I just realized that I haven’t updated this site in a long time…

You guys get a sneak preview of my presentation that I will be making on Thursday at UCLA.  Here’s the link to the goods: http://icer3k.net/tech_analysis_ppt.pdf.

As always, feel free to leave a comment or ask questions.  Hope you enjoy!

For the first time, the US Treasury sold 5 year TIPS (Treasury Inflation Protected Securities) at a yield of -0.55%.  What does that mean?  People are betting that inflation over the course of the next 5 years inflation will be greater than 0.55%.  If inflation is not greater than 0.55% over a 5 year period, that means you just lent your money out to the US Treasury at 0.55% yield for 5 years.

You might be wondering why the yield is negative rather than zero.  Currently inflation is about 2% annually and the interest on a 5-year non-TIPS bond is 1.26%.  The calculation for TIPS interest is base yield + (-) inflation (deflation).  If we apply this calculation to the latest bond offering, we would get -0.55% + 2%, or 1.45% yield.  Moral of the story: while its uncommon for TIPS to be auctioned off at negative yields, it is highly unlikely that investors will lose in this situation.  It also means that investors are betting on at least some inflation over the next 5 years.

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This is not a comprehensive list of data, but there are lots of significant economic data released every single day this week.  This week might be a little bit more volatile than normal.

Trading Calendar, October 25-29

All times are Eastern, AH = After Hours, BH = Before Hours

Bold Italicized items denote significant market movers.

Mon., 10/25

  • 10:00AM – Existing Home Sales
  • Earnings AH: AMGN

Tues., 10/26

  • 7:45AM – Retail Sales
  • 9:00AM – S&P Case Shiller Home Price Index
  • 10:00AM – Consumer Confidence
  • Earnings BH: ATI, COH, CMI, F, KMB, PCAR, AMTD, X
  • Earnings AH: BRCM, CBG

Wed., 10/27

  • 8:30AM – Durable Goods Order
  • 10:00AM – New Home Sales
  • 10:30AM – Crude Oil Inventories
  • Earnings BH: AKAM
  • Earnings AH: ALL, V

Thurs., 10/28

  • 8:30AM – Jobless Claims
  • 10:30AM – Natural Gas Inventories
  • Earnings BH: LLL, MOT, MMM, KLAC, POT
  • Earnings AH: CSTR, FSLR

Fri., 10/29

  • 8:30AM – GDP, Employment Cost Index
  • 9:45AM – Chicago PMI
  • 9:55AM – Consumer Sentiment
  • Earnings BH: ACI, EIX

My apologies about the lack of recent updates.  I have been pretty busy, but I hope to continue writing about the different types of investments until it is complete.

Note:  This is a continuation of Types of Investments – Part II

A bit of a recap of the previous two articles, Part I was about no-risk investments and Part II was about low-risk investments in US government bonds.  Bonds are a type of debt that people buy as an investment to hedge themselves from inflation risks.  As we’ve talked about in the past, the average inflation rate in the US is about 2-3% annually for the past 10 years.  You might be wondering, if inflation is just 2-3% annually, why do I want to invest in riskier assets to get more return?  Simple, you want your money to work for you.  As a human being, you can theoretically work 126 hours a week, assuming you sleep only 8 hours a day and not have any free time.  While that is certainly doable, but it wouldn’t be in the best interest for your health.

More after the jump!

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I’ll try to get these out before the week starts. 

Trading Calendar, October 20-22
All times are Eastern, AH = After Hours, BH = Before Hours
Bold Italicized items denote significant market movers.

Wed., 10/20

  • 10:30AM – Crude Oil Supply
  • Earnings BH: BLK, DAL, PJC, USB, WFC, EBAY, LCC
  • Earnings AH: NE, NFLX

Thurs., 10/21

  • 8:30AM – Jobless Claim
  • 10:00AM – Leading Indicators & Philadelphia Fed Survey
  • 10:30AM – Natural Gas Supply
  • Earnings BH: MCD, NOK, RS, TRV, T, CAT
  • Earnings AH: AMZN, AXP, COF, SNDK

Fri., 10/22

  • No significant economic data announcement.
  • Earnings BH: IR, VZ, KEY

Note: This is a continuation of Types of Investments – Part I.

In Part I, returns on cash equivalent investments and bonds were compared with inflation rates.  Bonds will give a better protection for inflation than cash equivalent investments over the long-term.  Over the past 20 years, bond yields have been higher than inflation rates by about 1-2% per annum.  I underestimated the technicalities of US government bonds, so this is a whole post dedicated to our government’s debt, yeah!

Tables and charts to follow after the jump.

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In order to get started with investments, you need to accumulate savings.  People save for many reasons including: emergency fund, marriage, birth of a child, buying a car, or buying a house.  It’s not something many young people think about now because we tend to live in the moment and enjoy our instant gratification, which can be costly.  If you’re able to save money, the first thing I recommend you to do is to set aside some money for the emergency fund for 6 months of living expenses.  By having that cash available immediately, you can eliminate borrowing money at high interest rates now and save lots of money in interest from borrowing money in the future.  In this post, we will talk about different types of investments, risks, and returns associated with the investments.

Chart and table to follow after the jump.

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Economists often use the 10-year treasury as a gauge for inflation in the future.  The following charts will show a disturbing trend on how the US inflation rate is projected to go down over time.  Inflation is commonly defined as a gradual increase in price over time and a gradual decrease in price over time is deflation.  As a consumer, you may think inflation is bad, deflation is good!  That would be incorrect, here’s why…

As the economy enters into a deflationary state, consumers believe that prices will go down, so they will hoard their cash and buy later.  That causes manufacturers to cut down on production, hoping to decrease supply and cause prices to go up.  During that process, manufacturers have more idle time and needs to layoff some of its staff to conserve money.  When employees leave the job, they depend on the government to receive their unemployment benefits.  It’s a long-cycle of events, but as you can see, deflation is not good for the economy at all.  You can see how stagnant the Japanese economy has been over the past ten to fifteen years with no growth.  If the US enters into a deflationary state, we may see unemployment levels remain high for a while.

Charts to follow after the jump…

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Setting Priorities

Posted: September 21, 2010 in Reality
Tags: , , ,

I was at UCLA yesterday for a meeting and helped an investment group advertise and collect contact information from those who are interested.  The group was located next to Habitats for Humanities, a non-profit volunteering organization, and their interest list was filling up quickly.  I thought to myself, why are college students a lot more willing to help those in need than to help themselves be more financially responsible?  After a long day of hard work, we were able to collect 7.5 pages of contact information from prospective members.

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Welcome!

Posted: September 20, 2010 in Uncategorized

Thanks for visiting Money: GTL!  I’m currently working out the kinks for the WordPress blog, I should be making a first blog post within the next few days.

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