Entries in Investing (6)


How the Stock, Bond Market Slide May Affect Your 401(k)

Hemera/Photodisc/Thinkstock(NEW YORK) -- With the Dow posting its worst two-day decline since 2008 this week, near-retirees with 401(k) accounts may worry about losing the gains of the market’s rebound over the past two years.

Ted Schwartz, president and chief investment officer of Capstone Investment Financial Group and personal finance columnist, said it’s especially important to stick to your retirement plan during moments of fear.

“The most important factor about 401(k)s is your time horizon,” Schwartz said. Hopefully, if you are planning to retire next year, your portfolio had little exposure to high-risk stocks.

“If you have a 10- to 20-year horizon, and you are investing monthly, yesterday was a non-event,” Schwartz said, referring to the nearly 400-point drop in the Dow Jones industrial average.

An investor’s time horizon is also relevant for 401(k)s that contain U.S. Treasury bonds. The 10-year treasury hit a record low yield of 1.67 percent earlier Friday.

“Treasuries are lower-risk investments, but on the downside with these yields they’re going to have trouble keeping up with inflation,” he said.

The impulse may be to sell stocks and bonds, but Schwartz said making decisions out of fear is not the way to steer your investments.

“What you want is a clear course and a portfolio you can live with and I think you ride through yesterday,” he said.

At the simplest level, younger investors should increase the risk in their portfolios when stocks are cheaper, but Schwartz said “we may not have hit bottom yet.”

He said “quality stocks” are likely to perform well over a longer period of time from this point.

“So maybe it’s a time to look at enough high-quality companies in which you have faith they’re going to do okay,” he said.

Copyright 2011 ABC News Radio


Asian Markets Sluggish on Debt Deal Uncertainty

Comstock Images/Thinkstock(WASHINGTON) -- Asian markets fell Monday as worry widened over the inability of U.S. political leaders to reach an agreement over raising the debt limit and avoiding an impending default as the Aug. 2 deadline draws near.

The debt dilemma has led oil prices to dive below $99 a barrel amid belief that the demand for crude oil will be reduced.

In Hong Kong, Secretary of State Hillary Clinton appealed to Asian nations that they should hold their faith in the U.S. economy, reminding them that the county has recovered from such instability in the past. Clinton predicted that a debt ceiling deal would be reached before the Aug. 2 deadline to avoid an unprecedented default.

It is feared that if an agreement is not reached, the United States could lose its triple-A credit rating.

"The political wrangling in Washington is intense right now," Clinton said. "But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy.

"I am confident that Congress will do the right thing and secure a deal on the debt ceiling, and work with President Obama to take the steps necessary to improve our long-term fiscal outlook."

Democrats are currently ironing out a deal that would have $2.7 trillion in cuts over the next 10 years, no tax increases and a debt ceiling increase (of $2.4 billion) that would last until 2013.

The Republican two step plan would see $1.2 trillion in cuts now, and a debt ceiling increase of about $1 trillion, or enough to last until February 2012. For the second step, a bipartisan committee would be created to identify another $1.8 trillion in cuts. After these cuts are approved, the debt ceiling would then be extended until 2013.

Ongoing bipartisan talks over the debt ceiling broke down over the weekend. Senate Majority Leader Harry Reid stated in a letter Sunday that the talks ended "over Republicans' continued insistence on a short-term raise of the debt ceiling."

As negotiations continue on Capitol Hill, gold is now trading at a record price ($1,613 per troy ounce) and the dollar is dropping against other currencies.

Copyright 2011 ABC News Radio


Report: $1-2 Trillion in Chinese Investments Could Create American Jobs

ChinaFotoPress/Getty Images(WASHINGTON) -- A new report from the Asia Society out Wednesday says that Chinese companies will be working to put $1-2 trillion of that country’s wealth to work outside its shores in the coming decade. And, if the U.S. is open to Chinese investment, it could result in hundreds of thousands of new jobs here.
"If just five percent of China's expected outflows target the United States over the coming decade, the numbers will be enormous," the report's authors, economists Daniel Rosen and Thilo Hanemann, said.
The authors of the report say Chinese firms in the United States have already created more than 10,000 American jobs and that direct investment by the Chinese has more than doubled in the U.S. in the past two years.
But fear of foreign investment in the U.S., especially from economic competitors like China, might keep the door closed to getting cash to U.S. shores.
"Japan's first investments in the United States during the 1980s were almost as controversial as China's but in the following years, Japanese U.S. affiliates put $1 trillion into America and today employ nearly 700,000 Americans," the authors said.
At a Washington D.C., press conference to release the report, Commerce Secretary Gary Locke took the opportunity to criticize current Chinese government policies which keep American firms from getting into China’s massive and quick-growing market.
He urged China to lift restrictions it places on American investments in China. Locke said there is an "imbalance of opportunity," with Chinese companies freer to operate here than U.S. firms are in China.
Many Chinese companies are wary of investing in the United States because of the political outcry caused by some previous high-profile forays, such as Chinese oil company CNOOC's unsuccessful attempt to acquire Unocal in 2005.
Much of that has to do with an incorrect suspicion held by many U.S. officials that "because China has so many state-owned enterprises, market forces and profit motives do not necessarily apply in that country," Rosen and Hanemann said.
"Therefore, they suspect that if a Chinese firm is coming to America, it must be for some political purpose rather than simply to make money. This conclusion is wrong and if we are to maximize U.S. interests, such misapprehensions must be corrected," they said.

Copyright 2011 ABC News Radio


Ford to Invest $850 Million in Michigan Before Announcing Profitable 3rd Quarter

Photo Courtesy - Getty Images(DETROIT) -- Ford Motor Company Monday announced its plans to invest $850 million in Michigan between 2011 and 2013.  Ford Motor said the sizable investment is intended to create up to 1,200 new full-time jobs by 2013, and to make improvements to its vehicle fuel economy.

"We are pleased to work with state and local government leaders to find new ways to work together, invest in our people as well as Ford facilities, further improve our competitiveness and secure jobs in Michigan," said Mark Fields, Ford's president of the Americas.

This announcement comes just after Ford's recent $950 million investment to repurpose the Michigan Assembly Plant from a large SUV factory to a "state-of-the-art car plant."

Ford will also release its third-quarter financial earnings Tuesday, and the results are expected to be impressive.  In spite of the slowest auto market since 1982, Ford is expected a $1.37 billion profit for the three months ending in September.

Under the leadership of Alan Mulally, Ford has sold off unprofitable brands like Volvo, cut loose slow selling name plates such as Mercury and concentrated its attention on its core brands -- Ford and Lincoln.

Foot traffic in dealerships is up and the company, founded 107 years ago by Henry Ford, is on target for a profitable 2010.

Copyright 2010 ABC News Radio


SEC: Computerized Trading Caused 'Flash Crash'

Photo Courtesy - Getty Images(WASHINGTON) -- The Securities and Exchange Commission said Friday that a major sell-off by a mutual fund caused the so-called "flash crash" back on May 6 that caused the Dow to drop nearly 1,000 points in minutes.

Identified by The Wall Street Journal as Kansas-based Waddell & Reed, the company apparently decided to sell $4.1 billion worth of futures contracts, electing to computerize the order.

Within 20 minutes, computers pushed the volume of shares onto the market, effectively flooding it and triggering other automated sell orders, which snowballed into the massive sell-off. Manually entering the trade could have taken five hours.

Regulators have recalibrated market circuit breakers and the report says the SEC will determine whether that is enough.

Copyright 2010 ABC News Radio


Gold, Silver Surge to New Record Highs

Photo Courtesy - Getty Images(NEW YORK) -- Gold and silver prices surged to new records Tuesday as the dollar weakened against major currencies, continuing a trend that has left Americans scrambling for alternatives to traditional investments such as stocks and money market accounts.

Silver touched $22 an ounce Tuesday, the highest since 1980. Silver has surged 36 percent this year from less than $9 when the financial crisis began in 2008. Gold, which has increased 19 percent in 2010, jumped to $1,313 an ounce, the highest ever recorded.

With stocks in the dumps and government deficits spiraling, Americans are increasingly turning their attention to silver and other precious metals. The high price of gold has prompted investors to load up on cheaper silver. Silver has gained 21 percent in price versus gold this year. Low interest rates are another factor in the rush to precious metals, experts say.

Copyright 2010 ABC News Radio

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