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How to Invest Smarter After the Recession
Tweet Share on Facebook August 28, 2009 Comment (23)John Bogle opens his seventh book by recalling a 2005 poem by Kurt Vonnegut called "Joe Heller." Vonnegut writes of an exchange with his friend, the Catch-22 author, at a party tossed by a billionaire. Vonnegut observes that the host made more money in one day than Heller made from Catch-22 since it was published in 1961. "I've got something he can never have," Heller replies. "The knowledge that I've got enough."
Many of us don't, apparently, which compelled Bogle, founder of the Vanguard mutual-fund firm, to write Enough: True Measures of Money, Business, and Life. Bogleheads, as fans of the financial pioneer are known, will recognize some familiar themes: Most money managers charge exorbitant fees that severely cut into returns for the average investor, for example. But Bogle also shows prescience in describing the housing bubble and other problems that sank the economy, in a book written mostly before Lehman Brothers failed in 2008, igniting a financial rout. I spoke recently with Bogle about how the recession and other factors will change the way we spend money and plan our financial lives. Excerpts:
How are the recession and the financial meltdown changing the way people need to think about their financial future? What happened in the '80s and '90s is a completely nonrecurring phenomenon. Two 17 percent-return decades in a row. That's without precedent. PEs [price-to-earning ratios] went from 8 to 16 to 32. For those returns to continue, PEs would have to go to 128. That may happen someday, but I don't want to be around to see it.
[See why a housing rebound could take 20 years.]
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The Case for Postal-Style Healthcare
Tweet Share on Facebook August 26, 2009 Comment (164)You've heard the refrain: If the government ran healthcare, it would be just like the U.S. Postal Service. And nobody wants that.
Or do we? The USPS, an independent government agency, is the convenient butt of jokes regarding poor service, rude employees, and occasional government mangling of personal property. It routinely borrows from the government to cover operating losses and endures disruptive political meddling in basic management decisions.
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6 Confirmation Questions For Ben Bernanke
Tweet Share on Facebook August 25, 2009 Comment (7)It’s not surprising that Ben Bernanke is getting a second round as chairman of the Federal Reserve. Had President Obama bounced Bernanke after one four-year term, it would have sent an unsettling message just as the economy appears to be turning the corner. And history may show that Bernanke’s aggressive intervention in the economy over the last 18 months has been much more prudent than the hands-off approach his detractors would have preferred.
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Why Health Insurers Make Lousy Villains
Tweet Share on Facebook August 25, 2009 Comment (343)One of the fresh spectacles we're likely to enjoy this fall is moral outrage—real or feigned—over health insurance companies that may or may not be rapacious.
President Obama has already singled out insurers as the villains responsible for exorbitant healthcare costs that are bankrupting families and businesses and making care unattainable for millions. Rep. Henry Waxman, chair of the House Energy and Commerce Committee, has asked 52 insurance providers for detailed data on pay and perks for executives, junkets for employees, and other ways they spend the money that comes from premiums paid by policyholders.
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How Your Car Compares to the Chevy Volt
Tweet Share on Facebook August 21, 2009 Comment (20)General Motors has delivered some momentous news this year. There was that inconvenient bankruptcy filing on June 1, and the taxpayer bailout that now totals $51 billion. To get our minds off that, GM recently announced that the Chevrolet Volt, which is now basically a taxpayer-funded science project, will get the equivalent of 230 miles per gallon in city driving. Whoa. In overall driving, GM assures us the Volt will shatter the mythical 100-mpg mark.
There's reason to be skeptical, since GM has overpromised many times before. And if GM ever needed some favorable press, it's now.
But so far the Volt is standing up to scrutiny, and the closer we get to the scheduled launch late next year, the more innovative the Volt appears. Even though most Americans won't buy one, the Volt could create one of the first meaningful alternatives to gas-powered cars. It could also change the way we think about fuel economy—and reinvigorate beleaguered GM.
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Could Your Health Insurer Run “Cash For Clunkers?”
Tweet Share on Facebook August 21, 2009 Comment (5)People opposed to healthcare reform have a new mantra: If the government can’t run the “cash for clunkers” program, do you really want them managing your healthcare?
Catchy. Timely. And probably as misleading as “death panels” and “euthanasia.”
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How to Avoid the ‘Cash for Clunkers’ Snarl
Tweet Share on Facebook August 19, 2009 Comment (13)When car dealers start doing business with the federal government, whaddya expect? Perfect harmony?
Of course not. Several weeks into the "cash for clunkers" program it turns out that delivering a couple of billion dollars worth of rebates to hundreds of thousands of car buyers can generate a few flat tires. The Department of Transportation's latest update on the Car Allowance Rebate System shows that the government has received applications for about 412,000 rebates totaling $1.7 billion. But so far, the feds have approved only a fraction of those, leaving dealers furious.
[See which carmakers have been hurt most and helped most by the recession.]
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Why a Housing Rebound Could Take 20 Years
Tweet Share on Facebook August 12, 2009 Comment (46)You know where the housing market has been. You may not want to know where it's headed.
There are tentative signs the depressed housing market may finally be close to bottoming out. That might sound like good news, but hitting bottom doesn't mean an upward rebound will follow anytime soon. Economist Celia Chen of Moody's Economy.com has published a forecast suggesting that residential real estate could take 10 years to recover in most states—and 20 years in Florida and California.
[See 10 cities facing the next real estate bust.]
Chen predicts that house prices will stop falling by the second quarter of 2010, which is consistent with what the Federal Reserve and many other forecasters have said. But her longer-term outlook helps explain why many economists are gloomy about the nation's economic prospects for the next several years. Some of Chen's predictions:
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How the Chevy Volt Will Transform Fuel Economy
Tweet Share on Facebook August 11, 2009 Comment (84)It’s an eye-popping number: 230 miles per gallon. General Motors says that’s the mileage its new plug-in car, the Chevrolet Volt, will get in city driving, assuming it goes on sale as planned in late 2010.
It’s also misleading. The Volt will get astounding “gas” mileage because it won’t exactly be powered by gas. At least a lot of the time it won’t, if drivers use the car the way GM envisions. That’s the whole point of an electric car: To propel a vehicle with something other than petroleum. If the Volt were powered mostly by a windmill or a nuclear reactor, it would also get great gas mileage, since the fuel would be coming from some other source.
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10 Cities Facing the Next Real Estate Bust
Tweet Share on Facebook August 11, 2009 Comment (9)The worst of the housing bust might finally be over, but another real estate tsunami is about to swamp many American cities. This time, it will be office buildings and retail space going vacant and facing foreclosure.
Like housing, commercial real estate goes through booms and busts, and the coming wipeout is likely to be a doozy. Commercial developers went on their own spending spree earlier this decade, racing to cash in on the hot economy with new office towers, hotel complexes, and retail projects. Banks supplied hundreds of billions of dollars in loans, often assuming that rents paid by tenants would keep going up. "The assumption was that the good times would go on forever," says Victor Calanog, director of research for REIS, a real-estate-research firm.
Rick Newman
The global economy is mysterious, even scary. Chief Business Correspondent Rick Newman connects the dots. In addition to his writing for U.S. News, Rick is the co-author of two books: Firefight: Inside the Battle to Save the Pentagon on 9/11, and Bury Us Upside Down: The Misty Pilots and the Secret Battle for the Ho Chi Minh Trail.
Read Rick's latest blog entries here.
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