Financial advisor Matt Krantz of USA Today recommends selling poorly performing stock to pay off pressing credit card debts.
Stock portfolios have generally stagnated over the past five years. If you are paying 15% annual interest rates on credit card debt at the same time it can seem like a no-win situation.
Matt wisely suggests that you should “strongly consider liquidating a big piece of your non-retirement portfolios to pay down your credit card debts”.
This translates as a guaranteed 15% annual return.
Moreover, “a 15% guaranteed return by repaying debt is just about the closest thing to a home run you’re going to find in this market”.
If you were an investment banker, the chances are you’ve already lost your job. If you were something less than a Master of the Universe, yours may have disappeared without a splash on CNN.
Is there any consolation for losing a job or a career, even in an economy on the brink of a slump? Paul Graham makes a great case for it.
“Our bodies weren’t designed to eat the foods that people in rich countries eat, or to get so little exercise. There may be a similar problem with the way we work: a normal job may be as bad for us intellectually as white flour or sugar is for us physically.”
But don’t jobs and food actually go together?
“The root of the problem is that humans weren’t meant to work in such large groups. … Though they’re statistically abnormal, startup founders seem to be working in a way that’s more natural for humans.”
Paul Graham — who is a venture capitalist — is right. You can buck the system and you owe it to yourself to make the attempt.
Incidentally, a recession is a great time to go it alone. Venture capitalists have money burning a hole in their vaults, there’s a surfeit of experts going cheap, and opportunities for anyone with a great idea or a new approach.
Innovation is at a premium during a downturn. Many of the biggest names in corporate America began in a garage during a recession when there was little else to do.
The long predicted influenza pandemic appears to be upon us, with more than 20 cases reported in the US at this writing. Last year, the World Bank predicted a pandemic would affect the world economy by a 5pc drop in output.
The US government has declared a health emergency, with Homeland Security chief effectively saying “Don’t panic.”
The danger is a kind of pandemic protectionism spreads around the world, adding to its economic woes. Already pork from Mexico has been banned by China and Russia. The ban has now been extended to Texas, California and Kansas. We can be sure that is only the beginning.
A serious 1918 type of pandemic, which killed millions around the globe, would really challenge the world economy and set it back a decade at least.
Let us hope it doesn’t come to that.
With the Bank of England already deep into the process of printing money by buying back the government’s debt, The Fed has yet to attempt this operation, preferring to buy corporate bonds instead.
The potential inflationary effects are the main are of concern. Others take the line that the Bank in the UK could do little else to boost the money supply, while a few politicians have pointed out that broad money (M4) is already rising by 20+ percent.
The BBC’s Economics Editor, Stephanie Flanders, weighs in with an informative piece on how the Americans are doing it — mainly by buying corporate bonds, not Treasuries:
Ahead of the curve
A good primer on the pros and cons is given by the BBC’s Business Editor, Robert Peston on his blog:
Will QE work?
My favourite is by the Daily Mail’s City Editor, Alex Brummer, who today gives an emphatic thumbs down to the whole operation.
Bank’s great experiment may prove gamble too far
Syntagma also greeted the “new dawn” of lumpen monetarism with incredulity:
Watch out for the mashed potato machine
Food for thought.