Financial News for the Business Week Ending 07/29/2011

• U.S. debt ceiling legislation still delayed

• Greek bonds downgraded to one step above default

• Dow Jones Industrial average loses near 500 points or 4 percent

• Second fiscal quarter U.S. GDP 1.3%; lower than expectations

• Jobless claims down just under 2% for second week of July

• Gold reaches new highs over $1,600 per ounce

Finance Events, Doubt and Facts

• Interest finance charges were first incurred around 5,000 years ago. 

• The 1933 Double Gold Eagle Coin sold for $7,590,020 .

• The Federal Government spent $400,000 per wolf to reintroduce them.

• Academic research finds rich people aren't as happy. 

• The dream of economic growth may be unsustainable. 

How Fixed Price Policies are Used by Businesses

Fixed price policies are effectively fiscal tools businesses use to facilitate a number of commercial objectives. These policies can be adjusted to fit income and expense related transactions and used to build market share.

Complete article link: http://smallbusiness.chron.com/examples-fixed-price-policies-12745.html

Is it safe to invest in China?

With annual GDP growth  between 8.7-9.3 percent forecasted through 2013 per the World Bank it is easy to think 'China' is a good investment. It is not quite that simple though. 'China' includes the sum total of its economic components which are managed by different policies and exist in a market quite different to the United States. Having a good grasp of China's economic drivers, and which ones offer good opportunities for investing if any, is a place to start evaluating the reality behind the beliefs.

In its July 16-17 Weekend Edition, The Wall Street Journal reported China is a good prospect for investors because problems are overestimated and Chinese Stocks are cheap. Yet in it its July 18-24 edition, Bloomberg-Businessweek  offers a completely different tone, one of caution. For example,  according to the latter source all that is needed to bring China to an economic crash or slowdown is GDP below 7 percent. Moreover, also per Bloomberg-Businessweek, the Chinese real-estate market is beginning to show signs of higher supply. This tends to affect prices to the downside and the affect on net worth follows and carries through into economic numbers such as GDP from real estate related production.

The Wall Street Journal suggests China's growth gives it more leeway to use aggressive monetary and fiscal policy, but historically, linear geometric growth for decade upon decade isn't exactly a swish shot in the basket for developing nations. Even the United States had bumps in the road via the 1929 stock market crash, the great depression and 1970's oil crisis. 

China's economy is somewhat dependent on the global economy as are most economies via globalization. If global demand for products subsides along with a plateau in real estate and cost driven inflation then there is room for doubt. Additionally, a restrictive monetary tightening during a period of growth encourages cyclical economics and China's inflation is still above 6 percent per Bloomberg meaning things are getting more expensive in reference to a  less than free-floating Yuan-Renminbi. That can also lead to a cyclical pattern or slowdown and is still rather high considering the Chinese Central Bank has been tightening money supply all year to date.

Then of course there are the actual securities and details. Exchange Traded Funds, Chinese currency, Treasuries, Businesses? Where and how to invest without losing money is more than a mere technicality. How well do fund managers invest in China? Past performance is not a guarantee of future success, and due diligence on Chinese companies isn't quite as easy as for U.S. businesses. Just like any investment, investing in China is a risk and that risk is probably best kept in mind despite China's current growth which is in excess of three times that of the United States. 

Financial news for the week ending July 15th, 2011

• Government continues debt ceiling impasse  

• Price of oil and gold remain high and reach new record

• Fears of European debt contagion reflect in bond valuations

• Consumer sentiment  drops to 2009 Q1-Q2 levels

• Dow Jones Industrial average down less than 100 points 

• Italian government also votes for fiscal tightening 

• Fed Chief Bernanke reports positive expectations for 2011 Q3-Q4

Can You Lower Property Tax With a Houseboat?

Houseboats don't pay real estate property tax because they are considered personal property. However, in some states such as Virginia, there is a personal property tax on boats which fall under the category of vehicles. For example, in Fairfax County the personal property tax rate is 4.57 percent which is higher than real estate tax of 1.07 percent.

Based on house boat listings at Buy a Boat, the price of house boats can range from as low as $10,000 to over $200,000. Sales tax on these types of boats is approximately 5 percent depending on the state. 

Several types of boats can serve as houseboats including yachts and tug boats but the size of houseboats can making docking them expensive. For this reason finding a cost effective place to put the boat on a long-term basis will be a major factor in determining whether or not it's more cost effective than paying 1-2 percent property tax on real estate.

Two additional factors to consider are insurance and boat registration. Insurance can add another $500-$1000 per year in costs and registration fees and requirements can found at the Department of Motor Vehicles state map.

Some houseboats don't have motors and are permanently moored rendering them non-transport boats. These boats may avoid registration this way. For example, the State of Pennsylvania requires recreational vehicles powered by diesel, gasoline or electric motors to register. 

The combined cost of insurance, sales tax, docking fees, registration costs and property tax if any can be compared to similar costs for other types of homes such recreational vehicles, mobile homes and real estate. A state or country with lots of rural lakes, waterways and no personal property tax on boats is a good place to start looking and houseboats built in countries with lower costs may also reduce the purchase price.

Why Free Doesn't Always Mean "Free"

The word "Free" is sometimes merely eye bait marketing to encourage readers to take a closer look at a flyer, offer or advertisement. In the following offer a "Free" $500 Gift Card allows recipients to use the gift card to acquire sunglasses. There's a catch.

Here's a picture of the gift card, the card is designed to place more emphasis on its benefits than disadvantages with the words "Free", "$500", and "Gift Card" next to images of a pair of sunglasses and a watch. The other side of the card reveals the deal's caveats.

A close look at the back of the card reveals seemingly encouraging or helpful information reminding the holder not to lose the card and of its expiration date. A few lines into the small print it says "There is a 9% Service Fee to pay for the product delivery & handling expenses provided by our mailing company." If these were Oakley or Ray-Ban sunglasses a delivery and handling fee of 9% might be ok, but it certainly is not free when the gift card's balance can't be used to pay for the shipping and handling.

The prices of these seemingly 'expensive' sunglasses range from $90-$170 in the first picture with those numbers crossed out. The problem here is even though the sunglasses are 'free' the service charge is applied to the value of the sunglasses making 9% of $170 equal to $15.30 which might even be a multiple of the actual value of the sunglasses. When sunglasses cost a dollar at dollar shops what distinguishes these sunglasses from those? 

Tough Business Sells

Some ideas may be capitalized with deep pockets, however that doesn't guarantee business profits. Selling a business idea requires sufficient thought about the market, location, product and brand. 

The following Museum of Salt & Pepper Shakers may not do well in a serious shopping district, but if it's located in a town full of novelty it might do better. The Jewelry sign just underneath seems to indicate a supplementary and unrelated product.

Keeping up with brand image is also important. The business below doesn't just have graffiti underneath its advertisement, but has graffiti telling visitors not to shop there! 

How Far To Drive For Cheaper Gas

Cheaper gas can sometimes be found by driving a little further into less traveled neighborhoods, off main routes, or even just a little down the road past an intersection. The gas prices may differ from as little as a penny to as much as .05-.10 cents. Two questions that pertain to this are how far should one travel to obtain cheaper gas? and when does it cease being cost effective?

Image source: 'Daniel Christensen'; GFDL, CC BY-SA 3.0

The answers are based on how much gas is being purchased, the price differential or difference in cost, and the cost of the gas. For example, if a vehicle with a ten gallon tank gets 25 miles per gallon and gas costs $3.60 at station one but $3.55 at gas station two, then a fill up of half a tank or 5 gallons will stop being cost effective after 1.736 miles have been driven. This is because the cost per mile driven is .144 cents and the savings on 5 gallons of gas is .25 cents at .05 cents differential. Since 1.736 x .144 cents is just short of .25 cents any distance further than that makes the cheaper gas not worthwhile unless more gas is needed.

Two good ways to ensure driving the extra mile to get cheaper gas is to drive until the gas tank is closer to a quarter full or 1/8th full and identifying the location of the more cost effective gas before hand. Also, driving with less gas can help lower the extra weight a vehicle must mobilize saving additional money. Websites such as Gas Buddy and Internet Auto Guide perform local searches for gas prices that can help identify where gas is cheapest. The more gallons purchased, the greater the price differential and the shorter the distance to the cheaper gas, the higher the benefits will be.

So is this worthwhile or just nickle and diming? It may not be much, but it is still savings; the average vehicle driver across all age groups drives 13,476 miles per year according to an April 2011 report from the  U.S. Department of Transportation. If a driver consistently saves .05 cents on the gallon for a vehicle which obtains 25 miles per gallon, then a savings of .002 cents per mile is obtained. This amounts to $26.95 per year based on the Department of Transportation statistics. Some retail stores such as Safeway and Costco offer discounted gas and gas rewards to shoppers lowering gas costs by roughly .03-.15 cents in comparison to other local gas stations. The higher the discount and the miles per gallon a vehicle gets, the greater the savings become.

Have a Great 4th of July Weekend

Financial News for the Week Ending 07/01/11

• IRS increases gas mileage from 51 cents to 55.5 cents for 2011

• Debit card interchange fee raised to .21 cents instead of .12 cents

• Greek legislation leads to second round of EU bailout funds

• Quantitative easing monetary policy ended 

• Stock market rallied for 5 days straight

• President Obama advocates for a national debt deal

• Institute for Supply Management Manufacturing Index rose 1.8 percent  

• Consumer sentiment dropped 2.8 percent in June