Political Central Banks

           

Central banks were set up on the premise that it would be best for a country to keep its financial system from undue political influences.

                   

Over time, politicians have let their natural tendency to exert influence and produce financial and economic pressures. It generally is harmful to change independent, objective banking independence, particularly during stressful times. But major global central banks are not doing well with regard to their national financial crises,

                       

In the U.S., the Federal Reserve, which always has been loosely supervised by Congress, appears to be more under the influence of the White House and its fiscal policy than it had ever been in past administrations.

                       

The Fed now goes more deeply into the American economy than it had before. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

ETF Funds

                              

Unmanaged ETFs or exchange traded funds, that follow or track various indexes, are a low-cost way of diversifying investments.

                   

Apart from fulfilling your investment purpose, be sure to buy seasoned funds that have been around for awhile.

                   

ETFs can sometimes be costly to trade. A big buy or sell order can adjust price. That is, to a premium where the price is higher than underlying assets, or a discount, if the price is lower than the net asset value or NAV of that ETF.

New, smaller ETFs may have this problem, which generally disappear when the fund is around a few years and has grown in size. You can check to see what the stated, recorded amounts of premium or discounts are on average.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Investment Markets Psychology

                 

Lots of research exists on human investment behavior. Personal psychology has much to do with the way securities markets operate.

                       

I have mentioned in the past, my studies and evaluations of over 1,600 investment strategies, and their pros and cons. In addition, I have always said there is no one strategy I have found better than any other. What makes for investment success is strict discipline.

                       

Furthermore, discipline can be mastered, with proper personalized control over the psychological hazards that beset investors.

                       

Main Street and Wall Street investors should look at the work done by Kahneman and Tversky on investing behavior. It will provide a glimpse of how investors think, often to their disadvantage.

           

Psychology does affect the way folks make securities market decisions, by affecting the discipline I suggest. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Future Securities Returns

           

Stocks have returned about 7% above the rate of inflation for the past two hundred years. And in twenty year periods, they have outperformed bonds about 90% of the time.

                       

However, these statistics conceal important facts. Someone who had invested at the market peak in 1929 would have had to wait until 1998 to reach a return of 10% on their money. That would include dividends. This is an after-inflation yearly return of 7%.

Actual returns will differ greatly, depending on the time you  begin investing in the market. An S & P 500 investor from 1929 through 1949 received an after- inflation return of about 4.5%. An S & P 500 investor starting in 1932, and holding on until 1951, received an after-inflation annual return of about 10.8%. That works out to over 6% more per year.

                       

Luck and chance with regard to time of market entry plays a major role, so be mindful of the danger of relying on averages. Investors are lulled into complacency with the false knowledge acquired about “average” returns. They hear what securities have earned on average going back years, and they then project the figures indiscriminately into the future.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

The Poor Japanese Economy

           

We are aware of the corporate growth of such as Hitachi and Nissin, but the Japanese economy has been  practically flat for over twenty odd years. This has been  despite huge Japanese government spending,  Japan public debt is now over 200% of GDP.

                       

Unfortunately, their economy will not recover anytime soon.The problem for the U.S. is that the administration has been on a path to “stimulate” the American economy, much the same way the Japanese have done,, spending and borrowing the assumed way to prosperity. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Derivatives Are Necessary

                 

Remember the big noise about derivatives, such as interest rate swaps and credit default swaps? Along with their connection with subprime mortgages and collateralized debt obligations? With their alleged role in the financial meltdown? And how they had to overhauled and re-regulated?

                       

Lengthy investigations were conducted, and Congress made its conclusions with the Dodd-Frank legislation.

                       

Draconian regulation was not necessary after all. The derivative markets continue to operate pretty much as they had before the ruckus that had little to do with derivatives as investment instruments. The resulting fine-tuning was not earth-shattering. .(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Bankers Aren’t So Greedy

                                  

Listening to public comments and opinions from all walks of life, most folks know little about finance and banking. Politicians are among this group of the financially ignorant. They should know more about finance.

                       

Thus, it’s entirely understandable that bashing bankers is fashionable, especially during tough economic times. Finding scapegoats is handy. It makes up for any guilt politicians may have when fomenting economic distress.

                       

Government excesses, such as poor fiscal and monetary policy from the Federal Reserve, most often produce economic problems, not bankers who become bystanders by necessity and happenstance.

                       

What succeeds as political ploys when all else fails? Blame bankers! Most folks haven’t a clue with which to disagree. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)