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Entries in Investment (7)

Friday
Oct052012

Envy Outweighs Greed in New Investment Study

Digital Vision/Thinkstock(JERUSALEM) -- “It is not enough that I succeed,” the late Gore Vidal once noted. “Others must fail.”

Vidal, who also famously admitted that “a little something” in him dies whenever a friend does well, would have had a field day with a new study, “Investment Choices with Envy and Altruism,” conducted by Israeli economists Haim Levy and Guy Kaplanski. Their findings are totally counter-intuitive from an economics standpoint (unless, of course, you’re Gore Vidal, in which case you probably knew it all along.)

Here’s the gist: We are all happy to lose money, just as long as other people lose more.

“Normally in economics we assume that the person wants to have the highest benefit from his wealth, and he does not care about other people,” said Levy, a professor of finance at Hebrew University, in Jerusalem.  "But that’s not what we found.”

About 10 percent of nearly a thousand business students and business executives interviewed in Israel, the United States, Switzerland, Turkey and China, were “altruists” -- that is, they said they were happy if a friend or family member made more money than they did. This only applied to someone they knew, however.

“Altruism is very rare toward strangers,” said Levy. “At most what we get is that you are indifferent to strangers.” (Indeed, another 20 percent they didn’t care what happened to anyone else as long as they had their own money.)

But a whopping 70 percent said they were fine losing money, provided other people lost more. "‘I’m happier if you are relatively poorer’-- which goes against economic theory,” said Levy. “Economic theory says, ‘I should be happy with what I have.’ But we found that, ‘I’m happy to decrease my wealth as long you decrease your wealth.’ This is pure jealousy.”

This jealousy applies to strangers, too, and not just our nearest and dearest. For example: Suppose your portfolio decreases by 10 percent. According to the study, if the Dow Jones Industrial Average drops 20 percent, you would be OK with your loss, because you only lost ten percent -- and everyone else, even those you don’t know! -- lost more.

On the other hand, if your portfolio increased by 10 percent and the Dow went up, say, 30 percent, you would be unhappy. Sure, you may have made money, but other folks made even more -- which is completely unacceptable in a world rife with schadenfreude.

Although the findings are bleak about human nature, they don’t especially shock ABC News personal finance columnist Ted Schwartz, the president and chief investment officer of Capstone Investment Financial Group. "Our job as an adviser is to teach clients to run their own race-- 'What are your goals and how do you achieve them?'” he said. “Society trains you to run a comparative race-- 'I lost 20 percent but they lost 30, so I win.’ So, I am not too surprised by this study."

“The key to success,” he continues, “is to avoid large periods when you are not compounding your money due to losses. As Warren Buffet says, rule one is don’t lose money. Rule two is don’t forget rule one.”

And if your best friend happens to forget both rules, well, so much the better.

Copyright 2012 ABC News Radio

Monday
Sep192011

Solyndra Bankruptcy Unlikely to Hamper Gov’t Investment in Green Jobs

Ken James/Bloomberg via Getty Images(WASHINGTON) -- Two weeks ago, an American solar company declared bankruptcy.  It was one of three U.S. solar companies to go under in a month, but this one was special.

Solyndra, the solar panel manufacturer, risked losing as much as $528 million in taxpayer money the day it shuttered its Freemont, Calif., factory and is now calling into question the integrity of the government’s loan guarantee program for renewable energies.

But while the evidence continues to prove that gambling millions in taxpayer money on a company that made just $3 for a product that took $7 to produce was rather unwise, it doesn’t look like the one bad apple has ruined the whole orchard of green energy investments.

“I think renewable energy remains one of the best long-term investments one can make as long as you’re careful to pick your companies,” said Garvin Jabusch, chief investment officer at Green Alpha Advisers, which focuses on environmentally sustainable investments.  “If some companies go bankrupt, this is just normal capitalism.”

The Solyndra bankruptcy has inspired an investigation from the House Energy Committee, whose chairman Fred Upton (R-Mich.) said was a “classic case of fraud and abuse and waste.”

But the Energy Department argues the bankruptcy is not emblematic of the entire loan program.  The solar company loan represents about 1.3 percent of the entire loan guarantee program, which was a $2.4 billion initiative created under the 2009 Recovery Act to support the new green technology investments, which can be risky.  Under the program, the government does not actually pay out any money, but guarantees that if the company fails, the Treasury will repay the private loan.

“What this program is intended to do is leverage private sector capital towards innovative clean energy technology that can help American manufacturing remain competitive, but might not otherwise receive project financing on the open market,” said Damien LaVera, a spokesman for the Energy Department.  “Congress recognized that investing in innovative tech carries intrinsic amount of risk.”

The Solyndra bankruptcy is not symptomatic of the entire solar industry either, Jabusch said.  According to the Solar Energy Industries Association, the solar market nearly doubled from 2009 to 2010 and is anticipated to add about 24,000 jobs, a 26 percent increase, over the next year.

Copyright 2011 ABC News Radio

Monday
Jun202011

Be Cautious When Rolling Over Your 401(k)

Photodisc/Thinkstock(NEW YORK) -- If you have a 401(k) plan and retire or switch jobs, you can roll over your funds into your own private account.

And those who are eligible for a retirement rollover "may be very heavily marketed to do this," says Karen Blumenthal of the Wall Street Journal.

She says, "The company that has your 401(k) may be calling...you may be getting things in the mail, even if you just turned 59-and-a-half years old, to start taking your money out."

Rolling over your 401(k) account into an IRA can give you a lot more investment choices, but beware: "Like anything else, if you're getting a lot of marketing about a financial thing then you ought to look a little closer," Blumenthal says.

Make sure to check the competition and watch out for fees.

Copyright 2011 ABC News Radio

Friday
Jan282011

Hoarders Say Gold Is Last 'Safe' Investment

Photo Courtesy - Getty Images(CINCINNATI, Ohio) -- The price of gold may be trading at a three-month low, but that is not stopping people from hoarding the precious metal in their homes, bank vaults or even in hiding places.

For some, fears of the country's growing levels of debt and inflation make currency seem less dependable, and gold and other precious metals seem rock solid.

Pete Sorrentino, vice president of Huntington Asset advisors in Cincinnati, has investments in gold bars and bullion coins and manages a $95 million fund for his clients, 2.6 percent of which is actual gold held in a depository. He said the low price of gold makes it an ideal time to buy it as global financial markets fare well.

"This is an ideal time for anyone who has missed out and want participation in gold, as long as the attention is focused on problems in Europe, and we tend to get fairly good reports in earnings season," said Sorrentino. "You'll see people continuing to favor financial assets over the precious metals."

He said he prefers coins over bars because the assay, or examination process, is easier. He said coins are more difficult to counterfeit and manipulate than gold bars. But with the lower price of gold these days, he prefers silver coins.

"I tend to give them out as gifts," said Sorrentino, claiming he is not a vast hoarder. "The people to whom I gave them a couple years [ago] were quite happy later."

Gold was trading at a record high at the end of 2010, with its contracts trading at a peak of $1,430 in December.

On Thursday, it was trading at $1,318.40 on the Comex division of the New York Mercantile Exchange, its lowest level since Oct. 4, according to Dow Jones.

Copyright 2011 ABC News Radio 

Monday
Jan032011

Report: Facebook Now Worth $50 Billion after Receiving Investments

Photo Courtesy - Nicholas Kamm/AFP/Getty Images(NEW YORK) -- Facebook's value is now up to $50 billion after receiving two investments worth a combined total of $500 million, The New York Times reported Sunday night.

The social networking site received $450 million from global investment banking and securities firm, Goldman Sachs, and another $50 million from Russian investment firm, Digital Sky Technologies, the Times reported, citing people involved in the deal.

The investments put Facebook's worth at a higher value than Time Warner, Yahoo! and eBay.  They also could push the company towards going public.

Copyright 2011 ABC News Radio

Tuesday
Dec072010

Three Brokers Disciplined for Mishandling Money of Former MLB Players

Photo Courtesy -- Getty Images(NEWARK, NJ) – The New Jersey Attorney General announced Tuesday that three brokers have been disciplined for bad financial deals with three former Major League Baseball players who had been clients.

“Clients trusted these industry professionals with their hard-earned savings, and that trust was broken,” said Attorney General Paula T. Dow. “Professional athletes, working toward a financially secure future upon retirement, became victims to those seeking to enrich themselves.”

Two of the brokers, Stephen Elliot Hill and Steven Kolinsky, co-owners of Kolinsky-Hill Financial Group, had their brokers licenses suspended. According to a press release, Hill misappropriated nearly $1.7 million of his clients’ money.

Florida broker Roy Glassberg was sanctioned for part in the deal. He failed to disclose that the funds that were misappropriated by Hill benefited his company.

The names of the former baseball players affected by the deals have not been released. However, Sports Illustrated reported that former New York Mets outfielder Cliff Floyd is among those who were stung financially.

Copyright 2010 ABC News Radio

Tuesday
Oct122010

Google Invests in Transmission of Offshore Wind Power

Photo Courtesy - ABC News(NEW YORK) -- Google announced it will invest in a $5 billion backbone transmission project to establish connection to future offshore wind power turbines along the mid-Atlantic coast in an effort to accelerate the use of wind power as a renewable energy source.  The Atlantic Wind Connection (AWC) will consist of 350 miles of undersea cables off the coast of northern New Jersey down to southern Virginia, which will connect 6,000 megawatts of offshore wind, enough to power approximately 1.9 million households. 

“Google is very excited about this investment and this project because it does two things.  It can dramatically accelerate the deployment of renewable energy and it also offers us attractive returns for our capital,” Rick Needham, the Green Business Operations Director for Google, said.

The AWC will help mid-Atlantic states meet their renewable energy goals and create jobs in the wind energy sector.  Oceana, an ocean conservation group, estimates that development of wind energy off the Atlantic coast could create between 133,000 and 212,000 U.S. jobs.

“This is the foundation, this is the spark that’s going to light a new industry, new opportunity, new jobs for the east coast,” Robert Mitchell, CEO of Trans-Elect Development Company, said.

In addition to receiving Google’s pledge to provide funding for the startup of the project, the AWC is led by Trans-Elect, an independent transmission development company, and sponsored by Good Energies and Marubeni Corporation.  Construction of the AWC is expected to start in 2013 after the project has acquired proper permits on the federal, state and local levels and has undergone an environmental review.  The projected completion date of the first stage, which will span from New Jersey to Delaware, is 2016, and the second phase, which will link the remainder of the mid-Atlantic region down to Virginia, would be completed by 2020.

The AWC will use high voltage direct current (HVDC) transmission technology, making this the first attempt to connect multiple points, both on land and on platforms located at sea, along the HVDC line.  On-shore wind farms typically use high voltage alternating current (HVAC) technology, which is more expensive, has higher losses and uses more copper than HVDC lines.  A typical onshore wind turbine produces 1.5 megawatts.  However, offshore wind turbines are larger and easier to transport to sea, giving them the capacity to produce anywhere from 5 to 10 megawatts each.

Copyright 2010 ABC News Radio







ABC News Radio