Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
This was inevitable. Detroit filed for bankruptcy yesterday, making it the largest municipal bankruptcy to date. I’m sure the local news organizations will have a field day with this one. You can expect to see a lot of “Is (insert city name) next?” kind of stuff. It’s already happening in Chicago. Just give it time if it hasn’t started in your area.
I would not be surprised if this doesn’t have a spillover effect on the municipal bonds market. The words largest bankruptcy tends to do that. A little fear should push muni bond prices down over the next few weeks.
But what’s even more concerning is the outcome this might have on the pensions of city workers and the precedent it sets for other cities dealing with similar issues. This points out the growing problem with pensions – a lack of funds. It’s usually due to a few things: inflating the projected returns on pension funds, not correcting the projections after the fact, and not paying into the pension at all. I think there’s a lesson in there for everyone.
There’s been a number of studies that show our belief in being above average (this article does a great job covering it). Chalk it up to our competitive mentality. This falls inline with the idea of beating market, the S&P 500. Is it possible? Sure. The records of enough great investors show it’s not just a fluke.
But will most of us do it? Doubtful. Most won’t bother to learn, research, and refine the habits necessary to succeed beyond average. If that’s the case, don’t try. There’s nothing wrong with average in investing. Below average is the problem.
- The Error-Proof Portfolio: Rising Rates a Wake-Up Call for Your Whole Portfolio – good run down of rising rate risk in a portfolio.
- Returns From the Stock Market: What to Expect – seems valuations do matter, even with index investing.
- Close to Retiring? Uh-Oh, So is Your Financial Adviser – something to think about for those getting up there in age along with their advisors.
- What If Bernanke Could Be Blunt – can you image blunt politicians, me neither.
- On Wall Street, a Culture of Greed Won’t Let Go – might be time to change the compensation plans.