Despite a rally of over 50% since its March low, put in a historical context of previous market rallies this current one by the Dow Jones Industrial Average is both short in duration and small in magnitude. . . .more
On Monday the Dow Jones Industrial Average stock index hit not only its highest number for 2009 but also over the last year, with a gain of 203.52 points (2.03%) to . . .more
In a surprising move, the board of Berkshire Hathaway has approved a decision to split the company's Class B common stock shares at a ratio of 50-for 1. Berkshire Hathaway Chairman Warren Buffett . . .more
Despite my assumption that nobody took action on this nice little promotion from ING's ShareBuilder, I'm going to clear up some possible confusion regarding the promotion. After signing up and depositing my $50, I received an email from ShareBuilder saying
To receive your $50 Account Bonus, all you need to do is purchase a stock or ETF in either your Automatic Investment Plan or through a real-time trade by 11/25/2009. If you have not set up your investment plan or real-time trade yet, get started today.
I was a bit miffed because I had read the small print back to front and it mentioned nothing about purchasing securities to get the bonus. I emailed Customer Service and got this very quick, pleasing response:
Hi Michael, I would be happy to clear up the confusion about your promotion. You will receive the $50 promotion 4-6 weeks after making your first deposit of at least $50. The deposit must be posted to your account before 10/1/09. You must enter the promotion code when opening your account.
Typically, most ShareBuilder promotions require a trade. The ORANGE50 promotion was a special one time offer.
So there you have it, folks. Confirmation. There's still time left to get a guaranteed 100% return on your cash (actually slightly more given the massive 0.03% return the ShareBuilder money market fund is currently sporting!)
ShareBuilder, the online brokerage arm of ING, is offering a $50 bonus to match a new account funded by at least $50. The only restriction appears to be time - the bonus will post after 4-6 weeks and cannot be withdrawn for 90 days.
I just opened up an account. I haven't used ShareBuilder yet so I cannot speak to it as a discount broker, but I do use ING Direct and love it. From my limited research it seems that ShareBuilder offers a competitive commission for purchases ($4 for orders placed on Tuesdays) although sales command a fairly high $9.95 rate. They appear to offer a wide array of ETFs, mutual funds, etc.
At any rate this bonus is a no-brainer. Take advantage!
For more authoritative opinions, check out this roundtable over at NYT between Simon Johnson, Nicholas Bloom, and Barry Ritholz about the market's rally since its March 9th low. Johnson's all doom and gloom; Bloom's a bit more measured in his take on the situation; Ritholz offers investment strategy more than analysis of the virtues of this recent rally.
(Although Ritholz seems to offer somewhat contradictory advice. If buy and hold is a "losing strategy" in a bear market, then why does he say "For many investors, dollar cost averaging into broad index funds works well" and then actually suggest that they increase their investments during major downturns like the present? "If you want to be a bit aggressive, you can increase your contributions once the markets fall 30 percent or (like now) 50 percent." I think the key here is the difference between active traders and passive buy-and-hold investors - active strategy will change depending on the market situation; for most average investors, passive dollar cost averaging is the way to go regardless of market conditions. And indeed in the case of the latter, increasing that investment during major downturns is a way to pick up extra shares on the cheap.)
I've been watching several excellent videos explaining the Geithner Public-Private Investment Partnership (PPIP) plan over at the YouTubes courtesy of Salman Khan of the Khan Academy. Khan explains things clearly and effectively with simple visual aids.
If you're confused about the plan (and confusing it is) then check out Khan's series. He starts off explaining the basics of how the plan works and then in "Geithner II" raises the disturbing point that these banks could buy these assets from themselves - via special investment vehicles, hedge funds, or other independent entities associated with the banks - in effect recapitalizing themselves by shoring up balance sheets with a fat government subsidy:
This does seem like an almost foregone conclusion unless the gov't can somehow prevent it through legal means...but I'm not sure they can. Even if the banks do an end-around here, it might actually work in terms of recapitalizing the banks and avoiding insolvency, but it would essentially be an indirect bailout, which is extremely distasteful right now. I'm more or less in agreement with Khan and the Krugman/Johnson camp - the sooner we nationalize these institutions ("nationalize" in the sense of putting them into FDIC receivership, recapitalization, and eventual reprivatization) - the sooner we can rebound from this crisis. Even if the PPIP works to keep the banks functioning, it does so at great expense to the taxpayer and does nothing to address the systemic risk of these "too big to fail" banks. I'd prefer the definite path of nationalization rather than this pseudo-nationalization by way of enormous gov't subsidy.
In his latest video, "Geithner 5: A better solution," Khan addresses the problem which the PPIP is intended to solve - that of a lack of information about these toxic assets and liquidity (ignoring for the moment the high likelihood that it's as much as or even more of a solvency problem than a liquidity one). He has a great idea, similar to the one I mentioned here, to open up the market to all investors and provide detailed information on all these toxic assets. Basically list these assets as shares of corporations (owned by their respective banks) on the New York Stock Exchange and allow anyone to purchase shares. At the moment these assets are only available to institutional or large net worth investors via hedge funds and the like; mincing them into thousands of shares would allow access to Phil Everyman. Aside from the idea that individual investors should be able to receive the benefits of the "Geithner put" just like hedge funds, Khan's idea solves both the lack of information and liquidity problems:
There are details to be worked out in the execution, of course. The analysis and summaries of the assets as he describes would take some time and a lot of hard work on the part of some smart people, but it's something that, once done, would allow any individual with a modicum of means to invest in these assets.
I find this stuff fascinating, intimidating, and troubling all at once.
Love this idea from Daniel Gross over at Slate. Wouldn't be too hard to imagine a way to get individual investors access to the new Public-Private Investment Program (PPIP), and I would guess a lot of savvy investors would be willing to toss a little cash toward a big upside/low downside investment that would work directly toward helping stabilize the financial sector.
Hell, I'd jump on board if all my investable assets weren't tied up in nonperishables right now.
In recent months I've taken to listening to several quality podcasts:
EconTalk: Russ Roberts of the Library of Economics and Liberty (econlib.org) and George Mason University hosts this weekly hour-long podcast with some big name guests on deep economic issues. Heady, fascinating, and frankly frightening stuff given our current climate. The most intellectually demanding of the bunch.
NPR: Planet Money: Laura Conaway and David Kestenbaum host these 20-minute shows that usually touch upon a couple different issues, including both macro-economic and personal finance topics. Often has regular folks call in with stories about unemployment, banking, and other PF issues. Pleasant hosts, often pretty funny, and packed with good news and info.
Vanguard: Plain Talk on Investing: A somewhat irregular (ranging from weekly to monthly) podcast with short 8-10 minute episodes about specific investing topics. Simple, quality, digestible advice. I look forward to applying some of this once I am able to generate some investable assets once again!
A preponderance of NPR, no?
Also this now-defunct podcast was simply astounding in its time. Content was meh but listen to the smooth sounds of the Velvet Fog on the narration!
There are a few articles in the Weekend Journal about the Bernard Madoff Ponzi pyramid scheme, in which Madoff allegedly duped investors out of some $50 billion. This one talks about Madoff's private nature and inscrutable "investing" strategy. This details the sad story of former Fort Lee, NJ mayor Burt Ross. This lists numerous other victims of Madoff's scam, including major names, hedge funds, companies, non-profits, and foreign investors.
It's incredible that this could happen. For all of these people - independent investors, fund managers, charity organizations - to blindly trust Madoff with billions in capital boggles the mind. It goes against the most basic of investment advice: Know what you're investing in. Diversify. It's a combination of greed, delusion - there had to be on some level - and "rolling with the good times" as Madoff brought in high, consistent returns of between 10-12% per year. Forget that these were ludicrous in a declining market, forget that monthly statements from Madoff Securities represented quite literally impossible profits. Investors basked in the ignorant comfort of those fat returns.
A lot of blame to go around beyond Madoff, of course. The SEC didn't investigate Madoff Securities for years until just recently despite evidence and entreaties to do so from several people. And how about these countless funds investing others' money in something that nobody understood? What a disaster.
