What to Look for Tomorrow: The Jobs Report

Posted by T.W. Hanson - Mar 6th, 2008 at 21:03

worker

Every four to five weeks, we get to see whether more or fewer people are finding jobs.  The number comes out on the first Monday of each month.  This is one of the most important economic releases of the cycle.  It shows us what happened is happening in the U.S. labor markets and allows us to better forecast what is coming next.  Look for it not only to set the tone for the markets for the rest of the day but permeate into political discourse as well.

Economists are currently forecasting an increase of 25,000 jobs and an unemployment rate of 5.0%.  A large deviation from either of these numbers will move the financial markets.  If the numbers are as predicted, you will only need to suffer a few newspaper headlines and political rhetoric as the statistics are spun.

Watch the futures at 8:30AM Eastern for the reaction.

Biting the Dust in Santa Fe

Posted by T.W. Hanson - Mar 5th, 2008 at 20:03

ghost town

In the latest chapter of the current credit crisis, Thornburg Mortgage received a notice of default from JP Morgan.

Thornburg Mortgage is a Santa Fe based mortgage lending institution that invests in a portfolio of highly-rated adjustable-rate mortgage securities and loans.  The company specialized in “jumbo” mortgages, large mortgages used to finance the purchase of large homes.  Thornburg especially suffered from federally sponsored entities like Fannie Mae being prohibited from purchasing these jumbo loans.

This means that we have another casualty of the current economic environment and that people are defaulting on large mortgages.

If this trend continues, vicenarians may be able to accumulate mansions on the cheap.

Save on groceries : buy the store brand

Posted by Tad Johnson - Mar 4th, 2008 at 23:03

Here’s a fun little secret about groceries : nine times out of ten, the name brand and the store brand product are virtually identical. The only real difference is that one costs 20% more. In fact, most packaged food products are processed at the exact same facilities using the same ingredients. The only thing you’re buying by paying more for the name brand is just that–the name.

crunch.gif

As with all things, there are some cases where the flavor or quality is noticeably different. Cheerios and the generic equivalent are going to taste the same (toasting oats is not rocket science). The store brand Honey Bunches of Oats might not have the exact flavors or ratios down, so this might taste a little different. Even so, is it worth the added cost?

Knowing full well that their products are generally indistinguishable from the cheaper store brand, the major food companies spend millions (or is it billions?) every year on marketing. There are some very smart people getting paid very well to convince you that Pop-Secret popcorn is better than the generic. The irony to this is that the reason they charge you more is (in part) to cover their advertising expense. Since the store brands never advertise, you pay only for the food itself.

store-vs-brand.jpgIn the case of over the counter medicine, the savings are even better. Once a drug enters the generic market, you can buy a store brand of the exact same drug for 50% or less. It’s truly remarkable.

Armed with this knowledge, think carefully next time you’re shopping for groceries. You just might discover that you can save an extra $20 a week by switching to the store brand. And as we know, that makes a nice addition to your Roth IRA or 401(k).

Mint vs. Yodlee (vs. Quicken)

Posted by Tad Johnson - Mar 3rd, 2008 at 23:03

Online personal finance tools are a hot new internet trend. For a vicenarian with a bunch of accounts to track and not a lot of time to do it, these can be a godsend. You have the convenience of checking all your accounts from one page, from any computer, including historical data.

Here’s a quick look at a few of the more popular options:

mint.jpgMint has been getting some very favorable press recently, including some impressive awards and the venture capital to back them up. Their value proposition is to save you money by suggesting better ways to save and spend your money.

Pros : Slick web2.0 interface. Easy integration with most online accounts. Smart algorithms that make suggestions based on the aggregated data from mint users.

Cons : Not as feature-rich as Yodlee (though it uses Yodlee technology). Even though it learns to improve, category-matching algorithm is hit or miss.

If you’re doing your personal finance on paper or in your head, check this one out. The interface is simply gorgeous and the recommendations can be useful. With so much momentum, keep your eye on this for new features in the future.

yodlee.JPG Yodlee does business by licensing its online personal finance software to bigger banks (like Fidelity and Bank of America) and other personal finance sites (like mint). Although it’s not well advertised, they also offer their service directly to the customer through Yodlee Moneycenter.

Pros : Great features like spending analysis, net worth graphs, budgeting, and portfolio analysis. Easy to set up with most online banks.

Cons : Interface can be finicky. Like Mint, automatic categorization is iffy. For reasons unknown, not actively marketed to the consumer.

If you’re looking for the most features, definitely look to Yodlee. They’re clearly market leaders in this area, though most of their business is in selling their software to other businesses.

quicken_online_logo_90.jpg Quicken has long been the market leader in desktop-based personal finance software. Sadly, they haven’t done much to freshen the design of Quicken over the years, so Quicken 2006 and Quicken 1996 look frighteningly similar. In a response to their online competitors, Intuit released Quicken Online this year. It costs $2.99/month on a subscription basis.

Pros : Intuit knows this market inside and out, and they’re not going anywhere as a company. If you already use Quicken, this might be a useful transition to the convenience of online access.

Cons : $2.99/month?! That’s a hefty price to pay for a service you can get free elsewhere. If you’re going to spend that much money, you might as well buy the full desktop version and enjoy the speed and features of a desktop app.

This one shouldn’t be too hard of a decision for the vicenarian. It’s not worth paying Intuit every month when their competitors do an equally good job for free.

Higher Volume Does Not Imply Higher Intelligence

Posted by T.W. Hanson - Mar 2nd, 2008 at 20:03

talking heads

If you follow news coverage of the financial markets, you have undoubtedly been forced to endure the screaming, fist pounding and big hand gestures of the “experts.” Remember that these forms of communication were mostly weeded out by evolution.

If these women and men were sage enough to know where the market is going next, why are they spending their evenings yelling about it in front of TV cameras? I see three possible explanations:

  • They have positions in the securities that they are talking about and are trying to move the market in personally advantageous directions.
  • They couldn’t or can no longer make a good enough living from investing. As a result, they are reliant on making money from being a market cheerleader on TV.
  • They actually have unique insights into the market and feel it is their philanthropic duty to inform the world of their successful trading strategies.

I believe that there are people in all three camps. Some people do provide good thoughts about the market and its likely future course. Others are selfish and simply use the time to talk their own positions.

I have found that one of the best indicators of insight versus ignorant posturing is volume. Beware of the person who’s argument rests on the number of decibels her or his vocal chords can produce.

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