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Apr 14.11
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Finance
/ by Ro Econ
This post continues a discussion about cash flow, net present value, interest rates and NPV, and IRR, which you can read by clicking on the specific links. This post deals with the topic of project evaluation.
The main methods used for project evaluation are the NPV method and the IRR method. According to them, an investment project is viable if the NPV is positive or if the IRR is higher than the cost of capital. In most cases these two methods will yield the same conclusion regarding the profitability of a project, and when not, the NPV method is more accurate.
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Mar 30.11
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Macroeconomics
/ by Ro Econ
When California sneezes the rest of the country, and sometimes the world, feels it. A State with over 30+ million people rivals in population to some G8 countries like Canada. (Actually California has about 3 million more people.)
When the Californian economy is in trouble the rest of the nation takes notice. It’s not a far cry to suggest that the state of America’s economic recovery will hinge on the ability for California to pull themselves out of their current crisis.
This brief macroeconomic outlook of California was compiled by a San Diego Bankruptcy Attorney, Cecilia Chen using data from RAND California.
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Mar 28.11
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Behavioral Economics
/ by Ro Econ
In mental accounting there are three main components to this theory. The three of them are as follows and may affect the individuals preferences as follows:
Value Function
This is a function that represents gains and looses with respect to some reference point. In rational behavior theory, it would predict that an individual gains some sort of utility in a gain situation and inversely a same amount of disutility for the same size loss. In mental accounting however, this does not hold true in that individuals typically show contrasting behavior. Value function states that in gains individuals typically view their gains in a concave function to which it displays diminishing marginal returns and in losses it is convex showing increasing marginal returns.
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Mar 14.11
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Macroeconomics
/ by Ro Econ
They are just afraid of taxing the top .1%. That greed will topple the US.
As Sen. Al Franken (D-Minn.) pointed out in a little-noticed but powerful speech on the economy in December, “during the past 20 years, 56 percent of all income growth went to the top 1 percent of households. Even more unbelievably, a third of all income growth went to just the top one-tenth of 1 percent.” Some people are definitely not broke, yet we can’t even think about raising their taxes.
By contrast, Franken noted that “when you adjust for inflation, the median household income actually declined over the last decade.” Many of those folks are going broke, yet because “we’re broke,” we’re told we can’t possibly help them.
http://www.washingtonpost.com/opinions/what-if-were-not-broke/2011/03/11/ABhFE6T_story.html
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Feb 25.11
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Foreign Exchange
/ by Ro Econ
Running on a renewed high from the rising oil prices, the Canadian dollar appreciated against the American dollar to hit over 1.0225 USD cents to 1 CDN cent. The CDN dollar hit the three year high amidst turmoil in Northern Africa with the potential fall of oil-rich Libya who have reportedly stopped production to the tune of 1/2 to 1 million barrels per day.
The rise also has the Bank of Canada at odds with how it will approach it’s March rate announcement.
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Feb 24.11
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Macroeconomics
/ by Ro Econ
Decreases in five-year fixed mortgage rates and minimal home price appreciation made housing more affordable. This is a far cry from affordability due to a massive decrease in housing prices (great for those getting, brutal for those looking to renew their mortgages).
With the impending rate hike those who are looking at a home worth less and a high mortgage payment, they may find themselves in dire straits. However, a housing bubble doesn’t seem to be supported by the emerging data on Canadian housing.
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Feb 18.11
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Debt Management
/ by Ro Econ
In its 12th annual assessment of the state of Canadian family finances, the Vanier Institute of the Family reports that average family debt has now hit $100,000.
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Feb 08.11
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Macroeconomics
/ by Ro Econ
An interesting article came out from the WSJ discussing Canada’s labor market versus the US and the impact on the foreign exchange market.
The focus started with the release of January job data from both the US and Canada.
StatsCan announced the economy added 69,200 jobs in January. That number was twice that of the 36,000 jobs expansion reported later by the U.S. Bureau of Labor Statistics. The Canadian figure exceeded expectations by almost 5x, whereas the US numbers were about half of expectations.
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Feb 07.11
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Debt Management
/ by Ro Econ
US credit-card debt rose for the first time since 2008. What’s hilarious about this whole observation, as reported by the FED, is that it’s an indicator that a) Americans are spending more, b) Americans have a short memory.
Part of the inability to recover from the 2008 crash, and why the crash took place in the first place, was the unmanageable debt load carried by Americans. Now, it seems spending is going up, and it’s not just spending with money on hand, but rather money on credit.
Not a good habit to get into.
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Jan 13.11
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Personal Finances
/ by Ro Econ
Have you ever started a serious fitness program that involved one on one sessions with a personal trainer? Usually you’ll end up tracking habits you never tracked before which can be quite the eye opener. If you have a competent trainer they won’t lecture but merely use a matter of fact tone of voice and encourage you to persevere in the program set up for you.
What does that have to do with personal finances? Everything! Especially when you relationship isn’t with a trainer, but with a financial planner. So what constitutes a successful financial planning relationship?
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