Tag Archive | SHY

9 ETFs To Play Currency Debasement

As developing nations continue to implement loose monetary policies, keep interest rates low and boost money supply, a nation’s debt and currency debasement should me of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation’s currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits. Read More…

10 ETFs To Play Deflation

As deflationary concerns continue to make headlines among investors, dividend paying investments, interest-bearing investments and cash become more appealing.

Weak economic figures, a decline in money supply and fiscal tightening around the world are a few reasons why falling prices could be in the near future. Other factors that could lead to a drop in prices include tight credit markets, declines in consumer spending and high unemployment – all of which lead to a reduction in the demand for goods. Declines in the demand for goods eventually result in excess supply, which further leads to a decline in prices to bring supply and demand in equilibrium.

A fall in prices can be detrimental to an economic recovery if businesses and consumers become reluctant to spend and decide to hold on to any disposable cash. This decrease in money supply is most devastating to economies that are highly dependent on consumer spending, such as the United States. Other results of deflation include erosion of consumer confidence and amplification of the burden of both household and public-sector debt. Read More…

Three Reasons Bond ETFs Could Be In Bubble Territory

As many investors have shunned stocks and turned to long-term fixed income to park their investment dollars, the safety of bonds, and the exchange traded funds (ETFs) that hold them, may be in jeopardy. 

The first reason the bond market might be in trouble is because prices are being inflated.  With concerns in the overall health of the global economy, the fear of a double-dip recession and unemployment levels remaining at stubbornly high levels, numerous investors are shunning risk and turning to bonds.  In fact, over the last year, net inflows into fixed income investment tools have outpaced net inflow into equities by nearly tenfold.  The Investment Company Institute reports that from January 2008 through June 2010, outflows from equity funds totaled $232 billion while bond funds have seen a massive $559 billion of inflows.  This trend in turn has pushed long-term bond prices up and yields down.  In fact, on an inflation-adjusted basis, there is a negative yield for most short-term bonds. Read More…

Three Risks Associated With Bond ETFs

Exchange traded funds [ETFs] are known for their ability to provide diversification, low cost alternatives, asset allocation and exposure to hard to reach markets and sectors. From a portfolio management and asset class perspective, bond ETFs do such a thing, however, it is equally important to understand the inherent risks involved with these versatile investment tools.

The first risk involved with bond ETFs is the risk of default. Bond ETFs hold actual bonds, which are promissory notes. So in essence, these promissory notes are only as good as the government, agency or corporation that issues it. Read More…

ETFs For Currency Debasement

As the crisis in Europe continues to take its toll on the markets and bank borrowing costs rise, a nation’s debt and currency debasement should me of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal. Read More…

Seven ETFs To Play Deflation

As deflationary concerns continue to make headlines amongst investors, dividend paying investments, interest-bearing investments and cash become more appealing. 

Weak economic figures, a decline in money supply and fiscal tightening around the world are a few reasons why falling prices could be in the near future.   Other factors that could lead to a drop in prices include tight credit markets, declines in consumer spending and high unemployment- all of which lead to a reduction in the demand for goods.  Declines in the demand for goods eventually result in excess supply, which further leads to a decline in prices to bring supply and demand in equilibrium.  Read More…

3 Risks Of Bond ETFs

Exchange traded funds (ETFs) are known for their ability to provide diversification, low cost alternatives, asset allocation and exposure to hard to reach markets and sectors.  From a portfolio management and asset class perspective, bond ETFs do such a thing, however, it is equally important to understand the inherent risks involved with these versatile investment tools.

The first risk involved with bond ETFs is the risk of default.  Bond ETFs hold actual bonds which are promissory notes.  So in essence, these promissory notes are only as good as the government, agency or corporation that issues it.  Read More…

4 Reasons Bond Markets Could Be In Bubble

As many investors have shunned stocks and turned to long-term fixed income to park their investment dollars, the safety of long-term bonds may be in jeopardy. 

The first reason the long term bond market might be in trouble is because prices are being inflated.  With concerns in the overall health of the global economy, the burst of a housing bubble which led to a financial crisis and unemployment levels remaining at stubbornly high levels, numerous investors are shunning risk and turning to long-term bonds.  In fact, over the last year, net inflows into fixed income investment tools have outpaced net inflow into equities by nearly tenfold.  According to the Investment Company Institute, bond funds witnessed $375 billion of inflows in 2009 and the trend is continuing in 2010, with an estimated $380 billion to pour into bond funds.  This in turn, has pushed long-term bond prices up.

A second factor that could be detrimental to long-term bonds is the likely rise in interest rates in coming years.  Granted, economic slack, low inflation levels and stable inflation expectations will likely enable the Federal Reserve to maintain its target rate at record low levels through 2010 and even into 2011, the Fed will eventually have to tighten rates to reduce its balance sheet and normalize its engagement with financial markets.  This will make bond trading less attractive and will likely hinder bond values. Read More…

ETFs For Currency Debasement

As the crisis in Europe continues to take its toll on the markets and bank borrowing costs rise, a nation’s debt and currency debasement should me of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation’s currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits. Read More…

ETFs For Currency Debasement

By Kevin Grewal

As developing nations around the world have turned to government funded stimulus packages to ignite their economies, a nation’s debt and currency debasement should be of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation’s currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits.

Some experts suggest that this trend in the developing world, in particularly the United States, is likely to continue as nations have become accustomed to borrowing extraordinary amounts of money and printing extra currency to stay afloat.  If this is the case, than inflation will be inevitable and currency values will diminish. 

Some possible ways to protect against currency debasement and increases in inflation include the following: Read More…

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