‘The Use of Inside Information

                     

No matter what investors see as government attempts to even the playing field by convicting those who attempt to use inside securities information, many investors are still missing the point.

                       

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 investigators, as in the Martha Stewart case.

                       

Yes, there is an advantage of being an ‘inside player” in the securities field, and 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 such 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 at Twitter.)

Advantages of Compound Interest

                     

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 any 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, Even if you stopped adding to that money, at that rate over the next 20 years, you would have more than triple your capital. It’s the power of compound interest.

                       

You would probably still consider yourself middle class; your net earnings have been modest. But you’re labeled “rich” by liberal 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 at Twitter.)

Avoiding a Government Default

Politicos in Washington have a totally different interpretation of government default than what it is with real international finances.

                       

To them, 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 high budget outflow

                       

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

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

Use of Credit Default Swaps

                      

Credit Default Swaps (CDS) are back from the infamy of 2009. Except when left-leaning politicians in Washington are looking for scapegoats.

                       

They’re an insurance policy in the event an issuer of a bond or note defaults. They come in handy in volatile markets. Credit Default Swaps make it easier to sell bonds and notes because traders are then willing to trade to facilitate the bond/note market.

                       

Default Swaps were the type of obligations that became well-known in the past financial meltdown. So they became the targets of official abuse. Underlying causes of the meltdown could be attributed to government policies directly, as I have noted before, in my comments. CDS’ reputation got scapegoated. But they are a valid and useful investment vehicle when traded in open markets. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

No Financial Sense with TIPS

                 

Rampant inflation is inevitable with our U.S. budgetary crisis. And too many investors are being lured to the use of TIPS or Treasury Inflation-Protected Securities.

                       

They fail to offer enough return on your investment. Judicious use of bonds, using duration principles will give you far better returns.

                       

Furthermore, TIPS owned outside a tax deferred retirement account, such as an IRA or 401 (k), require tax payments for inflation benefits you get. and in the year in which they occur. This applies as well in a mutual fund, whether your investment is in or out of a tax-deferred account. You have to closely check the fund treatments of TIPS..(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Calculating Investment Adviser Cost

                                   

Avoid money advisers if you can. You usually pay them a fee of 1% to 2% of your assets which amounts to about 20% or more of your earnings each year. If you invest with them in a hedge fund, you pay 20% or more of earnings off the top, plus that percentage of assets management fee.

                       

Only a tiny number of money managers prove to be frauds, but you will sleep better by staying away from them all because of their annual cost that adds up to a large chunk of what you’re left with.

                       

Hire an accountant, or a CPA, and if you have considerable funds, a tax attorney. But avoid expensive money managers by sticking to plain, low-management-cost funds.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

ETF Choices

 

Look closely at exchange traded funds (ETFs) you buy because they are not all alike. Some may be managed when the original idea for their growth has been for them to follow indexes, unmanaged.

                       

ETF funds that trade infrequently will have big differences between bid and asked prices. And also their net asset values. You want to avoid those losses and discrepancies. Also, ETF fees will vary and may be way too high in many instances.

                       

Then there are ETFs that don’t follow their chosen index too well. Focus may be poor, just to suit a current market. That will defeat the original purpose you may have had for investing in them.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)