Sound Advice

Is The Game Over For Bitcoins?   What a roller-coaster ride it has been for Bitcoins, the best known of the cryptocurrencies.  Back on March 9 th , 2020, just as the Covid pandemic was emerging, Bitcoin traded as low as 5,385.23.  A bit more than 18 months later, that price soared almost a dozen times higher to 68,789.25.  A number of other cryptocurrencies also had major gains.   Things have changed.   From the peak of last November, Bitcoin has dropped by nearly two-thirds.  Ethereum, another fantasy currency, had an even more exciting ride, zooming almost 50 times from early March, 2020 to the high reached on Halloween last year, followed by a plunge similar to that of the Bitcoin.   There are numerous other cryptocurrencies, most of which seem to have been created by those who specialize in science-fiction.  Here are some of the more amusing names: Polkadot, Avalanche, Chiliz, Helium, Fantom, PancakeSwap, and Basic Attention...

Recession . . . and then what?   The prospect of a recession and the repercussions that come along with an economic downturn are unsettling to investors, but by the time there has been a reasonable level of agreement about such an occurrence, most, if not all, of the typical pullback in stocks has already taken place.   Although periods of economic weakness are different and brought about by varying, often unique, developments, the result tends to be similar.  The stage is set when the stock market has reached excessively rich levels.  Even so, that alone rarely starts the drop.   The trigger is usually an event or series of events that raises the level of uncertainty among Wall Streeters . . . as well as the public . . . and begins a chain of fear-induced selling.   Over time, stock market valuations tend to be either too high or too low.  They are rarely near the average of past valuations, which ranged between 15-18 times estimated ear...

A Good Year For Hedge Funds After Lagging Badly For A Decade     Investing in a hedge fund may well spark an interesting conversation at a cocktail party, but a closer look at these high-end opportunities tells quite a story.   First, you have to be an accredited investor to join in.   For the typical hedge fund, that means a net worth of at least $1 million, exclusive of your primary residence, as well as an annual income over $200,000 if you’re single, or $300,000 if you’re married. Then there’s the matter of fees.   The typical fee for a hedge fund investment is 2% of assets managed plus 20% of the profits each year.   That’s a high price to pay, but one would hope that the ostensibly super-bright people running these operations could generate returns that justify the cost. The reality is that they have not.   Indeed, average hedge fund returns over the latest 10 years have been less than half those of the Standard & Poor’s 500 Index...

Are tech stocks worth the additional risk?   Companies whose focus is technology have been accounting for an increasing proportion of the total value of the Standard & Poor’s 500 Index over the latest 10 years.   Since the giant tech companies have grown more rapidly and now represent 28% of the total, the S&P Index has become more volatile. The S&P has been largely propelled by a group that had been known as the FAANGs: Facebook, Amazon Apple, Netflix, and Google.   The propulsion goes both ways.   This year, the combination of a lingering pandemic, hyperinflation, and conflict in Ukraine has sent the investment markets tumbling, with this group leading the way down. For this reason, it seems worthwhile to think about investing in the broad market in slightly different ways.   Since the S&P Index is biased toward the largest companies, it would be interesting to consider the results if all stocks in the index were equally weighted.   ...