By A.I. Miguel

Whether your objective is to hedge US dollar inflation, diversification of monetary units, or speculation, the only way to trade foreign currencies in the past was via the futures market.  Without getting into the reasons why, this route was inappropriate for many.  Today, with the advent of the exchange traded fund (ETF), this avenue is open to practically everyone.  These securities trade just like a stock.  All you need is an account at a discount stock broker. Below is a list of various currency ETF’s, along with their respective sponsors. 

Name, Symbol:

CurrencyShares Australian Dollar Trust   FXA
CurrencyShares British Pound Sterling Trust   FXB
CurrencyShares Canadian Dollar Trust   FXC 
CurrencyShares Euro Trust   FXE
CurrencyShares Japanese Yen Trust 

WisdomTree Dreyfus Chinese Yuan Fund CYB
WisdomTree Dreyfus Brazilian Real Fund BZF
WisdomTree Dreyfus New Zealand Dollar Fund BNZ
WisdomTree Dreyfus South African Rand Fund SZR
WisdomTree Dreyfus Indian Rupee Fund ICN
WisdomTree Dreyfus Euro Fund EU
WisdomTree Dreyfus Japanese Yen Fund JYF

For complete information on CurrencyShares, visit the RydexInvestment’s website at: http://www.currencyshares.com/

For complete information on WisdomTree ETF’s, visit their website at:

http://www.wisdomtree.com/etfs/index.asp

Please note, the author does not recommend the purchase (or short sale) of this or any other asset class, and is in not affiliated with any of the Funds or Sponsors listed above. The sole purpose of this article is to inform the reader about the ability to trade currency interests via the stock market.  There is always a degree of risk of loss when trading any asset class.   Before making a purchase or sale on any asset, please take the time necessary for thorough research.  The degree and form of ownership of a specific commodity varies for each ETF.  Make sure that the particular ETF meets your parameters before investing money. Liquidity for ETFs varies. You may obtain more information, including a prospectus, about an ETF from the respective sponsor.

By A.I. Miguel

In the past, if you wanted to speculate on a commodity (i.e. Gasoline, Oil, Cotton, Coffee, etc), the only way was to open an account with a commodity futures broker.  This presented numerous drawbacks for the average investor/speculator:

·          First you needed to spend the time and effort to learn about the futures market and the underlying contracts. This is not an easy undertaking for most people.

·          Next is the high cost of a futures contract.  Just one contract may cost hundreds of thousands of dollars.  Yes, you can trade on a slim margin, but that entails a highly leveraged degree of risk that can wipe out your principal pretty quickly.

·          Quotes for commodities are not as easily accessible compared to stock market quotes. 

·          Lastly, commodity futures contracts are a wasting asset (that they will expire with in the time frame specified in the contract), and you will need to close out the position before expiration (unless you are going to take or deliver the commodity and amounts specified in the contracted).

Today, you can trade commodity interest via the stock market in the form of an Exchange Traded Fund (ETF) with a discount stock broker.

There are advantages of trading commodity ETFs versus the traditional commodity futures contracts:

·          It is comparatively easier to learn about and understand the stock market and underlying ETFs.

·          The principal dollar amount of an ETF position is decided by you. With many ETFs, the minimum purchase amount is typically only 1 share (although to control 1 share is probably not worth the time or effort, and normal brokerage commissions will apply).  ETFs can usually be traded on margin, but with much higher requirement compared to a futures contract.

·          Quotes for ETFs are readily available on the Internet. 

·          Unless it is specified in the prospectus or the board of directors decides to close the fund, ETFs do not expire.  You can stay long (or short, unless the stock is no longer available) for as long as you think it will take for the commodity to complete its movement. 

Here is a listing of selected commodity ETFs:

Please note, the author does not recommend the purchase (or short sale) of this or any other asset class, and is in not affiliated with any of the Funds or Sponsors listed above. The sole purpose of this article is to inform the reader about the ability to trade commodity interests via the stock market.  There is always a degree of risk of loss when trading any asset class.   Before making a purchase or sale on any asset, please take the time necessary for thorough research.  The degree and form of ownership of a specific commodity varies for each ETF.  Make sure that the particular ETF meets your parameters before investing money. Liquidity for ETFs varies. You may obtain more information, including a prospectus, about an ETF from the respective sponsor.

By A.I. Miguel

There are many potential worries in today’s financial markets, economy and political landscape.  Whether used for an inflation hedge, an investment, or speculation, many people are now looking to acquire precious metals, specifically gold and silver.  Before going to your local coin or metals dealer, keep in mind there are disadvantages in physical ownership versus electronic book-entry ownership. 

Physical ownership:

Whether held in bars, coins, jewelry, or other means, physical ownership can be uneconomical and possibly risky.

When initially acquiring the metal, there could be a sizable retail mark-up that must be paid.  (The local coin/metal dealer is in business to make money.)

Once you own the physical metal, take note of the following…

·          There could be a storage/maintenance fees if stored off outside your home.

·          There is also risk of theft, which could possibly be countered by insurance, but that also is an additional cost.

Once you are finally ready to sell the metal, note the following…

·         There will likely be a markdown versus the current spot price.

·         Liquidity. Your local coin dealer may be fully stocked in a particular coin and is not buying that issue.  That will force you to spend time and effort in the search for a new buyer.

Electronic book-entry form:

In the United States, there are approximately 6 gold/silver/precious metal choices in electronic book-entry form.  These choices are in the form of an exchange traded fund (etf). Compared to physical ownership, the acquisition, storage (holding), and disposition of etfs is relatively easy.

The two most popular etfs are:

• SPDR Gold Shares (symbol GLD).  This is a grantor trust that tracks the price of gold bullion. 1 share represents 1/10^th ounce of the metal.

• iShares Silver Trust (symbol SLV).  This grantor trust tracks the price of silver (London Silver Fix). 1 share represents 1 ounce of the metal.

The four others include:

• iShares Comex Gold Trust (symbol IAU)
• PowerShares DB Gold Fund (DGL)
• PowerShares DB Precious Metals Fund (DBP)
• PowerShares DB Silver Fund (DBS)

In order to acquire an etf, one should consider opening an account with a discount stock broker.  The transaction fee to purchase an etf typically costs around $10, but could vary widely.  If buying only $100 worth of an etf, this may not make sense, but for higher dollar amounts, it is very economical.  For example, on a $10,000 purchase, a $10 transaction fee is only 1/10^th of one percent of the principal. 

The cost to hold the SLV or GLD etf is also minimal.  The expense ratio charged by the sponsor of the fund is only around ½ of 1 percent.  Brokerage firms typically do not charge maintenance fees if a certain level of activity or account size is maintained. 

The SLV and GLD etfs typically have outstanding continuous liquidity, with a typical spread (between the bid and the offer) of only 1-2 cents.  For example, on April 23^rd 2009, the GLD was quoted with a bid of $88.93 and offered at $88.94.  What this means is that an investor can place an order to buy at market and obtain a share of GLD for $88.94.  If an investor chooses to sell at market, he will get $88.93 per share.

Please note, the author does not recommend the purchase of this or any other asset class, and is in not affiliated with PowerShares, iShares, or SPDR funds. The sole purpose of this article is to inform the reader about the advantages of owning a precious metals etf, and the disadvantages of physical ownership.  Liquidity for etfs vary. 

Before making a purchase or sale on any asset, please take the time necessary for thorough research. You may obtain more information, including a prospectus, about an etf from the respective sponsor:

SPDR ETFs: https://www.spdrs.com/

iShares: http://us.ishares.com/home.htm

PowerShares DB Commodity Services ETFs: http://www.dbfunds.db.com/

By A.I. Miguel 

It is widely believed that approximately 80% of the United States’ healthcare dollars are spent on 20% of the people.  Our healthcare system is set up to treat ailments, not prevent them. Year after year, businesses are being crippled by double digit healthcare premium increases for their employees. How do you fix healthcare problem in the US? Simple, give people a financial incentive to be healthy. 

Currently, an employer pays the same annual healthcare premium for each employee.  Rates are not tailored to the employee’s health status or lifestyle choices.  If you could make the employee pay for a percentage of his healthcare (if he/she chooses not to maintain a healthy lifestyle), AND the insurance companies would agree to charge a rate based on each individual’s health (not the group’s health), the net cost of healthcare would likely come down. 

Here are examples of 4 employees:

Employee A, Albert, a person of “Average” Health in today’s society.

Albert’s annual rate under the current program is $7000, all of which is absorbed by his employer.  He does not smoke, use drugs, or drink alcohol in excess.  He is only slightly overweight, which in today’s society is the norm.  Semi-annually, he will visit his Primary Care Physician (PCP) for a mandatory physical.  The doctor will looks at factors such as blood pressure readings, body fat content, cholesterol readings, etc.  Albert receives a grade “Acceptable-high end of range” from his doctor. This rating means that Albert’s health is within, but at the top end of acceptable ranges.  In other words, he could do better. 

Under the new proposed program, the Albert’s of the world would pay 10% ($700) of that $7000 annual premium.  Whether or not the employer would make up the difference by paying Albert an extra $700 in salary is at the discretion of the boss, but either way, if Albert could save that $700, he would think twice about that 2^nd desert, or instead of driving the ¼ mile to the store, he may consider walking, in order to get to the grade of Bonnie(below).

Employee B, Bonnie, a person of “Good” Health in today’s society.

Like Albert, Bonnie does not does not smoke, use drugs, or drink alcohol in excess, but unlike him, she is not overweight.  She eats healthy food, and gets regular casual exercise by walking before work in the morning.  After her semi-annual visit to her PCP, her result came back as “Acceptable-middle area of ranges”. 

Under the new proposed program, the Bonnie’s of the world, would not pay any part of the annual premium.   Due to her better health choices, her employer would benefit also, by only paying $6000 per year for her coverage.

Employee C, Cliff, a person of excellent health.

Like Albert and Bonnie, Cliff does not use tobacco, drugs, or excessive alcohol.   He stays in great shape by getting regular exercise and eating healthy.  His Body Mass Index (BMI) is very low, and blood pressure readings are very good. His doctor gives him a grade of “excellent” after the semi-annual physical. 

Under the new proposed plan, not only will Cliff not pay any part of his healthcare cost, the insurance company will reward both him and his employer for his good health choices. His employer will only have to pay $5500 for his annual coverage, and the insurance company will send Bob a check for $500.

Employee D, Doug, a person of poor health.

Unlike the other 3 employees, Doug is in terrible condition.  He uses tobacco, drugs, drinks excessively, and is obese.  Exercise is foreign to him, and junk food IS his diet.  He is constantly visiting doctors to treat the ailments brought on by his poor health choices.   People that live this type of lifestyle are most likely to need high-cost emergency healthcare (i.e. heart attack visit to a hospital emergency room). As you could imagine, the results of Doug’s annual physical were dismal, receiving a grade of “Poor”.

Under the new proposed plan, the insurance company may charge a “high-risk” rate of $14,000 for this employee.  Doug’s employer will only have to pay $7000 (the same as slighty out-of-shape Albert above), but Doug will also have to pay an equal amount.  The result is that Doug will be paying 50% of his new $14,000 annual healthcare premium.  If you think that is excessive, remember that 20% of the populace uses 80% of our healthcare dollars.

To conclude, this proposed plan could be a long-term win-win-win for all the parties involved. The employees have a financial incentive to maintain a healthy life-style. The employer’s maximum rate per employee is capped at $7000 per year, and could be lower depending on the lifestyle choices of their employees. Insurances companies get to charge more money to the high-risk people, who will most likely need high-cost healthcare.

By K.C. Karnes

The answer varies. Let’s compare AIG and the state of California.

It was announced this week by Treasury Secretary Timothy Geithner, that based on lawyer’s advice, he could not stop the $165 million in bonuses that AIG was handing out to hundreds of employees. They were signed in early 2008, before the company was fast losing money. The AIG employees had a contract based on performance and profitability. Unfortunately, based on their performance, there was no profitability. Now 80% of AIG is owned by the taxpayers.

In February the state of California announced “furlough Fridays” with more than 200,000 state workers expected to stay home without pay amid the state’s fiscal crisis. Governor Schwarzenegger ordered the two-day-a-month furlough, reducing the average state worker’s salary by 9.2%, as state officials try to solve the state’s $42 billion budget shortfall. Schwarzenegger’s administration estimated that cutting workers hours could save the state $1.3 billion over the next 18 months.

It would appear that the government does have the power to override contracts. State workers are being forced to take pay cuts to bring down the state’s debt and make up for the financial shortfalls. These are not executives making millions of dollars a year, they are average citizens doing what’s right to make a living.

At the state Department of Transportation, a handful of engineers showed up to work without pay because they didn’t want to get behind on projects they said were important to public safety.

Their contracts aren’t being honored, but at least they have an 80% stake in AIG.