I am retired and take educated guesses on all things financial.

October 18, 2006

October 19, 2006: ALPHA,Stocks,Bonds ETF's,.

With the Dow bumping up to new highs, a mixed-party Congress likely (short of a Republican majority,I love gridlock in Congress), interest rates low and war fatigue increasingly numbing the country, here's how I view the investment climate:

If you are seeking tax advantaged yield, go after energy pipeline LP's such as ETP. You are getting a very nice dividend that is not going to rake you at tax time. Just be prepared to fill out a few additional tax forms come April. If taxes are not an issue, check out the GE Interest Plus account, currently at 5.43% (see my earlier blog posts on this vehicle). Ohio Savings and Capital One offer good money market rates online.For the arch-conservatives, six month Treasury Bills are yielding about 4.75% and can be purchased free online (see previous blog posts). The ETF's claiming yield are coming up short in my opinion and should not be purchased for that purpose. ONE exception might be the Claymore Dividend Hog fund (see previoous blog post).

I still like shorter term GMAC Smart Notes so long as you hold them to maturity and are SELECTIVE in your choice and purchase price. Some have a big spread and it seems to me that the prices fluctuate quite a bit daily. Usually, several are cheap on a day to day basis due to market excentrics. Do not buy any that mature after mid-2009 so long as GM is on the ropes. Avoid bond funds. Avoid buying junk for an extra yield boost (except those Smart Notes).

So many ETF' little to choose. There are scores of eclectic ETF's being offered or in the works. Be careful. A few may work out for you, but the majority are nothing more than marketing tools to pry more cash out of your pocket with little chance of beating the vanilla index fund over the long haul. And I do not endorse index funds! The hype over ETF's has been fierce. I still prefer well chosen individual stocks (see previous blog posts)with a FEW sector ETF's to spice up areas in your diversified portfolio that cover parts of the globe where company transparency is poor, or where industries are best selected (such as pharma) en masse.

Seeking ALPHA in the current high altitudes becomes somewhat daunting, but entirely possible if you stop, look and listen to the investment vehicles you are considering. If you are scratching your head, trying to figure out what investment is ripe,remember,there is never a bad time to lock in a few profits.

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