John Wasik

Beat high-frequency trading machines by not playing their game

Aug 29, 2011 15:14 UTC

The days of you trying to make a buck actively trading in the stock market are over.

Individuals don’t stand a chance anymore because they are largely competing against rational machines often guided by herd-like irrational forces. The robots can rule in the blink of an eye.

I’m not spouting lines from an Isaac Asimov novel, but citing reality. The machines and people who program and profit from them have won — for now.

I knew it was over for human traders when I heard that high-frequency trading firms were hooking up their data lines directly to exchange computers to gain an extra hundredth of a second in execution time.

High-speed programs are designed to move millions of shares in a fraction of a second to take advantage of small movements in securities prices. These algorithms are ideal Wall Street workers. They don’t need health insurance and you don’t have to pay them bonuses to help finance their Lamborghinis or homes in the Hamptons.

Why 401(k) plans will fall short for most Americans

Aug 26, 2011 15:27 UTC

It’s time to end the fraudulent notion that 401(k)-type plans are adequate retirement vehicles for most Americans.

They fall short in so many ways, but mostly because they’re too expensive, are exposed to excessive unhedged market risk, poor allocation and contain no income guarantees. There is a better way: Congress can fix the problem while boosting private investment.

With the latest market rout, it’s hardly surprising that most Americans say they are “not where they need to be” on retirement saving. Most are behind after two recessions, two market crashes and yet another downturn.

Hedging can end your retirement panic now

Aug 22, 2011 15:03 UTC

Even with the most recent market agita, there’s no reason for you to worry long-term about your retirement funds.

Is my head in the clouds? As darkly volatile as this moment in personal investing may seem, it’s actually a golden age for portfolio insurance. Retirement worries as we know it can come to an end — if you know how to hedge properly. There are plenty of retail tools available to that end.

Part of my optimism is based on the availability of off-the-shelf portfolio insurance for everyone. If you hedge your holdings the way the big institutions do, big dips will do no harm and you can even make money when the market’s down.

The “people” Washington helps most: big corporations

Aug 19, 2011 15:15 UTC

By John F. Wasik
The opinions expressed are his own.

If corporations are people, as GOP Presidential candidate Mitt Romney recently declared, they are very special people indeed.

As you know, big corporations are treated by the courts as if they are people, yet can contribute infinite amounts of money to purchase politicians, legislation and tax breaks.

Megacorporations’ access to tax breaks and loopholes has gotten so out of control that even General Electric CEO Jeff Immelt says that the U.S. corporate tax code should be reformed. The $150-billion company managed to have a negative 61 percent tax rate last year.

Is it time to jump back into stocks?

Aug 15, 2011 15:37 UTC

Should I stay or should I go?

This compelling theme, referring to stock investing and not the great Clash song, is like a little gnat buzzing in one’s ear.

The answer depends on how well you can predict the future, your gut check for risk and history. I know that’s a weaselly response, so let me explain.

I could easily make a case for buying stocks now. There are some bargains out there and thousands of companies are profitable.

The Tea Party’s “blue deal” for America

Aug 12, 2011 16:29 UTC

By John F. Wasik
The opinions expressed are his own.

Imagine being elected to government even though you’re openly hostile to it.

Such is the perverse arrangement the Tea Party has with the electorate, which is foisting a “Blue Deal” on Americans. As opposed to a “New” deal or even “Square” deal, the Blue Deal and its prolonged pain will hurt most middle-class Americans through higher costs in retirement, health care and public health.

Tea Party affiliates’ nonchalant posturing on the potential debt default influenced the Standard and Poor’s decision to downgrade U.S. debt and the ensuing turmoil.

4 ways to hedge the market without playing whack-a-mole

Aug 10, 2011 17:00 UTC

Is the recent market upheaval the growling of a new, prolonged bear market or a tempest in a teapot?

It’s too soon to tell and most of us will guess wrong anyway. As Washington and global traders sort out the impact of the U.S. “Tea Party debt downgrade,” you should employ the best hedging strategies possible.

Of course, if you already have a comprehensive financial plan with an investment policy statement in place — and it’s working for you — you’re probably fine. While the ongoing market angst is troubling, you’re still on course.

What U.S. debt downgrade means for ETFs

Aug 8, 2011 15:22 UTC

A woman shades herself from the sun with an umbrella as she walks down 34th Street in New York July 22, 2011. REUTERS/Shannon Stapleton  Is it time to take cover from exchange-traded funds (ETFs) now that Standard and Poor’s has cut the U.S. debt rating?

With the recent U.S. and Euro debt crises introducing new uncertainty, volatility will be the name of the game. As the frenzy of new fund offerings abates, many funds may close because they will be unable to attract sufficient assets. But a handful of safeguards can protect you.

“The number of ETFs that are shut down or liquidated, while previously a rare occurrence, is on the rise,” said Tom Lydon, publisher of the popular ETF Web site www.etftrends.com in an email. “Closings are up 500 percent in each of the last three years over 2007 levels (which equates to one each week).”

Job creation: Fixing America with an infrastructure bank

Aug 5, 2011 14:17 UTC

We have iPhones, iPods and iPads. Why not an “iBank?”

This wouldn’t be an electronic gizmo that’s obsolete in a year, though. It would be a public-private partnership to bolster America’s infrastructure. It will create jobs, cut the deficit and repair what needs to be fixed all over the country.

An infrastructure bank, or iBank, solves a lot of problems without busting the budget. Instead of providing direct government grants or earmarks for specific projects, loans are made by a government-banking entity.

The U.S. is inexcusably late to the game on this time-tested idea. The European Investment Bank has financed some $350 billion in projects from 2005 through 2009. China spent 9 percent of its gross domestic product — also roughly $350 billion — to build subways, highways and high-speed rail in 2009 alone. Brazil invested $240 billion over the past three years.

6 ways to protect your portfolio after debt deal

Aug 2, 2011 19:03 UTC

With the U.S. debt ceiling crisis: It “ain’t over ‘til it’s over,” to quote my favorite philosopher Yogi Berra. And this one is definitely not over by a long shot.

Some $1.5 trillion in cuts in federal programs will be considered toward the end of the year. Credit agencies may still downgrade U.S. debt. And the harsh plan may ultimately damage the floundering American economy. Fortunately, you have time to protect your portfolio before another politico-economic reign of terror ensues.

Start with an assumption that the markets may frown on U.S. debt and the dollar in general. And there may not be much – if any – significant economic growth in the U.S. for some time. Here are six key portfolio themes that you can consider to bolster your portfolio and insulate it from global debt woes.