Financial Advisers Who Are Over-Active

  As you know from my reports, I find professional advisers extraordinarily expensive for most ordinary investors. They take as much as 20% and more of earnings when their cut is 1½% or more of assets managed. Only investors who require estate and tax advice need additional expert consultation.

To make themselves appear necessary, advisers will make up portfolios with as much as ten and more individual funds when just a few, low cost funds will do.  The assortment is supposed to be the result of more selective investment thought. But the end result is meaningless, apart from marketing the adviser’s service.

I have written volumes about the subject, but to sum up, let me repeat a simple lesson: Once you learn investment basics, you can manage your own investments with low-cost index mutual funds, (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Government Debt is Worse Than You May Think

Most Americans may not be too concerned about heavy government financing by enormous borrowing, the equivalent of printing money, plus enormous outstanding debt that has to be constantly financed.

An economics basic: Funds for financing business and government are in a Zero Sum game. Funds needed by government to finance huge debt have to displace funds needed by industry. Economists of every stripe concede that. This problem will get worse when government has to raise its cost of borrowing from currently very low to more realistic, higher levels.

Governments can only overcome the accommodation for extraordinary spending and the potential problems they entail, by expanding the economy.

But if the government is heavily taxing while borrowing and literally printing money, it will be curtailing that necessary economic expansion.

To sum up: You cannot borrow forever without hurting expansion because you crowd out funds required for private business to operate normally. There will be business stagnation and inflation. Proof has been shown over and over for centuries. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

“Inside” Investors Who Get Inside Information

No matter how many investors see government attempts to even the playing field by convicting those who attempt to use inside securities information, too many investors are missing the facts.

What is illegal is the sale or divulging of information you are contractually not permitted to divulge, as part of your employment.

What you can divulge about your special securities knowledge is vague. Many individuals are convicted of merely lying to government, as in the Martha Stewart case.

Yes, there is an advantage of being an ‘inside player” in the securities field; that has to do with the job or work you may have in the securities industry. But this is not illegal. It does cause a disadvantage to investors who choose to engage  inside players when it’s often unnecessary.

I always suggest investors avoid dealing with inside players. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Political Translation of “Government Default”

 Politicians in Washington have a totally different interpretation of government default than what it is in the real financial field.

To politicians, true danger is any event that doesn’t help get them elected or keep them in office.

So why not make the debt ceiling higher? It allows them to spend more despite higher budget outflows

In the real world, bondholders would prefer to have their interest and principal payments held up temporarily, for assurances, the U.S. were trimming its budget to make all its payments in the future.

Not the other way around, with government kicking the proverbial problem down the road every few months until the U.S. becomes another bankrupt Greece or Portugal. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Taxes Defeat Compound-Interest Investment Benefits

Politicians love to tax “the rich” but they’re really taxing savers who believe in the compound interest table and know how it works over a number of years.

Save $1,000 of earnings each year for only 25 years, at 6%, and you have amassed $58,100. Put away $10,000 annually and you have over $581,000, in just 25 years, If you stopped adding to the money because some is taxed away, you would have far less capital.

You probably still consider yourself middle class; your net earnings have been modest. But you’re labeled “rich” by politicians who want to tax you all along, to support their “poor” voting bloc.

Ironically, most of the finger-pointing politicians have far more wealth than you, whether actually earned, or inherited.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)

Futures Markets as a Chrystal Ball?

A few businesses have had employees create a futures market on a subject of importance to their company. They feel that certain points of view, though a gamble, can be prescient, if the gamblers or speculators have no inherent bias in their choices.

Future projections on business concerns always are difficult to estimate. If any can be predicted with more independent accuracy, they would be immensely practical.

But caution is needed. For such markets to have value, they must have lots of independent input. Sampling should be efficient and unbiased.

I find that is almost impractical in most business projections. However, futures markets may have their place in foretelling political outcomes and general marketing concepts.(See the Earl J Weinreb NewsHole® comments and @BusinessNewshole tweets.)

The Economist Joseph Schumpeter

Those who know the least about capitalism rail the most about its negatives and never appreciate its overwhelming positives. I suggest to them a review of the life and work of Joseph Schumpeter, the Austrian-German-American economist. He died in 1950 and has been since mostly overlooked in academic circles and the media.

His view of “creative destruction,” how the demise of established companies led to a growing economy has been the foundation of the American dream for so many of its citizens.

Personal incomes have doubled every fifty or sixty years in America, when entrepreneurial zeal is permitted to operate.

Yet, left-leaning politicians will never guess there is any economic opportunity without government being the instrument of largess.(See the Earl J Weinreb NewsHole® comments and @BusinessNewshole tweets.)