On Retirement Investing and the Economy

 |  Includes: DIA, PEK, QQQ, SPY
by: Roger Nusbaum

First up is that my wife went to her 20th high school reunion on Saturday (we learned with my tenth how boring reunions are for the spouse so I didn't have to go). A milestone like this (quasi-milestone anyway) can be a good time for a self assessment of sorts.

This can relate to investing in several ways. Presumably someone investing for retirement has some sort of plan with some sense of whether they are ahead of where they need to be or behind and by how much. In talking to a reasonably large sample size of people you knew 20 or 30 years ago you will find people who are healthy, happy and successful and some who are not as fortunate for whatever reason.

Likewise a room of financially-aware 60-year-olds would include people very reasonably on track and people in a lot of trouble (and everything in between). When someone is not where they want to be in life or in their portfolio and self-aware enough to realize this they might want to try to fix it for the better. Fixing for the better can mean a well thought out change in strategy and habits or a desperate path that relies far more on chance than is prudent.

While I acknowledge that some people do need desperate situations in order to come though, I think where investing is concerned the more desperate someone is the more likely they are to do worse, to the point of ending up far worse off than before. Someone who has been a mediocre investor with poor savings habits is very unlikely to catch up in the market, they have a better chance saving more and making serious spending cutbacks.

Next is another follow up on the Market Vectors China ETF (NYSEARCA:PEK), the A-shares fund that replicates Shanghai Composite exposure with derivatives and is already trading at a large premium to its NAV. In reporting that Van Eck has filed for A-shares sector funds (something I mentioned as probable the other day) IndexUniverse notes that Van Eck is waiting for qualified foreign institutional investor status which would allow the fund to own the stocks directly which could solve the premium to NAV issue although that is yet to be seen.

For people interested in China but who prefer not to use individual stocks I think sectors funds are far superior to broad based funds which tend to be very heavy in financials; a sector in China that I believe should be avoided at all costs. In that light a series of sector funds that represent real differentiation would be a very positive development. I would note that quite a few of the stocks in these Van Eck funds (should they ever list) would no doubt overlap with the already existing GlobalX Funds but there are performance differences between shares listed in Shanghai versus Hong Kong--at least this has been the case in the past.

Yesterday we had a medical call at one of the camp sites nearby on Forest Service land. In addition to Walker Fire (I drove our rescue vehicle with one of our EMTs), the Prescott FD responded along with the ambulance service that contracts with all the local agencies to transport patients. The call was down a windy (as in twists and turns) dirt road which was actually a muddy road because it was pouring rain out. We were fourth on scene (I only mentioned two agencies above) and blocking our way in and everyone else's way out was a Forest Service pick up truck. The ranger in question served no medical purpose by being there but managed to gum up the entire situation and what was funny (in a way) was that about forty feet ahead of him was an enormous area (unoccupied camp site) where he could have parked.

Upon getting to the scene I go straight to the ranger, tell him he's blocking everyone and ask him to move right now. He was a little startled by my directness and gave an indication that he would move on his timetable but then seemed to respond to my almost imperceptible nod of the head to do it now and he actually jogged with me back out to the vehicles and got out of the way.

The reason to mention this in detail is that it seem like there is an analogy here to what other government employees are trying to do for the economy. This ranger thought he was helping out but the manner in which he was participating could only impede the progress of the incident. That he was impeding progress never occurred to him until a stranger (he is new to our area) pointed out the dynamics of the situation.

We are in an economic situation where all measures taken previously came up short of what was expected yet the "best solution" seems to be more of the same, going even bigger if necessary. I've mentioned many times before my belief that time fixes things and any steps taken by the government will either speed up a fix or slow it down. I believe the general strategy is misguided for the low probability of it working and the consequences that will come regardless of the effectiveness. This is yet another reason to increase foreign equity exposure--but not in Western Europe.

Disclosure: None