Archive for October, 2004

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Sunday, October 31st, 2004

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I like REITs

Monday, October 25th, 2004

I like Real Estate Investment Trusts. Mary Rowland writes that REITs have a negative correlation with the broader market:

Consider this: One dollar invested in the Standard & Poor’s 500 Index ($INX) at the beginning of 2000 would have been worth 62 cents at the end of 2002. The same dollar invested in the Wilshire Real Estate Investment Trust Index ($REW.X) would have become $1.52 at the end of the period. (Bond returns, by contrast, would have fallen in between these two results.)

This negative correlation is important because there are only a handful of ways to diversify your portfolio with stocks that have a negative correlation with the broader US market.

Ernie Ankrim writes that REITs are part of a diversified portfolio but should not be overweighted:

So where are we today? As of the end of October, the current yield for equities was 1.03

Stock market blog review

Sunday, October 24th, 2004

Random Roger’s Big Picture is a blog written by someone who really knows his stuff. I like the way Roger Nusbaum thinks: for example he looked at the Swiss markets to see if it offered a chance to diversify for US investors. He also looked at investment ideas in Switzerland.

I think that Roger’s insights offer investors a lot of interesting reading, so check out Random Roger’s Big Picture.

Google

Saturday, October 23rd, 2004

The market is getting awfully excited about Google’s 500 million in sales. Google’s 17% increase is being compared to what was seen in the nineties. I know the first instinct is to get excited, but I’m not so sure this is healthy. Having said that, it would have been nice if I’d bought shares at 85.00 each, but I was skeptical then too…

Where has your money been? Where is your money going?

Friday, October 22nd, 2004

Chet Currier writes that the last 5 years haven’t been good for stock investors. The next 5 years may be the same. While there are trned here and there, market timing won’t work consistently.

The temptation then may be to get your money out of stocks. Other than stocks, how many growth investments are there? A few years ago I thought I’d diversify and have a little fun but picking up a few hockey cards. With the recent NHL lockout, none of my investments have done as badly as my hockey cards.

Or, now that the market has been losing ground for three months the temptation may be to invest heavily in the stock market. Be careful; there’s a reason we’re seeing some money leave stocks and og into bonds. Uncertainty. Bad things could happen in Iraq, to the US economy, etc. Stocks could suffer as a result.

I’m going to stick with my few speculative stocks, my few precious metals, my dividend paying stocks, and my index funds.

Economic uncertainty

Friday, October 22nd, 2004

Rachel Koning of CBS Marketwatch writes that rising oil prices are making people seriously consider the possibility of a slowdown in the US economy. Economic uncertainty is never good for stocks, but can be good for bonds: “All told, a climate of economic, regulatory and political uncertainty tends to send investors in the direction of lower-risk investments, including government-issued debt securities.”

Jack Kemp writes that uncertainty is the main reason for the stock market’s three month decline. Interestingly, he argues that the stock market will lose ground if Kerry gains in the polls. However, as I have written previously there are many people who feel Kerry would be better for the markets.

Uncertainty is also causing a decline in the dollar. In this case, the deficit and other factors are also contributing to the dollar’s weakness.

KOSDAQ construction companies

Friday, October 22nd, 2004

Construction companies in Korea took a big hit after a special law that would have relocated Korea’s capitol city was ruled unconstitutional. I was hoping that the relocation would happen as I think it would benefit the Korean economy. At the moment too much of Korea’s welath is concentrated in Seoul.

Uncertain outlook for KOSPI

Sunday, October 17th, 2004

Investors looking for foreign stocks may be considering the KOSPI, the Korean stock market. However, many analysts are bearish on the KOSPI. Exports to China are slowing down. There is a fear that exports to the US will do the same. China and the US are Korea’s 2 biggest export markets.

Export markets are critical because domestic demand is weak. The governement finally admitted that economic growth may fall short of the government’s prediction of 5%. Analysts have been saying this for a while now.

Interest rates were expected to be cut in October, but they weren’t as rising oil prices might contribute to fuel inflation. Cutting interest rates would make it easier for people to borrow money. More money being spent would mean higher prices or inflation.

Of course, the finance minister wanted interest rates cut to fuel domestic demand, which could alleviate the problems caused by slowing export growth. Analaysts now say that a rate cut in November is inevitable.

Conclusion = weak domestic demand and slowing export growth spells trouble for the KOSPI. A rate cut will increase domestic demand and one is expected, but is not quite inevitable. Export growth will be dependent on the Chinese and US economies. Don’t forget that just because growth will be lower than 5%, doesn’t mean there’s no growth. 5% or a bit less is not bad for the World’s 11th biggest economy.

Investing in Korean shipbuilders

Wednesday, October 13th, 2004

At first the shipbuilders leading the KOSPI higher might indicate that there’s a buying opportunity. After all business is booming for Korean shipbuilders.

However, both Korea and China have been accused of dumping by EU shipbuilders. It’s no secret that Korea is very protective of its industries (American car manufacturers have been complaining about this for years). So far no one has listened to the EU shipbuilders complaining about Korea, but they might some day. And if the Korean governmnet announced that it had been but would no longer be helping out its shipbuilders, their stock would suffer. This makes it a risky long term investment.

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Wednesday, October 13th, 2004

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