Stocks Plus other Investments
The Stox Plus section develops ideas and strategies. The asset universe includes: bonds, collectibles, commodities, currencies, stocks, real estate, intellectual properties and derivative products. These asset classes are more than alternatives: They are complementary and may provide interesting diversification properties. They also influence decisions.
Cash, money, coins and tokens - refer to various objects and notions as to what should be a currency, monetary unit or proxy, or a recognizable and mutually acceptable means for exchange. Money simply defined is a medium of exchange, a store of value, and a fungible or divisible unit of acceptance for transactions. When cash is king parties try to hold on to their monetary or currency holdings expecting that investments, commodities or other goods and services of interest will drop in price relative to the unit. Thus, these parties expect to get more transactional quantities for a given unit of exchange. Over time there has been much misinformation as to what money really is. In many countries money consisted of currency in circulation be it coinage or certificates for various denominations. These certificates represented an ownership right in a specific amount of gold or silver subject to strict fineness and established alloy composition. Over that timeline as physical backing eroded or was dispensed with, money supply series could be composed of various other items such as demand deposits and credit marked-to-market among other things. As countries substituted notes or other paper for certificates these countries effectively separated people and other parties from stores of value. To put it simply and accurately, if someone was forced to redeem a gold or silver coin for a plastic coin or “token” would the transaction be equal, equitable or even fairly comparable? No. What if one had to exchange gold or silver rings or earrings for plastic ones? Again, the answer is no. What if you had to exchange your labor for plastic trinkets? You know the answer. That is why it is necessary to have sound money be it domestically or internationally. That is why it is essential that money or cash retain value and economic merit for AND between transactions. The more variables and arguments – not reasons – others interject into the discussion and process is designed to separate you from your money. Money has been around in various forms for thousands of years. When it is debased or made unreasonably “complex” is when economies and cultures breakdown. If things were the same the perhaps money should be the same. If things progressed, advanced, or became financially better then maybe the coins and currency should be backed by more metallic content not less. However, history has demonstrated time and time again that when money is debased, peak standards often coincided with peak money.
Lifestyle Adjustments - refer to changes in various aspects of living, enjoyment, savings, investing, and debt management among other things. To benefit from growth one must profit from increases in income, wealth and/or relative reductions in expenditures including debt service. When growth is lacking or financial pools are draining it is necessary to try to reduce outflows. Increases in debt are not permanent solutions but increase the leverage and likelihood of default. Therefore it is vital to readjust lifestyles and even standards of living. Previous enjoyments of relatively high consumption/expenditure standards must be addressed. Deficits for individuals, businesses, organizations and governments occur when there is insufficient income to cover outlays. By continuing with these practices the result is increased burdens. Efforts to “restore” and maintain over-consumption are faulty because they require further increases in debt obligations and/or asset sales. In fact, those sales of bridges, buildings and roads continue which reduces the infrastructure and asset base. For many, the sale of securities to generate cash is only providing a temporary, unsustainable fix. Prudent savers and investors are impaired due to extremely low interest rates because the income streams have pretty much evaporated. See related features and links on this site. These changes impact currencies, travel, education, charities and contributions, medicine, archeology and other pursuits.
July 2000. Overlays - Refers to strategies and tactics for deploying funds and assets within a portfolio. At an elementary level, it refers to a complementary position in futures and options relative to a stock and/or bond portfolio. Often cash positions consist of treasury securities and other marginable instruments. Therefore the investor or portfolio manager can alter allocations and exposures with these derivatives. Effectively, they are overlaid on the core holdings. Foreign exchange and currencies (forwards, futures, options) are implemented relative to other assets. A manager can reduce or expand currency impacts on a portfolio. This activity may also be referred to as an overlay. It can be seen that overlays can do double duty. One can be a risk management technique, and the other can leverage, expand or diversify holding exposures. Similarly, commodities can be overlaid against financials such as stocks, bonds, and currencies.
November 1999. Visit the Selective Indexes and Tables. These illustrative tools quantify ideas of relative value and market capitalization for firms in industries such as technology or finance. To visit, simply click:
April 1999. Concerned about the stock market's accelerating performance with narrowing leadership or breadth? Perhaps, it is time to consider an asset allocation into precious metals. The Sage of Omaha, Warren Buffett, already made his move into silver bullion. This is understandable because it reduces the margin of error or spurrious assay results. It was not too long ago that some mining companies "salted" the assay samples to fraudently suggest substantially higher ore content. If you mathematically or graphically view the precious metals such as gold or silver, they give a strong appearance of negative correlations to major stock indices. This is particularly noticeable over the past 20-25 years. In fact, silver and gold peaked in 1980, the same year that many strategists claim that the stock market registered an historic secular bottom. This statistical property of negative correlation can be helpful to balance securities portfolios. It can act as a counterweight or hedge. With Y2K around the corner, you may begin to see a movement towards hard assets as token to moderate financial insurance policies. Since some important money managers have chosen bullion or precious metals stocks, they are less vulnerable to potential millennium bug problems which would impact book-entry or book-form registrations. The latter terms describe ownership recorded on computers and not by certificates.
March 1999. What are the institutional and individual ramifications of the Euro? What does it suggest for corporate and banking costs and profits? There are many. The compression of the initial eleven member currencies into one standard unit is analogous to converting eleven different train track gauges into one uniform benchmark. This standardization should generate cost savings because hedging or risk management expenses are expected to decline. The Euro minimizes multiple currency conversions. Each step or crossrate conversion entails a spread or difference between the bid and the offer. These spreads should now contract due to a market which exhibits greater depth and breadth. On the profit-side, corporations such as manufacturers, services, and importers/exporters should benefit from a trimming of currency transactional costs. On the other side, banks and currency exchange companies should experience a reduction in profitability. This is because of the tighter spreads and reduction of multiple step hedges. Foreign exchange operations are a key and principal business for many banks throughout the world. This euro-effect will also spillover into derivatives activities. Again, it would negatively impact profitability. For those owning bank shares in their portfolios, it may be useful to evaluate the currency implications of such investments. For more EURO CURRENCY UNIT information, resources, and links connect to Barkley's Euro Resources Desk.
Previous Feature: Types of Hedge Funds.
There are numerous types of Hedge Funds. They reflect different investment styles, product lines, and geographic regions. Among the more common varieties are: