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Advice on Alternative Investment Strategies

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Q: Anyone heard of International Information Exchange?
Anyone heard of this IIE? It was supposed to protect investors.

The principal undertaking of the International Information Exchange (IIE) is to protect investors employing alternative investment strategies, i.e. private investment opportunities, hard asset commodities trading and offshore investing.

International Information Exchange
775, 15th St. NW
Suite 500
Washington, DC 20005

Tel: (202) 263-1950
Fax: (202) 263-1951

http://www.theiie.net/

A: I searched online but nothing came out.
I hope that you will chose my answer as best one.
Thanks

Q: Help me find the expected rate of return!?
“You are considering two investment opportunities, namely, Investment A and Investment B. Suppose, the rate of return on Investment A can be described by a Normal distribution with mean 8% and standard deviation 4%, and the rate of return on Investment B can be described by a Normal distribution with mean 5% and standard deviation 5%.”

a) If you allocate half of your portfolio to each investment, what is the expected rate of return?

b) Consider the alternative strategy of allocating one-third of your portfolio to Investment A, and the remaining two-thirds to Investment B. What is the expected rate of return on this alternative strategy?

c) How would you measure the risk associated with the two investment strategies outlined in parts (a) and (b)? Based on this measure, which investment strategy would you prefer – the one outlined in part (a), or the one outlined in part (b)?

A: Now the expected return on a portfolio of assets is simply the weighted average of the returns on the individual assets.
Thus for a two asset portfolio the expected return
=w1E (A) +w2E (b)
Where
E (A) =expected return on asset A
E (B) =expected return on asset B
W1=percentage of the total portfolio value invested in asset A
W2 = percentage of the total portfolio value invested in asset B
Now to answer your question
(A)allocate half of your portfolio to each investment, the expected return will equal
0.5(0.8) +0.5(0.5) =0.65
=65%
(B) one-third of your portfolio to Investment A, and the remaining two-thirds to Investment B the expected return will equal
0.33(0.8) +0.67(0.5) =0.33
=33%
(c)The variance and standard deviation of returns are common measures of investment risk but to measure the standard deviation for a portfolio of assets it’s not simply the weighted average of assets standard deviation it’s also a function of the correlation among the returns of the assets in the portfolio
The general formula for the portfolio standard deviation:

σp=√(w_1^2 σ_(1+)^2 w_2^2 σ_2^2+2w_1 w_2 〖COV〗_1,2 )

Where:
σp=portfolio standard deviation
W1=percentage of the total portfolio value invested in asset A
W2 = percentage of the total portfolio value invested in asset B
〖COV〗_1,2=the covariance between the returns of asset A and B

Q: what are some good resources to learn about investing and finance?
i’m interested in books and online sources for learning about all things finance. i want to learn more about personal finance and investing for myself, as well as larger scale and more complex financial strategies and instruments. what should i focus my research on? i’m intrigued by hedge funds and other alternative investments, but i also want to learn about more common and readily accessible investing vehicles and styles.

A: The weekly investing column in the newspaper is written by a group called The Motey Fool. www.fool.com (not my website). It’s good for beginners in investing and finance..

Q: Investment Strategy – ETF’s?
Figuring I do not possess the time/knowledge to follow individual stocks I was thinking of buying ETF’s in the following broad industries as an alternative to help gain exposure to stocks in my portfolio:

The broad industries – Basic Materials,Conglomerates,Consumer Goods,Financial,Healthcare,Industrial Goods, Services, Tech and Util

Is this a sound alternative?

A: You are on the right track for a diversified portfolio. One way to cover all the areas is to expand to 9 index ETF’s- xlb, xlp, xly, ixg, xlv, dia, xle, xlk, xlu. Start with 11% of your money in each of the 9 funds. Once each year, rebalance by selling shares in the one that went up the most, buy shares in the one that went down the most, getting back approximately to 11% in each. This strategy has beat the s&p 500 for the past 5 years.

Q: Investment Fundamentals – Financial Planning Project Question help?
I have a project question which asked for an implementation schedule for the products i recommended outlining the actions required by the clients and adviser in order to implement the recommendations?

The recommendations by me are:

Michael and Anna have a good financial condition. They have a decent amount of net worth of $1,892,000 (Total Assets – $2,102,000 less Total Liabilities – $210,000). Michael and Anna are aged 39 and 37 respectively, this indicates that they are still young and have more time for retirement and as a result more time to work and earn before retirement. They are likely to have a Growth risk profile. They are more suitable to invest in growth assets. For example around 85% in property and shares and 15% in fixed interest and cash
It has been established that Michael and Anna were both quite inexperienced when it came to investing. A managed fund provides exposure to the market without requiring serious research. In essence, the responsibility of the investor making the profit is removed. Michael has a demanding job as well as a family. The direct market may well require more time and knowledge than he currently posses. Involvement in this type of investment will also provide access to professional fund managers.
Another luxury of managed funds compared to direct investment is diversification. Michael has expressed an element regarding investments. A managed fund can satisfy this curiosity. This may encourage the use of a regular savings plan.
With two young children, heavy involvement in an investment would be difficult and stressful. Michael and Anna have indicated that they wish to pay off their existing mortgage with the proceeds of inherited property as soon as possible. With this in mind direct property investment may not be suitable. Indirect property investments should also be considered. It may be more suitable for Michael and Anna to invest into a managed fund, such as a property securities trust. These investments include listed and unlisted property trusts, as well as property security funds. The above mentioned investments will provide a higher level of liquidity, especially the listed property trusts, and also remove the burden of managing a direct property. Michael and Anna may even like to become involved in a property syndicate.
A commitment to the children’s education has been made and a property trust may be the vehicle to drive that investment. This strategy would appear to be much more suitable and indeed manageable. A property securities fund also has beneficial tax implications as well. The transparent structure passes tax advantaged incomes back to them. This may also be of particular interest to them’ as taxation was listed as a high priority on their list of concerns. A listed property trust may also be suitable and income from such could be used for their needs like their children’s visit to Disneyland. To complete a variety of alternatives, a private syndicate should also be discussed.
Pooling funds with others dramatically reduces the financial strain of the investment. As such they can also invest in pooled development funds which offer tax advantages as well. They are like venture capitalists. The main attraction of such funds is that there is no capital gains tax or income tax on pooled development funds. Given the nature of the couple’s employment one could assume they are associated with potentially interested parties who could provide stable and substantial capital.

I don’t expect an answer directly, but just guideline to start the answer, if anyone can help please???

A: I do not find a question in all this, sorry.

Q: Does FDI do more harm than good?
What is your opinion on the contribution Foreign Direct Investment makes in developing countries?

Does a real transfer of knowledge and technology occur or is it just a matter of exploiting that particular country’s national advantages?

Should countries continue to vie for FDI or develop alternative strategies?
Juan, buying shares in a foreign company isn’t a form of FDI it is known as ‘portfolio investment’.

A: FDI is essential for technological up-gradation and overall upliftment of any country..FDI provides the necessary “push” to the economy since they are the guys with BIG money, also the new age mantra is partnership and not competition.

Developing countries will and should vie for FDI.

Q: what are the EXXON MOBILE stakeholder-theory perspective?
2.EXXON/MOBILE has long been a pariah in the energy business for its blatant disregard for the environmental damage it has been causing in the course of its normal business operations all over the globe. The company has recently made significant attempts to change its blemished corporate image by adopting more environment friendly strategies such as making substantial investments in alternative sources of energy. Explain this “change of heart” in terms of (a) the stakeholder-theory perspective and (b) the more traditional approaches focused on long-term, sustainable profitability.

A: The traditional input-output model has the corporation only looking at the investors, employees, suppliers, and customers. The government is also a place to start. With the new more environment friendly strategies, I think (not sure) Exxon would get more tax breaks by pursuing these alternative sources of energy. Since it is profitable to look at the government as stakeholder, then Exxon will do so when it needs to.

There could be secondary stakeholders, such as political groups, where Exxon wants to appease these groups in order to improve its image.

Long-term sustainable profitably comes in 2 ways. Before oil runs out, Exxon will have diversified its risk because it can produce energy in multiple forms instead of just oil. So, if Hurricane Alice wipes out 10 of its refineries, it can still produce energy and make a profit that quarter.

The other case happens when oil finally runs out X years down the line. Their R&D would hopefully be ahead of the competetion so that they still have a foothold in the energy industry while the others would be struggling to play catch up.

Q: Max out 401(k), or add in Index Funds?
Assume a situation where a mid 30’s adult can invest 15% of their yearly salary. They work for a company who’s match for 401k is 6%. Assuming the individual is not eligible to contribute to a Roth IRA, which is a wiser investment strategy?

1. Max out the 401(k), then invest in indexed funds if possible.

2. Invest 6% to get the max company match, then invest the remaining 9% in indexed funds.

(alternatives to these are also welcome)
Thanks for the answers so far. Let me add that the 401(k) does not offer indexed funds. If the individual maxes the 401(k), they get the tax deferral now, but in the long run-makes less money (since indexed funds outperform actively managed funds).

A: I would max out the 401(k) contribution, even going above the matched contributions. Most 401(k) plans will offer one or more stock index funds as part of the plan, so you still are earning the maximum long term return in the Plan as you would outside the Plan.

The benefit of it being in the Plan is you won’t spend it (can’t, without a penalty), and the interest is cumulating tax deferred… meaning that you have more of your money (and your money’s money) working for you.

The only reason to not max out the 401(k) is if you think you will need to use it before retirement, and if you would face a penalty for early withdrawal.

Q: Could I become at least a millionaire by age 23 by trading options using a “Straddle” strategy every time?
I am 17 now, will be 18 in 2 months, I’ve read about all the different investment vehicles there are to make money. Because I live in the UK, I could trade CFDs (Contracts for Differences), but they don’t float my boat now. I’ve read into options trading, bought books, read blogs and articles on the subject, and I’ve been exploring into the many various strategies you can use to invest with and Straddles catch my eye. Straddles are strategies where in which you purchase a Long Call & Long Put with the same strike price, in which before the option has any value, the price of the stock must go strongly up or down. What I’d like to know is if I started with, say, £500 and tradeed stocks using Straddles every time, but once I made enough money, branched out and diversified my investment just to avoid losing everything, could I in 5 years, from age 18 to age 23, or as an alternative, by age 27 become a millionaire, and is this possible and has anybody ever done it in this short of time?

A: Straddles and their out of the money cousins Strangles, only work with high volatility underlyings as you use these strategies when you believe that the underlying will move by a large amount, but you don’t know which way (or you would just take the directional trade). First off, to make any money you need for the underlying to move by more than the premium before you can break even.
The problem with high volatility stocks is that this volatility is price into the option (Vega) and the higher the volatility, the more the option costs.

To be put into perspective, your £500 would buy you two options. Because of high cost of bank balance sheets and high Vega on stocks at the moment the average in the money option is running at around 15% premium. So for you to make any money overall, one leg of the option needs to move by 30% before you even break even.

This is a type of hedging strategy so will never make large amounts of money that you are thinking of, what you should do is study one or two areas of the AIM market and then trade CFD’s.

Being very honest, anyone who becomes a millionaire is very good at what they do. So the chances of you becoming a millionaire in the next 10 years through trading is very, very slim unless you are good at it.

Good luck and happy hunting

Q: Who still believes Global Warming is caused by man?
Global warming ethics, pork and profits

By Paul Driessen
web posted February 12, 2007

The ink has barely dried on its new code of conduct, and already Congress is redefining ethics and pork to fit a global warming agenda. As Will Rogers observed, “with Congress, every time they make a joke, it’s a law. And every time they make a law, it’s a joke.”

However, life-altering, economy-wrecking climate bills are no laughing matter. That’s why we need to recognize that the Kyoto Protocol and proposed “climate protection” laws will not stabilize the climate, even if CO2 is to blame. It’s why we must acknowledge that money to be made, and power to be gained, from climate alarmism and symbolism is a major reason so many are getting on the climate “consensus” bandwagon.

In accusing ExxonMobil of giving “more than $19 million since the late 1990s” to public policy institutes that promote climate holocaust “denial,” Senate Inquisitors Olympia Snowe and Jay Rockefeller slandered both the donor and recipients. Moreover, this is less than half of what Pew Charitable Trusts and allied foundations contributed to the Pew Center on Climate Change alone over the same period. It’s a pittance compared to what US environmental groups spent propagating climate chaos scare stories.

It amounts to 30 cents for every $1,000 that the US, EU and UN spent since 1993 (some $80 billion all together) on global warming catastrophe research. And it ignores the fact that the Exxon grants also supported malaria control, Third World economic development and many other efforts.

Aside from honest, if unfounded, fears of climate disasters, why might others support climate alarmism?

Scientists who use climate change to explain environmental changes improve their chances of getting research grants from foundations, corporations – and US government programs that budget a whopping $6.5 billion for global warming in 2007. They also increase the likelihood of getting headlines and quotes in news stories: “Climate change threatens extinction of rare frogs, scientist says.” Climate disaster skeptics face an uphill battle on grants, headlines and quotes.

Politicians get to grandstand green credentials, cement relationships with activists who can support reelection campaigns and higher aspirations, magically transform $14-billion in alternative energy pork into ethical planetary protection, and promote policies that otherwise would raise serious eyebrows.

Corporate actions that cause even one death are dealt with severely; but praise is heaped on federal mileage standards that cause hundreds of deaths, as cars are downsized and plasticized to save fuel and reduce emissions. High energy prices are denounced at congressional hearings, if due to market forces – but praised if imposed by government “to prevent climate change.” Drilling in the Arctic or off our coasts is condemned, even to create jobs, tax revenues and enhanced security; but subsidizing wind power to generate 2% of our electricity is lauded, even if giant turbines despoil millions of acres and kill millions of birds.

Alarmist rhetoric has also redefined corporate social responsibility, created the Climate Action Partnership and launched the emerging Enviro-Industrial Complex.

Environmental activists have turned climate fears into successful fund-raising tools – and a brilliant strategy for achieving their dream of controlling global resource use, technological change and economic development, through laws, treaties, regulations and pressure campaigns. Recent developments promise to supercharge these efforts.

Environmental Defense is collaborating with Morgan Stanley, to promote emission trading systems and other climate change initiatives – giving ED direct monetary and policy stakes in the banking, investment and political arenas, and in any carbon allowance or cap-and-trade programs Congress might enact. Other environmental groups, companies and Wall Street firms will no doubt follow their lead.

ED designed and led the disingenuous campaign that persuaded many healthcare agencies to ban DDT, resulting in millions of deaths from malaria. Greenpeace, Sierra Club, Union of Concerned Scientists, ED and other groups still post deceitful claims about DDT on their websites, further delaying progress against this killer disease. By blaming climate change for malaria, they deflect criticism for their vile actions.

Climate catastrophe claims enable activists to gain official advisory status with companies and governments on environmental issues. They also make it “ethical” for Rainforest Action Network and other pressure groups to oppose power generation in Third World countries, where few have access to electricity – and thereby keep communities perpetually impoverished.

Meanwhile, Prince Charles gets lionized for appropriating 62 first class jetliner seats for his entourage of 20, on a trans-Atlantic trip to receive an environmental prize and lecture Americans on saving the Earth – because at least he didn’t use his private jet.

Companies in the CAP and EIC can develop and promote new product lines, using tax breaks, subsidies, legal mandates and regulatory provisions to gain competitive advantages. They get favorable coverage from the media, and kid-glove treatment from members of Congress who routinely pillory climate chaos skeptics.

Some worry that this could become a license to further redefine corporate ethics, present self-interest as planet-saving altruism, and profit from questionable arrangements with environmental groups and Congress. Certainly, cap-and-trade rules will create valuable property rights and reward companies that reduce CO2 emissions, often by replacing old, inefficient, high-polluting plants that they want to retire anyway.

DuPont and BP will get money for biofuels, GE for its portfolio of climate protection equipment, ADM for ethanol, Lehman Brothers for emission trading and other deals. Environmental activists will be able to influence corporate, state and federal policy, and rake in still more cash. Insurance companies can blame global warming for rate increases and coverage denials.

Lobbying and deal-brokering will enter a new era. As Thenardier the innkeeper observed in Les Miserables, “When it comes to fixing prices, there are lots of tricks he knows. Jees, it’s just amazing how it grows.” Indeed, the opportunities to “game the system” will be limited only by one’s “eco-magination.”

To determine the losers, look in the mirror. Activists and politicians are creating a Frankenstein climate monster on steroids. Were it real, we’d need to dismantle our economy and living standards to slay the beast. How else could we eliminate 80–90% of US and EU fossil fuel emissions by 2050, to stabilize carbon dioxide emissions and (theoretically) a climate that has always been anything but stable?

Think lifestyles circa 1900, or earlier. Ponder the British environment minister’s latest prescription: World War II rationing, no meat or cheese, restrictions on air travel, no veggies that aren’t grown locally. France wants a new government agency that would single out, police and penalize countries that “abuse the Earth.” Others want to put little solar panels on African huts, while kleptocratic dictators get millions of dollars for trading away their people’s right to generate electricity and emit CO2.

We should improve energy efficiency, reduce pollution, and develop new energy technologies. But when we demand immediate action to prevent exaggerated or imaginary crises, we stifle debate, railroad through programs that don’t work, create enough pork to fill 50 Chicago stockyards, and impose horrendous unintended consequences on countless families. That is shortsighted and immoral.

A: EVERY CHILDREN OLDER THAN 5YR THAT IS STUDIING SCIENCE AT SCHOOL UNDERSTAND THAT HUMAN ACTIVITY ARE CAUSING Global Warming…

Q: Business class question dealing with taxes.?
JUST TAX THE RICH AND PAY OFF THE DEBT?

For years, economic was defined as the allocation of scarce resources among competing groups and individuals. No two groups would seem more in competition in a society than the rich and the poor. The feeling among many people is that the rich got rich by exploiting the poor (labor). In their search for more equality, some people suggest increasing taxes on the rich and giving the additional money to the poor. Such was the thinking behind most socialist governments.
The problem with such thinking is that there simply aren’t enough wealthy people making enough money so that by increasing their taxes the government would be able to pay for all its programs. A few years back, Forbes magazine reported that if the federal government took 100% of the income of the 35,875 millionaires in the U.S., the increase in revenue would run the government for just 12 days. If the total wealth of the 400 richest people in the U.S. were confiscated, it would pay for just three months.
Wealthy people make most of their money from investing in businesses. If the government were to increase their taxes, that investment money would no longer be there, and the economy would slow. Therefore, it is clear that taxing the rich isn’t a solution to the government’s problems. The tax burden always falls on the middle class, those people who are struggling to pay their mortgages, send their kids to school, and so forth. Increasing their taxes makes them poorer, and nobody feels better off. That’s why recent tax bills have cut the taxes on the middle class or offered them more benefits, such as a start in college for their children.
The only long-term solution to meeting government needs is for the economy to grow. That increases the size of the pie and makes it possible for everyone to have more without taking it from someone else. The problem is that growth strategies are directly in conflict with goals of more equality. Growth often comes from cutting taxes on the rich. That encourages them to invest more and to make the economy grow.

discussion questions for supplemental case 2-2:

1. Recently Sweden joined many of the other nations in the world in cutting taxes. The Swedish people also voted against a socialist government. Taxing the rich is no longer the preferred way to balance government budgets. What are the alternatives?

2. There are thousands of millionaires and some billionaires in the United States. What are the advantages and disadvantages of taxing such people at much higher rates than now prevail?

So, this was a question we received on a test in my business class on Monday. I got it wrong, and I am just curious as to what a good answer would have been.
Bostonian…. I didn’t include my answer in this, so how would you know whether I know what I’m talking about or not?
That long paragraph before the questions was part of the test.

A: The Forbes article is disingenuous at best. It assumes that those 35,875 millionaires are worth exactly $1 million and no more. Since a billionaire is also a millionaire, confiscation of the wealth of the top 35,875 richest Americans would wipe out the deficit in one fell swoop and probably leave enough to fund most government operations in perpetuity if it were properly invested in high-quality commercial securities.

Tossing about terms like “socialist” and “socialism ” while obviously not knowing what the terms really mean pretty much guarantees that you will get a poor grade.

Re-think your position from an ECONOMIC standpoint, not a POLITICAL standpoint. While reality can be hard to pinpoint in complex economic issues, it’s absolutely obscured by a thick fog when viewed politically.

Q: I think I have a very feasible idea/concept that needs an “angel” investor. How can I find one?
In the near future, more and more people will rely less on desktops and instead opt for web based applications. The major players (Google, Amazon, IBM) are positioning themselves in varying implementation of “Cloud” concept strategies. I feel that there are cheaper alternatives to the “Cloud concept” but will require a multi-pronged approach in software, firmware and hardware development that require investments I cannot afford. “Angel investors” are non-existent in my part of the world. Where can I get in touch with any investor that is willing to evaluate my concept/idea?

A: Business 2.0 http://money.cnn.com/2006/02/28/magazines/business2/angelinvestor/index.htm has a very good article on angel investors, what they typically look for, what kind of investments they support, etc.

You may want to go and pitch your ideas where investors gather. Here are some places where angel investors come and those looking for funding can come and pitch their business plans. Be sure to have a strong business plan and describe what makes your business idea stand apart:

Angel Capital Association http://www.angelcapitalassociation.org
Angel’s Forum http://www.angelsforum.com
Band of Angels http://www.bandangels.com
Common Angels http://www.commonangels.com
Keiretsu Forum http://www.k4forum.com
Launchpad Venture Group http://www.launchpadventuregroup.com
New World Angels http://www.newworldangels.com
New York Angels http://www.newyorkangels.com
Robin Hood Ventures http://www.robinhoodventures.com (charges $250)

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