Archive for July, 2011

What We Should Be Doing

In my last post, I mentioned that there has been an unhealthy linking of the debt ceiling and the federal budget. These are independent issues and we could have easily avoided the political finger pointing and drama if Congress would have simply raised the debt ceiling as it has in the past. Political leaders thought they could use the debt ceiling as an incentive to make progress toward dealing with our federal government’s long-term budget deficit. In the end, the linking of these issues might result in some measure of improvement in our financial condition, but the rancor created during this process is unlikely to subside anytime soon, and partisanship will probably have been increased. In linking the two issues, our politicians have substituted a cattle prod for leadership.

I expect a deal in the next few days that will raise the debt ceiling. My hope is that the guiding

Building a Laddered Treasury Portfolio

In the past, I have written about the dangers of owning a bond mutual fund or ETF. The primary negative is that these portfolios are usually managed to maintain a specific average maturity for all of the holdings combined. Individual bonds within the funds mature, but the proceeds from these maturities will be reinvested to achieve the same average maturity advertised by the fund company. Therefore, the fund will act as if you own a bond with no maturity for as long as you hold it, and you will suffer (or benefit) the impact of market-wide interest rate movements. In a rising interest rate environment, bond funds can be very volatile and lose significant principal.

There has recently been a great development in this area with the creation of target date maturity bond mutual funds and exchange-traded funds that will actually mature in a specific year. Unfortunately, these funds are

Understanding the Debt Limit

The Committee for a Responsible Federal Budget has just published an excellent paper titled “Understanding the Debt Limit.” If you are wanting to understand why the debt limit debate is important, be aware of the possible implications of not increasing the the limit, and learn about the history of the debt limit process, I recommend you read this publication.


Behind Closed Doors

“We all walk in the dark and each of us must learn to turn on his or her own light.”  ~Earl Nightingale

There has been much gnashing of teeth and name-calling between our political parties over how to reduce our current federal budget deficit and stave off a potential financial meltdown in the next 10-20 years because of Medicare and Social Security promises made to the Baby Boomers. Most of the ideas we hear from our leaders in the daily media would have a relatively minor impact on our financial fate. The real discussions must go on behind closed doors so that voters and corporate contributors do not get angry and sabotage talks before they get serious. Unfortunately, this is a political reality.

But, what if our leaders could do something that has a significant positive impact on our future finances while flying under the radar screens of most