nvestment Adviser Charges

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Despite getting burned in 2008, investors keep coming back to advisers who annually cost them as much as 25% or more of their

investment income. (Calculate the average fee of 11⁄2% 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 @BusinessNewHole tweets.)

Fannie Mae and Freddie Mac

                    

Fannie Mae and its related Freddie Mac, semi-private companies, had been blessed with special government backing. The Democrat party took them under its wings 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 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 Congressional influence disregarded 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 the bankers by the politicians who were actually responsible.

                       

We get more of the same with Dodd-Frank legislation. You can expect more of the same fiasco resulting unless cooler heads prevail in correcting that bit of legislation. The Dodd-Frank Act does not prevent credit bubbles but enhances them.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)   

Whole Life or Term Insurance?

                  

Comparisons between whole life insurance and term insurance are usually simplified by the issue of price. 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 periodically into 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 @BusinessNewHole tweets.)

Stock Broker Advice

 SEC regulations see that stock brokers have to treat their clients differently than in the past, if they already do not.

                       

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

                       

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

                       

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

                       

The main result of this gives investors more ammunition to sue brokers for real or imagined damages. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)

Investment Analysts’ Fault

                 

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. Follow them too closely and you court trouble.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)

                   

Market Volatility

     

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 at least 80% and, often more, of all trades and activity. Why then should the markets behave so erratically?

                       

These pros ought to know what they are doing, unlike the public, amateur investors who blindly follow the pros.However, Wall Street "wizards" invariably act in a mob-like manner. They may still make their millions, simply because they are ensconced as Wall Street inside players. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)

Wall Street Securities Experts

      

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 public company reports. These have to do with earnings, without any true understanding of the nature of those earnings. Furthermore, much of what are announced could be the result of fanciful accounting. 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 many, many 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 becomes repetitive gospel. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)