Legion of Angels News Archive

WASHINGTON (AP) – Treasury Secretary Henry Paulson said Tuesday the current financial challenges facing the country will persist for a number of months, but he said the economy will rebound.

Paulson, speaking to an audience in New York, said that the recovery will occur because the administration, working with the Federal Reserve, is committed to taking the necessary steps to strength the financial system.

He said that close cooperation with other countries is critical and cautioned that it is important for all nations to be careful to make sure that the actions they are taking to deal with the crisis do not come at the expense of other nations.

“Our government will do what is necessary to significantly strengthen our banks and financial institutions, enabling them to increase financing for the consumption and business investments that drive U.S. economic growth,” Paulson said in remarks to the National Committee on U.S.-China Relations.

Copies of his remarks were released in Washington.

“Through a multitude of powerful actions we have and will demonstrate our commitment to unlocking our credit markets and minimizing the impact of the current instability on the rest of the U.S. economy,” Paulson said. “Although we expect current challenges to continue for a number of months, we will overcome them as we have overcome every challenge our nation has ever faced.”

He said that dealing with the financial crisis required “dramatic teps” in the United States and close coordination with other nations. He specifically mentioned talks he has had with Chinese leaders including Vice Premier Wang Qishan, who was recently appointed to lead a newly created financial crisis committee in China.

“It is clear that China accepts its responsibility as a major world economy that will work with the United States and other partners to ensure global economic stability,” Paulson said.

The Treasury Secretary also said he was looking forward to the next round of high-level talks with China, which will take place in Beijing in December.

Paulson began the discussions, known as the Strategic Economic Dialogue, in 2006 as a way to deal with a number of trade tensions between the two nations that reflected America’s soaring trade gap with China.

Paulson has expressed the hope that the next administration will continue these talks but he said Tuesday night that for this to occur, the talks must produce concrete results.

In a separate appearance Tuesday, Paulson said in an interview on the “Charlie Rose Show” that the government’s efforts to deal with the credit crisis were working but he cautioned that the disruptions to the economy would continue to be felt for some time.

“We’ve got some challenging months ahead in terms of the impact of the credit crunch on the economy,” he said.

Source — CNN

(Money Magazine) – TeRon Lawrence, 37, sees opportunity in the recent stock and real estate market turmoil. In fact, he sees a lot of opportunities.

A self-described aggressive investor, he admits that he’s “taken some pretty severe blows this year,” but he hasn’t been scared away from owning stocks. Instead, he says he’s willing to get even more aggressive in preparation for a market rebound.

At the same time he’s considering investing in real estate and could sell some stock to help buy a property. He also figures this is a good time to be paying down debts, primarily $12,000 in credit-card balances. “I probably haven’t taken that debt as seriously as I should,” he says.

He’d like to be free of his credit-card ball and chain as soon as possible, but he’s not sure how to weigh that desire against his investment goals. If opportunity really is knocking in today’s financial turmoil, Lawrence doesn’t want to miss it.

Where he is now

Fortunately, Lawrence has the wherewithal to deal with his debt without ignoring his investments. His telecommunications sales job pays around $115,000 a year in salary and bonuses, and he’s been vigilant about keeping his monthly expenses low.

He owes $155,000 on his home outside Dallas, which is worth about $190,000, making for a manageable mortgage expense. He also maxes out his 401(k) contributions, plowing $15,500 a year into his plan. Between his 401(k), IRA, company stock and a variable annuity, he has about $200,000 salted away.

What he should do

* Build up an emergency fund.

While Lawrence has been diligent about investing in his 401(k), he hasn’t created much of a cash cushion for himself. Given that he’s recently divorced, with no spousal income to fall back on, Lawrence would be in a precarious position if he lost his job or faced some other financial crunch.

It’s important that he save enough to cover at least three months’ worth of expenses, says financial planner Brent Little of Odyssey Wealth Management in Irving, Texas. (He recommends an even higher target.) If Lawrence sells off the annuity, he should set aside $12,000 in savings right away to cover potential crises.

* Pay off the plastic - now.

Lawrence has already stopped using his credit cards and consolidated his debt onto two cards carrying interest rates of 7.9% and 9.9%. But eliminating the remaining tab should be his top priority, says Little.

To come up with enough money to completely pay off that debt, Little recommends that he cash out the $91,000 he has in a variable annuity - an investment saddled with expensive fees that hobble his return. Lawrence would incur a tax hit - and a 2% penalty if he sold before October 2009 - but Little notes that he’ll be paying almost that much in fees if he holds on for another year.

And that doesn’t even factor in the mounting credit-card charges he faces. Lawrence is not sure that he’s comfortable cashing out immediately - “I don’t really like the thought of paying those penalties,” he says - but Little says the payoff will be worth it.

* Get smart about risk.

With his long investing time horizon and his high tolerance for risk, Lawrence can continue to be aggressive with his retirement portfolio. But his current mix, which includes a hefty 49% stake in international stocks and just 2% in bonds, hasn’t provided rewards that adequately match the risks.

He also continues to buy shares of his employer at a 15% discount through an employee stock-purchase plan. Little suggests that he limit company stock to about 5% of his overall portfolio by selling off shares he’s held for at least a year (making them eligible for long-term capital-gains tax treatment). Better diversification could reduce the risk his portfolio undergoes without lowering its expected long-term returns.

Little also suggests that he add a small-cap mutual fund such as Royce Value Plus and bump up his bondholdings to 18% of his portfolio by buying a fund such as Vanguard Total Bond Market Index.

Lawrence seems comfortable with this balanced approach. “I like the plan,” he says.

* Take a pass on real estate.

Lawrence has often heard that buying a rental property is the best path to building wealth. That’s why he wants to make his first foray into investment real estate.

Little, though, suggests holding off altogether. “The risk isn’t worth the reward in this case,” he says. A rental property wouldn’t add much diversification to his portfolio, might be difficult to unload if he ever needed money in a hurry, and most important, would be time consuming and stressful.

Lawrence accepts that advice happily. “I don’t want the headache,” he says. “I never really wanted to be a landlord.”

The makeover

* The problem Lawrence is carrying $12,000 in credit-card debt, with monthly interest payments eating into his cash flow.
* The plan Pay it off. Raise the required $12,000 by cashing in a variable annuity, even though that will entail penalties.
* The payoff Once rid of monthly credit-card payments, he will have more cash available to funnel into his investment portfolio.

* The problem Lawrence’s portfolio is concentrated in volatile stock markets overseas and his employer’s stock. That’s way too much risk.
* The plan Cut the employer’s stock from 15% of the portfolio to just 5%. Trim the international fund and add a bond fund.
* The payoff Better portfolio diversification should make his investment returns much more stable.

* The problem Lawrence lacks an emergency fund, making his financial security highly vulnerable to job loss.
* The plan Use extra proceeds from the annuity cash-out to create a $12,000 emergency fund.
* The payoff With money set aside to cover three months of expenses, he has a cushion against negative surprises.

Source — CNN