The Power of the ETF

For decades, the mutual fund was king and investors searching for relatively inexpensive diversification would use these investment pools as a great way to spread risk with the benefits of professional portfolio management. Today we have some new, less expensive and more flexible tools available to retail investors. The ETF, or Exchange Traded Fund, looks and acts like a mutual fund (known as a “plain vanilla” in Wall Street parlance) but has some very unique characteristics.
The most distinct difference is that an ETF can be bought or sold at anytime during the trading day whereas a mutual fund can only be bought or sold at the end of the trading day. As a benefit to long-term investors, an ETF will usually have less turn-over than a mutual fund which can help lower the end-of-year tax bill. Another bonus is that an ETF will usually have a much lower annual expense ratio (typically .50%) than a mutual fund (typically 1.50%). If you can get the same no-load index fund for more than -1.00% cheaper per year, that can add up to serious savings over the long term!
Specialty ETF’s have also added investment tools that were not available to retail investors in the past. New funds have recently been set up to allow access to commodities (such as gold), currencies (such as euros), and international stocks. In the past, these types of alternative investments were only available to well-healed hedge fund investors with $1 mil+ of liquidity or veteran traders willing to open expensive commodity and currency trading accounts on margin.
ETF’s are one of the greatest modern breakthroughs for investment management tools to emerge in the past decade. Please feel free to contact me to discuss investment opportunities in these exciting new products.

Michael T. Maloney, CFP®
845-300-8282

A Raging Bull in China

China is now the second largest economy in the world. China’s annual growth has averaged 10% over the past 30 years making it the largest exporter and the fastest growing major economy. China covers approximately the same land area as the United States (3.7 million square miles) but has a population of 1.3 billion people (compared to 300 million people living in the U.S.). Therefore, the prospect for continued growth going forward is tremendous.
A vast majority of Chinese live without the simple luxuries that we in the U.S. may take for granted such as running water, washer / dryers, and cell phones. As the Chinese economy shifts from being an export-driven economy to a more consumer-driven economy, it should help the citizens enjoy the fruits of their labor and create a larger middle-class. If China can simultaneously eliminate carbon emissions while establishing a better infrastructure, the sky is really the limit for the Chinese Dragon.

Please contact me for information about how to take advantage of investment opportunities in China.

Michael T. Maloney, CFP®
MTM Capital Partners, LLC

845-300-8282

www.mtmcp.com

Summer Stock Market Volatility

The summer doldrums are now upon us and the long dog days of summer have kept the volume on Wall Street very low. The old adage, “Sell in May and Go Away” has been good advice so far. An investor would have been very well served to have sold stocks on May 1, 2010 (May Day) and went off on a nice vacation to spend their summer on the beach worry-free.

The rest of us, however, have experienced some extreme volatility as the stock market has been moving sharply between gains and losses. Unfortunately, with interest rates next to zero it has become very difficult for investors to earn a return on cash which has forced savers into riskier asset classes.

I am pleased to announce that I have recently launched my company MTM Capital Partners, LLC to offer local financial planning services and investment advice. Please contact me directly for a free no-obligation consultation.

Michael T. Maloney, CFP®
MTM Capital Partners, LLC
845-300-8282

SILVER is the new GOLD

Gold has hit an all-time high of $1,250. The flight-to-safety trade is starting to take on a different flight pattern away from U.S. treasury bonds to Gold. We are starting to establish a real base of support for Gold prices at the $1,200 level. The sovereign debt concerns in Europe (1.00 Dollar = 1.19 Euro) are beginning to shed light on to a much larger global sovereign debt problem that stretches around the globe from the U.K. to the U.S. Bill Gross of Pimco was recently quoted as saying that the 30 year bull market for bonds is over.

As Gold continues to soar to new heights the sister precious metal Silver has not moved in tandem. The New York Post has recently reported that J.P. Morgan is under investigation for manipulation of the Silver futures market. The allegation is that Morgan pushed down Silver prices when bullish news broke during 2009 to keep the price surpressed.

The historical relationship between Gold and Silver has been 20:1 which means that Silver is historically priced at 5% of Gold. Within the Roman Empire, Silver was acknowledge to always be priced at 10% of Gold, however, the supply of Silver during that time period was much more limited. Therefore, even at a 20:1 ratio Silver would now be priced at $62.50!!!

Current Price: $18.00 per troy oz.

http://www.bloomberg.com/markets/commodities/cfutures.html

The best way to buy Silver (other than physical), is SLV for unleverage or AGQ for 2x leverage.

Canary in the Coal Mine

Alan Greenspan was recently quoted as saying that the recent spike in U.S. Treasury Yields is equivalent to a, "canary in the mine". If the 10 year treasury yield goes over 4.00% and holds it may be a very bad sign for higher interest rates going forward. The Fed controls short term interest rates only. The market controls long term interest rates and if the bidders do not show up at the treasury auctions the government must increase the rates to intice buyers.

The rate on the 10 year treasury bill dictates interest rates for mortgages, business loans, etc. If that rate increases to say 5.50% (which is being projected for 2010 year end by Morgan Stanley) that would spell very bad news for the fragile recovery in the real estate market and may also push up the already sky high national unemployment rate well over 10%.