ETF Prime Archive

Join us at the library

Next week, in conjunction with the Missouri Council on Economic Education, we will be putting on a free investment seminar at the Plaza branch of the Kansas City Public Library.  The seminar starts at 7:00 pm and should run till about 8:00 or 8:30.

The seminar will include an overview of current economic developments and how investors can position their portfolios in these turbulent economic times.  After the presentation, we will be available for a question and answer session along with Mike English, the President of The Missouri Council on Economic Education.

 The seminar is open to the public and is primarily for people who do not have access to an investment advisor.  Having said that, we certainly welcome anyone who has an interest to attend.

Economic (March) Madness

In the spirit of March Madness, The Motley Fool decided to have some fun creating a “Blame Bracket” to determine who is most responsible for the economic madness we’ve all been experiencing over the past year.  While the “committee” did an admirable job selecting the field, there were surely a few disappointed “teams” left out of the dance (short sellers and the Nixon administration for canceling the Bretton Woods system come to mind).  Nevertheless, the tourney got underway without any monumental upsets in the first round including Wall Street sailing past Main Street and the SEC outlasting Fannie and Freddie.  Now down to the Elite Eight and with the clock striking midnight on the Cinderallas, the remaining heavyweights will battle it out for the right to wear the recession’s crown.  Here are the predictions:

Elite Eight contests:  The Media over Bernie Madoff, Repealers of the Glass-Steagall Act over Inventors of Derivatives, the SEC over Congress, and Wall Street over Geeks Bearing Formulas

Final Four:  Wall Street over The Media and the SEC over Repealers of the Glass-Steagall Act

Champion:  Wall Street over the SEC

So, there you have it.  At the end of the day, it was Wall Street who over-leveraged, Wall Street who blindly used derivatives and relied on quantitative models without understanding the risks involved, Wall Street CEOs who misled the media on the financial health of their companies, and Wall Street who used its political influence to limit the regulatory power of the SEC.

ETF Dividends

There is a brief story yesterday in the USA today explaining how ETF dividends work. 

In addition to trading on exchanges like stocks, ETFs also share other features.  The process for paying dividends is just like stocks: there is a date of record (the date in which the owners of the shares who will receive the dividend are determined), an ex-dividend date (the date an ETF is traded without the benefit of the current dividend is attached to the share), and a payments date (dividend is paid).

An Inconvenient Debt

A day after I suggested ignoring all the talking heads on TV and just watching M2, I came across this hilarious youtube clip.  I’ll admit I had never even heard of Glenn Beck before, but he’s explaining in a more creative way what is going on with M2.

Ignore TV, Watch M2

The media is full of noise from talking heads debating the merits of TARP, bank bailouts, gov’t debt buybacks, foreclosure prevention, stimulus checks, Wall Street bonus babies, etc.  It’s impossible to turn on the television and not find someone who is an expert on what the Treasury and Fed should be doing.

I don’t think anyone knows how things are going to play out, and even Bernanke is making this up as he goes.

So I take what most people say with a grain of salt.  But I do like to listen to statistics.  And there is one statistic that tells us a lot about how a portfolio should be constructed over the next few years.  That statistic is the M2 money supply.

M2 is generally regarded as the best measure of the total amount of money in our economy.  And there has historically been a relationship between long-term money supply growth and price inflation.

The Fed publishes the weekly money supply at its website.  As of last week, the seasonally adjusted level of M2 was growing at annualized rates in excess of 15% over the previous 3 and 6 month periods.  15% is a big number and should tell an informed investor that they should include some inflation hedges in their portfolio.

So don’t get too caught up in the daily debates on TV, including whether or not we are going into a deflationary spiral or headed for inflation.  Keep an eye on M2.  Don’t be surprised if it starts to acclerate.