increased trading costs, taxes, and a greater tendency to speculate as reasons for this underperformance.”
Blockbuster’s stock just dropped 79% this afternoon after Bloomberg published a story that said the company hired the firm Kirkland & Ellis “to evaluate restructuring options, including a possible pre-packaged bankruptcy.” Blockbuster says they’ve only hired the firm for “refinancing and capital raising initiatives,” and that they do not intend to file for bankruptcy.