Quote Response to Mulla’s Quote of the Day
February 28th, 2009 10:17 am
“The taxpayer – that’s someone who works for the federal government but doesn’t have to take the civil service examination.”
Ronald Reagan
Archive
Archive for February, 2009
Deflation: Cheaper Shoes
February 27th, 2009 6:37 pm
So the U.S. is in a recession, and unless you’re George W Bush, there’s no denying that. But if you have money in hand, then you can cash in on all those amazing deals (the complete Twilight set for $45.65! *Mock Gasp*). The dollar is worth a lot more than it was last summer. That’s all well and true, but while this phenomenon, known as deflation, might work for you temporarily, it wreaks havoc on the economy.
You see, the deflation risk we face today is a long term one (props to the current Obama administration for not ignoring the recession and admitting it’ll take time to heal). Normally, when there are slumps in the market, temporary recessions if you will, there is a bounce back as people swoop in on the lower prices. However, in today’s crisis, the lower prices are leading to lower production, as companies try to cut costs. The easiest way to cut production of course is firing people. As people lose their jobs, demand shifts down, beginning a vicious circle of further price drops. This pattern is known as a deflationary spiral.
In the last major deflation slump of the 80’s, the core inflation rate went down from 10% to 4%. The fourth quarter forecast for year ending 2008, was 0.5%. Warning signs of the oncoming deflation risk have already been set off. Inflation for the month of January was realized to 0.03%. Mean decrease per month in interest rates has been 0.80% since July 2008. While the trend has been that the decreases have slowly been decreasing themselves, the threat is such that even the government can no longer ignore the numbers, as shown by the Budget and Economic Outlook published by the Congressional Budget Office.
What does this mean for us? As signs that we are edging closer and closer to a deflation trap are getting clearer and clearer, the real value of cash is increasing, meaning shoes are relatively cheaper (and therefore more accessibly thrown at politicians).
Quote of the Day
February 27th, 2009 6:36 pm
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”
Sam Ewing
Wanted: Interest rates aggregator
February 26th, 2009 1:19 pm
Over the past year, I’ve watched the interest rate on my online savings account slowly drop from 3.75% APY all the way down to its current 2.05%. Yes, the economy is going to hell in a hand basket, but that news doesn’t ease the pain of a 1.7% decline in interest.
When Emigrant Direct’s rate hit the low 2’s, I considered switching to a bank with higher interest rates, so I could earn more money on the same amount of money that was just sitting there. Being the type A person that I am, I began to research different banks and thought to myself, “Gee, I wish there were a site that aggregated all these rates for me!”
Lo and behold, I found Bankrate.com. It seemed like the answer to all my interest rate prayers. Unfortunately, it was too good to be true: I couldn’t even find the bank I was currently using on the listings, but I could find banks offering a lower interest rate than mine. I knew the information wasn’t complete.
So I did a little more Googling and found that my suspicions on Bankrate.com were confirmed. Fortunately, the same page also gave me links to two other sites that tracked interest rates. And the best part of these two sites is that they’re focused on savings, checking and credit card accounts, the types of accounts that are most applicable to college students, whereas Bankrate had extensive information on mortgages that aren’t generally applicable to undergrads.
For your savings accounts pleasure:
Money-Rates.com: http://www.money-rates.com/savings.htm
BestCashCow.com: http://www.bestcashcow.com/savings_-_checking_-_cds/article/sam_cass/first-trade-union-bank
Bond Bailout
February 25th, 2009 12:04 pm
It seems that the waters are getting murkier and murkier for us young investors. Where were the good old days of buy low, sell high? In an environment where stocks go up and down more than my G.P.A, it’s a huge leap of faith to attempt investing.
For the first time in recorded history, the S&P 500 has reported an overall loss in every single constituent, the mighty Berkshire Hathaway fell to a lowly $73,677.30 per stock mid-Friday and Ford has fallen to 4.3% of it’s value from ten years ago.
In such a hectic environment, bonds provide a safe haven. With the Treasury yielding a 5% return, and the price of the bond trade rising— with still much room to rise—it promises to be both a short-term fix and a long-term investment.
Interestingly, though, junk bonds appear to be showing greater value. The average rate of return offers 20%, a significant rise over the Treasury bonds, and increasing bond trade prices. For short-term lookouts, they still offer a viable option. Take a look at T. Rowe Price High-Yield, which has yielded 8.05% in the past 3 months.
Perhaps it’s time to move away from the stock market. But greater reward means greater risk.
Hello!
February 25th, 2009 12:40 am
Hi! I’m Angela, and welcome to The Bottom Line, The Daily Pennsylvanian’s business opinion blog.
And I’m Mulla, and we’re your business bloggers this semester.
We’ll be blogging this semester on a variety of business and personal-finance topics.
I’ll be blogging about current business news on Mondays, Wednesdays, and Fridays.
And I’ll be blogging about the personal finance side of life, on Tuesdays, Thursdays, and the weekends.
You’ll be getting some multi-part blog series from us on a variety of topics.
Such as “Ask the Tax Chick” on Tuesdays!
If you have a question or a topic you’d like to see blogged about, email us at bizexperts@dailypennsylvanian.com.
Ask the Taxpert: Finding your perfect tax form
February 24th, 2009 9:43 am
With all this tax talk, you’re probably wondering, “How do I go about filing my taxes?” Well, you need to fill out a form.
The three IRS personal tax forms available are forms 1040, 1040A, and 1040EZ. If you’re a college student, you should probably be filing a 1040A or 1040EZ because the average undergrad does not have enough itemized deductions to merit the trouble of using the real 1040. The main difference between the A and EZ forms is the ability to deduct certain items for income on the A that you can’t deduct on the EZ.
The 1040A and 1040EZ both have taxable income limitations of $100,000, which few, if any, college students max out. The other potential income limit you may run into is the taxable interest limit. If you accrued or were credited more than $1,500 of interest from things like checking or savings accounts in 2008, you won’t be eligible to file the EZ, but you can still file the A so long as you fill out a separate supplement form called Schedule 1 as well. Given that the highest savings interest rate all year hovered below 5% for non-high-net-worth accounts, you need to have had around $30K in the bank to actually accrue that much interest, which probably does not apply to most college students.
Once you’ve figured out that none of these limits apply to you, it’s time to fill out the form. 1040EZ is, as its name implies, “easy” because there are essentially four steps involved: Read more…
Quote of the Day
February 23rd, 2009 2:51 pm
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Ronald Reagan
Tips on tipping
February 21st, 2009 11:28 am
Tipping Troubles
Tipping is one of those nebulous trappings of society that everyone knows must be done, but few actually know the exact rules of the game. Tipping is also deeply entrenched in our everyday lives as Penn students: from the food delivery guy to hairdressers to – perhaps most frequently of all – taxi drivers, the practice is everywhere, and we should all be prepared to tip correctly.
If you Google “tipping,” approximately 13.5 million hits show up. Personally, I would like to see a concise tipping guide instead of weeding through dozens of search results. So, for your reading convenience, the CNN Money guide to tipping, in tabular form.
From the article, some relevant tipping situations to note: Read more…
Get out your cutlass
February 20th, 2009 5:36 pm
I know a lot of you are looking for jobs right now and are completely stressed out by it. I’ve never been as glad to be below 21 (the age to get that first job of course). I’ll point you towards this article on CNN, which explains that 20 of the top 100 companies to work for are hiring.
Recent Comments