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.
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
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
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
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: email@example.com. 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
parts A,B,C, and D at
the July 21 meeting of
the Los Angeles AAII
chapter at the Skirball
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,
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. firstname.lastname@example.org.
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
meetings, go to:
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