Investing Basics: Why Use ETF Funds – MarketRiders 01-31-14

Salient to Investors:

Advantages of ETFs

  1. Low cost. Active mutual funds charge upwards of 1.5% versus ETFs charge as low as 0.05%. The fees investors pay managers account for a third and up to half of their potential gain over the years.
  2. Simplicity. Buying and holding, then buying and selling over and over to keep in balance, the S&P 500 would be cumbersome and the trading commissions immense. ETFs do the same in one package that trades under a simple ticker.
  3. Control. A broad-index ETF offers an accurate price with no hassles.
  4. Tax advantages. ETFs automatically buy and sell to track the index but securities law allows them to do the buying and selling without triggering investment taxes on the owner.
  5. ETFs de-personalize your investments and therefore reduce being influenced by emotional reaction to individual stock events.

Read the full article at http://www.marketriders.com/investing/investing-basics-use-etf-funds/

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The ETF industry has exploded in recent years, that’s for sure. In the early 1990s there were only a small handful and almost nobody used them. By one recent count, there are now 1,194 exchange-traded funds controlling $1.3 trillion in assets.

Investors have come to rely on them to achieve a number of goals, both short- and long-term, and the major retirement firms have begun to market them as the solution to nearly any saver’s needs.

A silver bullet? Perhaps not, but they do have specific features that help serious savers get the job done.

1. Low cost

There are exceptions, as you would imagine in any group numbering over 1,000, but most ETFs are built to offer exposure to a given part of the market at a very low cost. While active mutual funds charge upwards of 1.5%, ETFs provide access to hundreds, even thousands of stocks for as low as 0.05%.

The difference here is not just a number. The fees investors pay managers account for a third and up to half of their potential gain over the years, money that they simply lose to the manager, forever.

U.S. cent Investing Basics: Why Use ETF Funds

2. Simplicity

You really could not replicate owning the S&P 500 as an individual investor. The trouble of purchasing and holding (then buying and selling over and over to keep in balance) would be cumbersome, the trading commissions immense. ETFs wrap all that up in a neat package that trades under a simple ticker.

3. Control

Stock pickers sometimes get in an out of single shares in an attempt to avoid losses or take gains while they can. They assume, too often, that a buyer will appear and give them the price they seek. With a broad-index ETF, the very liquidity of the market assures the investor an accurate price with no hassles.

4. Tax advantages

In tax-deferred accounts this is less of an issue, but investors with taxable holdings can greatly benefit from using ETFs. The funds automatically buy and sell to track the index, but securities law allows them to do the buying and selling without triggering investment taxes on you, the holder of the security.

5. Ease

The great danger facing most retirement investors is their own emotions. As your portfolio grows larger, the stakes are higher. Active investors often take on unusual risks far too late in the process or they shut down and avoid all risk out of fear. Either reaction can be a serious problem for the long-term investor.

ETFs depersonalize your investments. Since you own everything, you are much less caught up in the drama of who is the CEO of which company, or the likely effect of some global political trend. Distance helps you keep things in perspective.

Retirement investing should be a simple, easy check-off on your to-do list, not a part-time job that creates stress in your life. ETFs are a great tool for making that simplicity happen.

How an ageing population will change the world – BBC News 01-31-14

Salient to Investors:

Pew Research Center said:

  • The world population over 65 years old will triple by 2050, drastically altering some countries’ demographic make-up as more elderly people depend on working-age men and women.
  • 87% of Japanese believe its ageing population poses a problem, but only 26% of Americans agree.
  • Most people in the survey of 21 countries believe governments should be responsible for caring for their older populations.

Read the full article at http://www.bbc.co.uk/news/magazine-25968269

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Jim Rogers thinks gold will bottom 2014 – Jim Rogers Blog 01-30-14

Salient to Investors:

Jim Rogers said:

  • Precious metals are overdue for a modest rally as everybody got negative and everybody got short. Won’t buy or sell the rally, but wait until later in the yearn when gold will fall and hopefully make a nice bottom around $900-$1100 so we can buy gold again.
  • Prefer silver to gold but not buying either.

Read the full article at http://jimrogers-trades.blogspot.com/2014/01/jim-rogers-thinks-gold-will-bottom-2014.html

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How I Am Playing The Game – Jim Rogers On The Markets 01-30-14

Salient to Investors:

Jim Rogers said:

  • Prefers the Japanese market, down 60 or 70 percent from all time highs. to the US which is at all time highs. Abe has no constraints, can spend and print as much as he wants.
  • Like Russia’s very depressed stock market. Russia is hated more than any other place except maybe Argentina. 

Read the full article at http://jimrogersonthemarkets.blogspot.com/2014/01/how-i-am-playing-game.html

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S&P 500 Erases Loss for Week on Earnings, Spending Data – Bloomberg 01-30-14

Salient to Investors:

David Kelly at JPMorgan Funds said the Fed looks justified in continuing to taper given economic momentum and recent sharp declines in the unemployment rate. Kelly said assuming the volatility in emerging markets subsides, this economic report should bolster the case for both higher interest rates and higher stock prices.

Investors pulled money from emerging markets ETFs at the fastest rate on record in January on China’s slowing growth and tapering sink currencies from Turkey to Brazil.

Dan Greenhaus at BTIG said a quarter with GDP growth more than 3 percent despite government spending contracted as much as it did, is unquestionably a positive. Greenhaus said concerns over emerging markets are the dominant topic and to the extent this remains contained, the sell-off is likely to be limited.

Analysts estimate S&P 500 companies increased EPS by 6.6 percent in Q4, 2013 and revenue by 2.6 percent.

Read the full article at http://www.bloomberg.com/news/2014-01-30/u-s-stock-index-futures-rise-as-facebook-jumps-on-sales.html

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Bonds Prove Bears Wrong in Best Start Since 2008 as Stocks Tank – Bloomberg 01-30-14

Salient to Investors:

Paresh Upadhyaya at Pioneer Investment Mgmt said January was definitely a surprise for investors. Neil Azous agreed.

Fixed-income assets worldwide posted their biggest January returns since 2008, while equity prices fell the most since 2010. Gold is rallying.

Joseph Quinlan at US Trust Bank of America said this is an unusual January and we are right on the knife’s edge where we’re coming off Fed tapering Quinlan said emerging markets have been suspect all along.

Investors Intelligence reported 62 percent of equity newsletter writers were bullish at the start of January, the most in 6 years.

Twenty Wall Street equity strategists predicted the S&P 500 will end 2014 at 1,955.

Robbert Van Batenburg at Newedge Group said we know what the Fed will do, but we do not know what the ultimate consequences are, and we do not know what is going on in China with respect to the shadow banking system.

Uri Landesman at Platinum Partners said investors are debating if this is just a minor hiccup in an incredible 5-yr bull rally, or the party is over and we will see a serious correction.

Jason Lejonvarn at Hermes Fund Managers said there is no single theme that runs across commodities in general, with quite a bit of sugar supply coming on stream and natural gas a very strong weather play.

Jeff Currie et al at Goldman Sachs said gold is vulnerable and may fall to $1,050 by year-end as the Fed tapers.

Read the full article at http://www.bloomberg.com/news/2014-01-31/bonds-prove-bears-wrong-in-best-start-since-2008-as-stocks-tank.html

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Siegel: Dow Heading to 18K, Worry Good for Markets – Bloomberg 01-29-14

Salient to Investors:

Jeremy Siegel at Wharton said:

No bull market rises in a straight line so this is a correction only and typical of a market climbing a wall of worry. Dow headed to 18000 by year-end.

Fair market value is $18000 as the S&P 500 has sold for an average of 16.5-17 times earnings over the past 60 years  but if you take out the period of double interest rates the average P/E has been 18-19, or 10 % higher than today. Analysts are expecting an 8-10% earnings increase so that would be a bonus.

Disappointed that the Fed did not hint that if it sees continued weakness it might slow or stop the tapering temporarily.

Federal minimum wage increase to $10.10 is not a good idea but would not be a disaster and won’t change his forecasts but does not expect it to pass in this an election year. US is best jobs market in world and still creates more jobs than anyone in the world. Only one-third of the minimum wage earners are the primary family breadwinners.  

Myra accounts is not his first preference but anything that increases savings is a good idea as the US saves too little.

Disturbed by the unemployment drop to 6.7% s it was due to a combination of low participation rate and low payroll growth and not robust growth. We don’t need any supply constraints, bottlenecks in labor or products or raw materials which could prematurely end bull market as Fed would really have to tighten. 

Watch the video at http://www.bloomberg.com/video/siegel-dow-heading-to-18k-worry-good-for-markets-n4MXyKXLT_6egloByM1edg.html

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Bernanke’s Unprecedented Rescue Unlikely to Be Repeated – – Bloomberg 01-29-14

Salient to Investors:

Kristin Forbes at MIT said Bernanke was incredibly creative in the different steps and programs he took to prevent a free fall of the global economy, and made decisions with highly imperfect information, necessary in a crisis.

Vincent Reinhart at Morgan Stanley said the Fed legacy is still open – we survived but the question is what are the consequences?

Tad Rivelle at TCW Group said the Fed’s operations under Bernanke were very intrusive, and expects his legacy will ultimately be negative as policies used during the crisis and slow recovery lead to future instability, perhaps social and political as well as financial. Rivelle said the Fed’s low-rate policies are providing “preferential access” to a privileged group of borrowers: the government, corporations and consumers with the highest credit scores.

Jeffrey Lacker at FRB Richmond warns that if the perception of government guarantees against financial risk is not reduced, it will set the stage for another crisis. Richmond Fed economists estimate that the proportion of the total liabilities of US financial firms covered by an implicit or explicit federal safety net increased by 27 percent over the past 12 years.

Phillip Swagel at the University of Maryland said we won’t know if too-big-to-fail has been solved until the next crisis – the tools exist to take down a troubled bank, but the unknown is the will of the government.

Julia Coronado at BNP Paribas said the Fed is intervening in the yield curve, in liquidity markets, in many asset classes, and the book’s last chapters have yet to be written, and there’s still a lot of risk.

Read the full article at http://www.bloomberg.com/news/2014-01-29/bernanke-unique-rescuing-u-s-with-acts-no-fed-chairman-embraced.html

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The Wild Card: Central Banks – Jim Rogers On The Markets 01-29-14

Salient to Investors:

Jim Rogers said:

The unknown wild card is what happens when central banks cut back. The Fed will cut back until markets around the world start falling, and get scared when they are down 15 or 20 percent and start printing money again.  This will eventually lead to inflation.

Read the full article at http://jimrogersonthemarkets.blogspot.com/2014/01/the-wild-card-central-banks.html

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Investing: Don`t Follow Others – Jim Rogers Blog 01-29-14

Salient to Investors:

Jim Rogers said:

Following others is very dangerous, like acting on a hot tip, and is nearly always a mistake. 

Read the full article at http://jimrogers-blog.blogspot.com/2014/01/investing-dont-follow-others.html

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Following each other is a very dangerous thing. Getting a hot tip and then acting on it and doing what other people are doing, that is nearly always a mistake. Nearly every time in my life that I have done something because others said so, it has costed me money.