ngps[at]netmemetic.com (Ng Pheng Siong) wrote in message news:<bnm37j$odf$1[at]mawar.singnet.com.sg> ...
- quote -

I don't know very much about them, but believe they are highly
marketed because they absorb big fees: those costs are something the
investor must bear, to reward the people who sold them to him.

Therefore, my preferred strategy for safety preservation is to invest
a certain proportion of my savings in high quality short term
corporate bond funds, which generate a small premium over US
government securities but are pretty safe (as long as this is a
portfolio, rather than individual holdings). The other asset of
interest is TIPS, which guarantee a long term return with no risk.

The rest of the money goes into equity index funds (with a few punts
on value funds). Although this part of the portfolio may change in
value by 30% in a given year (or 50% overnight ;-) in the long run,
the low costs and the power of accumulated dividends being reinvested
will, history says, produce good returns.

Alarms about US corporate accounting and stock fraud are as inevitable
as each bubble. What is important to keep in perspective is that it
is unlikely US companies are fundamentally crooked (in aggregate) and
that society's enthusiasm for untrampled capitalism waxes and wanes.
Right now I reckon we are in a particularly cronyist phase (Enron),
which will be followed by a Theodore Roosevelt type reformer.

While the US market PE is so high, I am less bullish about stock
markets and would favour a relatively low exposure (ie 50% say) and
relatively more short term bonds (I stress short term).

But I don't worry that US capitalism and hence the rationale for
owning common stocks is about to disappear, any more than it
disappeared during the crises of the 1970s: things were far, far worse
then.

According to darkness <darkness39[at]yahoo.com> :
- quote -

I've just read this book "Blind Faith" by Edward Winslow. Chapter 3 is
entitled "Faith in Corporations" and paints a stark picture on stock option
accounting, pro forma accounting and "big baths".

The later part of the book talks about principal-protected investments like
market-linked CDs.

What do you think of these instruments?


--
Ng Pheng Siong <ngps[at]netmemetic.com
http://firewall.rulemaker.net -+- Manage Your Firewall Rulebase Changes
http://sandbox.rulemaker.net/ngps -+- Open Source Python Crypto & SSL

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<erinpv4iplk3t7rv14ud45mbh33d40tkvd[at]4ax.com> ...
- quote -

Indeed so. The case is not for the US (which will most likely
continue to do well, just it is a reality of economics and mathematics
that places like China and India will 'catch up') doing well
economically, the question is what happens to the US stock market.

(I have worries about the debt loads of US consumers and institutions,
I have worries about the scale of future government deficits, I have
worries about the US energy position, but history says it is the thing
you do not see which hits you.)


on the us market, I think we can say the PE is high, and is
discounting a very robust recovery. A rough measure of future returns
from stocks is 1/PE, and that says that US stocks are still not very
attractive.

So turning to the original question: no the last 25 years does not
convince me that a US investor should not hold foreign stocks.
Because you cannot use the last 25 years to forecast returns on the
next 25 ((except to the extent that it is historically true that 25
years of good performance is usually followed by 25 years of less good
performance, and vice versa: ie stock returns exhibit weak form mean
reversion).

- quote -

On Sun, 26 Oct 2003 07:10:26 CST, "Nashville Pete"
<poremski[at]comcast.net> wrote:

- quote -


US woes snipped -


Proponents of the "Wall of worry" theory thank you.
<grin

-HW "Skip" Weldon
Columbia, SC

There are three factors that must be added to your analysis which seems to
be mostly based on past history:

US global economic dominance continues to fade at an exponential rate.
Nation states have courage now to do what they never dared to do in the
past.

1. China
China is Nuclear, puts a man into space and manages their currency any way
they want no matter what Mr. Bush says. China is a heavy investor in US
equity and debt and will soon sell off some of this and diversify a large
part into Euros as she aims for new growth in the soon to be
larger-than-the-US Euro-zone market.

2. Middle East Oil and the fall of the Petro-dollar as the sole oil currency
Iran and Russia will sell their oil for both US$ and Euros for the first
time thus breaking the 50 year dominance of the petro-dollar as the sole oil
currency except for when Iraq sold oil for Euros between 2000 and 2002 with
UN approval

3. Unrest with US hegemony in South America and stirrings in Brazil,
Venezuela and Argentina.
Argentina has just thumbed it's nose at the IMF on it's recent loan
repayment since it needs no additional US$ for oil because Venezuela will
now supply oil through a newly set-up barter arrangement and will not
require payment in US dollars.

Things are changing and our thinking had better change too, else we small
investors will be seriously hurt. Scandals and scams are being uncovered in
US corporations, accounting firms, stock exchanges, and mutual fund
managers, across the board among the Wall Street financial cabal. It seems
to me that the most risky decision is to stay too heavily in US equities and
debt and in investments and savings denominated solely in US currency. I
follow my own thinking even to the extent that some of my savings are in
CD's denominated in both Australian dollars and Euros. (Guaranteed by the
FDIC)





"darkness" <darkness39[at]yahoo.com> wrote in message
news:17f41cc6.0310260151.624e7200[at]posting.google.com...
- quote -

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<k86ipvge2venn8c29a8co2u91o8t14jibm[at]4ax.com> ...
- quote -

Remember that this is data mining. ie it so happens in the last 25
years that the US stock market has outperformed just about every other
stock market in the world (I think Sweden has done better?). Past 25
years performance is *not* a good way to forecast future performance.

Taking a look at where the US market is now, and its PE and dividend
yield, I think it would be fair to say that the superior growth
prospects of the US economy are largely in the price. Coupled that
with continued pressure (upwards) on executive compensation (less
profits for shareholders) and continued pressure (upwards) on the size
of the government sector (all of those deficits will come home to
roost, plus the growth in Medicare and Defence) and I would
hypothesise that the corporate profit share of Gross National Income
is not likely to increase substantially. The great PE rerating of
American shares, that began with deregulation in the Carter years,
Volker's victory over inflation and Reagan's rationalisation of the
tax regime (and the end of the Cold War dividend) is just about over.

A related theme has been corporate governance. The US has had the
most transparent and beneficial legal and institutional arrangements
towards minority shareholders: SEC, GAAP etc. Although this is still
the case, the gap seems to be narrowing in many countries (eg
Continental Europe or Japan) which gives optimism that excess Free
Cash Flow is more likely to be paid out to shareholders by companies
based in these countries. No one in Europe had heard of Shareholder
Value 15 years ago, now most companies at least pay lip service to it.
Again, the US has the lead, but the gap seems to be closing (a bit).

So the degree of outperformance by the US over global markets as a
whole is likely to be less than it was. This is not forecastable,
except to the extent that we can look at PE ratios.

Turning to currency, the US dollar has devalued massively against the
DM and the Yen in the last 30 years: in the early 1970s, the yen was
hovering around 330, I believe (v. 100ish now). This has been an
important contributant to overseas returns for a US dollar investor.
What is happening I think is that the US political economy is very
much tilted towards high current account deficits, low savings ratios,
and relatively higher inflation than a number of other country
currencies, and this forces the US currency down, long run. The US in
some sense has characteristics of an emerging market (eg much better
demographics than Europe or Japan, due to immigration) which tilts its
politics towards weaker dollar, bigger budgetary deficits, higher
inflation etc. in the pursuit of higher economic growth.

Lastly to correlation. The benefits of international equity
diversification have undoubtedly shrunk as international capital
markets have become more correlated over the last 20 years or so. If
Wall Street crashes this afternoon, London will crash the next
morning.

US companies with large overseas earnings tend to trade more like the
US market, than they do overseas markets. This is a well researched
datum in international finance. So simply owning US companies with
overseas earnings does not diversify away from the US stock market.


So the likely relative returns of foreign investing will be higher
relative to the US in the next 25 years, although the entire gap may
not close. The diversification benefits will be lower, somewhat
negating the volatility reduction.

Turning to the actual purpose of savings, ie to meet future
consumption, the percentage of imports in the US consumer basket has
grown (but still remains small by the standards of most developed
nations). This argues for having income streams (or future income
streams ie expected future dividends) in foreign currencies.

As to the practical matter of investing overseas, my general take is
that for portfolios of less than $150k, say, a 10% holding in a good,
diversified foreign stock fund is probably enough diversification.
The theoretical optimum is probably something like 25-35% in (unhedged
currency) foreign assets. The problem at the moment is no stock
market looks cheap although, for example, German euro paying bonds are
probably fairly safe (Europe mired in recession). Yes Europe is
broadly on a much lower PE than the US, but the earnings prospects are
much worse. Yes emerging markets look interesting, but history shows
they are very cyclical, and there are all kinds of signs they look
toppy.

One needs to be opportunistic, and rebalance fairly frequently.

On Fri, 24 Oct 2003 07:07:14 CST, "Nashville Pete"
<poremski[at]comcast.net> wrote:

- quote -

The other day someone was visiting on international investments. Her
take was interesting:

She said that her 500 Index already had some international exposure in
the form of US companies with international business. Besides, she
said, while international might add diversity and thus reduce
short-mid term volatility, there was no evidence that she had seen
that it actually boosted long-term (25 years) returns.

Comments?

-HW "Skip" Weldon
Columbia, SC

In your position I would look for a mutual fund providing a broadly
diversified asset mix beyond that of a simple index fund. Such would include
both US and foreign equities and debt (corp and govt instruments) as well as
precious metals and some real estate. All will be held and managed in one
mutual fund. Look at USAA Cornerstone Fund USCRX I hold some myself and
contribute to separate funds for my children. As you learn you can add to
this.


<steve[at]pcwhip.com> wrote in message
news:12552fcb.0310230807.410ba523[at]posting.google.com...
- quote -

In article <12552fcb.0310230807.410ba523[at]posting.google.com> ,
<steve[at]pcwhip.com> wrote:

- quote -

You want funds that have no up-front costs, no back-end charges, and
as low of on-going expenses as possible. As far as the actual index
goes, you want a broad index, at least the S&P, and better yet the
Wilshire 5000. Don't go with any specialized or narrow index until
you understand them enough to know for sure what you are doing.

As far as specific suggestions go, if you want a mail-order type
place, you are hard pressed to beat Vanguard or Charles Schwab (where
you can still get the Vanguard funds). If you want to work with
a broker on this, or a real live person, then any stock broker or
bank can help you out. If they cannot do the Vanguard index funds,
then look at Exchange Traded Funds. The Viper is the one you want
to start with, stock symbol VTI. You will pay transaction charges
in and out with ETF's, but the on-going fees are tiny (0.15% or so?).
The transaction charges are the cost of dealing with a real person.

I agree on the Roth to get started. The general advice you find
here is to maximize the 401K or 403B you have at work, up to the
point where you meet any match. Then do the Roth. Then look at
a traditional IRA. Once you max them out, go back and max out
your 401K or 403B. Also note that you can contribute for your wife
if you are married.

There is nothing wrong with being a rookie. Everyone starts there
at the beginning. The big thing is not to be afraid to ask questions,
read as much as you can (and what you are interested in, don't make
it painful), don't get talked into anything you don't understand,
and limit the downside in any deal you do. You can try more things
as you get more saavy, but for now, it is good to build a nice solid
base of index funds.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

Hi all, hope you don't mind a question from an investment rookie. I am in
the process of learning about investments and have decided that the ROTH is
the best way for me to go (at least as a starting point). What I never
realized is that most of these are 'self-directed' which means that after
making my contributions, I then need to make the investment decisions as
well.

I'm basically clueless when it comes to sorting thru all the myriad of
mutual funds and other possibilities....from what I've read, I believe the
smartest thing for me to do would be to buy into an index fund and then
proceed further as I become more educated....

So, the inevitable question - which Index fund? There are hundreds of these
as I'm sure you already know....I am not interested in becoming an
investment genius, however I have the feeling that I need to be one, in
order to invest on the proper path....

Any advice any of you could offer would be greatly appreciated!

Thanks!