Posted by Sophie Egge on January 25, 2012
It would be fair to describe me as a contrarian investor. I advocate Valuation-Informed Indexing. Valuation-Informed Indexers go with high stock allocations when prices are low (which means most investors are not happy with stocks) and with low stock allocations when prices are high (which means that most investors love stocks).
Still, I am not a pure contrarian. I see five potential dangers.
1) The Momentum Going Against You Might Be More Powerful Than You Realize
The logic of Contrarian Investing is that, when prices get too high, they sooner or later must come down, and when prices get too low, they sooner or later must rise. The trouble is that there is also a logic to Momentum Investing, the idea of going with the herd. Once investors start leaning in one direction, they are inclined to lean harder and harder in that direction for some time.
In 1996, stock prices reached insanely dangerous levels. Some contrarians shorted the market. They were killed. Stocks went up big time in 1996, 1997, 1998 and 1999.
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Posted by Zachary Ogilvie on January 21, 2012
Dear Erica,
I just got my first credit card. Its from Capital One, and they are holding my $49 so I can have a $200 credit. I know thats not much, but Im really excited anyway. I do not want to get into trouble like everyone else. Do you have any advice for me? Amanda
Hi Amanda,
Nice job on getting a new credit account! From your description, I gather that it’s a secured credit card, which is great. I usually recommend them to people who are either just starting out or who need to start over. Because they are collateralized, they’re far easier to qualify for than those that aren’t. As you’ve discovered, by leaving just a small amount of money at the bank for safekeeping, they agree to let you borrow from them using the credit card. Their risk in giving you credit is minimal, since they can claim your deposit if you fail to pay your bill, and you get to enjoy the benefits of charging.
Out of curiosity, I conducted a little research about which credit product you might be holding. I belie
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Posted by Madison Backhouse on January 19, 2012
The auto industry reported more than one piece of good news in recent weeks, including job gains and increased sales. With the collapse almost five years behind us, how will future car models bolster an industry on the crux of rejuvenation?
As many had predicted (and prayed for) the precarious auto industry is on the rebound reassuring consumers that there is a reason it has long been one of the strongholds of our economy.
The Center for Automotive Research in Ann Arbor, Mich. predicts that the auto industry will employ 756,800 by 2015, up from 566,400 in 2010.
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Posted by Sophie Egge on January 15, 2012
Financial Stability Board Chairman Mark Carney on Sunday rejected calls from the banking industry to delay planned tougher capital rules for lenders, saying such a move would not spur strong growth.
“There is much conflation and deliberate confusion of the consequences of global deleveraging … with financial reform,” Carney told the Financial Times in an interview posted online on Sunday.
He rejected claims that “if somehow, we could stop the clock on these reforms … the global economy would be growing at 5 percent,” he told the FT.
Banks say they may have to deleverage — sell off assets and pull loans to businesses — to comply on time with tougher global capital and liquidity rules being monitored by the FSB.
Carney, who also heads the Bank of Canada, took up the reins at the FSB last November when its then chairman, Mario Draghi, left to become European Central Bank president.
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