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Tim McMahon
Jobs Crisis Among Recent College Graduates
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Education Trends
The ongoing unemployment crisis in this country has plagued Americans of all backgrounds and vocations looking to find a decently paying job in their field. But one demographic that has been hit particularly hard by unemployment is one that you might not expect. The Atlantic magazine reports that unemployment has been unusually rampant among recent college graduates. Specifically, they cite a report from the Associated Press that nearly 53% of recent college grads are either underemployed or out of a job altogether. Those are sobering statistics for current college students looking to graduate in the immediate future.
Graduated
When the Associated Press says that recent college students are underemployed, they mean that college students are taking jobs that they’re either overqualified for or those that don’t utilize the full range of their skills. A political science major may be working at a coffee shop, or advertising major may have chosen a job in retail over unemployment. But some graduates can’t or won’t find employment in lower skilled jobs—the Associated Press reports that nearly 750,000 graduates have no job prospects. In other words, a lot of young people are making hard choices about the immediate future of their careers. Continue reading
Invest in Structured Bonds?
By Tim McMahon, editor
What Are Structured Bonds?
First let’s look at what makes up a bond. A bond is a form of debt where a company borrows money from investors and has a certain expiration date called a “Maturity Date”. The interest rate that the company pays is called the “coupon rate.” One advantage of a bond over a stock is that a bond is a debt so bondholders are “creditors”.
In the event of corporate bankruptcy bondholders go to the head of the line while shareholders as owners go to the back of the line and only get whatever is left over (if anything) once all the creditors (including bond holders) are satisfied.
In an effort to lower the interest rate they had to pay to investors companies started offering “convertible bonds.” Thus a convertible bond has all the security benefits of a bond with some of the upside potential of stocks.
A convertible bond has the option to be able to be converted into stock if the price of the stock rises high enough. In this way, investors were not only lenders to the company but could also participate in the growth of the company as shareholders. In exchange for this added potential gain the bondholders were given a lower interest rate, i.e. the “Coupon rate” is lower on a convertible bond than on a similar standard bond.
Structured bonds are based on the idea of convertible bonds. In an effort to add even more flexibility and additional features including higher yields, lower risk or a variety of other features, investment banks started ‘slicing and dicing’ traditional bonds in a variety of ways creating derivatives called structured bonds.
Two Forms of Structured Bonds
There are two basic forms of structured bonds Continue reading
World-Wide Marginal Tax Rates
How does the U.S. Tax Rate compare with other countries?
Recently the people at Turbo-Tax created a great “info-graphic” comparing world-wide marginal income tax rates so we can see where we stand.
According to Wikipedia
A marginal tax rate is the tax rate that applies to the last unit of currency of the tax base (taxable income or spending)
In other words the marginal tax rate is the rate you will pay on the next dollar you earn. It doesn’t include other taxes like state taxes, sales taxes, property taxes etc. Based on this chart the U.S. compares pretty favorably on a tax rate basis when compared to other developed countries.
U.S. Healthcare Trends- Young Docs Not Optimistic
In March 2012, the Physicians Foundation surveyed 500 physicians aged 40 or younger. 250 were primary care physicians, 175 were Surgical specialists and 75 were hospital based specialists. The typical physician in the survey was 37 years old and employed by a medical group. You would expect these young physicians to be on top of the world, they’ve finished medical school and have promising well-paid careers. Interestingly, however, that is not the case. According to the survey,
These physicians are markedly pessimistic regarding the future of the U.S. healthcare system, with the “new healthcare legislation” ranking as a strong #1 reason for the pessimism. Many voice considerable cynicism with (what several call) government’ involvement.
Will future headlines read:
14,000 seniors with cancer DIE every year because they’re refused life-saving treatments?
Using the MIP to Decide- When to Refinance
The MIP (Moore Inflation Predictor) is our proprietary index that projects future inflation rates one year into the future.
It uses a “fan” style with varying level of likelihood that certain rates will be attained. If you are considering refinancing (see When is it Right to Refinance? ) naturally you want the best rate. In order to determine the timing just look at the MIP chart.
From it you can determine when the next bottom will be occurring. Even though the MIP tracks and predicts the “Inflation” rate, interest rates tend to track fairly well with Inflation. So when the inflation rate is bottoming the interest rate should be bottoming as well. And this makes sense because Continue reading
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Editor
When is it Right to Refinance?
With “everyone” talking about the historically low mortgage rates you are ready to decide if it “pays” to refinance. The “rule of thumb” supplied by mortgage companies is that if you can reduce your interest rate by 1% it is usually profitable.
But there is more to it than that. Like how long are you planning on staying in the house? If there were no fees or costs involved that wouldn’t be a consideration.
But in the real world, the first thing you need to determine is what rates do you qualify for and what are the other factors like points and closing costs. (See How to Find a Good Mortgage)
When you refinance it is common to roll the additional costs and fees back into the mortgage so there are no “out of pocket” costs. But this allows the Bank or other mortgage holder to charge you interest on these fees. At the current low interest rates and if you choose a short time period for your mortgage the additional interest will be relatively small.
But even at these low rates, if you have a 30 year mortgage, interest will end up doubling the amount of fees over the 30 year life of the loan. Continue reading
Low Mortgage Rates – Reduce Your Payment or the Length of the Loan?
Prior to 2008 current mortgage rates were at their lowest levels in decades and many people were refinancing. At the time I warned that “this trend seems dangerous to me because rather than using this as an opportunity to shorten the life of their mortgage people are just reducing their payments.” Or worse still they were increasing their debt levels by maxing out their home equity.
Why would paying less on your monthly mortgage be bad? Paying less to the bank sounds like a good idea to me! The reason I think this is a bad idea is because many people are using this as an opportunity to increase their debt. Because they can afford the payment on a larger debt they are simply spending up to the limit. People who do this will never get out of debt and will remain slaves to the bank for their entire lives.
1st Choice- Refinance to reduce the life of your loan
Remember the old song “16 tons” which spoke of shoveling coal all day long and just ending up another day older and deeper in debt. Not even being able to die because I “owe my soul to the company store”. Today people have an opportunity to get out from under and they aren’t taking it. Continue reading
How to find a Good Mortgage
It is always a good idea to compare mortgage rates from several different companies. But there are several factors to keep in mind. The lowest rate isn’t always the best deal.
Other factors to consider are “points” and “closing costs”.
Points are simply additional finance charges tacked on to the beginning of a loan. They can be paid up front or spread out over the life of the loan. Although adding them into the loan makes your up front costs lower, it greatly increases your total cost since in effect you are paying interest on interest.
Closing Costs are additional fees and expenses necessary in order to transfer ownership of a property. Some examples of typical closing costs are title insurance, title searches, court filing fees, and survey charges. Sometimes closing costs are called settlement costs. These fees are not the same with every lender so be sure to include them in your comparison. Continue reading
A Bi-Weekly Mortgage can Save You Thousands
How to Save $$$ on Your Mortgage
You can save literally thousands of dollars and quite possibly “tens of thousands” of dollars by following this simply relatively painless method.
By using this simple Bi-Weekly mortgage system to make your mortgage payments you drastically reduce the total amount of your interest payments and you can even cut the time it takes to pay off your mortgage! Sound interesting?
I did exactly this myself a couple of years ago after I had refinanced at a lower rate. But you don’t have to refinance to take advantage of this great method! A single five-minute phone call is all it takes. Often there is no charge for this service. I actually pay the mortgage company $2.00/mo. for the service but it is well worth it!
Chances are, you can do the same thing. Here’s how these “mortgage-reduction programs” work.
