Financial Bubbles

             

Past experiences from financial bubbles are always overlooked. In my studies as a market analyst and businessman, I have seen how bubbles originate, and then cause damage.

                       

Bubbles are not stopped by Federal Reserve action on interest rates, as is usually suggested by pundits. That is because politicians always take over, and often influence any dampening efforts by the Fed. All with an adverse effect.

                       

It would, for example, have had done absolutely nothing with the internet bubble. Or even the mortgage bubble because interest rate adjustments then would have been applied too late. So the Fed has had little to do with the bubble solution all the time. In fact, it has aided and abetted the problem. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Inflation and Investing in Commodities

              

Is investing in oil, gas, mining shares, gold, silver and other precious metals, the means to overcome inflation? It is not simple as often presented by the media and promoters.

                       

Many commodities can only be held in the form of futures contracts of less than a year. They are speculative and have to be continually renewed for the long term. It takes trading experience, with no assurances of lasting success.

                       

Mining corporation investments have all the complications of securities investing and involve conventional strategy. The ability to master discipline is essential. Few investors, professionals or amateur, are adept at this aspect of successful investing.

                       

Buying gold or silver coins or bullion presents other problems including that of storage and insurance.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Currency Trading

                 

Currency trading is dominated by banks, funds, investment companies and commercial corporations. Over $4 trillion are traded every day. Trading involves buying one currency while selling another at the same time. Such as the Dollar/Euro relationship.

                       

However, trading is not truly suitable for small investors, for whom it’s more like gambling. The lure is the small entry amounts and considerable leverage, as much as 50 to 1, much more than is possible with securities and other commodity trading.The downside is risk: Only about 30% of currency accounts are profitable

                       

If you insist on trading, you must have a set strategy. Automated programs help but are no guarantees for success. No matter how much research you do, so many constant influences beyond a trader’s control, domestically and globally, affect currency prices (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

The U. S. Credit Rating

Credit agency ratings cannot be overlooked in the discussion whether the U.S. keeps spending beyond its means today, or into the distant future when today’s politicians are dead or retired.

                                           

Politicians cavalierly seem to think it’s o.k to have budget deficits as long as government keep raising the debt ceiling. The reality: No one in the rest of the world will consider the dollar convertible, thus an investment. The cost of U.S. borrowing will then go sky-high. Thus, credit agency downgrading is the timely warning.

                       

The debt ceiling is the key that permits heavy spending; yet taxation always restricts business expansion and total government revenue.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Banks Too-Big-to-Fail?

           

The one member of the administration involved with financial regulation in the 2008/2009 era, who better handled financial institution problems, was the Federal Deposit Insurance Corporation.

                       

The FDIC, which insures bank member deposits, takes over institutions when in trouble. This often involves takeovers by other, sounder institutions.

                       

The principle can be applied to the problems that perplex so many in Washington. Too many feel the Dodd-Frank regulation must entail new government meddling with unexplored ideas and ventures. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

ETF Investment Types

              

ETFs, or exchange traded funds, are interesting. They may track an index set by securities earnings rather than by securities market weightings. That will make a difference. Index make-ups may also vary within group types. The number of shares in an index is also important, as the size and trading value of those shares will then vary.

                       

Trading volume is important as liquidity helps traders using ETFs. And for many who periodically want their dividends reinvested. It’s important they get better pricing on small purchases. Even if the ETFs use the same stock indexes, underlying costs of operation may differ. Lower-cost is a better choice. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Home Prices

             

What the government could have done following the first signs of financial distress in the new construction market a few years ago in 2008-2009.

                       

One way was to have government buy up at bargain prices all the unsold tract homes in bubble-infested areas, such as Arizona, California and Florida. This would not have been a bailout for the builders. They would have suffered losses.

                       

The action would have dried up the major excess supply of real estate and stopped the ongoing, adverse psychology that kept reducing values of the rest of the nation’s perfectly good real estate that was not too overvalued. The cost would be relatively very low, compared to the many billions and even trillions we have expended.

                       

The federal government, through one or more of its agencies, could have guaranteed all the loans of banks, the way the FDIC insures deposits. Fees would be charged the banks for the guaranty.

                       

No bailout funds from taxpayers, no phony stimulus funds which really amounted to political slush funds. No poor psychology that could make banks wary of loans to small business; thus more job creation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)