The Options Market

Options offer an investor the right but not the obligation to buy or sell a security at a set price.

Options are used for investments becoming more impervious to swings in the markets, Also, to protect shares from under-performing. And to make money when market conditions are extreme.

To invest in options, you must take time to learn fully about them. Know the difference between a call and a put, strike price and all applicable terms.

There is no real quick options course, Take your time learning because of the complex nature of the arcane aspect of this classification of the securities business.

Do not get involved unless you learn about options both academically and in practice. Therefore, run through some fantasy dry-runs with no real funds, just to see how you would have done with real money. Then use your own real capital.

Bankers, Athletes and Income

Do bankers make too much money?

They may if they earn commissions and options of hundreds of millions a year. But they do work at jobs that take years to perfect..

Do athletes earn too much money?

They certainly do, if they earn up to $30 million a year for playing a kid’s game. And which many amateurs do for nothing, but just a little less efficiently. The real difference in their capability is not learned but in their eyes or muscles, for the most part.

Do gymnasts deserve more than they earn?

They get practically no income despite all the incurred pain, and years of training and practice, and the need to overcome initial physical fear.

I have had personal experience with all three working practices. It’s difficult to see how bureaucrats and politicos in Washington are so ready to damn bankers as a group for making “too much” money while other genuinely overpaid groups are left to make their fortunes politically undisturbed.

Incidentally, high-priced athletes are indirectly being financed by bailout funds of their bosses’ subsidized ballparks.

Avoiding Mid-Stream Investing Changes

You know an adviser has no clue about strategy when he tells a mutual fund investor not to buy a fund that clings to a particular “style” of investment, such as small cap or large cap. But to instead choose what is right for the times.

That advice will let you know the adviser has no specific strategy. The adviser is willing to change strategy to suit whatever style may be popular at the time.

My experience has shown that such undisciplined investments with no set strategy will not do as well as it should. It’s a case of market timing with adverse odds.

The Obama Administration’s Idea of Family Income

When the Obama Administration speaks about the top 1% of wage earners in this country and their domestic income, they are wrong in making comparisons and interpretations of official family income statistics of the 1980s.

Their argument does not consider that families have changed. Twenty, thirty years ago, there may have been just one worker in a family, where today, husbands and wives more likely work. Perhaps kids are also part-timers.

So families may have two and perhaps more small income providers. They could add a sum of income that may classify them as so-called “rich” by the Obama Administration, ready to be heavily taxed.

Buying Gold?

I have commented before on buying gold as an inflation hedge, and why the idea is not a simple solution to inflation, as advertised. Gold prices relate primarily to the rise and fall of the dollar, rather than inflation itself.

I feel there are many other ways to protect yourself against inflation. A weaker dollar waxes and wanes cyclically. Other investments I discuss from time to time are more directly attuned to inflationary factors.

For those who have decided to buy gold, however, an option that often is not fully understood is whether to buy gold mining shares, instead of gold coins or bullion.

There is dividend income in holding shares as well as potential capital growth. Gold coins and bullion do not offer income. And you have to store and safeguard the physical assets.

However, mining company shares run into occasional production problems and potentially negative management issues. That is a negative factor.

Remember, gold can be bought without physical possession, in the form of mutual funds or exchange traded funds (ETF)s.

Need More Federal Regulation?

XBRL or Extensible Business Reporting Language can permit data to be collected and analyzed. It can be used to assess risk on about 600 mortgage points. And the data may be readily tracked.

There is a far better case for using such data resources for collection and review and more transparency on mortgages, than the need for extensive federal regulation, including Dodd-Frank.

Layers of added regulation we know from experience really does not work.

Investing Risks

You can take more investing risks when you are young because there’s more time to recoup your errors. But If you lose a big chunk of capital, it still sets you back a good deal.

Yes, it is better to lose chunks of capital at age 30 than when you’re 60, or older. Nevertheless, look at a compound interest table, and see what happens to any amount of principal, when you lose a large sum early on.

Therefore, it’s essential that investment risks always be a concern in your planning. ( See the Earl J Weinreb NewsHole® comments.)