Ventured&Gained - Personal Finance News and Insight I Bloomberg

Why Rich People Feel Poor

Why Rich People Feel Poor

Spare a thought for the millionaires this week. The bill from last year's tax increases has come due.

The rich aren't poor, of course, whatever their tax burden. An adjusted gross income of $389,000 puts you in the top 1 percent of earners in 2011, according to the latest IRS data. No telethons have been organized. No TV ads have been narrated by Sarah McLachlan. Even the House Republicans have been silent lately on taxes on top earners, as Bloomberg's Richard Rubin notes.

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Did Al Gore Invent ETFs, Too? 

AL Gore

Sebastian Mercado has seen a lot of crazy charts comparing the massive flow of money into exchange-traded funds with other big trends. So the Deutsche Bank U.S. ETF strategist decided to add his own chart into the mix.

ETF assets have more than doubled every four years since 2000. Financial markets willing, global ETF assets could reach a best-case $3.1 trillion by yearend, up from 2013's $2.2 trillion, says Mercado. The industry's growth and the trend the strategist pairs it with in the chart below show a .97 percent correlation.

Do we think ETFs are as big or important as the Internet? No. But a case could be made that ETFs are doing to the investment world what digital music did to the music world. Both are disruptive technologies, for sure. As the digitization of music and iTunes challenged the business model of the record companies, ETFs are bringing change to the old guard mutual fund companies, which are all looking at charts like Mercado’s and trying to figure out a way to avoid going the way of the CD and the cassette tape.

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Finding Value Amid the Rubble

The NASDAQ Composite Index has fallen 7.2 percent from its high on March 6, recording its worst 30-day performance since November 2012. Nearly three-quarters of the 2,500 components in the index were down for the period. Former momentum darlings of social media and biotechnology were hit hardest.

Tuesday's intraday low coincided with the 200-day moving average. Technical strategist Chris Verrone of Strategas Research Partners argues returning to the mean is a healthy, if not somewhat painful, inevitability. It also provides bulls an opportunity to buy the proverbial dip -- though this particular dip may strike some as more than merely proverbial.

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Where to Find Income

The Commerce Department released moderately better data on the economy this morning -- but don't celebrate quite yet. While U.S. consumer prices ticked higher in March, today's 1.5 percent figure still falls short of the Federal Reserve's stated 2 percent target.

Small amounts of inflation signal growth and even pricing power, both positives for the economy. This is why the Fed wants to see higher inflation, and has committed to maintain "low rates for an extended period" until it perceives sufficient change.

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The '90s Are Back in This Tech ETF 

Nirvana. Seinfeld. Michael Jordan. Who doesn’t love the 90s?

Nirvana. Seinfeld. Michael Jordan. Who doesn't love the 90s?

Turns out the hot names of the '90s are in again when it comes to investing in the technology sector. Those young '90s tech companies have matured into more stable adults with tons of cash. Companies like Microsoft Corp. (MSFT), Cisco Systems Inc. (CSCO), Oracle Corp. (ORCL) and Intel Corp. (INTC) have held up amidst a tech stock selloff that has the Global X Social Media ETF (SOCL), filled with new-generation players like Facebook Inc. and LinkedIn Corp., stumbling 18 percent in the past month. That has many investors thinking about going retro and playing it safer with their tech exposure.

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BlackRock: Seek Opportunities Abroad

--Charles Dickens

A Tale of Two Cities indeed. Emerging markets and the S&P 500 are producing very different results for investors this year. One is up and one is down -- curiously, both by the same amount.

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The Value Angle to Biotech Stocks

Biotechnology companies pioneer new drugs and make life better...how ironic their stocks have managed to wreak so much havoc in recent weeks. If you're looking for a culprit behind the selloff, blame biotech. The group's momentum led stocks higher, and now it's payback time.

Mark Schoenebaum of ISI Group has consistently won Institutional Investor's annual ranking as the top biotech research analyst. This morning he highlights how the sector's 20.5 percent decline in six weeks has brought valuations down to levels more typically associated with large-cap pharmaceuticals. He's not seen this before, and provided a chart to prove the point. Even during the financial crisis, biotechs maintained their premium...not so today.

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The Market's Message: Protect Yourself

The S&P 500 Index has crossed the flat line a total of 15 times so far this year. We believe its inability to rally past last year's +29.6 percent mark signals fatigue, especially in light of some recent bullish news:

Now consider the market reaction:

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When the Messenger Is Worth Shooting 

When the Messenger Is Worth Shooting

April is cruel for other reasons. It’s Financial Literacy Month, when well-meaning experts bear the bad news: many of us are financial fools.

The 30-day marketing blitz sweeps up Congress, banks, state capitols, pollsters and personal finance columnists in an annual lamentation--and scolding--that Americans, the kids especially, don’t know much about money. To help, Bank of America, for example, is sponsoring a workshop series to educate low-income people.

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How Money Managers Fight Their Emotions and Sometimes Lose

How Money Managers Combat Their Irrationality

Jeff Schwarte was in a quandary. The manager of the $3.5 billion Principal Large Cap Value Fund had held a big stake in Apple stock since 2004. Eight years later, in mid-2012, his analysts remained bullish on the stock. But since the start of the year, the algorithms in Schwarte's quantitative valuation models had warned that Apple's profit margins were shrinking.

As Schwarte weighed the evidence, he got an e-mail about his Apple stake from behavioral finance consulting firm Cabot Research. It was an automated alert about positions that Cabot -- which Principal Funds had hired to analyze manager portfolio holdings and trades for behavioral flaws -- sends about positions that might indicate a bias. In this case, Schwarte said, his analysts had fallen victim to "the endowment effect": Someone with a winning position is reluctant to let it go even if there are good reasons to do so.

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About Ventured&Gained

Ventured&Gained offers posts and features about the real issues and opportunities facing individual investors. Analyses or commentary are the views of the author and/or commentator, and do not necessarily reflect the views of Bloomberg News.

Suzanne Woolley, Editor
swoolley2@bloomberg.net

Ben Steverman, Deputy Editor
bsteverman@bloomberg.net

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