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Bananas, Corn, and Inflation

In a recent article in Barron's, the columnist Thomas Donlan asks "Which is a better store of value, bananas or corn?"  He rightfully concludes that corn is superior.  Bananas go from green, to yellow, to black in short order -- they become worthless rather quickly.  Corn, on the other hand, can be stored for long periods of time if the kernels are properly handled. 

In these less agrarian times, we store our wealth in dollars (unless you're hoarding gold bars or barrels of oil in your back yard).  Dollars tend not to decay, but they can lose their value via inflation.  Inflation eats away at money by reducing the value of its purchasing power.

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Risks of Inflation

Many analysts state that we need to embrace the "new normal," predicting that the U.S. economy will grow at a rate of 2% for a while instead of its historical average of 3.6%.  With lackluster economic growth being a real possibility for several years, it may be surprising to hear that a big debate is going on regarding the prospect of higher inflation.  The concern over inflation arises from the dramatic increases in both the money supply and federal expenditures.  Ben Warwick of Quantitative Equity Strategies describes the situation as: "the Treasury keeps printing currency and the Fed keeps spending it in attempt to bolster the flagging economy." 

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The Importance of Beneficiary Designations

Once upon a time, William Kennedy married Liv Kennedy.  They divorced. In a divorce decree, Liv waived her rights to William's retirement plan benefits.  Liv eventually died. Yet, when William subsequently died, his retirement plan did not pass to his daughter per his will, but instead went to Liv's estate. 

The U.S. Supreme Court granted William's late, ex-wife's estate the loot for a simple reason -- William had signed a plan document stating that Liv (his wife at the time) was the beneficiary of his retirement account.  William never amended this beneficiary designation and it controlled the disposition of the money.  William's will and the divorce consent decree did not override it.

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Lies, Damn Lies, and Statistics

At a presentation that I recently attended, a bright, successful hedge fund manager claimed there are two types of economies in the world today -- emerging markets (like China and India) and submerging markets (like the United States).  To bolster his claim, the manager noted how China and India are graduating significantly more engineers each year than the good, old USA.  This statement may be technically true, but it's terribly misleading.

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The Paradox of Thrift or The Down Side of Saving

After extolling the virtues of saving (http://blog.wienerfinancial.com), it would be useful to point out why our government feels it necessary to deal with the detrimental aspects of thrift.

It is common wisdom that our current situation has arisen in no small part from our boundless spending with little thought to saving for the future.  Now that fear has struck, we are responding rationally by lowering our expenditures and shoring up our reserves.

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