John Wasik

Five contrarian reasons not to refinance

Jun 15, 2012 16:07 UTC

CHICAGO, June 15 (Reuters) – These days, lenders are
incredibly picky when it comes to customers. When I looked into
refinancing a few months ago, a mortgage broker asked for two
years of tax filings, and wanted my accountant to certify them.
Since the savings on a new loan would’ve been minor, I passed.

That’s not the advice you hear most, though, when it comes
to refinancing in today’s rate market. With 30-year loan rates
still under 4 percent, if you know you’re going to stay in your
home for a while – or need to cut payments on other properties
you own – don’t wait.

Unless the U.S. economy goes on life support again, it’s
hard to believe that rates will go any lower – in the June 14
Freddie Mac mortgage survey rates were 3.71 percent for 30-year
loans and 2.98 percent for 15-year notes. Until this week, those
averages showed a quiet six-week streak of record-low rates.

To put those rock-bottom rates in perspective, last year at
this time, 30-year loans averaged 4.5 percent. During the
meltdown year of 2008, they were 6.3 percent. In June of 2002,
they were 6.6 percent; 8.5 percent in 1992; 16.7 percent in
1982; and 7.4 percent in 1972. So there’s little argument that
we’re still experiencing the lowest mortgage rates in two

Yet it’s not always a good time to refinance. Here are some
key considerations:

Drill for income with energy stocks

Jun 8, 2012 15:02 UTC

CHICAGO (Reuters) – Whenever the threat of an economic slowdown starts hulking around like a cranky bear, I look to essentials that are important to me as a long-term investor, like energy. Then I consider what investors need most while they watch share prices dip, and that is steady dividends.

Although I have severe reservations about energy companies’ role in global warming – they can be doing much more to promote clean/alternative energy – energy companies that pay healthy, consistent dividends still make sense. They will still make profits drilling for oil and natural gas far into the future, even in the face of falling oil prices.

Good examples of old, healthy dividend payers are Exxon-Mobil and Chevron, two of the largest energy producers on the planet. Even as oil prices gyrate, the total long-term global demand for oil and gas is increasing. And if you’re willing to hold onto these stocks, you can be rewarded over decades.

Staples and discretionary stocks, it’s that easy

Jun 4, 2012 16:13 UTC

CHICAGO, June 4 (Reuters) – To maintain your mettle as an
investor in the face of mixed economic signals, you have to be
able to be able to do what F. Scott Fitzgerald said was the test
of first-rate intelligence: be able to hold two opposing ideas
in your mind and still function.

On one hand, it’s counter-intuitive to buy into a decline.
It doesn’t feel right, although you will get better prices on
quality stocks. The standard approach, which I suspect most
investors choose, is to retreat to the sidelines.

If you can take the risk, keep investing in solid companies.
If you need growth in your portfolio, don’t pull out; embrace
the long-term prospects of owning companies that produce
consistent profits and dividends. A good place to look for
profits are U.S. consumer staples and discretionary stocks.
These stocks are among the most profitable in the world, have
paid robust dividends and continue to benefit from the
snail-like U.S. recovery that may be “de-coupling” from Europe
and not moving in lockstep.

Where in the world are dividends good?

Jun 1, 2012 14:39 UTC

CHICAGO, June 1 (Reuters) – Finding consistent total stock
returns has always been a challenge. But even as the euro zone
beast continues to flair its nostrils and U.S. employment
wheezes, there are stocks that are worthy contenders,
particularly ones that pay dividends. While they don’t eliminate
market risk, dividends can bolster total return in skittish
equity markets. And some of the best sectors for high-dividend
players are far from Wall Street.

For long-term investing, think commodities, energy,
utilities and non-banking financial services. Banking is still
touchy, but insurance is a safer bet.

Established, brand-name stocks often pay large dividends,
but that doesn’t mean they should dominate your portfolio. The
Admiral Group, a U.K.-based auto insurance company, for
example, is hardly in a league with the oil producer Royal Dutch
Shell in terms of name recognition. Yet the insurer is
the top holding in the SPDR S&P International Dividend ETF
, paying a 5.38 percent dividend yield as of June 1.

Four new ways to curb your market enthusiasm

May 29, 2012 15:10 UTC

CHICAGO (Reuters) – It’s already shaping up to be a summer of discontent for investors, so it’s time to manage your expectations. To a global investor, there are conflicting signals everywhere: Although the U.S. economy continues to chug along like a tugboat, the “fiscal cliff” of massive tax increases and budget cuts still looms at the end of the year. Then there is the euro zone opera with the fat lady singing in Greece, Spain and elsewhere.

Do you stay out of all stocks and cower in bonds? What about the possibility of rising inflation in the United States and recession in Europe? How do you avoid the “tail risk” of multiple sour scenarios unfolding the way they did last August?

While it’s hard to predict the cumulative effect of political and financial uncertainty, you can adjust your attitude accordingly so that you deal with what will come. Here are some new approaches:

College investing the low-risk way

May 25, 2012 17:00 UTC

CHICAGO, May 25 (Reuters) – Despite saving for the past
decade and a half, I know I’m nowhere near covering projected
college bills for my daughters, who are now teenagers. So I’ve
been employing an investment strategy to try to make up the
difference so that tuition doesn’t sink my kids into a loathsome
amount of debt.

The basis of our plan is that we invest our college funds in
an age-adjusted 529 college savings plan that reduces market and
interest-rate risk the closer the girls get to matriculation.
Every state offers these funds with major mutual-fund companies
managing them.

In our case, we started investing in the Upromise plan that
links my business credit-card purchases to contributions to
college-savings accounts for both of my daughters. Depending
upon the item purchased, the company, owned by Sallie Mae, will
contribute from 1 to 5 percent of the purchase price into our
college accounts. There is a similar program called
BabyMint.com, which is also worth exploring.

What if Europe and U.S. decouple?

May 21, 2012 17:26 UTC

CHICAGO, May 21 (Reuters) – What if, despite conventional
wisdom, the United States and Eurozone economies “decoupled?”
This suggests that no matter what happens in Greece, Spain and
the rest of the beleaguered European nations, the U.S. economy
wouldn’t be linked to those woes and would continue its mild
recovery relatively unimpaired.

There’s growing evidence to suggest that this has been
happening and may manifest itself more in coming months. That
means Europe and America could be more like two ships passing in
the night rather than on a collision course.

As most of Europe struggles with austerity programs,
political shifts and debt woes, U.S. stocks have generally been
staging a rebound. The MSCI All Country World Ex USA Index
finished April 2.5 percent below the level of October
2009, “when foreign stocks established their relative strength
peak against the U.S.,” according to a May report from Leuthold
Weeden Institutional Research.

Bet on U.S. manufacturing for a rebound

May 18, 2012 12:36 UTC

CHICAGO (Reuters) – If you were betting on a big rebound for any one sector this year, you probably would have put your money on banking instead of manufacturing.

The more glamorous rebound story has been banking and the financial services sector, but with the revelation of a $2 billion trading loss at JP Morgan Chase & Co, it’s clear some of the biggest banks may have not taken the lessons of 2008 seriously. They continue to bad-mouth and fight reforms and engage in risky derivatives trading, and there is likely more dirt under the carpet in that sector.

Megabanks are difficult to divine. The economy might be rebounding, but they might not lend widely and focus instead on making more money from their trading desks, which are still largely a black box to investors.

Professional tricks to lower property tax assessment

May 14, 2012 17:35 UTC

CHICAGO, May 14 (Reuters) – One of the best investments I
made in my home this year was to hire somebody to prove that its
value had fallen.

I know this sounds daft, but it resulted in a lower property
tax bill. In our case, our taxes dropped by $1,000 to around
$10,000 for the 2011 tax year. But we didn’t challenge our taxes
ourselves – we will pay a specialized property-tax consultant
$250 – 25 percent of our tax savings – to appeal for us.

If you owe more than your home is worth and you want to stay
in your home – or just can’t sell – taxes are the one fixed cost
you can have some success in reducing. (You can also try to
refinance to a lower mortgage rate, but that can be difficult
or impossible when you haven’t any or enough home equity.)

Facebook IPO meets behavioral economics

May 11, 2012 17:51 UTC

CHICAGO, May 11 (Reuters) – You may be smitten with the
Facebook story and debating whether or not to buy stock
when the company goes public. But if you haven’t studied the
history of IPOs, you may be jumping into the purchase with
unrealistic expectations and flawed biases.

While many of those allocated shares early on will likely
prosper – or be able to sell quickly at a profit after an
immediate run-up – the rest of us might not fare as well.

The company may raise up to $10.6 billion, an amount that
would beat the debuts of tech giant Google Inc while
giving it a total stock market value that exceeds Amazon.com
. Facebook has indicated an initial public offering
(IPO) per-share range of $28 to $35, pegging the potential value
of the company at $77 billion to $96 billion.