Tips for Financial Services Consumers

                      

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.

                       

And learn how compound interest tables can be your magic instructors.

                       

Anything the government gives you is actually 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 at Twitter.)

Investing in Life insurance?

                    

Non-Term, Whole Life form of life insurance combines life protection and savings at a fixed return. It’s an expensive choice.

                       

Sales pitches about tax deferred benefits behind whole life insurance can be misleading. Other secure, tax deferred investment options are available.

                       

Whole life is not a true investment vehicle, despite any sales pitches. 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 at Twitter.)

Government Consumer Finance Tips

                     

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;  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, to take 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 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 at Twitter.)

Shop for Life Insurance

                       

I have commented on life insurance in the past; 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?

(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Avoiding Bonds During Inflation?

                    

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

                       

They never get into the whole story, owing to ignorance or indifference to research.

                                           

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. I emphasize the use of duration principles. The message is an eye- opener.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Misleading Investment Earnings?

                                         

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 often 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, measuring points of cycles should be taken into account.

                       

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 at Twitter.)

The Public Pension Planning Fiasco

                    

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 the fund managers undertake such fiduciary responsibility, especially in the face of budget deficits. Moreover, future economic growth is unlikely, so the assumed return figure is even more unattainable.

                       

Yet, the fantasy and façade continue; the public employee pension planning fiasco goes on. In fact, almost 20% of such public pensions blindly plan on average annual earnings well over what’s attainable.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

               

Fully Evaluate the Securities Market

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.

One: Are your goals short term or long?

Two   Are you taking proper consideration of your age?

Three: What are your feelings about risks?

Four: Consider the economy. We have been in more than o®dinary doldrums.It may not bounce back for several years.

Five: Inflation will eventually come bouncing back because of Budgetary and Federal Reserve excesses.

                       

Economic stagnation could stifle corporate profits. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Stock Broker or Stock Dealer Transactions

                              

Some of the brokerage transaction you make are just simple broker transactions. 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 actually 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 at Twitter.)

Investments With No Income Earnings

I would be very careful, and as a rule, avoid securities with no earnings.  I include ownership of gold or silver metals.

Should the principal value of your holdings fall, you have no benefit of reinvestment from periodic returns. Those may return future profits, overall. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

State and Local Public Employee Retirement Traps

         

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

           

Unlike the federal government, states and local entities cannot print money. They therefore cannot continue to keep borrowing to meet obligations.

           

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

Odds for Successful Investing

                    

Most folks are not familiar with the odds for successful finance and it affects their outlook on financial matters.

                       

An example: Flip 100 coins, heads or tails; there is a 75% chance of a streak of 6 or more right calls. 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 at Twitter.)

Government “Experts” Confusion

                      

An idea of just how unsure and inexpert government “experts” can be: The Federal Reserve Bank kept on its past path of buying $multi-billion of government bonds. This inflates the economy by, in effect, printing fresh currency. The Fed intention: To rouse the economy

                       

But at the same time, the Fed allowed some big banks to raise their dividends, which soaks up capital and their lendable funds.

                       

While some banks, instead, use their Fed induced, newly-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 at Twitter.)

Retirement Planning is an Uncertain Effort For Many

                     

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? 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 at twitter.)