Timing Securities Buying/Selling

Buying, selling or holding securities evaluations are not simple to make. They’re often the basis of media articles because they fill space. And the media invariably get explanations wrong.

One-sided ads will add to the timing confusion.

The strategy an investor should use will depend on the original investment intent when the securities are purchased. What is the purpose of the purchase? What is the reasoning in terms of investor age, goals, risk accommodation, and psychology?

And, most importantly, the extent of discipline the investor has decided to employ to keep to that strategy.

Provided, the investor is one of the few who can be really disciplined. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Avoid Costly Investment Advisers

Investors keep using advisers who cost them as much as 25% or more of their investment income. (Calculate the average fee of 1½% of investment assets against average investment income and you get an idea of what money advisers get from clients each year.)

The trend for using investment advisers appears to be growing; the fact these same folks were generally unable to help prevent the damage from past market debacles has not hurt adviser reputations.

You can easily invest in low-cost index mutual funds and ETFs, using common sense as I always recommend. Avoid advisers, except for necessary lawyers, accountants and tax experts you may need. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Financial Aides -- The Real Villains

Fannie Mae and  related Freddie Mac are government-sponsored  companies which had been blessed with  backing  as a special means of helping the “poor” and minorities. It also became a political device to “overcome” so-called red-lining, where minorities allegedly could not get loans because banks unfairly turned them down for credit.

Hundreds of billions of dollars were soon involved. Influential liberal politicians had friendly execs employed, with incentives to augment the gigantic volume of systemic mortgage growth and guarantees.

Over the years many observers noted the accumulated danger but the ensconced Congressional influence, exemplified by representative Barney Frank, pooh-poohed any attempt at reducing the growing risks to the entire mortgage system.

We know now about the subprime debacle as the banks attempted to cope with the toxic assets that resulted from being fed Fannie Mae and Freddie Mac fare. Blame has been placed on the shoulders of bankers by the politicians who were actually responsible.

We get more of the same, regulation with Representative’s Frank’s name attached to it: the Dodd-Frank Act. You can expect more of the same fiasco resulting unless cooler heads prevail in correcting that bit of legislation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Vaue of Whole Life Insurance

Comparisons between whole life insurance and term insurance are usually simplified by  pricing. Whole life is more expensive when you shop for protection.

On the other hand, for those who need forced savings and who would not put what they would save from lower term life premiums into proper, low cost mutual funds, whole life is still a choice.

Particularly because whole life policy earnings, while lower, are tax exempted.

Another comparison often overlooked: There is always an extended term option in a whole life policy; the policyholder can convert the contract into term insurance at a later date, and without the need of a physical exam, even if otherwise uninsurable. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Stock Broker Advisers

SEC regulations see that stock brokers  have to treat  clients differently than in the past.

Of course it doesn’t  do much for most investment portfolios, but it  makes bureaucrats feel better.

In the old days a broker had to be sure that an investment was ”suitable” for a client. What was suitable was often debatable, but that makes securities markets as erratic as they are.

Now the broker is supposed to have a “fiduciary duty” toward the client. according to SEC intentions. That should open a hornet’s nest of endless legal problems

The main result of this is to give investors more ammunition to sue brokers for real or imagined damages. That offers more power to the lawyers. And to give brokers the excuse to become more profitable “advisers.”(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Faulty Investment Analysts

The majority of securities analysts could not operate a pushcart. Yet, they constantly critique top business executives about the way they run multi-billion dollar companies.

In addition to this prevailing fault, financial community analysts have an extremely limited time frame. While a business must look years ahead, those involved with Wall Street securities usually operate with much shorter time-goals. That makes them market timers where the success odds are known to be poor.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter

Why Are Securities Markets So Erratic?

Securities markets are generally erratic.  However, when you think about it, they really ought to be calmer than they are.

Institutional investors and advisers are considered professionals. They’re the experts who account for  80%, and often  more, of all trades and activity. Why then should the markets behave erratically?

Pros ought to know what they are doing, unlike the other 20% or so of the public amateur investors who blindly follow the pros.

However, Wall Street "wizards" invariably act in a mob-like manner.

They still make their millions, simply because they are ensconced as Wall Street inside players. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Wall Street’s Securities Experts

Reality: Little deep investment research and thought comes from the analytical securities segment of Wall Street.

What goes for research there is primarily in the form of company reportage. These have to do with reported earnings, without any true understanding of the nature of those earnings.

Furthermore, much of what earnings are announced could be the result of fanciful accounting. So all that analytical reporting may be meaningless, if not misleading.

Little is done on what is most important to the investor; the use of disciplined strategy.

Most analysts and money managers have no time for careful, insightful thought of the multi- hundreds of strategies, which, along with disciplined use, are essential.

Moreover, the investment community is incestuous, in a way which creates herd-like, impulsive instincts. This results in the inanities that has become repetitive gospel, over the years. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Medicare and Social Security Are Actually Ponzi Schemes?

The biggest Ponzi scheme of all time may well be sponsored by the U.S. Government.

Medicare and Social Security are estimated to be short by over 110 trillion dollars. That makes them completely bankrupt, were they genuine, private insurance enterprises.

Example: The average American has no idea how Social Security works. He or she will tell you it’s as advertised. It’s not, because there is no trust and reserve fund behind it, though you often hear politicians mention “lock box.”.

Benefits are paid today from earnings of those still working, So, what makes this different from any other Ponzi scheme? Paying off some today with money taken from others, to whom benefits are promised tomorrow. Social Security tax funds taken in, are never really invested. They are used to pay off Social Security obligations of today.

Government also has exhausted what is supposed to be the Medicare Trust Fund. Social Security will run out of money in a couple of decades, or much sooner, when there are probably not enough workers to pay off retirees.

So what makes these programs different from other Ponzi schemes? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Future Social Security, Medicare and Medicaid??

By 2050, Social Security, Medicare and Medicaid, will take up nearly the entire federal budget, if it remains on its present course. By 2080, Medicare alone will comprise the entire federal budget.

This projection is unsustainable. There will have to be some changes done by politicians in office.

But the impending debacle does point up the stupidity of those in office today, who have set forth a path to disaster, for us, our children and grandchildren.

Congress and the administration are creating a bankrupt system for us and our descendants. Solutions will only involve far less services and benefits, with rationing and much higher taxes, as well as huge inflation.

We have never encountered such financial problems before.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Stimulus Bait and Switch

The government’s “stimulus,” evolved in its usage. The old meaning had been perfectly useful in Keynesian economic parlance. But it has now became a cover for politicians who conveniently use the term to hide other motives they may have.

What the bulk of the population in the U. S.thinks of when Washington attempts to stimulate the economy is that spending will get business moving, employers hiring and consumers buying as quickly as possible. Today , and not years in the future.

Poor psychology is what makes deep economic recessions linger on. A true stimulus must promptly change that poor psychology.

But when only a small amount of stimulus money is actually designed to be spent quickly, another motive is apparent. When the vast bulk of stimulus money is designed to be a slush fund to expand federal and state government jobs, the goal is  different.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Media Securities Suggestions

Financial portfolios you get in the media are amusing; they are not a laughing matter. Because you can get burned if you follow such advice.

Media suggestions come with some adviser mentioned; the one making the recommendations. That adviser has been singled out from among tens of thousands in the business.

Advisers are always seeking publicity; they strive to have pet portfolio ideas published.  So why this mention in the media? Is it a friend or relative of the columnist or reporter or interviewer?

Furthermore, the portfolios are usually an attempt to time the market. Also, they never identify objectives by investor age or risk capacity or psychological sensitivity. It makes the reportage useless. And dangerous. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Costs of Your Annuity Terminations

Annuity salesmen  often overlook start-up costs of annuity contracts that can be in effect for up to seven years.

Salesmen commissions and administrative expenses must be met. Early termination requires faster amortization. These are in addition to management fees that are imposed each year on annuities that involve variable investment.

Furthermore, the annuity may have life insurance provisions that you may not need. You will still pay for that feature.

So annuities may involve costs you are not aware of, And you cannot easily drop contracts. There will be penalties for making corrections or changing your mind.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Getting a Financial Education From Media Headlines

Investors get most of their financial and business education from the media, especially brief bytes and headlines.

Schools don’t provide  adequate information for students to comprehend economics and finance. As a result, the public cannot evaluate the ads, nor headlines that apply to finance and business topics, or to get meaningful explanations from inept media sources.

They therefore get biased, one-sided opinions without any contrasting arguments or alternatives.

Brokers and advisers cited in the media frequently promote a particular point of view. The media often poorly screens content.

Remember also, the importance of investor age, family status, personal psychology, finances and risk status, have lots to do with investment choice, Media slants often neglect them. So stay alert to basics and avoid tips from questionable sources. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Believe Ads For Your Investment Advice?

Ads give only possible advantages, and not the downsides of investments being suggested. Why take the advice? Yet, so many investors learn about what they buy solely from ads and salesmen.

I have now researched over 1,600 investment strategies that are occasionally or frequently used. I have also looked into the pros and cons of each. And I have not found one that has an exclusive advantage, without at least one disadvantage.

An example: Sellers of gold investments may be selling one type without discussing various other forms, or whether everyone ought to be buying gold at all, despite looming inflation. The public never gets full information.

Furthermore, investor age, family status, personal psychology, finances and risk status, have lots to do with investment choice. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Impractical Use of Solar Panels

Covering the desert landscape with solar panels is not the way to make the environment “green.”

When solar panels get covered with desert dust and dirt, they don’t accomplish their goal. They have to be washed down with water every month. Yet, precious water is not available in the desert.

The Wildlife Conservancy and other clear-minded environmentalists are against solar panels in the desert. That, in addition to the fact the process still has to be subsidized by taxpayers. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Reasons Why Government Deficits Are Dangerous

You can be certain that government deficits will spell disaster. For taxpayers and even for those who don’t pay taxes. And for anyone who worries about the cost of living.

That debt of today is being financed at very low interest cost. But those costs will easily double and triple. Long term rates can conceivably reach 18% or so from under 3% right now,

So we are looking at astronomical debt, with poor prospects of an economy expanding where it can accommodate that debt.

The public will eventually see that today’s spending is only a down payment on future costs, to be paid by heavy taxes and a more worthless dollar. Yes, if taxes don’t foot the bill, a worthless, inflated dollar will. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Institutional Investors’ Adviser Fees

Huge institutional investors should be able to get better terms as investors than do smaller investors. Mutual funds do reduce expenses to clients who keep larger fund balances. This is perfectly logical and it’s legal.

But the U.S. has not been happy about fee discounts if done in unison by organized major investors. They include; endowments, foundations and pension funds, as part of groups, Institutional Limited Partners Association (ILPA), who use buyout or private equity funds for special deals. The group’s members have more than one trillion dollars at work.

They would all like to negotiate lower terms than they have been getting. But it would be against the “anti-trust” law. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

U.S. Gold-Backing

The Treasury Department has  over 261 million ounces of gold. There’s been lots of talk about how it can be used, or whether it ought to be kept.

One suggestion has been to use it to reduce U.S. debt. I would rather not sell gold for this purpose, I feel it will not reduce or affect government spending habits.

I believe the gold holding ought to instead be used to back the U.S. dollar. The stability would be an economic boon that could accompany what we do when reducing government spending and reducing debt.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Financial Advisers Often Overact

 I find professional advisers too expensive for most ordinary investors. They take as much as 20% and more of earnings when their cut is 1½% or more of assets managed. Only investors who require estate and tax advice need additional advisory consultation.

To make themselves appear necessary, advisers will make up portfolios with as much as ten and more individual funds when just a few, low cost funds will do. But the odd assortment appears to be the result of more selective investment thought. The end result is meaningless, apart from marketing the adviser’s service.

I have written volumes about the subject, but to sum up, let me repeat a simple lesson: Once you learn investment basics, you can manage on your own with low-cost index mutual funds, (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Debt Causes Inflation

Aware Americans are concerned about heavy government financing by enormous borrowing, the equivalent of printing money, and resulting enormous outstanding debt that has to be constantly financed.

Funds for financing business and government are in a Zero Sum game. Funds needed by government to finance huge debt have to displace funds needed by industry. Economists of every stripe concede that. This problem will get worse when government has to raise its cost of borrowing from currently very low to more realistic, higher levels.

Governments can only overcome the accommodation for extraordinary spending and the potential problems they will entail, by expanding the economy.

But if the government is heavily taxing while borrowing and literally printing money, it will be curtailing that necessary economic expansion.

You cannot borrow forever without hurting expansion because you crowd out funds required for private business to operate normally. There will be business stagnation and inflation. Proof has been shown over and over for centuries.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

‘Inside Investors' Use of Inside Information

No matter what investors see as government attempts to even the playing field by convicting those who attempt to use inside securities information, many investors are still missing the point.

What is illegal is the sale or divulging of information you are contractually not permitted to divulge, as part of your employment.

What you can divulge about your special securities knowledge is vague. Many individuals are convicted of merely lying, as in the Martha Stewart case.

Yes, there is an advantage of being an ‘inside player” in the securities field, and has to do with the job or work you may  have in the securities industry. But this is not illegal. It does cause a disadvantage to investors who choose to engage such inside players when it’s often unnecessary.

I always suggest investors avoid dealing with inside players.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Compound Interest Benefits

Leftist politicians love to tax “the rich” but they’re really taxing savers who believe in the compound interest table and know how it works over any number of years.

Save $1,000 of earnings each year for only 25 years at 6% and you have amassed $58,100. Put away $10,000 annually and you have over $581,000, in just 25 years, If you stopped adding to the money, at that rate over the next 20 years, you would have more than triple your capital.

It’ the power of compound interest.

You would probably still consider yourself middle class; your net earnings have been modest. But you’re labeled “rich” by liberal politicians who want to tax you all along, to support their “poor” voting bloc.

Ironically, most of the finger-pointing politicians have far more wealth than you, whether actually earned or inherited.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Default’s Meaning

The liberals in Washington have a totally different interpretation of government default than what it is with real international finances.

To the liberals, true danger is any event that doesn’t help get them elected or keep them in office.

So why not make the debt ceiling higher? It allows them to spend more despite high budget outflow

In the real world, bondholders would prefer to have their interest and principal payments held up temporarily, for assurances, the U.S. were trimming its budget to make all its payments in the future.

Not the other way around, with liberal government kicking the proverbial problem down the road every few months until the U.S. becomes another bankrupt Greece or Portugal.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Value of Credit Default Swaps

Credit Default Swaps (CDS) are back from the infamy of 2009. Except when left-leaning politicians in Washington are looking for scapegoats.

They’re an insurance policy in the event an issuer of a bond or note defaults. They come in handy in volatile markets. Credit Default Swaps make it easier to sell bonds and notes because traders are then willing to trade in them to facilitate the bond/note market.

Default Swaps were the type of obligations that became well-known in the past financial meltdown. So they became the targets of official abuse. Underlying causes of the meltdown could be attributed to government policies directly, as I have noted before, in my comments.

CDS’ reputation got scapegoated. But they are a valid and useful investment vehicle when traded in open markets. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Money Adviser's Real Costs

Avoid money advisers  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 all 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 at Twitter.)

Money Adviser Costs

Avoid money advisers  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 all 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 at Twitter.)

Choose ETFs Wisely

 

Look closely at the 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, unmanaged.

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

Also, ETF charge fees will 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 at Twitter.)