Feb. 13, 2009
As much of the nation’s focus is on the soon-to-be-passed Stimulus Bill, and the tragic Buffalo plane crash, there’s other news that bears notice.
This week, corporations have rushed to take advantage of the opportunity to raise capital, in order to pay down their spiraling debts. They’ve done so by creating a raft of new high yield, low-rated bonds.
While yield-starved investors—including mature women, whom I seek to inform and empower financially–are likely to attack these as would a shark sensing blood in the water, allow me to issue a warning that there will be blood in the proverbial streets if/when these bonds default.
Remember what our mothers taught us. If it sounds too good to be true, it probably is.
Let’s start with some definitions first. There are two major bond ranking agencies; Standard & Poor’s and Moody’s. “Junk bond” is the slang term for Lower Rated/High Yield Bonds. Technically a bond that is rated a letter rating lower than BBB- by Standard & Poor’s and rated below Baa3 by Moody’s is called High Yield, or Junk. US Treasury Bonds are rated triple AAA by comparison.
So while the excess “spread” between the yield of US Treasuries and Junk Bonds has narrowed to a whopping 16%, having been almost 22% in mid December, investors need to exercise extreme caution, IF they purchase junk bonds at all.
The rating systems were designed to act as an indicator of credit worthiness, and bond ratings would generally be thought of as welcome information, providing education to bond purchasers. That is, people who actually research this information before they buy.
However, many commission starved bond dealers and brokerage house registered reps tend to SELL investments to their clients; with nowhere near as much regard for suitability as that of their percentage commission unfortunately. Yes, it’s true.
Granted, many of us in the fee-only financial advisory business have been sorely disappointed (if not a far stronger word) in the failure of Moody’s and Standard & Poor’s to issue adequate or accurate warnings for many of the world’s companies that have since gone quite South. However, Moody’s has just revamped their predictions of global bond defaults as soon as this November to over 3 times that of the current rate, an already high 15.1%.
So, don’t be duped by this week’s flood of high yield bonds. While I hate to be redundant, pigs get fatter, hogs get slaughtered! You will have long forgotten where you spent that extra short-term yield, once your junk bond defaults and not only is the income lost, but the principal right along with it.
Please invest responsibly!
Posted by Debra in Investing | No Comments
Feb. 11, 2009
I also read yesterday that one in five Americans aged 18-34 is obese! Yes, I have noticed the spread widening on Americans as we sidle up to yet our next buffet or super-sized fast food meal.
I personally was in the Las Vegas audience last week when Karl Rove could hardly contain his chortling as he belittled the obesity epidemic we have in America. His slick one-liners rolled easily off his tongue mocking the attention and funds that President Obama’s stimulus plan allots to addressing one of America’s costliest and most debilitating ills. It surely didn’t surprise me that Karl apparently doesn’t care that this generation is the first that is scheduled to live less years than their parents, principally because of obesity.
I say arrest this obesity epidemic now, and yes, earmark funds for public awareness programs and treatments. We need to lead by example, as adults and as a nation. We do want our bodies to last as long as our hearts keep pumping, and we do hope to remain vibrant in our golden years. Wedo want to be able to move with, and play with, our grandchildren or nieces and nephews. There is hope! The TV blockbuster, Biggest Losers is key evidence that with personal will power and the support of others we can winthe fight against obesity. We Can Do It Women! and men too, of course.
Apparently the State of New York heard me and others calling for a healthy America, in recently instituting an obesity tax on certain sugared soft drinks.
Even the military is weighted down with ineffectiveness these days, rendering our very national security more vulnerable. The number of service people diagnosed as obese has more than doubled since the 2003 invasion of Baghdad, Iraq.
At the end of the day, we are talking about a slippery slope with regard to so much of America’s and the globe’s appetite, greed, addiction and/or depression.
I listened to a reformed, yet once-convicted securities representative give an ethics lecture last Friday. He carefully explained that he went step-by-step deeper into oblivion believing he would give only this one kickback; and then never again. Further, how he never figured he’d get caught. His was an addictive game of greed and egotism.
He admitted that the beloved women in his life—both his mother and his wife—warned him of his errant ways, yet he willfully broke their hearts, as well as that of his young sons, by continuing his slide into the grips of greed, eventually losing his family relationships and his possessions, and being imprisoned.
Time will tell the full story of Bernie Madoff, and the myriad other Ponzi scheme architects, yet I suspect that decisions became more and more laced with optimism about add-water-and-stir wealth.
Little attention was paid to the prospect of getting caught. The aire of being above the law permeates a crook’s decision making, and in Madoff’s case, nary a care about the individual’s and foundation’s throats he stomped on.
For the record, I’ve never been bankrupt, never committed a felony (or even a misdemeanor) never accepted kickbacks, consistently voted in local and national elections, always worked at least one job (often 2-3) have an exceptional FICO score, great employment history, and haven’t cheated employees or family members. Not sure that’ll make headlines, nor could I be a wildly successful public speaker in the opinion of some yet I do know right from wrong, and I attempt to live by the Golden Rule. Boring yet beautiful. Simple and proud of it.
Values still remain, and a majority of American’s still uphold them. The media needs to search out those who would balance out the negative headlines and showcase the many ball players, military, and business people that play by the rules and enjoy a lifestyle befitting them and their labor/contributions.
So, hearty congratulations to all my readers who achieve greatness in their fields, in their families in their communities and in this fragile global network It all starts in our heads, you know. If we believe we can do it, we can. With the continued commitment towards personal excellence, and with the support of our loved ones we can achieve massive victories.
Congratulations to all my mature women readers who are pushing past their personal fears to begin to understand money and the role it plays in their lives. I am eager to throw a life preserver to you in the form of education and cheer leading regarding your money. With over 30 years of experience investing client’s money, I can help you sift through the mountains of financial information to cull what’s important to your financial future. Your past accomplishments are fodder for your money successes. We’ll use a combination of common sense, history, and future thinking to forge ahead and ultimately ensure that your money will last your lifetimes.
No, we will not succumb to paralysis about our money any longer. We’ll say no to our Bag Lady fears that otherwise rob us of rich moments of our lives when we could be creating memories with our loved ones. We will face our challenges head on, step by step with a winning plan. We will resort to our resolve and discipline and reap the rich rewards, all without ever needing to cheat.
Congratulations on reintroducing the word NO back into our language, and meaning it. No to unlimited buffets, no to unlimited profits, no to drugs, no to unfair business practices, no to dog-eat-dog greed, no to becoming addicted, and no to staying addicted.
In essence then, once our NO is taken seriously—principally by us—then our YES begins to have much more meaning. Yes to HOPE, yes to continued hard work, yes to pitching in, yes to opportunity, yes to education, yes to studying something new, yes to mastering our money, yes to health, yes to living our lives fully, yes to giving back. Yes, yes, yes, We Can Do It Women!™
Posted by Debra in Bag Lady Fears | No Comments
Feb. 10, 2009
Alex Rodriguez’s admission to steroid use from 2001-2003 yesterday was the latest example of tarnish and cheating and lying. Young? Not too young to cash the big checks! Stupid, yes, I’ll readily agree. Greedy? Check. Selfish? Surely. A hero? Not.
They say he’ll be treated better because he was honest and admitted steroid use. Yet there wasn’t much of an apology was there?
As I read the breaking story he only “came clean” after the results were released of a 2003 random drug test that showed him testing positive. Not exactly a forthright confession in my opinion, especially after his bold-faced lie to Katie Couric as recently as 2007 attesting that he never used performance enhancing drugs. I mean, how about the Texas Rangers, and their fans, and now the Yankee organization and their fans as well as all those who hold the record books as hallowed? Not sure I can believe his stop date, or the start date, for that matter….only Alex knows for sure.
Already sports writers have jumped to the plausibility that he will be granted leniency in the Hall of Fame vote! I’d like to see ¼ of Alex’s remaining contract pay be diverted to Whitey Ford and those legitimate Hall of Famers who played and excelled for the love of the game, to buttress their pittance pensions. Only when Alex and other major league cheaters feel it in the wallet, can we imagine that they will be truly sorry. In the meantime, let me tell you, cheating doesn’t pay in the long term, and the costs along the way are far greater than anyone could ever imagine.
Why doesn’t Alex admit something obvious while he’s at it? Why doesn’t he admit that he continues to be an albatross to the NY Yankees, even absent his latest confession? Where have all the championship rings gone that were supposed to grace their fingers, once Sir Alex was signed?
Why, when the National Baseball League, or National Football League, or National Hockey League for all that matter, have consistently been riddled with drug-laced meatheads masquerading like athletes, don’t they test every week, alternating the days of the week of the tests? I would far rather have a portion of my bloated ticket price funnel to increased frequency drug testing than to pad the cheaters’ paychecks and pensions!
I can acknowledge that people make mistakes. I’ve certainly made a couple. Yet, I do have a problem with people deliberately taking measures into their own hands, when they’ve been unwilling to do the hard (and often time consuming) work of achievement! What kind of example are they setting? Where’s the risk and reward standard?
On a similar note, what’s Illinois’ Ex Gov. Rod Blagojevich so concerned with what his young daughter will think of his conviction and impeachment, all of a sudden? Somehow I think he got the order wrong! Children aren’t stupid and the lucky ones have 2 eyes and 2 ears with which to observe and make their own judgments about all adults, yes especially their parents.
I must draw a marked distinction here however between Alex’s latent admission and Rod’s continued defiance regarding their respective cheating. Alex does offer a semblance of hope, for which I’m exceedingly grateful.
Don’t we all know the saying, pigs get fatter, and hogs get slaughtered? Do I have to revert back to my farm days and produce pictures of pigs and hogs for people to be able to differentiate and understand?
I mean here’s to capitalism and all, yet good bye to unabated greed and above-the-law egotism!