41 billion dollar question

Hey



This past week, the Federal Reserve decided to cut the interest rate to 4.5% from 5.25% in two months. They also just put 41 billion dollars into the banking system.



Now, if you look at these two headlines, you might think that the country is headed for a recession and in big economic trouble. The problem is that the government just reported a GDP increase of 3.9%! How bad do they think the future will be economically? What exactly is going on?



I think these cuts are not to serve the country but to save those in the financial industry who made large bets and lost big. You need to look no further than the irresponsibility of the major financial firms like Merrill Lynch and Citigroup. Their earnings reports look so terrible, they had to give their respective CEO's severance packages worth over $100 million just to go away so the companies could clean up their mess. What do the other banks' earnings look like?

I am worried about the continued descent of the dollar. This action by the fed will undoubtedly help the dollar continue to fall against other major currencies.

Please add your comments as I am not sure if there is even a model that this current economic situation falls in.

trouble brewing ahead

I have been keeping up with recent news and feel out of whack with what is going on in the economy. I see the stock market is moving up but don't feel confident in why the market is up while the economy slows. I have a few reasons



1) The fed is trying to cover up the foreclosure disaster by lowering interest rates. In the meantime, commodity prices are flying through the roof and the dollar is getting its butt kicked like its an opponent of the New England Patriots. Ultimately, this action will create longer lasting economic problems for the US. I don't see a problem with the rise in foreclosures. People who bought houses without even reading what the adjusted interest rate would be were stupid and deserve some short term pain. Let them go back to renting.



2) The price of oil is skyrocketing. And there is no end in sight. The instability in the middle east is growing. Iraq cannot govern itself, Iran continues on its nuclear mission, and Turkey has joined in the mess with their squabbling with the Kurds. I feel that this is just the tip of the iceberg as Russia and China will become more involved. A barrell of oil currently costs over 90 dollars a barrell. The silver lining in this issue is that research and development into other sources of energy have also skyrocketed.



3) A larger percentage of the GDP is covering health care costs. To be fair, more Americans are living longer. But that is inconsequential to other issues like prescription drug legislation or the profiteering of HMO's and insurance companies on the health of Americans. Unless we find a way to curb these costs, they will impact our work productivity in the long term.

taking profits and educating

Hey everyone

I have made a decision to go back to school. In the process I have found that I will need the portfolio's assets to pay for it. I look forward to the challenge and will continue to write about the topics concerning finance and wealth.

Mike Keane

The Pres said what?!!!

Hey everyone

I know it is all to easy to catch our fearless leader in a confusing phrase but this comment from Yahoo! regarding the economy shows just how clueless he really is.

"There is no question that there is some unsettling times in the housing market and credits associated with the housing market," the president said. But he said he didn't see that spreading to the broader economy.
Bush said he was optimistic about the economy. "But I would be pessimistic if I thought Congress was going to get their way — and they're not. We're not going to raise taxes," he added.
Pressed on whether he thought there was any risk of recession, Bush said: "You need to talk to economists. I think I got a B in Econ 101."

So, let me get this straight. He makes a judgement on the effects of the housing market on the rest of the economy and then comes back and explains that because he received a B in Econ 101, he isn't qualified to comment on whether or not we are headed for a recession? Unbelievable.

- This is the time to pick up some investment real estate. This is very similair to the stock bubble. I think the recovery will be just as profitable as the stock market recovery has been for the last four years.

The Wikiwealth portfolio consists of the following:
Pepsi Stock (www.pepsi.com)
AGG Bond ETF
SharebuilderMoney Market (www.sharebuilder.com)
Optionsxpress Money Market (www.optionsxpress.com)

starbucks straddle

Hey

Starbucks might be in for a good three to six month straddle at $27.50. The Bands are closer than they were before their most recent breakout. The volume has dried up. The Average true range has also shrunk. I believe there will be a breakout. I obviously just don't know which way which is why I am suggesting a straddle. A chart is below.

The Wikiwealth portfolio consists of the following:

Pepsi Stock (www.pepsi.com)

AGG Bond ETF

SharebuilderMoney Market (www.sharebuilder.com)

Optionsxpress Money Market (www.optionsxpress.com)

Frito Lay Leads the Way

Hey

Even though I am not happy about some of the products that Pepsi and Frito Lay produce, their continuous stamp on the environmental cause is undeniable.

A Frito Lay plant has just earned a spot in the EPA's green leadership program. The text is below.

http://biz.yahoo.com/prnews/070830/lath025.html?.v=101

I believe their continued execution in advancing the environmental cause while making money will help Pepsi in the long run. With this market as it is, the companies with long run outlooks are the ones to be in.

The Wikiwealth portfolio consists of the following:
Pepsi Stock (www.pepsi.com)
AGG Bond ETF
SharebuilderMoney Market (www.sharebuilder.com)
Optionsxpress Money Market (www.optionsxpress.com)

Etrade

It seems the recent ridiculous movement of the stock market has created some decent opportunities to pick up some valuable stock at a decent price.

The one that is screaming out to me is Etrade.

The PE is 11 (very low), the growth in earnings is projected to be in the 20% range, and their exposure to bad loans is little. In fact, the most recent earnings report showed their credit rating rose!

With the volatility rising, more people have traded this month than expected. Couple that with the big boys returning next month to their desks, the company should easily make their earnings estimates.

The stock has been hammered almost 20% since their earnings release.

I recommend taking a look at this stock. I currently do not own shares in Etrade.

The Wikiwealth portfolio consists of the following:
Pepsi Stock (www.pepsi.com)
AGG Bond ETFSharebuilder
Money Market (www.sharebuilder.com)
Optionsxpress Money Market (www.optionsxpress.com)