If variable annuities were easy to understand then the SEC wouldn't have to issue a special bulletin explaining them. Not that you'll learn much from the sugar coated document. The thing reads like it was written by one of the biggest lobbies in Washington–the insurance industry. https://www.youngresearch.com/wp-content/uploads/2014/02/ib_var_annuities.pdf … [Read more...]
Archives for February 2014
Fed Warns of Dangerous Markets
In a study that could only be sanctioned by the independent (read unaccountable) Federal Reserve, the astute researchers at the Fed Bank of Chicago have come to the profound conclusion that faster and less transparent markets (aka high-frequency trading) pose dangers that aren’t properly appreciated. The investing public recognized the dubious role of high frequency trading about 2 hours after the 2010 flash crash. Leave it to the Fed to slam the barn door long after the horse has bolted. Bloomberg reports: Faster and less transparent markets pose risks that require more study, according … [Read more...]
How to Trump the Average Trader
After a mini-correction to begin the year, the stock market has staged an impressive rally. The Dow has risen 5.6% in only two weeks and it is now within a couple of percentage points of moving into the green for the year. The much more speculative NASDAQ index has already achieved that feat. The NASDAQ index is up 1.6% so far in 2014 after rising 38% last year. Compare that to the 26% gain in the blue-chip Dow for 2013. The NASDAQ outperformed in 2013 and it is doings so again YTD. What does the continued outperformance of the NASDAQ say about the stock market? This is a speculators … [Read more...]
Heads I Win, Tails You Lose
The promises in some variable annuities are too good to be true–a realization being made by the insurers that made them. You can learn more here: Variable annuities combine a 401(k)-like investment account with the equivalent of an insurance policy. They appeal to investors approaching retirement with a promise of guaranteed regular payouts that could reset higher if the policy's underlying investments fare well. Yet the products usually have higher fees than plain-vanilla "immediate" annuities, which deliver an annual payout in return for a lump-sum payment. (Variable annuities are … [Read more...]
Blame it on the Rain
Economists can't blame this lame economy on the weather forever. It snows in the winter. Get used to it. At some point it comes down to the fact that there aren't enough of us working, our manufacturing base is in China, and the Fed is run by academics poisoning the patient with easy money. The proof is in the pudding as retail sales and payrolls stumble along. Bloomberg reports: This year’s harsh winter is causing the pace of U.S. economic growth to fall along with the mercury. February payrolls may be the next victim of the severe weather that has gripped the country during the last … [Read more...]
VIDEO: The European Debt Crisis Visualized
Feb. 12 (Bloomberg) -- At the heart of the European debt crisis is the euro, the currency that ties together 18 countries in an intimate manner. So when one country teeters on the brink of financial collapse, the entire continent is at risk. How did such a flawed system come to be? Bloomberg Television and Jonathan Jarvis present "The European Debt Crisis Visualized." … [Read more...]
Star Wars Trading
High speed traders are racing to zero–the elimination of time to execute trades–with lasers. Investors depending on stop-losses may want to pay attention. With instant laser trading imagine how quickly a line will form when sellers want out of the market. Remember, just because a seller wants out at "X" dollars, it doesn't mean there's a matching buyer. The bid could be several dollars lower making the stop loss "peace of mind" useless. Read more on laser trading here in The WSJ: In March, a small Chicago communications company plans to switch on an array of laser devices linking the New York … [Read more...]
20% Inflation
New Fed Chief Janet Yellen's comments before the House Financial Services Committee yesterday were hard to take. Once again we have an academic telling us how to run a free market system, "someone that has never traded a horse in her life," commented one client. Yellen feels 2% inflation is harmless. Savers do not. It's debilitating when your dollars are worth 20% less in ten years. And that's being kind. Economist Judy Shelton points out in The WSJ that we've been down this road before. Then again, Ms. Yellen is credited with successfully convincing Alan Greenspan that mild inflation does … [Read more...]
Ten Year Compound Return 9.8%
Young Research’s Retirement Compounders common stock program has a ten year compounded rate of return of 9.8% per year. As you can see in the chart that’s better than the 6.8% by both the S&P 500 and Dow Jones Industrial Average. In this market I think a ten year historical record is imperative in gaining some perspective. It’s easy for hard charging sales types to promote five year returns without ever mentioning 2008. The prudent investor looks at both the good and the bad times to set his course. And that most certainly includes looking at 2008. … [Read more...]
Bond Funds Break Record
For the week ending February 5 investors added a record $10.7 billion to taxable bond mutual funds and exchange traded funds (ETFs) according to Lipper. On the flip-side investors withdrew $18.8 billion from stock mutual funds and ETFs. The stock market’s shaky start caught a lot of investors flat footed. The WSJ reports: Investors also continued to yank cash out of emerging-market stocks for the fourth week in a row. Emerging-market stock funds shed $2.7 billion in the most-recent week, the biggest outflow since February 2011, compared with $2.6 billion a week earlier. Virtually all of … [Read more...]