Personal Finance | Michael R Lewis, ASJA

May 21, 2014January 1, 2024

Does Gold Belong In Your Investment Portfolio?

Humankind’s fascination with gold can be dated back as far as 4000 B.C., and for much of our collective history, possession of gold was a sign of wealth and status restricted solely to governments and nobility. Eventually, the first gold coins are believed to have initially financed long-distance trading around the world – around 500 B.C., Darius the Great of the Persian Empire is thought to have minted the first coin, the “daric,” to facilitate the expansion of his empire and the needs of his army as it moved into foreign territories.

Many countries came to use gold and silver coins as currencies for centuries. However, during the worldwide depression of the 1930s, every industrialized nation ceased using the gold standard, subsequently severing the close link between the value (and quantity) of gold and the value of money.

Despite this, gold continues to be a sought-after commodity due to its scarcity and reputation as a hedge against monetary or societal collapse. But does it deserve a place in your portfolio?

Gold in Modern Civilization

Today, gold is available in several forms, including the following:

Historic Collectors’ Coins

Minted as currency by many countries, these coins are now collected as much for their numismatic value as their gold content. Like other collector’s items, such as stamps and fine art, only experts, or those who have access to experts, should consider this investment.

Collector Gold Coins

Issued by countries and commercial businesses, these coins are priced according to their weight and purity. The more popular coins are the Canadian Maple Leaf, the South African Krugerrand, and the American Eagle.

Gold Bars

Available by weight of one gram, one ounce, ten ounces, and one kilo (32.15 ounces) generally with 99.99% purity, bars are also referred to as “gold bullion.” A standard gold ingot like that found in the U.S. Fort Knox Depository, and commonly depicted in movies, is seven inches long, three and five-eighths inches wide, and one and three-quarters inches high, and weighs 27.5 pounds. At current market prices, an ingot would have a value in excess of $500,000, much too expensive to support an active investor market.

Common Stock of a Gold Mining Company

Ownership in a company whose sole business is the search and discovery of gold, and the potential value of the element in the resources not yet produced is a common type of gold investment.

Gold Exchange Traded Fund (ETF)

A gold ETF does not typically hold gold as a commodity, but tracks its price with a combination of financial derivatives.

Gold Exchange Traded Notes (ETN)

A gold ETN is a debt security that’s value fluctuates based upon the price of the underlying index – in this case, the price of gold. While this investment includes credit risk, the benefit of being taxed as a long-term capital gain rather than paying ordinary interest exists with this vehicle.

Gold is not money or currency, but an investment which must be converted into money before it can be used to purchase other assets. Of course, individuals and businesses can agree to exchange an amount of gold for a service or product – as was done for centuries – but it would require negotiation about the relative value of each, a timely and potentially risky process for both parties.

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May 9, 2014January 3, 2024

Should I Buy or Lease a Car? New or Used?

The automobile occupies a special place in the American psyche. For most of the 20th century, it was the economic backbone of the nation, spurring growth and innovation across industries including steel, rubber, glass, and petroleum. It was the impetus for the geographic spread of cities and the dispersion of families across the continent.

The car symbolizes freedom, status, and utility. It remains the first major acquisition for many Americans, and obtaining a driver’s license is a rite of passage for every teenage boy and girl. While aircraft and railroad passenger miles have steadily increased over the years, auto passengers still log 7.25 miles for every airplane and rail passenger mile combined.

According to the U.S. Department of Transportation, there were 192,513,278 automobiles and light trucks registered in the United States at the end of 2011. In 2013, the average age of the typical American’s car on the streets was 11.4 years.

Even as new cars are added to the total, older cars continue to be maintained and driven on a daily basis. On average from 1990 to 2010, for every 100 new cars purchased there were an additional 220 used cars purchased and 23 cars leased. In 2012, approximately 7.25 million new cars were bought, with an additional estimated 16 million used and 1.6 million leased vehicles.

Considerations When Buying a Car

When buying your first car or trading up, there are a number of factors to consider.

1. Ego

Whose heart doesn’t beat faster to the deep rumble of a big V-8? Who doesn’t imagine rolling down the broken shoreline of Highway 1 in a red convertible, top down and hair streaming in the breeze? The trick to managing ego is understanding the trade-offs. A new Corvette is fun to drive, but it costs considerably more money than a Honda Civic.

Understanding the Impact of a Federal Minimum Wage Increase

On February 11, 2014, President Barack Obama signed an executive order raising the minimum pay for workers employed by companies that have federal contracts. The pay per hour would be lifted from $7.25 to $10.10 and go into effect on January 1, 2015.

As might be expected, the move ignited a fire storm of dueling statistics and questionable conclusions from both sides of the political spectrum. Consequently, the average American is likely confused about who the order affects and its potential impact on the economy.

The Driver for Change: Income Inequality in America

The words “income inequality” presuppose that the current distribution of income between various levels of the population is unfair, a conclusion both supported and contested by many. The facts are that an increasing share of pre-tax cash market income – such as wages and salaries, dividends, interest, rent, investment returns, and business profits – has gone to the top 1% of Americans, while the share of the bottom 90% has fallen since the mid- to late-1970s. According to figures compiled by Emmanuel Saez, economics professor at UC-Berkely, the top 1% received around 22.5% of all pretax income while the bottom 90% dropped below a 50% share for the first time in history.

Whether or not this represents a problem depends upon your perspective and political leanings. According to a Pew Research Factank report from December 2013, 61% of Democrats and 50% of independents said the gap was a big problem – versus only 28% of Republicans.

In 2012, former partner at Bain Capital and author of “Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong,” Edward Conard, aggressively argued that the enormous and growing income inequality was a sign that the U.S. economy was working, and, if we had a little more inequality, everyone – particularly the 99% – would be better off. According to the New York Times, Conard is not only a member of top 1%, he is a member of the top 0.1%, with an estimated wealth of hundreds of millions of dollars. Are Mr. Conard and his 1% cohorts just protecting their assets as their opponents claim, or do they have the solution for a better America?

On the other side of the issue, Nobel laureate economist Joseph E. Stiglitz claims in his book “The Price of Inequality” that rising inequality is putting a brake on growth and promoting economic instability. British epidemiologists Kate E. Pickett and Richard G. Wilkinson, writing in “The Spirit Level: Why More Equal Societies Almost Always Do Better,” go even further to claim that income inequality undermines social bonds, contributes to mental illness, and increases obesity and teenage pregnancy while fostering crime and lowering life expectancy. Conservatives claim such opinions are akin to Chicken Little’s hysteria that the sky is falling – but what if they’re right?

A third perspective on income inequality was presented in a 2013 Forbes article by Shah Gilani, a hedge fund manager and a former manager of the futures and options division of Lloyd’s Bank. Gilani proposes that the tax code should be revamped and simplified while improving educational opportunities and skill-based opportunities for the middle class. He argues that the middle class are the real victims of inequality, and if not helped they “will increasingly slip into poverty and the backbone of America’s increasingly brittle skeleton will turn to dust.”

Day Trading for a Living – Benefits and Risks

In the days before personal computers, instantaneous communications, and sophisticated software, many Wall Street brokerage firms employed veteran traders to sit and interpret the paper tapes of stock transactions that spewed from mechanical tickers across the city. These traders, known as tape readers, would note the price and volume pattern of individual trades in the hopes that they could identify opportunities for quick profits. For example, if the latest trade of a stock differed significantly from previous trades in either price or volume, this might be interpreted as the work of insiders acting before news that could affect the company is announced. The tape readers would then act similarly, hoping their intuition was correct.

Since that time, the stock ticker has been replaced by a massive electronic network capable of analyzing and reporting trade data throughout the world. That technology has led to changes in the way the investment industry functions. One of the more unique positions in today’s landscape is that of the day trader.

Definition of Day Trading

By definition, day trading is the regular practice of buying and selling one or more security positions within a single trading day. No position, long or short, is held overnight. Day traders frequently deal in thousands of shares, often with leverage, and look for small-percentage profits on each trade – often less than $1 or $2 per share. They take positions based upon their analysis of a stock’s probable price direction within the trading period.

Popular day trading strategies include the following: