A Sign of Rising Interest Rates?

The U.S. Federal Reserve surprised the market last week by raising the U.S. discount rate by a quarter of a point (0.25%).

Fed Chairman Ben Bernanke insists the rate hike should not be considered to be monetary tightening, but the bond market doesn’t answer to the Fed Chairman and recognizes that the interest-rate cycle has reached the point where tightening has begun.

There are other signs that a trend of interest rates moving higher has begun.

Generally, when the stock market sells off, the bond market moves in the opposite direction.  When news about Greece’s debt problems hit the market and stock prices declined, typically we would have seen a significant flight to safety, resulting in a significant rally in the bond market.  We saw some shifting of assets to safer investments, but the shift quickly faded. read more

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More Wenning Advice

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Visit the Wenning Investments Web site.  In our news room, you’ll find an archive of our Wenning Advice newsletter.  You’ll also find articles quoting me that have appeared in The Wall Street Journal, Forbes and other media.

Want more?  If there’s a topic you want addressed, leave me a comment here or send me an e-mail.  I look forward to hearing from you.

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Exchange-Traded Funds Have Grown Up

Not long ago, exchange-traded funds (ETFs) were hardly ever considered as an investment option for retail investors.  While many investors had heard of them, they were generally considered to be just another type of index fund.

Still, led by the popularity of the SPDR (aka, Spider), which is based on the S&P 500 stock index, ETFs grew to $610 billion in assets by May 2008.  By then there were 680 ETFs for every index imaginable.

With last year’s introduction of actively managed ETFs, they are likely to become even more popular.  There are already as many varieties of ETFs as there are of mutual funds and their numbers are growing rapidly. read more

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An Investment For Pessimists

When it comes to investments with exotic sounding names, it’s hard to beat inverse-leveraged exchange-traded funds.

Then again, it’s also hard to beat them when the market is sinking.

Given their potential for performing well in down markets, it’s worth knowing what they are and how to use them.

Our next post will explain exchange-traded funds (ETFs).  Put what about that “inverse-leveraged” part?

An inverse fund moves in the opposite direction from the underlying securities.  For example, an inverse fund for the S&P 500 would move up when the S&P 500 moves down.  Unfortunately, of course, it would move down when the S&P 500 moves up. read more

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