exertia

The Economist has a thought-provoking article on the "two most noteworthy trends among the swelling ranks of middle-class consumers around the world—trends that appear to be, at first glance, at odds with each other. These are the tendencies for consumers to be more cost-conscious; but simultaneously more willing to splurge money on luxury items." Key takeaways:

• Sales both at the top and bottom of the consumer market are rapidly growing while sales are being squeezed hard in the middle, though it is still the largest market segment in rich countries.
• One reason [for trading down] why this change has taken place is that the discount retailers have raised the quality of their products. A second development is the rapid increase in transparency in consumer markets, thanks not least to the internet.
• Americans, in particular, “have become addicted to the deal, which is leading them to do irrational things” … One consequence is that people buy lots of stuff they do not need … chiefly because it seems to be a bargain.
• Companies that get stuck in the mid-market may be doomed. But as businesses trading up clash with those trading down, some of them may end up as losers, too.

Recommended reading on this topic:

• "Trading Up" where Michael Silverstein and Neil Fiske explored half of the change, the phenomenon of the middle-class occasionally treating themselves to luxuries that they would once have regarded as unaffordable.
• "Treasure Hunt: Inside the Mind of the New Consumer" where Michael Silverstein and John Butman report on the other side of that coin, the popularity of trading down—hunting for basic goods at bargain prices, not least to generate the savings that can be lavished on the occasional luxury.
• "The Naked Corporation" by Don Tapscott and David Ticoll
• "Shopportunity! : How to Be a Retail Revolutionary" by Kate Newlin

As a follow-up to my post from yesterday, let us see how we can play the market in light of the new developments in crude and alternative energy. Investing in crude oil futures / options is highly risk-prone because of the vast fluctuations and the global drive to reduce reliance on these energy sources. A better option to play the energy markets is mutual funds that invest in companies that not only mine and process crude oil but also in companies on the frontiers of exploration and that provide related goods and services.

First, we head over to Yahoo Finance’s list of the top performers in the Specialty - Natural Resources category. Our preference is for funds that have consistently shown great performance i.e. funds that show up in as many of the different lists - 3 month, 1 year, 3 year and 5 year - as possible. Here it is easy to see that Jennison Natural Resources has been a consistent top performer since it appears in all 4 lists. The only close competitor is U.S. Global Investors Global Res (PSPFX) which is ranked first in 3 of the 4 lists. Both these funds are rated 4 stars by Morningstar representing an almost similar risk / reward ratio. The 2 significant differences are in the minimum investment amount - $5,000 for US Global and $2,500 for Jennison - and in the expense ratio which is higher for Jennison (1.97%) as compared to US Global (1.30%). So the choice is apparent: if you have 5K or higher to invest and are willing to put it in one basket, go for US Global. If you’re like me and want to put smaller chunks of money in different investments, go for Jennison (PNRCX).

PNRCX also meets the requirements discussed earlier - if you see its holdings it has substantial (lucrative) investments in companies like GlobalSantaFe, Suncor Energy, National-Oilwell, etc. and no great exposures to the big oil majors like Chevron, BP, etc.

NYT has an interesting article on online savings banks, covering most of the popular ones like HSBC, ING Direct, Emigrant and Citibank. These banks have started offering upto 4.8% yields in some cases, which at zero-risk (since these are FDIC-insured) makes this a better investment option as compared to several mutual funds / stocks.

My personal favorite is HSBC with its clean interface, trustworthiness, ATM withdrawals and competitive interest rates. They had an offer where you got a $25 bonus by entering the promo code start while filling in your application [thanks Spoofee, for the tip] although I am not sure whether its working now.

Here’s an interesting post on how to fight and get your money back if you filed a rebate but never got a check. Includes links to the Better Business Bureau (BBB), Federal Trade Commission (FTC), State Attorney Generals and Small Claims Courts among others.

Here are some sites with good deals, bargains and coupon codes:

• Spoofee.com - lots of freebies
• eDealinfo.com
• Deals2buy.com

SFGate has an interesting article with a wealth of info for people wanting to start investing in metals (although a bit dated):

There are several ways for individuals to invest in metals, including stocks, mutual funds and ETFs, direct and indirect ownership of the metal, or futures contracts.

Some ways to gain exposure to metals:

• Stocks: Owning companies that mine for and produce various metals.
• Mutual funds and exchange-traded funds: Most focus on gold, which tends to be influenced by currency and geopolitical issues.
• Direct ownership: Precious- metals dealers and online trading firms sell silver, gold, platinum and palladium.
• Futures contracts: Potentially the riskiest — and most lucrative — way to play metals.

The article goes on to give the outlook on the most important metals and how you can get a piece of the action

Knowledge@Wharton has an interesting article on investing in Foreign Stocks:

… Siegel says the typical American investor should have 40% of his or her equity portfolio in foreign stocks, since many foreign markets have greater potential for growth than the well-developed U.S. market. "The U.S. will, over time, become a narrower and narrower slice of the world market. Just as you don't want to confine yourself to two industries in your portfolio, you don't want to confine yourself to one country…. I really advise broad diversification"

The gist:

• Investing in foreign index funds might be better than managed funds because of their lower costs
• Just as it is wise to diversify holdings across industries, it is wise to diversify across countries

I myself have positions in the Principal International Separate Account, a managed fund available through my 401-K plan and have made an annualized return of upwards of 30% on it.