16 posts tagged “money”

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I recently switched from Net 10 to Straight Talk. Net 10 offered 10 cents per minute w/o a contract, while Straight Talk offers $1 a day service (1000 minutes, 1000 text messages, and 30MB Internet for $30) w/o a contract. Straight Talk also has an unlimited plan for $45.

Straight Talk uses Verizon towers so service coverage is excellent. The Motorola Razor phone I ordered has a built in browser - so getting my sports scores, stock quotes, and weather info is a snap.

There is one big caveat - do not try to port your old phone number. Straight Talk (owned by TracFone) has a problem setting up "web sessions" for numbers they port. So if you try to port your old number, expect several calls to corporate headquarters - 800-876-5753 - before you obtain web access (see here and here). Frustrating for sure, but eventually it does get resolved.

Let me start out by saying that inflation due to the FED printing money has not begun. What inflation we have right now is cost push.

Here is some anecdotal evidence from my life. The last time I orderer a large sausage pizza it was $17.75 (up from $16.50 six months ago). Last week my favorite gyro meal cost $5.95 (up from $5.25 the last time I had one). A ride on the Chicago subway went from $2.00 to $2.25, and now they want to raise fares to $3.00.

Now take a look at empirical evidence from Shadow Government Statistics. It clearly shows we never had any deflation.

Why would businesses raise prices in a bad economy? Especially if demand for their product is elastic ~ raising prices decreases total revenue. The only logical answer is cost push inflation. This is a situation where resource prices (expenses) are rising so fast, producers feel the need to pass on those costs. What expenses?

• Miminmum wage is now $7.25
• Health Insurance
• Property and Casualty Insurance
• Government fees such as inspection and licensing
• Credit card processing fees and bank fess have increased for business owners
  
• Transportation - look at the move in oil since March 2009
• Agricultural commodities (which are inputs to cows, pigs, and chickens)

IMHO, US Treasuries are the next financial bubble to burst.

1. The Fed has been buying Treasuries bonds in an effort to lower borrowing costs and end the worst U.S. economic downturn in 70 years. Its holdings of Treasuries edged up to $759.80 billion from $757.77 billion last week. However, the Federal Reserve's program of buying Treasuries will end in October.
2. Even the Chinese, one of the largest buyers of Treasury securities, are buying fewer treasuries. They are buying gold with their US Dollars.
3. Yet investors are making huge bets on bonds. In the last six months they have allocated double the amount of new money to bond mutual funds as they did over the entire four years from 2003 through 2006! All academic studies agree that poor market timing decisions are the rule rather than the exception among mutual fund investors.
4. Besides that, the federal government actually needs high inflation down the road. Why? So they can pay off this low interest debt with cheapened dollars. Debtors gain during inflationary times.
5. It's not just me questioning the current price of treasuries.
   

Looking at the next 18 months, I see higher yields on the 10-year and the 30-year. Bond prices fall when interest rates rise. With fewer buyers and a falling US dollar, higher rates are inevitable. Get into TMV or TBT while they are on sale! My earlier posts on bonds should help you.

DXDDX - a mutual fund that moves up 2.5 times when the dollar index falls.

 Here are some reasons the dollar should continue to fall.

1. For the fiscal year ending Sept. 30, the Congressional Budget Office forecasts a record deficit of $1.75 trillion, almost four times the previous year’s $454.8 billion shortfall and about 13 percent of gross domestic product. Bear in mind that the target demanded of European nations wanting to join the euro was a deficit no greater than 3 percent of GDP.
2. David Walker, a former U.S. comptroller general, wrote in the Financial Times on May 12 that the U.S.’s top credit rating looks incompatible with “an accumulated negative net worth” of more than $11 trillion and “additional off-balance-sheet obligations” of $45 trillion.
3. The biggest problem is that external investors — particularly China — have more skin in the dollar game than in euros, yen or pounds, which makes the U.S. currency the most likely candidate to meet the cleaver in a crisis of confidence about post-crunch government finances.
4. If commodity prices rise and the US dollar falls, energy and food prices will remain relatively constant for everyone outside the United States (since all commodities are priced in US dollars)