SUNDAY, JUNE 13, 2010 PERSONAL FINANCE
Get a good read on the market: Pick up a book
by Andrew Feinberg W
hen my 7-year-old daughter, Julia, asked me what I do all day, I told her that I spend most of my time reading. Julia, a book fiend,
brightened and said, “They pay you for that?” Yes, they do — indirectly. The best investors read all the time. As Berkshire Hathaway vice chairman Charlie Munger has said in assessing the success of his sidekick, Warren Buffett: “If you want to be an outlier in achievement, just sit on your ass and read most of your life.” Billionaire hedge-fund manager Bill Ackman loves to read, too, according to “Confidence Game,” a fine new book about his ultimately correct bet against the shares of bond insurer MBIA. In the book, one of his best friends describes a week spent at a beach house with Ackman and his family: “Bill did what he always did on vacation” — he read financial statements. Why it helps. You don’t have to be a compulsive consumer of 10-Ks to improve your investment performance (although the more you know about the stocks you own, the better you should do). In my view, reading offers investors three
distinct benefits. First, it crowds out the TV noise. The folks on CNBC’s Fast Money may be smart, but their Whac-A-Mole approach always makes you feel as if you should be doing something — anything — to make a quick buck. Not a good attitude for a successful long-term investor. Second, reading helps you develop all the qualities that go into successful investing. Third, reading can give you specific investment ideas. But don’t become a voracious reader to finance a Caribbean spree. You read not to make a quick killing but to learn more about the investing process and the world around you.
So where do you start? My must-read list includes wonderful books by Benjamin Graham (“The Intelligent Investor”), Seth Klarman (the hard-to-get “Margin of Safety”), Joel Greenblatt (“You Can Be a Stock Market Genius”) and Philip Fisher (“Common Stocks” and “Uncommon Profits”). Michael Lewis’s new book, “The Big Short,” offers a terrific peek into the minds of some smart, iconoclastic investors. But books aren’t enough. (“If past history were all there was to the game,” Buffett has said, “the richest people would be librarians.”) You need to understand the present, too. By far the best investment publication available today, for both the astuteness of its stock picks and the depth of its study of the investment process, is the Value Investor Insight newsletter (
www.valueinvestorinsight.com; $349 a year for 12 issues). I devour my monthly copy as soon as it arrives. (VII is produced by Kiplinger columnists Whitney Tilson and John Heins.)
To protect yourself, think like an ID thief
by Kimberly Lankford Q
My credit-card company called me and said that somebody tried to charge a penny
to my account. When I explained that it wasn’t my charge, the issuer canceled my card and sent me a new one. Was this an identity thief at work? In the future, what can I do to protect myself from identity theft? This is a common ploy for ID
thieves, who test out your credit card with a small charge and then, if it goes through, start making big purchases. Crooks may even use programs with algorithms that run 16-digit numbers until they get a hit. Then they try to charge a penny or a dollar or two, making it look as if a charity is the recipient, says Adam Levin, chairman of Identity Theft 911, which sells ID-theft prevention services to businesses. “They’re hoping that because of the small size of the transaction, it will slip through filtering systems.”
Another trick ID thieves use is to impersonate an employee of your bank’s fraud department and fish for your sensitive information. After offering enough of your
personal details to get in your trust, they may ask you for your Social Security number or the security code on your credit card. If you get a suspicious call, call the customer-service number on the back of your credit card. It’s a good idea to regularly check your bank and
credit-card balances online for suspicious transactions. You should also check your credit report to see whether anyone has applied for credit in your name. You can get one free credit report per year from each of the three credit bureaus at
www.annualcreditreport.com. You could also put a credit freeze on your account, which blocks potential lenders from getting access to your credit report without your authorization. (Your current creditors are exempt from the freeze, and you can make charges to your current cards without unfreezing your account.) The protection works only if you freeze your credit at all three bureaus (
Equifax.com,
TransUnion.com and
Experian.com). It generally costs $10 at each bureau to freeze the account and $10 to unfreeze it.
— Kiplinger’s Personal Finance
State of the labor union: What if I don’t want in?
by Knight Kiplinger BY TIM GRAJEK/FOR THE WASHINGTON POST The next essential read is the monthly
letter from Howard Marks, chairman of Oaktree Capital Management (
www.oaktreecapital.com). Marks is a more philosophical version of Buffett, a great investor who always makes you think. In a recent missive, Marks observed that stock-market bulls were, in effect, betting that Congress would be able to cut spending. He was dubious that our elected leaders would succeed. I also find valuable the monthly comments of Bill Gross (
www.pimco.com), the quarterly letters of Jeremy Grantham (
www.gmo.com) and the daily commentary on RealMoney Silver (
www.thestreet.com; $900 a year). Most of the time, reading leads to contemplation, which keeps you from
acting. That’s a good thing. Most investors are too active for their own good. Having a solid background in investing history and, in particular, in value investing (the approach that works best over time) can be especially helpful at market extremes. If I had read less, I would not have been so quick to sell technology in early 2000, near the peak of the bubble, or dive into bank stocks at the market lows in March 2009. Reading helps remind you that everything
you’re seeing has happened before. It just looks a little different each time. —Kiplinger’s Personal Finance
Columnist Andrew Feinberg writes about the choices and challenges facing individual investors.
I’m a young worker re- cently hired by a com- pany whose wage-and- hour employees (like me) are represented by a union. I thought I would have a choice of whether to join the union. Given the amount of union dues, the slim benefits of membership and my dis- agreement with the union’s politics, I would rather have passed on membership. But under my state’s law, I have to pay dues. Do you think this is fair?
Q
No, I don’t. I believe workers should have freedom of choice. Employees should have the right to invite a union to make its case and solicit members, free of employer intimidation, and fellow workers should have the freedom to oppose the orga- nizing effort, free of union pres- sure. Everyone should have the right to vote in a secret ballot on whether they want to be rep- resented by the union. And, even if the union is certified as the collective-bargaining agent for that shop, workers should have the right not to join the union and pay dues. — Kiplinger’s Personal Finance
More from Kiplinger Go to
www.kiplinger.com for more analysis.
For international investors, making sense of ‘a topsy-turvy world’ currency from G1
mestic demand, it’s really going to be relying increasingly on ex- ports for support,” he said. “Now is the time to be increasingly di- versifying out of dollar assets.”
The euro effect
Despite the ongoing worries about the U.S. government’s debt levels, the European debt crisis has helped reverse the weakening dollar, which has been on a de- cline since peaking around 2002. In contrast to the recent battering that investments have taken, the dollar’s fall during those years boosted returns for Americans in- vested in international stock and bond funds. From 2002 to the end of last
year, the MSCI EAFE index, which tracks global developed markets outside the United States and Canada, surged 37 percent. With dividends reinvested, the gain was 75 percent. But in local currencies, the return was actu- ally a loss of almost 5 percent. The picture was worse for Europeans converting their holdings into eu- ros; they lost 15 percent, although with dividends reinvested, they made a modest gain of about 9 percent. (For investors in Argen- tina, which defaulted in 2002, the gain was 42o percent, without dividends). Money managers caution against making drastic changes in individual portfolios. They say the investing environment, in- cluding the stock and currency markets, will remain volatile as the sovereign debt crisis contin- ues to play out. Barry Glassman, president of Glassman Wealth Services in Mc- Lean, said stock investors should still diversify abroad. He has tried to protect client assets from cur- rency movements in part by in- vesting in international stock mutual funds and exchange-trad- ed funds that hedge currency risk. Broadly speaking, he thinks the way to go is embracing cur- rency risk in emerging markets — with less debt levels and faster-
growing economies — while hav- ing a majority of developed mar- ket investments hedged back to the dollar. “Investors should not be blind to the currency risk inherent in foreign funds,” he said. “Investors need to realize they have two in- vestments going.”
A bet against
Not everyone is an advocate of hedging away currency risk. These money managers say expo- sure to different currencies pro- vides another source of diversifi- cation. Besides, they say, short- term currency moves are notori- ously hard to predict. “Our view there is, hedging costs are not cheap,” said Jason White, portfolio specialist for international equities at T. Rowe Price. “You have to pay very real costs for an uncertain benefit.” White said his firm incorpo-
rates currency into its investment decisions, analyzing regions and currencies from which a com- pany derives revenue. “If you’re investing in compa- nies that are denominated in eu- ros, obviously as a U.S. investor you’re losing money on that cur- rency translation,” White said. “However, if you are that Euro- pean-based business . . . your goods are more competitive in a global marketplace. . . . That’s how we see a lot of opportunity, particularly in the export-driven economies.” Gregg Wolper, a senior fund analyst at Morningstar, said few international funds fully hedge away currency risk, although it has become more common to see fund managers who bet against a slice of the portfolio under cer- tain circumstances. “To us, it’s really more a short- term asset allocation rather than a long-term core investment strategy,” said Oliver Pursche, co- portfolio manager of the GMG Defensive Beta Fund. “The risk right now is much more on the downside on the euro than on the upside. So we want to reduce that exposure and hedge out that risk.”
In search of stability With the markets roiled by
anxieties, the fund has refocused its overseas holdings to large companies in more-stable econo- mies; in Europe, he said, that has meant steering clear of Spain, Portugal and Turkey, and into Germany, Switzerland and Brit- ain. “The market is trading on fear, not on fundamentals,” Pursche said. “In that kind of environ- ment, the smaller, less-well- known investments tend to take a disproportionate hit.” Art Steinmetz, chief invest- ment officer of fixed income at OppenheimerFunds, said credit concerns in developed markets have prompted his team to invest
heavily in emerging markets in the international bond fund. “We’re sitting down and going
over every country to say, ‘Where are those countries that have fis- cal flexibility? Where are those countries that have the capacity to keep monetary policy non- inflationary?’ Those are the cur- rencies we would rather hold,” Steinmetz said. “What’s amazing is that formerly risky countries are the ones that are looking far more virtuous. “It’s really a topsy-turvy world.
A few years ago, we paid very lit- tle attention to the relative credit risk between and among Euro- pean countries . . . Now that’s all changed.”
tset@washpost.com HANNELORE FOERSTER/BLOOMBERG NEWS
Eurozone finance ministers celebrated after approving a bailout fund last week, but few international investors have been smiling lately.
KLMNO
G3
EMERGENCY MANAGEMENT AN URGENT NEED. IMMEDIATE OPPORTUNITIES.
Government and private employers need thousands of managers who can prevent and respond to disasters, or prepare for acts of terrorism. Be ready with a degree from University of Maryland University College (UMUC). You can earn your BS in emergency management. Or choose from an MS in technology management or an MS in management—each with a specialization in emergency management.
Enroll now. Copyright © 2010 University of Maryland University College
• Learn to prepare and implement disaster preparedness and response plans
• Acquire the leadership skills you need for crisis management and disaster response
• Scholarships, loans and an interest-free monthly payment plan available
800-888-UMUC •
umuc.edu/solutions
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158