1 Admittedly Squishy Investing Metric I Just Love

1 Admittedly Squishy Investing Metric I Just Love

People often have a hard time saying "sorry," don't they? That one little word — so fraught with weight, meaning, and of course, responsibility — is hard enough for the average person who's cut in front of you in a parking lot to utter, let alone the
See all stories on this topic »

read more

Your Questions About Is The Stock Market A Ponzi Scheme

Richard asks…

Don’t you love living in America where ponzi schemes are legal?

Have you noticed that the stock market resembles exactly what a ponzi scheme is. The stock market keeps a select few people earning billions in profit a year, trickling down like a pyramid scheme to the latest investors who get shafted. Best of all it is legal, and controls the economy so tightly it causes recessions / depressions.

Justin answers:

Yeah, no, soon as I finish school I’m moving to another country.

Donald asks…

Why did the baby-boomer generation in the UK decide to enrich themselves at the expense of their children?

Why did they decide to purchase buy-to-let properties, thus pushing up the price of housing to ridiculous levels, ensuring that their children could never afford to buy property? Why did they decide to have final salary pension schemes for themselves, but defined contribution schemes for their children, thus subjecting their children’s pensions to the vagaries of the stock market whilst enjoying a lavish retirement to be paid for by their children (baby boomer’s pensions are on average a shocking 108% higher than their contributions)? Why did they decide to have free university education for themselves, but subject their children to crippling levels of debt in order to gain a degree?

Justin answers:

The baby boomers are only partially to blame. It was the conservative policy of selling social housing stock at knock down criminal prices, and copying america by encouraging home ownership. The tory trick was to rig the market by not replenishing social housing stock, therefore creating a demand on limited property for this island. The baby boomers were simply led by GREED and the tories duly obliged. Tory capitalism is built on a ponzi scheme unless we break the cycle, we shall perpetually experience, a RECESSION. This time they have created an almighty GLOBAL RECESSION with no end in sight

Robert asks…

What is the investment scheme like a Ponzi?

Simple version is the first day I contact 1000 investors and tell half that stock market will go up tomorrow and half that it will go down. Next day I do the same, but only contact the ones who got the correct prediction from me the first day. I continue until I have a small group who have experienced that I am always right and I get them to invest with me. What is that scheme called?

Justin answers:

That would be the pre-lude to a confidence trick, the establishment of trust. I don’t think it’s considered a scheme of itself but simply part of other schemes.

Mighty labourious way of doing it though, after 9 iterations you have a track record of 9 correct calls in a row with one mark out of the initial 1,000 marks. I suppose if you keep pushing a scam with each iteration then it would be worthwhile. You’ll still need a scam to push.

Charles asks…

How can those OWS be allowed to spoil Wall Street’s chances of helping young people play the stock market with?

their Social Security withholdings? ……….They just need to watch out for Ponzi schemes, then they’ll be ok.

Justin answers:

Lol. Yea it’s the risky government bonds that you have to watch out for.

Thomas asks…

I am looking to invest in the stock market so I have no exposure to the United States.Where do you recommend?

After watching the 1999 collapse and now a near Depression because of the Banks running a giant Ponzi scheme I believe I would be better served with other countries. Any suggestions would be appreciated

Justin answers:

In 2001 and 2008 all world markets crashed. Some crashed harder than others and some have recovered more than others since then, but all are down significantly from their 2007 highs.

A large part of the reason for the 2008 crash was global banks (Citi, UBS, etc). Every market in the world was exposed to issues stemming from the ill advised investments of these large banks. It will be difficult to avoid banks completely no matter where you invest.

After all that, IMHO, the US is still the best market to invest in. It has the most open and liquid markets in the world. Outside the US, markets in Europe might be interesting (like London, Paris, or Zurich) but they will also be highly correlated to the US markets.

You might also try a World Markets ex US mutual fund (an index of the world markets without the US market included). I think Vanguard has a fund and an ETF based on this index.

Ken asks…

Does the current financial situation spell doom for the insane idea of privatizing Social Security?

As terrible as the current Social Security system is, can you imagine what would happen in a financial situation like this if those funds had been invested on the private market?

Now that things are changing, are any public figures still convinced that people can be convinced to turn their retirement money over to corporate criminals? Is anyone still pushing this Ponzi scheme?

Is it all over for the privatization lunatics?

Justin answers:

The government’s program is pretty much guaranteed to fail before I am old enough to see any of it.

So I would rather have the risky stock market than the guaranteed failure of the government program.

Powered by Yahoo! Answers

read more

Stock Investing For Newbies.

Prior to you can begin investing the initial thing you ought to do is make an assessment of your personal monetary position. Prior to you can invest in anything you need to have the essential richesse accessible. Perhaps the best way to tackle issues would be to checklist all your belongings i.e. real estate, cost savings, money, mutual funds and so on set against this your liabilities mortgages, loans and` credit card financial debt, this will give you an indication of the amount of capital you have accessible for investment.

Prior to you think about any type of investment it is a lot much better to distinct high charging debts especially if you are not using them to acquire an appreciating asset, such as the mortgage on your house. Credit cards, especially shop cards and personal loans with greater monthly payments ought to be paid off before you consider investing richesse in the stock marketplace.

As soon as you are certain that you have capital available for investment in the subsequent thing is to decide on your danger level, or to place it an additional way the amount of volatility in the stock price that you can reside with, and still be in a position to rest at evening! The general guideline is that the greater the risk the greater the potential acquire, that is why you ought to only commit in the stock marketplace with capital that you do not require for instant every day requirements. If you are only ready to consider a low danger and are pleased to take a correspondingly low return Money Marketplace Money would probably be most appropriate for you, the stock marketplace nevertheless provides the possible for a a lot higher acquire with a correspondingly higher danger.

Once you determine to start investing take it gradually at the starting, only commit part of your capital preferably no more than 20% in one or two stocks, this will permit you to get the really feel of things without risking everything, you may also wish to diversify your holdings and have a combination of shares and bonds and mutual money this will have the effect of decreasing your risk and of program will also reduce your potential reward.

The actual mechanics of investing in shares or mutual funds is extremely simple to do, online there are numerous investment services that offer up to date information about stocks and as soon as you are ready to commit it is very simple to find and no-frills on-line stockbroker who will work to 1 very reduced commission rates. If you require much more information and a higher degree of service you can always use of complete-services stockbroker but of program this will involve considerably greater costs.

Offering you take the time to completely investigated the topic prior to you commit your hard attained capital, stock marketplace investing can be very rewarding even for newbies.

read more

Butler: Successful investing is personal, not global

Butler: Successful investing is personal, not global

A friend mentioned that their CPA had warned them to jettison all of their growth funds and growth stocks because the fiscal cliff's imposition of higher capital gains rates would drive this investment category down in value. Look. The fiscal cliff, if
See all stories on this topic »

read more

Saletan: The shameful attack on Mitt Romney's investing

Saletan: The shameful attack on Mitt Romney's investing

He said of Romney and Paul Ryan: "Instead of investing in America, they hide their money in Swiss bank accounts and ship our jobs to China. Swiss bank accounts never built an American bridge. Swiss bank accounts never put cops on the streets or
See all stories on this topic »

read more

Your Questions About Disadvantages Of Gold Investment

David asks…

What is balance of payments? and why balance of payments be always in equillibrium?

Hey guys pls help me out. wid what balance of payments exactly is? and why should we have balance of payments in equillibrium? i mean its lucrative for ny country if there BOP is in surplus

financi4 answers:


Balance of payments can be difficult/confusing

What does it mean?
The balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country’s exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country’s status in international trade, with net capital outflow.

A very good article explaining this can be found in the Consise Encyclopedia of Ecconomics. It can be read


and starts

Few subjects in economics have caused so much confusion—and so much groundless fear—in the past four hundred years as the thought that a country might have a deficit in its balance of payments. This fear is groundless for two reasons: (1) there never is a deficit, and (2) it wouldn’t necessarily hurt if there were.

The balance of payments accounts of a country record the payments and receipts of the residents of the country in their transactions with residents of other countries. If all transactions are included, the payments and receipts of each country are, and must be, equal. Any apparent inequality simply leaves one country acquiring assets in the others. For example, if Americans buy automobiles from Japan, and have no other transactions with Japan, the Japanese must end up holding dollars, which they may hold in the form of bank deposits in the United States or in some other U.S. Investment. The payments of Americans to Japan for automobiles are balanced by the payments of Japanese to U.S. Individuals and institutions, including banks, for the acquisition of dollar assets. Put another way, Japan sold the United States automobiles, and the United States sold Japan dollars or dollar-denominated assets such as Treasury bills and New York office buildings.

Although the totals of payments and receipts are necessarily equal, there will be inequalities—excesses of payments or receipts, called deficits or surpluses—in particular kinds of transactions. Thus, there can be a deficit or surplus in any of the following: merchandise trade (goods), services trade, foreign investment income, unilateral transfers (foreign aid), private investment, the flow of gold and money between central banks and treasuries, or any combination of these or other international transactions. The statement that a country has a deficit or surplus in its “balance of payments” must refer to some particular class of transactions. In 1991 the United States had a deficit in goods of $73.4 billion but a surplus in services of $45.3 billion.

This article goes on to explain the concept of advantage/disadvantage of surplus and deficit.

I hope this helps

George asks…

what is the financial formula to measure risk (standard deviation) of gold investment?

i want to make some risk and return analysis, and compare gold and other financial asset such as bond, stock, reits commodities and etc.

financi4 answers:

First off, the formula for standard deviation is available on 1.2 billion websites. Doing a research project and not being able to find the formula for standard deviation on the web does not bode well for your research project.

Second off. You have some problems with this approach. Gold is inherently undiversified. Stocks are diversified. That means gold starts out at a disadvantage. “Bonds” can mean anything from short-term AAA debt to defaulted pennies on the dollar crap.

Third off, the risk/return analysis suggests that perhaps you can come up with a return. If you knew returns, then we have an optimality theory for portfolios invented by Markowitz in the 50’s (he won the Nobel prize for it). You may have noticed that almost nobody talks about their Markowitz optimizer. The problem is that the inherent return in equity is not known to say nothing of the inherent return in gold (although I’ll bet if I got liquored up I could argue eloquently that the inherent return in gold is the inflation rate).

Fourth, if you are looking at volatility going forward for a wildly traded commodity like gold, you shouldn’t be using standard deviation at all, you should be using implied volatilities from option data which is something like teh marekt’s estimate of forward vol. It’s like 40% for gold and less for all other assets you have listed.

Steven asks…

How to invest in gold?

Do i just buy gold and put it in my safe? how do i sell it later? is it really a very good idea? anyone have details on investing in gold? have you done it? did it work out good?

financi4 answers:

As others have said you can own paper gold or physical gold. Paper gold is like an ETF, gold stock, or other some sort of paper product which has a claim on gold. That claim may or may not be convertible to you in real physical gold. You can not buy gold from any bank in the US. If you live in Canada then you can acquire it from some banks directly.

I always take physical possession of my gold and in fact I just got back from the post office where I had delivered to me 6 ounces of gold. You want physical gold in your hands before moving into paper gold in any form. The best way to own gold in in the form of coins minted by government. In the US you want American Eagles or pre 1933 US $20 gold pieces in raw ungraded condition see examples here.




WARNING!!!! If in the US DO NOT BUY FOREIGN GOLD. The only exception to this is fractional gold such as 1/10th 1/4 ounce, 1/2 ounce Canadian Maples, Krugerrands, fractional gold from Australia, China, and European Union Philharmonics. Stay away from British sovereigns, swiss gold francs and other older foreign gold. Only buy American gold eagles and US $20 raw gold when ever possible There are many advantages to owning US material that would take time to explain. There are many disadvantages to foreign gold. Also stay away from Goldline because they push the foreign gold on people who are uneducated in gold buying.

I buy gold from only 2 companies and will consider using a third. They are American Gold Exchange http://www.amergold.com/ Patroit Trading Group http://allamericangold.com/index.html and the third is APMEX http://www.apmex.com/ Selling gold back is as simple as reversing the buying process. Just call the coin dealer and sell it back to who you bought it from or call some other dealer, broker or coin shop. The dealers work with bullion banks and will buy gold on the spot.

First off you need to understand that gold is not an investment. Gold is and acts more like an insurance policy. You are insuring that something in your portfolio can never go to $0.00. All paper assets have the ability to go to $0.00. This is what you are insuring against. Silver is also in the gold realm as well, so when talking about gold, silver is included.

Gold is money and a store of value. It is the “Currency of last resort” as Greenspan has stated many times through the years. Gold doesnt pay interest, dividends, doesnt restate earnings, has no lawyers, accountants, CEOs or CFOs lying to you on television. Gold doesnt ask for bailouts, doesnt go BK and cannot cook its books. Gold cant be debased or printed at the will of a company or governmetnt and holds its purchasing power.

Gold sits there as a store of value, is labor intensive, and a one ounce coin will not split into a bunch of half ounce coins at the direction of the pin stripped bandits on Wall Street. Also Gold is the ONLY asset class in the last ten years to increase in value and retain every dollar of its purchasing power.
The NASDAQ is up 1700% since it was created in 1971. Gold has outperformed all assets since we went off the gold standard in 1971. Gold would be even with the NASDAQ if it fell to $630 an ounce. Gold would be even with the DOW and the S&P 500 if it were to fall to $420 an ounce.

Gold has outperformed ALL asset classes since we went off the gold standard. No exceptions. However silver since 1928 has outperformed them all.

Investing in gold and silver for the short term is gambling. Dont do it. Putting cash into gold and silver for long term savings is the only way to go. History has shown that to be the best way to perserve wealth for 6000 years.

Alan Greenspan said before he became chairman of the Federal Reserve, “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold (from 1933 to 1975). If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” Alan Greenspan 1967

Paul asks…

What are the problems of full-reserve banking?

I have heard several arguments for this system since it is supposed to provide economic stability and eliminates many of the dangers of the banking system that we have today. But what are the issues with this system and are there advantages to keeping the fractional reserve system that we have today?

financi4 answers:

This is a rather nasty subject.

Those who object to fractional reserve banking do so primarily on the grounds that it allows the easy creation of money and so increases inflation. Many are people who believe that any price inflation is evil (not economically bad policy, but morally evil)

So, what would you have to give up in order to achieve the combination of full reserve banking and 0% inflation rate?

1. Economic growth.

If you have fiat money and full reserve banking and are willing to have an inflation rate greater than 0%, then this is not a valid objection. (The government can create the extra money you need for a small amount of inflation) But if you want to eliminate any inflation, if you want a gold-back currency, etc. Then it is the bigest cost.

2. Major government regulations. Without government regulation and close inspection, you can’t prevent the creation of money by lenders. (Historically, banking started with various institutions offering “promises to pay” to be used by travelers, etc. Without some way of checking that each and every “promise to pay” is backed by full reserve, you allow the creation of money – i.e. Factional reserve banking)

Again, not an issue if you don’t object to government regulations – though full reserve regulations would have to be much tighter than today’s financial regulation. Today there is a whole “shadow banking system” that is completely unregulated but still creates money by fractional reserve lending.

Some proponents of full-reserve seem to think the market will take care of this problem,
but that seems more than a little optimistic to me.

3. One of the primary (some would argue the single primary) functions of a bank is to convert short-term debt into long-term investments: the bank takes the money in checking accounts (which are short term because they can be withdrawn any time) and created mortgages (long term investments) with it.

Many argue that with full-reserve banking, this function of banks would be impossible.
If so, it would make the cost in economic growth still greater.

So, you pay these costs and what do you get in return?

The claim is that you get “greater stability”
But how?

1. Yes, it is true that private banks can no longer create money, but modern central banks already limit how much money the banks they regulate can create. Most of the instability problems have come from institutions and activities that aren’t regulated.

2. For stable prices, the supply of money has to match the supply of goods. So if private banks are not going to create money as needed, the central bank or the government will just have to do it on its own. And it is (they are?) perfectly capable of doing so.

So why do you trust the government to create the right amount of money but not control the amount of money the private banks create?

3. Of course, you can distrust the central banks and the governments to the point where you insist on currency backed by a commodity such as gold rather than have fiat money.

Now you no longer have price stability – a find of gold causes inflation
A long period with no new gold causes deflation and depression;
as does people choosing to hold more cash:

4. Then there is the question of bank runs. Full reserve banking is supposed to make them impossible. That may be true if the bank has a single building and all the money is right there. But what if the bank has several branches? Do you have to go to the branch where you opened your account? Are we going to give up electronic banking completely?

If the answer is that there will be central vault with reserves, then how is that different from the current system with the FDIC and Federal reserve guaranteeing deposits?

Mark asks…

A little help with Economics Application Questions?

1. What are some disadvantages to having a money system backed by a precious commodity, such as gold or silver?

2. What would happen if the market interest rate on loans were 12% and the government, feeling the rate too high, passed laws making it illegal for banks and other institutions to lend at a rate higher than 6%? How would it effect households, business firms and the government?

financi4 answers:

1. It puts a restraint on economic growth. For example, if the government wants to finance a greenhouse project that is expensive, the government can either use taxpayer’s money or deduct expenses from other public investments. But a money system that is not backed by precious commodities (known as the fiat system) can easily just print up a bunch of money and finance the greenhouse project without having to resort to either of the two options (which is a big hassle BTW).

However, being on the gold standard as its called, restricts growth as the government has to carefully make sure that any money spent is backed by the precious commodities.

2. Aggregate spending would increase at the new 6% high. Of course, since the 6% interest rate serves as the maximum now, aggregate spending can further be increased as in this case, the 6% is now considered to be relatively high. Therefore, if it is to be changed, the only other direction in which the interest rate can move is down – thus increasing overall spending in the economy even more.

Chris asks…

What is the best way to buy Gold, for example, how about eGold?

financi4 answers:

In my opinion there are two avenues open to you.

The index gold funds of which one is GLD. One share is the equivelent of 1/10 oz. Of gold. You buy it just like a stock. There is one disadvantage that you need to be aware of. There is an annual management fee on the fund.

The other avenue open to you that you may wish to consider is a gold mining stock. ABX is the most profitable. There are others. Buying shares in a less profitable company may prove a better investment if gold goes up another $100 an ounce because it will mean a more significan increase in earning for the less profitable company. Along those same lines there are mutual funds that invest in gold mining companies. You might wish to investigate those.

Those are the two investments that I believe other you the most potential.

Donald asks…

In what form is it best to own Gold?

As an investment, other then stocks? Bullion, coins, some other form?

financi4 answers:

Mostly depends how paranoid you are.

You may find this interesting reading:


You could buy gold coins at a local coin shop, or online.
Bars are harder to buy locally, but they can be purchased online.

Storing your gold at home has a big advantage and a big disadvantage: No matter what happens, you can lay your hands on it. However, you have to worry about someone breaking in and stealing it.

If you store your gold somewhere else, you may have to pay to store it, and you can only get it out when they are open for business.

Look at the Kitco “pool” accounts. They basically store your gold for free, but if you want the gold, you may have to pay fabrication fees, shipping, handling, and insurance.


Ken asks…

Is property a better investment than a mutual fund or gold?

financi4 answers:

It can be. It can also not be. It depends on the property. All three have advantages and disadvantages. It comes down to knowing everything you can know about an investment before you invest.

Michael asks…

Please explain the Advantages and Disadvantages of Common Stocks?

Please explain the Advantages and Disadvantages of Common Stocks


financi4 answers:

Advantage: Best investment vehicle over time. Outperforms gold, real estate. Average rate of return about 10% a year over the history of the stock market.

Disadvantage: Risk. You are putting your money into a company or companies that may make bad decisions or have bad earnings, causing the stock to go down.

Powered by Yahoo! Answers

read more