According to a recent report on the legendary investor, Warren Buffet, it’s time to purchase stock in American companies. The method behind what might seem like a bout of madness for the aging investor is that when the total market value of US stocks drops to a level between 70%-80% of American Gross National Product, it’s time to buy. 

Buffet’s fantastic success as an investor is based, in part, on his practice of seeking out undervalued companies to invest in. He soon moved from turning over a profit through stocks in a company to purchasing undervalued companies and bringing the most-successful ones together into the Berkshire-Hathaway brand. But purchasing a struggling company is well out of the average investor’s financial reach. The only remaining option is to purchase a portion of that company as stock. 

It could well be said that nearly every company in the US that has the resources to continue operations is currently undervalued. With the total value of the stock market reaching the 76% mark at best, perhaps Buffet is right and its time to pull some money from under that mattress and invest it. 

Perhaps it comes down to a matter of faith. Once you decide whether or not you believe the economy will recover, the question of investing gains simplicity. If you cannot afford to lose a dime, then just like always, you should keep your money in a safe place and not worry about the stock market. However, if you have some cash on hand and want to research the possibility of creating genuine long-term wealth, it’s a great time to check out the stock market.  photo credit: ArtemFinland

Unless you live under a rock that you are no longer making payments on, you’ve heard about government efforts to revitalize the American economy. As Sarah Palin said so eloquently, “we need to shore up the economy”. As reported by Forbes, the US Senate has approved a tentative $780 Billion stimulus package that must find common ground with the larger US House package. Both proposals use a combination of government funding and tax cuts to promote a new flow of money in the American economy. 

To break it down into simple terms: A similar plan implemented in your personal finances would attempt to solve your money problems by reducing your income and increasing your debt. You could do this by working less and making up for that lack of income by paying for more of your daily needs with a credit card.

That plan wouldn’t make any sense to you unless you happened to be self-employed without insurance and needed to take time off in order to heal up from a work-related injury. In that situation, it makes sense to reduce your income and increase your debt so that you can guarantee that you’ll be able to eventually return to work. 

It’s easy to hear the numbers being thrown around about the current stimulus package and make sweeping judgements about what will or will not work. It’s much harder to find multiple perspectives on a particular situation before forming an opinion. Taking the time to research current events, finance solutions, and ways to save money will not only enable you to make better decisions for yourself, but to influence others to make smart money choices. photo credit: Phil Romans

photo credit: Clean Wal-Mart

A recent article outlining Walmart Corporation’s decision to “go green”by New York Time’s writers Stephanie Rosenbloom and Michael Barbaro should give you hope as a consumer. Why?

Walmart is such a massive company that it dictates the terms by which it purchases products. To put this in perspective, imagine you are the primary customer at a local bakery. You purchase 5-600 loaves of potato bread at this bakery each week and it’s safe to say that they would fail without your business. Understanding your position, wouldn’t you feel comfortable asking your local baker to make potato bread in round loaves instead of the typical oblong ones? Of course you would! Your neighborhood baker would be happily obliged to bake round loaves in order to keep your business. Walmart does the same thing with many of its producers. When Walmart asks GE to produce a different shape of florescent light bulb, GE spends the money to make the new light bulb because it cannot afford to lose Walmart as a customer.

Walmart’s choice to “go green” means that companies the world over have started scrambling to develop environmentally-friendly versions of their products so they don’t lose Walmart as a customer. After only two days of board meetings, Walmart has begun a dramatic evolution toward environmentally-friendly products with a force that legislators can only drool over. Walmart wants to sell you everything. They’ve decided to win your money by offering environmentally-friendly products that will save you money in the long run while costing you less in the short term. Just don’t give them all your money.

photo credit: jurvetson

Auto manufacturing in the United States is big business with a long history. Henry Ford’s implementation of the assembly line as a manufacturing process revolutionized the way Americans built cars. Nearly 100 years later, two major automakers are begging for American taxpayer dollars to shore up business models that have crumbled in the face of the current economic downturn. Chrysler LLC, and General Motors have flown, driven, and begged their way to Washington in an effort to secure the funding needed to keep their company doors open. Here are a few of their stories: (more…)

It’s understandable but also a real shame that a lot of people only give to charities when times are good. That’s because tough times are when charities most need our help - they probably have a lot more people accessing their services and will be financially struggling themselves anyway. But if you’re also finding financial life a bit of a struggle, there are still ways you can help, according to the Five Cent Nickel blog, including:

• Volunteer at a charity. Your time is also valuable and charities always need volunteers.
• Clean out your wardrobe and give some clothes to charity that you no longer need - even in tough times there is bound to be something you no longer wear or no longer fits you well.
• Clean out your cupboards and donate things like kitchen materials that you rarely use.
• Check if your favorite charities are able to accept donations of frequent flyer miles. If you’re not using them anyway then they might be able to do some good.
• Donate blood! It doesn’t cost you anything but it could save somebody’s life.

Who says that you don’t have anything to give when the economy’s so bad? There are plenty of options to consider.

There are a lot of scared and worried people out there right now. If you’re one of them, maybe you could use some of the advice Tina Su gives at her Think Simple Now site on how to overcome fear during the current economic crisis. Rather than dwelling on the problems and feeling worse and worse, Tina has several useful pieces of advice for how to emotionally survive the recession:

• Focus on what you’re able to control: For example, accept that you can’t control the stock market, but you can control your reaction to what happens to your stocks.
• Reduce news consumption: In crisis times, people tend to glue themselves to the TV to find out all the latest (bad) news - just stick to getting the basics instead and don’t make yourself more depressed.
• Be grateful: Don’t think about what you’re losing or can’t have - focus on what you have to be happy about and grateful for, like family and friends.
• Remember that things will get better: The economy runs in cycles. Things will bounce back, although we can’t be sure when.
• Make sure you have an emergency fund: Just in case you lose your job or have unexpected expenses, you should always have an emergency fund, but in times like these it’s even more important to save part of your income every month.
• Choose to be happy: Learn more about maintaining a positive attitude to life and choosing happiness rather than a negative emotion.

Here’s a newsflash: it’s not all doom and gloom. In fact Rick Newman managed to come up with a pretty full list of ten blessings of these bad economic times; yes, there are positives you can see. Some of the highlights from this list include:

• Cheap prices on consumer goods: Fire sales of electronic goods like TVs and DVD players take place during these kinds of economic difficulties and if you’ve got some spare cash you can get huge bargains.
• Cheap cars too: Car dealers are finding it exceptionally hard to sell cars in this market, so if you’re ready to upgrade your car this is the time when you can get an excellent deal.
• And cheap stocks: When the stock market crashes, you can finally pick up some stocks for much lower prices - as long as you’re lucky enough to be left with some cash after the crash.
• Lower taxes: Depending on your own economic situation, you could be in for some significant tax cuts.
• Extra tasks at work: This might sound like a bad one - other workers get laid off and you have to pick up the slack - but on the positive side, it’s a great time to show that you are capable of doing a higher level job. Volunteer for some meaty tasks that would normally be outside your scope of duties and you might find yourself climbing the corporate ladder faster.

The September 15, 2008 bankruptcy filing by Lehman Brothers is the biggest in corporate history in terms of assets held.

Lehman’s slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. Crushed by debt and losses tied to mortgage-backed securities, the 158-year-old investment bank entered into bankruptcy after Bank of America Corp. and Barclays plc., which were considered potential suitors for Lehman, walked out of the deal.

One day after the filing, Barclays said it would buy Lehman’s United States capital markets division for $1.75 billion, a bargain price. Nomura Holdings of Japan agreed to buy many of Lehman’s foreign assets. Lehman also said it would sell much of its money management business to Bain Capital and Hellman & Friedman for $2.15 billion.

Driven by mark-to-market adjustments stemming from write-downs on commercial and residential mortgage and real estate assets, Lehman had forecast a net loss of about $3.9 billion or $5.92 per share for the third quarter ended August 31, 2008, compared to a net loss of $2.8 billion for the second quarter of fiscal 2008 and net income of $887 million or $1.54 per share for the third quarter of fiscal 2007.

But while Lehman’s collapse may have been the biggest to date, it’s not the first company to file for bankruptcy protection after making unwise–or illegal–investments. Here’s a look at some earlier collapses. (more…)

Even the wealthy have been hard hit by the country’s economic problems — Bill Gates alone has lost more than $1.5 billion — and their luxurious homes are the first to hit the chopping block. CNN Money reports on seven mega mansions, ranging in price from $1.5 million to $15 million, that Sotheby’s auction house plans to auction off on March 28, 2009.

The auction’s most affordable home, which comes in at a mostly-unaffordable $1.495 million, is located in Fort Lauderdale. The 5 bedroom, 3.5 bathroom home is billed as a cottage, and sits adjacent to fabulous golf courses and country club offerings. Marble floors, a golf course view, and a beautiful 30′ by 15′ pool round out the home’s assets.

Sotheby’s most expensive home, also located in Fort Lauderdale, was originally priced at $14.999 million. The 9 bedroom, 9 full bath and 4 half bath home will sell for much less (if at all), and its proud new owners will enjoy an infinity pool, spectacular landscaping, a home theatre, massage room, and even an indoor pool. No word on the mansion’s starting bid price.

Clearly, even the country’s wealthy home owners have seen their investments dive. If you’re one of the lucky few who still a bank account full of disposable income, check out CNN Money’s auction rundown… great deals are sure to be had.

photo credit: SqueakyMarmot

The economy has slowed to a crawl, which means less buying power for the average American. But when you do decide to buy, there’s good news: you now have leverage. Vendors are eager to sell their services, from mortgages to gym memberships, and that means that they’re willing to negotiate with you.

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