Investing Overseas With the Dollar

Investing overseas is done for investment diversification. The investor wants the benefits of growth opportunities that are to be gained globally. Perhaps those prospects appear to be better than those domestically.

Remember, currency moves are always involved. Will the dollar be getting stronger or weaker? If the dollar gets weaker, as is currently the case, such investments become more valuable as translated currency works in favor of the U.S. investor. (Travel overseas becomes more expensive.)

However, should the dollar get stronger, the reverse is true. Investments become less valuable as translated currency works against the interests of the U.S. investor.

Maxing Out Your Credit Card

It may be necessary to take down the maximum amount of credit your credit card permits, but it does not help your credit score. Therefore, do so only in an emergency. It’s nice to know that your credit permits you a certain liberty, but don’t take extreme spending binges.

Of course, if you don’t use your card at all, or only occasionally, you may be dropped or the maximum available credit may be reduced.

That’s because credit card companies are getting more sensitive about account activity. Despite public misinformation, credit card companies are not doing well. They have written off lots of bad debt. So, use credit cards intelligently.

Managed Mutual Funds or Indexes

Don’t bother looking for the best mutual fund managers. You will be wasting your time. Experience and research show that the “best” in any year are achieved mostly by chance.

In any category of mutual funds, only a small percentage of active managers beat the performance of indexes or unmanaged funds. Furthermore, those who distinguish themselves in any one year, generally cannot repeat their performance the next, or on any consistent basis.

A very isolated few managers can outperform indexes over the years, and if they do, it’s pure luck.. ( See the Earl J Weinreb NewsHole® comments.)

Teaching Consumers Finance

The recently passed Dodd-Frank , or Wall Street Reform and Consumer Protection Act law covers consumer protection.

Much of the law has yet to go into effect; many parts that involve consumers are not yet clearly set so it isn’t yet clear how the consumer will benefit.

Consumer education was a major consideration but the question is still how Dodd-Frank will do this. There are about 150 pages of the Act that explains the creation of the Consumer Finance Protection Board (CFPB).

The board's chief function involves financial educational programs, and collecting, investigating and responding to consumer complaints. It’s to research consumer financial markets that affect consumers.

Also included is the mortgage disclosure form from a combination of suggestions from the Real Estate Settlement Procedures Act and the Truth in Lending Act, and existing laws.

True, consumers need help. From my experience, too many consumers are ignorant of basic finance, including the role of interest costs.

But I cannot see how this can be accomplished by consumer-oriented documents alone. It can be taught in schools early on.

Creating more informed consumers cannot be practically accomplished by regulators.

Stimulus Action and Recessions.

Why hasn’t the government’s stimulus program worked? We know it has not produced needed jobs.

It has also done havoc to interest rates because of meddling. When left alone, interest rates usually adjust to supply and demand forces and adjust economic events. However, when government imposes stimulus proposals to raise credit and lift the economy, the system is disturbed and distorted.

This unbalances the economy and does the exact opposite of what has been intended.

Ludwig von Mises wrote fully about the phenomenon in the 1920s. However, the fashionable economist during the 1930s recession was John Maynard Keynes. He became the poster child of that recovery movement.

The Keynes government pump-priming thesis that employed prolonged stimuli actually deepened, and helped induce the Great Depression. Nevertheless, it is the premise of the Obama administration’s failed current policy.

Politics and Bank Credit

Banks are not making sufficient loans to small business, even when they have the ability to do so. They make more money these days by borrowing cheaply from the Federal Reserve and investing in government bonds.

Also, there is political meddling and too strict bank supervision adding to the bank lending confused picture.

Some banking groups are now complaining that they have the money to lend, but with few takers because of the recession.

Yes, commerce is in a slump. But many viable, thriving businesses, especially commercial real estate operations, are genuinely seeking loans from banks who have funds.

Yet, too many lenders are hesitant about extending loans they once more readily made.

Why Rely on the Federal Reserve?

We make a habit of using Federal Reserve actions as responsible, even though they are often proven wrong. This has been proven by the decisions we have gotten in the past couple of years.

We have to remember that economists are fallible, even when they direct the Federal Reserve.

In the more distant past as well, those in the Fed worried we may have deflation and therefore inflated the economy, and added too much currency. In fact the Fed, almost automatically, has been on the side of abetting inflation, in an attempt to prevent deflation.

Thus, the Fed has been the chief culprit causing the bubbles which invariably lead to busts and eventual recessions.