DOC - AAII-LA by wuxiangyu


									                                                                                June, 2012


Favored Growth and Income Investments                    the nation.
         After the Euro Crisis                                    That is what China, a family-oriented
                                                         society, has been doing since Deng Xaiopeng
        By William Parmenter, Ph.D., editor              became leader in 1978, and it has transformed
                                                         itself from an economic weakling into a
        Dr. Mark Skousen talked on the topic of          juggernaut. China’s example, a state with
My Favorite Growth and Income Investments                mixed elements of communism and capitalism,
After the Euro Crisis at the May 19, meeting of          illustrates that the ‘ism’ is not as important as
the Los Angeles chapter of the AAII at the               vigorous entrepreneurialism, and implementing
Skirball Center.                                         pragmatic and socially responsible economic
        Skousen is known to the Los Angeles              policies that produce results.
AAII Chapter, having spoken before. Skousen is a                  Skousen pointed out that weaker
serious academic scholar and for two years was a         European nations, particularly Greece, are now
professor at Columbia University. He is an               facing the ugly reality that continually piling up
investment counselor, author of over 25 books,           debt and living beyond their means is a formula
including textbooks, and a public speaker.               for national bankruptcy.
Skousen earned his B.A., M.S. and Ph.D. in                        “We are living in difficult times,”
economics, the last at George Washington                 Skousen said, stating a theme of his talk. After
University.                                              addressing contemporary European and U.S.
        The professor describes himself as having        economic problems, he linked that topic to
one foot in Vienna and the other one in Chicago.         investing, discussing the need to reduce
That means he is a follower of the Austrian              volatility in one’s portfolio. He operationalized
school, focusing on capital and production, and          his talk, by moving his remarks into the
sympathetic      toward      the    Chicago-school       marketplace, and recommending five dividend
monetarists, focusing on money and the                   plays.
competitive marketplace.
        Smart, smooth, and sophisticated, Skousen
showed no sympathy for Keynesian-economics,
consumption-oriented public policies, and welfare                      Table of Contents
states, especially those that are complacent about
unsustainable debt accumulation.                         Euro Crisis and Dividend Stocks…Mark Skousen…....p.1
                                                          ETFs and Investment Strategy…....Don Gimpel…….p.6
        And, common sense is on Skousen’s side,           Mutual Fund Screener…….Michael Gavin…………p.9
as people and nations need to live comfortably            Wall Street Maxims………….Mark Skousen……….p.9
within their means, be concerned about the well-         Education Nuggets……………..Don Gimpel………..p.10
being of the family and population, save, and            Letters to the Editor…………………………………..p.11
invest money to grow wealth for the family and            Orange Country Meeting Announcements…………p.11

        The latest Euro zone crisis will not be the          and Eurobonds. He is not wasting any more
last one, he said, noting that Greece, after a               national treasure on supporting the U.S.A.’s
partial default is facing a full default. With a             military fiasco in Afghanistan. France is pulling
change in government Greece may decide to pull               its 3,300 troops out now, two years early. The
out of the Euro zone, stiff its banker creditors,            U.S. can pursue its ignominious debacle without
continue unsustainable spending, and further roil            France’s complicity.
the financial markets.                                               Feathering the beds of rich elites and
        If, however, the Greeks revert to the                attacking the poor with austerity measures will
drachma, and the exchange rate drops 30 percent,             not be France’s policy, Hollande made clear to
it would give a big boost to tourism, and to                 Germany’s Chancellor Angela Merkel in a
Greece’s economy. Greece could come out better
than expected, giving Portugal an impetus to                  the
follow suit, and drop out of the Euro- zone.
        Anyway you cut it, look for European
financial turbulence ahead. The euro plunged to               Los Angeles County Meeting Schedule
its lowest value in two years, and its credibility as
a reserve currency is taking a beating. Since Feb.
                                                              Westside Computer Group – Don Gimpel, (310) 276-9875
24, the euro has dropped from plus 3.96% for         Veterans of Foreign Wars Memorial
2012 to minus 3.31% on May 25, a spread of                    Bldg. Culver Blvd. and Overland Avenue, Culver City. The group
                                                              will meet at 10:30 a.m., Saturday, June 2. Topic: TBA. The
7.27%.                                                        UltraFS 11 group will meet at 9 a.m. on the same day.
        Europe’s 17 nation Eurozone is boiling
                                                              Pasadena Group – Will meet at 7 p.m. May15, at Pasadena Main
with political and economic turmoil. The rich                 Library, in the David Wright Auditorium, at 285 E. Walnut St.,
elites are complaining about porous borders, poor             Pasadena. (Meets third Tuesday of the month, except for August
                                                              and December.) Topic TBA. Voluntary contribution of $2.
immigrants and accumulating welfare debt. At the              Contact, Ivan Wong at (626) 446-2486,
other end of the political spectrum, populists are
                                                              Mutual Fund/ETF Group —Meets at 10:00 a.m., Saturday, in the
complaining about austerity attacks on the welfare            Craft Room at the Santa Monica Memorial Park, 1401 Olympic Blvd.,
and living standards of the middle and poor class,            Santa Monica, CA 90401. For the next meeting topic and date,
                                                              contact Gunter Hagen (310) 457-7404.
while the rich get a free ride with reduced taxes,            Meetings are free to the public.
huge salaries, and corporate tax breaks.
                                                              Stock Selection Group —Norm Langhout, (310) 391-6430,
Financially        ruinous       foreign      military Meeting at 7 p.m. , May 23, using IBD,
misadventures continue to drain treasuries.                   CANSLIM stock selection method , at Fairview Library, 2101
                                                              Ocean Park Blvd., Santa Monica. The group meets the fourth
        France elected Francoise Hollande, of the             Wednesday of the month.
Socialist party on May 6, replacing Nicolas
                                                              Los Angeles Chapter, Skirball Center, registration at 8:30 a.m.,
Sarkozy, a president so unpopular that even                   seminars from 9 a.m. to noon on Sat. June 16, with Christine
Marine Le Pen, head of the far-right National                 Benz, on May 19, on Strategies For Pursuing Your Retirement.
                                                              After talking for an hour, and an intermission, Benz will engage in
Front would not support him in the second and                 a dialogue with the audience for an hour.
final round of elections. Her lack of support was
                                                              Desert (Palm Springs area) Group Usually meets from 10 a.m. to
significant, as the the National Front had achieved           noon, second Saturday of the month at Sunset View Club House,
an unprecedented high of 18 percent of the vote in            Sun City, Palm Desert. The contact person is Patricia Gammino.
                                                              For more information contact her at: fastnet@msn com. or at
the first round of the elections.            Sarkozy          (760) 485-6161.
represented the elites and their repressive strategy
of cost-cutting at the expense of the middle and              Option Special Interest Group, meets online on first, third and
low class.                                                    when applicable, fifth Tuesday of the month at 7:30 p.m., except
                                                              August and December. Get instructions on how to participate
        Hollande burst on the scene, making clear             from Robert Morgen at Currently, it
that he is interested in lifting France economically          is a small group, providing extensive interaction.
by growing the economy with stimulus measures
                                                             compared to Singapore, as both are, mainly of
watershed meeting last week.                                 Chinese population, small, entrepreneurially-
         Hollande’s election represents the                  driven trading states. But is it realistic to
opportunity for Europe to move away from bank-               compare Hong Kong with the U.S.?
driven ‘austerity’ policies that support the wealthy                 The      good-humor       of   Skousen’s
class and erode the living standard of the middle            presentation was infectious. His favorite
and low class.                                               aphorism was, he quipped, “To err is human,
         Political and economic issues of the                but to be paid for it is divine.” People burst out
Eurozone presage and echo similar issues in the              laughing at the well-delivered remark, which,
U.S., and they have direct implications for U.S.             intentionally or not, neatly capsulizes the
financial markets and investing. Unlike Europe,              attitude of top management of the huge
however, the U.S. does not have a robust left in             investment banks. Remember the CEO of Bank
either its political spectrum, or in its mass media,         of America?—he got a whopping bonus for
with the result that political dialogue in the U.S. is       nearly destroying the nation’s biggest bank.
truncated, and framed by the rich, right-wing                        Exorbitant CEO compensation has
elites, who own the giant media corporations.                become a hot issue. The typical CEO (of 322
         Turning to the U.S., Skousen opined that            S&P 500 companies surveyed by Equilar) was
Romney, could get elected if the economy                     compensated $9.6 million in 2011, up six
continues and deteriorates from its current 8.1              percent from 2010. It would take the typical
percent unemployment rate.            ‘Could’ is a           worker, whose median pay was $39,300 in
theoretical possibility, as only 40 percent support          2011, some 244.27 years (or six 40-year
Romney, compared to 60 percent who support                   careers) to earn $9.6 million. What a yawning
Obama.                                                       chasm between lowest and highest, a differential
         When the presidential race heats up, and            of over 244 times.
the Democrats frame Romney as the Bain                               A few CEOs received far more in 2011:
‘vulture’ capitalist, who gutted companies, and              Tim Cook of Apple got $378 million, David
put people out of work, will that bode well for an           Simon of Simon Property Group got $137
electoral shift toward Romney?             How will          million, Leslie Moonves of CBS Corp. got $68
Romney fare in debates with Obama, a former                  million,     David      Zaslav    of   Discovery
U.S. Constitutional law professor at the                     Communications got $52 million and Philippe
University of Chicago, who: punches hard, stays              Dauman of Viacom Inc. got $43 million.
on message, and by speaking directly to his                          If these were private companies, people
potential supporters bypasses the media?                     would be less concerned. But these are public
         Concerning Romney’s election, Skousen               companies using public resources that have a
waxed poetic on instituting a 15 percent flat tax,           public responsibility to be fair and just—to
which would usher in a “golden age” of economic              make sure that all employees are fairly
prosperity for the U.S.          He enthusiastically         compensated with wages and benefit packages,
referred to Hong Kong as a great model to                    and that the corporation is not polluting the
emulate, a city with an 18 percent flat tax on               environment.
income and corporations, and no capital gains tax.                   Well, did not Adam Smith maintain in
         As an exponent of the Austrian school of            the Wealth of Nations (1776), a foundation for
economics, it is understandable that Skousen did             Austrian- and Chicago-school thinking, that the
not mention that flat taxes are regressive, and fall         “invisible     hand”      would    regulate    the
hard on the middle and poor classes, while                   marketplace? By invisible hand he meant that
favoring the rich class. He also neglected to                individuals pursuing their self-interest under
mention that Hong Kong could reasonably be                   competitive conditions in a marketplace bound
by justice would produce the greatest good.                between rich and poor needs to be narrowed by
        Smith did say that.        But, what has           empowering the poor to earn a bigger piece of
happened in the marketplace, cheerled by a right-          the economic pie.
wing, slanted news media, is a travesty of Smith’s                  Some will find facing reality very
invisible hand. Think instead of amputated hand,           difficult (it is called being in denial) and will
or mutilated hand. Where is the competition in             complain that AAII should stay out of politics.
collusive oligopolistic industries; the justice in         Reply, it is a core truth that financial markets
suppressing labor wages and benefits; the fairness         and investment depend on the political-
in rapacious CEO compensation?                             economy, and that is the very focus of various
        When publically-owned corporations                 economic schools, be they Austrian, Chicago,
abdicate their public responsibility to their              Keynesian or Marxist. When financial markets
employees and communities, skew the political              and the economy are struggling, talk inexorably
process with PACs, and distort the legal                   turns to the political-economy. Robust political
framework with self-serving legislation, then the          debate concerning the nation’s finances and
government (meaning taxpayers) have to pay for             economy is vital and healthy in a democratic
medical and retirement programs for discarded              republic, so we need to accommodate ourselves,
workers and retirees, bail out mismanaged banks            and to sharpen our understanding of the issues,
and financial houses, and pay to clean up                  as this is a contentious political season.
corporate pollution.                                                Turning to personal investments,
        It is not just the gap between worker and          Skousen quoted Steve Forbes, “everyone is a
CEO compensation that is a matter of concern, it           long-term investor, until the market goes down.”
is the gap between the obfuscating rhetoric of elite                Forbes’s quip pointed Skousen toward
apologists and the wreckage they have created in           the topic of reducing volatility in the interest of
society that is scandalous.                                producing       steady and stable returns on
        What Skousen’s remarks point to is the             investments But, how to reduce volatility?
coming of a lively political debate in the U.S. If                  Skousen suggested three methods. The
the Eurozone turmoil is a harbinger of future              first was to invest in non-correlated assets and to
discussion ahead, the U.S.’s national debt and the         rebalance each year. In that connection, he
unsustainable rate of debt accumulation will be a          recommended two informative investment
centerpiece of political debate.                           primers: Burton Malkiel and Charles Ellis’s
        Elite view: austerity measures should be           Elements of Investing (2010), an overview on
imposed by big banks and their political cronies           investing that reduces the process to a few
on the middle and poor classes and erode their             simple rules. And Alexander Green’s Gone
standard of living. Elites will argue that what is         Fishin’ Portfolio (2008), divided into three
good for elites is good for the nation; emulate us.        parts: 1) Get Wise, 2) Get Wealthy (with
Like Marie Antoinette advised, ‘if you are                 chapter eight covering the ‘gone fishin’
starving and can’t afford bread, then, eat cake.’          portfolio), and 3) Get On With Your Life.
        Populist view: national resources should                    A second method to reduce portfolio
be in the public domain, growth should be                  volatility is to invest in stock-index annuities.
emphasized; tax welfare, loopholes and breaks for          To find out more about them, contact the firm,
the rich and corporations should be closed;                David T. Phillip Co., at 888-892-1102.
military misadventures should be stopped; a more                    A third method is to invest in dividend
progressive tax, and a high minimum wage, that             paying stocks and funds. At this point, Skousen
guarantees the welfare of all should be instituted.        recommended his own Investing in One Lesson
Populists will argue that unbridled greed is a             (2007), an introductory book on investing with
recipe for social disaster, and the glaring gap            catchy quotes and stories, packed into 14
chapters and 155 pages of text. After stating that          which were the dividend cutters.
stocks are inherently more volatile than their                      Skousen recommended picking four or
underlying businesses, the rest of the book offers          five sound stocks that are yielding five to six
ways to minimize the risks of stock market                  percent in dividends. To back up his words, and
investing while making money. (The book does                make his talk useful to AAII members looking
not focus per se on dividend stocks.)                       for sound investment ideas, he recommended
        “Why dividend stocks?” Skousen asked                five high-dividend paying growth plays. (That
rhetorically. Well, because, dividends give the             is, recommended that readers investigate them
edge to a winning stock strategy. Dividends are a           for themselves, as AAII is an educational
better indicator of a stock’s health than are               organization, which accepts no responsibility for
earnings. Over time, dividend stocks beat the               personal investment decisions.)
market with less risk. Dividend stocks often are                    Skousen put up slides of the charts of the
not in the news, so are bargains.                           price and 50- and 200-DMA (day moving
        If everyone jumps onto a dividend strategy          average) of his recommendations, which readers
it will stop working, Skousen said. That is                 can view on by typing
because dividend stocks are often undervalued               the ticker symbol into the sharp chart box.
with low P/E ratios, and if everyone jumps in they                  FAX, Aberdeen Asia-Pacific Income
will be fully or overvalued.                                Fund, is a closed-end fund, selling at a three
        How a good stock deal gradually and                 percent discount. The price at $7.46 is well
progressively turns into a bad deal was explained           above the 50 DMA at $7.14, and the 200 DMA
by Skousen via the story of passing along a                 at $5.67. The fund is a play against the U.S.
burning match. The CEO lights the match and                 dollar and the rising Australian dollar, due to a
gets the most benefit; he passes it on to the               boom in commodities. Over every time period,
insiders, who pass it on to the bankers, who pass it        the fund has made money, although it tanked in
on to the brokers, who pass it on to the retail             2008, and then recovered. The fund has a 3.5%
customers, who get their fingers burned. Moral,             dividend, and a good growth rate.
at the end of the chain, retail is the last to learn,               EDP, Enterprise Product Partners, is a
and first to lose, with finger- burning results.            pipeline company for NG (natural gas). The
        A broker made the same point: on the first          price at $50.29 is well above the 50 DMA of
day of a big market event, the insiders profit, on          $44.52 and the 200 DMA of $32.02. Although
the second day, the industry profits, and by the            the price of NG has been collapsing, the
third day when the retail clients get in, it’s too          company continues to make money, based on
late. Moral, is it a wonder there has been so many          the volume of NG sales, not the price. This is
insider trading scandals, when inside information           an undervalued play, due to its being a master
is so important?                                            limited partnership, so retirees worried about
        A point concerning glamour versus                   taxes will not invest in it.
performance in divided stocks can be made by                        EFT, Eaton Vance Floating Income Rate
comparing IBM’s and Exxon’s return. IBM has                 Trust closed-end fund loans to major
consistently had the better financial fundamentals,         corporations. Its price $15.93 is above the 50
but Exxon has been three times more profitable.             DMA at $14.69 and the 200 DMA at $12.26.
Why? Because IBM is a ‘story-stock’ for which               When interest rates rise, treasuries will fall
investors have continually overpaid, keeping its            dramatically in price. This is an ETF hedge
P/E ratio high. (Skousen called it the ‘growth              against rising interest rates--which, the Fed has
delusion.’)                                                 repeatedly said it will keep low through 2014.
        Rating stocks, the best performers were                     Skousen commented that he likes
the dividend growers, ranging down to the worst,            closed-end funds, because they do not have to
sell shares in a crisis. EFT plummeted in the 2008         state in 1995, in which 53 per cent of the
crash, but the fund kept paying dividends, the             economy was controlled by the government. In
managers did not panic, and the fund recovered.            1995, the government switched courses,
        MAIN, Main Street Capital Corporation              embarking on an austerity program, firing
has a seven percent current dividend, and a rising         60,000 government employees, cut taxes, had an
dividend policy, but the price will be volatile.           economic boom and balanced the budget within
The price at $26.24 is above the 50 DMA at                 two years. Canada came through the 2008
$19.91 and the 200 DMA at $13.97.                          financial crisis okay, and no banks collapsed, he
        SDRL, Seadrill Ltd is involved in deep             said.
ocean drilling, a volatile company, selling for nine               “We can learn a lot from the Canadian
times earnings, and has a dividend of nine                 experience,” Skousen said. Yes, we can learn
percent. The price of $35.90 is above the 50               something from the Canadian experience, a
DMA at $34, and presumably above the 200                   country with a population one-tenth the size of
DMA, which did not show on the chart.                      the U.S. and a commodity-driven economy that
        Readers who check out the current status           is 90 percent under U.S. corporate control. But
of the five recommended stocks by typing their             we can also learn to reframe the discussion so
ticker symbols into the sharp-chart box on                 that we unlock, and discuss issues that are will find that the price of           relevant to the well-being of all the nation’s
ETF, MAIN and SDRL is below the 50 DMA,                    people.
their prices having declined sharply in May.                       We can ask questions such as: should the
FAX’s price is even with the 50 DMA. And, no               minimum wage be substantially raised, so the
chart came up for EDP.                                     low and middle class have a living income, that
        Skousen mentioned the book by J. Paul              obviates the need for humiliating ‘welfare’
Getty, How to Be Rich (1986), a miser’s tale of            programs? Should public resources continue to
how to be rich, not how to get rich. But Getty did         be turned into private pelf? Can we close the
get rich, rated as the 67th richest American who           gap between CEO and worker pay? Can the full
ever lived, his oil fortune worth $2 billion when          range of the political spectrum, from far left to
the lonely man died in 1976. He built the Getty            far right, get equal time and space in the mass
Villa in Malibu, and Richard Meier designed the            media? Why do corporations get to destroy the
Getty Center off the 405 freeway, with its                 environment with pollution, and not be barred
fabulous art campus of over a dozen buildings and          from doing it, and not have to pay the full costs
sculptured gardens. Getty’s legacy put Los                 of clean up and restoration? And, does
Angeles on the international art map.                      subsidizing and pampering the rich and
        Skousen touted his new book, The Maxims            corporations with preferential tax rates and
of Wall Street (2012), hardback $20, signing               loopholes best serve the public interest?
autographed copies in the lobby. He closed his                     Skousen has been publishing the
talk, quoting John D. Rockefeller from his book,           monthly      newsletter    Forecasts&Strategies,
“Do you know the only thing that gives me                  which he researches and writes himself, since
pleasure? It is to see my dividends coming in.”            1980. It contains eight pages of articles of
Yes, a bit humorous, and a bit of a melancholy             financial information and advice, and can be
commentary on one of America’s demigods of                 accessed at at 800-
avaricious and predatory capitalism.                       211-7661, or 202-216-0600. This is the website
        In the question and answer session,                for those interested in subscribing to his
Skousen continued rhapsodizing on the austerity-           services.
approach to government debt. He cited the case                      For those interested in reading more on
of Canada, which was an “out-of-control” welfare           Austrian-school economics, fully considered in
Skousen’s new economics textbook Economic                   losses. Gimpel offered a sell rule. When the
Logic (2010), go to This                  price of the investment drops below the
website contains many fascinating and                       crossover of the 75- and 300-DMA (DMA
informative articles on economics, as Skousen has           means Day Moving Average), or, the price
morphed from a classroom professor to an                    drops below an eight percent drawdown,
educator of humanity.                                       whichever comes first, then, sell.
                                                                     It is an ironclad rule. You do not make
       ETFs and Investment Strategy                         excuses, noting the investment dropped with a
                                                            general market movement, or it had a good
        By William Parmenter Ph.D., editor                  earnings report, or whatever, and wait for it to
         Dr. Don Gimpel talked on the subject of                     Just follow the rule and sell. Following
ETFs That Emulate and Investment Strategy at the            this rule would have saved investors from two-
May 19 meeting of the AAII Los Angeles Chapter              thirds of the drawdown in the 2008 market
at the Skirball Center.                                     collapse.
         Gimpel has a Ph.D. degree in engineering                    For a DMA buy rule, buy when the price
from Cal Tech, was in the restaurant business, and          goes above the crossover the 50-and 200-DMA.
is both an active investor and educator of                           Various time periods were tested and
investors. He is on the board of directors of Los           these were the ones that worked the best. Also,
Angeles AAII, runs the Computerized Investing               back-testing was done to see if the rules worked
SIG, and offers five minutes of investment                  over time.
education at the chapter’s monthly Skirball                          Go to for a site
meetings.                                                   where you look at the 50- and 200-DMA, and
         “Investors should follow a strategy,”              the 75- and 300-DMA. On the homepage, in the
Gimpel said, noting that he thinks therein lies the         upper right hand corner, make sure you are
future of investing. By strategy Gimpel means               using a sharp chart, and in the slot below, type
rules and procedures that guide you on what,                in the ticker symbol you are interested in, say
when and how to buy and sell.                               QQQ. Then click on ‘go’.
          ETFs have advantages over mutual funds                     When the chart comes up, look below
as an investment in that they have low expense              the chart to the section labeled ‘overlays.’ Type
ratios, they trade intraday, they are tax efficient,        in the moving average parameters and click on
and they offer a large variety of indexed                   ‘update.’ That updates the chart with your
investments. ETFs are versatile, investing in               parameters.
countries, commodities, industries, market                           When you examine the QQQ chart, you
segments, currency and indexes.                             will notice the price rose from $56 on Dec. 19 to
         Most people do not have buy, sell, or              a high of $68 on April 26. Since that top, the
investment strategies. They opportunistically buy           price has fallen off to $62.07. Now check out
and sell. The results for the average retail                the 75- and 300 DMA, and you will see the 75
investor are marred by buying high and selling              DMA is at $65.16, the price is $62.07, and the
low—the opposite of what one should do to make              300 DMA is at $58.48. That is the relevant
money. It is all too easy to get swept up in the            data. What to do? To sell or not to sell is the
enthusiasm of the moment, or fall for the current           question.
‘story’ stock, and then to sell at a loss when                       One, has the price dropped 8 percent off
disillusioned.                                              the high? The high at $68, minus the current
         If investors would use a sell rule and stick       price of $62.07 is $5.93. And, $5.93 divided by
with it, they would save themselves considerable            $68 is 8.7 percent. So, sell. If your reference
point is your buy price, then do the computation,                  To do research on ETFs, go to the
and make your decision.                                    website and on the homepage
        Two, we noted the price is between the 75-         you will see the heading: The Comprehensive
and 300-DMA, so that does not indicate a sell.             and Original ETF Database. You will see a
There is not convergence of the 75- and 300-               variety of categories where you can click on the
DMA on price, either.                                      links and research those topics. For instance,
        The sell rule is a price drop of 8 percent.        you will find: Quicklinks: the links under that
or price dropping below a convergence of the 75-           heading are: ETF screener, ETFs by types, ETF
and 300-DMA, whichever comes first.                        by country exposure, ETF db categories, ETF
Reinforcing the sell decision, is the steady down          by issuer and Largest ETFs.
slope of the QQQ since its high on April 26.                       You will also find, on the same page the
        What if you want to compare how                    following categories you can investigate: Fixed
different ETFs are performing? Go to                       Income, Alternatives ETF Center, Emerging and on the homepage in the              Markets ETF Center, Financial Advisor and
upper righthand corner, type in the ETF ticker             RIA Center, Most Popular ETFs, Browse Our
symbol in which you are interested, say QQQ.               Data Base, and Browse by Ticker Symbol.
Then click on go.                                                  Examples of strategies ETFs follow are:
        When the chart comes up, go to the box             earnings, dividends, doomsday, GARP, moats,
below the chart and find the slot that says                momentum and indexes. The oldest ones have
‘compare funds.’ QQQ will already be in the slot.          only been around for five years, and new ones
Leaving a space after each ticker symbol, type in          are coming online.
ticker symbols that you want to compare QQQ to.                    The main point of Gimpel’s presentation
For example, type in IEF, MDY, and VNQ. Just               was to present a 19-page tabulation of ETFs in
leave a space between tickers, do not put commas,          the following categories: equities, bonds and
and click on ‘go.’                                         commodities. The document is available on the
        A chart comes up that shows the                    chapter’s website at
comparative performance of QQQ (Nasdaq 100),               On the homepage, go to the lefthand rail column
IEF (7-10 year Treasury bond), VNQ (Vanguard               and click on ‘Don’s Toolbox, Tools/Hints’. On
Reits), and MDY (S & P mid-cap 400 stocks).                the toolbox page, click on the top item, labeled,
Since April 1, IEF has shown a gradual uptrend.            “Strategy-Based ETFs 2” and that takes you to
The other three show a general downtrend.                  the 19-page document.
        Look below the chart, and you will see a                   The first category is: Stragegy-Based
table that gives relative comparisons on the four          ETFs, Equities. The presentation of data is put
ETFs. The chart shows relative strength, and               in eight columns, labeled: Ticker Symbol,
return for one-day, five-day, one-month, three-            Source, Strategy, Assets, Return from Start,
months, six-months, one-year time periods and              Return One Year, Number of Years Since Start,
volume information. The color coding is light              and Index.
green, profitable, and pink, loss. It is easy to see               There are about 170 equity ETFs,
that only IEF has been profitable in the last two          grouped by strategy, listed over 11 pages. Then
months.                                                    follow about 45 bond ETFs, listed over 4 pages. is useful for making            Last comes about 25 commodity ETFs, listed on
comparisons between various ETFs. If you                   two pages.
compare ETFs from different categories, it can                     In examining the charts of ETFs, you
help you decide whether to be in domestic stocks,          will notice that some rows are shaded gray.
domestic bonds, emerging markets, commodities,             That means the ETF returned a minimum of 10
REITs, or whatever you decide to compare.                  percent since inception, and last year.
        Gimpel calls the 19-pages of ETF charts          several additional features are available to
“your map to a ‘gold mine.” But, do not blame            customers.
Gimpel if you lose money. In investing you are                   Various methods of categorizing
responsible for your own decision-making.                investments were discussed with emphasis on
        In the question and answer session,              the mutual fund-selection process. The major
Gimpel pointed out investor’s should avoid               categories were core equity, primary
paying too much for a round trip. They should            investments, advanced investment strategies and
avoid ETFs that have too big a spread between bid        all-in-one investments.
and ask.                                                         An informative hand out was distributed
        He also said it is the index that counts.        to the attendees, listing specific no-load, no-
You can Google the index and get a good                  transaction-fee, mutual funds on TD
description of it. ETFs are based on their ability       Ameritrade’s premier list for each category and
to follow indexes.                                       sub-category.
        Gimpel closed with the opinion that ETFs                 Access TD Ameritrade ‘s website at
are the wave of the future, and are clearly    
preferable over mutual funds.                                    Michael J. Gavin can be contacted at
        For more information, go to the chapter (310)205-
website at and look under         7327.
‘Don’s Toolbox.’ Gimpel may be addressed in                      Richard Donnelly can be contacted at
person at 10:30 a.m., June 2, at the Computer’s (310)205-
User’s SIG meeting, when he will be talking on           7326
the topic of Answers to Market and Economic
Questions at the VFW building at the intersection                   Maxims of Wall Street,
of Overland and Culver boulevards, Culver City.                        A Book Review
He will also be at the Los Angeles AAII chapter
meeting from 8:30 a.m. to 12:30 p.m., June 16,                  By William Parmenter Ph.D., editor
when he will give a brief talk on Five Minutes of
Investor Education.

            Mutual Fund Screener

     By Gunter Hagen, Ph.D., SIG chairman

       Michael J. Gavin and Richard Donnelly
explained how to use the TD Ameritrade
Website/Mutual Fund Screener at the Saturday
morning, May 5 meeting of the AAII Los Angeles
Mutual Fund/ETF SIG in the Craft Room, Santa                     Mark Skousen Maxims of Wall Street: A
Monica Memorial Park.                                    Compendium of Financial Adages, Ancient
       Michael J. Gavin is the branch manager of         Proverbs, and Worldly Wisdom (New York:
the TD Ameritrade Beverly Hills Office, and has          Forecast and Strategies, 2012), 285 pp.,
extensive experience in the financial field.             bibliography and indexed, $25 hardbound.
       TD Ameritrades On Line Screener can be
used without having an account with TD                           Mark Skousen, Ph.D. has been following
Ameritrade, making it available to everyone, but         the financial markets since he was a high school
                                                         student in Portland, Ore., and made his first
investment as a class activity.                             these maxims from the book:
         He went on to become a serious academic                    Heavy volume, price rises—light
scholar, receiving his B.S., M.A. and Ph.D. in              volume, price falls.”
economics, writing economics textbooks, and                         “Technicians look ahead,
developing his own financial newsletter (in 1980),          fundamentalists look backwards. The true
and advising service. During those decades he               language of the market is technical.”
has been collecting Wall Street adages, aphorisms                   “Prices have no memory.”
and sayings. Finally, he has put them into a book,                  Skousen adds value to his book by
and this is the book, self-published in a hardbound         including great investors’ rules for investing.
“classic” edition.                                          For instance, he lists Bernard Baruch’s Ten
         The sayings are interesting on one level as        Rules for Investing (including: “Don’t try to buy
light and humorous reading. One can get a                   at the bottom and sell at the top. This can’t be
chuckle, a groan, a frown, a moment of self-                done—except by liars.”). He includes Larry
recognition and an ‘aha’ experience as one                  Swedroe’s Fourteen Simple (Investing) Truths,
browses through the hundreds of sayings.                    (including: “The forecasts of market strategists
         On another, more serious level, the                and analysts have no value, except as
sayings have the gravitas of a philosophy of                entertainment.).
maxims in a field that is bereft of philosophy.                     After perusing the stimulating, thought-
         Think of Don Quixote and Sancho Panza              provoking and entertaining maxims, read the
in Miguel De Cervantes masterpiece of world                 biographical profile on Skousen, on pages 257-
literature, Don Quixote (1605 and 1615) with the            60, and learn what an engaged and active life he
two roaming the plains of La Mancha, uttering               has had in economics, academe and finance.
their maximums and pithy sayings. In sum, it was
a compendium of folk and knight errant                                  Education Nuggets
philosophy, a sketch of the intellectual paradigm
of an era.                                                         By William Parmenter Ph.D., editor
         So it is with Skousen’s book. We see an
age revealed. It is a field of greed and predation,                 Dr. Don Gimpel talked about the
and a world of gambling and shallow material                handouts that he is going to distribute each
values. A trio of book quotes may illustrate the            month at the May 19 monthly meeting of the
point:                                                      Los Angeles Chapter of the AAII at the Skirball
         “Nobody is immune to sucker bets.”                 Center on
         “Wall Street is a gambling house peopled                   Gimpel commented that the Los Angeles
with dealers, croupiers and touts on one side, and          chapter is the biggest and most vibrant of all the
with winners and suckers on the other.”                     AAII chapters in the nation. But despite having
         “The market takes no prisoners.”                   hundreds of members in the chapter, the
         Never mind: does the book have any                 attendance rate at the monthly Skirball meetings
redeeming value? Does it have any artistic merit?           could be improved.
         Concerning redeeming value: the book                       To the end of improving attendance,
gives an impressionistic portrait of the mass mind          Gimpel is offering each month two free
of Wall Street, the financial field, and how people         handouts of real investment value. The catch is
in that field think. That has considerable value to         the handouts are only available to attendees.
students of investing.                                              What were the topics of the handouts
         And artistic merit: there is a considerable        distributed at the May 19 meeting? At the risk if
art in coming up with quotable and memorable                breaching a top-secret classification of security,
quotes, as many of these maxims are. Consider               the reader is going to get a peak. One handout

    concerned useful investment links, and the other,                  Meeting Details:
    econometric indicators with charts. Want to learn              Date:
    more? You should have been there. Moral,                                   Saturday, May 14, 2012
    attend the monthly Skirball meetings for financial             Time:       8:30 a.m.            Registration/Social
    education of an experience of exceptional value.
                                                                               9:00 – 10:30 a.m.    Program
               Letters to the Editor                                           10:30 – 11:00 a.m.   Q&A

            Edited by William Parmenter Ph.D.                      Location:   Balearic Community Center
                                                                               1975 Balearic Dr.
           Pro Forma encourages letters to the editor,                         Costa Mesa, CA 92626
    and will try to print all copies received. Email                           714-754-5158
    them to the editor at:
                                                                   Payment:    At the door, everyone, $5/person
       Orange County AAII Announcements
                                                                           For more information about the Orange
                                                                   County chapter of AAII and their meetings, go
           The AAII Orange County Chapter will                     to: http//www.robertsgeneral.com_aaii.
           June 4--Reverse Mortgages as an Alternative
      Asset--Robert Trommler, Senior                                       Note to Pro Forma Contributors
      Products Manager, Wells Fargo Bank                                                  Please have your copy typed in Word in
          July--No Meeting
                                                                   12-point, using Times New Roman typeface.
                                                                   Articles     from     Special     Interest    and
           August 20--Time-tested Mutual Fund Managers            Neighborhood Groups are requested. Letters to
      and Investment Strategies--                                  the editor are welcome and will be run in a a
      Benjamin Shepherd, Editor of Louis Rukeyser’s Mutual         separate section. Articles from the Orange
      Funds and Louis Rukeyser’s
      Wall Street                           County and other area local chapters are
                                                                   solicited. Readers who want to email an article
           September 17--(Special Time 1:00 p.m.)                 about investing or the financial system will have
      Economic Indicators, the Market and                          a chance to appear in print.
      ETFs--Matthew McCall, President, Penn Financial Group
                                                                           Book reviews are welcome. Call if you
      LLC www.                                       want to check on your ideas in advance. Email
                                                                   articles and letters to the editor at
          October --No Meeting                          , or call the editor at
           November TBD--Federal and State Income Tax
      Law Update--Herb Farrington, Tax
      and Financial Services

                                              Pro Forma

                         Pro Forma Editor                           William Parmenter
                         Pro Forma Editor, Emeritus                   Orvis Adams

                                          SIG GROUP CHAIRMEN

                         IBD Meet-up/ AAII CANSLIM               Norman Langhout
                         Mutual Fund Group                           Gunter Hagen
                         Options Group                              Robert Morgen
                         Pasadena Group                                 Ivan Wong
                         Palm Springs Group                         Patti Gammino
                         San Fernando Valley Group                      Evan Press
                         Westside Computer Group                      Don Gimpel

     Pro Forma is offered free of charge exclusively via email and is also available for downloading from the
 Los Angeles Chapter web site at:
     The American Association of Individual Investors is an independent nonprofit corporation formed
 for the purpose of assisting individuals in becoming effective managers of their own assets through
 programs of education, information and research.
    Pro Forma is published for advising members of the groups' activities and for sharing information. All
material compiled without verification of accuracy to a specific task or computer system. All material provided
in the newsletter is for educational purposes only. Comments are the views of their author and no other
person or organization. Investing is an inherently risky business. Investors may loose their entire investment
or more. Past performance is not a guide to future return. Investors bear the sole and complete
responsibility for their investment decisions.


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