Is the Misery Index Coming Back Soon?

Remember the Misery Index? If you who were not around or were too young in the 1970s, you may not have heard of it.

The Misery Index combined the unemployment and inflation rates. reaching a high of 22 in 1980. It confronted Ronald Reagan when he got into office, replacing Jimmie Carter, during what was the worst recession since the Great Depression of the 1930s.

The media does a poor job of relating this bit of news. A few years from now when inflation takes hold because of our huge budget deficits, the Misery Index will no doubt be back in vogue.

The media then will no doubt fail to provide the basic reasons for its conception and rebirth.

Where to Invest For Income

Where do you find investment income when money market funds and bank deposits yield so little? When Federal Reserve policy sees to it that funds in the banking system are kept so artificially low?

We know this will eventually produce enormous inflation but what does it do for those who need investment income today and are trying to invest for tomorrow in an economy where corporate earnings are being stifled by anticipated higher corporate taxes and federal regulations.

The financial media does a poor job answering this because they fail to educate the public on the proper use of corporate bonds.

And in doing so, they never fully discuss the use of duration, which helps overcome the risks of upcoming inflation and future higher interest rates. ( See the Earl J Weinreb NewsHole® comments.)

The Great Recession and Hedge Funds

How has the hedge fund industry been affected by the Great Recession?

Aside from the fact that many funds have folded because of disastrous financial returns, the glamour of the industry has only somewhat faded. Hedge funds are still a major financial factor that is attracting big investors.

Invested funds are now a little easier to remove. Investors have more leeway with management and can be more particular with regard to investment withdrawal terms.

However, hedge fund charges are not much lower. Management fees generally are still set at 1½% of managed assets and 20% of the profits generated. Sought-after funds charge even more, as before.

Hedge funds operate in different ways with varying objectives. They have a tougher row to hoe in this economy and principals may face higher taxes. But they remain a factor because only they in the investment industry, have the speculative funds and freedom to operate these days, when political eyes are more focused on commercial and investment banks

Is Wall Street Too Close To Regulatory Agencies?

Is Wall Street too close to its regulatory officials and agencies? The question comes up when financial calamities occur.

Particularly because officials of major brokers and investment bankers in Wall Street are often recruited to become regulators.

But who, then, has the needed experience?

Unfortunately, we too often have bureaucrats and politicians in Washington who enact or supervise what affects mega-business operations. Despite the fact they have never successfully operated a business or financial entity on their own.

You have an example the way banks were pushed to accept subprime loans in order to have folks get homes they never could afford.

All because of populist political ideas.

Unusual Retirement Basics

Here are some retirement basics which need repetition because of the constant poor advice investors get from both the general and the financial media.

Much of that advice comes through public relations placements of articles and information by financial advisers in the media, or by ads.

Example: Articles you see or hear on retirement planning are primarily marketing tools, placed to influence would-be investors.

They attempt to satisfy normal fears investors may have of having insufficient funds for the education of children, of not having a comfortable retirement, or an attempt to overcome fear of outliving savings and investments.

But such normal fears are actually leading investors into a trap.

They are getting expensive advice for the most part. Most investors may never need extensive estate and tax planning, but only if the enormous size of their assets warrants it.

Otherwise, why pay 1 ½% or more for a financial adviser who will cost them as much as 20% or more of their annual investment income? That adds up to a huge chunk of total assets over the years. Furthermore, investors need only the lowest cost indexed mutual funds or exchange traded funds (ETFs) in which to invest.

Retirement basics can be quite simple for the average investor who can avoid the adviser hoopla. ( See the Earl J Weinreb NewsHole® comments.)

Questions to Ask Advisers

The financial media always seems to get it all wrong. As you know if you are a reader of my commentaries, I always suggest most investors avoid adviser fees because they take away up to 20% or more of securities earnings when they just charge an annual fee equal to 1 1/2% of your total assets.

The media bothers to get into the question you may ask your adviser whether he or she is compensated from the sale of any securities on which they advise. It should never get to that.

Of course there is a conflict of interest if the adviser’s compensation comes from the sale of any securities on which he or she makes a judgment. Avoid that entirely. But why require an adviser in the first place?

The only adviser you need is a lawyer when necessary or tax account or estate expert when needed.

It is simple enough to learn the rudiments of basic investment. Believe me, you can learn simple investing A B Cs., if you try. It’s your money and future. ( See the Earl J Weinreb NewsHole® comments.)

Liberal Solutions: Chasing Away Millionaires

Who will the politicians tax if millionaires disappear? Or are taxed out of existence, if those on the Left have their way?

New York State and California, which have always had the largest number of millionaires, report that their number have been falling. That is bad for politicians who love to tax them to solve state fiscal and budget problems.

Unfortunately for these high-tax states, millionaires, and those not as wealthy, are taking precautions. When taxes get onerous, they leave for other states.

Eventually, of course, the Federal government may well catch up with its millionaire citizens, with federal income and death taxes.

Liberal politicians who hear the lesson about the goose who laid the golden egg, think the goose is always in open season just for them.