Sushi Money

A dynamic week thus far with the market rallying off lows, and the SEC cracking down on short sellers in the financial sector.   Although markets may struggle today as tech bellwethers Microsoft, Google and IBM are giving analysts concern over the sector.  Technology shares have remained strong overall but Google is raising a few eyebrows with second quarter revenue jumping only 35% and paid clicks 19% compared to 20% a year ago.  Microsft’s profit leaped 42% but that may not be quite good enough as the earnings dipped below estimates as well.  And Citigroup posts a $2.5 billion loss but beats estimates? 

Meanwhile Al Gore is telling Congress not to let anyone drill for oil and that we need to shift faster to renewable energy, but T. Boone Pickens probably has a lot of better ideas Al.  Besides, why not do both?   While the energy debate heats up, the price of oil has been falling.  Is this the top for oil and energy?   Probably not. 

And all the world’s a stage this week as Senator Obama heads out on a “fact-finding trip” around the world to meet Middle Eastern and European leaders.  And the media is “going gaga” with three network anchors taking the trip with him.  Wow, with coverage like that who needs advertising?! But he will meet a host of world leaders and discuss many critical issues. 

The McCain camp calls it a political stunt… Politics? In an election year? Yep.  Interesting that McCain’s been to Iraq eight times and Afghanistan four times over the years, but Obama just once to Iraq in 2006, and never to Afghanistan.  And yet Obama’s media coverage will be non-stop, much to the consternation of the Republicans.  No time like the present however, especially with the Democratic convention next month?  If Obama wins the election, my guess is this trip will have been a pivotal event.  But you never know, sometimes people get the wrong idea.   With the New Yorker fiasco a lot of folks seem to think the Obama’s are off limits to satire.

But after the takeover of IndyMac Bank, many people are wondering if their investments and savings are safe.  If a leading national bank can become overextended, and then taken over by federal regulators in order to prevent a total collapse, what does that say about the other banks and institutions we use?  Can it happen with other banks?  Do we need to worry about our money?

The simple truth is that any bank, and any investment, can fail.  There are few guarantees in life, and getting a return on your money isn’t one of them.  Most banks however will be just fine.  We live in an amazing country regardless of the current economic challenges, and if we invest patiently and wisely, our money should grow over time.  If we put our money in reputable banking institutions, then we should feel secure in the knowledge that the money will be there when we need it.

Saving money is different than investing money however. Savings accounts are like emergency funds, and if you don’t have an emergency fund, then that’s priority #1.  The emergency fund should hold enough cash to fund 3-12 months of living expenses, depending upon your career and personal desires.  Most folks shoot for 3-6 months living expenses, and most Americans don’t even come close.  But it’s important as a safeguard for uplanned or emergency expenses, and in scary economic times, the emergency fund is one of the best things we can do to prepare.

By the way, to reiterate basic banking fundamentals, it’s important to remember that the FDIC only insures or guarantees banking funds for individual amounts normally up to $100,000. More may be insured if the account is joint, or meets other criteria. But as an individual, if you are keeping more than $100,000 in cash, CD’s or money market accounts within the same banking institution, then your money may not be protected in case your bank fails. 

What can you do?   Quite simply, move some of that money to a different bank, or several different banks.  Some folks don’t realize this.  You can have $300,000 for example, divided in $100,000 accounts at three different institutions, and all those accounts will be guaranteed and insured by the FDIC.  That’s a whole lot better than wondering if you’ll get your money back (in excess of $100,000) after the bank fails, as some with IndyMac Bank are doing.

Here’s a good look at the IndyMac Bank problems and a few questions and answers from Dave Ramsey:

If you have further questions about FDIC insurance and your account coverage status, take a look at the FDIC website. 

I’ve said it before, but investing means you don’t need the money for 3-5 years, preferably closer to 10 or beyond. You are investing the money for the future, not for a car you want to buy or a down payment for a house in 2 years. Of course the “patient” part of it is as difficult as the “wisely” part of it. It’s difficult enough to keep ourselves investing over time, but even harder to be successful by ourselves.

I’m a big believer in holding low-cost mutual funds over time, and putting together a diversified allocation of assets that will grow over decades.  If you can afford professional help, then get it. If not, then maximzie that 401(k) and IRA each year, and look at the options available within the plans. Don’t just stick with company stock.  Most companies do not limit the options you have within the 401(k) or retirement account, but sometimes you have to ask to learn more about your choices. For your IRA a solid company such as Vanguard can really help you manage retirement and investment accounts.

In other news it’s shocking, but not surprising, to read about U.S citizens hiding trillions of dollars in swiss bank accounts.  Holy cow, there’s some rich pickings for the IRS, and it looks like they’ve finally started enforcing the law.  And if you’re worried about where to get your next cup of Starbuck’s coffee, you can check out the list of store closings by state.  That’s an amazing about face for the flagship coffee company, and with competition from McDonalds and dozens of other coffee shop startups they’re probably trying to hold it all together.  Time to get another morning cup myself…

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