Archive for September, 2009

Today’s News Illustrates Weakness of Using Indicators

Wednesday, September 30th, 2009
Today’s News Illustrates Weakness of Using Indicators

Last week, I discussed the problems with relying on indicators for making investment decisions (“Take Indicator News with a Grain of Salt”). This subject is important to understand, particularly in today’s economy. So, I am using The Wall Street Journal today to provide good examples of what’s bad and good. »

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Look at Stocks’ Future Prospects, Not Their Past Performance

Tuesday, September 29th, 2009
Look at Stocks’ Future Prospects, Not Their Past Performance

We’re in an interesting place in the stock market. The economy seems to be improving with economists thinking we are leaving the recession behind. The stock market has risen 50% off its March bottom as pessimism waned and corporate earnings came in better than expected. But many investors are not biting and continue to... »

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Currency and Commodity “Investing” Has Serious Pitfalls

Monday, September 28th, 2009
Currency and Commodity “Investing” Has Serious Pitfalls

In The Wall Street Journal (September 26/27, page A-1), the article, “Small Investors Make Big Bets on Currencies” highlights how individuals can be enticed into betting on currency and commodity price moves. As the article correctly observes, “One of the riskiest corners of Wall Street is making a push to attract individual traders….” »

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Credit Ratings Are Not Going Away

Friday, September 25th, 2009
Credit Ratings Are Not Going Away

Congress is grilling the ratings agencies, and there has been discussion about not relying on the credit raters anymore. (For example see The Wall Street Journal today on page C-1: “Raters Face Fresh Push in House Over Claims.”) Moody’s is in the news with a former employee talking to congressmen about the publication of... »

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Fed Has Created Overpriced Mortgage Securities

Thursday, September 24th, 2009
Fed Has Created Overpriced Mortgage Securities

The Federal Reserve Board’s commentary yesterday included an extension of time to complete its purchases of $1,250 billion in mortgage securities issued by Federal National Mortgage Association (FNMA or Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac). To date it has accumulated over $850 billion worth, and they want to... »

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Take Indicator News with a Grain of Salt

Wednesday, September 23rd, 2009
Take Indicator News with a Grain of Salt

Every day there are new economic indicator reports, often presented and analyzed as if they carried high significance and provided important insight. But they don’t – especially if our interest is in investing wisely. Here are the problems… »

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Making Money with Low Interest Rates

Tuesday, September 22nd, 2009
Making Money with Low Interest Rates

Investors are taking on the price risk of long-term bonds and bond funds to increase their income. Such moves look smart on the surface with 1-year Treasury bills yielding only 0.4% and 10-year notes, 3.4%. However, the low interest rates on short-term investments could actually provide the better return. Here’s why… »

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Consider Avoiding Bonds for Now

Monday, September 21st, 2009
Consider Avoiding Bonds for Now

There is currently a large move to bonds and bond funds. The impetus behind this buying interest is (1) investors improving their yields, (2) banks investing (rather than lending) their cash flows, and (3) the Federal Reserve attempting to keep long-term interest rates attractive to borrowers. »

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