Category Archives: Video

I Will Give a Guide to ETF Investing on Monday

I will be giving a lecture called “Guide to ETF Investing” this Monday, January 28, 2013, to the New York Investing Meetup group.

This is a prepaid event and the in-person class costs $20. You must register and pay through PayPal (you can use a credit card) at: (this URL is good for in-person attendance and not the webinar).

Space is limited and all of this group’s previous classes have sold out. Please register early.

There is a webinar available for the class (you hear the presentation and see the slides, there is no video) and the cost is only $15. You can register for the webinar at:

The class will be held at the group’s meeting hall at 5th Avenue and 21st Street in Manhattan. You will receive directions and at least one reminder after you have paid and registered.

The New York Investing Meetup group offers a profitable alternative to Wall Street hype. It provides unbiased, practical stock market education and economic analysis from independent traders and successful investors. You can view their videos on You Tube at:

CLASS LEVEL: Beginner/Intermediate Investor

Cartoon About Creation and Redemption.

I found this neat video “The ‘Aha’ Moment – Understanding ETF Liquidity” on the iShares blog. This colorful little cartoon attempts to explain the creation/redemption process of ETFs with the analogy of flower bouquets.

The flowers are the shares of the individual stocks and the bouquets are the ETF shares. Overall, it’s not bad, but when it actually gets to the creation/redemption process the “Aha” moment left me a little confused, with a little bit too much on the flowers and not enough translation on what this means to stock shares.

Basically, an ETF share (bouquets) is like a share of the index it follows. It represents the value of all the underlying stocks (flowers) in the index. However, when the demand rises for ETF shares, they need to create more ETF shares. It sorta glides over the most important part. If the investor wants 500 shares of an ETF (500 bouquets) with 100 stocks (flowers) in the index, then the authorized participant needs to go the market himself to get, in this case, 50,000 flowers, 500 of each of the 100 individual stock (flowers) in the index. He can get them either from the market maker, the AP’s inventory, or others in the market. The AP takes this basket of securities (flowers) and trades them with the ETF (bouquet) maker, who in turn gives him 500 shares of the fund (bouquets), each holding 100 stocks (flowers). Because the 50,000 flowers are equal 500 bouquets it’s an even trade.

Was the video perfectly clear to you?

Europe Must Act Now to Avoid a Default, Buiter Says

Willem Buiter, chief economist at Citigroup Inc., discusses Europe’s sovereign-debt crisis, the exposure of banks to the region and the role of the European Central Bank in resolution of the crisis. He speaks with Tom Keene on Bloomberg Television’s

Buiter says what everyone inherently knows, but can’t say outloud, that “time is running out… I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it. So they have to act now.”

Vodpod videos no longer available.

5 Factors to Consider When Buying an ETF

The people at iShares have created a series of five attractive videos to help you look at the five main variables to consider when buying an ETF.

Yeah, it’s a commercial. But it’s very well done, very informative and not very long.

Shilling Sees Paradigm Shift From Spending

If you’re anything like me, you’re thinking this market has gone too high too fast to last. It has to fall. But what if I’m wrong? Will I totally miss out on the biggest recovery since WWII?

The Tech Ticker at Yahoo! Finance has had a very bearish bent for at least two months, maybe more. Almost all the experts they have on say we in for a serious correction. Well, all the experts I listen to. But I think the boys at Tech Ticker feel they don’t want to be cheerleaders in this rally and are trying to do their best as journalists to warn people about the dangers ahead.

Today they interview a guy named Gary Shilling who appears to own his own firm. They don’t say who he is or what he does and Aaron Task should be punished for not properly identifying this guy or why he’s a credible analyst. That said, he sounds smart.

And he is smart. He’s an economics consultant with a doctorate from Stanford University. According to his Web site he “set up” the economics department at Merrill Lynch at age 29 and served as the firm’s first economist. He’s also worked at the Federal Reserve Bank in San Francisco. And Schilling has a pretty impressive resume of making correct forecasts before major market turns.

Shilling says after “a 25-year borrowing and spending binge the ability of the U.S. consumer to borrow, especially against their house, is severely constrained.”

He adds with baby boomers needing to feather their nest eggs, savings not spending will be the order of the day for the next few years. On top of that, when people are unemployed they don’t spend a lot of money.

Check out the clip.

How does this tie into ETFs? I think for anyone worried about the state of the market but wants to be invested the smart thing to do is do what professionals do when they don’t know what to do. Buy the SPDR (SPY)

Are ETFs Too Powerful?

Mark Haines of CNBC asks Tom Lydon of ETF Trends whether ETFs are too powerful.

Most of this asks will ETFs take over for mutual funds. But then says some ETFs don’t do what they say. Again, this is a case of investors not knowing what they are buying. So, who’s fault is that?

Dow Kicks Out GM; S&P Still Holds It

GM Wagoner

Former GM CEO Rick Wagoner upon realizing what just hit the fan.

4 pm.

Late night I sent my story about General Motors and the indexes out to a few people, including some people at Dow Jones. This morning General Motors is pulled from the Dow Jones Industrial Average. Coincidence? I’ll let you decide.

Today, Dow Jones pulls GM and Citigroup out of the DJIA. The two companies will leave June 8 to give index fund investors time to adapt to the deletion and addition of two new components, Cisco Systems and Travelers. Since GM is getting knocked off the New York Stock Exchange tomorrow, GM will be going to an over-the-counter market, representatives for Dow Jones Indexes said they will use “the best available price source” for the next week. Can you imagine, the Dow being priced off the Pink Sheets. That’s the true Wild West of Wall Street. Oh, the humanity!

Since the DJIA is created by the editors of the Wall Street Journal, there’s no requirement for them to remove GM before today.

One thing to remember is that an index isn’t a portfolio. A fund or ETF is a portfolio. It lives in the real world and costs money to maintain. An index is just a construct that measures the market.

A Dow component since 1925, GM has been a significant part of measuring the stock market through the 1920s bubble, the crash of 1929, the Depression and every up and down of the American economy since. It’s only fitting that the index itself should suffer and be brought down by this once mighty component. If the index is the market and GM has been a huge part of the market and the American economy for so long, it’s appropriate that the Dow should hold it until today to give a proper measurement of the U.S. stock market and economy. But, that’s not good for funds that follow the Dow, such as the Dow Diamonds (DIA). They will probably suffer the loss even though they would have liked to get rid of the stock months ago.

However, the S&P 500 is rules based and a company needs to have $3 billion of market capitalization to remain in this “Large-cap index.” GM hasn’t had $3 billion since December. At the close on Monday, it was still in the index.

Here’s a great video from The New York Times: The Decline of G.M..

Meanwhile back at the other automobile bankruptcy in America, it appears Tommy Lasorda has been brought in as Chrysler’s vice chairman to make the Chrysler bankruptcy work. I wonder if they will bring in Joe Torre to fix GM.