http://online.barrons.com/article/SB124657282666888819.html#mod=BOL_hpp_highlight
Cover of Barron's on investment research firm Short Alert. Check it out!
Sunday, July 5, 2009
Tuesday, June 30, 2009
Link to Goldman Article in Rolling Stone
The Rolling Stone article by Matt Taibbi
http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine
Some quotes from the article:
"From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again"
"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
“It’s a gangster state, running on gangster economics, and even prices can’t be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can’t stop it, but at least we know where it’s all going.”
Also, more Goldman bashing in this article after their 3.44 billion Q2 earnings release and estimated 770k compensation per employee this year:
http://www.nytimes.com/2009/07/17/opinion/17krugman.html?em
"The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else."
"Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers."
http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine
Some quotes from the article:
"From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again"
"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
“It’s a gangster state, running on gangster economics, and even prices can’t be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can’t stop it, but at least we know where it’s all going.”
Also, more Goldman bashing in this article after their 3.44 billion Q2 earnings release and estimated 770k compensation per employee this year:
http://www.nytimes.com/2009/07/17/opinion/17krugman.html?em
"The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else."
"Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers."
Tuesday, June 23, 2009
Government (Goldman) Sachs
Matt Taibbi of Rolling Stone magazine wrote a scathing article about Goldman Sachs in the newest issue. Taibbi cites Goldman's influence in politics and it's contribution to the internet bubble, housing crisis, gas prices, and the bailout. Disclosure we do own stock in Goldman, and just because a company isn't ethical doesn't mean you shouldn't invest in them. The stock market is about making money not investing ethically. I will try to link if the article is posted online. Here are some of the highlights:
*IPO's were limited to companies 5 years in existence and 3 years of consistent profitability before the internet bubble when investment banks began to let companies that might never earn a profit IPO.
*During the internet bubble they engaged in "laddering" (selling IPO's to investors who promise to buy more at a higher price) and "spinning" (undervaluing IPO's and selling to company executives in exchange for future underwriting business) and earning billions in IPO fees and feeding the bubble.
*Before the housing bust homeowners had to have 10 percent down payment, steady income, and good credit rating. After the internet bubble, Goldman's next bubble was the housing market thanks to Rick Rubin (former Goldman exec and then treasury secretary)who relaxed underwriting standards. The bank began selling CDO's of repackaged mortgages knowing they would fail but still they got high credit ratings because they packaged the mortgages together.
*Then they bought credit default swaps from AIG, which had almost no regulation because of the 2000 Commodity Futures Market Act, and taking short positions against the same investments it was selling. The government would then have to bailout AIG (Hank Paulsen the treasury secretary at the time was also a former Goldman exec) to repay it 13 billion in credit default swap payments owed.
*Next when investors started to worry about the fall of the dollar and the mortgage market Goldman Sachs and the other investment banks moved to the physical commodity markets. Ever since the Depression commodity markets had been designed to help farmers prevent price uncertainty and act as a middleman with traditional speculators.
*In 1991 Goldman Sachs was given an exemption to trade in the commodities market. By 2008, 75% of the activity was speculative. This would not be a problem if speculation was long and short, but the majority of commodity speculation is "long only" which drives up the price of the commodity. At the same time, Goldman Sachs was cheerleading rising oil prices by putting out reports that oil would go higher. *The rise of oil prices also increased food prices that the average person has to pay. While Goldman employees earned on average over $600,000 in bonuses.
*Goldman received 10 billion in TARP funds of taxpayer money plus by changing to a bank holding company they can borrow at discount window of the Federal reserve which is undisclosed. Goldman also benefited from one of it's major rivals Lehman Brothers collapse but AIG was bailed out who owed Goldman Sachs $13 billion.
*Goldman switched to a year end calendar and wrote off the bookss $1.3 billion in losses in December which were not reported because of the switch in calendar. Then it reported $1.8 billion profit in first quarter 2009 mostly due to the taxpayer money from the bailout of AIG. In that first quarter Goldman reported employee compensation and bonuses of $4.7 billion. It also raised $5 billion by issuing new shares of stock after releasing the first quarter results. Essentially borrowing money to pay its employees.
*Despite making a profit of $2 billion in 2008, Goldman only paid $14 million in income tax due to shipping their revenues offshore. In comparison, Goldman paid its CEO in 2008 $43 million.
*What is the next bubble Goldman will exploit? Taibbi's article says it's the new carbon credit market. Goldman employees are a major contributor to the Obama campaign and Goldman alumns are in the Obama administration. The carbon credit market will require companies with greater carbon emissions to buy credits from companies who do not use all their credits and will be very lucrative. The volume of this market would be upward of a trillion of dollars annually and the credits will have a government mandate increase in price every year (unlike commodities it's already rigged in advance). The government would pay Goldman to collect the money and the money would be gauranteed.
*Goldman already has investments in Horizon Wind Energy, BP Solar, Changing World Technologies, and a 10 percent stake in Chicago Climate Exchange, where the carbon credits will be traded, and a minority stake in Blue Source LLC, a company that sells carbon credits of the type that will be in great demand if the bill passes.
*IPO's were limited to companies 5 years in existence and 3 years of consistent profitability before the internet bubble when investment banks began to let companies that might never earn a profit IPO.
*During the internet bubble they engaged in "laddering" (selling IPO's to investors who promise to buy more at a higher price) and "spinning" (undervaluing IPO's and selling to company executives in exchange for future underwriting business) and earning billions in IPO fees and feeding the bubble.
*Before the housing bust homeowners had to have 10 percent down payment, steady income, and good credit rating. After the internet bubble, Goldman's next bubble was the housing market thanks to Rick Rubin (former Goldman exec and then treasury secretary)who relaxed underwriting standards. The bank began selling CDO's of repackaged mortgages knowing they would fail but still they got high credit ratings because they packaged the mortgages together.
*Then they bought credit default swaps from AIG, which had almost no regulation because of the 2000 Commodity Futures Market Act, and taking short positions against the same investments it was selling. The government would then have to bailout AIG (Hank Paulsen the treasury secretary at the time was also a former Goldman exec) to repay it 13 billion in credit default swap payments owed.
*Next when investors started to worry about the fall of the dollar and the mortgage market Goldman Sachs and the other investment banks moved to the physical commodity markets. Ever since the Depression commodity markets had been designed to help farmers prevent price uncertainty and act as a middleman with traditional speculators.
*In 1991 Goldman Sachs was given an exemption to trade in the commodities market. By 2008, 75% of the activity was speculative. This would not be a problem if speculation was long and short, but the majority of commodity speculation is "long only" which drives up the price of the commodity. At the same time, Goldman Sachs was cheerleading rising oil prices by putting out reports that oil would go higher. *The rise of oil prices also increased food prices that the average person has to pay. While Goldman employees earned on average over $600,000 in bonuses.
*Goldman received 10 billion in TARP funds of taxpayer money plus by changing to a bank holding company they can borrow at discount window of the Federal reserve which is undisclosed. Goldman also benefited from one of it's major rivals Lehman Brothers collapse but AIG was bailed out who owed Goldman Sachs $13 billion.
*Goldman switched to a year end calendar and wrote off the bookss $1.3 billion in losses in December which were not reported because of the switch in calendar. Then it reported $1.8 billion profit in first quarter 2009 mostly due to the taxpayer money from the bailout of AIG. In that first quarter Goldman reported employee compensation and bonuses of $4.7 billion. It also raised $5 billion by issuing new shares of stock after releasing the first quarter results. Essentially borrowing money to pay its employees.
*Despite making a profit of $2 billion in 2008, Goldman only paid $14 million in income tax due to shipping their revenues offshore. In comparison, Goldman paid its CEO in 2008 $43 million.
*What is the next bubble Goldman will exploit? Taibbi's article says it's the new carbon credit market. Goldman employees are a major contributor to the Obama campaign and Goldman alumns are in the Obama administration. The carbon credit market will require companies with greater carbon emissions to buy credits from companies who do not use all their credits and will be very lucrative. The volume of this market would be upward of a trillion of dollars annually and the credits will have a government mandate increase in price every year (unlike commodities it's already rigged in advance). The government would pay Goldman to collect the money and the money would be gauranteed.
*Goldman already has investments in Horizon Wind Energy, BP Solar, Changing World Technologies, and a 10 percent stake in Chicago Climate Exchange, where the carbon credits will be traded, and a minority stake in Blue Source LLC, a company that sells carbon credits of the type that will be in great demand if the bill passes.
Friday, June 5, 2009
What does it cost to invest in the stock market?
This is a common question I have been asked, whether when I wasworking as a financial advisor or now when people come to me withfinancial questions. The answer is "It depends." There are essentially four different standard ways to invest your money: mutual funds, index funds, managed accounts (which usually require anywhere from $50,000-$100,000) and individual stocks. We will explain each one more in depth to break down how the fees are calculated. We will wrap it up with an explanation of how our fee is broken down and calculated.
Mutual funds are probably something we are all most familiar with.These are funds that are made up of a large number of stocks. Mostcontain anywhere from 50-200 stocks in their portfolio. They have aportfolio manager that oversees what the fund invests in. He is very pivotal to the success of the fund. There are two types of mutual funds: no-load funds and load funds. A no-load fund is a mutual fund in which there is only a trading fee to invest your money. If you invest into it by yourself the fee will be whatever your online broker charges you. I know Scottrade charges $7 a trade, so this is fairly inexpensive. Yearly they have a maintenance charge, the average of which is around 1.25-1.5%. As for load mutual funds,they operate the same way. The only exception is they charge an up-front commission percentage of what you invest. Typically, from what I have seen, it is between 4.5-5%. These initially cut into your current investment, thus, limiting what you get invested and hampering yourreturns. It should also be pointed out, that according to John C.Bogle, founder of Vanguard, even in a bull market, only 1 out of 6mutual funds beat the overall market. Even still, only 1 out of 21 ofthese funds beat it by a 1.5% margin, which would cover the yearly feethey charge you. So you are going to be trusting your own knowledge toget yourself into a fund that outperforms the market by at least 1.5%to ensure you are beating the average of the market as a whole, or youwill be trusting your financial advisor to make that selection foryou. Reference http://finance.yahoo.com/funds/how_to_choose/article/100583/The_Disappointing_Reality_of_Funds_That_Beat_the_Marketor Common Sense on Mutual Funds: New Imperatives for the IntelligentInvestor,by John C. Bogle, published by John Wiley & Sons (© 2000)
Index funds are funds that try to trace a certain benchmark or indexsuch as the S&P 500 (typically), the Dow, the NASDAQ or any otherbroad market return. These index funds can either be a loaded fund ora no-load fund just like mutual funds. They basically are a fund thatholds the same companies that their benchmark or index does and doestheir best to trace it. Their only job is to make sure to get as close to it as possible, not beat it or trail it. The maintanence fee can be as inexpensive as.18%. Since they do not try to beat the market, you will typically be fractionally below the market as a whole.
Managed funds (if you have the minimum to get into them) are a group of investors that use your money to "build your own mutual fund." Thismeans, they essentially take the money you have invested and buystocks for you to make sure you have a diversified portfolio. From my experience, these have done better, although I have no hard facts toback it up. Because you have professionals actively managing yourmoney, they will charge you a certain percentage a year to manage it.Since you cannot look these up, from the people I have talked to who are in them report a range anywhere from 1.5-2.5% a year, typically with no initial fee get into it. Also, from my experience, about half beat theS&P on a consistent basis and very few have beat it to the point it has covered its yearly fee.
The last of your common selections are individual stocks. You can either invest in them on your own at the per trade rate mentioned above or have your financial advisor do it for you. This means you aredeciding for yourself which stocks you feel are going to out performthe market or you are trusting your financial advisor to make thoseselections for you. From my experience, it costs anywhere from $22-$55for your broker to buy a stock. Let me break that down for you in percentages. If you invest $10,000 into a single stock, you would bepaying anywhere from .22-.55% per stock trade. If you invested $1,000into a single stock it would sky rocket to 2.2-5.5% per stock trade. Once again you would be relying on your own, or your broker's knowledge of stocks that would outperform the market average.
Parnassah Investments does a very simple way of calculating our fee.Over the course of the year we charge a 1.25% fee. This is broken upquarterly, meaning every quarter we will charge .3125%. This is calculated by your investment into our fund averaged between your amount invested at the beginning of the quarter and at the quarter'send. It can either be taken out of your investment, or a check can be made out to Parnassah Investments for your convenience. This way you can ensure the money you designated to be put to use investing in thestock market can stay there and keep working for you. Our fund'sobjective is to outperform the S&P 500. Currently we have outperformedthe market by 18.1% (last quarter), outperformed by 2.3% (quarter 42008), underperformed by .05% (quarter 3 2008), outperformed by 4.45%(combined quarter 2 and quarter 1 2008) and since inception we haveoutperformed by 21.89%.
There are a few other points that need to be made before concluding this post. Mutual funds and index funds typically have a minimum that can be invested into their funds. My guess from checking around is about $2,000. Subsaquent investments require a minimum of around $500. With Parnassah Investments there are no minimums or minimum subsequent investments.That is what makes investing with trusted friends and collegues such a perk. Another reason for the shortfall of mutual funds is their size. There are certain restrictions on how much they can invest into a certain stock. Thus, limiting their ability to outperform theirindexes. Investing with a smaller fund and one with no percentage restrictions into stocks can maximize your profits in which others cannot due to their size. Successful funds starting out end up fizzling because of the money they attract, which ultimately limits their ability to capitalize on their earning potential. These are just some things I hope you consider before you invest.
Mutual funds are probably something we are all most familiar with.These are funds that are made up of a large number of stocks. Mostcontain anywhere from 50-200 stocks in their portfolio. They have aportfolio manager that oversees what the fund invests in. He is very pivotal to the success of the fund. There are two types of mutual funds: no-load funds and load funds. A no-load fund is a mutual fund in which there is only a trading fee to invest your money. If you invest into it by yourself the fee will be whatever your online broker charges you. I know Scottrade charges $7 a trade, so this is fairly inexpensive. Yearly they have a maintenance charge, the average of which is around 1.25-1.5%. As for load mutual funds,they operate the same way. The only exception is they charge an up-front commission percentage of what you invest. Typically, from what I have seen, it is between 4.5-5%. These initially cut into your current investment, thus, limiting what you get invested and hampering yourreturns. It should also be pointed out, that according to John C.Bogle, founder of Vanguard, even in a bull market, only 1 out of 6mutual funds beat the overall market. Even still, only 1 out of 21 ofthese funds beat it by a 1.5% margin, which would cover the yearly feethey charge you. So you are going to be trusting your own knowledge toget yourself into a fund that outperforms the market by at least 1.5%to ensure you are beating the average of the market as a whole, or youwill be trusting your financial advisor to make that selection foryou. Reference http://finance.yahoo.com/funds/how_to_choose/article/100583/The_Disappointing_Reality_of_Funds_That_Beat_the_Marketor Common Sense on Mutual Funds: New Imperatives for the IntelligentInvestor,by John C. Bogle, published by John Wiley & Sons (© 2000)
Index funds are funds that try to trace a certain benchmark or indexsuch as the S&P 500 (typically), the Dow, the NASDAQ or any otherbroad market return. These index funds can either be a loaded fund ora no-load fund just like mutual funds. They basically are a fund thatholds the same companies that their benchmark or index does and doestheir best to trace it. Their only job is to make sure to get as close to it as possible, not beat it or trail it. The maintanence fee can be as inexpensive as.18%. Since they do not try to beat the market, you will typically be fractionally below the market as a whole.
Managed funds (if you have the minimum to get into them) are a group of investors that use your money to "build your own mutual fund." Thismeans, they essentially take the money you have invested and buystocks for you to make sure you have a diversified portfolio. From my experience, these have done better, although I have no hard facts toback it up. Because you have professionals actively managing yourmoney, they will charge you a certain percentage a year to manage it.Since you cannot look these up, from the people I have talked to who are in them report a range anywhere from 1.5-2.5% a year, typically with no initial fee get into it. Also, from my experience, about half beat theS&P on a consistent basis and very few have beat it to the point it has covered its yearly fee.
The last of your common selections are individual stocks. You can either invest in them on your own at the per trade rate mentioned above or have your financial advisor do it for you. This means you aredeciding for yourself which stocks you feel are going to out performthe market or you are trusting your financial advisor to make thoseselections for you. From my experience, it costs anywhere from $22-$55for your broker to buy a stock. Let me break that down for you in percentages. If you invest $10,000 into a single stock, you would bepaying anywhere from .22-.55% per stock trade. If you invested $1,000into a single stock it would sky rocket to 2.2-5.5% per stock trade. Once again you would be relying on your own, or your broker's knowledge of stocks that would outperform the market average.
Parnassah Investments does a very simple way of calculating our fee.Over the course of the year we charge a 1.25% fee. This is broken upquarterly, meaning every quarter we will charge .3125%. This is calculated by your investment into our fund averaged between your amount invested at the beginning of the quarter and at the quarter'send. It can either be taken out of your investment, or a check can be made out to Parnassah Investments for your convenience. This way you can ensure the money you designated to be put to use investing in thestock market can stay there and keep working for you. Our fund'sobjective is to outperform the S&P 500. Currently we have outperformedthe market by 18.1% (last quarter), outperformed by 2.3% (quarter 42008), underperformed by .05% (quarter 3 2008), outperformed by 4.45%(combined quarter 2 and quarter 1 2008) and since inception we haveoutperformed by 21.89%.
There are a few other points that need to be made before concluding this post. Mutual funds and index funds typically have a minimum that can be invested into their funds. My guess from checking around is about $2,000. Subsaquent investments require a minimum of around $500. With Parnassah Investments there are no minimums or minimum subsequent investments.That is what makes investing with trusted friends and collegues such a perk. Another reason for the shortfall of mutual funds is their size. There are certain restrictions on how much they can invest into a certain stock. Thus, limiting their ability to outperform theirindexes. Investing with a smaller fund and one with no percentage restrictions into stocks can maximize your profits in which others cannot due to their size. Successful funds starting out end up fizzling because of the money they attract, which ultimately limits their ability to capitalize on their earning potential. These are just some things I hope you consider before you invest.
Tuesday, March 3, 2009
Friday, February 13, 2009
Water, a basic necessity
How many things do we do that requires the use of water? Can you go a day without it? These are the reasons why many believe that water is the next oil. In certain third world countries, populations are growing due to the area's vast resources. Many of these places still do not have the proper water infrastructures for safe and clean water. The more people depend on these commodities (oil, copper, gold, silver, steel, coal and natural gas, to name a few) the more populations will sprout up in rural and impoverished areas. These areas need the basic necessity of clean water, not only to drink but to bathe, clean clothes and refine these materials. This, coupled along with growing population and the fact that nearly 1/6 of the population already does not have sanitary water, is a reason why clean water will be in high demand in the coming years.
This means there is a great opportunity in water cleansing and infrastructure companies in the coming years. Although it is uncertain when these companies' stocks will reflect this need, we are very interested in getting in now, before the actual realization of it happens. We all know it will, but just like oil, it did not rapidly increase in value until there was a limited supply along with international control. Unlike oil, we know the set amount of water and know it is a resource we cannot live without. We can find new ways to take the place of the things oil does for us, thus eventually diminishing its value. With water, we know the amount we have and we know we can reuse it with the right procedure.
All we know is, that in the future, water will finally be recognized as a resource we need to invest in. Not only to ensure that the world's population has clean water to drink, but also enough clean water to use, as we all do on a daily basis. When will the rest of investors and government agencies realize this? We are not sure, but we do know the need is there. Therefore, we are looking for a long term play into a water ETF.
This means there is a great opportunity in water cleansing and infrastructure companies in the coming years. Although it is uncertain when these companies' stocks will reflect this need, we are very interested in getting in now, before the actual realization of it happens. We all know it will, but just like oil, it did not rapidly increase in value until there was a limited supply along with international control. Unlike oil, we know the set amount of water and know it is a resource we cannot live without. We can find new ways to take the place of the things oil does for us, thus eventually diminishing its value. With water, we know the amount we have and we know we can reuse it with the right procedure.
All we know is, that in the future, water will finally be recognized as a resource we need to invest in. Not only to ensure that the world's population has clean water to drink, but also enough clean water to use, as we all do on a daily basis. When will the rest of investors and government agencies realize this? We are not sure, but we do know the need is there. Therefore, we are looking for a long term play into a water ETF.
Sunday, January 25, 2009
The Super Bowl And the Stock Market
Theory has it that whoever wins the Super Bowl will predict whether the market goes up or down. The Super Bowl Indicator predicts that if an NFL team wins the Super Bowl the market will go up but if an old AFL team wins then the market will go down. This theory has been right 33 times out of the 42 Super Bowls for a 79% rate of success of predicting the market. There's no logical correlation between who wins the Super Bowl and the stock market and it's more superstition than economic forecast.
Last year the Giants (an old NFL team) won the Super Bowl over the Patriots (an AFL team) which should've meant the stock market would go up but we all saw how that worked out. This year both the Cardinals and the Steelers are from the NFL (The Cardinals were originally of the St. Louis franchise). According to the indicator, no matter which team wins the stock market is predicted to go up. At least we can be optimistic. But if you ask me the Cardinals don't have a chance against the Steelers defense.
Last year the Giants (an old NFL team) won the Super Bowl over the Patriots (an AFL team) which should've meant the stock market would go up but we all saw how that worked out. This year both the Cardinals and the Steelers are from the NFL (The Cardinals were originally of the St. Louis franchise). According to the indicator, no matter which team wins the stock market is predicted to go up. At least we can be optimistic. But if you ask me the Cardinals don't have a chance against the Steelers defense.
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