John Wasik

Coming soon: the loud thud of a gold bust

Nov 29, 2010 21:56 UTC

VIETNAMSome time in the future the price of gold will crash and it won’t have a fairy-tale ending for the millions of investors who piled on in recent months.

If I could tell you when gold was going to bust, I’d likely be wrong or bigger than Warren Buffett, so I won’t even try. Just be incredibly cautious now. There are too many signs that gold is frothier than a Starbucks cappuccino.

It’s not that I don’t nod in agreement when gold bugs rant about why their metal holds a special value now. The dollar is in deep trouble as the U.S. sinks deeper into debt. Will Portugal and Spain be the next Ireland on the bailout boulevard? Ben Bernanke may not be able to put a dent in U.S. unemployment or the intractable housing crisis.

And yes, I also know the argument on how gold is nowhere near its inflation-adjusted equivalent of its high in January, 1980. According to the Leuthold Group, gold will have to hit $2,400 an ounce to match the $850 high mark it hit in 1980 in real terms. That doesn’t mean it will, of course.

Yet the back story of the world’s financial insecurity isn’t necessarily about gold being the last or only store of value. It just may be the most popular red herring at the moment.

Giving your own way: Doing charity right

Nov 22, 2010 17:27 UTC

QUAKE-HAITI/Charity can get complicated. There is no “wrong” way of giving, but you can certainly maximize your gift in a number of ways.

We all give in our own way. A neighbor recently invited us to help at a homeless shelter. That was his way of giving back.

Service tends to be the best gift because it’s a direct contribution and you can often feel the results. I still can’t express enough gratitude for the meals my neighbors prepared when my wife was ailing last year.

How to get back into stocks

Nov 19, 2010 14:50 UTC

stocksSo you’ve been out of the market for some time now and you hope that the great belly ache of 2008 won’t return. Maybe even the GM public offering sounded appetizing. How should you get back to the table?

Of course, simply gorging on one kind of stock (like auto companies or gold mining), is like eating the same old greasy hamburger. That’s what got you into trouble in the first place. A broad mix of investments is much safer.

Let’s say you were in the market last year. Contrary to public opinion, it was great year for investors after the collapse of 2008. Here’s what you would have missed if you were on the sidelines sheepishly eating porridge.

How to sail the QE2 investment cruise

Nov 15, 2010 16:27 UTC

If only “QE2″ stood for the famous cruise ship Queen Elizabeth II. When she was sailing (she was retired in 2008), you could plunk down a tidy sum, be guaranteed a handful of exotic locales and come back home safely.

Cruising is probably not the appropriate metaphor for the acronym for the U.S. Federal Reserve’s recent QE2 or “quantitative easing,” which will buy at least $600 billion in long-term U.S. Treasury Bonds. It’s an investment voyage of sorts and could be profitable if you concentrate on overseas ports of call.

The Fed hopes that by bringing down interest rates — and indirectly printing money — that the lower costs of doing business will compel U.S.-based businesses to hire workers and stimulate the doldrums-like economy.

Four ways to ensure the Fed’s stimulus will work

Nov 12, 2010 18:27 UTC

By John Wasik
The opinions expressed are the author’s own.

The Federal Reserve can buy all the US Treasury bonds it wants, but it won’t do much other than make corporate treasurers waggily over being able to borrow at incredibly low rates.

As a last-ditch effort to stimulate the US economy, the Fed’s $600 billion initial purchase of US debt, also known as “QE2,” could be better spent directly helping Americans and easing the housing crisis.

Part of the problem is not that interest rates aren’t low enough — short-term rates are practically zero — it’s that there’s little demand because nobody is getting financially ahead through employment, homeownership or 401(k)s. There’s no sense in the middle class of a “wealth effect.” Fear is ruling now. So here are some proven approaches that might help:

5 profitable post-election predictions

Nov 8, 2010 18:04 UTC

USA-ELECTIONS/Remember that classic carnival ride, the “tilt-a-whirl?” That’s what financial planning will be like under the new Congress, when Republicans control the House of Representatives and the Senate is divided.

Some big decisions need to be made about taxes, retirement and estate planning laws – moves that Congress didn’t make before they recessed for the election.

The wrenching move to the right and the political wrangling about these key topics could be dizzying. That means you can either get motion sickness watching the two parties battle, or you can try to plan for your long-term goals no matter what comes out of Washington.

In ETF war, investors finally win

Nov 1, 2010 16:14 UTC

A trader cheers as the Dow Jones industrial average approaches the 10,000 level on the floor of the New York Stock Exchange, October 14, 2009. Reuters/Brendan McDermidImagine a financial services war in which prices dropped and benefited both investors and providers.

Such a conflict is waging in the exchange-traded fund (ETF) arena, where commission and fund management fees (“expense ratios”) are both coming down. This is exciting for cost-conscious investors because it can boost your total return with only a handful of funds.

Because you are paying less upfront (no sales charges) and annually (management expense ratios), your net return can be higher.