Recently in Investing Category

My daughter is 3 and I finally got around to opening an official college savings account for her.

I blame myself for being slow but I also blame the system our government created for being overly complicated and obtuse.

After doing my research, I decided to start with an ESA account because of one thing: I can invest in anything I want. I have total control. I will also need to use a 529 plan because we need to save more than $2k/year but I have put the decision about which plan (and which type of plan) off for now.

What I want is a larger ESA plan but all I ever hear about is 529 plans. Why?

First off, ESA accounts are capped to $2,000 of savings a year. Again, I ask why?

My first instinct is to follow the money and my first guess is that the government (paid off by the industry) push 529 plans because it means more jobs for the financial industry.

529 plans are free money for investment funds and every state has at least two funds. Those state funds just funnel money into a handful of investment companies (Schwab, Fidelity, etc) who collectively take in billions of dollars with little or no oversight. Their customer is state governments not individual savers.

Customers, like myself, put money into the fund and have little to no say about how the money is spent.

We are given a very small set of investment options to choose from. (Who picks those?)

In many funds we are limited to a single allocation change per year. Yes, I said YEAR!

You read the newspaper and see the financial bubble and meltdown coming? Well good luck doing anything about it in a 529 plan; you get to ride it out.

You think you are saving for college but in reality you are just creating jobs for investment companies who get to manage billions of dollars of dumb money. After all, the best customer is a silent, powerless customer.

I can see the industry arguing that this a "fire and forget" strategy for savings. Most people dont have the time or skills to evaluate investments so they will do it for us.

That is a good argument but they should also offer a self-managed fund.

The ESA limits and 529 limits should be equal. If you want to trust in your anonymous brokers, go for it but let me invest in myself.

We dont have that system so I suspect self-interest at work on the political process.

And recent news indicates that a lot of people are pulling money out of 529 plans for just this lack of control. Why should we support a system we feel is flawed?

More Parents Are Becoming 529 Dropouts

Investors and Advisers Seek More-Flexible Options in Wake of Market Turmoil

Wall Street Journal

By JANE J. KIM

11-11-09

"Any new money going to my kids' college education is going into something that I manage myself," he said. "I know I could do better and I can be safer."

In recent years, 529 plans have been pitched as the ultimate college-savings vehicle. The plans are sponsored by states, and their investment options and fees can vary widely.

But in the wake of last year's market collapse and some high-profile fund blowups, some investors—and financial advisers—are paring back their reliance on 529 plans and in some cases are considering alternatives. After tucking some $15.5 billion into 529s in 2006 and an additional $15.2 billion in 2007, investors contributed an estimated $5.2 billion last year, according to Financial Research Corp., a Boston research firm owned by Mercatus Partners LLC. So far this year, investors have put an estimated $4.8 billion into the plans.

I have the same complaints about 401k plans. Again, their customer is the corporation/employer not the employee/saver. And the result is poor selection and lack of control. But that is another post for another day.

Wells Fargo posts a profit? Huh?

Last month the economy was in "collapse" and we needed to spend tax dollars to "save the banking system."

This month the banking system is posting profits? I guess I ought to be happy that the banks are doing better but this change comes so soon, it just doesnt feel right.

This week the other big banks will announce their results. If they post profits, watch out.

The anger felt by the public towards AIG will surge onto banks and there will be some 'splaining to do. What's more, the general sense that we dont know who we can trust will only get worse. Our system depends so much on the "greater fool' theory, but right now the public is starting to worry that they are the fool.

Are we really ready for recovery so soon?

Even though the stock market bounces up and down, I dont think so. There is a lot of news, good and bad, and one has to take as much as you can into account and guess.

My concern is debt. If you have ever gotten yourself into credit card debt, you know that it is much easier to charge the card up than it is to pay it back down. There may be a "glimmer of hope" but we have a lot of bad debt to pay back down and like any diet, it is not pleasant and it takes a lot longer than we think it will.

This interview on Friday with the News Hour was a good summary of some of the problems still out there.

Obama Optimistic, Yet Cautious on Economic Recovery Outlook

The president said Friday he saw "glimmers of hope" in increased lending to small businesses, but the economy was still under "under severe stress." Analysts discuss the signs of economic recovery and the road ahead.

Credit card debt is continuing to go bad and so is commercial real estate. Add that to the existing housing debt and I see a lot of pain for lenders and bond investors. Banks may post a profit; stock markets may go up, but losses are still coming.

Another issue is that FASB has conceded to political pressure and modified the rules for mark to market accounting for debts. The belief is that this change will let banks hide their bad debts for longer. Instead of going bankrupt now, they will trickle out the losses over time, probably years -- just like Japan did.

On the one hand that might be a good thing, lots of little pains instead of a heart attack, on the other hand some of us wanted to rip off the band aid and get it over with. Its clear that wont happen and the Obama administration wants to stall.

It is April 2009 and the S&P500 is about 8,000. I am with the folks that think this is a bear rally and we will soon be "testing new lows".

Back in February of 2008, we tried to purchase a house in Bellevue. We called it the "blue house". It was an older dare I say run-down house in an older neighborhood. The seller thought it was worth a lot more than I did so we didnt get the house.

The thing that stuck with me though was the neighbors. We met a few of the neighbors and I think about one of the couples from time to time. They thought the asking price was a fair one because they had just paid the same amount for a smaller house a few blocks away as an investment property.

The husband was an engineer. They were well educated and had steady jobs and were raising kids. These were people who were fully capable of doing math and showing some common sense. I get very nervous when I meet people like this who just bought "investment" properties.

I tried to delicately ask: Is the rent on that house enough to cover the mortgage?

They were happy to talk about it. The rent was not covering the mortgage but that was ok with them. "It would pay off in the long term."

I think about them from time to time.

I wonder if they have figured out by now that a short-term loss is never a long-term gain in real estate.

If you are starting a business, you invest money up front and expect a loss until your revenue grows enough to make your money back. But that model only works win a business where you get revenue growth which is not how real estate works.

With real estate, you pretty much know from the start what your revenue will be and if it is less than your expenses there will never be a long-term gain. You are basically buying a bankruptcy which is why its so important to stick with properties that are priced to cash flow.

Yes, from time to time I think about that family and the thousands like them.

How long can they keep it going?
How long before they want to get out and cant?
How long before they are forced to get out or go bankrupt?

And it wasnt just individuals. Lots of "professionals" got caught up in the same problems with their own investments.

what do you do when income is less than expenses?

First you try to raise your income but that is hard to do in rental property.

Generally there is a lot of supply out there. If you jack up prices on your tenants, you a) piss them off and b) push them into moving. (That's what happened to us.)

If there are a lot of rental choices out there, the tenants leave and it will be hard for you to replace them. So you drop your prices or offer intro rates to fill your unit. That is the time when you decide ANY money is better than no money.

If you cannot solve the problem by raising income, you cut expenses. You take your rent checks and you spend as little as humanly possible. The first thing you cut is the stuff people wont notice immediately - maintenance and repairs. Then you cut management and staff.

The result for renters is more problems and less service.

A friend of mine is renting the bottom unit in a "luxury" building. Her unit has been flooded twice. First time a toilette backed up in the unit above her. The second time the unit two levels above had a pipe freeze and burst. Instead of wrapping the pipes, management had to deal with damage to two apartments and storage units.

I would expect to see a lot of problems like this at larger apartment complexes as well as a lot of desperation to fill units because there are a lot of new units coming on the market.

If things are REALLY bad, you cut your biggest expense: your creditors. You take the rent checks and you stop paying your mortgage.

Its been a few months now and there is a steady stream of stories about renters who paid their rent and end up getting evicted because their landlord didnt. It is sad but I would expect to see even more of it in 2009.

And I expect to see problems in commercial property too. Just this last week the WSJ warned of a huge wave of commercial property defaults on the horizon. I would expect to see problems with any property that changed hands in the past 2 to 5 years.

Its funny to think back 6 to 9 months ago and look at what people were saying about investing in real estate and economy in general. What a different world it will be in 2009.

I have written before about the odd, often ironic, way American's treat money. For a capitalist country whose culture revolves around money, we are just plain terrible at managing it. Even people with successful family businesses often dont know much about money or how to talk about it with their family.

Most Americans have little or no training in managing money and they take money very personally as a measure of self-worth. Taken together these two facts are the one-two punch of financial problems. Most American's try to use a cashflow management system ("If I have cash in the back, I must have money.") but thanks to credit cards, their spending is completely out of control and they really have no idea how much money they have or where they spend it.

It also surprises me how many people think "business" money is somehow different from "household" money. Your household IS a business. You have income; you have expenses; you have to balance the books to stay out of bankruptcy. Everyone should think of their household as a business so that they can make money less personal and be more productive talking about it. Thinking of a household as a business is also a good way to involve more members of the household in financial dialog and decisions.

the three steps

There are three basic activities for managing money in a household or business. Each activity creates a foundation for the next one and they work in order. Some people have skills in one area but you need to address all three to be successful.

1. Accounting -- The techniques and record-keeping that tell you where the money goes
2. Spending -- Deciding what to buy or (even more important) not buy every month
3. Investing -- How to make money with your past savings

The first activity, accounting, is pretty much solved with software like Quicken. By recording your purchases and bank records in Quicken and using the business reports (income/expense, balance sheet, cashflow) one can easily keep track of where their money goes. Even though I am regularly frustrated by Quicken and its quirks, one just cannot manage a household-business without it.

The second activity, spending control, is a set of values and behaviors that lead to decisions. Controlling one's spending is almost completely absent in many if not most households because people dont have any data with which to make decisions. Without data, all you have are emotions and its not possible to make good decisions purely by emotion. Without data you will always give in and overspend which is why so many people have credit card problems. There are so many individual purchase decisions in a given month, one can never know what they truly can afford without accounting data.

Spending control involves daily discussion of priorities and goals with your family partners, including the difference between needs and wants. It involves looking at your accounting reports to see what resources you have and where you spend money today and comparing that with your financial goals for the years ahead. Most of all, it involves the willpower to say no even when every part of you wants to say yes. Spending control is the hardest part of managing money because our culture is all about spending and the peer pressure is enormous. But fact is that you will never have any savings until you learn to control your spending.

The third activity, investing, is about knowledge. If you do the first two steps, you will have free cash flow, ie savings, every month with which to invest. Knowing what to invest in and different types of investments (stocks, bonds, ETF, mutual funds, options) is a matter of training and education. The same is true for understanding different investment vehicles like IRA's, 401Ks, 529s and the like. Even if you have limited investment knowledge but you master the first two steps, you will be better off than millions of your fellow Americans.

closing

The bad news is that managing money is a lot like losing weight - you have to learn to honestly and regularly use a scale, learn when to say no, and you need both willpower and patience to stick with it over a lifetime.

The good news is that all three steps are doable by just about anyone. Taking charge of your finances, while difficult at times, is also quite empowering and it is never too late to start.

I have been talking and writing about the housing bubble for several years. Turns out I was an unwitting investor.

A while back I pulled some money out of securities and put it into ultra-short-term bonds, which I expected to be ultra safe.

SWYPX

Category: Ultrashort Bond YieldPlus seeks to maintain an average portfolio duration of 1 year or less.

You may want to consider this fund if...

You are seeking higher yield than a money fund can offer for your longer-term cash (cash you intend to hold for one year or more) yet can accommodate share price fluctuation.

You are looking for relatively stable monthly income but are unwilling to take on the risks associated with a longer-term security.

Recently I noticed that the value of these ultra-safe bonds had dropped. A LOT. What?!

Look at this graph... 2004. 2005. 2006. 2007........!

Turns out my "ultra-safe" investment was actually investing in CDO's and other housing-related kruft. Despite my own warnings about the housing mess, I am now a victim too. If I had known what they were buying, I would never have bought this fund. And if I had listened to Schwab, I would never have known what happened -- it took this lawsuit and article.

More specifically, the Complaint alleges that, in connection with the Funds' Registration Statement, defendants failed to disclose or indicate the following:

(1) that the Funds' assets were or would be overly-concentrated in the highly risky mortgage industry and that such securities were or would be highly vulnerable to illiquidity;

(2) that there existed no primary market for the majority of the bonds;

(3) that the duration for a majority of the Funds is over two years;

(4) that the values of the Funds' shares were inflated and highly speculative given their composition;

(5) that there were not adequate internal controls; and

(6) that, as a result of the foregoing, the Funds' Registration Statements were false and misleading at all relevant times.

Well isn't that just great. Joke's on me.

Recently I have been thinking about the fact that the only way to get more money is to take someone else's. Today I ran across this article.

Clearly, there are plenty of very rich people who dont know a thing about investing. Wall Street is an insiders-game and just having wealth does not make you an insider. Sometime it makes you the patsy for real insiders.

There are plenty of people who have been successful with a business. They know their business but when they stray beyond it, they are just a vulnerable to swindlers and bad decisions as the rest of us.

Debt Crisis Hits a Dynasty

Billionaire Mahers Rack Up Losses In 'Auction' Bonds

By ROBERT FRANK

February 14, 2008

When M. Brian and Basil Maher sold their family's shipping business last July for more than $1 billion, they quickly put the money in a safe place.

Or so they thought.

The two brothers handed much of it to Lehman Brothers Holdings Inc. with marching orders to make only the most conservative, cashlike investments. Within weeks, however, they had lost access to more than a quarter-billion dollars.

"We didn't think we were taking risks," says Brian Maher, 61 years old. "We read about all the troubles in the credit markets and said, 'I'm glad we're not invested in that stuff.' It turns out, we were."

...

The brothers had no real investing expertise. Brian owned a few mutual funds. One of Basil's rare forays into stock picking left him with a $1,000 loss, "which was a lot for me at the time."

Their plan was to park the money in a safe place until they could hire their own team of wealth managers.

Mr. Liu and the Mahers drew up a basic list of financial objectives. The first one, according to a letter the family sent the banks: "Preserve capital." The second was to "provide sufficient liquidity" and third was "capture a market rate of return based on [the brothers'] investment policy parameters and market conditions."

But when they saw an account summary from Lehman in early August, the Mahers were alarmed. It showed that two thirds of the account -- about $400 million -- had been invested in corporate securities with obscure names like Tortoise TYY I, or INC 2003-2.

Mr. Liu says he came away from his conversation with Lehman unsure of the quality of the bonds' underlying assets. He consulted with the Mahers, and they agreed the bonds should be sold as soon as possible. Mr. Liu told Lehman to "unwind the positions and give the Mahers their money back."

Lehman, however, had trouble selling.

I have not been blogging much about investing or the economy lately but 2006 continues to confuse me.

With widespread expectations that corporate profits would be down in 2007, I have been expecting the stock market to drop. It has risen.

What has been falling is the value of the US$. Something I haven't been thinking about (and no one has been talking about) for over a year. Our ballooning Federal deficit and the falling US$ seem to be unpopular topics in the face of a rising stock market and Iraq.

Trying to lower trade deficits by weakening the US$ has questionable value over the long term. I have doubts that getting China to raise the Yuan will help our failing manufacturing industries very much.

Lots of conflicting information for investors these days. Who knows what to believe?

Here is a brief summary of articles from the past month with a handful of quotes:

• Move to index funds because managed-fund performance is down.
• Invest in Bershire stocks.
• Seek safety in the biggest US stocks.
• Forgo stocks altogether and purchase index funds.
• Cash returns are at a peak; lock in rates now.
• The stock rally is about over; expect corporate profits (and P/E ratios) to drop in 2007.

Every time I see this chart, it blows me away. I know that you need to do comparisons as ratios but but the growth in absolute terms is just extraordinary to me.

Look at the big crashes: the 1920s and 1987. They seem quaint by the scale of the market today. (Although in ratio terms, it isn't. 1987 looks like about 30% drop which is larger than the drop from 1999 to the low point in the 2000's.)

Most periods of extreme growth are followed by decades of relative flatness. At least that was true before the 1980's.

I wonder how many investors will really understand what the program is doing and how much risk they are taking.

Is it time for new strategies in retirement investing? It is nice to see that I am not the only person struggling with the market volatility of 2006.

Then again, I am not convinced that rebalancing is the answer. Just say "60/30/10"" doesnt answer the question of what stocks or what bonds...

2006 has been a really difficult year for investing. Everything has been so up and down, its hard to know where to put your money. (For instance, since this article on bonds went to print, the Dow rose to an all-time-high of close to 12,000 - hardly a recession.)

This article from September has some advice on bond investing, specifically on building a "bond ladder".

Suddenly there is a raft of articles about failing hedge funds... Since normal folks like myself were generally excluded from hedge fund riches, Im not too put out by the news.

The real story for me is who is actually losing money here. The media focuses on the big money winners in the stock market but there are a lot of big money losers out there. Where are these losses going to show up? In the dot-com crash, it was a lot of pension and retirement money that got lost. Not so here.

When a lot of money tries to buy a liimted number of assets, prices go up.

What happens to those prices when the money supply dries up? Well we may be about to find out.

It is still hard to find any articles discussing the economic impact of global warming, but if you keep your ears open, the "recession" word is starting to show up again. Which is interesting because most of the news lately has me thinking about dot coms stocks in 1999.

"It will never go down!"
"It's a new economy!"
"If you dont get in now, you will only miss out on the easy money!"

Here are two articles from a few months ago that talk about growing market volatility due to hedge funds and housing. Given the global crash of equity markets this past week, it is something to think about.

How risky have things gotten? How much are people leveraged? Is the global system at risk of sudden, dramatic shifts?

The articles in the paper used to be all about how prices kept going up up up.

Now they are about the cooling off.

This is a good article with a terrific graphic. I love graphics :)

The Federal Reserve meets periodically to set the rate that banks borrow money in the short-term. This rate has an impact on a lot things, such as mortgage rates and treasury bonds, so its worth watching. Raising rates increases the cost of borrowing and acts as a brake, slowing things like the housing market down. (At least in theory.) Whether that is good or not depends on your investment bets.

After a long time without any increases, the trend this year is (finally) up.

Three articles about Japan, who finally seem to be recovering from their own financial hang-over after how many decades?

In the 1908's investors pushed Japan's real estate prices through the roof and the banks had so many bad debts, they could not collect on them for fear of bringing down the whole banking system. Hmmm, why does that sound so familiar?

As the World's second largest economy, this trend in Japan is one to watch if you are interested in investing there.

Im a big fan of investing in other countries. Ive been looking for hard numbers but it appears that the US is roughly half of the world market. So if you money is only in the USA, you are only participating in half the market.

But the decision where to invest is complicated. Here are two articles about overseas investing. One warns about international bonds and the other warns about staying out of the world markets.

One of the most alarming things about the recent investment market is the apparent disappearance of risk premiums. One is supposed to pay a premium for safer investments but these days safe and risky are priced the same.

One of the biggest contributing factors to the housing bubble is the willingness of banks to lend money to anyone with a pulse. This article on bonds shows that its not just the housing market that is being impacted by current thinking and the same cause - the people who make the loans dont hold them and the people who buy the loans dont know who pays them.

Will it take another great depression to wake people up? I sure hope not.

For a capitalist country, we have funny behaviors when it comes to money. Everyone wants to have money (or at least appear to have money) but few people really talk about money in a constructive way. In fact, most people find talking about money impolite. I've noticed that talking about money makes people even more uncomfortable than talking about politics, which is saying a lot.

This article and its nine financial discussion topics is a good read.

I continue to find people who believe their house is their "best investment". If you are one of those people, this post is for you.

Assets, Liabilities and Ownership

This post is about investments but the definition of an investment is closely tied to the idea of an asset.

Im sure you have heard these terms before. An asset is something you own that is worth money. A liability is money you owe to someone else. The difference between the two (assets - liabilities) is what you actually "own". (It is also called net worth.)

An interesting article on the wave of taking company's private rather than public.

Private Game

By HENNY SENDER Staff Reporter of THE WALL STREET JOURNAL

December 29, 2005

There's a new game in town -- but not everyone can play.

This year, there's been a wave of big investors swooping in and buying up public companies, then delisting the companies and taking them private.

As rate on 2-year T-Bills gets ready to pass 10-year bills presaging a recession, surely due to President Bush's wise fiscal leadership, the Japanese are eager for inflation. Which may finally be starting to happen.

In Japan, an End
To Falling Prices
May Soon Be Near

By SEBASTIAN MOFFETT Staff Reporter of THE WALL STREET JOURNAL

December 27, 2005

TOKYO – Japan's most-watched price indicator rose for only the second time in seven years, fueling expectations of an end to a long period of economy-hobbling price falls.

The nationwide core consumer-price index, which excludes volatile fresh-food prices, rose 0.1% in November from a year earlier, the government said. Economists say the indicator has a good chance of continuing to rise, marking a turning point for the world's second-largest economy. The data follow three years of higher Japanese corporate profits, which have led to more investment and consumer spending. If the increases continue, they could point toward an end to the central bank's super-easy monetary policy.

This gradual tightening of monetary policy is expected to lift interest rates modestly: The yield on the benchmark 10-year government bond is about 1.5%, but economists think it will rise over the next year.

It has already come down again but the Dow got very close to the 11,000 mark. The Nikkei is at a 5 year high. Gold hit $500 and ounce while platinum hit $1000/oz! Lots of big psychological barriers going on.

Is investing all math or is it also impacted by psychology?

Go Figure: Zeroing In on Market Milestones

The Round-Numbers Approach To Making Decisions Can Have A Real Impact on Trading

By AARON LUCCHETTI Staff Reporter of THE WALL STREET JOURNAL

December 5, 2005

Wall Street traders and bankers love zeros this time of year -- at the end of their bonus checks. When it comes to big, round numbers, investors are more ambivalent.

Take 11000. The Dow Jones Industrial Average has been peering at that lofty milestone for more than four years and has been within striking distance of it for days, but investors can't seem to push it over the top. The same had been true of gold until it broke the $500-an-ounce mark last week for the first time since 1987 and Japan's Nikkei 225 Stock Average until it settled above 15000 points Thursday for the first time in nearly five years.

Many analysts dismiss the focus on such milestones as numerology that doesn't carry much weight in stock picking or gauging the economy's health. But the approach of round numbers has real impact on trading because many investors base real decisions on them. If the industrial average hits 11000, some figure, many will sell to solidify profits, so maybe it is better to sell now -- a mind-set that knocks down prices. Others figure momentum is building and rush to buy, boosting prices.

"It's 100% psychological," says Michael Cook, head of Cook Mayer Taylor, an asset-management firm in Memphis, Tenn. "These are emotional figures, but they're real because" individual investors pay attention to them, and "the market is made up of a host of individuals."

Precious Metal Tops $500 Mark,
And DJIA Adds 106.70 Points
To Close In on Key 11000 Level

By E.S. BROWNING Staff Reporter of THE WALL STREET JOURNAL

December 2, 2005

In a day of active trading across the financial markets, gold surpassed $500 an ounce, the Nasdaq Composite Index jumped to a 4½-year high and the Dow Jones Industrial Average surged 106.70 points.

The stock rally began with Tokyo's Nikkei index surpassing 15000 for the first time in five years. U.S. stock futures rallied before regular hours as the European Central Bank raised its benchmark interest rate to 2¼%. Higher rates could create headwinds for European companies. With the Federal Reserve expected to stop raising U.S. rates next year, analysts recommended a shift toward U.S. stocks.

Nikkei, Gold Hit Milestones; Dow Nears One

Japan's Strengthening Economy And Market Overhauls Propel Stock Index to Close Above 15000

By YUKA HAYASHI and CRAIG KARMIN Staff Reporters of THE WALL STREET JOURNAL

December 2, 2005

The growing strength in Japan's economy sent the Nikkei Stock Average to a five-year high, zooming past the 15000 mark. Sustaining those gains will depend in part on whether Japan can keep moving toward U.S.-style practices for how companies and markets are run.

The Nikkei hadn't closed above 15000 since December 2000. Yesterday, the 225-stock Nikkei rose 258.35 points, or 1.7%, to 15130.50, leaving it up 32% for the year.

As I have said in the past, what keeps investing interesting (and hard) is that the rules keep changing as clever people invent yet more investment products. Here is a new type of "bond".

Mutual-Fund Investing 
Takes a New Structure

'Certificates' Work Like Bonds And Look Attractive for Retirees But Lack Oversight and Fee Data

By SARA CALIAN Staff Reporter of THE WALL STREET JOURNAL

December 2, 2005

As investors scour the globe looking for ways to generate income while giving their money a chance to grow, they have been pouring cash into a new type of investment tied to mutual funds or hedge funds.

The money in these investments, known as structured notes, goes into stock or bond mutual funds or even funds of hedge funds. But the investments, also known as certificates, work in many ways like bonds. They usually have a maturity date and offer an annual return.

...

In the U.S., which the International Monetary Fund estimates accounted for 9% of the $140 billion in structured notes sold world-wide last year, the notes have been sold largely to wealthy individuals. But Ben Phillips, managing director at Cerulli Associates, a fund research firm in Boston, predicts they will become more popular because they can offer "steady yield" that will appeal to baby boomers who are beginning to retire.

...

In Europe, the notes are mostly created and sold by banks, which provide regulators and investors with a prospectus that describes the structure and fees charged by the bank. Banks typically attach the prospectus of the underlying fund or funds. Investors then have to sift through two or more sets of dense documents to add up all the fees. Mutual funds, by contrast, must report fees and performance in a more straightforward manner.

Not only can you buy investments with a Dollar but you can invest in Dollars. If you can understand how currencies work :)

Here is an interesting article on a new currency index and corresponding mutual funds.

Citigroup Unveils
New Currency Measure
Using Investor Fund Flows

By CRAIG KARMIN Staff Reporter of THE WALL STREET JOURNAL

December 2, 2005

The dollar has fallen 10% since the end of 1999, according to the popular U.S. Dollar Index, which measures the buck's performance against a basket of currencies. But Citigroup argues it is more accurate to say the dollar has tumbled less than 6% over the same period.

Yesterday, Citigroup began trading options on this index and 10 other currency-related indexes, which the bank says are the first currency indexes ever to be based on investor flows. The weightings for each index are based on fund-flow data collected by the bank over the past three years, and every index will be revised annually to reflect the latest fund-flow figures.

"Fund flows from hedge funds and other money managers are extremely important," says Arnold Miyamoto, a managing director for Citigroup in New York. "This index is a better representation of what goes on the in the currency market."

Currently, the benchmark for currency trading is the U.S. Dollar Index, which is calculated by and trades on the New York Board of Trade. It includes six currencies that are based on data from international trade flows.

Citigroup, one of the largest foreign-exchange dealers, estimates that about 70% of all currency transactions world-wide these days are related to investor fund flows, including trading done by stock and bond portfolio managers, hedge funds and other speculators, commercial banks and central banks. Only 30% of foreign exchange is related to transactions from the corporations that are measured in government trade data, Citigroup says.

Two articles about investing in bonds, which has become a bit confusing. (At least I am confused :)

A few articles on the prices of precious metals. I was a bit surprised to learn that the demand driving up the price of platinum is diesel auto makers and not my wife's demand for jewelry. *phew*

Where will these prices go now?

Here are three articles on investing overseas. As I have previously stated, I am a big proponent of so-called emerging markets, not because i understand them better but because i think they have so much room to grow.

At $486/oz gold still has the lead but for how long?

Google worth $400/share? I must confess, i really like Google the company but i thought the stock was overpriced at the IPO and crazy at $150... So much for my credibility.

Three articles this week on investing in SIPS, ETFs and emerging markets.

The intention of this page is to share investing ideas with friends and family. Since everyone has some money in investments these days, I wanted to talk more about what people are thinking and doing with their money.

I wanted to share my general thoughts, personal guidelines, expectations, and my actual stock picks. Sort of an electronic investing club thing. I am hoping others will post their own feedback in the comments.

So much for my sleepy ole' tax liens.