Investorial

Just catching up with reading a few Blogs when I noticed this stimulating post on Blog Maverick. Mark Cuban comes to us with his take on the “wealth transfer” that is constantly transacting between the ignorant and the informed in the stock market.

Mark made so many interesting points that I encourage you to read the full post for yourself. I just want to quote a few points that jumped out at me:

Buy and Hold ” is the 2nd most misleading marketing slogan ever, after the brilliant “rinse and repeat” message on every shampoo bottle.

The bottom line is that unless you plan on making it a full time job to do your research and put yourself in a position to have an advantage, you are going to get your ass kicked at some point by someone who does

Funds are in the business of making money for themselves first. You 2nd.

The stock market is by definition a ponzi scheme.

[...] a stock that doesn’t pay dividends is valued like a baseball card.

During a recent sit-down with some of my Taiwanese friends, the discussion topic invariably shifted to stocks and stock markets. I am not Taiwanese, but I was curious as to how the Taiwanese investors and their stock exchange worked. It turned out to be a revelation of how a stock market can be affected by various inefficiences, cultural and political issues. Here are some of my findings from that night and from my past inquiries:

Like many Asian markets, the stock exchanges uses a numbering system rather than a alphabetical ticker system, comparable to the race-track where gamblers bet on horses by the numbers as well! What was more interesting was the fact that (more…)

The Globe & Mail reports that a coalition of Canadian investment regulators have offered 55 investment firms that referred business to the scandal plagued hedge fund company Portus a settlement term. The terms were to repay the referral fees paid to advisors of said firms in exchange for dropping investigations against the firms and their financial advisors.

The deadline for firms to accept the offer is January 24th, 2006. Manulife has previously offered restitution proactively. 2 firms that have already accepted the terms of the proposal are Berkshire Securities (widely publicized during this scandal) and Aegon Dealer Service Canada Inc.

I feel this settlement offer is really generous and the advisors and firms involved are certainly getting away from this with a light slap on the hand! I predict that almost all the firms will accept the settlement terms by its deadline.

I know people who are part of the Aegon distribution channel and some have referred clients to Portus. It’ll be interesting to see if I can find out whether the settlement will be at the cost of the firms or if advisors have to be charged-back for the referral fees they earned themselves. You can also read my views on previous posts here.

Globe & Mail: Firms given option to repay Portus fees

Much has been emphasized about the current existence of an inverted yield curve heralding the oncoming of a recession. Does it have merit? What are its counter-arguments?

I won’t pretend to be an expert on the subject matter, nor am I a historian to confirm the truth in the past. However, we always stated that “the past is not a certain indication of the future”. We have to learn to take media information on both sides of the argument with a grain of salt. Draw your own conclusions from what you’ve gathered!

First a definition:

“An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession. An inverted yield curve is sometimes referred to as a ‘negative yield curve’.”

The definition already included what most people are fearing. Historical correlations have much wisdom to offer, however are we comparing apples to apples? (more…)

Forbes.com ran an article today on 7 Financial Planning Diseases, capitalizing on the New Years Resolutions atmosphere to capture reader attention. Personal Finance For Dummies author, Eric Tyson, explains that many people twist the fundamentals of personal money management and get themselves into trouble. Here’s a summary and my self-analysis. (Read the article for more details)

1. Excessive Spending
2. Workaholism
3. Herd Following & Information Junkies
4. Extreme Save-ism
5. Procrastination
6. Mismatched Style (between couples)
7. Adolescent-Onset Budgeting Woes

My self-analysis
This list is geared more towards adults with a family and kids. As a single guy, #6 and #7 do not apply to me, but will be something I have to be mindful in the future. Striking a balance between #1 and #4 is a struggle for most people. I believe I am doing well in that area. I don’t spend money often. But when something is worth spending, I won’t sacrifice quality for thriftiness. I still don’t understand how #2 works or fits in this list. #5 is an admitted failing of mine. Often I’d have many ideas to blog on Investorial, but my procrastination renders these ideas usely in the think-tank. Some times, I forget to pay bills with that attitude too!

I’m leaving #3, “Herd Following & Information Junkies”, for last because this is certainly one of the reasons why Investorial began as a hobby. I do not necessary think being an information junkie is a sin. Both herd followers and contrarians have a habit of gathering a lot of information. The difference is how they process that information! Herd followers get excited about the news that they want to hear, and are more apt to jump on the bandwagon without performing further analysis. Their preconceived conclusions and quick-to-judge attitude leaves them as vulnerable ripe pickings for contrarians and skeptics who often dig and uncover for facts that are more-than-meets-the-eye.

Are you a herd follower or a contrarian? Sound off please!