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Money Morning Contributing Editor Martin Hutchinson created quite a buzz with a recent column that told investors to steer clear of municipal bonds, the popular fixed-income securities more commonly referred to as "munis."
The story – part of Money Morning's "Outlook 2011" annual economic forecast series – also generated several reader questions. We thought that our subscribers might find them of interest, and are sharing Hutchinson's answers with you.
by Don Miller
Even though the cost of living in the United States jumped higher in December, the way the government calculates inflation will give the U.S. Federal Reserve enough cover to maintain its loose money policy.
The consumer price index (CPI) rose 0.5% in December, the largest increase in 18 months, the Labor Department reported Friday. About 80% of the increase was due to an 8.5% rise in the gasoline index, also the sharpest increase in 18 months. Food prices rose by 0.1% in December.
The CPI is the broadest of three monthly price gauges from the Labor Department, because it includes goods and services. Almost 60% of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.
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Although worries about European sovereign debt continue to top the list of key investor concerns, two major credit-rating firms last week reminded investors that the United States may also have a debt problem.
In a research report on Thursday, Moody's Investors Service (NYSE: MCO) said the U.S. government will have to arrest its explosive deficit growth if it's to have any hope of keeping its "Aaa" debt rating. In a separate action that same day, Carol Sirou, the head of Standard & Poor's France, told listeners at a Paris conference that her firm could conceivably lower the outlook for the U.S. debt rating sometime in the future.
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Crude oil prices are getting set to break the $100 a barrel mark in coming months . But will they eclipse their all-time high of $147? Energy-industry specialist Dr. Kent Moors, advisor to six of the world's top 10 oil companies, predicts that oil could hit $150 by July. That means $4.50 for a gallon […]
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Will the dollar spend 2011 in the gutter? Our forecast definitively shows that it will. The U.S. economy is still stuck in the depths of a possible double-dip recession. The Federal Reserve is doing its best to devalue America's currency. And foreign economies have so little faith in U.S. "recovery" that they're bypassing the dollar […]
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Goldman Sachs Group Inc.'s (NYSE: GS) $2 billion deal to finance Facebook Inc. combines the worst features of the last two speculative manias – the dot-com bubble of 1999-2000 and the Wall Street financing bubble of 2006-08.
At 25 times revenue and more than 100 times earnings, Goldman's Facebook deal smacks of the "dot-bomb" debacle. And the fact that this financing deal came to pass after a major Wall Street firm effectively drove a truck through two central features of securities regulation is more than a little reminiscent of the investment-banking shenanigans that fed into the global financial crisis.
The fact that history is repeating itself on Wall Street shouldn't surprise us. Nor should the fact that the Wall Street "rent-extraction machine" is once again operating in high gear.
One thing's for certain: One day the bubble will burst; and when that happens, the great bulk of the costs will be borne by ordinary Americans – as was the case back in 2008.
To understand the Facebook deal's full potential fallout, please read on…
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With oil prices rising and the Gulf oil spill fading from the forefront of the American psyche, deepwater drilling is set to emerge as a very hot, and very controversial topic in the months ahead – particularly among Republican representatives.
The GOP traditionally has been the party that supports the development of fossil fuels, while Democrats tend to push for more environmental regulation and a move toward renewable resources.
Right now, oil industry lobbyists believe higher prices warrant more drilling off the U.S. coast, but environmental groups, congressional Democrats, the Obama administration – which relaxed drilling restrictions just months before BP PLC's (NYSE ADR: BP) disastrous spill – aren't likely to agree.
In fact, lawmakers are already sniping at one another, spurred by the findings of U.S. President Obama's oil spill commission, which was tasked with investigating the Gulf oil spill.
by Don Miller
The housing crisis could peak in 2011, as the number of homeowners receiving foreclosure notices climbs about 20%, putting a further drag on prices, according to the latest forecast from RealtyTrac Inc.
As high unemployment persists and banks resume seizures after a moratorium to correct paperwork snafus, the market will see a steady increase in volume this year, the tracker of housing data reported.
"We will peak in foreclosures and probably bottom out in pricing, and that's what we need to do in order to begin the recovery," Rick Sharga, RealtyTrac's senior vice president, said in an interview at Bloomberg News headquarters in New York. "But it's probably not going to feel good in the process."
Properties receiving notices of default, auction or repossession rose 2% from a year earlier to a record 2.87 million in 2010, the Irvine, California-based data seller said yesterday (Thursday). Actions against homeowners in default jumped despite a plunge in filings in the latter part of the year – including a 26% drop in December – as banks were forced to review their practices.
by Don Miller
So far, 2011 has seen the biggest flurry of mergers and acquisitions (M&A) in a decade, helped by a stock market that's off to a roaring start.
Worldwide deals worth $34 billion were announced on Sunday and Monday, bringing total M&A volume this year to more than $83 billion, up from $67 billion in the same period last year, the Financial Times reported.
The early frenzy of deal making marks the busiest start for M&A activity since 2000, buoying expectations for a rebound in volumes and prices as the economy recovers.
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While prices for food and energy have been rising, inflation in the United States has remained relatively subdued.
One common explanation for that phenomenon is that U.S. inflation has been "exported" to China and elsewhere through the U.S. Federal Reserve's monetary policy. And given the perennial U.S. balance of payments deficit, it's good to know the country has found something it can successfully export!
However, the bad news here is that inflation does not stay exported – and in 2011 it may boomerang back to make life on Main Street miserable.
Thankfully, there are precautions we can take to combat higher prices and preserve our wealth.
To find out what you can do to protect yourself from surging inflation, read on...
