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In the 1992 election campaign, H. Ross Perot predicted a "giant sucking sound" of U.S. jobs heading for Mexico if the North American Free Trade Agreement passed. Perot seems to have been wrong on that – wherever U.S. jobs have gone, it's not Mexico.
Nevertheless, if you listen carefully there's still a "giant sucking sound" – but this time it's the sound of U.S. capital headed overseas.
To find out what the Fed must do to keep capital at home, and why it won't act, read on…
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Question: We have some money invested in tax-free municipal bonds, but read in the local newspaper that with the potential rise of interest rates these bonds tend to do poorly. Can you better explain this, and if this is the case, what do you recommend? I appreciate your input. Thank you.
| – Joan |
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Growing up in Massachusetts, my mother used to say, "Live long enough, and you'll see just about anything happen in politics."
And she was right.
A wrestler, a standup comic, several movie actors, and former sports figures have been elected to office; tea parties are back as a way of challenging leadership; even a disgraced former governor makes it onto "Celebrity Apprentice."
But she never saw this one coming – a U.S. sanctions move against Iran that may actually work… and make you some money in the process.
by Don Miller
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Prices for Greek 10-year bonds plummeted to record lows today (Thursday) on speculation Europe's most troubled economy is about to unravel.
Economists expressed new doubts over the country's banks and short term funding plans and warned that recent developments now threaten to create a vicious cycle of bad news.
"The fear factor is beginning to creep in. In fact, it's galloping in," Neil Mellor, a senior currencies analyst at Bank of New York Mellon Corp. (NYSE: BK) in London told The Wall Street Journal.
by Don Miller
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In a surprise move, Treasury Secretary Timothy Geithner will meet with Chinese Vice Premier Wang Qishan in Beijing today (Thursday), as speculation increases that China is considering letting its currency, the yuan, rise against the dollar.
The unexpected meeting was arranged on-the-fly after Geithner's scheduled trip to India, and may be a sign that both countries are seeking to defuse the currency issue ahead of Chinese President Hu Jintao's trip to Washington next week.
The move follows the Treasury Department's decision last weekend to delay a decision on whether to label China a "currency manipulator."
"[China is] becoming more open to the world, and with that, you're going to see the [yuan] take on a broader role internationally," Geithner said in a Bloomberg Television interview in Mumbai as he finished preparations for the previously unscheduled visit to China. "That's a healthy, necessary adjustment."
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Could the U.S. bull market actually be for real?
That's the question investors have been asking since U.S. stocks essentially bounced off of their March 2009 post-crash lows – only to be launched into one of the strongest rallies in U.S. market history.
More than a year later, U.S. investors still don't know what to believe – or what to expect, says Jon D. Markman, a market commentator and best-selling author who is also a Money Morning contributing writer. The most recent sentiment poll by the American Association of Individual Investors, or AAII, showed that only 41% of investors are bullish. Cash flows at mutual funds that invest in U.S. stocks are telling a similar story, with a $5.1 billion monthly outflow, Markman says the most recent data shows.
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When investing in the emerging markets, you need to cast your net beyond the obvious candidates. Granted, China, Brazil and India have emerged to become very attractive investment stories (I don't trust Russia, the fourth and final "BRIC" economy).
But everyone else has heard of them, too, which is why their markets have been bid up very high in the past year. Their prospects remain excellent, but you're paying a lot for them.
From time to time, however, a country that has been off investors' radar screens has a few good years, and begins to creep onto them. In such countries, risk may be high, but values at least remain reasonable.
That's why it might be worth investing in Peru.
To find out why Peru may be worth a look right now, please read on...
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The United States and Brazil yesterday (Tuesday) announced a trade agreement to end their long-standing dispute about U.S. cotton subsidies. The countries reached the deal one day before Brazil was to impose up to $830 million in sanctions authorized by the World Trade Organization (WTO). The United States will give $147.3 million in assistance to […]
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As government debt levels soar, is America on the road to ruin?
The Obama administration's 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years – $1.2 trillion more than the administration predicted and enough to bring the federal debt to 90% of U.S. gross domestic product (GDP) by 2020, the Congressional Budget Office reported two weeks ago.
U.S. public debt was $6.3 trillion, or $56,000 per household, when President Barack Obama took office in the middle of the worst financial crisis since the Great Depression. It's now at $8.2 trillion ($72,000 per household) and if the present course continues, federal debt will hit $20.3 trillion (in excess of $170,000 per household) in 2020, the CBO predicts.
U.S. debt hasn't been that high since the end of World War II, when the debt-to-GDP ratio hit 109%. Greece – the focus of global default fears – currently has debt that's at 115% of GDP.
Money Morning Question of the Week: Are you worried about U.S. debt levels? Are we headed down the road to ruin? Why or why not? Would you favor tax increases and/or budget cuts if it meant the country would get this debt under control?
What follows are some of the most-well-thought-out and articulate answers to this question that we've received to date.
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The odds are good that China won't dump its holdings of U.S. Treasuries anytime soon. But by substantially reducing its purchases of U.S. debt – or halting them completely in the form of a buyers' strike – the Red Dragon could absolutely shatter the myth that it is the U.S. Federal Reserve that controls U.S. interest rates.
And that could also crater the bond market in the process.
To find out how you could protect yourself if foreign creditors ditch the dollar read on…
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