by The Investor
on April 28, 2010
I have been having a good discussion about the US versus Greece on Twitter with my favourite Canadian blogger MoneyEnergy.
Our disagreement has now spilled into the comments on an old post of mine that she was kind enough to take the time to read about how Wall Street caused the credit crisis. (I wrote it in March 2008, but it’s taken on new relevance in the light of the alleged Goldman fraud.)
The discussion first began on Twitter after MoneyEnergy (real name Clare) posted these thoughts:
Clare: Anyone else think it unfair that S&P, Moody’s haven’t downgraded US credit rating yet even a notch? They obviously have the bite for others.
Maybe it’s completely ok to take advantage of the USD reserve status? = only reason US can keep printing its debt. Not better than Greece.
It’s really sad to see such a small nation punished and self-punishing (its workers striking, etc –> can they do anything else?).
Putting aside thoughts of Greeks working 40 weeks a year, retiring at 50, and generally living high on the hog, I soberly replied:
Monevator: US can print money. Greece can’t coz in Euro. Also cant devalue (as US has). Key differences.
I thought that was that: I had spoken.
But Clare read my tweet, digested…
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by The Investor
on April 24, 2010
My view on the current valuation of different asset classes, followed by this week’s money links.
Last week I mentioned I’ve been selling down equities since late March. I hope I was clear this was an asset allocation decision, not a call on valuation.
Over 90% of my net worth was in shares, after I went ‘all in’ with my last reserves in March 2009.
That was the buy of the century, but 13 months on I don’t want to push my luck, given that I may want to buy a house in the next five years.
I still remain more than 75% invested in shares. By most measures, this is too high. But I still see equities (including REITs) as reasonable value and most other assets as expensive.
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by Guest Author
on April 23, 2010
If you want to retire early, then as this final article by Jacob from Early Retirement Extreme warns, you’ll need to do things differently.
Having introduced extreme early retirement and outlined some ways of living frugally, Jacob now concludes by suggesting you rip up the rulebook.
I saved around 75 per cent of my income in order to retire early. Sometimes more, sometimes less.
My budget is slightly over $500 a month. Almost half of that is rent, but I could decrease that by moving out of California. You could make that kind of money with a part-time job as a burger flipper or a greeter, if you wanted to have more time to do interesting stuff right away without saving to retire early.
In terms of the recession, I did lose some dividend income, but I quit my career right at the market low in March 2009. It does not concern me.
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by The Investor
on April 22, 2010
The humble interest only mortgage has become a byword for financial recklessness. In the eyes of many, such mortgages are the UK equivalent of sub-prime loans in the US.
But I disagree:
- Sub-prime mortgages saw US banks scanning the worst localities for the worst customers. Just to make sure things ended badly, the resultant loans were sliced and diced into mortgage-backed securities and sold with an often fanciful credit rating. Cue the credit crisis.
- An interest only mortgage is simply a financial product with the potential to be misused.
Comparing a sub-prime mortgage to an interest only mortgage is like comparing crack cocaine with aspirin. Both can kill you, but with an aspirin – or an interest only mortgage – you’ll be fine provided you read the label and follow the instructions.
I don’t have a mortgage, but if and when I buy a home I’ll probably go interest only. In this article I’ll explain why.
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