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Don’t Be A Wall Street Patsy
You want to know the truth? The truth is that Wall Street has stacked the deck against you.
That's why you need to understand how the game is played. Otherwise you'll end up a Wall Street patsy.
So, here's the truth along with some lessons that will help you play the game like a pro.
First, though, we'll need to debunk a few myths…
Let's start with the myth that the Street lowered brokerage charges for the benefit of retail investors. At one time, these fees used to be obscenely high and fixed.
But, on May 1, 1975, fixed commissions were abolished after brash upstarts like Charles Schwab and disgruntled investors decided to attack The Street's price-fixing schemes.
The negotiated commissions regime that followed lowered the cost of access to the stock market, essentially ushering in the era of the "individual investor."
The influx of these individual investors, many of whom didn't have enough money to create diversified portfolios, soon became a boon for mutual funds – which have since grown like weeds in an untended sod farm.
Wall Street Changed the Game
Since the commission business was no longer profitable, Wall Street moved its retail business to an "assets under management" model.
So instead of making money on commissions the game changed to gathering as many assets as you could into a retail investor's account and charging a fee to "manage" them; in other words, just watch them.
That's one of the reasons why Wall Street advocates a "buy and hold" strategy for retail investors. They don't want you to take those assets away from them.
It's the same thing with mutual funds.
And conveniently, if your broker puts you into mutual funds that are losers, it's not your broker's fault.
Now, it's the mutual fund manager's fault. That way the broker can't be blamed if your account loses money.
Instead, your broker can tell you, "Don't fire me, let's fire the mutual fund manager and let's find you a better fund to invest in. But, no matter what happens, we need to buy and hold and not try and time the market."
That's what retail investors are told to do over and over and over again.
But guess what? That's definitely not what Wall Street firms do.
In fact, while you're being told to buy and hold, exchange specialists, market-makers, hedge funds and every trading desk at every Wall Street bank and firm are busy trading.
Some individual investors began to see how Wall Street was really making its money and started trading themselves.
Of course, that only increased the competition for easy trades as more retail investors traded in and out of stocks.
To continue their advantage over the public, Wall Street fought to do away with the uptick rule. The rule was wiped out so traders could short sell any stock at any time.
But it's the big Wall Street players who benefit from the rule change because they can use their huge capital positions and work with each other to drive down stocks they have shorted.
Who gets hurt? The buy-and-hold retail investors who are told to buy more at lower prices are the ones who get fleeced.
And, who is selling to them?…
Better Than Brazil: How to Invest in a Colombian Safe Haven
What's an investor to do?…
The Eurozone is about to collapse. The United States is struggling out of the deepest recession since World War II. And the IMF forecasts global growth will drop from 5% in 2011 to 2.6% in 2012.
How about investing in a safe haven far away from all of these troubles – one where you can actually watch your money grow?
I have found one in Colombia. Let me tell you why.
It is because Colombia is no longer a place controlled by drug kingpins or ripped apart by civil war. Colombia is a country on the comeback.
This revival began in 2002 when former president Alvaro Uribe decided to take on both the leftist guerillas and the drug barons. Since then, his successor Jose Santos has followed up on those policies, and they have worked.
In 2011, Colombia's homicides dropped by 5% to 14,746 and its murder rate dropped to 33 per 100,000 of population.
Admittedly, that's still five times the U.S. level, but these things are relative – it's half the level it was just four years ago.
Foreign investors have noticed, and last year, foreign investment in Colombia was up 56% to $14.8 billion.
Colombia Beats Brazil
In fact, according to the World Bank's "Doing Business" survey, Colombia ranked 42 out of 183 countries.
That was near the top spot in Latin America and far above Brazil's appalling rank of 126. Only Chile was higher with a rank of 39.
Stock market investors have noticed this, too – in the second half of 2011 Colombia had $4.9 billion of initial public offerings, the most in Latin America – and yes, again ahead of Brazil!
On the macroeconomic side, Colombia is sound, with public debt at just 45% of gross domestic product (GDP), a modest budget deficit, inflation just over 3% and the central bank base rate at 4.75% — no Ben Bernanke nonsense of zero interest rates!
Colombia has also gotten a boost by a surge in oil production, with exploration now possible in areas that had been "no go" for foreign investors for decades.
In November 2011, oil production was 920,000 barrels/day, up 17.5% from the previous year. Oil and minerals were responsible for 82% of Colombia's 2011 foreign investment, so the potential for investors is immense.
However, the real reason why Colombia is so attractive [To continue reading, please click here...]
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How Presidential Candidate Ron Paul's Campaign Could End the Fed
Led by presidential candidate Ron Paul's "end the Fed" mantra, Republicans have made their attacks on the U.S. Federal Reserve into an election year rallying cry.
It's one that could turn ugly in November if the GOP manages to score big.
Where Paul has been the lone voice in the wilderness criticizing the central bank for years, others in the GOP recently adopted the Fed as a scapegoat for the financial crisis of 2008.
Many of the Republican attacks include calls to fire Fed Chairman Ben S. Bernanke and to scale back the Fed's mandate – or in Paul's case, eradicate it altogether.
And while Paul – who actually wrote a book called "End the Fed" in 2008 – has little chance of becoming the nominee, his campaign does have a larger philosophical objective.
"It is Paul's goal to permanently establish within the Republican Party a group that is dead set on not having the Fed," Douglas Holtz-Eakin, chief economic adviser to Sen. John McCain, R-AZ, during his 2008 run for the presidency,told MarketWatch. "This is not going away."
Ron Paul Scores Big With Younger Voters
Although Paul's overall support generally hovers in the low double digits, his message is very popular among younger Republican voters.
Paul won 48% of the under-30 vote in Iowa, 47% of the under-30 vote in New Hampshire and 31% in South Carolina. It's a demographic every candidate covets.
Paul's resonance with young voters, combined with the public's dim view of the Fed has set off an all-out GOP assault on the central bank.
For added juice, Republicans in general have sought to tie their criticisms of the Fed to U.S. President Barack Obama and the Democrats.
"If you are a [Republican] running for Congress – those freshmen in the House – they thought that Bernanke was walking around talking about buying assets for Obama to make it easier for him to spend," Holtz-Eakin told MarketWatch. "It lit the fuse."
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