Tonawanda News

Columns

November 20, 2012

CONFER: Why stocks are higher than expected

(Continued)

Tonawanda News — Consider real estate. The primary cause of the Great Recession was the bursting of the housing bubble. People bought expensive homes that they shouldn’t have (while lending institutions and the government enabled them) in hopes of continued growth in the market, believing they could turn around and sell the home a few years later for many dollars more. It wasn’t long before it was realized

that they couldn’t support their investments: Rising energy and food prices socked the economy in 2007. That caused job cuts and cutbacks which in turn affected those who had taken on the exorbitant home payments. Housing prices plummeted and homeowners who were underwater abandoned ship. Because of that sting, people are hesitant to buy first and second homes again, banks won’t

allow them to, and, above all, many people are incapable of doing so in today’s world because of high unemployment and lower wages.

Government bonds and notes used to be solid investments, too. Someone could buy the debt from the government and, years down the line, reap the rewards from a solid yield in the 5 to 9 percent range in the 1990s and a middling 3 to 6 percent during the 2000s. Now, a 10-year Treasury note has a yield around 1.5 percent. To buy them at such low rates, you’d have to be either a fool, ungodly conservative, retired or worried about an all-out economic collapse. What has contributed to this destruction of the bond market is the willingness of the Federal Reserve to continue to buy-up debt in an effort to keep the federal government afloat.

The Fed has also been complicit in the loss of gains on Certificates of Deposit (CDs). Borrowing from the Fed and other banks is too easy for financial entities thanks to historically low rates, so banks no longer have a reason to lean on consumers for borrowing. Back in the 1980s your average investor could make a killing on CDs – 6-month returns were as high as 17 percent and 5-year CDs were at 12 percent. Now, banks market to their clients 2 percent yields like they’re the best thing going.

Text Only
Columns
  • duvall, eric.jpg DUVALL: On lines blurred, crossed and nonexistent It strikes me more and more how blurry the lines have gotten in all facets of our world, large and small.

    July 28, 2014 1 Photo

  • Tucker, Barbara.jpg TUCKER: Oh, the joys of Sound Off Never thought the words "Thank goodness for Sound Off" would ever be printed here.

    July 26, 2014 1 Photo

  • adamczyk, ed.jpg ADAMCZYK: And now for something completely different... Last weekend I attended a local movie theater (a plushy, posh experience; they design these places now to get you out of your living room and away from your home electronics) to watch the sun set on the British Empire.

    July 25, 2014 1 Photo

  • wallace, amy.jpg WALLACE: Too much information? Is there such a thing as TMI or too much information anymore? Some might say yes.

    July 24, 2014 1 Photo

  • duvall, eric.jpg DUVALL: On reading and the lack thereof It was surprising to me a few weeks ago when a friend asked a group of us to estimate how many books we have each read over the last five years. The English teacher said 200 and he far and away led the pack. I was probably the median and my number was 20-25.

    July 23, 2014 1 Photo

  • confer, bob.jpg CONFER: A Con-Con would be a con game

    July 23, 2014 1 Photo

  • duvall, eric.jpg DUVALL: Conflict in Ukraine now a concern of global proportions It seems increasingly clear Ukrainian separatists, with the help from the Russian military, are responsible for the tragedy. They, of course, have denied it. They've also denied access to the crash site to international investigators seeking to recover the dead and determine what happened. That's not something the innocent party does.

    July 20, 2014 1 Photo

  • ADAMCZYK: Personal development, rendered in steel Accepting the premise that everyone needs to fill the same amount of time every day (24 hours, every day), some people use theirs rebuilding things, tangible things, and thus fulfill a few intangible goals.

    July 18, 2014

  • WALLACE: Festival season is underway Summer is the season of fairs and festivals. From Canal Fest in the Tonawandas to the Allentown Art Festival and Italian Heritage Festival in Buffalo to the Erie County Fair in Hamburg, the Western New York area has no shortage of things to do with the family over the summer.

    July 17, 2014

  • duvall, eric.jpg DUVALL: King George's abdication leaves many questions I've covered Niagara County politics for 10 years and it's been a fascinating -- and often infuriating -- experience. With the news the man known with equal parts respect and cynicism as "King George" is walking away it's about to get more interesting.

    July 16, 2014 1 Photo