Market Myths

Fairy Tales Mislead Investors of All Types

The world of investment is a hothouse of myths that belie the reality of the financial markets as well as the real economy. The billow of fairy tales pervades the entire
landscape, ranging from stocks and futures to commodities and currencies.

The bluster of fiction serves to fuddle and stymie investors of all breeds. The players in a bind include newcomers dabbling in the market in their spare time as well as veterans bent on trading the whole day long.

The worst of the folklore can be traced to a pile of voodoo spawned by the high priests of financial economics. The tall tales spun by the hoary clergy run the gamut from the
mystique of random walks to the impossibility of superior returns.

Not surprisingly, the heap of bunk confuses rather than enlightens the luckless investors. In fact, a host of shibboleths do not merely distort the reality but contradict the facts entirely. The hail of obfuscation feeds a quagmire that’s in many ways more slippery and treacherous than most people suspect.

On the upside, though, the financial forum is not as fickle or mystic as it appears to lots of folks, be they wild-eyed tyros or jaded pros. To approach the field in a cogent way, the earnest player can take concrete steps to sort out the wheat from the chaff, the signal from the noise. In thrashing out a sound trail through the thicket of hokum, the first task of the investor is to thresh out the solid facts from the mushy yarns piled high and wide throughout the landscape.

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Market Cycles

 Causes and Effects of Waves 
 in the 
 Financial Forum and Real Economy 

A host of market cycles crop up in the financial forum as well as the real economy. In fact, the two domains of the virtual and tangible are interlinked in myriads of ways. As an example, the action in the stock market depends for the most part on events taking place in the external environment. In the opposite direction, the goings-on in the financial arena affect the vitality of the economy at large.

Looking at the big picture, the whole environment – made up of natural forces as well as human factors – plays a crucial role throughout the marketplace. A showcase lies in the impact of the weather on concrete goods as well as virtual assets. For instance, the onset of winter kindles the demand for heating, the prospect of which prods merchants in the commercial realm and traders in the futures market into bidding up the price of oil in advance.

In these ways a heap of cyclic themes show up everywhere, from stocks and bonds in the capital markets to crops and toys in the real economy. Moreover, the hardy motifs span the spectrum of time scales, from less than a month to more than a decade.

Read more on Market Cycles.

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Forecasting the Next Crash of the Stock Market

Timeline for the 2010s

For the wordly investor, the main event of 2011 so far has been the crash of the stock market in the U.S. and elsewhere, along with the bedlam in kindred fields such as commodities and currencies. As is often the case, the mayhem caused by the actors – be they part-time amateurs or full-time professionals – was for the most part a premature and avoidable ordeal for the entire community.

The smashup of the markets was prompted by the specter of a full-blown recession in the global economy in the near future. One reason for the jitters stemmed from the fitful progress of the industrial nations such as the United States, Britain and Japan. Another factor lay in the brouhaha over the debt crisis in Europe, along with widespread fears of a breakup of the euro plus the collapse of the regional economy.

For a number of years, the politicians in the developed world went out of their way to prop up the distortions in the marketplace that emerged during the run-up to the financial crisis of 2008. Instead of prolonging the malady, the politicos should have allowed the economy to heal itself. Better yet, public policy could have helped to undo the damage throughout the entire meshwork of production and distribution. Thanks to the counterproductive moves of the pols, however, the economy was doomed to struggle and flounder.

On a positive note, the crash of the stock market this year popped up in sync with the long-range schedule of meltdowns. As a result, the sequence of bombshells appears to be back on track despite the partial derailing linked to financial crisis of 2008. As things stand, the next crackup of the bourse is likely to occur around 2017 in line with the running sequence of flaps in the modern era.

Read more on Forecasting the Next Crash of the Stock Market.


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Analysis of Financial Markets

Fundamental and Technical Methods
for Gauging Assets

The analysis of financial markets can be divided into two broad types: fundamental and technical. The former approach explores the prospects for an enterprise in the real economy in order to gauge the outlook for its securities such as stocks and bonds. Meanwhile, the latter scheme examines the past and current behavior of a security in the financial arena as a way to divine the future.

To many folks, these two methods appear to be diametrical opposites. For this reason, along with personal tastes, investors tend to concentrate on one methodology or the other with scant regard for the competing scheme.

On the other hand, each approach has its strengths as well as limitations. For this reason, there is no need for anyone to rely solely on one or the other. In fact, a number of wily investors do take up both types of analysis to a greater or lesser degree. A case in point is the gamer who selects a stock based on the prospects for the underlying company, then draws on technical cues in order to pinpoint the best times to buy or sell the security.

Read more on Analysis of Financial Markets.


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International Real Estate for Investment and Retirement

A Primer and Guide to Top Resources 

for Investing in International Real Estate

An investor in international real estate has to consider a host of issues in selecting a property. To this end, the crucial factors span the gamut from global trends in real estate to local conditions in the target neighborhood.

This article presents a lineup of large-scale trends in the marketplace as well as key issues for the investor. A second, and related, task is to lay out a palette of pointers for avoiding common mistakes. A third feature involves a review of the top resources for investing in the property sector in far-flung countries.

Read more on International Real Estate for Investment and Retirement.


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Best Broker for Online Stock Trading and More

Choosing the Best Broker for Online Trading,
from Stocks and Options to Futures and Forex

The best broker for online stock trading – and handling other types of assets ranging from bonds and options to futures and forex – depends on the matchup between the offerings of the vendors and the needs of the investor. As an example, a novice in the stock market who deals only with equities ought to favor a simple system with a user-friendly interface. By contrast, a veteran who uses a rolling sequence of futures contracts to cut down the volatility of the common stocks within the same portfolio would require a system of greater versatility and efficiency.

Even in the case of a particular trader, the proper choice of platform will vary over time. The factors at work include the shifting mix of financial resources and the latest views on retirement planning.

As a backdrop, the brokerage industry relies heavily on the tools of information technology. Due to rapid advances in hardware as well as software, the trading platforms have a way of morphing over time. The same is true of the schedule of transaction fees.

In this roily setting, there is no single package that befits all investors. In fact, the best choice of platform may well vary from one year to the next even in the case of a particular person. As a result, picking a broker for online trading is not a one-off decision that remains forever fixed, but an ongoing task that evolves over time.

Read more on Best Broker for Online Stock Trading and More.

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Real Story behind Angel Investing

 Review of a Germinal Book 

 on Angel Investing 

Angel capital is a common source of funding for budding ventures. An example lies in the United States, where the level of financial support from business angels is comparable to the sum from venture capitalists.

Moreover, the practice of venture capital is still in its infancy in many other countries. For this reason, the business angel tends to play a larger role in the sponsorship of fledgling firms.

Despite its crucial function, though, the field of angel capital is obscured by a mantle of rumor and anecdote rather than fact and data. An exemplar lies in the U.S., where concrete data on angel capital is hard to come by. Not surprisingly, the scrappy state of affairs is even worse in the rest of the world.

On the upside, however, the dearth of knowledge has become less acute in recent years. A good example is found in an incisive program of research pursued in America. The probing has shown, for instance, that business angels have a penchant for investing in stable firms as well as newborn ventures. Moreover, the usual preference is to invest in a company that has attained a positive cash flow rather than a venture on the verge of bankruptcy.

As a group, business angels invest in a broad spectrum of industries in addition to the pacesetters in the technology sector. At the level of the individual, a cherub is apt to favor the industry they know best from their previous experience in the field.

The angels resemble other sources of informal capital in a number of ways. In particular, the cherubim usually have no more experience, expertise or capital than the friends and relatives of the entrepreneurs.

Read more on Real Story behind Angel Investing.


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Cruddy Information on Exchange Traded Funds

 Guide to Choosing Exchange Traded Funds 

 in Spite of Shifty Information 

The modern investor faces a raft of challenges due to the confounding nature of the information available on exchange traded funds (ETFs). One of the stumpers stems from the profusion of new-fangled vehicles for investing in a particular market. Another hurdle lies in the occasional outcrop of blighted information which may be incorrect, outdated, and/or misleading.

In the age of the Internet, one of the most popular resources for the investing public lies in the online portal maintained by Yahoo Finance. Another fount of information for the financial community is a rating agency named Morningstar, which has served for decades as a beacon on communal pools such as index funds.

Sadly, though, the stalwarts of this breed are known to serve up faulty data at times. To begin with, the information provided by two different sources may be incompatible with each other. Worse yet, the figures displayed at a single Web site are at times internally inconsistent.

For these reasons, the astute investor is obliged to mull over the data obtained before making any crucial decision. Due to the pitfalls in store, a sensible course of action is to compare a batch of figures against each other in order to assess their consistency.

Another safeguard is to give preference to elementary items of data over derived statistics. Starting from basic nubs of information, the target figures can at times be calculated manually with relative ease.

An example in this vein is to figure out the average return on investment for a particular security based on the initial and final values of the price record. Another ploy is to check a selection of numerical data against a graphic display in order to confirm that the figures appear to be compatible.

The knotty issues of this sort can be explored in depth by way of a case study involving the energy sector. The application deals with the selection of exchange traded funds focused on the market for crude oil. The standard bearer for each type of vehicle is presented, along with a review of its performance in recent years.

From a larger stance, the goal of the exercise is to uncover the problems posed by confounding data. A related task is to present a muster of guidelines for dealing with the stumbling blocks.

Read more on Cruddy Information on Exchange Traded Funds.

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Top ETFs for the Frontier Markets of Turkey, Thailand and South Africa

 Review of TUR, THD and EZA as 

 the Best Exchange Traded Funds 

 for Frontier Markets 

 During and After the Financial Crisis 

The top vehicles for growth include the exchange traded funds (ETFs) for the frontier markets of Thailand, Turkey and South Africa. The time frame for evaluation covers a crucial stretch of three years spanning the financial crisis of 2008 and its aftermath. In sizing up the performance of the funds, the key factors include the return on investment, the volatility of the pool, and the cost of maintenance.

As a rule, the vital features are interlinked rather than independent. As an example, a vehicle on the fast track to growth is prone to be more flighty than a sluggish one which plods along at a modest pace. Another sample lies in the cost structure: an index fund with a heavy burden of maintenance fees is prone to lag behind its rivals that have leaner structures.

In sizing up the index funds, a straightforward scheme is to begin with a list of the high flyers. Then the other factors such as risk and cost can be brought to bear on the appraisal.

For the tally at hand, the total return – consisting of the capital gain and dividend yield – covered a stretch of three years ending in March 2011. By this reckoning, the index fund for Turkey earned the gold medal.

Meanwhile, the pool for South Africa turned in a solid return coupled with a lower level of volatility. As a result, the African fund won the trophy for risk-adjusted returns.

In sizing up the efficiency of operations, the funds for Turkey and South Africa boasted a slim advantage over the pool for Thailand. On the other hand, the difference in maintenance fees was too small to have much of an impact on the rankings.

Read more on Top ETFs for the Frontier Markets of Turkey, Thailand and South Africa.

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Trends in Communication Networks and Optical Chips

 NeoPhotonics as a Showcase of Trends in 

 Communication Networks and Optical Chips 

Optical devices continue to play a growing role in communication networks. In the current setting, the upgrowth of the technology is spotlighted by the initial public offering (IPO) of NeoPhotonics Corporation.

The market for communication networks has enjoyed strapping growth for decades on end. In this environment, NeoPhotonics produces hardware modules which can be used to increase the capacity and reliability of high-speed networks while reducing the cost and size of the hardware. Due to the boons of optical devices on integrated chips, the technology is destined to to play a growing role in the industry.

The bulk of the hardware units to date rely on the hookup of discrete components in order to process the signals. The makeshift result is a clunky system marked by great complexity and high cost in tandem with low reliability.

A better approach is to combine a multiplicity of functions on a single slab of silicon. The benefits of a photonic integrated circuit (PIC) include high speed and high reliability.

On the downside, the initial cost of designing the hardware and building the production line is apt to be a lot higher. On the other hand, the unit cost associated with mass production can be far lower.

In a representative year, worldwide traffic on the Internet swells by 45% or so. According to one estimate, the flow of digital signals will burgeon at a compound annual growth rate of 34% until the middle of the 2010s.

From the standpoint of the vendors, the market for optical hardware is slated to expand along with the groundswell of digital traffic. Depending on the niche, the revenue stream is expected to rise at an annual rate of 15% to 42%.

Within the field of optical platforms, NeoPhotonics garnered sales of $155 million in 2009. The intake comprised an increase of 16% over the previous year. During the first 9 months of 2010, the revenues of $133M amounted to a rise of 19% above the corresponding figure for the previous year.

In terms of profits, the company suffered a net loss of $6.8M in 2009. During the first 9 months of 2010, however, the firm enjoyed a net income of $2.9M.

As is often the case after an initial public offering, the price of NeoPhotonics stock ran into a spate of turbulence in the stock market. Even so, the prospects for the equity look promising over the longer range. If the company can keep up its momentum on the business end, then the upswell of sales and earnings is bound to lift up the equity in tandem.

Read more on Trends in Communication Networks and Optical Chips.

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Volatility Slams the Return on Index Funds

 The Return on Index Funds  

 Rises with the Aloofness of the Investor  

 and Falls with the Volatility of the Market 

A high level of volatility in the market prods investors into fiddling with their portfolios, thereby slashing the return on investment for index funds. By trading in and out of the stock market at precisely the wrong times, the fidgety players end up shooting themselves in the foot.

Over the long haul, the sprightly segments of the market are apt to outpace the other branches. The dynamic niches include bantam firms, technology ventures, and emerging regions. On the downside, though, the spry markets tend to be more roily than the rest.

Unfortunately, the investing public has a way of dashing in and out of the market at just the wrong moments. As a result, the punters give up a great deal of the gains on offer in the lusty domains. The higher the volatility, the greater in general is the lag of the investor behind the target index.

On the upside, though, there is a straightforward way for the mass of investors to boost their earnings by a significant amount. The gamers could enjoy a plump increase in profits if they would stop meddling with their portfolios and simply ignore the goings-on in the marketplace. Moreover, the benefits of a laissez-faire policy grows with the turbulence of the market, along with the flightiness of the corresponding index fund.

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Wildcats of Finance

Turning a Wrecking Ball into a Productive Vehicle

for Investors and Other Stakeholders

Wildcat groups such as hedge funds have played a growing role in causing or hiking blowups in the capital markets as well as the banking system. A showcase was the crisis of 2008, which ended up crippling the financial complex along with the real economy. The bombshell obliterated trillions of dollars from each of the major stock markets of the world, destroyed millions of jobs in sizable countries, and nixed trillions of dollars through lost output in the global marketplace.

This guidebook exposes the reality behind the illusion of profits in the hedge fund game. In plain language, the primer explains knotty issues like the following.

• Why do the hedge funds destroy wealth?
• How can the operators enrich themselves by delivering worse results to their customers?
• Why does the true performance of the wildcats remain hidden from view of the investing public?
• How do the custodians slash returns and hoist risk for their clients as well as the financial community and the entire society?
• Why will the crash of 2008 and the global recession in its wake show up repeatedly, and cause greater devastation, unless proper safeguards are put in place beforehand?
• How can public officials protect the stability of the markets?
• How could the economic liability of hedge funds be turned into a social asset?
• How can shrewd investors grow rather than wreck their capital?

The main audience for the book consists of active investors and earnest policymakers. Other types of readers include concerned professionals in the financial community as well as thoughtful observers in all walks of life.

Given the carnage to the real economy caused by reckless schemes in the financial sector, the message of this guidebook is in fact relevant to every member of the society at large.

Read more on Wildcats of Finance.



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How Forex Affects an ETF for Global Investment

 Showcase of Australia and Korea 

In a global marketplace, the return on investment for an exchange traded fund (ETF) depends in part on the behavior of the foreign exchange (forex) market. Whatever the type of asset, the turnout of the currency in a particular country can have a big impact on the payoff for an international investor. It makes no difference whether the investment involves a financial instrument like a stock or bond, or a tangible object such as land or housing.

Many people have the impression that equities and currencies are independent classes of assets. While that may be true in principle, it’s hardly the case in practice.

For this reason, the global investor has to consider the linkages amongst different types of assets. The forces at work are examined in connection with a couple of stark examples involving Australia and Korea. The case studies happen to involve divergent cultures and distinct time scales, but the crucial patterns crop up regardless.

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Top 10 ETF List for Growth – Performance, Risk and Cost

In order to pick out a promising exchange traded fund (ETF) in an orderly way, the first task of the investor is to compile a list of the top performers. For this purpose, the crucial factors include the pace of capital gains, the level of price volatility, and the burden of maintenance charges.

In certain cases, additional features may come to the fore. A case in point is the yield due to the dividends thrown off by the ETF.

For the most part, the traits noted above are interlinked rather than independent. As an example, an exchange traded fund on a growth streak is apt to be more volatile than a sluggish one which plods along at a modest pace. Another sample is the cost structure; whatever the performance in the past, an index fund with a heavy load is more likely than not in the future to lag behind its rivals with leaner structures.

In tackling these issues, a sensible step is to begin with a muster of the top 10 funds by way of growth. Then the other factors such as risk and cost can be brought to bear on the evaluation.

Read more on Top 10 ETF List for Growth – Performance, Risk and Cost.

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Upsurge of the Index Fund and the ETF

An irony of the financial forum is that the mass of effort put into trumping the benchmarks of the market turns out to be not only feckless but in fact counterproductive. As a result, the average investor lags the market averages. The shortfall of performance applies to the corps of professional managers as well as the throng of amateur players.

For this reason, a growing number of investors have taken up the goal of simply keeping up with the market yardsticks. To this end, the express goal of an index fund is to track a benchmark of the market.

A popular type of index fund takes the form of the exchange traded fund (ETF). The advantages of the ETF lie in the cost-effectiveness of the vehicle as well as the convenience in buying and selling the shares.

Read more on Investment Funds.


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Forecast of the Stock Market and the Global Economy

Outlook for 2011 and Beyond

In contrast to common perception, the stock market and the real economy are intertwined in the present as well as the future – a linkage which can serve as the basis for forecasting. The process is illustrated by way of a timely survey: a forecast of the stock market along with the global economy for 2011 and beyond.

On the whole, the volume of economic output is likely to expand by roughly 4.5% over the year to come. The same is true of the growth rate for much of this decade.

In line with the norm, though, the expansion will be patchy rather than uniform. For instance, mature economies such as the U.S. will grow by a mere couple of percent per year after adjusting for inflation.

Furthermore, about 1% of the increase will stem from the buildup of the population due to the net flow of immigration over emigration.  In that case, the rate of productivity will creep upward by just 1% per year. The same outcome lies in store for the average level of income.

On the other hand, the spearheads in the emerging regions will gallop ahead at a blistering pace. In places such as China and India, the upsurge of economic output is set to reach 9% or more per annum.

Meanwhile, the exporters to the budding countries will fare somewhere in between the two extremes of growth. An example is found in Australia or Canada as exporters of raw materials. Another sample is Germany or Korea as suppliers of capital equipment or finished goods.

In the absence of any big surprises, the markets round the planet are destined to enjoy a refreshing upswing in 2011. Moreover, the outlook for the years to come is a bit less sparkling but still cheery even so.

On the upside, the winds of fortune smile upon the bourses of the world. During the run-up to the Presidential race, the U.S. government will whip up a storm of hubbub in a heated effort to fire up the economy.

For the most part, the hoopla will be a blast of hot air without much impact over the long range. Even so, any dumpage of money into the marketplace by way of fiscal programs or monetary schemes will serve to nudge up the volume of commercial transactions. In that case, the gush of spending is bound to be a tonic for the stock market, at least over the short and medium range.

As a result, the U.S. bourse is slated to surge by 15% or so over the course of 2011. Since the American market is a beacon for the rest of the world, the upswell will bolster other bourses throughout the planet.

Read more on Forecast of the Stock Market and the Global Economy.

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Starting Point for Investment Planning

Adapting to Change in Global Markets

The upgrowth of global markets gives rise to changing opportunities for investment planning. In this dynamic environment, an orderly approach to investing begins with a wholesome view of the big picture.

As it happens, the asset classes and market niches are interlinked rather than independent. For this reason, a grasp of the larger context provides a trusty backdrop for dealing with any portion in particular.


Making Sense of the Turmoil

The purpose of MintKit Investing is to serve as a staging area for investing in growth in a worldwide economy. To this end, the hub examines ground-breaking trends, promising opportunities, and crafty techniques across the panoply of financial markets and tangible assets.

On one hand, the full spectrum of topics covered by the hub is unlikely to interest all comers in a uniform way. Rather, some folks will lean toward certain topics rather than others.

Despite the diversity of concerns, though, a systematic view of the opportunities for growth is a useful foundation for every decision maker. Put another way, the shrewd investor keeps an open mind and considers a broad array of assets for investment.

Read more on Starting Point for Investment Planning.

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