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Europe is a good bet

 

When the allies invaded the coast of Normandy on June 6, 1944, no one knew how much was at stake. It was a risky move that not only put an end to years of bloodshed within Europe but also ushered in a new world order that continues today. European leaders are hoping that their central bank’s actions this week will provide an economic D-Day of their own. read more…

A road to the future

 

There is a growing national buzz among scientists and engineers over a driveway in Idaho.  This green-hued stretch of hexagonal tiles of hardened glass in an Idaho suburb represents one prototype idea for revolutionizing the nation’s highways. It could be a road to the future.   read more…

The Last Hurrah

 

This holiday-shortened week saw all three market averages grind higher. At the same time, interest rates declined to levels not seen since the Fed announced their intent to taper stimulus last spring.  Welcome to the new world where both bond and stock investors make money. read more…

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A Market that won’t quit

 

It’s official. The markets have recovered every dollar lost since the beginning of the financial crisies and the onset of the Great Recession.  Congratulations are in order for all those investors who stuck with the equity market but what about those who didn’t? read more…

An Educational IRA for Kindergarten and above

Most savers are familiar with state-sponsored 529 Plans, a tax advantaged savings plan to help put your children through college. However, there is another savings plan that could assist you in meeting the bills for school grades one through twelve as well as college. It is called a Coverdell Education Savings Account (ESA). read more…

Looking for an excuse

You may be wondering how an island nation with an economy smaller than Vermont could set the world’s stock markets on edge for most of the week. The short answer is the markets are looking for any excuse to take some profits.

That’s not to say that I am ignoring events in Cyprus, a small island in the Mediterranean with a bit over a million inhabitants. The Cyprus problem is simple. Their banking system holds $176 billion in deposits–about eight times the nation’s GDP—and some of these banks are in deep financial trouble.   They need a bailout similar to the rescue packages given to Greece, Ireland, and Portugal.

For the first time since the financial crisis began back in 2008, the EU has changed the rules for a bailout. In exchange for $13 billion in funds, the Cyprus government must raise $7.5 billion on their own. To do that, the EU wanted them to tax all their country’s bank accounts of 100,000 euros or more (about $130,000). What would you do if that happened here?

Two words: Bank run. As soon as Cypriots got wind of this scheme they stormed the ATMs of all their nation’s banks, but they weren’t working. Then the government said they would take steps to prevent any money from leaving the country. Chaos ensued. Parliament convened and it only took until Tuesday before the Cypriot government rejected the scheme out of hand.  That still leaves the question of how and under what terms the country will be able to receive a bail-out.

What spooked investors was the possibility that what happens in Cyprus could happen in other parts of Europe. Was the EU signaling a new and potentially damaging approach to Europe’s financial problems? Would bank depositors in Spain, Italy or elsewhere be next? This is serious stuff, since the only thing keeping a depositor’s money in any particular bank is the belief and trust that their money is safe. If there was even a possibility that some government in financial distress might swoop in and “tax” 10% of your money, what would you do?

So the specter of a potential bank run throughout Europe was one of the “what if” scenarios making the rounds of Wall Street this week. It seems to me that every governmental financial institution around the world has gone to extreme lengths to convince depositors that their banks are safe. I can’t see what anyone would have to gain by changing that policy.

It may simply be that since the lion’s share of high net worth depositors in Cyprus happens to be Russian moguls, the EU may be trying to scare the Russian government into becoming a part of a Cyprus bailout plan. Who knows?

As for the U.S. market, you know my opinion. I’m bullish, but expecting a pull back. Investors used this obvious piece of negative fluff as an excuse to sell a little stock.  If one looks hard enough, you can and will find something to worry about. This week it was Cyprus. Next week there will be something else. Stay invested.

Will beer become an acquired taste?

Twenty-five years ago American beer had more in common with spring water than with one of the oldest beverages of the human race. Today, thanks to a return to the methods of the past, microbreweries and craft beer brewers are hoping to create a renaissance among beer drinkers in America. read more…

Is Everybody Happy?

 

The Dow made a new record high every day this week, except Friday. The S&P 500 Index came within a hair’s breath of its historical high as well. Most world indexes are doing the same thing. The consensus is that the markets are going higher–Uh oh. read more…

The Richest Man on Earth

 

As the white smoke clears, the world’s first Argentine was appointed to the pinnacle of the Roman Catholic Church. Pope Francis I, formerly known as Cardinal Jorge Mario Bergoglio, assumed the reigns of what many believe is the wealthiest instituition on earth and since he is the boss that makes him one wealthy individual. read more…

Now What?

 

Unless you have been in a coma, most investors are well aware that the Dow Jones Industrial Average reached an all-time high this week. Aside from its headline value, should we attach any importance to this event? read more…

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About Bill

Bill Schmick was born in a blue-collar neighborhood of Philadelphia, just a few blocks north of “Rocky Balboa” territory where most of his Catholic schoolmates grew up to be either cops or criminals. He narrowly escaped both professions by volunteering to fight in Vietnam as a U.S. Marine... Read More

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