What is Quantitative Easing?

If you follow Financial news, you no doubt have heard of the Fed decision to inject another 600 Billion Dollars into the system by purchasing Treasury Bonds and to “maintain low interest rates” in a strategy dubbed “Quantitative Easing.”

Quantitative Easing (QE) is an extreme monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system.  In short, it is printing money.   

QE can trigger higher inflation or even hyperinflation if too much money is created.  It can fail if banks are still reluctant to lend money to small businesses and households in order to spur demands. 

To put it simply, people who have saved money will find it is devalued by inflation; however those who have debt will see the value of that debt decline.  Those who own homes will see the value of the increase as more devalued dollars are needed to purchase the home.  The value of the debt on that home will decrease as the number of dollars needed to settle the mortgage will remain constant and can be paid with future devalued dollars. 

Before the Fed decided to force this policy on us, maybe they should have taken a popular vote.  Oh wait, voting is a right in democracies not, dictatorships.

GOP Takes House, Democrats Keep Senate

The Republican Party took control of the House of Representatives in Tuesday’s election, dealing a withering blow to President Barack Obama, but Democrats narrowly clung to a majority in the Senate.

Republicans were projected to nab 60 seats in the House, Fox News said, easily exceeding the 39 needed to capture control of the chamber from the Democrats for the first time since 2006.

Rep. John Boehner, the Ohio Republican who is likely to become Speaker of the House, said that Tuesday’s results were a repudiation of big government and sent a message to Obama.

“That message is: Change course,” Boehner said.

Senate Majority Leader Harry Reid, meanwhile, won re-election after a fierce fight with Sharron Angle, one of Election 2010’s most visible tea-party candidates. Republicans were projected to gain at least six seats in the Senate.

“Today, Nevada chose hope over fear. Nevada chose to go forward, not backwards,” Reid told supporters in his victory speech. The embattled lawmaker vowed to press on for jobs, later adding: “The bell that rang wasn’t the end of the fight, but the start of the next round.”

The re-election of Reid sets up a faceoff against Boehner, as he still will oversee the Democratic-controlled Senate — but one with a few more Republicans than in the current session of Congress.

The size of the Republican wave was evident early on. Democrats lost bellwether House contests in Virginia and Indiana, with Reps. Tom Perriello and Baron Hill falling to their Republican opponents in closely watched races. Rep. John Spratt, who chairs the House Budget Committee, fell to Republican Mick Mulvaney in South Carolina after jousting over health-care reform and Obama’s stimulus bill.

Rep. Barney Frank, the chairman of the House Financial Services Committee, won re-election from Massachusetts. Meanwhile, 26-year Democratic House veteran Paul Kanjorski, who wrote major parts of the Wall Street reform bill, lost to Republican Lou Barletta in Pennsylvania.

Before the election, polls showed a majority of Americans were dissatisfied with the economy, with unemployment near 10% and the deficit at a near-record $1.3 trillion at the end of fiscal 2010.

But anger about the economy wasn’t widespread enough to return the Republicans to the majority in the upper chamber. An early win by Democrat Joe Manchin in West Virginia meant that the Senate was on track to stay in Democrats’ hands.

And the Republican tidal wave steered clear of California, as voters were returning Jerry Brown to the governor’s office and fellow Democrat Barbara Boxer was barely keeping her Senate seat, early returns showed.

The two Democrats took on two former tech titans from Silicon Valley and prevailed. Brown defeated one-time eBay Inc. CEO Meg Whitman in his race, overcoming Whitman’s massive $173 million campaign war chest, $141 million of that coming from her personal fortune. Meanwhile, Boxer edged out ex-Hewlett-Packard Co. Chief Executive Carly Fiorina for her seat.

Americans worried about the economy and jobs voted in all 50 states Tuesday for all 435 House seats and in 37 Senate races, as well as for 37 governorships.

Rand Paul, an eye doctor and son of Rep. Ron Paul of Texas, became the anti-spending tea-party movement’s first senator, and kept a Kentucky Senate seat in the Republican Party. Dan Coats’s victory in Indiana gave Republicans their first pickup of the night; he took the seat of retiring Democratic Sen. Evan Bayh.

This is a repost from: Marketwatch

Keep Investing, Even During Bear Markets

Too many people allow their investing habits to be influenced by whether the market is a “bear" market” or a “bull market.”  During “bear markets,” when stock prices are undergoing a general decline (the typical bear market since 1899 has lasted about fifteen months), many investors refuse to invest.  Admittedly, it’s difficult to invest when stock prices fall almost daily.  Nevertheless, the only way you make a long term investment strategy works is to maintain your investing plan during bear markets.  That’s how you build positions to take advantage of bull markets. 

Smart investors buy during bull and bear markets.  When millionaire investors were asked if their investment style differed from bull markets to bear markets, 70% said that they invested no differently.  In other words, to these investors, bull or bear markets are just labels for the same thing; a place to invest and grow your money over time.

Top 5 Reasons Apple Stock Can’t Go Higher

Call me a pessimist.  But, if you’ve been following Apple closely (like we all do in this business), I’m sure you get the feeling that this relentless push to the upside has reached its upper limit.   As of this writing, Apple is trading at $305.29 per share and an analyst made a rather bold prediction that Apple’s stock price will reach $390.00 a year from now or sooner. 

Here are the reasons why this is wishful thinking.  And, to refrain from public humiliation, I will not name those brave Apple cultist-er…analysts.  By the way, I’m a certified Apple ‘Opinionator’ meaning, I have earned the right to criticize this company as I was a PC-turned-MAC convert and back to PC again (see why on number 2)!

1. Their products are too expensive.  Of course, I’m not just talking about the initial sticker shock of their new products for sale.  But, the used Apple product prices are beyond reason to me.  Case in point; found on Craigslist, a 2-year old iMac 24” (base model) listed for $1500.  For that amount, I can get my hands on a PC with four times the computation power and storage space.  Call me crazy, but sooner or later, consumers will wake up to the fact that “being cool” isn’t worth the price tag anymore.
2. Apple product life is too short (but maybe they designed it that way).  Three years ago I decided to see what all the hoopla was about and bought myself a brand new ($2,200) 24” iMac with the anodized aluminum trim and a cool factor of 11 out of 10.  When the thing won’t turn on anymore, I went to the local Apple store to get a repair diagnosis and cost estimate.  And, without writing the 4-letter word in all caps here, I will just say that having the extended warranty run out, a dead iMac and a 4-digit cost-to-repair estimate in my hands did not turn my frown upside down.  If I had given the okay to repair my iMac, my total 3-year cost to own would have been a whopping $3,400!  I asked myself, is being “cool” really worth it? 
3. The Mac OS is not as stable as the company claims them to be (it crashes just as frequently as Vista).   If their Mac OS Snow Leopard – or whatever cat they’re on now, is really rock solid as they claim them to be, then why do they only function under Apple hardware?  If what they produce is of true value, then it would work in a multitude of hardware and software environments.  Windows 7 64-bit and Ubuntu 10 are viable, feature-rich alternatives but best of all, they work with millions of hardware configurations so consumers are not locked in to Apple-specific (expensive) units.  And by the way, Ubuntu is FREE (it’s what CAM Trading relies on for file backups and redundancy).
4. iPad.  What is the point of this product?  My guess is, to look cool in public places!  I can tape three one-hundred dollar bills to my forehead and get more noticed in public than a $600 iPad.  What, the hundred dollar bills on my forehead can’t check email at a Starbucks you say?  You’re right, but who are you to think you’re so important that you can’t wait to get home to check your email on a 200 dollar PC?  Get a life!
5. Apple TV.  For years, Apple has been digging for gold to come up with a viable formula for ultimate sales success.  But, new LCD TVs are here with Netflix-ready and internet access.  This eliminates the need to buy a separate device for streaming movies and shows.  I believe Apple should cut their losses and exit out of that foolish product line. 

I realize that what I’m saying may offend a lot of people, but you can always put your money where your mouth is and prove me wrong by buying a few shares of Apple stock today to hold for a year!

This article should not be construed as financial advice.  In fact, anything written here should not be taken as financial advice and that you should seek the counsel of professionals before making changes to your investment portfolio.