Ask MetaFilter questions tagged with finance and economy

Economics' greatest hits? ... or... Where's the science in economics?

zaebiz — Tue, 23 Jun 2009 12:54:37 -0800

As a former scientist, help me gain some faith in economics. What were the great successes of economics as a tool for making better decisions in the last 100 years? The Queen of England said it best for me : Why did none of the big shot economists see this crisis coming?

Having been scientifically trained, I have always had this belief that economics is a mostly mathematical rationalisation of events after-the-fact with the same predictive capabilities as astrology and whose validity decreases as more people believe in it. Why am I wrong? what demonstrable uses has it had? Also interested in any books or papers discussing either side of this debate.

Most bang for the buck

Iteki — Fri, 30 Jan 2009 14:15:22 -0800

Financefilter: Better to buy sterling now in bulk, or monthly for a year? Asking for a friend. We have had a look at this, this, and this previous.

Said friend has euro savings. She needs to pay for a course in sterling on a monthly basis starting this month. Having exchanged enough for the current installment already she has lost about 10p per pound purely to the rate disparity. It adds up.

That said, is she better off exchanging the entire fees now at 89p per euro or will it work out as closer to parity if exchanged on a monthly basis throughout the year? Law of averages or something?

If it's relevant, she is intending to relocate to the uk later in the year.

Are there other good options she is missing here? For example would paying by credit card negate bank commissions or anything?

More tax cuts?

Vindaloo — Mon, 12 Jan 2009 06:48:58 -0800

Canadian finance minister, Jim Flaherty, is set to announce our government's plans to stimulate the economy. That plan is rumoured to contain some major tax cuts. Help me understand why every policy, in good times and bad, always calls for tax cuts. The Harper government has already made numerous tax cuts, including the famous 2% reduction in the GST. This reduction means the average Canadian now save about $250 a year, but it costs our government about $7.5 billion in lost revenue. And this was done when the economy was strong, the coffers were full, and the government said it didn't need the money.

Now things are bad, the economy stinks and the government must intervene. With more tax cuts.

I don't get it. Tax cuts when things are good, tax cuts when things are bad. Tax cuts in the morning, tax cuts at lunch, I smoke two tax cuts then I smoke two more. Please help me understand why the solution to seemingly every macroeconomic situation is tax cuts. Is it just my left-bending mind which finds this suspicious?

Can I track the OMX Government Relief Index using Google Finance?

kidbritish — Sat, 10 Jan 2009 21:30:36 -0800

Can I track the OMX Government Relief Index using Google Finance?

How to handle a retro-reduced inheritance?

Anonymous — Mon, 13 Oct 2008 06:28:52 -0800

How to handle a retro-reduced inheritance? This spring I received an inheritance from my grandmother. Initially there was a check to each of us for $n, and later a (much larger) check for %x, the leftover balance. Now I am told that the executor/overseer, her step-son (btw), claims to have made a mistake on the calculations and the % portion was distributed before someone "cashed" one of the $n checks (for $100,000). He is now seeking to recollect on this error. For me, this is to the tune of about $20k.

Perhaps ordinarily I would just shrug and be as helpful as possible. But the timing is odd. After watching my family's portfolios fall nearly 40% in the past few weeks, combined with a suspiciously dispersed inheritance in our family 20 years ago, it is cultivating,harvesting, and curing some weird feelings.

1) Who "overlooks" a $100,000 check? I learned in 6th grade math class to balance a checkbook by what you write out on it, not what is already cashed. If this moron missed this, what else did he miss? How large was the estate in order to miss this?

2) What are my actual obligations? If the check was already cut to me, do I legally owe anything?

3) Obviously, I am seeking legal advice ASAP but wanted any immediate nerd wisdom/questions to ask/etc

4) Tips for negotiating with family that I am socially very distant from? My sister and I are the only surviving islands in this midwest-conservative river. The executor in question's father had framed pictures of Reagan and Bush on his wall. I was essentially shunned from this part of the family at age 15 for having a pierced ear. My sister was not given college funding (as everyone else in the family was) because of her controversial decision to study art instead of home-ec or teaching (the only appropriate options for a woman).

I would really like any guidance, how to talk to a lawyer, what to ask, how to socially handle this, anything. Its just not stuff I want to deal with and I resent that I am even needing to. Thanks for understanding and any possible guidance.

Great Depression movies

DirtyCreature — Thu, 02 Oct 2008 17:12:10 -0800

Most acclaimed or your favorite movies about life during the Great Depression or the Great Panic of 1873?

So now that we're in this handbasket, how do we get out?

dismas — Mon, 15 Sep 2008 15:25:59 -0800

Okay, so a bunch of US financial firms are in a mess. What can/should be done about it? I've got a pretty okay handle on what's went wrong with Bear Sterns, Lehman Bros., Freddie and Fannie, and the housing market crisis in general, I think (although if someone has a really awesome explanation and wants to post it, that's fine). I'm seeing a lot of articles saying things are a mess (to varying degrees), but I'm having trouble finding anyone saying what should actually be done now that we're in the mess. What can and should Congress, the Fed, the Treasury Department, whoever do? Anything? Do we just not know?

I'm reasonably financially literate (I'm an economics major who hasn't taken any classes about finances specifically, but I read financial publications on a regular basis and feel like I have an okay handle on them), but if the answer is really specific and complicated, I might need a little bit of an explanation - in particular, I get a little confused about all of this derivative trading business.

Liquidating an estate in the USA... in today's economy. Shouldn't we just wait a while?

Anonymous — Sat, 21 Jun 2008 07:33:00 -0800

How should we handle liquidating assets in an estate in the USA right now? Assets consist primarily of a stock portfolio and a house. My father recently passed away, leaving behind an investment portfolio worth about $650,000 and a house valued at $300,000. This will be split 6 ways; four of the inheritors have expressed a preference to liquidate everything straightaway and wash their hands of it.

Aside from the emotional issues the other 2 inheritors have with rushing into this, we are wondering financially what is the best way to handle this given today's market conditions. My understanding is that housing prices are very low, and we can all see what's happening with the stock market. My first reaction is that now is an extremely bad time to be liquidating any assets from a strictly economical perspective; this view is what I am asking for your feedback on.

None of us are very experienced in financial matters; we plan on searching for a financial advisor next business week, but in the meantime I would appreciate any informed advice about how we can best retain the value of these assets as we decide how to handle the estate.

Specifically:

1) Should we sell the house now and take what we can get, or is it likely that we could get more value from holding on to it for a year or so and possibly trying to rent it in the meantime? I think that there are two factors that would contribute to the house being sold under value: today's market conditions, and the desire on the part of the executor of the will to sell the house as quickly as possible regardless of any loss. At least one of these seems avoidable, but if the market is expected to worsen, it would be an advantage to sell it now. No one plans to live in the house, but there are local family members who have offered to help with its care and administration if needed.

2) Same as above for stocks; I have not yet seen the contents of the portfolio, but am inclined to believe that after the November elections, there is a good chance the economy will be positively affected. We also know that the portfolio consisted of low-risk stocks aimed more at stability and long-term returns. Should we wait and see, for this or any other reasons, or should we cash it in now in case things get even worse?

3) The biggest concern: what happens if the 6 beneficiaries disagree on the questions above? One of the four who wants to eat the whole cake now will have power of attorney by Monday. If the two of us strongly disagree with his opinions on how to handle the assets, what happens?

More important background: the 4 who want to take the money and run are all 40-something homeowners who are married with 2 or 3 kids apiece, have Masters degrees, are stably employed in long-term careers, and generally already have all the security they could ask for as far as I know. We (the other two) are in our early twenties, have bachelor's degrees, are employed but with very modest salaries, and are unmarried. I think these differences are serious and, without being selfish, I feel that given that they have so much more security, our needs for the near future should be prioritized. The people who left this inheritance were there to support them when they were our age, and we no longer have any sort of safety net. Side question: is this incredibly selfish of me? I realize that they are probably looking forward to using their share towards their children's college tuition and their retirement funds, but the fact is that a few thousand dollars lost by liquidating sooner than necessary could mean a lot more to the younger beneficiaries. We are not sure why they want to rush into liquidating everything immediately when none of them have any immediate need for large sums of cash that we know of, and certainly no one was anticipating this to happen now.

Again, we will look for a financial advisor and are going to speak with some attorneys in our local network as well, but appreciate your advice in the meantime.

A real economic downturn, or not so much?

bystander — Mon, 05 May 2008 05:05:25 -0800

How is the downturn in the US economy affecting you? I live in Australia, so have limited exposure to the US day-to-day economy, but read a fair bit of US media. If you live in the US you can easily look at a NYT story quoting starving Florida realtors and say "beat up", but from here it is hard to tell what is genuine, and what is exaggerated (or at least unrepresentative) to sell newspapers.
Are MeFi members really finding it tough? Context with a before and after would help understand comments.

Don't cry for me, just help me write about Argentine bond trading

np312 — Wed, 03 Oct 2007 19:43:25 -0800

Does this (fictional) international finance scenario I'm writing make sense? If not, how can I tweak it so it's more accurate? (Bond traders, investment bankers, or economy-buffs, feel free to chip in!) I have a very limited understanding of global business finance but need to have a minor part of a story I'm working on involve an element of this. (see related question)

So I've figured out that the character is a managing director of emerging markets for a JP Morgan-type multinational firm. In this particular scenario, (which takes place a couple months before Argentina's 2001 economic crisis,) she has to convince an Argentine businessman or government official (not sure what his title would be, feel free to chip in) to allow her American JP Morgan-ish firm to broker the sale of Argentinean securities and/or bonds. Yet when their economy falls apart, she loses her deal and/or gets shafted because no one wants to do business with Argentina anymore by that point in their crisis.

Um... yeah. I have no idea whether this is a plausible scenario. Help me make it plausible, please! Details are good! Many thanks.

If the dollar collapses, what the hell happens to my retirement account?

Anonymous — Mon, 01 Oct 2007 14:54:38 -0800

Looking for good articles, links, etc. that discuss (rationally, not all panicky-like) strategies for managing one's 401(k) in light of recent shifts in the market and (perhaps more importantly) the declining dollar. So far, everything I've found seems geared toward investors managing their stock portfolios rather than workers managing their retirement accounts. Part II: if anyone would care to comment (I know that You Are Not A [or My] Financial Planner), here's my particular situation (hence why the question is anonymous; it's that weird American neurosis about discussing income rearing its ugly head).

Me: late 30s, unmarried/no kids (but long-term SO and I are discussing both of those factors changing over the next couple of years). I expect to retire in 25-28 years. My employer also offers a pension on top of our retirement plan, in which I am fully vested (but don’t know how much I want to even bank on it, considering the horror stories that sometimes crop up regarding disappearing pension funds). I don't plan on relying on Social Security for anything; I figure if it still exists when I retire, that will be gravy.

Income: $53,000/year, with 4-5% raises annually. I put aside 10% of pretax income into my retirement account, with a company match of 4% of my income. I plan to increase my investment by 1 or 2% annually till I reach my contribution limit. (Other relevant financial facts: I rent my home, own my car outright, and have about $7000 in savings; my only debt is about $3000 in CC debt--at 0% till next summer--which I am on track to pay off once and for all in less than a year.)

Currently have just under $27,000 in account (I didn't really start getting serious about contributing to plan and managing it till a few years ago). My asset allocation is:
- 25% international equity
- 30% U.S. small/mid equity
- 30% U.S. large equity
- 15% "guaranteed income"

None of those funds has significant holdings in real estate, so they haven’t (so far) lost much value in the recent market gyrations at all (in fact, while some of my individual funds are down, my overall return is--for now, at least--still quite good). Beyond that, I understand that the market has its cycles anyway, and has historically always gained in value over the long run. (And since I’m not retiring for at least 25 years, the long run is what I am concerned about.)

BUT! I am very concerned about long-term dollar devaluation. Does it make any sense to shift more money into international funds (which are doing extremely well for me), even though those are normally considered the most risky? That is, if the dollar keeps declining for years to come (which I think it might), doesn't that actually mean that international funds become less risky?

Also, is there anything (besides hysteria) to the rising hubbub in the blogosphere of "Buy gold! Buy gold!"? And what to make of the analysis that I read somewhere (wish I could find it now) that the long-term historical gains in the stock market may begin to reverse once the baby-boomers begin retiring (i.e., once they start removing their funds out of the market in quantities greater than the current workforce will be putting their funds into the market)?

Sorry if some of these questions seem rudimentary. As I said, I only started paying attention to these things in the past few years. Thanks!

Dollars to donuts

doctorcurly — Thu, 20 Sep 2007 05:42:04 -0800

Should I be worried about an impending collapse of the US dollar? There's been a lot in the news lately to suggest that the US dollar is headed for even deeper trouble than it's been, starting with various oil-producing countries moving away from the dollar standard, and China's threatening to off-load its stash of dollar reserves.

Any economists out there care to comment?
This question was asked also about a year ago, but the times, they are a-changin'...

How much should Google's stock be worth?

rkent — Fri, 06 Aug 2004 09:18:43 -0800

Amateur economists, VCs, MBA students: what's a fair price for a google share? Based on what assumptions? Some background info to assist your calculations. Centrally from this NYTimes article:

24.6 million shares will be sold
The distribution structure will be Dutch Auction, where (basically) the top 24.6 million bids will get a share, but only pay the amount of the 24.6 millionth-place bid.
They hope to make around $3 billion, so that puts the expected share price at over $100.

I'll start the estimating with an extremely simple calculation, assuming that a stock "should" have a P/E ratio of no more than 20. Based on earnings of $105.6M last year, this puts the (backwards-looking) "correct" market cap at $2.1B, for a share price of around $85. So maybe the $100+ isn't so unreasonable if you expect the earnings to increase this year?