LIVING OFF DIVIDENDS & PASSIVE INCOME

The QE2 leaving Southampton

Today the Federal Reserve launched the highly anticipated QE2, announcing that it will buy $600 million of Treasuries in 2011 ($75 million per month). It will also continue to reinvest payments on its securities holdings which could bring the total capital injection closer to $1 trillion dollars.

I’m still waiting to see any evidence of  “Change You Can Believe In” and for the $8.5 trillion bailout to kick in and create jobs. But since Bernanke seems that it hasn’t been working too well, we’re going to do exactly the same thing that got us in to this mess – keep interest rates low and turn on the liquidity spigots!

One point of interest is these policies seem to benefit banks the most. Here’s an excerpt from an article on Yahoo! News:  Read more... (435 words, 9 images, estimated 1:44 mins reading time)

Here’s a round up of some terrific articles I’ve read in the past week:  Read more... (172 words, 8 images, estimated 41 secs reading time)

• Why spend $1.7 million on lunch with Warren Buffett when you already know what he’s going to say? Well if you don’t then you better read the link.
• Is Goldman Sachs the equivalent of a Wall Street Mafia? Read this great piece and you’ll be convinced and maybe flabbergasted as well.
• Thinking of joining a startup firm? Guy Kawaski offers great career advice that I wish I had received 8 years ago!
• The specter of the subprime is still lurking! (use firefox plugin “refspoof” to read the WSJ for free)
  
• A little bit of personal finance with everyday luxuries you definitely can do without
• And finally, a link to the Christian Science Monitor’s new economic blog who discusses whether or not you should buy real estate at this time. Of course, with a link back to my site, how could I not include them!

Stanford professor John Taylor had an alarming op-ed piece in the Financial Times on the Trillion Dollar deficits

“I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO [congressional Budget Office] to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?  Read more... (343 words, 8 images, estimated 1:22 mins reading time)

There’s in interesting quote in the New York Times today:
“Banking should not be exciting. If banking is exciting there is something wrong with it.”
- Clay Ewing, President of German American Bancorp.

I just read this interesting article in the Financial Times. Seems like China has tired of US dollars and is looking to get rid of them.

Beijing Bets on Bullion

 By Patti Waldmeir in Shanghai , Financial Times, 6 May 2009

China is expected to keep buying gold to diversify its vast foreign reserves after it recently revealed it had been secretively buying bullion.

Beijing and Shanghai-based gold industry analysts said the country had almost doubled its bullion holdings. But they said China was likely to make as many purchases as possible within its borders, rather than turn to international markets where it could push up gold prices.

Beijing’s exact gold purchasing intentions are a state secret, but industry analysts are betting on more purchases as Beijing has been clear about its desire to diversify its foreign reserves away from the US dollar. Although gold is quoted in dollars, its price usually rises when the dollar weakens.  Read more... (502 words, 8 images, estimated 2:00 mins reading time)

The state of California, the 9th largest economy in the world, is having liquidity issues of its own. Faced with a shortfall in taxes, it under-budgeted by nearly $42 billion. The government said it will have to delay issuing tax refunds. In fact, according to Governator Arnold Schwarzenegger, the state could run out of cash by February.

According to the AP News:

California’s controller says he will begin a 30-day delay on tax refunds and other payments starting Feb. 1 because the state is running out of money.

Controller John Chiang said Friday he must delay $3.7 billion in payments next month because lawmakers have failed to address California’s growing deficit.

With a $41.6 billion shortfall over the next year-and-a-half, the state is on the brink of issuing IOUs.

Chiang says his office must continue education and debt payments but will defer money for tax refunds, student aid, social services and mental health programs.  Read more... (200 words, 8 images, estimated 48 secs reading time)