Some ETFs Are Not Acceptable

Look closely at exchange traded funds (ETFs) you buy because they are not all alike. Some may be managed when the original idea for their growth has been for them to follow indexes, un-managed.

ETF funds that trade infrequently will have big differences between bid and asked prices, and their net asset values. You want to avoid those losses and discrepancies

ETFs charge fees that may vary and may be way too high in many instances

Then there are ETFs that don’t follow their chosen index too well. Focus may be poor, just to suit a current market. That will defeat the original purpose you may have had for investing in them.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Outlandish Money Manager Costs

Avoid money managers if you can. You pay them a fee of 1% to 2% of your assets which amounts to about 20% or more of your earnings a year. If you invest with them in a hedge fund, you pay 20% or more of earnings off the top, plus that percentage management fee.

Only a tiny number of money managers prove to be frauds, but you will sleep better by staying away from them because of their annual cost that adds up to a large chunk of what you’re left with.

Hire an accountant, or a CPA, and if you have considerable funds, a tax attorney. But avoid expensive money managers by sticking to plain, low-management-cost funds.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Detecting Ponzi Schemes

Sometimes it’s not easy to protect against Ponzi frauds, despite what the media tells you, after they are revealed. The SEC often fails to discover them in time.

But there are basics you can follow to reduce odds of falling into traps that entice scams.

A basic way to avoid investment frauds: Stick to plain investing vehicles from low-cost, investment funds. They are the ones with the lowest-cost management fees, who have been in business for years.

Avoid those who appear to pay off far better than the low-cost investment funds. And hotshots who get publicity from ignorant or complicit “friends” or from media public relations. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Silkscreen Prints Are Not True Original Art

Screen printed or silkscreen prints, as works of art have commanded lots of attention.

I have been a serious collector of prints. So I have paid attention to the question of originality as this is a factor in determining value. After all, when collecting, you must ask yourself what is true art?

Originality, one of several originality factors has to do with the way prints are created by the artist. Each copy of a print made in multi-copies can be original if done according to established standards.

I have always felt, along with experts on the subject, that the silk screen process did not produce a genuine original because the artist had no complete control over the finished work, as is the case with other print processes. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Your Investment Goals

Consider your personal investment goals when investing, not media suggestions.

Media advice can be misleading because they invariably disregard individual circumstances, such as the investor’s age and ability to take risks.

You can afford to take losses in your youth when you have time to recoup any errors; those you cannot afford when you are older or retired.

Investors must also consider risk by taking into account their knowledge of the securities markets and other distinctive personal situations; also age, number of dependents, financial status and investing-comfort.

Therefore, much media advice and commentary is universally misused. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

European and American Unemployment Insurance

About one third of the unemployed on benefits will get jobs once those benefits expire. However, the longer the benefit term, the longer many unemployed take to start looking.

The difference between the U. S. and Europe has been that the latter has better unemployment benefits. Europe also has chronically higher unemployment. (See the Earl J Weinreb NewsHole® comments and @BusinessNewshole tweets.)

The SEC Helps Waste Your Money

The SEC is around to help you avoid securities fraud. And it does to an extent. Much is pure theater.

That’s why the SEC has had a poor record in discovering massive frauds and Ponzi schemes, uncovering them usually by chance, and only after they have already been exposed.

But in their mad dash in reacting to fraud, instead of preventing the bulk of transgressions, the SEC does lots of monetary damage. They tend to pick the average, uninformed investor’s pocketbook by causing unnecessary expense with legal fine-tooth-combing, printing and mailing.

And requires such action constantly, perhaps to a far greater extent than is necessary to alert an ordinarily informed investor.

Just one example: The expense of having banks, mutual funds and corporations send out useless, expensive, legalese financial literature, that the recipients do not read because they cannot understand the terms the SEC has the senders use.

The only ones who can profit are the lawyers. If a dot or letter isn’t properly crossed or is missing, the lawyers will sue the senders of that hard-to- read and comprehend mail. Again, at the expense of the poor mail recipients who never benefit from the impractical information anyway. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Importance of Asset Allocation

 What do you do attempting to maintain stock/bond asset allocation relationships in erratic markets?

The early 2009 bear-market in stocks had also been accompanied by a massive sell-off in bonds. The domestic market’s experience was paralleled overseas as well. That was unusual and not supposed to happen. When stocks in the past were weak, bond prices had generally shown strength.

Therefore asset allocation did not help in that bear market. Using different asset classes to get a high return at a lower risk was unattainable.

Alternatives to conventional stock/bond formulas to balance market fluctuations are not sure-fire answers. But advisers love to recommend a variety with the aid of 20/20 hindsight.

Collectibles are not the answer in protecting against market downturns. because of a lack of ready marketability and poor resale margins.

Investors have been using combinations of gold, silver and other precious metal holdings. Still others, questionable short-term commodity trading antics.

Over the long run, diversification among different asset classes has produced much higher returns, along with lower risk. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

The Odds of Timing the Stock Market

 The financial media has a habit of commenting on timing the securities markets. It cannot stop for a good reason. Securities-timing articles fill space in blogs, books and publications, over the air, and the internet.

Yet, independent research constantly shows that market timing never works consistently.One example:  Mutual fund management companies know that in-and-out investors never do as well as their buy-and-hold, long-term statistics show.

Reading a financial article telling how a rally trend in one security class may be finished, and it may be time to get into another type, should be a danger signal, not a buy opportunity. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Can Dodd-Frank Prevent Financial Bubbles?

The purpose of the administration’s attempt to regulate the economy amounts to a foolhardy attempt to smooth out the effects of booms and severe financial jolts and recessions.

The U. S. has repeatedly been through recurring economic cycles over many years. Other economies around the world have experienced the same.

The bottom line is: Over-regulation or overly-strict regulation never works. The effort always has a short term goal, but, nevertheless, is used because it’s always a political measure to temper public unrest.

Dodd-Frank is excessive regulation that will not help. There is the usual political factor that overrides supervision that the regulation affords. Easy money and the subprime crisis were what Congress and the administration created, not the lack of supervision.

I have commentated on this repeatedly, mentioning how simple bank guarantees and not having “mark-to market” accounting for banks in an emergency, would have been the alternative solution. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Financial Adviser-Guru Qualifications

 The financial media covets financial advisers with its imprimatur, as a veritable storehouse of valuable knowledge. The media invariably puts forth commentaries on advisor suggestions as the best advice available.

Somehow, the media manage to find these pundits from over 100,000 who ply the trade in the U.S. alone.(I don’t want to get into the subject of how these advisers manage to get selected for media quotes.)

But there isn’t advice from these sources that cannot be often questioned, especially when it comes to bonds, The quoted financial expert invariably never fully discusses the principles of duration when it comes to these investments. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Are TIPS a Good Investment?

Much publicity in the financial media tells about how TIPS funds can legitimately inflate yields, in accordance with Securities and Exchange Commission rules. It’s easy to be hoodwinked into believing you are getting more than you are, while enjoying benefits of inflation protection.

I have never been a fan of TIPS. I have always explained its shortcomings on the return you get and tax bites. And how you can avoid inflation’s effect on fixed income investments with proper use of duration principles.

The problem: Investors and those in the financial media are in the dark about the use of duration principles. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets)

Securities Market Signals

I have found scores of securities markets signals in my investigation of strategies. However, many described in the media from time to time are not as sensitive as others.

The short treasury bill rate has always been an important one, until the federal Reserve decided, in recent years, to keep money at basically zero cost. When they do decide to raise the rate, there will be an indication of actionable policy change.

There is always that question of sensitivity. For instance, look at the Misery Index, That is the addition of inflation and unemployment rates. Great for psychology but not overly sensitive for quick market action decisions.

I have seen the “Crack Spread” or refinery profitability range index. But that’s seasonal and hard to gauge for investment strategy. An even less sensitive investment strategy indicator is the Baltic Dry Index or BDI. This calculates the cost of moving bulk raw materials across oceans and involves mainly those companies involved and ship rentals. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

The Fed Is Ruining Ordinary Investors

Ordinary, average, Main Street savers and investors, who normally are seeking safe havens for their savings and funds, have been literally ripped off by Federal Reserve policies over the past few years.

Unfortunately, when they see how little they can earn on their money, if risk avoidance is their concern, these investors place the blame on everyone but the guilty. It’s the Fed that’s primarily responsible.

And this will continue with the mistaken notion that Fed policy, that in effect is inflating the currency while attempting to stimulate the economy, will actually work before complete financial disaster.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Regulating the Hedge Funds

More hedge funds are now subject to SEC regulations. However, regulate them too severely, and they no longer can be considered hedge funds in the true sense. Not by the definition of what an investment hedge fund should do for an investor.

Hedge fund managers need secrecy in order to trade. If they divulge their intentions in advance, as stricter regulations promote, their efforts and objectives will be neutralized. Other investors will be able to counter strategy, to make any proposed hedging worthless or even dangerous.

Moreover, hedge fund activity had little to do with the financial downturn of 2008.

Over-regulation is another instance of the administration’s jousting for no real purpose, other than catering to its anti-business, anti-finance industry constituency. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Derivatives Are Misunderstood by Media

Politicians point fingers at derivatives as bad, and a major cause of our past financial distress.

But derivatives perform an important function as a financial instrument.

Timothy Geithner, the Secretary of the Treasury, overlooked meetings, monitoring trading of derivatives, when he headed the New York Federal Reserve. So, the mysterious workings of derivatives should not have been so dangerous, and deadly, causing the 2008 financial meltdown. And they didn’t warrant the notoriety they received.

Derivatives trading now have tougher regulations and more transparency, but derivatives make financing cheaper in the long run. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Estate Planning Use of Life Insurance

 Be careful buying life insurance from estate planners. It's their job to sell life insurance. They sell other financial products as well; various types of annuities and mutual funds. But their options are limited and yours become restricted.

Planners may know their products, but they have a conflict of interest. If they are tied to one life insurance company, you are not shopping prices and terms.

When they are selling mutual funds, you are probably not getting the lowest cost selections. The latter have to be higher cost to warrant compensation for salesmen. Lower cost mutual funds are essential to your benefit, no matter what the sales pitch may be on past or future “performance.”

If you need substantial estate advice, see a non-salesman accountant or lawyer, specializing in the field. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Our States Are in Financial Predicaments

 
Most of this country’s states are having financial trouble. Pension and other poorly undertaken contracts are making it impossible for most to balance their budgets. Tax revenues are down from past levels, while spending cuts have not kept up with demand for state services and outlays.

Yet, legislators keep handing out promises and largess as if prosperity still reigned. School costs keep growing. Public service and government=worker union pressures are destructive for officials seeking budget solutions.

Unionized employees often get 70% or more of their income for retirement each year, after only thirty years or so of work.

Chicanery is also at work. Many government pensions are permitted to be ‘spiked’ upward with overtime pay and raises, before retirement.

Remember: It takes $1 million in capital funds at 5% to get one $50,000 annual pension per worker per year. And that 5% is not being achieved these days.

Bankruptcy to break pension contracts is not an option for states, without federal law changes, but maybe for cities and towns.

There will have to be some freeze in obligations or change in contracts for  solutions. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

The Gold Enthusiasts

The market for gold as coins and bullion has been rising, thanks to the weakening dollar. I have frequently commented on this because I feel gold can be speculative for most folks who have no idea about its downside.

It can fall sharply, with any attempts to balance the U. S. budget, which will have to be done if the country is to avoid becoming another Greece or Portugal or Spain. And gold does not earn income or revenues upon which to establish intrinsic value.

It’s a psychological defensive weapon in many ways and psychology changes.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Ongoing European Unemployment

Too many European countries are on the edge of bankruptcy amidst well over permanent 10%-Plus unemployment. 

And with younger workers, who do not get counted as unemployed because they give up early on, and are, in fact, permanently on the dole the moment they leave school in their teens. If they excel at something, it’s in their demand for funds from their neighbors’ taxes. Those neighbors who work.

This is the society many of our politicians fail to point to, when they sell us on government-supervised ObamaCare and other services the Europeans get so “cheaply.” (See the Earl J Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Hidden Personal Tax Costs

There is a hidden personal tax cost the government never mentions. The media hardly ever brings it up, even at tax payment time.

We shall leave the question of how much business taxes cost individuals who are not in business but instead look at direct hits to everyone’s pocketbook.

Some facts: Personal tax has additional cost composed of two parts: One is the effort that goes into the preparation, even when done by an outside preparer.

And the second is the actual cost of preparations. Time is important because it is spent with enormous aggravation. Estimates of out of pocket costs are at least 30% that of the actual lax payments made by average individuals.

That approximate 30% tax increase is on everyone, small incomers, middle classes and not just the favorite liberal scapegoat “rich.” And it’s staggering.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Inept Media Investment Strategies

Whenever the financial media discusses investment strategies, it’s about a favorite of someone being interviewed or reviewed. Perhaps it's the strategy in the contents of a public relations release, disguised as financial news.

The purpose of investigations I have done of literally thousands of independent strategy studies and investing techniques, have helped me delve into the investment strategy phenomenon.

My conclusions often differ with that of the media, which tend to overlook investment strategies and techniques.

They are not up to the task, and most reports are not objective. So such strategies get short shrift. Yet, proper strategy use increases the odds of investing success. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Are Derivatives a Wall Street Problem?

A government can hide its long-term, poor fiscal position with short swap, or credit default derivatives. This paper manipulation made things look what they were not with Greek’s financial deficit spending over recent years.

Using derivatives for deception was wrong.

However, derivatives have a legitimate function in government financing, as they do in normal business and financial transactions.

Eliminating derivatives or making them tougher to write, will dry up the supply of conventional debt financing, That will simply make it tougher for governments such as Greece to get credit. They will then sell their bonds only at very much higher interest cost. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Wall Street’s Risky “Alternative” Investments

You read or hear about so-called alternative investments from the sharp-pencil boys on Wall Street. This occurs when investors’ interests begin to flag with the plain vanilla types they may understand. Alternatives sometimes include suggestions for the purchase of art in some form.

The problem is that the alternates are usually too sophisticated for most investors and are generally too risky.They do generate interest and thus produce articles in the media and more business transactions for the Wall Street folks. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Recessions are Short if Government Isn't Too Handy

Throughout U.S, history we have had economic cycles, booms and busts. To even them out the Federal Reserve System was legislated about a hundred years ago.

But human-handed regulation has never really succeeded at that function.

Experience has taught us that natural cycles very quickly correct themselves. And that the deeper the downturn, the sharper the economy will bounce back.

Except when government meddled in the 1930’s as it has in recent years. Along with multi-trillion dollar budget deficits that are confusing and scaring large and smaller, job-creating business owners.

By now the economy should be thriving again, and isn’t.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Undisciplined Attempts at Investment

I have documented over 1,600 investment strategies used by professionals, and have looked at their pros and cons.

While there is no perfect strategy, the chief pitfall in their usage is usually the lack of discipline employed to follow through, not the strategy itself. 

 

Additionally: I discovered why markets can be so rash and erratic. When institutional investors account for 80% and more of trades, why should the markets behave so erratically? Wall Street wizards invariably act in an undisciplined, mob-like manner; not as true experts. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets

Political and Thus Dangerous Corporate Bailouts

Corporations, such as those in the automobile industry and in financial trouble, can always use the bankruptcy courts for an orderly means to reorganize debts.

This has unfortunately been forgotten in the recent past by this administration, at enormous cost to our national budget and constitutional framework.

Bailouts were done, in effect, to salvage outrageous union contracts, which bankruptcy courts would have dissolved equitably. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Media Mis-Handling of Repo Financial Transactions

The financial media does a poor job of commenting on financial matters, by scapegoating big business and Wall Street, repeating populist political comments.

Another example is the subject of repos. The elimination of repos sales off the books of Lehman Brothers had relatively little to do with the use of bank guarantees by the government, or eliminating mark-to-market accounting, for all banks. The latter, and not repos, were the villains in the financial meltdown of 2008/2009.

Some in the financial media, as well as the administration have ignorantly treated each financial institution problem as part of a group, to be treated alike, by similar regulatory treatment.

Thus, every entity that has been in trouble in the past is tossed in the same basket; AIG, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Bear Stearns, and so on. Each had its own peculiar problems and could have been rescued in its own way, probably without heavy-handed government assistance.

The media has done a poor job of sorting this out for the average citizen to understand.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Media Misconceptions and Mishandling of Financial Problems

 The media usually has no idea whom to blame for financial problems. They usually blame big business or Wall Street, as they are the popular scapegoats. (The Earl J Weinreb NewsHole® comments frequently critique the media for this.)

All problems regarding current financial troubles are treated as if they have had a similar cause, though they may have had their own. Prevention techniques would have varied for each, but are treated alike by the media.

Results: Whatever leftist, populist politician demagogy will be picked up by the media because it’s handy and it’s what many in the media have learned in school.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Capable Insurance Company Analysts?

 Beware of Wall Street’s insurance advice. Companies make annual filings with their various home-state insurance departments. Very few, if any, analysts can understand these intricate documents. Therefore, they are not capable insurance analysts.

I rarely have found anyone on the Street giving advice on insurance company securities who has taken the trouble to truly learn how to understand the policies the companies write, and the reserves behind them. Unfortunately, this lack of Wall Street insurance knowledge persists, based on commentaries I see in the media.The earnings and book values they spout must, therefore, always be suspect.

There are Earl J. Weinreb commentaries on the subject. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Man-Made Financial Meltdowns of Home Prices

 This is a further reprise to my earlier reports, and the Earl J Weinreb NewsHole® comments, on what the government could have done following the first signs of financial distress in the new construction market a few years ago.

This is not hindsight as I had made such suggestions in my blog at the time.

The way was to have government buy up at bargain prices all the unsold tract homes in bubble-infested areas, such as Arizona, California and Florida. This would not have been a bailout for the builders. They would have suffered losses.

It would have dried up the major excess supply of real estate and stopped the ongoing, adverse psychology that kept reducing values of the rest of the nation’s perfectly good real estate that was not too overvalued. The cost would be relatively very low, compared to the many billions and even trillions we have expended.

The federal government, through one or more of its agencies, could have guaranteed all the loans of its banks, the way the FDIC insures deposits. Fees would be charged the banks for the guaranty.

No bailout funds from taxpayers, no phony stimulus funds which really amount to political slush funds. No poor psychology that makes banks wary of making loans to small business; thus more job creation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Proprietary Trading Creates Bank Risk?

Paul Volker, a former head of the Federal Reserve Bank and now advisor to president Obama, has wanted to restrict proprietary trading among banks or bank holding companies. But when pressed he has had no idea as to what really describes proprietary trading activity.

There have already been regulatory restraint on the activity, much of which have been ridden off by banks to other entities. However, there is no real lessoning of risk as a result. It's difficult to delineate trading by banks for accounts and for themselves in many instances, as Mr, Volker knows from his experience.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

The Psychology For Regulations

Debacles happen when you get an over-regulated attempt to spend yourself out of a financial tangle while psychologically pushing citizens and business into an ever-deepening recessionary funk.

I have felt that most regulators and politicians fail to understand psychology that drives the way people affect everyday economics.

I have been asked: What would you do if you could, in practical terms, to get out of a recession?

Simple. Cut taxes permanently and watch how that creates jobs and spending because of the psychological uplift. Clear the doubts for business and the consumer, and natural instincts will resolve recessions before they fester into depressions. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Recap: Our Man-Made Financial Meltdown:

I frequently comment on aspects of the 2008/2009 financial meltdown, and how the severity of our Great Recession could have been prevented, had there been a “hands-off” attitude by government. Instead, we got heavy-handed, ultra-expensive attempts.

Those of you who have seen my Earl J. Weinreb Newshole® info will have insight on much of the situation.

I bring this up once more because the Federal Reserve’s easy money policy,

The Fed has allowed itself to become a tool of administration fiscal policy and shows little independent monetary policy for its intended purpose. It helps guarantee future financial upheaval for this country unless an effort is made politically to change matters. We cannot any  longer depend on the Fed. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Financial Reforms in Doubt?

 The government has given more power to the Federal Reserve but the agency has had perhaps too much power up to now. The big problem is the possibility of any banking institution failing and then dragging down another.

Unfortunately, the regulators have historically never been good at this, and I doubt they ever will. The 2010 Dodd-Frank legislation has merely made it more of a debacle for big banks to fail.

That spells out more senseless bailouts.Want more information? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Regulating Pay of Top Execs

You receive a dependency that is difficult to get rid of when you accept government aid. The result becomes worse than an addiction. Even when you want to repay the debt, Uncle Sam makes it hard to comply.

For some of the larger banks who accepted funds from the U.S. the result was impractical and actually stupid.

Apart from the fact the bank management is controlled within a government straitjacket (a characteristic of a fascistic and not a capitalistic free government), banks who have accepted aid are restricted in how they pay bonuses and compensation to top executives. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Seeking An MBA or Equivalent?

A suggestion for students seeking an MBA .

You probably have seen Earl J. Weinreb comments on this subject many times in the past. They’re the result of my observing the successes, failures and foibles I have noted on Wall Street.

One has to do with the study of failures of the many mathematical models that have been devised to reduce risk. The models have not cut investment risk that is their primary objective.

I am not talking about the well-discussed Black Swan concept of risk that happens once every fifty years or so. Concerning events such as the recent financial meltdown. But they regard the constant use of financial models which don’t seem to work as they are intended to do.

The truth is, some complex models by MBAs work but they are destined to eventually fail, no matter the brain-power and effort applied. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Regulators Often Do a Poor Job

The current deep financial downturn, like all recessions, is started when business people and consumers get pessimistic and stop spending or buying.

The twelve regional Fed banks all have regulatory duties. But within them there are often disputes as to what exactly is to be done.

Many supervisors and regulators within the system have different functions, with varying answers from their observations. Always, a human element governs what they feel must be accomplished.

Errors inevitably turn up with individual decisions and action that would not happen when free markets determine outcome.. This fact has been established from years of experience.

Remember what I have said in the past about how better predictability futures markets anticipate events, as opposed to that of a small group of experts.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Investing With Bank Stock Advice

Bank analysts are never privy to inside banking operations. Example: complicated derivative portfolio information, or “repo” positions. In fact, they know so little of the plain-vanilla type; if they were, they could not understand the inherent complexities.

Yet every negative word analysts utter can doom the soundest financial institution, to the point where that organization sinks towards insolvency.

Rumors are often circulated, fomented by bank analysts who cannot possibly see a bank’s asset portfolio. That makes for self-fulfilling events. Especially when bank holdings must then be priced, "marked-to-market."

Fear-frenzy takes hold as analysts persist in this self-fulfilling, bearish sentiment.

There was a time when bank stocks were bought on the basis of book value, which can now be suspect, and dividends, which these days have been pressured by governmental regulation and oversight.

Then the question arises of how secure is each bank’s capital, in our fragile economy?

Another reason why I believe in index funds, even for banking equities. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Financial Services Consumers Can Be Smarter

  You can easily be a smarter financial services consumer without government assistance.

Always look at the fine print. It’s basic and not complicated when you bother to read carefully.

Another tip is remembering that there is no such thing as a free lunch. You pay for what you get in one way or another.

Figure out what you are getting. Consider comparable costs and what you pay for, in return for something you could receive that’s better. Take time and use a calculator when necessary. Most often you don’t have to be a math whiz.

Anything the government gives you is your money, either in the form of direct or hidden taxes, or worthless currency down the road. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Life insurance is a Questionable Investment

This insurance combines life protection and savings at a fixed return. It’s an expensive form of both. Sales pitches about tax deferred benefits behind whole life insurance can be misleading.

Other secure investment options are available. Whole life is not a true investment vehicle, despite any sales talk. Were you to buy term insurance separately for protection, and invest the difference in a secure, low-cost, income-based mutual fund, where dividends are reinvested, you would earn far better returns. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Consumer Finance Protection

The Administration feels a new behavioral concept can provide the consumer with what is best when shopping for complex financial products.

Especially when looking for mortgages. Or whether to choose a prepayment option despite penalties. Or the question of which down payment to place on mortgages.

So the Administration has been thinking of simplified versions of financial choices for consumers, that takes the burden away. It takes the term plain-vanilla to a new level, by suggesting a preferred option for all.

I can see having all choices spelled out on two sheets of paper, in large print and in plain English. The problem, however, is that such a standard option would soon become the only one available.

You will then get what only the government thinks is good for you.

You can be certain that the threat of a lawsuit from an enterprising lawyer would drive away any other product from a financial institution. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Cheap Life Insurance For Protection, Not Investment

Term insurance is the cheapest form of protection per premium dollar, as it contains no savings function.

As for the cheapest protection you can get, policies today can be quickly-acquired, over the internet or by phone. No physicals are often required for plans up to certain dollar limits. How do you get the best protection for your money?

Even though screening is currently computerized, bigger-dollar plans with no mandatory medical screening may be more expensive. If you’re healthy, why not pay less with more scrutiny for your coverage?

Shop around also for pricing on comparable terms; direct-writing companies are generally cheaper. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Use Bonds To Fight Inflation?

 

Most “experts” automatically tell you to avoid bonds when there’s a threat of inflation.

They are wrong because they never get into the whole story, owing to ignorance or indifference. That whole story involves discussion of duration principles and how long the bonds are to be held.

Paradoxically, inflation could be an opportunity for potential purchases of low-cost bond mutual funds, or ETFs, with low duration, and with dividends that are periodically reinvested.

I have commented a good deal about bonds and inflation in the past and will in the future. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Only Average Future Investment Returns?

 Investors are lulled into complacency about “average” returns. They hear what securities have earned on average going back years, and they then project earnings figures into the future.

These prospective averages are wrong. Indexes on which they are based are skewed. In years past, companies that failed may not have been included in statistics that are now used; therefore past results are overly positive.

In addition, there are steep investment-experience cycles which affect average results at any time. You may need to cash in funds just when your portfolio is in a down trend, or has recently been in one, and hasn’t had time to recover.

Thus, whenever you hear securities will bring you average returns, think again about what that number really is. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Public Pension Plan Fantasies

The assumed rate of return on pension funds of almost 60% of unionized American public workers is at 8.0%. This is currently almost impossible to get within any investment portfolio. Still their fund managers undertake fiduciary responsibility in the face of budget deficits. Moreover, future economic growth is unlikely, so the assumed return figure is even more unattainable.

Yet, the fantasy continues; the public employee budget fiasco goes on. In fact, almost 20% of such public pensions blindly plan on average annual earnings well over 8% per year.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Securities Market Questions

Investing in the securities market is never simple. But you can simplify the process somewhat by specifying your aims. Financial media reports and suggestions often fail to make this point.

Are your goals short term or not? Are you taking proper consideration of age? What are your feelings about risks?

Consider the economy. We have been in more than an ordinary recession. It may not bounce back for several years.

And inflation will be a distinct prospect, probably quite heavily, within a couple of years. Economic stagnation and high inflation could stifle corporate profits and stock pricing. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Brokers' Responsibilities

Be careful that some of the brokerage transactions you make are simple. In many instances, the broker may be acting as a principal, selling you a security from his inventory, or perhaps buying the security into his inventory. 

 

That could represent a very short period, an in-and-out transaction with another party. Nevertheless, the broker is technically not a broker but a dealer.

That is legal provided his markup is reasonable. In many instances a 5% markup is not acceptable when the security is traded in a liquid market.

The Financial Industry Regulatory Authority or FINRA has been attempting to fine tune the activity. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Bankrupt Public-Employee Retirement Funds

State and local public employee retirement programs have unfunded liabilities of about one Trillion dollars. according to Pew Center on the States. Despite the current publicity the subject gets, most folks have no concept of the real problem, nor the solution.

Unlike the federal government in Washington, states and local entities cannot print money. They cannot continue to keep borrowing either.

Talk of fed-enabling legislation for states to go bankrupt is not a practical solution. The public employees’ unions will not like the losses and shaving bond prices will starve the source of future financing, as well as decimate smaller savers in those bonds.

But there is no reason to panic if public employee pensions are negotiated to realistic levels, along with state and local budgets.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Odds of Financial Success

Most of us are not familiar with the odds of finance and it affects our outlook on financial matters.
 

Example: Flip 100 coins, heads or tails; there is a 75% chance of a streak of 6 or more straight guesses . And a 10% chance of a streak of 10 or more

Look what this does when we observe analysts and securities’ markets. You hear comments after market closings about events which really reflect randomness. But the comments attribute specific causes that occur only in the minds of the commentators. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Inexpert Government “Experts”

An idea of how unsure and inexpert the “experts” can be: The Federal Reserve Bank is still on its path of buying $ billions of government bonds. This inflates the economy by, in effect, printing fresh currency. The Fed intention is to rouse the economy, at which it's failing.

But at the same time, the Fed is allowing some big banks to raise their dividends, which soaks up capital and their lending funds. The Fed, after all, wants to rouse the unemployment problem.

While some banks, instead, use excess cash to buy up shares. All this adds to a mix which makes the Fed’s actions very imprecise, to go along with the rest of their their seat-of-the-pants decisions. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Retirement Planning Fantasies

Retirement planners use dubious assumed models. They take into account investments, forms of diversification, along with outlay plans, and a number of probabilities. One may be Monte Carlo simulation, a well-known model used by investment advisers for this purpose.

But such investment planning fails to work for many reasons.

A major financial market meltdown is one. And other unforeseen events happen; illness, a job loss, business failure, unexpected educational expenses. The result of a lifetime of retirement planning is often failure.

The solution is to be realistic. Be prepared to work at least part-time, past what you had originally thought would have been retirement age. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Trading Currency Difficulties

When trading the dollar overseas, a variety of international problems can make that currency stronger, situations that also affect the value of the Euro and foreign currencies in different ways.

And then other factors come into play. Such as rising oil and energy prices, with their effect on the American economy. The impact on the dollar can be opposite what it would ordinarily have been with respect to the other currencies.

We import oil. Were we producing our own energy, our dollar would be much stronger than it internationally is. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Understand Economics Opinions

When you listen to economic opinion find out what the politics of the economists are before taking their advice.

Political slants color their opinions. Economics is not a true science, so comments can diverge along those lines.

Look into track records; many of those lauded by the media have been consistently wrong for decades or merely misinterpreted. John Maynard Keynes' thoughts are an example.

Also, do not be impressed by awards, especially Nobel prizes, as some have been awarded primarily on the basis of politics.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Over-Regulation With Dodd-Frank

Not a day passes without a new adverse revelation about the Dodd-Frank Act, which had been cooked up by Congress to cure everything that hinted at financial malaise.

The actually unfinished result still has more than 530 regulations, with 60 studies and about 90 reports and we haven’t seen the end of them. Sarbanes-Oxley legislation, whose negative impact outweighs the positive, had 16 regulations that have helped the exodus of major corporations to flee overseas.

The Law of Unintended Consequences is always overlooked by politicians because it’s inconvenient when campaigning for office. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)