Offshore Investing

Forbes magazine advises that in order to invest in foreign stocks, we can choose between buying American Depository Receipts (ADRs) which are traded in the U.S., or the home-based shares themselves.

The rule of thumb generally is to go with the ADRs for convenience sake, unless the average daily volume is less than 10% of the stock's home-market value.

If the trading volume is thin, even a modest order could push up the purchase price in the U.S.. And thinly-traded ADRs also may have a wide bid-ask spread, which means that you buy high and sell low.

Depending on the foreign market involved, you could set up an account with E*Trade or EverBank in order to buy foreign stocks directly in their home market.

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Too Soon Old and Too Late Smart!

"The state is the great fiction by which everybody tries to live at the expense of everyone else."

-Frederick Bastiat


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Magic Moments

The "Magic Formula" is a best-selling method for picking stocks. That formula concentrates on a company's return on invested capital as well as its earnings yield (earnings per share divided by the stock price). Rankings can be found at MagicFormulaInvesting.com (in our Links List). The two scores are combined and companies are ranked by their total score.

The formula has worked historically but only seven months of the year, on average, and only three out of four calendar years. When Magic Formula investors hit rough spots, they lose patience and go on to some other strategy.

This is essentially a value-added formula and value stocks have performed well over the years.

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Free Market Wisdom

Under capitalism, the common man enjoys amenities which in ages gone by were unknown and therefore inaccessible even to the richest people.

-Ludwig von Mises


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Now and Forever

Immediate annuities, which might also be called life annuities or income annuities or payout annuities, may appeal to retirees. With these annuities, consumers pay a sum of cash to an insurance company and then receive a stream of money that may continue for as long as they live.

If a good chunk of a retirement portfolio is used to buy an immediate annuity, an elderly individual can be protected from running out of money.

Immediate annuities might offer inflation protection, access to capital, and money-back guarantees, but such extra features will reduce the amount of each check you receive.

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Food For Thought

It is amazing how many people think that the government's role is to give them what they want by overriding what other people want.

-Thomas Sowell


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Real Disagreement

Some Wall Street analysts predict that commercial property prices will decline by as much as 26%, causing banks and brokerage firms to lose $80 billion from problem loans.

That seems to be a logical extension of the turmoil in the residential real estate market. However, others argue that the commercial real estate market is not as valuable as the housing market.

There is not as much pressure to package commercial loans. Moreover, commercial real estate loans tend to be fixed, rather than adjustable, and they usually are not refinanced for long periods of time.

If worries about commercial real estate prove to be exaggerated, bank and brokerage firms may perform better than expected, which would be good news for investors.

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Economics in One Lesson

It is impossible to maintain a free society when more and more people look to the state to provide what Americans used to provide for themselves.

- Warren Pollock


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More From Munis

The yields on municipal bonds have not fallen as sharply as those on Treasuries during the subprime crisis. Now, most munis are paying out more tax-exempt interest than comparable Treasury bonds pay in taxable interest. After taxes, investors in the 28% tax bracket end up with 54% more from munis than from Treasuries. In the 35% tax bracket it's 70% more.

In the past, it was difficult for investors to buy individual munis because it was difficult to get pricing information. That's changing now because you can go to Web sites like Investinginbonds.com to find current prices and yields.

Be aware that if income taxes go up under the next Administration, munis will be in demand and prices likely will rise, to the profit of today's investors.

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