Financial News Friday – October 4, 2013

If you need to be brought up to speed on what the debt ceiling is, CNN Money has a quick slideshow to explain. It’s a little biased, using words like “unrealistic”, but the basics are the same. (CNN Money)

There are “awards” and then there are real awards. When an advisor touts a “prestigious” award they have received, you may wish to investigate the selection process. Allan Roth, a financial planner and contributing author over at CBS News, managed to buy a “best financial advisor” award for his 5 year old dachshund. (CBS News)

The market has placed upward pressure on short term T-Bill rates due to the possibility (unlikely, but within the realm of possibility as mentioned below) of a temporary government default. This has led to an inverted yield curve, where shorter term interest rates rise above longer term interest rates, as you can in see the chart above. Money markets accounts that invest in T-Bills may be avoiding T-Bills that mature at the end of October for this reason. (Business Insider)

The US government has defaulted on its loans once before.  In the scheme of things it’s a small blip, a couple of weeks of time during 1979, but it had large ramifications for the interest rate. After the small default due to technology issues and fights over the raising of the debt ceiling, the Treasury could not pay many individual investors the par value of their bonds at maturity. Over the weeks after the default Treasury interest rates on T-bills increased by around 0.6%. (TaxVox)

Depsite all of the media attention to the debt ceiling battle and government shutdown, S&P’s managing director on US government debt says US has a stable outlook and is unlikely to be downgraded due to the debt showdown. “A stable outlook means we think there’s a less than 1-in-3 chance of a rating change over the next two years.” (CNBC)

Twitter had a loss of $49 million in the first half of this year, largely due to spending 44% of its revenue on research and development. Twitter expects to increase its R&D budget in the future. Analysts expect Twitter to be valued between $15 billion and $20 billion during its initial public offering. I always like to think of Warren Buffett’s advice when buying a company’s stock, wherein you treat your purchase as if you are buying the entire company. It certainly frames the purchase differently. (Yahoo Finance)

Zerohedge points out that it seems many investors have likely mistaken Tweeter Home Entertainment Group Inc. to be Twitter. Since Twitter’s IPO plan announcement, Tweeter Home Entertainment Group has risen hundreds of percentage points. It just goes to show you how irrational some market participants can be. (Zerohedge)

Here’s a ranking of unemployment by country. (CNN Money)

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