The Bush administration’s plan to privatize Social Security would require individuals to purchase a guaranteed annuity with their investment proceeds upon retirement. A similar rule in the United Kingdom brought about a financial crisis that hobbled several financial institutions—most famously Equitable Life—in 1999. These insurance companies were unable to honor their guarantees when market interest rates fell below the rates they paid on the annuities they sold. If the administration goes ahead with its plan, it could set the stage for a similar, but much larger, financial crisis in the United States. How would this affect the risk profile of my investments in financial institutions?

Banks are slavering to expand their Chinese credit card businesses. The Chinese currently use cards for only 3 percent of their purchases, compared with a 15 percent average worldwide. Firms like Citigroup and American Express are considering expanding their card businesses, but the financial system in China is notoriously under-regulated and risky. Will this be a boon for my bank investments, or a quagmire?

Junk bonds are living up to their epithet, with investors accepting looser covenants and tighter pricing in order to glean some additional yield. Is it time to flee the high-yield market?

LBO firms have been flipping their investments, rather than investing for the long term, by taking newly acquired properties public more quickly than in the past. For example, several large firms bought PanAmSat for $4.1 billion in August 2004 and filed to take it public four months later. Is this enthusiasm for quick turnarounds good or bad for my investments in LBO funds?

The “scam of the year” was the sale of Yukos subsidiary Yuganskneftegas, and it demonstrated “the lack of rules” in Russia. This appraisal came not from a disenchanted Yukos investor, but Vladimir Putin’s senior economic advisor, Andrei Illarionov. If senior government officials have lost faith in the Russian market, should I be heading for the exits?

The Bank of England is worried about the search for yield among hedge funds, especially those that use complex strategies. In the BofE’s latest review of the financial system’s stability, it noted that these strategies can cause the markets significant liquidity problems if they have to be unwound quickly (as happened during the LTCM crisis in 1998). Are my hedge funds among those that could be caught in a liquidity trap? What would it mean for my investments?

Companies must start deducting the value of employee stock options from their profits as of their first financial statement after June 15 of this year. Private equity lobbyists say this will hurt small companies that cannot otherwise afford to attract top talent; transparency advocates say that not expensing options is tantamount to lying. When the transition takes place, will it affect the market values of firms in my portfolio? Will it hurt growth stocks in general?

Mutual funds returns beat those of hedge funds in 2004, according to Morningstar, the fund analysis firm. The average return for all mutual funds was 8.35 percent in the year to end-November. The CSFB Tremont Index of hedge fund performance showed a 7.9 percent return over the same period. Is this an aberration, or are mutual funds again poised to outperform hedge funds in 2005?

China will allow options contracts to trade this year, giving investors another tool to gain exposure to the country’s economy and to manage their financial and business risks. The first instruments will be options on commodity futures for wheat and copper. What does this development mean for my own business opportunities and investments in China?