muses of the moment

January 9, 2010

Warren Pollock on Real Fund Value

Filed under: 401K and IRAs, DOW and S&P500, Economic Confidence Model Cycle, ETF, Stock Market — totallygroovygirlfriday @ 6:50 am

William Pollock posted a very good video about the US Stock Market and investing in stocks and funds.

Click here for the link to the video (about 5 min).

There is a lot of information in this video, maybe too much for some. But there are some very important issues that effect your 401k and retirement funds. If you are going to have money in a 401k, you need to understand the basics of market investing. If you don’t, the financial industry will take your money.

Warren uses an example of GUT to show that the fund believes that the mire fact that they bundled some utility stocks together added 42% to the value. This is ridiculous. That 42% can and probably will evaporate at any time. If you are going to invest in funds, at the very least, value the individual stocks and add them up to see if they match the price of the fund. This is a simple way to figure out of a fund is overpriced.

Warren explains how to short (or hedge) a stock or fund. You will notice that it is hard for a regular investor to do this and not worth it because of the borrowing costs. If the market starts to implode again, you have no way to hedge against that scenario. You can only sell on the way down, guaranteeing some sort of loss.

Very soon “paper” investments will become unpopular in this winter K-wave cycle (once the herd finally understands that they are set up to fail). Foreign money is already out of the US market, because they understand this. Let Goldman Sachs trade with itself, do not risk your savings.

What Warren refers to as “starving the beast”, groovygirl refers to “taking your ball and going home”. If today’s systems and organizations are not playing fair, go find someone/somewhere who is.

Side musing: grooovygirl is really ill from listening to Big Media saying that the recession is over, jobs are a “lagging indicator”, and the jobs number is good this week. Please do not be taken in. As John Williams says, by mid 2010, the truth will be clear to all. We will move from a recession to a depression.

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