Inverse ETFs are tempting in markets like this. But they also miff investors who think they understand the concept—because it all seems so simple. And we all like simple.
When you short a fund and it goes down, you make money. But the problem is that shorting and buying an inverse fund are not even close to the same thing in terms of actual execution.
While many buy and hold investors think they are buying a long term ETF that works like magic—going up cleanly and in lockstep when the market goes down, it’s important to understand that Leveraged ETFs are typically built for day traders, and designed to be held for only one day. It says so right in the prospectus which most people of course never bother to read. Steve and Sinclair get under the hood on leveraged inverse ETFs and shine the light. In the Q & A segment, Matt Griffin of Payson Petroleum joins the A Team to talk about oil and gas market dynamics.
Steve and Sinclair update the markets, then national gold expert Nick Grovich joins Mastering Money in segments 2 and 3. In segment 4, Steve talks about Required Minimum Distributions (RMDs) and when it may be advisable to delay the first distribution.
9-11 will always be a day to remember. Not sure why Congress is fine with giving the world's largest sponsor of terror $150 billion dollars to go on a shopping spree. Especially since they have vowed to wipe Israel off the map in 25 years or less. Steve and Sinclair review the incisive market insights of Sam Stovall, an analyst with the S & P Capital IQ research team. In the Q & A, Steve breaks down how to achieve an extra $2,000 a month for life, using 75% less capital, while maintaining access to your money and not disinheriting your heirs. (Invest the other 25% for capital gain, or create an increase in an estate by up to 30% to 50%)
…Before 2005, the expense ratio of all previously issued ETFs averaged 0.4 percent, according to Morningstar. Since 2005, the average expense of new funds has jumped to over 0.6 percent, and some new exchange-traded products are charging over 1.0 percent in fees annually. Then there is a thing called “Tracking Error”: ETF managers are supposed to keep their funds’ investment performance in line with the indexes they track. That mission is not as easy as it sounds. There are many ways an ETF can stray from its intended index. That tracking error can be a cost to investors. Throughout the trading day, the spread between underlying securities and the ETF can be signifcant. For example, on August 24 when the market opened down 5.3%, the Vanguard Dividend Appreciation fund VIG, was down a whopping 38% for more than an hour. Steve and Sinclair breakdown some of the pros and cons of ETFs. In the Q & A, Steve reviews a more effective approach to reducing risks on the bond side of the portfolio.
…Heading into the opening bell on Monday, Aug. 24, it was clear that U.S. stocks were going to see some heavy selling. The Standard & Poor’s 500 had ended the prior week on a four-day slide, and markets in Europe and Asia were plunging. What no one expected—and what many experts claimed couldn’t happen—was that prices for many of the largest exchange-traded funds fell far more sharply than the stocks they owned.
Chris Dieterich,writing for Barron’s points out that ETFs are supposed to—and generally do—trade in lockstep with the stocks they own, with very little tracking error. Yet when the S&P 500 fell as much as 5.3% in the opening minutes of trading, ETFs like IVV, fell as much as 26%, some 20 percentage points below its fair value. The $18 billion Vanguard Dividend Appreciation ETF , SYMBOL VIG, and the $12 billion SPDR S&P Dividend SDY, plunged 38% apiece, while the PowerShares S&P 500 ETF, SPLV, fell as much as 46% before clawing back an hour after markets opened. Steve and Sinclair dig into what happened and why. Steve then answers questions on how to both protect your capital and grow it, while securing lifetime income that has no correlation to markets falling--at lower cost.
The Wall Street Journal reports that new home construction still has not made it back to 1990s levels, let alone the mid 2000s. Reports on new home construction show stability but the carnival days of big subdivisions on cheap land 50 miles away from downtown with no down payment, are a thing of the past. Millennials want to live where the action is (downtown) and aren't forming households the way previous generations did. Land costs in desirable areas are high, and construction labor is expensive, as half of the construction work force from 2007 has moved on to other forms of work. Steve and Sinclair break down some interesting stats affecting daily news reports behind the scenes. In the Q & A, real estate attorney Stephanie Wilson, a partner with the law firm Stoops, Denious, Wilson, and Murray discuss your rights as a home buyer of new construction, and how to go about curing deficiencies.
China's stock market may have another 50% leg down according to major traders and chartists. China now buys about an eighth of the world’s oil, a quarter of its gold, almost a third of its cotton and up to half of all the major base metals. The fear that China’s appetite for commodities, from copper to coal, is falling after a decade of breakneck growth has sent prices tumbling and help sent stock markets into turmoil in trying to adjust. Get some facts on what's really happening in China and how it is impacting the world, from oil to stocks to gold. In the Q & A segment, Steve reviews 3 important questions investors have about annuities, such as "Does the insurance company keep my money when I die?" (hint: not if you choose the right annuity)
Sam Stovall of S & P Capital IQ points out while many investors may think the worst is over, September September is the only month in history in which the S&P 500 fell more frequently than it rose. What's more, in the 11 times that the S&P 500 fell by more than 5 percent in August, it declined in 80 percent of the subsequent Septembers, and fell an average of nearly 4 percent. And why might this month be true to form and true to history? End-of-quarter mutual fund window dressing, a projected 4 percent decline in third quarter S&P 500 operating earnings per share, and the renewed possibility that the Federal Reserve may begin its rate tightening cycle at its upcoming mid-September Federal Open Market Committee meeting. Oh yeah, and China. Steve and Sinclair review Mr. Stovall's insights. In the Q & A, Steve breaks down how to achieve an extra $2,000 a month for life, using 75% less capital, while maintaining access to your money and not disinheriting your heirs. (Invest the other 25% for capital gain, or create an increase in an estate by up to 30% to 50%)
Here come the machines...the speed at which robots are gaining in sophistication is moving at the pace of Moore's Law. Fortune Magazine's Geoff Colvin's new book, Humans Are Underrated reveals that robots are capable of recognizing emotion and giving it back. Strange deflationary things are happening in the economy. The St. Louis Fed reports that men of prime working age—the group that historically has been the most thoroughly employed—are suddenly losing jobs faster than any other category. Gartner, the high tech consulting firm and Bill Gates founder of Microsoft both are saying that more than 45% of today's jobs will be non-existent in ten short years--by 2025. Steve and Sinclair review the book and the chilling facts. In the Q & A segment, CFP® Murray Titterington with IQ Wealth joins the A-Team to discuss the viability of Social Security.
A stock buyback, also known as a "share repurchase", is the act of a company buying back its own shares from the marketplace. On the positive side, you can think of a buyback as a company investing in itself, or using its cash to buy its own shares. But as Barron's columnist Ben Levisohn says “Like the Wizard of Oz, who was revealed as nothing more than a man behind a curtain working some cool special effects, stock buybacks might not be the great and powerful market force they were thought to be.”
Suddenly, buybacks appear to be suffering from diminishing returns. Why aren’t buybacks working like they were? A big part of the problem might be their popularity. Prior to share buyback mania-statistics show that companies that have a track record of repurchasing their own shares have historically outperformed the market. Steve and Sinclair dig into share buybacks and their effects on the market. In the Q & A, Steve reviews what goes into a comprehensive financial plan, and what separates a good plan from a mediocre one.