Money - AOL Money & Finance

Whether it's the "irrational exuberance" of the last decade or the apocalyptic view that prevailed last winter, investor psychology tends to be shortsighted and veer toward extremes. But investors need to overcome myopia and getting lost in the moment, Michael Mauboussin, the chief investment strategist of mutual fund giant Legg Masson Asset Management argues. And in his new book Think Twice: Harnessing the Power of Counterintution (Harvard Business School Press), he attempts to outline how all decision-makers can be aware of and counter their own biases.

Investors need to test the worldview that spirals out of a situation -- what Mauboussin calls the "inside view" -- with a broader perspective that takes factors like history and statistics into account.

Comments (2)Permalink

Alternative energy down on the farm: A still-untapped resource

By Alex Salkever | Nov 8th 2009, 8:30PM EST Filed Under: Energy, Technology, Green

As the federal government hands out billions of dollars to subsidize, push, prod and canoodle companies into jump-starting a green revolution in the U.S., one segment of the economy has been more or less left out. That would be farmers. The U.S. Department of Agriculture has gotten only a few tens of millions of dollars to underwrite grants and programs to promote rural alternative energy projects.

Still, acccording to the AP, the ranks of farmers who are producing their own power is increasing. But what's even more striking is how few now do so, considering the nature of their business and their access to precious energy commodities such as large acreage needed for solar panels and steady winds needed for wind-power generation. According to U.S. government figures collected in 2007, just over 1 percent of the 2 million U.S. farms are producing their own electricity, reported Cleantech.

Comments (3)Permalink

Why 10% jobless rate means misery for many, buying opportunity for some

By Matthew Scott | Nov 7th 2009, 3:00PM EST Filed Under: Economy, Investing

As news broke that the U.S. jobless rate crossed the dreaded 10 percent mark, many investors braced for the market's reaction. The response to word that unemployment reached levels not seen since 1983? The Dow Jones industrial average closed up 17.46 points to 10,023.42 and the S&P 500 ended the day at 1,069.30, up 2.67 points. Not exactly a sell-off.

So did news on Friday of 10.2 percent unemployment represent a buying opportunity? For those who follow market trends, it did.

Comments (108)Permalink

The Crash of 2008: It's the Panic of 1825 all over again (also 1837, 1847, 1866 ... )

By Charles Hugh Smith | Nov 8th 2009, 2:00PM EST Filed Under: Economy

A freeze in lending triggers a panic in a Western financial capital which then spreads around the globe, eventually tipping several South American countries into default. In a desperate attempt to stem the panic, the central bank steps in as "the lender of last resort" and unleashes a flood of new money into the palpitating financial system.

Gee, was that 1998, or 2008? Neither -- try 1825 London.

You might think an era of gas lighting, slow sailing ships and horse-drawn carriages has little to teach us about modern finance, but much of what we consider advanced capitalism has been in place since the 1500s: stock markets, portfolio insurance, options, commercial paper and global banking.

Comments (6)Permalink

In a Congress of millionaires, Republican Anh Cao voted for poor New Orleans

By Sam Gustin | Nov 8th 2009, 7:45PM EST Filed Under: People, Healthcare

The single House Republican who voted for the Democrats' health-care legislation is a first-term congressman from a strongly Democratic -- and very poor -- district comprising most of New Orleans. Rep. Anh "Joseph" Cao's vote is significant, not because it was politically motivated -- and it was -- but because it highlights the disparity between lower- and middle-class people throughout the country and many of their representatives in Washington, D.C.

Among the 535 elected representatives deciding the future shape of the American health care system, some 44% are millionaires, according to a new study by the Center for Responsive Politics (CRP), a nonpartisan reseach group that tracks the effect of money in U.S. politics and policy. Rep. Cao is not among them. Neither are his constituents.

Comments (7)Permalink

Why the coming natural gas boom isn't all it's 'fracced' up to be

By Charles Hugh Smith | Nov 8th 2009, 3:30PM EST Filed Under: Energy

$the-coming-natural-gas-boom-is-not-all-its-fracced-up-to-be$ Please pardon my poor punning, and let me explain: "Fraccing" (rhymes with "cracking") is the oil and natural gas industry's an informal contraction for the technology called hydraulic fracturing, in which water (and in some cases, a chemical mixture) is pumped deep underground to fracture shale and rock and thus free up trapped oil and gas deposits.

The financial media has been buzzing with stories proclaiming a new era for America's natural gas industry as new fraccing technology has enabled the tapping of vast dispersed fields in the Eastern U.S. and the "oil patch" states of Oklahoma and Texas. These advances have caused analysts to raise their estimates of America's natural gas reserves to an astounding 1.8 trillion cubic feet, the equivalent of about 320 billion barrels of oil -- far more than Saudi Arabia's proven reserves of around 260 billion barrels of oil.

Comments (5)Permalink

Franklin fund bought into Cadbury hoping for buyout deal

By Douglas McIntyre | Nov 8th 2009, 1:00PM EST Filed Under: Company News, Investing, Kraft Foods

franklin-fund-bought-into-cadbury-hoping-for-buyout-deal Some of the money managers at fund and money management firm Franklin Resources (BEN) must be clairvoyant. They bought Cadbury (CBY) shares before Kraft (KFT) made its buyout offer for the U.K. company. Franklin now owns at least 7.2% of Cadbury's shares.

Speaking at a conference in Vienna, Franklin fund manager Anne Gudefin, whose Mutual Global Discovery Fund holds the Cadbury shares, said "We have an idea" of a bid price for Cadbury that would be acceptable, according to a report from Bloomberg. Franklin bought a lot of the stock at below 550 pence per share. Cadbury closed trading Friday at 758 pence. A better bid from Kraft could take the shares higher.

Comments (0)Permalink

The week in preview: Earnings from Walmart, Macy's, and other retailers

By Trey Thoelcke | Nov 8th 2009, 12:30PM EST Filed Under: Earnings reports, Forecasts, Wal-Mart (WMT), Economic data, Urban Outfitters (URBN)

The conventional wisdom is that consumer spending is what drives the U.S. economy. And consumer spending arises out of consumer confidence. Unfortunately, the signals along the road to economic recovery are mixed, what with the rising GDP growth and the dismal unemployment numbers. Its enough to leave investors scratching their heads. What barometers of consumer confidence will the coming week bring?

The TIPP Economic Optimism Index for November is scheduled for Tuesday, and the University of Michigan Consumer Sentiment Index for November is due out Friday.

Comments (1)Permalink

Cruise wars: To lure tourists, companies vie to launch biggest ship

By Eric Wahlgren | Nov 8th 2009, 12:00PM EST Filed Under: Company News, Economy

There's a battle brewing at sea, but you won't hear a lick about it from the Pentagon. That's because it involves passenger ships, not battleships.

Cruise lines are fighting for customers by launching their biggest boats ever. It's no warship, but the largest boat to date -- Royal Caribbean International's (RCL) Oasis of the Seas (pictured) -- is, at 1,181 feet, 89 feet longer than the USS Nimitz aircraft carrier, one of the world's biggest battleships. And the second-largest cruise ship plying the ocean blue, Carnival's (CCL) 1,004-foot Carnival Dream, is just two feet shorter than the Chrysler Building is tall.

Comments (1)Permalink

Broader unemployment rate hits 17.5% as companies get smarter about staff

By Peter Cohan | Nov 8th 2009, 11:00AM EST Filed Under: Economy

broader-unemployment-rate-hits-17-5-as-companies-get-smarter-ab The weekly blizzard of economic statistics makes it tough to figure out what is really going on. But with a near-record number of people unemployed or underemployed, productivity at very high levels, and pay rising for the people who still have jobs, one conclusion seems to jump out: Companies are getting smarter about who they keep, how they manage the keepers, and who they fire.

Let's look at some of the numbers. The New York Times reports that what I would call wasted workers -- the combination of unemployed who are still looking for work, discouraged workers who have given up looking, and part-time workers seeking full-time jobs -- has hit a record 17.5%. This beats the previous record of 17.1% set in the midst of the Paul Volcker-led recession of 1982. (Then-Fed Chair Volcker's recession resulted from his decision to raise interest rates up to 20% to break the back of inflation.)

Comments (4)Permalink

Six top trades for the rest of 2009

By Sam Collins | Nov 7th 2009, 4:00PM EST Filed Under: Stocks to Buy, Best Stocks for 2009

6 Top Trades for the Rest of 2009 After seven months of one of the strongest rallies in history, the stock market is showing signs of faltering. From here on out through the rest of 2009, I believe the advance will shift gears, and instead of recording new highs every month, the trend will tend to flatten.