Well, another month goes into the history books. As you can see from the graphic I have put together (click on the graphic below to bring up a PDF version), it wasn’t a very good month. This most likely had to do with the looming debt ceiling deadline. July marked the third month in a row that the seven out of the ten indexes had a negative return. The last time that happened for the S&P 500 (the index that I have the most data for) was in 2008, when it happened twice.
Notice that I added a new column at the end for the weighted average return for all ten asset classes (assuming a ten percent stake in each asset class rebalanced monthly).
Yesterday, I mentioned a WSJ article on how a default would affect us personally. Today, the WSJ talks about how companies are bracing for default:
In a recent survey by the Association of Financial Professionals, which represents treasury and finance executives, half of the 305 respondents said failure to reach an agreement by the Aug. 2 deadline would have a detrimental impact on their access to capital and short-term investment strategies.
Half of the respondents planned to take defensive actions, such as a freeze on hiring, reducing capital spending and drawing on credit lines to build cash, the AFP said.
Buckle your seatbelts…
The analysis estimates that without authorization to borrow, the federal government would take in about $203 billion in revenue but have $362 billion in bills to pay.
Politics aside, read this: How a U.S. Default Could Affect You
According to the article, not raising the debt ceiling could “be big trouble for anyone who needs a car, needs a home or student loan, uses a credit card, has a retirement savings account or wants to travel abroad.”
What would happen if the ceiling wasn’t raised?
“”…choices would have to be made on what got paid. Interest on outstanding debt would take priority to avoid default and damage to the U.S. credit rating. Beyond that, should the government pay Social Security benefits but not the salaries of servicemen and servicewomen on active duty? Medicare and Medicaid payments but not federal workers’ salaries and benefits?”
I’m torn on this issue. I can see the short-term need to raise the ceiling but I also look at it from a personal finance point of view in that you don’t get out of debt by going into more debt.
I’m in a frugal mood today.
What’s your favorite (and inexpensive) idea for family summer fun?
Being that we live about an hour and a half from Galveston, ours would have to be going to Steward Beach in Galveston. It’s a family beach and is fairly inexpensive (unless you rent beach umbrellas and chairs at $30 for the day no matter when you get to the beach). They charge $6.00 per car to get in but you can bring your own ice chests and food, which is nice (no beer, which is bad). Of course, we could make the trips cheaper if we didn’t go out to eat too.
We also like going to the park but we don’t do that as much these days as we used to.
I’m sure the number of “cheap” things you can do as a family depends a lot on where you live. We’re 1.5 hours from Houston, where there is quite a bit to do. The only problem is that it means we have to spend $30 – $40 in gas to drive there and back (I’m estimating), which isn’t nearly as cheap as it used to be.
Interesting story in today’s WSJ: Millennials Make Millions
Catherine and David Cook started myYearbook.com in 2005 when they were 15 and 16 years old, respectively, as a way to connect with their new classmates at Montgomery High School in Skillman, N.J.
Big brother Geoff Cook, then 26 years old, bankrolled the start-up with $250,000 he had made from selling an online-resume business he built as a Harvard University student.
On Wednesday, Geoff Cook, now the 33-year-old chief executive of myYearbook.com, announced the sale of the company to Quepasa Corp., a social network aimed at Latinos.
All it takes is a good idea, money, and proper execution. Pretty simple, don’t you think?
Of course it’s not that simple or we’d all be rich. But, this story does make me want to spend some time talking about entrepreneurship with my three kids.