Stocks
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What Bankrupt Athletes Wish They Knew About Financial Windfalls
Few among us haven't dreamed of sudden riches - the financial windfall of a big legal settlement, an unexpected inheritance, a winning lottery ticket, or, for the young and athletically gifted, a lucrative contract with a major professional sports franchise.
But it turns out that few are prepared for a financial windfall when it comes their way.
Nowhere is this more obvious than with big sports stars.
Despite the proliferation of multimillion-dollar contracts, an astonishing number of professional athletes are forced to declare bankruptcy within a few years of hanging up their jerseys.
In the National Football League, for example, where the average salary is $1.9 million, 78% of former players are in bankruptcy within five years of retirement. That figure is 60% for former National Basketball Association players, who earn an average of $5.5 million a year as players.
How can people so generously compensated go broke so quickly?
Part of it has to do with youth, but many of the mistakes athletes make with the financial windfall of a professional sports salary also are made by regular people who suddenly come into large sums of money.
There's a lot we all can learn from their mistakes. When it comes to financial windfalls, it's best to know what to expect ahead of time so you can put the money to work for you instead of squandering it.
"Every single day, people come into large sums of money, whether it's a thousand dollars or a million, and without proper planning, funds quickly disappear," writes Jim Wang in U.S. News and World Report. "Just look at the horrible stories you often hear of lottery winners, and you'll have enough evidence that everyone needs a little preparation, even if you don't expect to get a windfall."
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Beat Ben Bernanke with These Juicy Double-Digit Yields
With the economy beginning to stall, Ben Bernanke's war on the nation's savers rolls on.
From his promise to keep the Fed funds rate near zero through late 2014 to his efforts to push ten-year note yields even lower, the Fed Chairman is a saver's worst nightmare.
You see, in Ben's world, the safety of money in the bank earning a reasonable interest rate is a dangerous thing.
It's why folks with savings have been virtually forced into the market these days in search of higher yields.
One place where income investors can find them is in closed-end funds.
A few of these funds even pay juicy double-digit yields -- like the one my Permanent Wealth Investor subscribers have earned 20% on in two years.
But here's the best part. You can actually buy closed-end funds like these on sale.
Let me explain.
Buying Closed-End Funds at a Discount
Developed in the 19th century, closed-end funds are the oldest type of mutual fund. If you understand the idea behind a mutual fund, then understanding a closed-end fund is easy.
In essence, they are the same thing- pools of money controlled by a professional money manager.
However, in contrast, a typical mutual fund is also what's known as an open-ended fund.
This means that the fund itself can issue as many shares as it needs to meet the demand on any given day. So the total number of shares in this type of fund isn't fixed at all-hence the term open ended. Shares are added as needed.
As a result, the cost of any share in one of these funds is always bought or sold at its current Net Asset Value (NAV). That's why shares of open-end funds don't trade per se on the exchanges.
A closed-end fund, on the other hand, is totally different. Unlike an open-ended fund, closed-end funds issue a limited number of shares. That means the number of shares outstanding is fixed.
So closed-end funds actually trade on an exchange like a stock, and are bought or sold minute-by-minute with a price driven by market sentiment.
That means that just like a stock, shares may trade at a premium or discount to their net asset value. That's a key difference, and why I say closed-end funds can be bought on sale.
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Stock Market Today: All Eyes on the Fed
It's clear what's moving the stock market today. The market was basically flat all morning until the U.S. Federal Reserve made its highly anticipated policy announcement.
The Fed announced that it would expand Operation Twist by $267 billion through the end of the year.
"This continuation of the maturity extension program (Operation Twist) should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative," the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.
The committee stated that economic growth has been "expanding moderately" this year but warned that "growth in employment has slowed in recent months, and the unemployment rate remains elevated."
Meanwhile, Greek formed a coalition government consisting of New Democracy, socialist party Pasok and the Democratic Party of the Left. Antonis Samaras, leader of the New Democracy party, was sworn in as prime minister earlier today.
"Greece has a government ... that is the message that we need to send abroad," said Evangelos Venizelos, leader of Pasok.
The embattled country had gone 223 days without an elected government. One of the new regime's first tasks will likely be renegotiating its bailout terms with the European Union and International Monetary Fund.
Stocks opened slightly lower awaiting the Fed's decision, but following its announcement the market took a sharp dive before heading back upward as many investors had hoped for QE3 rather than more "Twist."
There are two companies that are leading stocks downward today, The Procter & Gamble Co. (NYSE: PG) and Adobe Systems Inc. (Nasdaq: ADBE).
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Stock Market Today: This Bank Stock Faces More Backlash
The Greek elections did not generate any significant movement in the stock market today, which is especially bad news for one particular bank stock that's taking a lot of heat from investors.
Greece decided not to leave the euro Sunday as the pro-bailout New Democracy party narrowly won elections tallying just over 30% of the vote. Investors had feared a win by an anti-austerity movement could lead to a breakup of the euro and possibly the European Union.
That's all good news except stock markets opened lower Monday following the announcement.
Maybe investors really wanted the worst to happen concerning Greece, insuring more action by the Federal Reserve when they meet later this week. QE3 is still a possibility but it seems that some are disappointed by the Greek elections, which could just be a postponement to Greece's eventual "Grexit" from the euro.
European markets rallied following the election results, but by the time U.S. markets opened investor sentiment had become neutral. It seems that until the Fed's meeting concludes on Wednesday investors will be stuck waiting for more news out of Europe to guide them.
One sector that has been vilified recently is financial stocks, and today's headliner is Morgan Stanley (NYSE: MS).
The Wall Street Journal this morning highlighted Morgan Stanley for its leading role in Facebook's IPO debacle.
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The Five Questions You Need to Ask Your Financial Advisor Right Now
If you have a financial advisor you need to read this-especially if you are one of the 99%.
That's everybody who isn't a gazillionaire. You may know a few people who fit this bill.
Being a 99-percenter just means that you want to do better.
In that regard, you're no different than the 1%. They just have more money and by extension more freedom than you.
That doesn't mean they are any smarter.
I know plenty of uber-rich people who are financially inept. You probably do, too.
What sets people apart sometimes, though, is as simple as the questions they ask. True 1-percenters have this down pat-even if they don't have a gazillion dollars.
Here are five things you need to ask your financial advisor today if you want to join them.
If you do, you'll profit more consistently, reduce your risk and invest with greater peace of mind.
And I have no doubt that you will join the real 1%.
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Two Stocks to Buy in Uncertain Times
Europe’s debt problems are hitting a breaking point, U.S. economic growth is slowing and the Dow is down about 7% in the past month – so investors want to know what to do. Money Morning Capital Waves Strategist Shah Gilani is doing just that – sharing the stocks he thinks will provide safety in these uncertain times. He joined Fox Business’ “Varney & Co.” Tuesday morning to share with host Stuart Varney two investments he has recommended to his Capital Wave Forecast subscribers. One is a solid pharmaceutical company with blockbuster drugs barreling down the pipeline and 4.8% dividend yield. The other is an alternative utility-based investment with 5.8% dividend yield. Watch this clip to learn more.
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Tech News: Facebook (NASDAQ: FB) Scores Big with Both AOL Patent Sale and Instagram Deal
Facebook Inc. (NASDAQ: FB) topped the tech news today (Monday), benefitting from both a record-making deal with photo-sharing network Instagram, and an AOL Inc. (NYSE: AOL) patent sale.
Facebook announced Monday it would pay $1 billion in cash and stock for photo-sharing app maker Instagram.
The Instagram deal is Facebook's biggest ever in both price and reach. Instagram has more than 30 million active users - which it accumulated in just 18 months - the most of any startup that Facebook has bought.
"We don't plan on doing many more of these, if any at all," Facebook CEO Mark Zuckerberg wrote in a blog post Monday, speaking to the size and scope of the deal. "But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."
Instagram, the most popular way for iPhone users to take and share photos, was named iPhone app of the year in 2011. Its features allow picture takers to alter the size, color and style of photographs.
The Android Instagram app debuted last week to a frenzied audience, with millions downloading the app immediately.
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