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  • Size Matters

    With all the chatter about ETF’s I thought I would generate a dodgy collection of ETF’s and then look at their current market capitalisation. When I started the exercise I was interested to see where the liquidity risk might lie within the spectrum of the ETF’s I was looking at. When looking at an instrument… Read more…

  • However Vast The Darkness

  • Trust Me Im An Expert

    The next time you sit down to read the business section of the paper or watch one of the business shows consider this – “The more people believed they knew about finances in general, the more likely they were to overclaim knowledge of the fictitious financial terms. The same pattern emerged for other domains, including… Read more…

  • What A Brilliant Idea

    This is a rare feel-good story about financial literacy. In 1996, John Rogers, head of $11 billion Ariel Investments, helped start an elementary school focused on financial education in a low-income neighborhood on the South Side of Chicago. Each class gets a portfolio and buys and sells its own stocks. Students get a portion of… Read more…

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Size Matters

With all the chatter about ETF’s I thought I would generate a dodgy collection of ETF’s and then look at their current market capitalisation. When I started the exercise I was interested to see where the liquidity risk might lie within the spectrum of the ETF’s I was looking at. When looking at an instrument I tend not to focus on how magical it may initially appear but on what can go wrong. ETF’s can present a liquidity risk to traders – it is all too easy to get in but it may be impossible to get out.

What did surprise me about the list below is the enormous disparity in size – I was prepared for there to be a sizeable spread in the distribution, but the actual size of the spread surprised me. In my list the smallest ETF  (UBP) has a market cap of $950,000, and is minuscule compared than BlackRocks behemoth iShares MSCI EAFE (IVE) which has a cap of around $83B. However, this figure whilst impressive doesn’t convey the entire picture since IVE’s average daily volume is only around 10,000 shares, whereas STW has a market cap of about $3 billion but an average daily volume of around 175,000 shares. Sheer mass is impressive and is to be expected from the likes of BlackRocks offerings. However, liquidity in the form of turnover is more important to the trader and when I get time I will try and generate a list of ETF with average daily turnover figures.

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However Vast The Darkness

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Trust Me Im An Expert

The next time you sit down to read the business section of the paper or watch one of the business shows consider this -

“The more people believed they knew about finances in general, the more likely they were to overclaim knowledge of the fictitious financial terms.

The same pattern emerged for other domains, including biology, literature, philosophy, and geography.

For instance, people’s assessment of how much they know about a particular biological term will depend in part on how much they think they know about biology in general.”

More here – PsyBlog

This in many ways is simply an adjunct to the work done on experts and their predictive ability by Philip Tetlock which I have written about before. See here, here, here  and here.

Too few adopt Goethe’s maxim – Doubt grows with knowledge

What A Brilliant Idea

This is a rare feel-good story about financial literacy. In 1996, John Rogers, head of $11 billion Ariel Investments, helped start an elementary school focused on financial education in a low-income neighborhood on the South Side of Chicago. Each class gets a portfolio and buys and sells its own stocks. Students get a portion of the gains at graduation.

So far the Ariel Community Academy has disproved doubters (including me—I wrote an article a decade ago skeptical of financial education and mentioned the school). It now offers one of the strongest cases for teaching finance early. Students at the academy, which today goes up to the eighth grade, consistently out-test the city and the nation.

They’re also getting jobs. Last year Rogers hired his first Ariel graduate, Mario Gage, 23, in the marketing department. Gage was in the school’s second graduating class, before going on to study economics at the University of Chicago. His brother, also an Ariel grad, landed an internship at a hedge fund.

Given Ariel’s success, Rogers hopes other firms will follow its lead and partner directly with schools. “We need to jump-start job creation in urban areas,” he says. “Financial literacy is a big part of that.” Gage thinks so too. “The school put a lot of possibilities in my brain,” he says. “It definitely works.”

More here – Fortune

The Super-Rich Are Just As Miserable As The Rest Of Us

Let’s agree right off the bat that $25 million is a lot of money. Sure, to paraphrase Chris Rock (NSFW), if Bill Gates woke up tomorrow with a net worth of $25 million, he’d jump out a window. But to the vast majority of us, it’s a huge sum, more than enough to make some dreams come true. If money can’t buy happiness, $25 million should at least be enough for a down payment on contentment — and to generate some envy on the part of us without eight figures in assets.

Well, get ready to get jealous, if only for a moment. The number of American households with a net worth of $25 million or more — excluding their home — reached a new record last year, according to a recent report by wealth management research provider Spectrem Group.

Yet the same survey found that those wealthy Americans still have plenty of financial concerns. Actually, they sound fairly miserable… and that’s in a survey taken well before the stock market took a recent tumble. They may travel more, go to ballgames or concerts, or buy nice jewelry, but 70 percent of those surveyed said they get more satisfaction out of saving and investing their money than from spending it. More than half said they worry about the next generation wasting the money they inherit. And almost a quarter (23 percent) said they worry “constantly” — constantly— about their financial situation.

More here – The Week

The only comment I would make is that worrying about leaving a legacy for your children and whether they will develop a work ethic is very different from worrying about the fact that you might come up short on the rent for the family home this week or that your child probably cannot participate in activities at school because food comes first. So I call bullshit simply on the magnitude of the problem and its impact upon your life and the lives of those around you should the worst thing happen to you. For the majority of the wealthy the worst thing that can happen is that you raise a dickhead and your pool renovation is not done on time (my problem actually) Qualitatively, these are very different problems to those faced by others less fortunate.

Overblown hype regarding first world problems.

And The Boredom Party Continues

Just when you think something interesting might be about to happen.

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Although, in the short term it is hard to see any dramatic break to the upside when the number of shares doing the heavy lifting seems to be tapering off.

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So Where Is The 60 Minutes Feature

Whenever I wonder why things dont work all that well in Australia, or I look at Asia and see some of the stunning progress that is being made by countries that lack all of our natural advantages. I am reminded that young people who do things such as winning a Gold Medal at the International Maths Olympiad have their achievements buried deep in the media whereas drunken, surly, poor behaving loser athletes have gallons of ink wasted on their non achievements.

Let me guess upon which young person the countries future rests…..

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The Trading Game Pty Ltd (ACN: 099 576 253) is an AFSL holder (Licence no: 468163). This information is correct at the time of publishing and may not be reproduced without formal permission. It is of a general nature and does not take into account your objectives, financial situation or needs. Before acting on any of the information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.