Another Optimist Capitulates

Who Killed Capitalism?

Jeremy Siegel, finance professor at the University of Pennsylvania´s Wharton School of Finance commented, “Two weeks ago was the first time in my life that I was worried about the very stability of the United States financial system.”

I guess the image finally made it to the rear view mirror. Welcome to the party, pal. No wonder I haven't been seeing as many of Jeremy Siegel's Wisdomtree commercials on TV these days. You know the ads. They're the ones that tell us of earnings and dividend weighted funds and attempt to make us feel somewhat stupid for not being wise to what should be common sense.

Something has gone horribly wrong though. Banks certainly once had a lot of earnings and dividends. They don't now though. Oops.

It's like a variant of the dotcom bubble gone bad. Investors were once burned by a lack of earnings but no future earnings either. Now they're being burned by huge past earnings but no future earnings. There's a common theme here. It's a lack of future earnings. This somewhat backs my theory that it will be increasingly difficult to make money off of money in the future.

Perhaps we should consider reliance on an authority greater than ourselves—an invisible hand that is both benevolent and omniscient. What the world needs now is a cool head, a commitment to move forward, and the character to temper our self-preservation instincts.

This kind of peace and resolution stems from only one source. Currency is merely a symbol of the value we imbue to our economic and political systems. So when our systems fail and our wealth becomes vapor, where can we turn for stability and assurance? Look no further than the pleasant phrase printed on every U.S. coin: “In God We Trust.”

I say the following only half-jokingly and somewhat tongue-in-cheek. If that's the plan to deal with vaporized wealth and the death of capitalism in America, then welcome to the financial apocalypse. I see four horsemen on the horizon and they want their prosperity back.

August 15, 2006
WisdomTree High-Yield ETF Stands Apart

DHS is loaded with mega-cap stocks like Bank of America (BAC Quote - Cramer on BAC - Stock Picks), at 6.8% of the fund, Citigroup (C Quote - Cramer on C - Stock Picks) at 6.4% and General Electric (GE Quote - Cramer on GE - Stock Picks) with a 6.2% weighting. The top 10 actually accounts for 44.5% of the fund, which may draw some criticism considering that SDY has 28.1% of its weight in its top 10 and DVY has just 26%. The issue here, if there is one, is that having top holdings with 6% weights instead of 3% makes DHS more susceptible to single-stock risk.

Single-stock risk? If only we could be so lucky. Try the entire financial sector.

December 4, 2007
The Downside of Fundamental Indexing

DHS, like most broad-based dividend-weighted ETFs, has a very large weight in the financial sector. DHS allocates 35.41% to financials, compared with just 18.66% for the S&P 500.

DHS Performance