Mergent to bring out bond indexes

Here's good news for fixed income investors. Mergent, formerly known as Moody's, and Ryan ALM have teamed up to produce benchmark indexes of bonds.

Mergent already provides a great service to dividend investors through keeping its index of Mergent Dividend Achievers -- those are companies that have increased their dividends every year. The Dividend Achievers index forms the basis for a number of exchange traded funds, making it easy for income investors to buy a large number of companies that have consecutively raised their dividends (for U.S. companies, at least 10 years in a row). It also has version of Canadian and companies from other parts of the world which have raised their dividends at least 5 years in a row.

The press release did not give any details about what the bond indexes will focus on. Obviously, bonds don't raise their interest payments every year (don't we wish!), so they must be considering some other measure of quality.

You can learn more at:

Mergent and Ryah ALM bond index partnership



Mergent bond indexes
Mergent bond indexes

Define investing success

One common -- make that, "near universal" -- mistake people make with investments is to clearly define what they mean by "making money."

See, there're hundreds of investment techniques and methods of various kinds, and things to invest your money in. And they all "make money." Even HYIP scams make money for somebody -- everything can and sometimes does make money in the short term.

After all, any given investment can only go up or down. Sometimes they're essentially sideways, but sooner or later they choose one direction or the other.

So the odds are you can make money whether you choose investments for value, technical analysis, tea leaves, Gann squares, the Elliott Wave, astrology, Nostradamus, Edgar Cayce, growth, momentum, a gypsy medium, a crystal ball, dream analysis or any other nonsense. It also explains why so many investment newsletters stay in business. Some of their picks are winners and some readers put their money on those picks and are happy. So you should be careful about evaluating the records of anybody trying to sell you their stock picks or stock picking system or software.

But the real question is how much money, for how long, and for people actively buying and selling, how much of your gains is lost through transaction costs and paying capital gains taxes to the government.

That's why most people would be far better off to just put all their money into an S&P 500 index fund.

And in my opinion most people would be far better just putting all their money into investments that pay dividends or interest and holding on to them.

define investing success
define investing success

What goes up, comes down, and goes up and down again

The market had a terrific week last week. Now, of course, the question on everybody's mind is, will it keep going up this week.

Is that on your mind? I hope now. You have better things to do. Your job. Your business. Have fun with friends and family. Continue your education. Exercise. Watch a good movie.

Is this heresy? To some people, yes. I advocate that you just not care much what the market does unless it plunges so far that the overall economy is affected a la 1929. If it causes another Great Depression, then of course you should be concerned.

But these daily/weekly/monthly ups and downs just aren't worth the effort people put into tracking them. Even day traders. Last week the market went up big time, but I'm sure that most day traders lost money. And when it goes down, some day traders make money. What matters to all short term traders is how well they guess (or, to be nice, predict) the trends of the stocks or market they trade.

For you and me, we should just be buying up income-producing assets and focus the rest of our minds on living our lives. This of course should include doing well on our jobs, in our careers and in our businesses to increase our incomes so we have more money to invest.

But it doesn't include caring about the short term noise of the market. It goes up, it goes down. Care about your dividend and interest checks.






stock market noise
stock market noise

John Bogle interview

John Bogle started up the Vanguard family of mutual funds, known for their industry-shaking low expenses. I use that adjective "industry-shaking" for good reason -- most mutual fund companies want grab as much of your money as they can get away with. Bogle pioneered funds that take as little as possible, making their profits from volume.

Bogle understands that your longterm investment results are directly related to the price you pay, and keep paying in the form of expenses -- both front-end and back-end loads and annual management expenses. So he kept those down as much as possible. All investors owe him a debt of gratitude, because probably expenses at all mutual fund families are lower than they'd be if he hadn't founded Vanguard.

Bogle also made it easy for investors to simply buy the overall U.S. stock market through Vanguard's pioneering S&P 500 index fund.

This article focuses on Bogle's predictions for the stock market, and doesn't even mention the risks of investing in bonds, but he expects poor overall returns.

In my estimation, all the more reason to invest for income, because there's not going to be large returns from capital gains. The article mentions international diversification at the end, since Bogle apparently shares the general pessimism regarding the U.S. dollar's prospects. However, he doesn't even mention the greatest risk facing the U.S. (and many European) stock markets -- the retirement of baby boomers. What will happen when baby boomers want to sell their stocks for a big profit? Who's going to keep on buying?







John Bogle
John Bogle

A balanced income portfolio

One of the best known income investing "gurus" is Roger Conrad, who edits a free ezine UTILITY AND INCOME, as well as monthly newsletters UTILITY FORECASTER and CANADIAN EDGE, which is about Canadian Royalty Trusts.

So I was interested in his answer at a recent conference about how to have a balanced income portfolio. He favored income investors being in at least 7 or 8 different sectors:

1. Royalty trusts

2. Limited partnerships

3. Real Estate Investment Trusts (REITS)

4. Power and water utilities

5. Telecoms

6. Preferred stocks

7. Regional banks

8. Foreign utilities

9. Super oils (I'm assuming he meant stocks of big oil companies)

10. Selected bonds (with no details given, I'm not sure whether he includes Treasury Inflation Protected Securities

11. Convertibles in growth industries such as defense and mining.

An interesting list that I need to check out more. And he's not included some traditional high dividend payers such as companies with consumer brand names such as Altria and Coca-Cola. I have to wonder why not.

If you want to know more, check out his sites at: UTILITY FORECASTER and CANADIAN EDGE.

balanced income investing portfolio
balanced income investing portfolio

Subprime mortgages stories

If you're at all invested in companies doing subprime mortgages then you should know there's a risk, and you're buying stocks that pay dividends based on consumer goods you shouldn't see any drop in income.

In all the hand-wringing about problems in the subprime mortgage market dragging down stocks in the U.S., I have to wonder what's happening with American Equity Mortgage Company.

This company was started here in St Louis years ago by Ray Vincent and his wife. The importance of their respective roles has been argued at length, but there's no doubt that a lot of consumer awareness of this company was generated by the numerous radio commercials ending with how Ray pronounced the company phone number "ninety-nine, ninety-nine" in a sort of twang.

Years passed, and American Equity Mortgage made a lot of money going after the subprime market through radio commercials, and the Vincents' marriage came apart and wound up in divorce court. That's when Ray's radio voice was silenced, as the couple argued over who should get the money and the company.

That's not to mention the many other interesting aspects to their arguments -- him getting drunk and breaking up furniture, being thrown out of a Vegas casino, custody of their dog, her hiring a security service and then sleeping with the head of the company . . .

But there was a lot of money to split up. Finally, not long ago, their divorce went through. I think Ray got a lot of money but his wife retained control of American Equity Mortgage.

Now Ray's back on the radio with more radio ads and another mortgage company going after the subprime market, and another phone number with the last 4 numbers "ninety-nine, ninety-nine," though I've heard that his ex-wife is suing him over that, claiming it's an American Equity Mortgage. He claims it's a number and she has no right to keep him from saying a particular number, which makes sense to me.

Who says high finance is boring?


subprime mortgage lending
subprime mortgage lending

How does mining gold create new wealth?

Back in the late 1970s when predictions of economic doom and gloom were very popular, I read some of those books lauding the gold standard. In a lot of ways it makes sense to have money back up by some type of universal standard and store of value.

But I kept thinking -- if gold is true wealth, then the only way to create new wealth for the world was simply to mine gold. How did digging more of that yellow metal out of the ground add to the wealth of the world?

How does getting rid of that yellow metal destroy wealth? Does the world's supply of food or industrial capacity change if some gold is sunk to the bottom of the sea as when Spanish galleons were sunk by British ships during the 1700s?

There seems to be no comforting, solid yardstick for financial value. Everything is relative, including currencies. The value of the U.S. dollar can go up today against the Japanese yen but down against the euro. Tomorrow it may be the opposite. It's totally out of our control, but has very real consequences for businesses, consumers and travelers.

Yet as long as people are able to get their needs and desires met, the economy is functioning. And new products and innovations keep expanding our options and therefore our wealth. The real store of value is the "means of production" coupled with the ability to market what's produced to the end consumer. Consumer desires do change, so the challenge for businesses and investors is to keep up with that.



gold standard
gold standard