Technical Market Analysts

As you know from my blog and other comments, I always recommend the use of index mutual funds and ETFs (Exchange Traded Funds).

As I have often mentioned before, I have made a unique mini-career of looking at almost 1,600 investment strategies used by investors over the years. I have investigated the advantages and disadvantages of each.

And I can tell you there are some worthwhile concepts as well as gibberish in all. But no panacea exists among them.

I know there are analysts constantly looking for stock market winners. My comments hold for efforts of the so-called fundamentalist analysts who evaluate individual companies, seeking investment opportunities.

This certainly holds for market technicians as well. They have a whole panoply of theories about market direction that have little to do with corporate earnings and mostly to do with market swings, “heads”, ”shoulders” and similar exotic terms. I have found no panaceas either in their use.

Gold As An Investment

Gold value generally goes up when the dollar goes down, when compared to other currencies. It goes down when the dollar rises. When the economy becomes sounder, gold will not fare as well, Its attraction is primarily related to a weaker economy where the dollar is being further hurt by government action.

But caution: At times gold does move in unison with stocks,following the rise and fall of common shares.

Gold produces no earnings in the form of interest or dividends. It also costs you money for insurance or storage if you buy bullion or coins, and you want it stored or insured as a safeguard.

Buying Gold in a More Practical Way

As your know from reading my financial blogs, I am not an outright gold enthusiast. And if I choose gold investments, I would choose an ETF (exchange traded fund) and not gold coins or bullion form. The latter have to be stored and insured against theft, and undue expense for an investment which earns no income.

Gold investment market prices can easily be gauged in ETFs. I’ll have more to say in a later blog about gold as an investment.

Corporate Stockholder Rights

There are some corporations with two types of common shares, voting and non voting. The New York Times family, for instance, has special voting stock that controls ownership. Other non-voting New York Times company shareholders cannot vote that class of stock.

There has been a constant clamor for change. For example, talk that shareholders who hold their common stock for a longer period should have more voting power than those who buy shares for shorter, trading periods.

Or restrictions on those who buy them to exercise control for company takeovers. Conventional wisdom in the past was, that if you did not like management you sold your stock, instead of trying to take the company over.

Government Regulation Over Venture Capital Funds

The U.S. government would like to regulate venture capital funds because VCs advise the startup companies they finance, The Securities and Exchange Commission would supervise the regulation.

Naturally, bureaucrats feel venture capitalists “advise” their clients when they lend funds or invest in them. But that makes the slippery slope even more slippery. That would also make every member of a company’s board of directors an “adviser.” Or place every major bank lender into this category.

There could be no end to such regulation. It would open up the job market for all those civil servants who never operated a pushcart, but know how to run any business assigned to them for meddling. Every bureaucrat would be able to evaluate and parse the meaning of financial and managerial advice that lenders and investors suggest.

An example of state capitalism!!

“Dark Investor Pools”

Multi-millions of shares are traded each day in what are called “Dark Pools.” Quotes are listed after the trades are done. The pools are automated and enable institutional investors such as pension and mutual funds to quietly buy and sell holdings. This helps them transact very large contracts without divulging intentions.

Pension and mutual funds and their small investor clients, benefit from lower cost transactions and lower prices.

The Securities and Exchange Commission has come down on the side of more disclosure, for disclosure’s sake.

Again populist politics for the masses, without truly benefiting the masses.

Leveraged Secured Debt and a New Imposed Bubble

In the past the SEC and other regulatory authorities had no experience in the models that created the leverage that subsidized collateralized loans. So they permitted leverage to get higher and higher. Leverage went up from 10% to well over 30%, which made the loan values more volatile.

Today we still employ leveraged secured, collateralized debt in heavy volume. It’s an integral part of our commercial system despite the notoriety it received during the financial meltdown.

What can make us now believe that more regulation will help prevent any future financial mess from miscalculation? While we are still unsure of the type of loans we are currently permitting?

And we still permit homeowners to have special low down payment deals in our weak economy. All we are building is yet another bubble.