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The Anti Free Lunch. Investing for retirement. The Bad and The Ugly. Broker Conflict Annuities Churning Pushing under writings Pump and dump Not fiduciaries Inflation Free lunch Manipulation Black Pools Ponzi. Mutual fund Analysis by forbes. Non-Taxable Account Taxable Account

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Presentation Transcript
the bad and the ugly
The Bad and The Ugly
  • Broker Conflict
    • Annuities
    • Churning
    • Pushing under writings
    • Pump and dump
    • Not fiduciaries
  • Inflation
  • Free lunch
  • Manipulation
  • Black Pools
  • Ponzi
mutual fund analysis by forbes
Mutual fund Analysis by forbes
  • Non-Taxable Account Taxable Account
  • Expense Ratio .90% Expense Ratio .90%
  • Transaction Costs 1.44% Transaction Costs 1.44%
  • Cash Drag .83% Cash Drag .83%–
  • Tax Cost 1.00%
  • Total Costs 3.17% Total Costs 4.17%
the bad and the ugly 2
The Bad and the Ugly 2
  • Mutual fund success 30%
  • How clients drive bad outcomes
  • How funds come and go
  • Mutual fund survivorship ( Review of Finance )
  • 20% Lower when dropped funds are included
  • Mutual fund broker commission
  • 4.5 % – 5.75%
  • Stock picking letters ( Like a tout at the track )
advisor and broker knowledge
Advisor and Broker Knowledge


Asset Allocation

Style – Sector rotation


The company line

What makes money for them

Why are they dealing with you?

who are the lions
Who are the Lions?


Federal Reserve

Pension Funds

Mutual Funds

Insurance Companies

Hedge Funds

fixed income securities
Fixed Income Securities

Banks - Checking, CDs, Safety Box

TIPS – Use for $ 30,000 / Person Year

Corporate Bonds in IRA

Tax Free Municipal Bonds or Funds

Diversify and Ladder

indirect ways to own stocks
Indirect ways to own stocks
  • Mutual funds
  • Good Managed
  • Bad Lower outcomes, tax
  • Closed end funds (Also works for bonds)
  • Good Managed
  • Buy at a discount
  • Not driven by their owners
  • Tax Efficient
  • Bad Sell at a discount
indirect ways to own stocks 2
Indirect ways to own stocks 2
  • ETFs Good Tax Efficient
  • Low cost
  • Do as well as the market
  • Bad Not managed
  • Smart Beta ETFs
  • Good Tax Efficient
  • Low cost
  • May do better than the market
  • Bad Added risk of the model
aaii recommended etf portfolio
AAII Recommended ETF Portfolio
  • As of June 30, 2014 Weight YTD 2013 Expense
  • Guggenheim S&P equal weight 500 RSP 40% 8.4 35.6 .40
  • Guggenheim MidCap 400 Pure value RFV 20% 6.5 38.3 .35
  • Guggenheim SmallCap 600 Pure Value RZV 20% 2.9 45.1 .35
  • iShares MSCI Frontier 100 FM 10% 9.9 25.6 .79
  • Vanguard REIT index VNQ 10% 17.7 2.4 .10
  • Performance 100% 7.7 33.7
  • For Comparison S&P 500 SPY 100% 7.1 32.2 .09
company fundamentals stocks
Company Fundamentals - Stocks

Income year and quarter – Sustainable?



Balance Sheet

Inventory - Square root rule


Sneaky debt items

Quick ratio

company fundamentals stocks 2
Company Fundamentals – Stocks 2

Other Yahoo items

In depth at


Pension liability

Auditor Qualification of opinion


Capital leases

Related party transactions

company technical analysis
Company Technical Analysis

Moving average

Look at 50 day and 200 day

Breakout of 50 above 200 is a buy signal


Positive are buy signals


Stock Technical Analysis web site

buying stocks
Buying stocks

Check the market for direction

Find candidates

Things you like

Graham Variations

Candidates from ETFs

Low P/S, P/E

Do Fundamental analysis

Use Technical Analysis for timing


royalty trusts
Royalty Trusts

99% Oil and Gas

Not actively managed

Earnings distributed

Depletion tax advantage

Will run out

Think of it as an energy cost insurance policy

Buy enough to pay fuel and utility bills


It represents ownership of property

Depreciation Tax advantage

Use all of the stock tools to pick

Look at their properties


Put is an option to sell

Use Puts as a way of buying

Never sell a put if you do not want to own the stock

Buy puts on sinking ships

Call is an option to buy

Sell covered call for income

Buy a call in place of stock for short term gains

Use both for Pending major disruption


forex www forex com

Fastest way to make and loose money

Trillions change hands every day

Can be irrational both good and bad

Use Vegas money not Investment money


Does not keep up with inflation

Costs to own

Not productive

Is insurance against rapid inflation

assent allocation
Assent Allocation

No debt: House, car etc.

Emergency Fund – Three months

20-40% Fixed when rates are market rates

50-70% Equities

5-10% Specialties

REITs, Closed end Funds, Royalty Trusts

0-2% Gambles

Do not have blinders


Civilization Collapses -Guns, ammunition and food

Inflation – Commodities, foreign stocks and bonds, manufacture of things that will appreciate and short term securities

Deflation - Longer term bonds, money and not Commodities

Expropriation – Investments outside of the US Formerly only a risk in third world countries


Understand it or don’t do it

Know the source of the money

Be bold when others are fearful and be fearful when others are bold

Never give a Broker control

Use only FINRA Brokers and SEC Advisors

Do not buy Annuities