5 Fascinating Money Stories From The Week’s News
I thought it would be fun to try a little financial potpourri and take a look at 5 interesting stories about money that I discovered this week.
#1 Money Market Funds Caught Chasing Higher Returns
According to CNN ( Risky money market fund bets may be illegal ) some structured investment vehicles, like the money market funds that many people rely on for “safety” could have broken the law that mandates them by purchasing higher risk investments.
Securities regulations state that money market funds can only buy short-term, very safe securities. In particular, rule 2a-7, part of the Investment Company Act of 1940, says that money market funds can only hold securities that have “minimal credit risks.”
#2 How to Make Money with Property Investment
A topic close to my heart as I have seen the property evaluations explode in my city in the last 2 years. The next real estate boom?
If you want to make serious money from overseas property (and are happy to gamble), place your bet on the capitals of eastern Europe.
Top 20 cities to make money features a cool slide show of the top property investment spots.
The strategy, and it seems like a sound one, is to pick countries entering the European Union. In the past these countries have experience accelerated growth.
“These are the locations which are seeing employment levels, incomes and productivity rise rapidly from low levels to meet the EU average,” says Liam Bailey, head of residential research at Knight Frank.
“It is a process that has happened every time a country has joined the EU -remember Ireland and Portugal – and it is very likely to happen again in these countries.”
#3 Using Halloween to Teach Kids About Money
A novel approach to the important topic of teaching kids about money found at Grad Money Matters:
The day before Halloween, you make a deal with the kids. When they return back from trick or treating, you will buy their candies from them for real money. From the day after Halloween they can buy the candies back from you. For every day past Halloween, the price of candies falls by 5%. Each day, they can spend only a preset amount of money on buying back candies. Knowing kids, they will want to eat the choicest candies in the first few days and in the later days as the number of candies they can have for the preset amount increases, the candies are no longer their favorites and so may choose to keep the money instead of throwing it away on candies they donâ€™t like. They learn a few important money lessons while at the same time eating fewer candies. Itâ€™s a win-win situation.
#4 Does Money Buy World Series Championship Rings?
With the Sox ahead 2-0 at the time of writing the answer may be yes, but if you consider that the Rockies have a payroll of $54 million and the Sox coming in at $143 it hardly seems like a fair fight!
Interesting when you consider the rest of the teams in the league that the Rockies beat to get to the big show, it’s interesting to consider the correlation between team payroll and championships.
Here at TheStreet.com, we’re always looking at returns on investment. So we’ve run the numbers for all postseason series — including division, league and championship — since 2001, and compared them to team salary data.
The bottom line? There is little correlation, if any, between payroll and playoff success. The team with the higher payroll beat the team with the lower payroll in 113 games.
From my own experience playing sports team chemistry is the most important deciding factor in whether or not a team wins or loses. But I guess buying the best players is an easier approach (read the above article to get the numbers on the Yankees futile attempt to buy a championship since their last one in 2001).
#5 How Banks Make Money
The last story in this round up is a foundational and timely story about how banks make money. Grasping the concepts in this story are essential to understanding inflation and the dangers facing the United States with regards to its methods of dealing with its staggering debts.
Think about it this way: If your bank has a 10% reserve requirement and you deposit $1000 in your checking account, the bank must keep 10% or $100, but it’s free to lend out $900 at interest. The person who borrows that $900 will spend it and it will usually be deposited into another bank. Then that bank will do the same thing. It will keep 10% or $90 and then it’s free to lend out the rest at interest, which is $900 minus the $90, or $810. This process is repeated again and again, and is called “fractional reserve banking.” Each time the bank receives a deposit, it keeps 10% as reserves and can lend out the rest at interest.
Read the rest of How Banks Make Money.
That’s it for the money news wrap this week …any of these stories get you thinking?