It was the last day of the month (and Halloween as well), so
I'll be bracing for door duty tonight as the kids make their rounds
looking for treats. Unfortunately no treats for investors today as
the markets took it on the chin to end what was an otherwise solid
month of gains for the indices.
Outside of the headline story regarding MF Global (
) filing bankruptcy (more on that below), there were only a few
earnings reports out today moving the needle. Shares of Humana (
) came in with solid results and tacked on more than $4, while
shares of Mercury General (
) reversed earlier gains and closed lower.
With the tape moving lower, Wall Street analyst downgrades
weighed on several stocks, including shares of Cablevision (
), Arch Coal (
), and Chevron (
). Also moving down hard were the financials, with names like
Deutsche Bank (
), Morgan Stanley (
), Goldman Sachs (
), and Citigroup (
) pushing lower.
The MF Global/Jon Corzine Disaster
Just this past February, a Barron's article suggested investors
should not bet against former Goldman Sachs (
) CEO Jon Corzine in his quest to build commodities and futures
broker MF Global (
) into a successful financial enterprise. Here we are only eight
months later and the company has just filed for bankruptcy
protection. The lure for value investors was that Mr. Corzine was
building up the company's capital levels as well as attracting
big-name talent following the 2009 Wall Street tumble, during which
many people in finance lost their jobs.
MF Global had apparently expanded business around the firm's
trading activities, which involved sometimes taking the other side
of clients' trades using money from the company's balance
For sports fans, this practice is the equivalent of taking a bet
for a friend to put into a bookie, but then deciding to take on the
risk yourself. You're betting that your friend will be wrong, and
you'll keep the winnings (instead of the bookie). Obviously, a big
problem arises when you bet the wrong way, and don't have the money
to pay your friend. In MF Global's case, it appears they don't have
the funds "pay off" the bets they took the wrong side on.
I'm sure it was another scary weekend for the Federal Reserve.
They were probably very concerned about how much MF's losses would
amount to, and whether there needed to be a sudden rescue package
put in place. Thankfully, no bailouts were needed this time.
Trading has gotten much more dangerous these days, with all
sorts of complex instruments that are based upon little more than a
couple of back-testing models. Now we have firms and traders
trading double and triple leverage ETFs that many have blamed for
the market volatility (although most tend to complain only when the
markets are falling).
Adding insult to injury, reports out this morning state Jon
Corzine could be set to receive a $12 million severance package
from MF Global. Wow!
To everyone that feels the desire to take on the markets as a
trader, just know the risks involved and be prepared for any
worst-case scenarios. It seems like almost no one really considers
all the angles and appreciates how extremely difficult trading
Financial Smarts Decline In Your Later Years
A recent Texas Tech University study found that scores on a test
measuring knowledge of investments, insurance, credit and money
basics fell about 2% each year starting after age 60. I've often
talked about the importance of staying up-to-date with one's own
finances, as well as those of your parents. The percentage of adult
children providing personal care and/or financial assistance to a
parent has more than tripled over the past 15 years, and currently
represents a quarter of adult children, mainly Baby Boomers.
If you have parents that are in their older years, be sure to
help them avoid any major financial mishaps. If you can get your
parents to divulge their financial matters, it makes sense to know
what their obligations are, and how you may be able to step in to
help manage things in the event of unexpected circumstances. If you
can, obtain access to bank account and credit card information, and
make a list of what their monthly expenses are.
You certainly want to stay on top of any investment accounts, as
well. Having a will/trust set up is also a smart move. Make copies
of any key documents your parents possess that will be a factor in
their estate. Set up an annual check-up when it comes to taxes and
updating the regular financial obligations. Keep all the account
numbers and passwords in a safe place for when you need them.
These are all good tips to keep handy and share with anyone that
is facing a situation with aging parents. And if you're an aging
parent yourself, make sure you're comfortable in sharing these key
financial facts with your kids so as to avoid potential family
fall-outs later on.
Did You Miss Our Weekend Updates?
I hope everyone had a chance to check out our
members-only weekend articles, including new features that
highlight some of the biggest winners and losers from the week that
was, such as analyst upgrades/downgrades and earnings/story stocks.
These articles are a great way to catch up on the week that was in
the markets. We also have a rundown of how various Dividend ETFs
performed on the week.
Thanks for reading everybody. I'll see you tomorrow!
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
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