When to Sell Securities

                

My research and investigations have taught me a basic lesson that most investors overlook. This applies to Wall Street pros, as it does to rank amateurs, and whether the strategy is related to corporate activity or market strength/weakness.

                   

The rule: Sell if the specific reason you bought a security no longer applies. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Financial Stimulus is Often a Failure

                     

Interest rates normally adjust to supply and demand forces and thereby adjust economic events. However, whenever the government imposes stimulus proposals to raise credit and lift the economy, the system is disturbed and thus distorted.

                       

This unbalances the economy and does the exact opposite of what has been intended. It’s a lesson politicians wantonly overlook to suit their election goals.

                       

Ludwig von Mises wrote fully about the phenomenon in the 1920s but the economist in fashion during the 1930s recession was, unfortunately, John Maynard Keynes. He became the political icon of that recovery movement.

           

The Keynes government pump-priming thesis used prolonged stimuli that actually deepened, and helped induce the Great Depression. This was confirmed by the then Treasury Secretary. Henry Morgenthau. Nevertheless, it is the premise of failed current policy. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

       

Our Deficit’s Lack of Voter Action

                       

The U.S. announced debt is completely out-of-control Add to that the liability of the federal government for Social Security, Medicare, Medicaid and prescription drugs and you have an estimated deficit ranging between 60 and 100 trillion dollars.

                       

Entitlements now account for almost 60 percent of federal outlays. Every year, non-discretionary spending eats up more of the federal budget.

                                           

Over the past 30 years, U.S. tax revenues have averaged 18 percent of the GDP with spending, about 30 percent of the GDP.

Defense spending, even if eliminated, would not solve the huge deficit problem. And despite what some politicians love to say about the uselessness and waste of U.S. defense expenditures, it returns immeasurable benefits in the form of global economic prosperity, freedom and security.

Budget deficits, however, still don’t scare voters sufficiently. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Bank Credit Today

                       

Banks are not making sufficient loans to small business, even when they have the ability to do so. The fact is, they make more money these days, with far less risk, by borrowing cheaply from the Federal Reserve and investing other than in business loans.

                   

There is also political meddling and strict bank supervision adding to the bank-lending picture.

                       

Some banking groups are now complaining that they have the money to lend, but with less takers because of the recession.

                       

Thriving businesses are genuinely seeking loans from banks with funds. But, too many lenders are hesitant about extending loans they once more readily made.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Federal Reserve is Often Proven Wrong

                                       

The Federal Reserve is often proven wrong. This has been the case in almost half their decisions we have gotten under the auspices of their governorships.

                       

We have to remember that economists are fallible, even when they direct the Federal Reserve.

                       

In the past, those in the Fed worried we may have deflation; they therefore inflated the economy, and added too much currency. In fact the Fed, almost automatically, has been on the side of targeting some inflation, in an attempt to prevent deflation.

                       

Thus, the Fed has been the chief culprit, causing bubbles which invariably lead to busts and eventual depressions.

                       

And today is still aiding and abetting inflation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Back-Testing of Investment Strategies

  

                       

Professional investors often use back data to sell a favorite personal strategy, to predict future events.

Their financial models often resort to what is known as data mining. Information on various investing strategies of the past. They are collected and tested on a “what if’ basis for the future. This is also called back-testing; the strategies of the past are used to see what would happen, hypothetically, when projected into the future.

                       

All this is on many assumptions that the mathematical models are supposed to predict.

                       

After my decades-long investigations of investment strategies I can tell you this: There are some worthwhile concepts as well as gibberish in all. But no panacea exists. I would say that most of the data mining is therefore useless, except for their marketing of investment management services. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Downsides of Buying Annuities

                       

Annuity salesmen often compare benefits with the investing risks that attend stocks and bonds. They mention all the hazards of securities markets and the possibilities of market loss. But annuity salesmen often overlook downsides of their offering.

                       

Annuities certainly do have negatives; they are not for everyone. They have an insurance factor which may not be needed. And if not required, why pay for it?

                       

There are annuity management fees, contrary to some sales pitches and also early termination charges.

                       

Then there are fixed or variable annuities to select, that further complicate the picture. Fixed annuities have set returns which means the buyer has no protection from any future inflation. Variable annuities tie in securities markets but not as much as you may desire. So always be alert to the annuity sales pitch. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)