Trichet rejects concerns about budget cuts hitting economic growth

European Central Bank chief Jean-Claude Trichet rejected Friday concerns that the tough round of fiscal cutbacks planned by European governments could undercut the fragile recovery from recession.

'Fiscal consolidation and growth are not mutually exclusive,' Trichet told an ECB watchers conference in Frankfurt.

'We disagree with the view that reducing public expenditures will hinder economic growth,' he told the conference. 'On the contrary, prudent fiscal management provides the basis for balanced and sustainable growth.'

While US President Barack Obama has expressed worries that moves to wind back public spending could jeopardise the current economic upswing, leading European states such as Germany have unveiled plans for cutting back deficit and debt levels run up during the recession.

In his comments Friday, the ECB chief also sought to underline the key role to be played by the so-called stress tests for European banks in underpinning investor confidence in the region's financial sector.

'Fiscal consolidation is being put in place at the same time as we strengthen the resilience of the European banking sector,' Trichet said.

'Publication of the detailed results of a harmonised pan-European stress test is an important step in the right direction,'he said.

'These tests will increase transparency and enhance investors' confidence in Europe's banking sector,' he argued.

The stress tests, which are aimed at measuring the banks' chances of surviving another financial crisis, are been coordinated by the London-based Committee of European Banking Supervisors.

The committee said Wednesday that its findings would cover 91 institutions.

Trichet's speech on Friday came just one day after the ECB's governing council announced that it was leaving interest rates on hold at an historic low of 1 per cent.

The ECB has left borrowing costs unchanged for 14 consecutive months as it attempts to shore up economic confidence in the 16-member eurozone.

The Frankfurt-based bank is expecting the eurozone economy
to post moderate economic growth in the coming months as it recovers from recession.

A temperate economic expansion rate combined with subdued inflationary pressures means that most analysts are expecting the ECB to wait until late next year before hiking interest rates.

'But,' warned Trichet Friday, 'events over the past few months have made clear that it is still too early to declare the crisis over.'

Indeed, overhanging the European economy is the threat of the re-emergence of the debt crisis, which earlier this year sent financial markets into a tailspin and threatened to derail the global recovery.

2010 Income Tax Return Filing - What Are the Various Options For Filing 2010 Tax Returns?

For 2010 Income tax return filing, there are various ways available. Which way may be good for you will depend on various factors. Let us look first at what are the various returns filing methods available in 2010.

1. Tax filing Software - One prominent way is to use income tax preparation software such as Turbo Tax. These software have become sophisticated with each year. These tax softwares are up to date regarding all the deductions and tax associated guidelines and are very user interactive.

2. Free E-filing - This is a free method and is also encouraged by IRS. That's because this reduces the paper work for them and it allows them to process the returns quickly. So if a tax filer expects a refund, the refund will also send to them quickly if this method is used in 2010 income tax return filing. However, free e-filing method doesn't guarantee that all the deductions will be incorporated.

3. Through Tax Consultants - Another popular method. Companies like Jackson Hewitt, HR block have specialist tax preparers who will prepare the returns for you and shall help you in identifying areas where you can claim deductions so that your tax liability is low.

Of course, all the three of the above methods are very popular and have their own set of advantage. So the next obvious question that comes is which method will suit you more. The answer is dependent on various factors such as how complicated is your income tax returns. If your returns filing requires a lot of deductions, then you should opt for either the a software or should go to a consultant for 2010 income tax return filing.

However if the returns are going to be straight forward, then go ahead with Free E-filing option.

Economic Growth and Stock Returns - What Investors Need to Know

Although their forecasts are notoriously inaccurate, economists spend a great deal of time thinking about and forecasting future economic growth. Investors often consider these forecasts when deciding where to invest their money. The conventional view is that countries and regions with strong long-term economic growth prospects are more likely to deliver higher stock returns than those with slower growth expectations.

One popular theory is that corporate earnings in the aggregate should constitute roughly a constant percentage of GDP over the long run and, therefore, dividends will rise along with economic growth thus producing higher stock returns in faster growing economies (note: historical data does not appear to support this idea).

Following this logic, asset allocation would be a straightforward process of favoring high growth regions and countries of the world at the expense of the slow growth areas. For example, economists generally agree that the long-run growth potential of Asia is higher than either the United States or Europe. Is getting higher returns on our portfolios as easy as overweight Asian countries since the expected economic growth rate of the region is so much higher than both U.S. and Europe?

Of course, there is no free lunch in finance and market participants know which countries and regions of the world are expected to have higher economic growth in the future. These expectations are incorporated into current market prices, thereby making this knowledge of little value in making investment decisions.

Most important, several academic studies have failed to find a positive correlation between a country's economic growth and its stock market's return. British economists Dimson, Marsh, and Stanton find no evidence that economic growth is a predictor of future stock performance or that high growth economies outperform low growth ones. Similarly, Jay Ritter of the University of says that future economic growth is largely irrelevant for predicting future equity returns.

Simply put, while short-run changes in GDP growth can affect stock prices, there is no necessary long-term connection. Growth of an economy is determined by growth in the supply of labor and increases in productivity. Stock returns, on the other hand, are determined by the cost of capital, which is the rate of return required by investors to bear the risk of owning stocks.

In other words, it is primarily risk that determines long-term stock returns, or the returns on any investment asset (not the growth rate of the economy). Some investment advisors recommend investing in fast-growing economies with the expectation of superior returns, but historically that strategy has not generally succeeded.

This is not to say there is no connection between GDP growth and the stock market. The prosperity of companies and shareholders depends on the health of the economy at any point in time, but instead of GDP growth predicting stock returns, it is the stock market that predicts future GDP growth.

Just as global stock markets rose in 2009 in expectation of economic growth in 2010, economic researchers have found a statistically significant between a country's economic growth and its prior-year's stock market return. In short, a positive return on stocks in year t portends positive economic growth in year t+1.

The fact that the stock market discounts anticipated economic conditions and is a good predictor of future economic growth, suggests that free and competitive markets are efficient processors of information. This is good because the idea that free markets work is a central idea of capitalism and necessary for the proper functioning of capital markets.

In summary, buying into growth markets does not generate market-beating returns because markets anticipate the growth and factor this expectation into current prices. This underscores the importance of having a globally diversified portfolio with exposure to many different countries, regions and asset classes.

How to Find 100% Financing of Investment Property in a Bad Economy

For several years it was easy to find 100% financing of investment property. Just go to a bank and get an 80/20 no doc loan. You didn't need great credit, you didn't need cash and the investment didn't have to make sense.

But the credit crisis of 2008 forced the banks to pull back from their loose lending practices. Now most require 25% down payments when you are trying to buy rental property - if you can get a loan at all. Many would be investors seem locked out of the market at a time when foreclosures are creating many buying opportunities.

So what should you do? Well, some obvious points are:

* save money for a down payment
* improve your credit score

In bad economic times cash is king. Those with the cash are going to get the best deals. Period. But you can still buy investment rental property even if you don't have a lot of cash. (Though to be fair - you need cash once you own the property to handle vacancies, repairs, etc.)

One of the best actions you can take is to develop a good relationship with a small local bank. It was the big banks that were the most out of control (CountryWide, Bank of America, etc.). Many small local banks kept their heads on during the buildup of the real estate bubble and are in a good shape to loan money.

There are several alternatives to banks when it comes to getting 100% financing for investment property. The most obvious is seller financing. Now this won't work if the owner is a bank, but is a great way to find a win-win solution to the problems that sellers are having unloading their houses. And generally, a seller is not going to look too closely at where you are getting a down payment from.

If you have a good relationship with a local bank that knows local real estate values you also might be able to use the seller to carry the down payment as a second mortgage. The big banks are more likely to want you to have some "skin in the game".

If you are buying a property that needs a lot of rehab, the best option might be a hard money loan. Although hard money lenders now run credit checks, if you have some experience in real estate you can find this type of lender. If you are going to flip real estate and can get a deal that will sell quickly after making repairs, the higher fees and interest rates won't be a big impediment to using a hard money lender. A hard money lender will lend you money for the purchase and renovations.

You might have heard the term "private money lender" in your search for 100% financing of investment property. These are people that have either lots of cash or a self-directed IRA. With a self-directed IRA an investor can be a bank for you. He or she might be willing to lend you the money and give you a share in the property in exchange for a portion of the ownership.

For two of the best ideas of how to finance investment property with little or no money down see 100% Financing of Investment Property.

Is Real Estate the Best Investment in Today's Economy?

A good investment means security and stability in the future. People should know where to put their hard-earned money to be able to secure financial stability despite trying times. Investment, by definition is taking current resources and putting it somewhere else that may be beneficial in the near future. Everyone should be aware of the risks they need to take when investing their money. Some choose to invest in more tangible assets, such as jewellery, designer bags, cars, and the like.

Real estate investment is not something that everyone understands. There are a lot of seemingly complicated details when it comes to investing in real estate. However, there are glaring benefits why real estate can be considered a good investment. For one, investing in real estate is almost guaranteed appreciation. When you buy a house, for instance, your invested money is almost guaranteed to become bigger through time. It is also a great weapon against inflation. Real estate does not suffer the highs and lows of economic trends as much. Being a long term investment, it is a good source of stability. Another reason why it is a good investment is that real estate is a basic necessity. Just like food and water, everyone needs a place to live in. Buying a house is always the better choice than renting. Renting may seem more economical, but in the long run, owning a piece of property is still the best choice. Investing in more than one property will give you the competitive edge to dictate the prices on which you want to sell or lease your property in the near future. There are also tax advantages when buying condominium units, apartments, and houses. Long term appreciation is another convincing reason to think of investing in real estate. Buying a property in a good location will certainly prove to be beneficial. Renting out your properties to commercial establishments will earn you the money you invested eventually.

There is such a thing as pre-selling. This means that property developers sell the property significantly lower than its value as compared to when the project is finished. Buying during pre-selling almost guarantees bigger long term returns. Since the buyer is buying at a lower price, in time, his money will become bigger. However, one has to be wary of the reputation of the developer. It is important to do background research on the developers' portfolio. Before being hooked on the low price, make sure that the project will be finished as promised. Location is also very crucial in real estate investment. Research on the location of your target property. Developers usually know what kind of "environment" their properties lie on in the coming years. Do extensive research on the plans for the area in the next years. Remember, a good location means a more guaranteed high long term appreciation. When a property lies in a place that has a high commercial potential, buyers and businessmen will be more interested in your property.

Real estate is considered by many as a high-risk investment. However, long term returns prove to be worth it when properties are handled properly.