1. Do not spread your money too thin.

My friend has a little over $200,000 invested in the stock market through 27 different Mutual funds. In my opinion, 27 Mutual funds is 27 too many collecting load fees, management fees, commission fees, operating and advertising fees. Diversity is important, but just as important is over-diversification. Also, in my opinion, $200,000 should not be put into more than 12 stocks, let alone 27 different Mutual funds.

For some “long term” would mean holding a stock position over the weekend. For others, it may mean holding a security for at least 1 year for the purpose of declaring a longterm capital gain, thus saving on taxes. The rigid definition of a long-term investment in thestock market would be holding a security for a minimum of 5 years, to as long as 30 years. I’m going to tell you my definition of a long-term investment in a security by telling you a story. A true story!

My Mother worked as a teller in a small bank in Dover, New Jersey. The name of the bank was called The DoverCommunity Bank. While working at the bank (she eventually became a branch manager) she enrolled in thebank’s dividend reinvestment plan, making purchases of thestock through pay-roll deductions from her paycheck. She continued purchasing the stock through the years, having thedividends from her shares in the bank reinvested into moreshares every quarter. By the time she left the bank (in theearly seventies) she had accumulated around 300 shares ofThe Dover Community Bank.

Fighting an opponent doesn't always mean opposing his force. When faced with overwhelming power, good fighters often use their attacker's force to their advantage, like in Judo, for example. There are better examples in martial arts, but Judo is probably the most commonly known and understood. It looks like the US strategy in this transcontinental currency battle is to give the euro's masters what they want - except way too much of it, way too quickly, in order to overload the euro system and make it collapse

The ECB was instituted by the euro's creators to preside over an orderly transition away from a dollar-dependent world to a more versatile arrangement wherein the euro fulfills a quasi-reserve function that will eventually give way to gold being the ultimate international currency reserve, with all the fiats freely floating against gold instead of against each other.

Steve Selengut
Every fall, good year in the market or not, I explain to my clients why the final calendar quarter is always such a special time in the stock market. [Just who makes this "good" or "bad" year determination anyway, the Wall Street institutions, the media, investment letter writers?] Several forces are at work, all of which are part of "the conventional wisdom" but none of which will lead to good investment decision making, at least not very often.

In first place at the individual level is the mad rush to take losses on equity securities, and just because they have fallen in price from the time that they were purchased. Assuming (as I always do) that we are dealing with "Investment Grade Securities", lower prices should more logically be seen as an opportunity to add to positions cheaply than as an opportunity to reduce the 2005 tax liability on our other investment earnings. Losing (your) money is only a good idea in the eyes of accountants, particularly if the reasoning for buying the security was sound in the first place, and assuming that the issuing company is still profitable. This exercise is comparable to barging into your boss' office and demanding a cut in pay!

Steve Selengut
It matters not what lines, numbers, indices, or gurus you listen to, you just can't “know” where the stock market is going or when it will change course. Interest rates are less volatile, but direction assumptions can be potent. Much too much time and analytical effort is wasted trying to predict changes in direction, when knowing what we can't know is such a powerful eye opener! Let's stop wasting time and get down to the business of investing in a manner that uses what we do know more productively!

We are going to develop an "all you need to know" graphic that will help you chart your way to investment success. Visualize a standard sheet of graph paper with just three lines on it. Two of the lines will be relatively straight, with an upward bias. The first line is the "Total Working Capital" line and it should grow at an annual rate of from 5% to 12%, depending on asset allocation. Line Two is the "Gross Realized Income" line, and it too should always trend upward. The third line is labeled "Total Market Value", and it will follow a somewhat erratic, wave-like path, constantly moving up and down slightly below the "Working Capital" line. If we observe the chart over an extended period of time, we would observe lines One and Two moving upward regardless of what line Three is doing, BUT, we would also notice that the "lows" of line Three begin to occur above earlier highs. Line Three will rarely be above Line One, BUT when it does move upward, a greater movement upward in the other lines should be expected.

Morningstar now provides Fiduciary Grades on mutual funds. How does Morningstar determine these grades? How can mutual fund investors use these grades to better manage their portfolios?

Mutual fund investors use Morningstar Rating™ as a sign post of mutual fund performance. These ratings have proved to be a valuable tool for objectively comparing the performances of different mutual funds. In 2003, New York Attorney General, Elliott Spitzer launched actions against some mutual fund companies for allowing their privileged clients to profit from improper activities such as late trading.

In the aftermath of these developments, investors realize that they need more than the historical performance based Morningstar Ratings to evaluate mutual funds. The Morningstar Ratings do not get at critical intangibles. How seriously does the mutual fund company take its fiduciary responsibility to mutual fund investors? How aligned are the interests of the mutual fund manager and the mutual fund company with those of the mutual fund investor? To address this need, Morningstar has embarked on a system called the Fiduciary Grade. Morningstar has so far graded about 635 mutual funds, including 500 of the largest ones. Morningstar plans to provide Fiduciary Grades for a total of 2000 mutual funds over time.

Krassimir Petrov, Ph.D.
In a previous article called “China’s Great Depression”, I postulated that China must necessarily fall into a depression, probably comparable to the American one from the 1930s, which in turn will spread to become a worldwide depression. In response, many readers asked whether in such a depressionary environment the price of oil would go up or down. The straightforward answer is that in an inflationary bust, the price of oil will go up, and in a deflationary bust—down. Of course, the response is evasive, provides no analysis, and answers an ill-defined question. Therefore, the goal of this article is to explain the importance of the question, to define its scope properly, to answer it with sound economic analysis, and to summarize our results.

Krassimir Petrov
Having recently completed Rothbard’s “America’s Great Depression”, I couldn’t help draw the parallels between America’s roaring 20’s and China’s roaring economy today, and I couldn’t help conclude that China will inevitably fall in a depression just like America did during the 1930s. The objective of this article is to present an Austrian argument as to why this must happen; to substantiate my arguments, I will be quoting Rothbard’s Fifth Edition where relevant.

Before proceeding any further, I would urge all readers who haven’t read Rothbard’s “America’s Great Depression”, to pick up a copy and read it. First, it is a real pleasant read, and Rothbard’s witty style of writing makes reading it fun. Second, the first part of the book develops the Austrian Business Cycle Theory, which is indispensable for understanding credit booms and their inevitable busts. Finally, the second part of the book elaborates the development and the causes of the Inflationary Boom of the 1920s and provides a basis for comparison with the economic policies of modern-day China.

Keith Damsell - Predicting market crash, Barisheff stocks silver, platinum, gold

If Nick Barisheff's economic forecast is right, the dark clouds looming on the horizon are lined with silver. And gold. And platinum, too. In an unusual strategy, the Millennium BullionFund, a two-year old mutual fund managed by Mr. Barisheff, has taken a pass on mining stocks and invests solely in the precious metals, themselves. "It's a totally different risk-reward relationship. A mining stock can go to zero. Bullion can't go to zero," said Mr. Barisheff, who, with a mass of wispy white hair, moustache, glasses and natty suit, looks like a Bay Street version of Albert Einstein.

Like the physicist, Mr. Barisheff is prone to deep thinking, too.

F. William Engdahl
"The whole world is hostage to the misconceived economic policies of a dollar standard out of control."

The US Senate just reconfirmed 78-year-old Alan Greenspan to an unprecedented fifth term as chairman of the world's most powerful central bank, the Federal Reserve, or Fed as it is known. The fact that President Bush re-nominated Greenspan underscores how vulnerable the global financial edifice is, and not how excellent a central banker Greenspan is. On the surface, world growth appears to be expanding finally, after severe recession and the 60% fall of the US stock market in 2000-2001. The Federal Reserve says it is so confident that growth in the US economy is taking firm hold, that it raised its key interest rate from a record low 1% to 1.25% last month, signaling it would slowly bring rates up to "neutral" levels of 3.5-4.5% over coming months. Around the world, strong growth of exports are being reported from Brazil to Mexico to South Korea. Growth in China is so strong the government is worried it is overheating. In Europe, the UK is expanding at the fastest pace in 15 years. France expects GDP to grow by 2.5%, and even Germany is talking about stronger export growth. The driver is US economic growth.