An amusing story on the WSJ predicts that the Indianapolis Colts have a good shot at beating the sentimentally favored Saints in this weekend’s Super Bowl.  Apparently, the market predicts an AFC victory … unless a rally occurs by the end of the day.

Read it, here:  Can the market predict the Super Bowl?

A new analysis by the Dallas Fed suggests that, while at its highest in decades, unemployment in the current recession is not nearly as severe as in the Great Depression.

Economix blog on NYTimes.com

Josh Fischer, managing director of Sterling Pacific Financial, has been invited to present at PENSCO’s monthly webinar series on self-directed IRA investing.

His presentation, “Mortgage Pools: the Simplest Way to Start Investing Your IRA in Trust Deeds,” will provide an overview of investing in real estate notes, and the “mutual fund” approach offered by mortgage pools.

PENSCO’s team will also introduce their services — which allow retirement investors to truly diversify their IRA funds beyond the public markets into investment alternatives like trust deeds (notes), tax liens, real estate, private equity and more.

If you’re rethinking your retirement investing for the new year — and are interested in learning about all your diversification options — you should check out this free webinar from PENSCO.

For more information (and to register), visit this link.

Richard Thaler, a pioneer in behavioral economics, is the latest to question why so many underwater borrowers are continuing to pay their mortgages in a New York Times column.

Thaler notes that borrowers feel a sense of responsibility about continuing to pay even when their properties are grossly overvalued — and a sense of shame about foreclosing.  (Executives at companies with underwater mortgages, meanwhile, will evaluate their options purely on the basis of stakeholder economic benefit.)

Curiously, though, when borrowers see their neighbors accepting foreclosure and moving on, the stigma lessens. Individuals then begin to view the decision more like businesses do, based on economic factors rather than avoidance of shame.

Interestingly, Thaler argues that this is a powerful reason for the government to step in and mandate mortgage modifications.  Why?  Because mass foreclosures benefit no one, and, as unemployment lingers and borrowers start thinking more strategically and less emotionally, more will accept foreclosure as a strategic option.  Adjusting mortgages would prevent this behavior, allowing note holders to continue to receive payments — and avoid the huge costs and operational entanglements of repossessing huge numbers of overvalued properties.

What do you think?

Read Thaler’s column here.

With Roth conversion open to all taxpayers this year, regardless of income, opinions on both side of the fence are being expressed vigorously.  Some characterize the opportunity to convert as a huge gift from the government, while others feel just as strongly that it’s nothing more than a huge gift to the government!

A recent article in the New York Times highlights most of the issues on both sides of the question — and will help you think through whether or not conversion makes sense for you:

New Rules Ease Roth IRA Conversions, But Should You? (New York Times)

Andrew Ross Sorkin, New York Times financial journalist and author of the acclaimed book, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, offers an interesting (and rather scathing) take on what questions legislators should ask the heads of bailed-out financial services firms.

Read it: What the Financial Crisis Commission Should Ask (New York Times)

A straightforward, long-valued policy benchmark called the Taylor Rule might have led the Fed to raise interest rates in 2002-2005 — had they not talked themselves out of following it.  For many observers who believe that the run-up in housing prices was largely caused by artificially low interest rates, standing by the Taylor Rule might have been enough to prevent the meltdown altogether.

The Taylor Rule calls for central banks (like the Fed) to raise interest rates in response to trigger levels of inflation (and lower them in response to a recession). In an opinion piece in today’s Wall Street Journal, Professor John B. Taylor of Stanford (creator of the Taylor Rule), offers his view on the Fed’s surprising deviation from the Rule, which has been credited with contributing significantly to more than two decades of market stability from the late 70s to the beginning of the current century.

In a nutshell, the Fed relied on their own calculation of inflation risk — instead of actual, calculated inflation during the period.  Were Greenspan, Bernanke, et al rationalizing to keep interest rates low — perhaps for political reasons?  As Taylor notes, there were many other indicators that money was too cheap and inflation was underestimated — including observations from leaders of several state Federal Reserve Banks that interest rates were in fact negative over a large portion of 2000-2010.  Interest rates below zero in effect subsidize borrowers — an indisputable contributor to “irrational exuberance” in real estate markets.

To read Taylor’s entire contribution, click here.

Back in November, University of Arizona law professor Brent White received widespread media attention for his suggestion that homeowners who are severely under-water should walk away from their mortgages.

Now a new piece in next Sunday’s New York Times Magazine revisits the idea — adding the observation that businesses of all sorts routinely walk away from debts when it makes financial sense to do so.  But, unlike individual consumers, who face scorn and ethics-based pressure to keep paying their mortgages even when it makes little financial sense to do so, companies regularly stop paying loans, allow foreclosure and declare bankruptcy when they feel it is financially beneficial to the firm.

It’s an interesting question.  Is it wrong for homeowners to decide to walk away from their mortgage obligations?  Or, is surrendering the property a fair, normal option under a mortgage contract, since foreclosure is a possible outcome defined by the agreement?  And, whatever the answer … should the moral standard be the same for businesses as for individuals?  Comments encouraged!

If you or a parent are retiring soon, among the many decisions to consider is timing Social Security benefits.  When you turn 62, you’ll have an option to start collecting your earned benefit.  But, for many people, experts recommend that waiting until age 70 (the latest age  you can start collecting), in order to maximize your monthly payment and overall benefit.

Read more at:

Collect now, collect later? Timing your Social Security benefits (New York Times)
Start collecting Social Security now — or wait? (MSNBC.com)

Millions of Americans — many retirees concerned about losing savings they need for current expenses — are turning to savings accounts and CDs to safely store their money.  But, with interest rates around 1% or even lower, savers fall behind inflation — ultimately paying banks to store their money, rather than earning interest on the banks’ use of the funds.

Some investors are responding by getting more diligent and more creative in researching investments that can provide diversification — including other investments that are relatively secure and generate income.  Others, though, are putting up with negative growth out of fear.

Some critics even say that the government is intentionally creating this situation to encourage more funds to flow into the stock market, potentially creating yet another bubble.

(For more analysis, see At Tiny Rates, Saving Money Costs Investors at the New York Times web site.)