Real transaction cost for sharebuilder

Here's another secret ShareBuilder may not want you to know.

According to their broker records, 85% of ShareBuilder's purchase for plan participates are market order. And all these happen on the same day of week. If enough people signed on them and invested in less liquid stocks (the service itself is a brilliant idea), the market impact could be significant. Without using a broker specialized in trading for institutions and with their predictable buying pattern, long term investors are definitely paying for the price of slippage. Do we have a figure for it? My guestimate is as much as 0.57% for SIRI (why so many people are building their fortune on such a speculative stock at ShareBuilder?) or almost $6 for each $1000 automatically invested. The mileage may vary depends on the particular stock one invests in.

Transaction cost = Commissions + Spread-Cost + Market Impact

With an above average Spread-cost due to market order, a sizable market impact, the real trading cost at ShareBuilder is probably comparable with or higher than Scottrade.

Hopefully I am not getting more nastier surprise down the road.

The hidden high cost of ShareBuilder

I have been a new user of sharebuilder and the my first a couple of days' experience is definitely undervelming. Compare to the copious documentations and helps at either Fidelity, E*trade or even Scottrade, the documentations on sharebuilder.com is minimal at most if not unexist. Hope that they don't skimp on security. But to be sure, there are a lot of excesses. And the fee on their money market fund is one of such example. Before the cash is invested, they will be parked at BDMXX (ShareBuilder Bedford Shares of The RBB Money Market Portfolio), which sport a 12-1b fee of 0.60% (0.65% before voluntary cap). What's that use for? shelf spaces at brokerages! Actually the fee breakdown to

Annual Portfolio Operating Expenses*
(Expenses that are deducted from Portfolio assets)
Management Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
Distribution and Service (12b-1) Fees(1)(2) . . . . . . . . . . . 0.65%
Other Expenses(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.17%
Total Annual Portfolio Operating Expenses(1) . . . . . . . . . 1.27%

And the footnotes are

1. Management fees include investment advisory and administration fees. The Adviser voluntarily waived a portion of its Management Fees and/or reimbursed expenses for the Portfolio during the fiscal year ended August 31, 2006. The Adviser expects that it will continue to voluntarily waive a portion of these fees and/or reimburse expenses through the fiscal year ending August 31, 2007. The Portfolio’s service providers may also voluntarily waive a portion of their fees and/or reimburse expenses during these fiscal years. After these fee
waivers and/or reimbursements, the Portfolio’s Management Fees, Distribution and Service (12b-1) Fees, Other Expenses and ordinary Total Annual Portfolio Operating Expenses are not expected to exceed:
Management Fees 0.16%
Distribution and Service (12b-1) Fees 0.60%
Other Expenses 0.14%
Total Annual Portfolio Operating Expenses 0.90%
Although the Adviser expects the waivers and/or reimbursements to continue through August 31, 2007, these fee waivers and/or reimbursements are voluntary and may be terminated at any time.
2. Distribution and Service (12b-1) Fees reflect fees incurred by the Portfolio during the fiscal year ended August 31, 2006. The Portfolio may pay the Distributor up to a maximum of 0.65% of the average daily net assets of the Bedford Class under the Portfolio’s distribution
plan during the current fiscal year. The Distributor may voluntarily waive these fees at its discretion. The Distributor voluntarily waived 0.05% of its Distribution and Service Fee during the fiscal year ended August 31, 2006. These voluntary fee waivers may be terminated
at any time.

What does this mean? If you have cash parked in ShareBuilder or have this sucker in your 401K plan. You are giving a bout 20% of you meager return to ShareBuilder for the privilege to invest with them. No wonder this fund has miserable total return of

2.38% (1 year) 1.55% (3 years) 3.20% (10 years)

Your fortune will be much better off had you been with Fidelity or some other popular online brokers.

http://finance.yahoo.com/q/cq?d=v1&s=VMMXX+SWVXX+FDRXX+BDMXX

symbol	date	yield (after fees)
VMMXX	Sep 21	5.09%
SWVXX	Sep 21	5.08%
FDRXX	Sep 21	5.09%
BDMXX	Sep 21	4.58%

The 0.50% or so yield difference obviously come from the fee differences investors are paying dearly to ShareBuilder.

The Good, the Bad and the Ugly, -- Bernanke Cites Housing Culprit

Amid storms of criticism, Bernanke and various officials voted for the rate cut blunder are all out in PR. And the excuses only show that they still don't get it and the way they paint the picture is more of disingenuousness.

The red herring throw out by Bernanke is "I think the primary factor leading to increases in house prices -- not only in the U.S., but in many countries around the world -- was the generally low level of [inflation-adjusted] long-term interest rates in global capital markets." By wiggling so hard to disassociate Feds from housing bubble, Bernanke & Co further couldn't then justify their rate cut as now that he admitted that their rate cuts do not have big effect on housing market. So what are these guys talking? If they saying now that they are not trying to help housing market, the only ones they are bailing out with taxpayers' money is market speculators.

And all they said are obviously wrong when they are scrambling to find things to damp criticism. And people are dumping Treasury and Dollar as far as they after evaluating their poor decisions.

Firstly, the boom and bust are not because people taking out traditional 30-year loan. It's the adjustable rate mortgage (ARM) that's roiling the market. And the Feds rate has a huge impact on short term rate. The housing bubble is no different from the tech bubble burst in 2000. A lot of people were buying house just to flip.

Secondly, the effect of keeping short-term interest rate too low for too long just force investors to go out of their ways to search a little more return to fend off looming inflations (Dollar is falling under the weight of deficits and crude price is making new highs every quarter). End up they bought all the risky asset to get another extra 50 to 100 basis points of return. It's not only bubble in housing, --junk bonds, commodities, overseas and emerging market are also in the great ride.

How lame are our Feds in their excuses! Interest rate cut can be as easily abused as crack cocaine and we have a ever drug-addict economy. By being so obsessively focused on short term market results, the Feds are the biggest speculators as of today on their march towards a pain-free economy. Run for cover, man!

By creating a train wreck in slow motion Feds are doing as much harm as they can

Damn it! Helicopter Ben showed his true color.

Either the Feds under the leadership of Ben has been proven to be backboneless, inept or we are still way off from the transparency in either macroeconomics data or policy.

All the macroeconomics statistics tells us that economy is largely fine coping with the stresses. Yes, there's shrinking of employment, which could be due to braking of construction and lending activities. It is all but normal frictions in employment and economy. Or it could be the artifacts from the adjustments after adjustments by Department of Labor statisticians. A little downside risk could always be on the horizon, like any normal days in the world economy. There's credit crunch as market is adjusting risk perceptions and it works quite well. Countrywide is no long expanding like headless flies to fill every space left by other demised sub prime lenders. Investors are asking for higher premium for risky assets. Credit spread is moving towards the long run average. With injection of money supply and maintaining of discount window, there's no liquidity crisis for large part of economy but the once highest-flying speculators.

Then here come the shocking bold cut of Fed rate. Our indoctrinated monetarist, armed with goofy expectation theory demonstrated their ultimate recklessness in handling of economy. Good old days come back and all the zombies are back to party. It is a prescription to jump start speculation all over and again rather than the care economy needs. Rational investors are the ones being hit the hardest. They will stomach little return for their financial conservatism today and suffer with everyone in the future for high inflation and high interest rates. And there will be a worse crash to rescue down the road. Well, the Feds think they are god and capable of eliminating any hazard in market or economy. They will serve to prove that "no one is greater than market" once and again. By resorting to Leninism central planning tactics against normal market force, the Feds are doing all the harms they can along this march to stagnation in the future.

The only other explanation for Feds’ behavior is gross lacking of transparency in macroeconomics data or policy. If turned out to be true, that's another poor report card for Feds and another hazard for economy.