Based on the two main credit rating agencies, high-yield bonds carry a rating of ‘BBB’ or lower from S&P, and ‘Baa’ or lower from Moody’s. Bonds with ratings above these levels are considered investment grade. Credit ratings can be as low as ‘D’ (currently in default), and most bonds with ‘C’ ratings or lower carry a high risk of default; to compensate for this risk, yields will typically be very high.

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Permanent Portfolio Fund

The idea for permanent portfolio funds that you have a mutual fund that could withstand any market conditions. This was accomplished by investing in many different types of securities. Putting emphasis on investing in things that you could find outside of the stock market.

A permanent portfolio school of thought was to invest in an equal proportion of stocks, bonds, cash, and gold. Therefore, the original investment mix was 25% of each type of investment. In today’s conditions the current composition of the fund is 25% precious metals, 10% Swiss franc bonds, 15% real estate and natural resource stocks, 15% aggressive growth stocks, and 35% in government securities such as T-bills. In this way investors funds regardless of what happened in the economy feel more secure. Although with this fund you have to expect a slow and steady growth curve. This type of fund has been proven to gain value steadily over time.

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1. Fear
2. Cynicism
3. Laziness
4. Bad habits
5. Arrogance
6. Disappointment

Follow-up for these six bad traits will be posted soon.

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2. Simplify. Reduce holdings to 10 funds and roll over old 401(k)s from prior jobs into a Roth IRA to make portfolio easier to manage.

3. Invest in index funds. Sell actively managed funds in their taxable account, harvest tax losses, and move to low-cost exchange-traded funds.

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Many of the commonly-used approaches to financial planning take long-term average rates of return and then make the assumption that you will get that return every year. Say you build an investment portfolio that you think will have an average return of 8.5%. Just because the average is 8.5%, it should be obvious to anyone that has been alive the last 12 months that this does not mean we will get 8.5% every year.

While this may seem obvious, the implications are huge.

Link

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IEA slashes forecast for oil demand – again
Agency sees global demand declining by 2.4 million barrels per day in 2009 amid recession.

LONDON (Reuters) — World oil demand will drop by a hefty 2.4 million barrels per day in 2009, the International Energy Agency said on Friday, citing a growing consensus any recovery in the economy would not take place until next year.

As the rate of oil demand contraction reached levels last seen in the early 1980s, it said outright demand for this year was expected to be 83.4 million bpd, around one million bpd less than in its previous monthly report.

“This is a pretty exceptional period of demand collapsing,” said David Fyfe, head of the oil industry and markets division at the IEA, the Paris-based advisor to oil-consuming countries.

He could not say whether there would be further downward revisions as a shrinking world economy chokes off energy use.

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There are basically two approaches you can do when the economy is on a downturn.

A. Be aggressive
Gain as much profit as you can. This type of investor must be someone who can tolerate high risks in hoping for high rewards in return. The downside is you may end up losing a lot of money. This type of investing is not for the faint of heart. The attack plan of this kind of approach is trying to capitalize on investors in a panic-sell mode. Of course you still have to pick good stocks (more on this later). But pick the right choices and once the economy is on the up again, then that is the time you will reap your rewards.

B. Be defensive

Sometimes it is not all about making money, but more of not losing money. If you are the type of investor that would rather earn at a steady, safe pace, then you are a part of a safe bet in a declining market. You won’t reap double-digit returns but it will keep you from going broke in the long run.

The three basic thoughts to consider:

1. The economy will bounce back. Just like in a booming bull market, where there is always that inevitable top, there is also always a bottom in a bear market. You have just have to ride the downturn. Don’t panic.

2. Whether you take the aggressive or the defensive approach, it is important that you really understand the structure of the companies you are investing in. During a bad economy, your portfolio should only have companies that are sure to survive the downturn. Stay awway from start-ups, or companies with unproven track record. Go with companies with low debt, a history of steady growth, a history of strong earnings, and a low P/E ratio.

3.  Hold that “sell” button. Remember that stocks will not always be in the red. It may at sometime rise higher than expected.If a company has a history of sound fundamentals, it will come back up. Avoid selling at a loss unless you absolutely have to.

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1. Get Paid What You’re Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget? How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.

3. Maximize Your Employment Benefits

Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you’re maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.
4. Invest!

If you’re contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.
5. Have a Savings Plan

You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

6. Contribute to a Retirement Plan

If your employer has a 401(k) plan and you don’t contribute to it, you’re walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you’re already contributing, try to increase your contribution. If your employer doesn’t offer a retirement plan, consider an IRA.

7. Pay Off Credit Card Debt

Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash.
8. Review Your Insurance Coverages

Too many people are talked into paying too much for life and disability insurance, whether it’s by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it’s important that you have enough insurance to protect your dependents and your income in the case of death or disability.
9. Update Your Will

70% of Americans don’t have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn’t too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.
10. Keep Good Records
If you don’t keep good records, you’re probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It’s much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

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NEW YORK (Fortune) — Boeing stock has plunged as air travel swoons globally. This year is expected to be only the third time air traffic has declined in its 50-year history.

Boeing Shares have dropped 60% since their peak in October of 2007, and earnings have sunk 50% in the first quarter as airlines delay or cancel orders, Boeing begins to cut production, and investors worry about Pentagon spending cuts.

But with its 787 Dreamliner ready for launch this summer, should investors consider buying shares of the aerospace manufacturer?

Continue reading the article at:  money.cnn.com

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• Buffett is in favor of buying Wells Fargo
• Warren Buffett says Berkshire Hathaway is not interested in buying newspapers in the United States “at any price.” He says the changing media environment now means newspapers “have the possibility of unending losses” and he does not “see anything on the horizon that causes that erosion to end.
• Warren Buffett revealed the company had “got a chance to buy some corporate bonds very, very cheaply a few months back.”
• Warren Buffett says there are no plans for a buyback of Berkshire Hathaway stock right now.
• Buffett says operating earnings for Berkshire Hathaway will be about $1.7 billion, after taxes.  That compares to around $1.9 billion last year, and works out to a decline of almost 11 percent. He partially attributes the drop to losses in Berkshire’s investing portfolio and to losses on credit default swaps.

Berkshire Hathaway (NYSE: BRKA and NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Berkshire Hathaway’s core business is insurance, including property and casualty insurance, reinsurance and specialty nonstandard insurance. The Company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years, while employing large amounts of capital, and minimal debt. (source: wikipedia.com)

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