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L. A. Finance Los Angeles Chapter of AAII The following ten are the top economic indicators to watch: First, are the employment numm numb numbers August 2012 Strategies for Pursuing Your First, the unemployment rate. National Retirement Paycheck unemployment is currently at 8.2 percent, having come down from 10 percent at the worst By William Parmenter, Ph.D., editor of the recession. Unemployment is high and progress is proving difficult. J ames Goldberg talked on the topic of How to Make Money in the Current Economic Environment at the July 21 meeting of the Los Angeles chapter of the AAII at the Skirball Second, labor force participation: it is at 63 percent, versus 67 percent in 2001. Fewer people are looking for work, having been discouraged; and, there are more people moving Center. out of the labor force, having retired. Other Goldberg last things being equal, a smaller labor force talked to the Los Angeles produces less economic activity. Chapter in June 2011. He Third, personal savings rate: in 2012 it is the president of was 4 percent, having risen from 1 percent in Goldberg Economic 2006. Those numbers contrast with 12 percent Advisors, an economic in 1982, and 12.5 percent in 1974. Savings are and investment the basis for investment, a driver of economic counseling firm that growth. For example, China’s phenomenal focuses on individual growth rate since 1978 has been driven by a investors. savings rate of 25 percent and more. He is past president of the Los Angeles Four, car and light truck sales: currently Chapter of National Association for Business up to 14 million a year, compared to 9 million in Economics and was a director at the national 2008. That compares with 17 million a year in level. the base years from 1998 through 2004. Goldberg pointed out how well the Today’s figure is a drop of 18 percent off the investment ideas that he shared last June turned base. out: international bonds, up 14 percent; utilities, Five, new and existing home sales: up 18 percent; high yield bonds, up 8 to 9 currently running at 4 million a year, versus 6.5 percent; emerging market debt, up 14 percent; million a year in 2004, a drop of 38 percent. Apple, up 82 percent; Amazon, up 21 percent; and muni bonds, up 16 percent. Telecom was up zero, and gold was flat. Table of Contents Retirement Paycheck…..James Goldberg…..….p.1 U.S.A. Economic Outlook Medicare Basics………..Paul Davis………….p.5 Leverage and Money.….Mark Skoursen……..p.7 Goldberg not only gave the economic Things to Know About ETFs…Don Gimpel…..p.8 outlook, he pointed out the top ten economic Investor Education…………Don Gimpel……p.9 outlook indicators, in their rank order of Letters to and from the Editor…………...……p. 10 Orange Country Meeting Announcements...…p. 11 importance, enabling the attendees to become their own amateur economic forecasters. 1 So far, Goldberg has supplied a snapshot of work and sales—giving a rough sketch of the For meeting announcements, and other economy—it is down, compared to the pre- information, check out the AAII Los recession level. But he added more information, Angeles chapter website at: to give a more refined picture. www.aaiilosangeles.org. Six, the Case-Schiller Home Index: in 2012 it was at 140, compared to 212 in 2006. Another down number. wants to venture into the arcane art of economic Seven, change in real inventory levels: divination, err forecasting, he can give that a in 2012 it is $54 billion, compared to a base shot, too. average of $25 billion. That shows sales are What is Goldberg’s third and fourth sticky. Products are not moving off the shelves. quarter, 2012 forecast for the U.S.A. economy? Eight, manufacturing index: industrial In a phrase, Goldberg foresees, production has dropped off and is yet to recover. slowdown—rocky road ahead. The numbers: Nine, New Orders for Durable Goods: it has come up from 140,000 in 2009, to 225,000 2012 Forecast 3rd Quarter 4th Quarter in 2012, but recently has dropped off. The Real GDP 1.5% 1.5% number should be going up. CPI Y/Y 1.7% 1.7% Unemployment 8.4% 8.5% 10-year bond 1.5% 1.5% CPI, the Suspect Indicator Fed Funds rate .1% .1% Ten, CPI, and Core CPI: the respective Goldberg did not get into the political numbers are CPI at 2 percent, and core CPI at economy and discuss the presidential election, 1.7 percent. CPI is supply-side driven. The which definitely will affect financial markets numbers are down in part because of the and the economy. stabilization in home prices and a drop in energy About all that can be reliably forecast on prices. that score is that the two major candidates: CPI is used by the government, but after Obama, and Romney, each face significant being tinkered with, has become a suspect challenges: Obama on the deteriorating indicator. In addition, CPI, a measure of economy, evaporating recovery and inflation, varies widely by region, by city versus government’s unsustainable debt accumulation. country, and according to individuals. What is Romney with Hispanics in battleground states, your personal inflation rate? and with being tainted as a vulture capitalist, Goldberg noted, with some satisfaction who is no friend of the public. that the runaway inflation predictions failed, and were wrong. Eurozone Up to now Goldberg covered the numbers associated with ten indicators for Unemployment is an average of 11%, economic forecasting. But he has also done compared to 7.5% in 2008. Specific countries, something even more valuable: he shared with like Spain at 24%, with significant under- the audience the ten key indicators, roughly in employment, are worse. Industrial production is their order of importance, for economic down 2.8%. forecasting. Now the reader can be his own The Greek 10-year bond interest rate is economic analyst, by going to the government fluctuating in the astronomical zone: 24% on sources and looking up the numbers. If he June 26, after the May 6 election, up to 29%; bond is down 80 basis points, while the 10-year and pre-crisis at 20%. “The only good thing bond is down 75 basis points. about Greece is its small,” Goldberg quipped. Borrowing as a percentage of GDP was Ten-year bond rates are variable in the 11% in 2009, and is down to 8% in 2012. Eurozone: Portugal at 9 or 10%; Ireland at Federal government spending as a 6.7%; Spain and Italy at 6%, and Germany at percentage of GDP is 17% in 2012. Federal 1.25% debt as a percentage of GDP is 60% and going Spain needs help from the European in the wrong direction. Central Bank (ECB), controlled by German chancellor Andrea Merkel, and the German ‘Fiscal Cliff’ bankers of Frankfurt. No mandate is appearing on the horizon to bail out Spain. A ‘fiscal cliff’ is looming, starting in For comparison: Spain’s economy is 2013, with major revenue increases and $1.25 trillion, versus the U.S. economy of $16 spending cuts that total $501 billion, or 3.25 trillion. Spain will collapse if the ECB does not percent of GDP, according to Goldberg. come in and buy debt in the secondary market. The revenue increases and amounts In its cover article of July 16, Barron’s include: expiration of the ‘Bush’ tax cuts, $221 advocated that Europe keep cutting social billion; expiration of payroll tax cuts, $95 spending, reform its labor laws and engage in a billion; taxes in the affordable care act, $18 a massive stimulus program. A likely outcome billion; other expiring revenue provisions, $65 is a sharp decline in the value of the Euro, billion. perhaps to parity with the dollar. The spending cuts include: budget Late in July, ECB president Mario control act sequestration, $65 billion; expiration Draghi sparked a rally in the markets when he of emergency unemployment benefits, $26 pledged that the ECB would do “whatever it billion; and reduction in Medicare payments to takes” to save the euro. physicians, $11 billion. The next week the market dropped, The increases and cuts would reduce the concerned with his lack of specific action. federal deficit from 4.7% of the GDP to 1.2% Instead, Draghi disappointed the markets by by 2021, the Congressional Budget Office saying that the ECB would buy Italian and (CBO) estimated. Total deficit reduction could Spanish bonds, only after Eurozone be as high as $7.1 trillion over a decade if governments had activated their bail-out funds current law is enforced and not overridden, to do the same. according to a Nov. 16, 2011 Washington Post article by E. J. Dionne. Federal Reserve Policy and the Budget The ‘fiscal cliff’, estimated at $560 billion by the CBO, would cut the 2011 federal Keeping the federal funds rate below deficit of $1.2 trillion roughly in half. Estimates .5% from 2009 through 2012, is the longest ever are that it would reduce real GDP growth in for low rates—and the fed is saying that will 2013 to .5% versus 1.1% with a high probability continue through 2014. of recession in the first half of the year (a 1.3% The Fed has increased the government’s GDP contraction), followed by 2.3% growth in balance sheet by pumping in more money. the second half of 2013. Over the long-run Operation Twist has bought long-term lower deficits and less debt support higher Treasury bonds and sold short-term bonds, growth estimates, according to the CBO, and the pushing down long-term bond rates. The long Center on Budget and Policy Priorities. The political dimensions of the ‘fiscal and of economic sector rotation (slide 51). For cliff’ debate have pitted Democrats against more specifics consult the slides on the Los Republicans, with little being done, as both Angeles chapter’s website, under Presenter’s parties posture, while sliding toward the brink. Slides, at www.aaiilosangeles.org. The policy debate, in the U.S. and Europe, The top five stock market sectors for centers around austerity (deficit reduction) both 2011 and 2011 (there has been no change) versus economic growth (higher spending and have been: 1) large growth, 9.73%; 2) small tax cuts leading to bigger deficits). growth, 9.53%; 3) S&P 500, 9.2%; 4) large ‘Fiscal cliff’ poses real danger to the value, 8.2%; and 5) small value, 8.25%. wealth of the investing class. A hypothetical The top six economic sectors, slide 51, example will illustrate. If your investment year to date as of July 13, have been: 1) real income from capital gains is $100,000, and the estate, 16.79%; 2) consumer services, 14.44%; capital gains tax increases from 15 percent to 25 3) financial, 14.08%; 4) health, 13.65%; 5) percent—your tax bill went up by 67 percent. If telecom, 10.48%; and 6) technology, 9.22%. the economy goes into recession in the first half Top performing economic sectors change from of 2013, your income will be likely to drop even week to week, with rapid and dramatic shifts, as further—OUCH! No wonder GOP presidential one can observe from the weekly postings of candidates Mitt Romney and Paul Ryan look economic sector performance in the Los from good-to-great to the investing class. Angeles Times. The Markets What are BRICs Doing? Corporate profits as a percentage of In recent years, overseas and the BRICs GDP at 9.5% have never been higher. have been touted as the way to make money. How, Goldberg asked, did the big An international stock market rotation chart, corporations become the fat cats of the slide 53, year-to-date, to July 13, showed the marketplace? U.S.A. running in number two position, and the Corporations cut workers wages and only BRIC in the top five was India, at third. retirement benefits. Productivity is good. Unit The numbers: 1) Mexico, 16.45%; 2) S&P 500, labor costs are low and declining, which is good 9.2%; 3P Greater India, 9.05%; 4) Pacific, ex- news for corporations and the stock market. Japan, 7.3%; 5) South Africa, 5.09%. Ten-year and 30-year notes are way At the bottom of the chart were China down, with the 10-year note at 1.5%. Interest -4.22% and Brazil, -8.75%. Brazil sells to rates are very low and profits are very high; that China and the EU; and China sells to the EU. is why the stock market did not crash, said China and Brazil had negative numbers in 2011, Goldberg. also. Brazil blazed to off-the-chart number one The average P/E ratio of 12.5 is top performance ever at 121.86% in 2009, and attractive. After 12 lean years, stocks are more China rocked the top at 83.17% in 2006. Russia of a bargain. did not show up anywhere on the chart. Bonds have been the best investment in Bonds attract money when equities are the last 10 years. But they are not cheap now. down. Goldberg’s bond market sector rotation A bond bubble will likely develop in the next chart, year-to-date to July 6, slide 54, showed two years. bonds in a competitive position. The numbers: To give an idea of how the stock market 1) emerging markets, 7.83%; 2) high-yield, and its sectors are performing, Goldberg put up 7.44%; 3) corporate, 6.32%; 4) long U.S. a slide of stock market sector rotation (slide 50), Treasuries, 6.25%; 5) U.S. TIPs, 4.7%; and 6) barrels a day. Fracking became economical in munis, 3.82%. 1997 in the Barnett Shale in Texas. Energy Although Goldberg said it was late to get from the injection of highly pressurized fracking into emerging market bonds, he threw out the fluid creates fractures in shale formations ticker symbol TGEIX, an emerging bond fund allowing for much improved extraction rates of with returns 8.72% YTD, 1-year, 4.28%; 3-year, oil and natural gas. 16.47%; and five-year, 11.29%. The chart trend Massive deposits of hydrocarbons in is up and the trend line is above the 50- and North America could be tapped. Still to be 200-DMA, indicating a buy. overcome is the blowback from The ten-year Treasury yield is 1.48%. environmentalists concerned about the impact When interest rates go up, bond holders will be on public health from toxic fracking chemicals, creamed. There is no sign of that coming soon. and contamination of air and ground water. The The initial unemployment claims positive prospect is that the U.S. does not have dropped from 670,000 in 2009, to 375,000 in to be beholden to Middle East oil, and our 2012, showing employment is improving, dependence is declining. currently at a marginal rate. Coal stocks have been awful, said The monthly commodities future index Goldberg. Verizon has a high payout. Tobacco dropped from 470 in 2009 to 284 by June 29, stocks are way up. Cheap stocks are in Europe. 2012, showing that commodities are more affordable. ETF Dividend Equity Plays Questions and Answers A couple of ETF equity dividend plays are DVY and HDV, which have been Some of Goldberg’s best observations performing well. and investment ideas were brought out in the In the case of DVY, it is YTD up 6.4%; question and answers, which proved to be a 1-year up 10.08%, 5-year up 21.04% and the fruitful part of the presentation. trend line is above the 50- and 200-DMA on the He pointed out the government could do chart, indicating a buy. As for HDV, it is doing Operation Twist for another six months. Short – even been better: YTD up 8.91%; 1-year, up term rates could go on through 2015. 17.02%, and not applicable for three years, and “Who am I to say you are not doomed?” the 50- and 200-DMA are above the chart’s he quipped in response to a question. And, then trend line. more seriously, “I have given up on gold—it has Will there be a QE3? What about those done miserably.” trillions of dollars in investment money sitting “We have it in our power to fix our on the sidelines? There has been a stampede economic problems, both in the U.S. and in into bonds, especially high-yield, munis, and Europe. The question is, will we? Is there the emerging market bond funds. The people who political will? Too many times in the past, are dying are in equity mutual funds. Stocks are countries took it to the brink of the fiscal cliff cheap right now, but it is not a good market for and jumped off…splat! small caps, due to low growth and no dividends. Personally, I think the government will You can buy what Berkshire Hathaway take it to the brink, contemplate the abyss, but buys on your own. There are not a lot of cheap not jump off, he said. bond funds, though they may be good in value. Don Gimpel pointed out that the U.S. Domestic REITs have outperformed, but now is foreign oil dependence is declining. Fracking, not a good entry point. could boost U.S. oil production by three million If you are a momentum investor, study Part C: also known as Medicare Goldberg’s sector charts, slides 50, 51, 53 and Advantage, which offers health care run by 54 to get some ideas, and then look at the charts private insurance companies. of the corresponding ETFs. You will find Part D: is Medicare prescription drug Goldberg’s 60 slides, under ‘Presenter’s Slides’ coverage, which helps cover the cost of on the Los Angeles chapter website at prescription drugs. www.aaiilosangeles.org. Goldberg can be Among the topics Davis covered from contacted at phone 310-971-7226 and at the the handout were a Medicare decision diagram website: firstname.lastname@example.org. to help people decide which parts to sign up for. Next came a summary of Medicare Benefits and Cost-Sharing for 2012 table. After that came a Medicare Basics: A,B,C,D… table on 2012 Medicare costs. What Are Your Choices? By William Parmenter Ph.D., editor P aul Davis gave an educational overview of the basics of Medicare, parts A,B,C, and D at the July 21 meeting of the Los Angeles AAII chapter at the Skirball Center. Davis has been an insurance agent for Then came a table on Standardized the last 28 years, Medigap Plans A-N. Paul pointed out that Plan focusing for the last F is the most popular. Next came a handout on several years on senior the doughnut hole in 2012, the gap in Medicare health care. He has a business degree from the prescription care coverage. Some drug stores University of Southern California. are cheaper for prescription drugs, so it pays to The audience was able to follow Davis’s shop. talk on the handout he distributed, as he discussed the material in the same sequence as it Monthly Costs for Drugs appeared on the handout. In addition, the slides he used in his talk are available of the chapter The monthly cost range for Part D website, under the heading Presenter’s Slides at prescription drugs is from $15 to $191. The www.aaiilosangeles.org. cheapest is not best. Best is the most The different parts of Medicare are: comprehensive. Go to www.medicare.gov, and Part A: hospital insurance, which helps it will shop the 33 Part D plans for you. Each to cover inpatient care in hospitals, nursing year you need to shop Part D plans, as their facilities, hospices and home health care. formulary changes annually. And, as well, your Part B: medical insurance, to help cover drug needs change annually. out-patient care, durable medical equipment, The next handout was the summary of home health care and some preventive services. enrollment periods for Medicare Parts A, B, C, and D. Next came a checklist to determine if if you are eligible for subsidies, to bring down you are up to date on such preventive services your payments. as screening for alcoholism and diabetes, among People can save money on their others. Medicare prescriptions, part D, if they are eligible for a low-income subsidy. Although that probably would not apply to the mostly millionaire AAII audience, it never hurts to check on it with Social Security, at 1-800-772- 1213, or with Medi-Cal. Questions and Answers A lively question and answer session followed the talk, as people were especially interested in coverage, plans and rates. Some of the points that emerged: Sign up for Part D on Jan. 1. The annual open A five-page handout covered Medicare enrollment period is Oct. 7 to Dec. 1. You can coverage outside the 50 states and associated leave the Advantage Plans, Part C, each year territories, such as Puerto Rico and Guam. In during the open enrollment. certain cases, coverage is available on cruise Generally dental insurance plans are not ships. It is up to the patient to handle the worth it, as they are too expensive in relation to paperwork, as foreign hospitals are outside U.S. possible payout. jurisdiction. Lifetime coverage limit is around When you are shopping a plan, the two $50,000. key questions to ask are: 1) can you see the Some cruise trippers chose to doctor you want?, and 2) can you get the drugs buy supplemental travel insurance to help pay you want? the cost of health care services, as Medicare has There is no connection between long- limited coverage outside the U.S. Before you term health care, and Medicare field nursing, cruise the malarial waters off New Guinea’s which is covered up to 100 days, north coast you would do well to get the Long-term health care insurance is an specifics on what Medicare covers, at 1-800- asset preservation strategy, with the liability of 663-4227, or, www.medicare.gov/Coverage/. increasing premiums. Medicare identity theft is all too Shop rates on Medicare supplemental common. Someone steals your identity, by insurance. getting access to your Social Security number, Medicare Advantage plans in the Los or Medicare number, and submits fake billings Angeles area have no monthly premiums. in your name—disrupting your life, and The year 2012 marks Davis’ 28th year in possibly damaging your credit. Fight back, by the insurance business. He has dedicated calling 1-800447-8477, or by using the email himself, for the past several years to becoming alert: www.StopMedicareFraud.gov. an expert in the area of senior health care. In Davis drew the audiences’ attention to 2011, he was recognized as one the Valley’s items nine and ten on his handout concerning “Trusted Advisors.” the ten biggest mistakes seniors make on health If you would like to contact Paul Davis, insurance. Item nine was failing to review your he can be reached at www.pdinsure.com., and at plan annually. And, item ten was not finding out 8-818-888-0880, Paul Davis and Alberta investment eminence, they came to learn, lunch Bellisario Insurance Services. and pepper him with questions. “Everyone needs an investment Leverage and Money-Making strategy,” opined Gimpel. If you select an investment advisor, you Courtesy of Mark Skousen, Ph.D. are choosing his strategies…and paying him to make the mistakes. Thanks to professor Mark Skousen, In recent meetings Gimpel has been AAII’s June, 2012 speaker, who left behind an covering investment strategies, to wit: a) Set It autographed copy of his magnum opus, The and Forget It Mutual Funds, that pay 10 to 15 Maxims of Wall Street (2012), we can share percent a year for 10 years; b) Fidelity, which with you the wit and wisdom of some of Wall offers 40-some screening strategies, and c) the Street’s finest on the advisability of borrowing 80-plus screening strategies offered on the AAII money to make money: website. “You don’t launch spaceships with You had to be at the meeting to get the firecrackers.”—Bob Allen. 16-page annotated handout on ETFs. But you “Leverage is like shooting an arrow into can get the source document it was culled from the air. Eventually it comes down to earth.”— by going to: ETFdb.com/2012/101-etf-tips- Mark Skousen. tricks-every-financial-advisor-should-know. “Heavily margined, heavily watched.”— Gimpel considers this the most useful ETP Michael Sheimo. resource. The value added by Gimpel was to “He who lives by leverage, dies by edit the material from 50 pages to 14, and to add leverage.”—Ken Fisher. an index to make it easy to obtain answers. “It takes courage to ride with huge The background for Gimpel’s leverage. It takes courage to be a pig.”— presentation is that academics recommend George Soros. passive investing based on indexes, because of the low cost and maintenance. 102 Things To Know About ETFs Following that approach, the question arises, which index should you use? The S&P is By William Parmenter Ph.D., editor popular but is narrow. The investor needs to think about which index is best for him, in a Dr. Don Gimpel talked on ETFs and field of wide choice that is growing daily. investing strategies, at a meeting of the Some acronyms that are useful in Computer User’s Special Interest Group on navigating the field of ETFs are: ETB, exchange Saturday, Aug. 4, at the traded bonds; ETF, exchange traded funds; VFW building in Culver MLP, master limited partnerships; ETNs, City. exchange traded notes; and ETPs, exchange The meeting was traded partnerships. attended by the AAII Another important question, bearing investor brain trust, heavily on the indexes return, is how is it about 70 of the most weighted? For example the S&P 500 (SPY) is numerate, techno-savvy ‘capitalization’ weighted, but it also comes with and skilled investors in other forms of weighting. the L.A. chapter. Six forms of weighting the S&P 500 and Drawn by Dr. Don’s examples of funds in parentheses, follow: 1) Equal weighting (RSP); 2) Dividend weighting (Wisdom Tree); 3) Revenue weighted (Wisdom Gimpel had a few sage words about Tree); 4) Sector weighted (ALPS); 5) RAFI investing in energy stocks: don’t do it. The weighted (PRFZ), and (PRF); 6) Low volatility opportunities currently are not there. The weighting (SPLV). overwhelming majority of energy stocks are not How has equal weighting performed? currently good investments. The fund RSP has a cumulative annual return An energy revolution is under way. A (CAR) of 8.81% since the data base inception, lot of natural gas is coming on line and into use. compared to SPY’s 6.45%. RSP’s standard Fracking of oil shale in the U.S. and Poland is deviation is 6.71, compared to 6.06% for SPY. producing a lot of oil. In the next three years RSP has an increased return of 236 basis points the U.S. will be producing an additional three compounded and less volatility. million barrels of oil. The U.S. has enough oil Another comparison: since its inception shale to supply energy for the next 100 years. 1.21 years ago, SPLV (the S&P 500 low Canada is producing a million barrels of oil volatility index) has had a CAR or 13.79%, shale a day and that is like to double or triple. compared to SPY’s 3.96%. The standard deviation (SD) was reduced from 6.31 to 4.36. Questions and Answers Gimpel considered the currency denomination choice. Let’s say you wish to The idea of market valuation started with invest in international bonds, which are mainly the Fed. Dr. Roger G. Ibbotson did the denominated in U.S. dollars. Let’s assume that statistical research on market valuation. He sold the dollar is tanking relative to a basket of the financial information and research firm he foreign currencies, so you are exposed to both started, Ibbotson Associates, to Morningstar in the bond risk and the currency risk. You would 2006, which now provides estimates of market rather be in the foreign currency. and sector valuation, based on forward earnings You now have a choice of EMB (iShares estimates. JPMorgan USD Emerging Market Bond, or its Ibbotson is also founder, and CIO of local currency version LEMB. Further Zebra Capital, which manages equity market information on bond ETFs and currency neutral and long/short hedge fund strategies. His exposure is on page two of the handout. book with Rex A. Sinquefield, Stocks, Bonds, What about Build America bonds? Take Bills and Inflation, updated in annual yearbooks, advantage of America—everyone else does. serves as the standard reference for information BABS returned a CAR of 16.19% over the last on investment market returns. 2.19 years, as compared to SPY return of You can search for market valuation in 9.97%. The SD dropped from 5.64 to 3.60. Morningstar under Ibbotson. On the left hand Now, for some dynamic ETFs. Here is column you will see a list of nine sectors. The is a list of some ‘dynamic’ ETFs that can get sectors are rated as over- or undervalued. You you out of the market: 1) TRND (RBS U.S. can correlate this information with the ETFs you Large-Cap ETN); 2) TRNM (RBS U.S. Mid- are thinking about purchasing. Cap ETN); 3) TBAR, (RBS Gold TrendPilot); The buy-sell zone is: if the sector/ETFs 4) TWTI (RBS Oil TrendPilot); and 5) VQT, are 14% or more undervalued: buy; if they are (Barclays S&P 500 Dynamic VEQTOR ETN) 14% or more overvalued: sell. For a good resource, go to Another sell signal for an equity or bond www.finance.yahoo.com. and select investing, purchase is when the price line is down-sloping click on ETFs and click on View ETFs by and it passes through the intersection of the 75- performance, in the left-hand column. and 300-DMA lines. Don’t wait around, sell, go to cash, preserve your capital and look around Which one will be you? Gimpel has the for an undervalued, outperforming investment. software on his ‘toolbox’ enabling you to do your own calculations, using Excel software, but Investor Education you have to activate the macros. By Don Gimpel, Ph.D. Letters to and from the Editor For the last ten years Gimpel has been Edited by William Parmenter Ph.D. providing nuggets on investor education at the Los Angeles AAII chapters’ monthly Skirball If you want to let me know what you Center meetings. At the July 21 meeting he think, on a current topic, I welcome your talked about the two charts he passed out— comments. Send me an email at available only to meeting attendees. email@example.com. He pointed out that from time to time the Have you been thinking about which of market has horrible drops that could wipe out an the two major presidential candidates you are investor’s portfolio. Suddenly going broke and going to vote for? having to depend financially on your children is Mostly rich not a desirable outcome for a retiree. people will vote their Want evidence? Read Shakespeare’s class interest, and vote for King Lear. The imprudent king turned over his Romney, on the basis that assets to his three daughters. Two of him they do not want to take a successively humiliated him, turned him out and big tax hit on capital emotionally abused him. Lear did not trust the gains. They do not want third one who was loyal to him, and the whole to lose additional money thing turned out tragically. (If you are a king, it if the country goes into is ‘tragic’ when you lose your assets; but,when recession in the first half you are middleclass, it is more or less routine, of 2013. Besides, who so the government provides subsidized wants to be a traitor to their class like Franklin services.) Delano Roosevelt was labeled, and support Think at 65 you will probably be in social reconstruction and helping the poor. retirement for 25 to 35 years. Two ‘safe’, at What would the folks at the country club least popular investments, are the S&P 500 and think? I mean, what a way to wreck your day. five-year Treasuries, with variable percentages Its curious though, not all rich people in each. will vote Republican. Have you considered the You can do your own retirement case of President Obama? calculations by going to the chapter website, at. Both he and his wife are Harvard- www.aaiilosangeles.org. and clicking on Don’s educated lawyers, atop the pinnacle of Toolbox in the left-hand rail column. He has educational prestige. His job isn’t too shabby, several entries on retirement, including: MC- either—President of the United States, leader of stuff.xls; Monte-Carlo-2xlx; the ‘free’ world. Nor, is his salary, the White LifeExpectancy.xls; and Sam-retires.xls. Using House, the expense account and his perks…all the Monte Carlo method allows you to tinker hard to beat. with the numbers and create various scenarios. If Obama and his wife vote their class Gimpel put two graphs on the screen. In interest, they would vote Republican. one case the hypothetical retiree went broke. In the other case, the retiree outlived his assets. Then, why is he running so hard, and encouraging everyone to vote, Democrat? Orange County AAII Announcements Chances are he’ll vote for himself. Why? The AAII Orange County Chapter As Tina Turner sang, What has love got will present: to do with it? September 17--(Special Time 1:00 p.m.) As Buddha might have said, What has Economic Indicators, the Market and compassion got to do with it? ETFs--Matthew McCall, President, Penn As a matter of fact, love and compassion Financial Group LLC are important. When a person crosses a www.pennfinancialgroup.com threshold of spiritual maturity they quit caring October --No Meeting so selfishly for themselves, and began to open their heart to the plight of humanity. They November TBD--Federal and State Income Tax began to care, and to work for the common Law Update--Herb Farrington, Tax cause. and Financial Services Don’t believe me? Think about the Location: Balearic Community Center cases of Jimmy Carter, Warren Buffett, William 1975 Balearic Dr. Clinton, Bill Gates, and others…super powerful, Costa Mesa, CA 92626 super rich, and gave it all away to help others. 714-754-5158 If you are reading this, chances are you Payment: At the door, everyone, $5/person have made your pile. The question I want to challenge you with is: where do you stand on For more information about the the November election—with your class, or Orange County chapter of AAII and their with humanity? meetings, go to: http//www.robertsgeneral.com_aaii. Note to L.A. Finance Contributors P lease have your copy typed in Word in 12-point, using Times New Roman typeface. Articles from Special Interest and Neighborhood Groups are requested. Letters to the editor are welcome L. A. Finance is the financial education publication of the Los Angeles chapter of American Association of Individual Investors. All articles are exclusively for the purpose of education. L.A. Finance is offered free of charge exclusively via email and is also and are run in a separate section. Articles from available to the public for downloading from the Los the Orange County and other area local chapters Angeles chapter web site at: are solicited. Readers who want to email an www.aaiilosangeles.org. article about investing or the financial system The American Association of Individual will have a chance to appear in print. Investors Mission: AAII is an independent Book reviews are welcome. Call if you nonprofit corporation formed in 1978 for the want to check out your submission ideas in purpose of assisting individuals in becoming advance. Email articles and letters-to-the-editor effective managers of their own assets through at firstname.lastname@example.org, or call the editor at programs of education, information and research. Neither L. A. Finance nor the Los Angeles Chapter (562)-437-2412. of AAII accepts any responsibility for investor’s investment decisions. The investor takes the total Check out the AAII Los Angeles chapter and complete legal and ethical responsibility upon website at: www.aaiilosanges.org. himself. Caveat emptor.
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