SEC’s Fraud Protection

                   

The SEC exists to  avoid securities fraud. And it does, but only to an extent. Much of what it does is pure theater.

                       

Uncovering frauds is usually by chance, and only after they have already been exposed. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Alternative Market Protection

                     

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. We see how erratic they are.

                       

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.)

Advantage of Asset Allocation

                    

What do you do when 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 had been 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 formulae to balance market fluctuations are not sure-fire answers. But advisers love to recommend a variety with the aid of 20/20 hindsight. (See the Earl J Weinreb NewsHole® comments and @BusinessNewshole at twitter.)

Stock Market Timing

                        

The financial media has a habit of commenting on timing of 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, for example, 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.)

Regulation and Financial Disasters

 

The purpose of the administration’s attempt to regulate the economy amounts to an 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 the years. Other economies around the world have experienced the same.

                       

The bottom line: 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 does not help. There is the usual political factor that overrides all supervision that the regulation affords. Easy money and the subprime crisis were what Congress and the administration created, not the lack of supervision.

                       

Simple bank guarantees and not having “mark-to market” accounting for banks in an emergency, would have been the alternative solution for 2008-2009. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Securities Adviser Qualifications

                

The financial media provides many financial advisers with imprimatur, as a veritable storehouse of all valuable knowledge. The media invariably deems to put forth commentaries on advisor suggestions.

                       

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 quotes in the media.)

                       

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

TIPS Investing

                   

The financial media tells about how TIPS funds can legitimately inflate yields. 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 its tax bites. And how you can instead avoid inflation’s effect on fixed income investments with proper use of duration principles.

                                           

The problem: Most 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 many scores of securities market signals in my investigation of strategies. However, those usually described in the media  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 with ship rentals. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets)

The Fed and Ordinary Investor Savings

                                

Ordinary, average, Main Street savers and investors, who normally are seeking safe havens for their savings and funds, have been 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 produce financial disaster.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Regulating Hedge Funds

                  

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

                               

Hedge fund activity had little to do with the financial downturn of 2008. Over-regulation is another instance of jousting at windmills for no real purpose, other than catering to an anti-business, anti-finance industry constituency. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Bad-Mouthing Derivatives

                    

Politicians love to 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 former 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 foreboding, dangerous, and deadly with regard to the 2008 financial meltdown.

                       

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

Life Insurance Planners

                     

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

                       

Planners may know their products, but they may present 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 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.)

Poor State’s Financial Conditions

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. 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 only 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. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

   

Investing in Gold?

                   

The market for gold as coins and bullion has been rising, thanks to economic fears.. I have frequently commented on this because I feel gold can be too 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 eventually done. And gold does not earn income or revenues upon which to establish intrinsic value.

                       

It’s a psychological defensive weapon in many ways; but psychology can change from time to time..(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Securities Analyst Achievements?

                   

Securities analysts give you investment advice. They suggest what securities to buy and sell.

                       

Analysts constantly critique management of publicly owned companies. They claim to know what products and services companies ought to produce and what they should charge. Analysts propose when to hire and fire top executives.

                       

Yet very few analysts have hands-on ability to understand how any business operates from the inside. They are not even that proficient concerning Wall Street inner activity. They generally haven’t the business experience to successfully run a pushcart. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)