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.
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 email@example.com. 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, IWong82762@aol.com.
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. Ghagen1@yahoo.com.
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 firstname.lastname@example.org. 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 RMWall-AAII@yahoo.com. 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 www.stockcharts.com. 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
www.stockcharts.com. 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 www.MarkSkousen.com. 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 www.mskousen.com. 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 www.stockcharts.com. 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 www.etfdb.com. 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
www.etfscreen.com. 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 www.aaiilosangeles.org.
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.
www.etfscreen.com. 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 www.tdameritrade.com.
preferable over mutual funds. Michael J. Gavin can be contacted at
For more information, go to the chapter Michael.Gavin@tdameritrade.com (310)205-
website at www.aaiilosangele.org. 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 Richard.Donnelly@tdameritrade.com (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
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: wparmenter.com.
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
www.wellsfargo.com Please have your copy typed in Word in
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 www.investingdaily.com 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
pennfinancialgroup.com want to check on your ideas in advance. Email
articles and letters to the editor at
October --No Meeting email@example.com., or call the editor at
November TBD--Federal and State Income Tax
Law Update--Herb Farrington, Tax
and Financial Services
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: www.aaiilosangeles.org.
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
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Pro Forma is published for advising members of the groups' activities and for sharing information. All
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