I recently went to see a local production of "The Emperor's New Clothes" which is based off a short story by Hans Christian Anderson where two weavers promise an emperor a new suit of clothes that they say is invisible to those who are unfit for their positions, stupid or incompetent. When the emperor parades before his subjects in his new clothes, no one dares to say that they don't see anything for fear that they will be seen as unfit or stupid. Finally a child cries out, "But he isn't wearing anything at all!" and the weavers are exposed for the frauds that they are. Sadly this happens in real life and market gurus who get airtime on popular financial TV programs are there for entertainment, not for actual substance. Make sure that you know the difference.
Almost 10 years ago in October 2007, I made my first loan on Kiva.org whose mission is to connect people through lending to alleviate poverty. My loan was to Mrs. Doung in Cambodia who needed $1,200 to purchase a motor-bike to transport her children to work. She was earning just $4.80/day in revenue and her husband was earnings $3.60/day. Such is life in the developing world and they were probably considered lucky earning more than $1/daylop;. In the end she made her payments on time and 20 months later, her loan was paid off in full. Since then I have made 2410 more loans in 79 countries around the world and I have enjoyed helping entrepreneurs grow their businesses and help their families in the process. It is thrilling to know that Kiva just passed an unbelievable milestone -- Kiva lenders created over $1 billion in loans! I'm honored that I could be a part of it. Here are 5 reasons why I enjoy making loans on Kiva.
The 4th time was the charm for mainland Chinese stocks which were rejected from MSCI for the past three years. MSCI announced that domestic Chinese stocks will be included in MSCI's global emerging-market index for the first time -- inclusion will begin in 2018. It is largely a symbolic victory for China as they will finally be included in the popular MSCI indices but with just a 0.7% weighting.
It is that time of year where college graduates enter a new phase of their lives. Yes that is me from 20 years ago after earning my Bachelor of Science in Business Administration from the University of Richmond. I can't believe that so much time has passed but I thought I would share 3 financial tips for recent college graduates because most people learn little to nothing about it in school -- which is pretty crazy to think that our kids aren't taught crucial life skills like finance but I will leave that topic to another day. Let's dive right in.
Last year, Malia Obama made headlines when the White House announced that she would take a gap year between high school and college. The hiatus from classrooms, textbooks and tests has been a common occurence in other countries like Australia, UK and Israel; and it has become an increasingly popular choice in the US. I didn't take a gap year but I studied in the UK during my junior year of college and backpacked across Europe with friends. Traveling certainly expanded my worldview and I would encourage my own daughter to consider a gap year. In today's global economy, it can only help to have more experience with other cultures and a perspective that expands well past any borders. The concept is that college bound students go on an adventure, do something meaningful and arrive as a freshman a year later more mature and focused. This can be a year of travel, community service, interning, language immersion or working -- or a combination of any of those.
I usually reserve Friday blog posts for lighter topics but with the FOMC meeting this week, I think it is important to touch on the Fed's plan to shrink its $4.5 trillion balance sheet. While the announcement was widely expected, it spelled out in greater detail plans to slowly unwind the Fed's sizable bond holdings. We believe that this step is very positive alongside interest rate hikes. The economy is doing well enough that the Fed can step back from its emergency measures, thus saving ammo for the next recession. We do not believe that this will cause a spike in long term rates but will monitor the situation closely.
You have saved your nickels and dimes over your career and have a good-sized nest egg to retire. Then you hand it over to a shady broker with tons of violations? I hope not but it definitely happens and more often than you think. Would you go to a firm where 30% of their brokers have FINRA violations? How about a firm where 70% have violations? Where there is smoke there is fire and personally I'd run from these institutions ASAP. It is hard to imagine that they are still in business.
When you go grocery shopping and walk down the cereal aisle, are you overwhelmed by the number of varieties? There are probably too many choices. Today the same situation exists in the stock market. Investors have so many choices that you literally have tens of thousands of alternatives.
In the last 10 years, there has been a dramatic shift away from mutual funds and into exchange traded funds or ETFs. The amount of mutual funds peaked around the year 2000 and has remained pretty constant around 8000 funds. In the meantime, the number of publicly traded stocks has declined steadily and the amount of ETFs has been on the rise. Today the number of funds and ETFs is almost 3x the number of stocks available on US exchanges. If you add them all up, you have roughly 13,000 potential investment options between stocks, ETFs and mutual funds.
During a bull market, it seem like every single year a chart will start circulating comparing the current price action to a terrible period like 2008, 1987 or even 1929. Well today is that time again. Yogi Berra said it best: "It's like déjà vu all over again." Here is the chart that is making its rounds on Wall Street.
I remember hearing about bitcoin for the first time about four years ago when there was news that someone used the digital currency to buy a Tesla Model S for $103,000 which was the equivalent of 91.4 bitcoins. That buyer may have a bit of remorse because if he held on to his digital currency, it would be worth roughly $260k today. This year the cryptocurrency is up 193% and it is up almost 4x in the last year. It has become one of the hottest investments of 2017. Now the question is: should you be a buyer or is it a bubble?
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