2008 Nobel Prize winning economist Paul Krugman wrote an extensive piece last week entitled “How Did Economists Get It So Wrong?”. The gist of the piece is that many economists had come to believe that the once divided science of economics had evolved into a field where there was unanimity of vision and theory. Particularly in macroeconomics, where free market disciples of Friedrich Hayek and Milton Friedman and the so-called Chicago school of economics had ruled the roost and dominated the Nobel Prize in economics. The belief in market economics had led some to believe that the economy had become not only depression-proof but recession-proof. So what happened? Krugman, who is most defintely not of the Chicago school makes his case for what happened. Even if you don’t agree with Krugman, it makes for interesting reading and a good starting point for an economics debate. The one thing we can all agree on now is that despite all the advances in economic theory and practice, the economy is still subject to downturns and potential disasters. So it behooves any in the investor class to plan accordingly. The best way to do that is to learn how to trade and utilize options an other derivatives to protect your portfolio, house, nest-egg, etc.. Oh and by the way, this Chicago School can teach you how to do just that.
Business News Ticker
- EBay to sell a majority interest in Skype to private investors. EBay was criticized for overpaying for the internet calling service in 2005 when they outbid Google and paid nearly 3 billion if you include incentives. They didn’t even acquire the technology behind Skype’s uncanny clarity of signal which resulted in EBay going to court in Great Britain with the company who did buy those rights.
The deal helps EBay save facebuy placing the value of Skype closer to its purchase price than most analysts would have. Skype made $600,000,000 last year. Which is somewhat amazing when you consider that most of their basic calling services are free. Moral of this story: Never outbid Google.
-Pending home sales rose to a two-year high in July. This news combined with other recent good news in the housing market suggest we may have finally established a bottom in the housing market. There are a still an awful lot of homes in forclosure and homes on the market, but maybe there is some light at the end of the tunnel. Two indices of the housing market, the ETF UltraShort Real Estate (NYSE: SRS) and the Philadelphia Housing Index (PHILX: HGX) have made very significant technical moves off the bottom (in SRS’s case though, it would be off the top since it is a “short” index). CST’s Dan Keegan will soon give a webinar on how to use these instruments to protect the value of your home or lock in your home buying power. Check in here for details on the where and when for that webinar.