Stock market investment blog

You’ve probably seen the headlines about how Buffet says the economy is in shambles. If you haven’t already, take a look at the full interview because it doesn’t sound to me that he thinks we’re a hopeless case. He’s basically saying we will recover but there’s a risk of inflation and it may take some time to recover.

Interestingly, until we recover, until consumers start getting more spending power, I don’t see how inflation could be a problem…

Some people are hoping for an economic recovery this year but I am not so sure any respite will last more than a few months because I don’t see evidence that consumer spending will increase.

Due to relatively high unemployment and many workers who are unable to get raises, how greatly can consumer spending increase? If consumer spending doesn’t increase, corporate profits can’t increase much.Neither can government revenue.

So how is the economy supposed to recover?

Slowly but surely some friends worked the plastic the last year and low and behold ended up with a few thousand dollars on their card. Definitely caught up with them.

So they sat down and devised an interesting way to pay it down.

Basically anytime they use the card for something the cost is double – so if they uses the card for lunch and lunch is 15 dollars – the lunch will cost in their system 30 dollars.

When they get home they will add up their uses and send an online payment for double the amount to the credit card company.

this does a few things

1. It makes them stop using the card by doubling the cost They are now forced to really think if a charge is necessary now they aren’t blowing their money on small things that add up quickly like they used to –

2. By making multiple payments during the month instead of one payment at the end of the billing cycle they are slightly reducing their interest.and they are no longer shocked by large minimum payments when the bill comes ..

3. By double their payment they are of course paying down their credit card aggressively.. they said they really don’t notice the extra money going to the credit card because it is in small increments..

Of course the key is not cheating the system which they have been very good at.

Now this isn’t the best system. Obviously the best system is to pay your full bill at the end of each month, never paying interest. If you can’t then you stop using credit and budget the biggest payment you can each month. This system is for people who have tried the 2 better methods of paying down credit card debt and failed. After all, you can’t give up.

Interesting article here on the economics of poverty. Poor people pay more for banking, spend more time waiting for stuff, more on food, etc.

Some more interesting stuff on Warren Buffet. He talks about insurance, real estate, Moody’s and more.

Interesting article here on Buffet, his travel agent, and how he is more likely to buy US companies than foreign ones right now.

Berkshire’s Class A stock lost 32% in 2008, but the company reported a profit of almost $5 billion. Also with so much of it’s business (2/3) in insurance and utilities it’s not a bad call for uncertain times – if you still trust Buffet after he invested in ConocoPhillips when gas prices were at an all-time high. That cost Berkshire a billion or two.

This article talks about how the new 10% tax incentive (up to $8,000 max) makes it a good time to buy a first home.

That’s from now until Nov. 30 or Dec.1 depending on which newspaper article you believe. In the article linked above, one couple amended their 2008 return and are expecting a check in a few weeks. They say that needs to be done by April 15th so I guess now you’d have to wait till you pay your 2009 taxes.

Anyway, this article says things might be working and real estate may be ready to lead a US economic recovery. It’s possible but I’m not sold that we’re in a recovery right now.

We’re looking for “green shoots” in areas that got us into trouble in the first place – excessive consumption, mis-allocated capital, and a trading mentality. We’re celebrating firms like Goldman and JP Morgan because they made good trading gains while credit to the real economy continues to be cut.

If you believe like the Administration and Wall Street that we’ve got a “confidence” problem, then growing housing starts indicates improvement. If you that we have a structural problem with the economy, then a drop in building over-supplied assets is actually good news.

Lower housing prices can be a good thing because it means that workers can prosper at lower compensation levels, which means that we can start regaining cost advantages relative to our trading partners and taking back industry lost as well as creating new industry. All it would take would be to let the zombies on Wall Street go under.

This article talks about how vacation home sales are on the decline and how prices are coming down. But the conclusion is that retiring baby boomers will start buying vacation homes and retiring in them.

I know a few retiring baby boomers, and some bought a place near Disney that could be considered a vacation home by some but most of the ones I know prefer to stay near their friends / kids. So I’m not convinced that baby boomers will be driving the market in places like Costa Rica.

There’s also a personal finaince lesson here. One that I’ve mentioned about saving for unforseen medical expenses (because you can’t trust the insurance companies) and one that I shouldn’t have to mention about interest only mortgages:

But so far, no buyers. While she has dropped her price on the property, with its rambling five bedrooms and nearby rain forest, from $2.35 million to $1.5 million, she is experiencing firsthand just how dismal the market has become for vacation homes. She has enough money to pay her interest-only mortgage of $3,800 through July, but after that, there are no funds left.

She decided to sell the property because of unforeseen financial problems, such as medical expenses. “We’re about to lose it to the bank.”

Here is my situation. I work in Manhattan and a make a decent living. I am renting an apartment in Westchester with my girlfriend and I can’t help but want to own my own place and rent it out. I have about $25,000 available to put towards a downpayment, taxes, closing costs, etc. When my lease is up this fall I plan on moving back home to Stamford, CT to save money towards my first home purchase.

I know over the next year or 2 the market will be down and I want to capitalize on it since I have some money, I am young, and I can capitalize on the first time home owners loan (I have great credit as well). I would love to buy a place and rent, or buy a place close enough to NYC that I can commute from if I can’t find a tennant. Any suggestions on how to approach this? I know the first line of business is getting approved for a loan, but what other suggestions have you got?

Answer: How about picking an area with an upside and getting in touch with a local real Estate agent about purchasing a two family investment property where you can live and rent out either a finished basement or an upstairs pad. I think that would be a good start because this is clearly a buyers market and there should be a whole lot for you to choose from. Also making the rental your primary residence helps lower the necessary down payment.

Also keep in mind as more and more people are losing their homes to foreclosure, rental properties will be on the upside for years to come and don’t worry about those folks being bad risk just because they lost their homes as they still needed a stable roof over their heads.