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73 Comments

    • Beware Small ETFs [view article]
      I agree. Yesterday the iShares National Muni Bond ETF lost 3% in the final two hours of trading, starting precisely at 2:00PM. This is pure price manipulation and has nothing to do with tracking the index. I have lost all confidence in Barclay's iShares. Once I am out, I'll never use another iShares ETF again. Oct 09 10:04 AM
    • Post-Bailout Investing: The Big Picture [view article]
      As always, good information. Oct 03 11:36 AM
    • A Peek Under the Wisdom Tree [view article]
      Thank you Ray. I greatly appreciate your efforts in re-posting this info. Sep 29 12:25 AM
    • Bad Idea: A Tax on Trading [view article]
      This whole credit crisis started in 1999 under the Clinton administration when everyone was focused on Y2K. That year the Glass-Steagall Act was repealed. This Act, established in 1933 during the Great Depression, prohibited commercial banks from collaborating with stock brokerage firms or participating in investment banking activities. Soon every bank was doing investment-banking deals and either buying or starting their own broker-dealers. A hunger for new financial products to sell was quickly established.

      The same year Fannie Mae, the quasi-government mortgage lender, under pressure from the Clinton administration, instituted a pilot program to increase low-income homeownership by granting mortgages to people who were bad credit risks. With no regulatory oversight, the sub-prime mortgage market was born. This market grew from 2% of total loans in 2002 to over 30% of total loans in 2006, thanks in part to the artificially low interest rates Mr. Greenspan provided during that time frame.

      As the television commercials and newspaper advertisements quickly spread the word, people without jobs, with bad credit histories and no down payments were welcomed to the world of homeownership, thanks to the magic of no-documentation, Adjustable-Rate Mortgage loans. As a sense of entitlement grew, some borrowers began buying multiple homes and condos to “flip” at higher prices for quick profits. Classes were held in local hotels around the country teaching real estate “investors” how to make millions from real estate by buying and flipping homes using sub-prime loans.

      The sub-prime loans being generated were then packaged into CDOs (Collateral Debt Obligations), and given AAA ratings, thanks to the governmental link of Fannie Mae. Even though they were NOT backed by the full faith and credit of the US government, a wink and a nod allowed their AAA status. This rating caused the investment banks to skip any due diligence concerning the actual quality of the paper, and these new securities were rapidly being packaged and sold around the world.

      Ben Bernanke succeeded Alan Greenspan on February 1, 2006 and continued raising interest rates, a trend his predecessor began in mid-2004 after the Fed Funds rate had bottomed at 1.00%. Two years later, Fed Fund rates had climbed to 5.25%. As the 3-year Adjustable Rate Mortgages began resetting at much higher interest rates, many sub-prime borrower couldn’t afford the “doubling” of their monthly mortgage bill. As the supply of homes for sale quickly expanded, the real estate market softened and foreclosures began growing at an alarming rate. Soon, the AAA-rated CDO securities began defaulting, and both prices and buyers disappeared. The credit markets (bonds) began losing liquidity.

      To compound this problem, back in 2004, five of the largest, most well respected investment-banking firms went to the SEC and received approval to increase their use of leverage from $14 for every $1 of assets to $40 for $1 of assets. Not ironically, these five firms were Bear Stearns, Lehman Brothers, Merrill Lynch, JP Morgan and Goldman Sachs. They wanted the additional leverage to issue a new form of derivative security under the acronym of CDS (Credit Default Swaps). This security was designed to transfer the credit exposure of fixed-income products (bonds such as CDOs) among counter parties.

      In February of 2007, just as these bonds started defaulting, the Financial Accounting Standards Board (“FASB”) instituted “fair value accounting.” Because the values of these securities ranged so widely, both the commercial banks and investment banks in this game began taking massive write-offs. This led to a need for new capital, which was initially being provided, in part, by sovereign-wealth funds. But once again, due to political pressure, the sovereign wealth funds withdrew their support and the liquidity crisis was on with a vengence.

      Ah yes, politics. Clinton and the Democrats started the socialist ball rolling and now, 10 years later, we are watching capitalism's demise on Wall Street, Washington and Main Street. Who's going to bail us out?       Sep 27 03:30 PM
    • S&P 500 Trading Action [view article]
      "Whether you agree with the $700 billion TARP plan or not, this has been a case study on the worst of partisan politics."

      I agree. As Dennis Kneale stated on CNBC yesterday: "We should all vote against every single incumbant running for re-election."       Sep 27 01:56 PM
    • A Peek Under the Wisdom Tree [view article]
      Thank you Ray. Sep 25 04:21 PM
    • A Peek Under the Wisdom Tree [view article]
      Excellent article. Another question that I was hoping to see answered: "What are the tax ramifications?" If I understand this aspect correctly, the IRS does not recognize currencies, or ETFs holding currencies, as an investment. Therefore, capital gain rates do not apply and all gains are taxed at the tax payer's higher ordinary income rate. Can you, or anyone, verify or correct this understanding? Sep 25 02:26 PM
    • How to Profit from This Sell-off (100% Guaranteed): Tax Loss Harvesting [view article]
      You are betting that the stock WILL GO UP BY 114% in the next 5 years. What if it doesn't? What if it doesn't even get back to $10,000 in the next five years? What if it continues to fall farther over the next five years? What if Obama changes the capital gains rate? What if Obama discontinues the ability to write off any losses?

      Take the write-off now while you can.       Sep 17 04:53 PM
    • One Often Overlooked Benefit of ETFs: Transparency [view article]
      For a list of the complete holdings of an ETF, go to the issuers web site. Aug 27 10:41 AM
    • Double Short ProShares ETFs [view article]
      Interesting that ProShares has so many "Ultra" short ETFs for "Double Short" exposure, yet so few "conventional short" or one-to-one inverse ETFs. Aug 24 01:31 PM
    • On the Dollar and Commodities: Currencies Move Because We Let Them [view article]
      Excellent work. I appreciate your use of numerous Stockcharts to assit in making your points. In this article I especially enjoyed the final data on the importance of cutting losses. Cutting losses short is a practice I have utilized for years, even though it flies in the face of all the buy-and-hold, invest for the long run, Warren Buffett fundamental types. Technical analysis protected my clients money by exiting US stocks in October of 2000 and staying out until March of 2003. Our US stock allocations were sold again this past January.

      I am curious about your use of a 325-Day moving average. It is not a fibonacci number and I have never seen it used before by Murphy or any of the other technicians. Does it have any significant characteristics that caused you to choose it?

      Thank you for sharing your thoughtful insights.       Aug 18 01:09 PM
    • Correction: Beware of Taxes with Currency, Precious Metal ETFs [view article]
      User 211108:

      I am neither an attorney or CPA but the 28% tax rate for ANY holding period is correct. I suggest you contact State Street Global Advisors who provide the SPDR Gold Shares (GLD) at 1-866-787-2257 or iShares who provide the COMEX Gold Trust (IAU) at 1-800-474-2737. They will verify the 28% rate. You could also telephone or visit your local IRS office and they will verify the 28% rate. You could also contact a local CPA or tax attorney for their verification.       Aug 14 11:28 AM
    • The Fright of the Chameleon: WSJ’s ‘Intelligent Investor’ and ETF Paranoia [view article]
      Jason Zweig's article is simply another in a growing number of odd-ball articles that The Wall Street Journal. has been publishing lately. Sadly, the paper has been losing a lot of credibility this decade and Zweig's article immediately caused me to question whether mutual fund advertising dollars were growing thin at the paper. My conclusion was that Mr. Zweig simply wanted to show Morningstar that he could be a natural fit in their organization as well. Aug 05 05:18 PM
    • Checking In on the All-ETF Portfolio [view article]
      Geoff:

      You're web site is not working.       Aug 05 03:32 PM
    • Do Emerging Market ETFs Really Help You Diversify? [view article]
      (Note: During a raging bull, as long as you've got stocks, you're making money. It hardly matters that all of your stocks overlap because you're experiencing gains. Yet in a bear, low-correlating/non-co... correlating assets buffer the adverse effect of stock depreciation. And that's the real reason we "diversify."...

      Note: During a raging Bear, as long as you've got stocks, you're losing money. It hardly matters that all of your stocks have low correlation values because they can't buffer the adverse effect of stock depreciation. And that's the real reason we sell all stocks.

      The iPath Dow Jones-AIG Commodity Total Return ETF (DJP) is not a stock fund. Neither is the SPDR Lehman International Treasury Bond ETF (BWX). That is why diversifying among different ASSET CLASSES as opposed to diversifying among different STOCKS can provide profits. Your continual pitch for the WisdomTree Emerging Market High Yield ETF (DEM), with inaccurate yield assumptions, is disturbing as it is still a STOCK fund and has lost money in this Bear market.

      The only place for STOCK allocations (outside of the safety of cash) if you must be fully invested at all times is inverse stock funds, which take the opposite side of the trade for the specific sub-asset class you wish to own. As an example, rather than the WisdomTree Emerging Market High Yield ETF (DEM) which has lost money, compare that ETF to the ProShares Short MSCI Emerging Markets ETF (EUM), which does not apply leverage. Which would you have rather owned?

      Disclosure: Writer has previously owned DJP and currently owns BWX.



      Aug 03 01:28 PM
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