In January of 2008 I wrote the following hypothetical dialogue between an investor and his advisor. I
Tuesday, December 29, 2009
A Stock Market Conversation
In January of 2008 I wrote the following hypothetical dialogue between an investor and his advisor. I
Monday, December 28, 2009
Wednesday, December 23, 2009
Sunday, December 20, 2009
Only True Rockstars Are Above Reproach
Not a sound could be heard above the din of clicking cameras as the distinguished gentleman carrying a black briefcase swaggered his way into Washington DC's Federal Reserve Building. It was a crisp January morning in the year 2006 when the then rockstar of the financial world was about to chair his final meeting on the Nation's monetary policy. While his complexion may have resembled that of music legend Mick Jagger, Alan Greenspan
Wednesday, December 16, 2009
Sunday, December 13, 2009
As those of you who
Wednesday, December 9, 2009
We
Monday, December 7, 2009
When it
Wednesday, December 2, 2009
Monday, November 30, 2009
Dubai, After-Shock or Harbinger (and how about that dollar?)
While a huge number of shoppers gave up hours of sleep last Friday to hit the ground running (one report tells of an early-riser who was in such a hurry to get to the mall that he wiped out a fire hydrant and a tree in his very own driveway), the market turned what should have been a snoozer of a trading day into a virtual rollercoaster ride. News that Dubai, the largest (in population) of the United Arab Emirates, got way ahead of itself in terms of leverage sent the Dow (at one point) down more than 200 points. The announcement that Dubai World (the emirate
What
Wednesday, November 25, 2009
Monday, November 23, 2009
Maria, Money Mag and the Knowledge of Good and Evil
Step into my office any day of the workweek, look up and you
Wednesday, November 18, 2009
Monday, November 16, 2009
Wednesday, November 11, 2009
Monday, November 9, 2009
I Didn't Inhale, I Swear!
Apparently my day job makes me the ever-fortunate recipient of a never-ending stream of emails, blogs, newsletters, etc., which, for the most part, consist of very educated, very credible, very opinionated and often very political expert/guru/professor-types
Wednesday, November 4, 2009
Monday, November 2, 2009
Is The Rally Over or Is a New Bull Market Just Underway?
The October 6th issue of Business Week featured the following two headlines;
Thursday, October 29, 2009
Wednesday, October 28, 2009
Ben's The Man (but I digress)
I tell ya, I would not want to be Ben Bernanke for all the tea in that great capitalist nation they call China. Just kidding, well, maybe not; Communist China
Monday, October 26, 2009
Had someone told me last Monday that, before week
Friday, October 23, 2009
I find great joy in great commercial experiences. Whether it
Tuesday, October 20, 2009
The Dollar and Today's Market
The dollar/market relationship I wrote about Monday (dollar up/market down & vice versa) is clearly playing itself out today. In spite of very good reports from Google, etc., stocks look to be giving back a little ground.
The "experts" will site the disappointing housing starts number (which shows stabilization, but not rapid growth of late), and while that may be part of it, clearly today's strengthening of the greenback is giving the market a (albeit slight) headache.
Go to Monday's commentary - "Minnie Mouse, The Market and The Dollar" for a more thorough explanation of the current state of our currency and it's short and long-term implications...
The "experts" will site the disappointing housing starts number (which shows stabilization, but not rapid growth of late), and while that may be part of it, clearly today's strengthening of the greenback is giving the market a (albeit slight) headache.
Go to Monday's commentary - "Minnie Mouse, The Market and The Dollar" for a more thorough explanation of the current state of our currency and it's short and long-term implications...
Monday, October 19, 2009
Minnie Mouse, the Market, and the Dollar
Is this seven month stock market rally the real deal? Does Dow 10,000 reflect improved corporate earnings, a rebounding economy, record low interest rates and trillions of sideline cash? Or, is it no more legitimate than the current homerun record? The doubters tell us that the market
Tuesday, October 13, 2009
Monday, October 12, 2009
It
Wednesday, October 7, 2009
The Correction is a Coming - Someday
To the chagrin of all those flustered forecasters, September, the perennial worst month of the year for stocks (66% of the time that is) refused to deliver the elusive 10% correction they
Wednesday, September 30, 2009
What if the market never closed?
Dear Clients,
At 12:45pm yesterday the Dow was ever so slightly in positive territory. Fifteen minutes later, at the close, it was down 203 points. What amazing volatility we
At 12:45pm yesterday the Dow was ever so slightly in positive territory. Fifteen minutes later, at the close, it was down 203 points. What amazing volatility we
TIME cover 10-74
Dear Clients,
A week ago, the market was flailing; all the news was bad, with seemingly no light at the end of the tunnel. And here we are now, just this Tuesday, in the blink of an eye the market bolted ahead 400+ points, as measured by the Dow Jones Industrial Average. As I
A week ago, the market was flailing; all the news was bad, with seemingly no light at the end of the tunnel. And here we are now, just this Tuesday, in the blink of an eye the market bolted ahead 400+ points, as measured by the Dow Jones Industrial Average. As I
Monday, September 28, 2009
The Great Tree: Chapter 2
As the years unfolded in the land of the Great Tree the people grew by legions and their lives grew complicated. The wise foretold of a coming day when the number of mouths to feed would far exceed, in spite of man’s intervention, the Great Tree’s ability to sustain them. Fear gripped the hearts of all the people – yet even the threat of famine deterred not the gluttons (those who would not store) from consuming every morsel they could gather.
It was therefore declared that for the good of the community and the survival of the Tree, those desiring to pioneer beyond the shelter and create orchards of their own, would be allowed to do so and retain the bounty of their harvests for themselves and their families.
The majority of those eager to venture beyond the shade however, given their history, would not trust their leaders’ intent. They feared their farms would ultimately be subject to the government’s confiscatory practices. Yet, in spite of all historic precedent, and in the face of an otherwise dire fate, their leader’s aims were indeed virtuous.
As necessity then dictated, to inspire the people’s trust and to advance an entrepreneurial spirit, a new constitution, guaranteeing certain inalienable rights and protecting every citizen’s freedom to work and produce on his own behalf, was drafted and unanimously ratified. The old leaders stepped down as new officials, sworn to defend and enforce the covenants set forth in the constitution (its authors in fact), were duly elected by the people.
So it came to pass that those willing to dirty their hands, to extract the seeds from the fruit of the Great Tree, dig the holes, sow the seeds, water and fertilize the soil and ultimately profit from their own harvests, would be free to leave the shade of their once Great Giver in favor of their own bountiful orchards – conditioned only upon the paying of a small duty to the government. This duty amounted to a modest percentage of their annual yield and would fund the enforcement of the rules of law that protected their rights to build the lives of their dreams, as well as provide for certain essential services to the greater community.
While there were indeed many of the Land’s people who found satisfaction in these pursuits, there remained others however who possessed not the desire to produce their own good fortune, who chose instead to continue to live on whatever the Great Tree would bestow upon them.
Henceforth, while the industrious ones no longer needed to take from the Tree’s limbs, her bounty was sufficient to continue to feed those too old, unable, and even those unwilling to work, for some time to come. As the years passed however, the shade beneath her leaves grew crowded once again. Crowded by men and women who lacked either the capacity or the desire to venture beyond the great canopy to provide for themselves.
As the division in terms of the quality of life among those who strove for better and those who did not widened, a distinct envy began to develop among the self-proclaimed have-nots toward the strivers. The shade-dwellers would contend that, although (except for the disabled) their lot was clearly the result of their lack of initiative, the system was somehow unfair. That there simply should not be such a division, that in the interest of the social good, all manner of men should enjoy an equal share of the Earth’s bounty without regard to their contribution to the production and harvesting of such.
As the shade-dwelling masses grew, their influence upon the once great government grew strong. For all manner of men, pioneers and shade-seekers alike were rightfully endowed with the right to vote. And as the powers (and personal benefits) of political office were expanded, the position of policymaker became a highly coveted one indeed. So much so that the men and women campaigning for these positions would, regardless of their own ideals, cater to the group(s) they believed possessed the requisite votes to win them their desired posts.
And so it came to pass that a new era was born, an era where political gain took precedent over the legitimate needs of a growing society, and the shade-dwellers, now great in number, became a most powerful political force. Prospective politicians would stand within the crowded shelter of the Great Tree and pledge that while in office; they would increase taxation on those who, by virtue of their hard work and creativity, enjoyed lifestyles beyond what the shade-dwellers could ever imagine. As if the very spirit that once saved their land from ruin, could now be deemed selfish, greedy and deserving of punishment through excessive taxation.
Henceforth, under the guise of fairness, the self-interested politicians would commit their efforts to the redistribution of the land’s wealth and yes, the confiscated booty would be distributed among those who, by contributing nothing more than their votes, were deemed deserving of such.
The workers, the entrepreneurs, the pioneers who dared to risk going beyond the shade to build a better life, and to relieve the Tree of her burden, were perplexed by the chastisement being brought to bear upon them. The rule of law that once made possible and promoted their efforts had, at the hands of the politically ambitious, been manipulated and indeed corrupted to the point where the more successful their labors, the disproportionately greater the duties (taxes, regulatory fees, licenses, etc. etc.) they would be forced to pay. They had become villains. In the government’s eyes they had enjoyed too much success and would hence pay dearly for their perceived sins.
Law abiding as they were, the industrious, while they disagreed in principle, would nonetheless pay the higher taxes and fees levied against them. Yet they remained keenly aware of two fundamental truths; that they, not the policymakers, were responsible for the success of their great society, and that the maintaining of their personal liberties would lie, as perhaps never before, in their own hands.. And they knew therefore that a great day of reckoning was soon to come.
It was therefore declared that for the good of the community and the survival of the Tree, those desiring to pioneer beyond the shelter and create orchards of their own, would be allowed to do so and retain the bounty of their harvests for themselves and their families.
The majority of those eager to venture beyond the shade however, given their history, would not trust their leaders’ intent. They feared their farms would ultimately be subject to the government’s confiscatory practices. Yet, in spite of all historic precedent, and in the face of an otherwise dire fate, their leader’s aims were indeed virtuous.
As necessity then dictated, to inspire the people’s trust and to advance an entrepreneurial spirit, a new constitution, guaranteeing certain inalienable rights and protecting every citizen’s freedom to work and produce on his own behalf, was drafted and unanimously ratified. The old leaders stepped down as new officials, sworn to defend and enforce the covenants set forth in the constitution (its authors in fact), were duly elected by the people.
So it came to pass that those willing to dirty their hands, to extract the seeds from the fruit of the Great Tree, dig the holes, sow the seeds, water and fertilize the soil and ultimately profit from their own harvests, would be free to leave the shade of their once Great Giver in favor of their own bountiful orchards – conditioned only upon the paying of a small duty to the government. This duty amounted to a modest percentage of their annual yield and would fund the enforcement of the rules of law that protected their rights to build the lives of their dreams, as well as provide for certain essential services to the greater community.
While there were indeed many of the Land’s people who found satisfaction in these pursuits, there remained others however who possessed not the desire to produce their own good fortune, who chose instead to continue to live on whatever the Great Tree would bestow upon them.
Henceforth, while the industrious ones no longer needed to take from the Tree’s limbs, her bounty was sufficient to continue to feed those too old, unable, and even those unwilling to work, for some time to come. As the years passed however, the shade beneath her leaves grew crowded once again. Crowded by men and women who lacked either the capacity or the desire to venture beyond the great canopy to provide for themselves.
As the division in terms of the quality of life among those who strove for better and those who did not widened, a distinct envy began to develop among the self-proclaimed have-nots toward the strivers. The shade-dwellers would contend that, although (except for the disabled) their lot was clearly the result of their lack of initiative, the system was somehow unfair. That there simply should not be such a division, that in the interest of the social good, all manner of men should enjoy an equal share of the Earth’s bounty without regard to their contribution to the production and harvesting of such.
As the shade-dwelling masses grew, their influence upon the once great government grew strong. For all manner of men, pioneers and shade-seekers alike were rightfully endowed with the right to vote. And as the powers (and personal benefits) of political office were expanded, the position of policymaker became a highly coveted one indeed. So much so that the men and women campaigning for these positions would, regardless of their own ideals, cater to the group(s) they believed possessed the requisite votes to win them their desired posts.
And so it came to pass that a new era was born, an era where political gain took precedent over the legitimate needs of a growing society, and the shade-dwellers, now great in number, became a most powerful political force. Prospective politicians would stand within the crowded shelter of the Great Tree and pledge that while in office; they would increase taxation on those who, by virtue of their hard work and creativity, enjoyed lifestyles beyond what the shade-dwellers could ever imagine. As if the very spirit that once saved their land from ruin, could now be deemed selfish, greedy and deserving of punishment through excessive taxation.
Henceforth, under the guise of fairness, the self-interested politicians would commit their efforts to the redistribution of the land’s wealth and yes, the confiscated booty would be distributed among those who, by contributing nothing more than their votes, were deemed deserving of such.
The workers, the entrepreneurs, the pioneers who dared to risk going beyond the shade to build a better life, and to relieve the Tree of her burden, were perplexed by the chastisement being brought to bear upon them. The rule of law that once made possible and promoted their efforts had, at the hands of the politically ambitious, been manipulated and indeed corrupted to the point where the more successful their labors, the disproportionately greater the duties (taxes, regulatory fees, licenses, etc. etc.) they would be forced to pay. They had become villains. In the government’s eyes they had enjoyed too much success and would hence pay dearly for their perceived sins.
Law abiding as they were, the industrious, while they disagreed in principle, would nonetheless pay the higher taxes and fees levied against them. Yet they remained keenly aware of two fundamental truths; that they, not the policymakers, were responsible for the success of their great society, and that the maintaining of their personal liberties would lie, as perhaps never before, in their own hands.. And they knew therefore that a great day of reckoning was soon to come.
Monday, September 21, 2009
We Have Nothing to Fear but the Lack of Fear Itself
When your teenager is about to hop in the car and head to the beach, what are your parting words?
Tuesday, September 15, 2009
Private Client Commentary - Oil Conversation
Dear Clients,
After a strong month in April and a positive start to May, the market seems to be running into a little trouble at the moment. Not that we should be the least bit concerned with a couple of days of downside action, or, for that matter, a few months or even a year or two of downside action (since periodic and, at times, prolonged downside action is normal for the stock market), but it's always big news when the Dow takes a few hundred point hit. So lets listen to our two hypothetical friends converse on the events of the day
After a strong month in April and a positive start to May, the market seems to be running into a little trouble at the moment. Not that we should be the least bit concerned with a couple of days of downside action, or, for that matter, a few months or even a year or two of downside action (since periodic and, at times, prolonged downside action is normal for the stock market), but it's always big news when the Dow takes a few hundred point hit. So lets listen to our two hypothetical friends converse on the events of the day
Private Client Commentary - oil and capitulation
Dear Clients,
Last week I passionately expressed my concern over why the concept of a win fall profits tax, on anything, is a very bad idea. Apparently that commentary got your attention. I received some interesting comments - everything from concern over my blood pressure, to rousing applause, to how dare I use my commentary as a political platform. Of course I vehemently deny that I was doing anything more than showing my concern over a policy that I believe would lead us down a very dangerous economic path.
As for this week I'm feeling a little more subdued, but if you'll indulge me, I would like to stay on the oil topic for just another moment.
In a recent commentary, I made the statement that higher prices (of any given commodity) ultimately take care of higher prices. What essentially happens is that when the price of a commodity reaches levels that effectively causes consumers to reduce their overall spending (an economic slowdown), the demand for said commodity begins to decline, which brings the price down. While the commodity was previously soaring to record heights, production increased dramatically while the suppliers rushed to capitalize on the inflated price, thus increasing supply. We then end up in a situation where we have lots of supply, but slowing demand - causing the price of the commodity to fall. As the price declines, speculators unwind their positions, creating even more downward momentum.
This is how it works, and this is how it will continue to work as long as we allow it to - as long as the 'powers that be' continue to support the notion that markets over time, by themselves, will work to correct any and all imbalances. Imbalances that begin with fundamental phenomena - like strong global economic growth forcing the price of oil higher, which creates incentive for investors (and speculators as the case may be) to jump in, creating momentum that feeds on itself. We saw this in technology stocks in the late nineties, then real estate in the early two thousands, and now we seem to be experiencing it in energy.
Will the recent pullback in oil ultimately amount to a 'bursting of the energy bubble', driving prices further down? Or, is it simply a correction in oil's current bull market? Of course, no one, and I mean no one, knows for sure - just a few short weeks ago, when oil was sitting at $140+ per barrel, the majority of the 'experts' on CNBC were predicting $170+ by year's end. While today, pretty much all we're hearing is that the bubble has popped and, for the foreseeable future, prices will settle anywhere from $100 down to $70 per barrel.
As for stocks, at the moment it seems the declining price of oil and a strengthening U.S. dollar have resulted, near term at least, in a positive trend for the market. So have we seen the worst of this now ten month old bear market? Are we at the early stages of the next bull? Or, is it just a bear market rally? Of course no one, and I mean no one, knows for sure - just a few shorts weeks ago, when the Dow was sitting below 11,000, the majority of the 'experts' on CNBC were predicting that the worst was yet to come. While today, not all, but more than a few are telling us that indeed the worst is over, and its blue skies ahead.
Of course, yours truly is never going to make a near-term market prediction, but I will say that I'm not convinced at this point that the bear is done growling. Oh don't get me wrong, I'm sure he will lose his voice sooner or later, and then go into hibernation while the bulls take over. But it would be very normal at this stage of the game to see another "testing of the lows", as they say - particularly since we haven't experienced the "capitulation" that often spells the death of a bear market. Capitulation is what they have termed the big, high volume sell off that tends to occur at the end of a long decline in stocks. It's essentially what happens when the last group of nervous investors (the fence sitters) finally give up the ghost and take their losses - leaving just you and me holding stocks. With no one left to sell, the next orders will be a buys
Last week I passionately expressed my concern over why the concept of a win fall profits tax, on anything, is a very bad idea. Apparently that commentary got your attention. I received some interesting comments - everything from concern over my blood pressure, to rousing applause, to how dare I use my commentary as a political platform. Of course I vehemently deny that I was doing anything more than showing my concern over a policy that I believe would lead us down a very dangerous economic path.
As for this week I'm feeling a little more subdued, but if you'll indulge me, I would like to stay on the oil topic for just another moment.
In a recent commentary, I made the statement that higher prices (of any given commodity) ultimately take care of higher prices. What essentially happens is that when the price of a commodity reaches levels that effectively causes consumers to reduce their overall spending (an economic slowdown), the demand for said commodity begins to decline, which brings the price down. While the commodity was previously soaring to record heights, production increased dramatically while the suppliers rushed to capitalize on the inflated price, thus increasing supply. We then end up in a situation where we have lots of supply, but slowing demand - causing the price of the commodity to fall. As the price declines, speculators unwind their positions, creating even more downward momentum.
This is how it works, and this is how it will continue to work as long as we allow it to - as long as the 'powers that be' continue to support the notion that markets over time, by themselves, will work to correct any and all imbalances. Imbalances that begin with fundamental phenomena - like strong global economic growth forcing the price of oil higher, which creates incentive for investors (and speculators as the case may be) to jump in, creating momentum that feeds on itself. We saw this in technology stocks in the late nineties, then real estate in the early two thousands, and now we seem to be experiencing it in energy.
Will the recent pullback in oil ultimately amount to a 'bursting of the energy bubble', driving prices further down? Or, is it simply a correction in oil's current bull market? Of course, no one, and I mean no one, knows for sure - just a few short weeks ago, when oil was sitting at $140+ per barrel, the majority of the 'experts' on CNBC were predicting $170+ by year's end. While today, pretty much all we're hearing is that the bubble has popped and, for the foreseeable future, prices will settle anywhere from $100 down to $70 per barrel.
As for stocks, at the moment it seems the declining price of oil and a strengthening U.S. dollar have resulted, near term at least, in a positive trend for the market. So have we seen the worst of this now ten month old bear market? Are we at the early stages of the next bull? Or, is it just a bear market rally? Of course no one, and I mean no one, knows for sure - just a few shorts weeks ago, when the Dow was sitting below 11,000, the majority of the 'experts' on CNBC were predicting that the worst was yet to come. While today, not all, but more than a few are telling us that indeed the worst is over, and its blue skies ahead.
Of course, yours truly is never going to make a near-term market prediction, but I will say that I'm not convinced at this point that the bear is done growling. Oh don't get me wrong, I'm sure he will lose his voice sooner or later, and then go into hibernation while the bulls take over. But it would be very normal at this stage of the game to see another "testing of the lows", as they say - particularly since we haven't experienced the "capitulation" that often spells the death of a bear market. Capitulation is what they have termed the big, high volume sell off that tends to occur at the end of a long decline in stocks. It's essentially what happens when the last group of nervous investors (the fence sitters) finally give up the ghost and take their losses - leaving just you and me holding stocks. With no one left to sell, the next orders will be a buys
Monday, September 14, 2009
Beware the Bond
The following is an excerpt from Making Lemonade where I featured a short essay I had written back in May 2004 on what I saw as the then risk of the bond market.Every so often I
Friday, September 11, 2009
If I
Wednesday, September 9, 2009
Tuesday, September 1, 2009
Private Client Commentary - September's rep
Dear Clients,
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some
Monday, August 31, 2009
Monday, August 24, 2009
Wednesday, August 19, 2009
Sunday, August 9, 2009
Plays Main Street Like a Fiddle
Dear Clients,
In spite of what market history may suggest, most people refuse to believe that, in the eye of a financial storm, the sun will ever shine again (they
In spite of what market history may suggest, most people refuse to believe that, in the eye of a financial storm, the sun will ever shine again (they
Tuesday, August 4, 2009
Thursday, July 30, 2009
Tuesday, July 21, 2009
Wednesday, July 15, 2009
Thursday, July 9, 2009
Tuesday, July 7, 2009
Monday, July 6, 2009
Sunday, July 5, 2009
Private Client Commentary - Pine Trees
Dear Clients,
I promise to get back to more news oriented topics in the weeks ahead. But if you
I promise to get back to more news oriented topics in the weeks ahead. But if you
Wednesday, July 1, 2009
Wednesday, June 24, 2009
Monday, June 15, 2009
Tuesday, June 9, 2009
Some upbeat economic news......
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some
Monday, June 8, 2009
Private Client Commentary - Green Shoots & WalMart Jobs
Just want to pop in and touch on what did not happen this morning. The market is off 3% in the wake of Treasury Secretary Geitner
Friday, June 5, 2009
Private Client Commentary - cyclical market
Dear Clients,
You may or may not have noticed that for the past year and three months, I have written my commentaries on down days, almost exclusively. Which explains why, in 2008, I sent you over seventy messages.
These commentaries have been my attempt to help you understand that the market and the economy move cyclically, and to offer you a longer-term perspective than that expressed through the media. I have said many times in these messages that the human condition is such that we tend to believe that whatever is happening today will continue to happen forever (the media coverage of the market and so much of the
You may or may not have noticed that for the past year and three months, I have written my commentaries on down days, almost exclusively. Which explains why, in 2008, I sent you over seventy messages.
These commentaries have been my attempt to help you understand that the market and the economy move cyclically, and to offer you a longer-term perspective than that expressed through the media. I have said many times in these messages that the human condition is such that we tend to believe that whatever is happening today will continue to happen forever (the media coverage of the market and so much of the
Private Client Commentary - Green Shoots & WalMart Jobs 0609.docx
Dear Clients,
The Dow closed last Friday at 8,763, posting its third consecutive weekly increase and extending what is now a 2,300 point move off the bottom set in early March. So where do we go from here?
Of course I
The Dow closed last Friday at 8,763, posting its third consecutive weekly increase and extending what is now a 2,300 point move off the bottom set in early March. So where do we go from here?
Of course I
Private Client Commentary - plays Main Street like a fiddle
Dear Clients,
In spite of what market history may suggest, most people refuse to believe that, in the eye of a financial storm, the sun will ever shine again (they
In spite of what market history may suggest, most people refuse to believe that, in the eye of a financial storm, the sun will ever shine again (they
Monday, June 1, 2009
Private Client Commentary - Treasuries and interest rate risk
Dear Clients,
The Dow took a 170+ point hit last Wednesday as the stock market reacted to a sharp one-day sell off in Treasury securities
The Dow took a 170+ point hit last Wednesday as the stock market reacted to a sharp one-day sell off in Treasury securities
Fools and Liars
NYU Business Prof Nouriel Roubini (AKA Dr. Doom) predicted just a few weeks ago that this recession will go on for another three years.
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
Tuesday, May 26, 2009
Monday, May 18, 2009
Private Client Commentary - The Great Tree
Dear Clients,
I wrote the following little story as an analogy to what I see as the economic reality we currently find ourselves in. Hope you enjoy it
I wrote the following little story as an analogy to what I see as the economic reality we currently find ourselves in. Hope you enjoy it
Wednesday, May 13, 2009
Sunday, May 10, 2009
Private Client Commentary - 2009 version of 'sitting on the fence'
Dear Clients,
Despite my apparent penchant for picking on the prognosticators (particularly the pessimists), in this week
Despite my apparent penchant for picking on the prognosticators (particularly the pessimists), in this week
Tuesday, May 5, 2009
Private Client Commentary - fund holdings
Dear Clients,
There is of course a whole lot going on that we can talk about; the auto bailout, fed meeting on interest rates, massive global stimulus attempts, the worst recession since the early 80's, etc, etc. But just for today, rather than focus on any of the above, let's take a look at a few of the top holdings within a large cap growth fund that occupies the majority of the portfolios we service.
This particular fund currently holds 291 stocks. The following six are among the largest positions (in terms of the percentage of the portfolio each occupies).
Keeping with last week's theme, as you read the brief profiles, ask yourself if you see these companies continuing to produce their products and/or services in the years to come.
GE (represents 1.2% of the portfolio)
The diversified technology, media and financial services company with products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, it serves customers in more than 100 countries.
Current share price: $17.11
One year high: $38.52
Price to Earnings Ratio: 8.1
Dividend Yield: 7.25%
Microsoft (represents 2.25% of the portfolio)
Microsoft Corporation develops, manufactures, licenses and supports a range of software products for computing devices. The Company's software products include operating systems for servers, personal computers and intelligent devices, server applications for distributed computing environments, information worker productivity applications, business solution applications, high-performance computing applications and software development tools and video games.
Current share price: $18.98
One year high: $36.72
Price to Earnings Ratio: 10.2
Dividend Yield: 2.67%
Apple (represents 1.15% of the portfolio)
Apple Inc. designs, manufactures, and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals, and networking solutions.
Current share price: $98.27
One year high: $202.96
Price to Earnings Ratio: 18.3
Dividend Yield: n/a
PepsiCo (represents .90% of the portfolio)
PepsiCo, Inc. is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The Company is organized into four divisions: Frito-Lay North America (FLNA), PepsiCo Beverages North America (PBNA), PepsiCo International (PI) and Quaker Foods North America (QFNA). Its North American divisions operate in the United States and Canada. Its international division sells products in approximately 200 countries, with operations in Mexico and the United Kingdom.
Current share price: $51.81
One year high: $79.79
Price to Earnings Ratio: 14.9
Dividend Yield: 3.23%
Medtronic, Inc. (represents 1.24% of the portfolio)
Medtronic, Inc. (Medtronic) is a global player in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. The Company operates in seven business segments: Cardiac Rhythm Disease Management (CRDM); Spinal; Cardiovascular; Neuromodulation; Diabetes; Surgical Technologies, and Physio-Control.
Current share price: $29.85
One year high: $56.97
Price to Earnings Ratio: 15.3
Dividend Yield: 2.45%
Target Corp. (represents 1.3% of the portfolio)
Target Corporation operates general merchandise and food discount stores in the United States, which include Target and SuperTarget stores. The Company offers both everyday essentials and fashionable differentiated merchandise. Target
There is of course a whole lot going on that we can talk about; the auto bailout, fed meeting on interest rates, massive global stimulus attempts, the worst recession since the early 80's, etc, etc. But just for today, rather than focus on any of the above, let's take a look at a few of the top holdings within a large cap growth fund that occupies the majority of the portfolios we service.
This particular fund currently holds 291 stocks. The following six are among the largest positions (in terms of the percentage of the portfolio each occupies).
Keeping with last week's theme, as you read the brief profiles, ask yourself if you see these companies continuing to produce their products and/or services in the years to come.
GE (represents 1.2% of the portfolio)
The diversified technology, media and financial services company with products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, it serves customers in more than 100 countries.
Current share price: $17.11
One year high: $38.52
Price to Earnings Ratio: 8.1
Dividend Yield: 7.25%
Microsoft (represents 2.25% of the portfolio)
Microsoft Corporation develops, manufactures, licenses and supports a range of software products for computing devices. The Company's software products include operating systems for servers, personal computers and intelligent devices, server applications for distributed computing environments, information worker productivity applications, business solution applications, high-performance computing applications and software development tools and video games.
Current share price: $18.98
One year high: $36.72
Price to Earnings Ratio: 10.2
Dividend Yield: 2.67%
Apple (represents 1.15% of the portfolio)
Apple Inc. designs, manufactures, and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals, and networking solutions.
Current share price: $98.27
One year high: $202.96
Price to Earnings Ratio: 18.3
Dividend Yield: n/a
PepsiCo (represents .90% of the portfolio)
PepsiCo, Inc. is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The Company is organized into four divisions: Frito-Lay North America (FLNA), PepsiCo Beverages North America (PBNA), PepsiCo International (PI) and Quaker Foods North America (QFNA). Its North American divisions operate in the United States and Canada. Its international division sells products in approximately 200 countries, with operations in Mexico and the United Kingdom.
Current share price: $51.81
One year high: $79.79
Price to Earnings Ratio: 14.9
Dividend Yield: 3.23%
Medtronic, Inc. (represents 1.24% of the portfolio)
Medtronic, Inc. (Medtronic) is a global player in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. The Company operates in seven business segments: Cardiac Rhythm Disease Management (CRDM); Spinal; Cardiovascular; Neuromodulation; Diabetes; Surgical Technologies, and Physio-Control.
Current share price: $29.85
One year high: $56.97
Price to Earnings Ratio: 15.3
Dividend Yield: 2.45%
Target Corp. (represents 1.3% of the portfolio)
Target Corporation operates general merchandise and food discount stores in the United States, which include Target and SuperTarget stores. The Company offers both everyday essentials and fashionable differentiated merchandise. Target
Sunday, May 3, 2009
Private Client Commentary - I love predictions
Dear Clients,
I love predictions. Not making them, mind you, but listening to them. And of course those of primary interest to me have to do with the economy and the stock market. I know I
I love predictions. Not making them, mind you, but listening to them. And of course those of primary interest to me have to do with the economy and the stock market. I know I
Friday, May 1, 2009
Private Client Commentary - Treasury Risk
Dear Clients,
The Dow took at 170+ point hit last Tuesday as a reaction to a sharp one-day sell off in treasury bonds, pushing interest rates noticeably higher for the day. Then on Wednesday the Dow rebounded 104 points in the wake of a successful 7 year treasury note auction. Talk about your volatility.
In this week
The Dow took at 170+ point hit last Tuesday as a reaction to a sharp one-day sell off in treasury bonds, pushing interest rates noticeably higher for the day. Then on Wednesday the Dow rebounded 104 points in the wake of a successful 7 year treasury note auction. Talk about your volatility.
In this week
Monday, April 27, 2009
Monday, April 20, 2009
Safest Opinion is No Opinion
Dear Clients,
Not that we care. Not that (being the long-term, patient, battle-tested investors we are) we give a rat
Not that we care. Not that (being the long-term, patient, battle-tested investors we are) we give a rat
Thursday, April 16, 2009
Beige Book
Dear Clients,
Please forgive my unfailing redundancies, but enough of you continue to message me with the
Please forgive my unfailing redundancies, but enough of you continue to message me with the
Monday, April 13, 2009
Private Client Commentary - V W or L
Dear Clients,
A dozen television screens set to three different networks descend from the ceiling in the gym where I work out. The other morning I noticed real-time quotes of the Dow, the S&P 500 and the NASDAQ index futures appearing in the lower right corner of each screen. As I glanced at the TVs between every exercise (literally), I felt a subtle rush of positive energy when the futures moved higher (portending a positive open), and felt it wane as the numbers ticked lower (I know many of you can relate).
I made two observations that morning; one being that the stock market has taken center stage in virtually all corners of the media (I keep expecting a ticker to flash on Nickelodeon while my son and I watch SpongeBob), the other being how the moves of the Dow can subtly impact the very quality of our daily experience. Suffice it to say that my workouts are better when the market is better.
Now it
A dozen television screens set to three different networks descend from the ceiling in the gym where I work out. The other morning I noticed real-time quotes of the Dow, the S&P 500 and the NASDAQ index futures appearing in the lower right corner of each screen. As I glanced at the TVs between every exercise (literally), I felt a subtle rush of positive energy when the futures moved higher (portending a positive open), and felt it wane as the numbers ticked lower (I know many of you can relate).
I made two observations that morning; one being that the stock market has taken center stage in virtually all corners of the media (I keep expecting a ticker to flash on Nickelodeon while my son and I watch SpongeBob), the other being how the moves of the Dow can subtly impact the very quality of our daily experience. Suffice it to say that my workouts are better when the market is better.
Now it
Friday, April 10, 2009
Wednesday, April 8, 2009
Tuesday, April 7, 2009
safest opinion is no opinion
Not that we care. Not that (being the long-term, patient, battle-tested investors we are) we give a rat
Monday, April 6, 2009
Private Client Commentary - Perry and Ollie
Dear Clients,
The Dow is about 1,600 points off the recent bottom, real estate
The Dow is about 1,600 points off the recent bottom, real estate
Sunday, April 5, 2009
Private Client Commentary - AIG Bonuses
Dear Clients,
Forgive my cynicism, but in my opinion, last week
Forgive my cynicism, but in my opinion, last week
Private Client Commentary - investor personalities
Dear Clients,
For this commentary, I thought we'd take a break from investment topics and take a look at the investor. Hope you enjoy it.
Take care,
Marty
What's your mentality, your personality if you will, when it comes to your finances? Having spent the last couple of decades working with individuals in relation to their money, I have a few observations I'd like to share with you.
For starters, it almost goes without saying that money holds a very high position on most people's list of priorities. Many would profess however that, at best, it comes in fourth behind faith, family and contribution to their community. And I wouldn't dispute that for a moment, but this number four priority can lead to serious stress for some people.
At the two extremes, we have what we call the scarcity and abundance mentalities. Over the years I've counseled a number of individuals who I'd consider scarcity minded. These folks are great people; nice, humble and very conservative (financially speaking). However, they can be quite anxious when it comes to money. They may fear they won't have enough to retire. Or, once retired, they fear their money will run out before their bodies do. Many of them (not all) grew up in a financially challenged environment, where their association with money was one of stress and worry. They may have watched their parents worry, complain and even argue about what they felt they lacked materially. I have worked with scarcity minded people who have enviable fortunes (from years of saving diligently and spending minimally), but live like they're just getting by. They clip coupons, live in modest (paid for) homes, keep the thermostat at 84 in the summer, 64 in the winter, take modest vacations, if at all, drive nice full sized cars they paid cash for 11 years ago, and they can worry intensely when the stock market goes down (even though they usually have only modest exposure to stocks). These wonderful soles will die rich (having never lived rich - financially speaking), and leave wealthy heirs behind. For the scarcity minded investor, a conservative to moderate risk asset allocation strategy makes the most sense. These individuals tend to feel real pain when the market heads south (notice I said when), and left to their own devices, many would become the typical investor who, long-term, usually earns a much lower return on his or her stocks than the market indices would suggest. They would likely sell when things get scary, and only buy when they're sure it's safe - which is usually after the market's been going up for a while (sell low, buy high). Their emotional intensity is usually higher during down markets than up markets. In essence, the fear or anxiety they feel when stock prices decline is much more pronounced than the positive sensations they experience when stocks rise. It is highly unlikely that these investors will get into trouble by taking more income than their portfolio can support.
At the other extreme we have the abundance mentality. The abundant minded may also be nice, humble and even conservative in many ways. But this group doesn't seem to experience the kind of anxiety around money that many of the scarcity minded seem to. They believe they'll always have plenty. Many of them (not all) grew up in an environment where money, even when it was scarce, was not a topic that provoked stress and worry in their households. They're more likely to live lavishly - name brands, big homes with big mortgages, they keep the thermostat at 70 in the summer, 70 in the winter, take fabulous vacations, trade in their leased vehicle every three years, and worry very little when the stock market dips. These folks live rich lives (financially speaking for sure), and may very well die rich. A few however tell us that their ultimate goal is to spend their last dime on their death bed (a tough one for us to time by the way). Left to their own devices, they would stand a good chance of earning market returns on their stock portfolios. This is due to the fact that money doesn't scare them and they are therefore less apt to make emotionally driven investment decisions, which is a good thing since they need to maintain portfolios that can keep up with their lifestyles.
I guess I should also touch on another group we, as advisors, rarely see. This third group is tough to name since, in a sense, they seem to possess both abundance and scarcity minded traits. But rather than falling somewhere between, they live beyond either extreme (financially speaking). They're not likely to work with investment advisors, because there aren't any investments to seek advice on. They're abundant minded in a sense, since they have no problem spending money. But unfortunately, they tend to spend beyond their means, seemingly blind to their lack of abundance. So we could label them "abundant blinded". But, like the scarcity minded, I imagine they feel intense stress around money (for good reason), but unfortunately, acquiring new things is how they find temporary relief from their woes - which of course serves only to intensify their stress. So could we label this group the "scarcity blinded"? In either event, these are no doubt some (not all perhaps) of the folks we're hearing so much about in the news these days - the ones who financed expensive homes with interest only adjustable rate mortgages that blew up in their faces when their rates were adjusted up and their home values came down (as the real estate bubble began to burst). While we would never wish this on anybody, in our system, they will survive, and many will look back and see their experience as a blessing in disguise, the great turning point, where they were forced to look inside and make necessary changes in how they approach their lives financially.
So there you have it, the three extremes - keep in mind, these are extremes. We have found that most individuals (our clients at least) fall somewhere between the scarcity and abundance mentalities. They may feel anxiety when they read the headlines during bear markets (which is perfectly normal), but they're not likely to react and make potentially big (emotionally driven) investment mistakes.
As you've experienced, we spend a lot of time and energy helping our clients maintain what we believe is a healthy perspective on the financial realities of our world today. And we will certainly continue to walk you through the ups and downs to come. For yourself however, the next time you feel fear or anxiety as it relates to your money, take a look at your financial reality (give us a call if you need help with this) and consider whether your worry is based on the reality of your situation today, and, if not, ask yourself if you're not perhaps a little pre-wired to worry. If you can relate, who knows, maybe this insight will alleviate some of your stress. On the other hand, if you never worry about money, but wonder how you're going to pay off the VISA after booking the four week African photo safari, and tell yourself - "it's okay, we'll just hit the home equity line of credit, or skip our quarterly estimated tax payment in June, or, better yet, we'll just pull it out of our retirement plan like we did for the six week Mediterranean cruise we took all the kids on last year", ............ WE NEED TO TALK!!
For this commentary, I thought we'd take a break from investment topics and take a look at the investor. Hope you enjoy it.
Take care,
Marty
What's your mentality, your personality if you will, when it comes to your finances? Having spent the last couple of decades working with individuals in relation to their money, I have a few observations I'd like to share with you.
For starters, it almost goes without saying that money holds a very high position on most people's list of priorities. Many would profess however that, at best, it comes in fourth behind faith, family and contribution to their community. And I wouldn't dispute that for a moment, but this number four priority can lead to serious stress for some people.
At the two extremes, we have what we call the scarcity and abundance mentalities. Over the years I've counseled a number of individuals who I'd consider scarcity minded. These folks are great people; nice, humble and very conservative (financially speaking). However, they can be quite anxious when it comes to money. They may fear they won't have enough to retire. Or, once retired, they fear their money will run out before their bodies do. Many of them (not all) grew up in a financially challenged environment, where their association with money was one of stress and worry. They may have watched their parents worry, complain and even argue about what they felt they lacked materially. I have worked with scarcity minded people who have enviable fortunes (from years of saving diligently and spending minimally), but live like they're just getting by. They clip coupons, live in modest (paid for) homes, keep the thermostat at 84 in the summer, 64 in the winter, take modest vacations, if at all, drive nice full sized cars they paid cash for 11 years ago, and they can worry intensely when the stock market goes down (even though they usually have only modest exposure to stocks). These wonderful soles will die rich (having never lived rich - financially speaking), and leave wealthy heirs behind. For the scarcity minded investor, a conservative to moderate risk asset allocation strategy makes the most sense. These individuals tend to feel real pain when the market heads south (notice I said when), and left to their own devices, many would become the typical investor who, long-term, usually earns a much lower return on his or her stocks than the market indices would suggest. They would likely sell when things get scary, and only buy when they're sure it's safe - which is usually after the market's been going up for a while (sell low, buy high). Their emotional intensity is usually higher during down markets than up markets. In essence, the fear or anxiety they feel when stock prices decline is much more pronounced than the positive sensations they experience when stocks rise. It is highly unlikely that these investors will get into trouble by taking more income than their portfolio can support.
At the other extreme we have the abundance mentality. The abundant minded may also be nice, humble and even conservative in many ways. But this group doesn't seem to experience the kind of anxiety around money that many of the scarcity minded seem to. They believe they'll always have plenty. Many of them (not all) grew up in an environment where money, even when it was scarce, was not a topic that provoked stress and worry in their households. They're more likely to live lavishly - name brands, big homes with big mortgages, they keep the thermostat at 70 in the summer, 70 in the winter, take fabulous vacations, trade in their leased vehicle every three years, and worry very little when the stock market dips. These folks live rich lives (financially speaking for sure), and may very well die rich. A few however tell us that their ultimate goal is to spend their last dime on their death bed (a tough one for us to time by the way). Left to their own devices, they would stand a good chance of earning market returns on their stock portfolios. This is due to the fact that money doesn't scare them and they are therefore less apt to make emotionally driven investment decisions, which is a good thing since they need to maintain portfolios that can keep up with their lifestyles.
I guess I should also touch on another group we, as advisors, rarely see. This third group is tough to name since, in a sense, they seem to possess both abundance and scarcity minded traits. But rather than falling somewhere between, they live beyond either extreme (financially speaking). They're not likely to work with investment advisors, because there aren't any investments to seek advice on. They're abundant minded in a sense, since they have no problem spending money. But unfortunately, they tend to spend beyond their means, seemingly blind to their lack of abundance. So we could label them "abundant blinded". But, like the scarcity minded, I imagine they feel intense stress around money (for good reason), but unfortunately, acquiring new things is how they find temporary relief from their woes - which of course serves only to intensify their stress. So could we label this group the "scarcity blinded"? In either event, these are no doubt some (not all perhaps) of the folks we're hearing so much about in the news these days - the ones who financed expensive homes with interest only adjustable rate mortgages that blew up in their faces when their rates were adjusted up and their home values came down (as the real estate bubble began to burst). While we would never wish this on anybody, in our system, they will survive, and many will look back and see their experience as a blessing in disguise, the great turning point, where they were forced to look inside and make necessary changes in how they approach their lives financially.
So there you have it, the three extremes - keep in mind, these are extremes. We have found that most individuals (our clients at least) fall somewhere between the scarcity and abundance mentalities. They may feel anxiety when they read the headlines during bear markets (which is perfectly normal), but they're not likely to react and make potentially big (emotionally driven) investment mistakes.
As you've experienced, we spend a lot of time and energy helping our clients maintain what we believe is a healthy perspective on the financial realities of our world today. And we will certainly continue to walk you through the ups and downs to come. For yourself however, the next time you feel fear or anxiety as it relates to your money, take a look at your financial reality (give us a call if you need help with this) and consider whether your worry is based on the reality of your situation today, and, if not, ask yourself if you're not perhaps a little pre-wired to worry. If you can relate, who knows, maybe this insight will alleviate some of your stress. On the other hand, if you never worry about money, but wonder how you're going to pay off the VISA after booking the four week African photo safari, and tell yourself - "it's okay, we'll just hit the home equity line of credit, or skip our quarterly estimated tax payment in June, or, better yet, we'll just pull it out of our retirement plan like we did for the six week Mediterranean cruise we took all the kids on last year", ............ WE NEED TO TALK!!
Private Client Commentary - liars and fools
Dear Clients,
NYU Business Prof Nouriel Roubini (AKA Dr. Doom) predicted just a few weeks ago that this recession will go on for another three years.
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
NYU Business Prof Nouriel Roubini (AKA Dr. Doom) predicted just a few weeks ago that this recession will go on for another three years.
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
Private Client Commentary - September's rep
Dear Clients,
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some
Private Client Commentary - RTC bailout
Dear Clients,
The final comment of my last letter was to look for an RTC type program to come out of Washington that would be viewed as the ultimate answer to the current financial crisis
The final comment of my last letter was to look for an RTC type program to come out of Washington that would be viewed as the ultimate answer to the current financial crisis
Tuesday, March 31, 2009
Private Client Commentary - volatile week
Dear Clients,
Like I said in my last commentary, this looks to be a very volatile week. Yesterday the Dow dropped 240+ points (but it was down as much as 340 during the day). So why? Was it Secretary Geithner
Like I said in my last commentary, this looks to be a very volatile week. Yesterday the Dow dropped 240+ points (but it was down as much as 340 during the day). So why? Was it Secretary Geithner
Sunday, March 29, 2009
Tuesday, March 24, 2009
Private Client Commentary - the next stop
Dear Clients,
It finally happened. The plan to deal directly with the
It finally happened. The plan to deal directly with the
Private Client Commentary - bank plan
Dear Clients,
It finally happened. The plan to deal directly with the
It finally happened. The plan to deal directly with the
Sunday, March 22, 2009
Private Client Commentary - AIG Bonuses
Dear Clients,
Forgive my cynicism, but in my opinion, last week
Forgive my cynicism, but in my opinion, last week
Wednesday, March 18, 2009
Private Client Commentary - things motivating buyers at the moment
Dear Clients,
My what a difference a couple of weeks can make. February was the worst February since 1933. As of today, the market is on track to seeing its biggest single month increase since April 2003 (by the way, the last bear market bottomed in March 2003).
You have to admit, it felt like the sky was falling last month. But please remember, as I
My what a difference a couple of weeks can make. February was the worst February since 1933. As of today, the market is on track to seeing its biggest single month increase since April 2003 (by the way, the last bear market bottomed in March 2003).
You have to admit, it felt like the sky was falling last month. But please remember, as I
Monday, March 16, 2009
Private Client Commentary - last time we were at 7 200
Dear Clients,
The Dow closed Friday at 7,223 and you have to admit, even though the market is a zillion miles from where it was October
The Dow closed Friday at 7,223 and you have to admit, even though the market is a zillion miles from where it was October
Sunday, March 8, 2009
Private Client Commentary - tone from Washington
Dear Clients,
There's been no love affair between Washington and Wall Street thus far in '09. And while surely none of us would blame our new administration for a 6% (annualized) contraction in last quarter's GDP or for the current 8.1% unemployment rate, I bet we can agree that policy recently passed and proposed could have been a bit more investor friendly. Although the tone coming out of Washington has been somewhat more inspiring the past few days (referring to President Obama's more upbeat comments on the economy).
In a recent commentary I suggested that our policymakers have two major opportunities to give the stock market a much needed lift. One being the "Bad Bank" concept, where the government establishes an entity that would purchase the so called "toxic" assets off of bank balance sheets. The other being a suspension of mark-to-market accounting, which requires banks to value assets at current market prices. As you might imagine, there's virtually no market for these mortgage assets currently. Therefore banks are forced to mark them down (by the $billions) to what many believe are artificially low prices while their intent is to hold them past the current reporting period.
A House financial services committee has schedule a hearing for this Thursday on mark-to-market accounting rules. If indeed Washington were to suspend mtm, I believe Wall Street would be very pleased.
While there's nothing yet on the calendar regarding the "Bad Bank", supposedly Treasury Secretary Timothy Geithner and company are working on the details of a "public-private partnership" which would bring private distressed debt investors into the mix. Word has it that we are to receive some detail on this within the next couple of weeks.
No predictions here, just giving you a heads up that the next few days and weeks could bring some interesting developments. And in the meantime, expect that while emotions run high (leading to reactionary investment decisions), short-term traders will continue to rule the stock market (i.e., lots of volatility).
At this stage, rather than wondering how low the market will go, the more important question for the long-term investor becomes; how long can it stay at these (or lower) levels?
Stay tuned,
Marty
There's been no love affair between Washington and Wall Street thus far in '09. And while surely none of us would blame our new administration for a 6% (annualized) contraction in last quarter's GDP or for the current 8.1% unemployment rate, I bet we can agree that policy recently passed and proposed could have been a bit more investor friendly. Although the tone coming out of Washington has been somewhat more inspiring the past few days (referring to President Obama's more upbeat comments on the economy).
In a recent commentary I suggested that our policymakers have two major opportunities to give the stock market a much needed lift. One being the "Bad Bank" concept, where the government establishes an entity that would purchase the so called "toxic" assets off of bank balance sheets. The other being a suspension of mark-to-market accounting, which requires banks to value assets at current market prices. As you might imagine, there's virtually no market for these mortgage assets currently. Therefore banks are forced to mark them down (by the $billions) to what many believe are artificially low prices while their intent is to hold them past the current reporting period.
A House financial services committee has schedule a hearing for this Thursday on mark-to-market accounting rules. If indeed Washington were to suspend mtm, I believe Wall Street would be very pleased.
While there's nothing yet on the calendar regarding the "Bad Bank", supposedly Treasury Secretary Timothy Geithner and company are working on the details of a "public-private partnership" which would bring private distressed debt investors into the mix. Word has it that we are to receive some detail on this within the next couple of weeks.
No predictions here, just giving you a heads up that the next few days and weeks could bring some interesting developments. And in the meantime, expect that while emotions run high (leading to reactionary investment decisions), short-term traders will continue to rule the stock market (i.e., lots of volatility).
At this stage, rather than wondering how low the market will go, the more important question for the long-term investor becomes; how long can it stay at these (or lower) levels?
Stay tuned,
Marty
Thursday, March 5, 2009
Private Client Commentary - A stock market conversation
Dear Clients,
Many of you have commented that you enjoy the Q&A format for my commentaries. The following is a continuation of the Investor/Advisor conversation where the investor is looking for some clarification on some recent comments made by the advisor, and where the advisor emphasizes the importance of not reacting to the headlines.
Take care,
Marty
Investor: You
Many of you have commented that you enjoy the Q&A format for my commentaries. The following is a continuation of the Investor/Advisor conversation where the investor is looking for some clarification on some recent comments made by the advisor, and where the advisor emphasizes the importance of not reacting to the headlines.
Take care,
Marty
Investor: You
Private Client Commentary - everything has a ceiling and floor
Dear Clients,
I write this early Friday morning and it's looking to be yet another down day for the market.
"Could get worse before it gets better" is something I've been reminding for months now. I've also been reminding that market history supports the notion that to sell when the market has taken this kind of hit could be a bad idea. The thing is, market history supported that notion when the Dow was at 9,000 less than two months ago. So if two months ago you had a two month time horizon, you should have sold. If you have a time horizon that extends several years, well then it's an altogether different set of circumstances.
The question we have to ask ourselves is; is this time different? Will the market bounce back in furious fashion when the sideline cash (one day) comes roaring back in - when a real return of 0% in T-Bills is no longer acceptable and it believes the worst economic scenario is finally priced into stocks? Or will it rush to gold, already at record highs, while the economy continues to struggle under the weight of, well you name it? Do we buy into an asset class (gold) that has run through the roof
I write this early Friday morning and it's looking to be yet another down day for the market.
"Could get worse before it gets better" is something I've been reminding for months now. I've also been reminding that market history supports the notion that to sell when the market has taken this kind of hit could be a bad idea. The thing is, market history supported that notion when the Dow was at 9,000 less than two months ago. So if two months ago you had a two month time horizon, you should have sold. If you have a time horizon that extends several years, well then it's an altogether different set of circumstances.
The question we have to ask ourselves is; is this time different? Will the market bounce back in furious fashion when the sideline cash (one day) comes roaring back in - when a real return of 0% in T-Bills is no longer acceptable and it believes the worst economic scenario is finally priced into stocks? Or will it rush to gold, already at record highs, while the economy continues to struggle under the weight of, well you name it? Do we buy into an asset class (gold) that has run through the roof
Tuesday, March 3, 2009
Private Client Commentary - Stovall interview
Dear Clients,
A couple of months ago I sent you a chart showing every bear market with a decline of 30% or more, dating back to 1901. The chart showed how stocks tended to bounce aggressively once they finally bottomed out. In that spirit (and in light of the recent dramatic sell-off), the following is taken from last Tuesday
A couple of months ago I sent you a chart showing every bear market with a decline of 30% or more, dating back to 1901. The chart showed how stocks tended to bounce aggressively once they finally bottomed out. In that spirit (and in light of the recent dramatic sell-off), the following is taken from last Tuesday
Monday, March 2, 2009
Private Client Commentary - Buffet letter
Dear Clients,
This week you'll hear from all corners of the media how Warren Buffet, the Earth's wealthiest individual, in his annual letter to Berkshire Hathaway shareholders, confessed to doing some "dumb things" in 2008. I browsed around various media outlets this weekend just to see how they titled their headlines and I have to tell you, the critics who claim that the media sensationalizes the bad news and contributes to the sour mood of the American citizen are absolutely correct (at least as far as the coverage of Buffet's 2008 letter to shareholders is concerned). I happened to read the letter and while stating the facts in terms of the things he wishes he could take back, he made some awfully good decisions in 2008 as well. Overall I found it to be a pretty upbeat, yet very honest, message to his flock. I encourage you to read the letter in its entirety on berkshirehathaway.com. You'll be relieved to know that the
This week you'll hear from all corners of the media how Warren Buffet, the Earth's wealthiest individual, in his annual letter to Berkshire Hathaway shareholders, confessed to doing some "dumb things" in 2008. I browsed around various media outlets this weekend just to see how they titled their headlines and I have to tell you, the critics who claim that the media sensationalizes the bad news and contributes to the sour mood of the American citizen are absolutely correct (at least as far as the coverage of Buffet's 2008 letter to shareholders is concerned). I happened to read the letter and while stating the facts in terms of the things he wishes he could take back, he made some awfully good decisions in 2008 as well. Overall I found it to be a pretty upbeat, yet very honest, message to his flock. I encourage you to read the letter in its entirety on berkshirehathaway.com. You'll be relieved to know that the
Sunday, March 1, 2009
Private Client NL Business Cycle
THE BUSINESS CYCLE
(The Forest Through The Trees)
Did you know that the Native American rain dances actually worked 100% of the time. That
(The Forest Through The Trees)
Did you know that the Native American rain dances actually worked 100% of the time. That
Friday, February 27, 2009
Private Client Commentary - everything has a ceiling and floor
Dear Clients,
Looks like another one of those days that calls for two commentaries. As I mentioned in this morning
Looks like another one of those days that calls for two commentaries. As I mentioned in this morning
Private Client Commentary - ceilings and floors
Dear Clients,
I write this early Friday morning and it's looking to be yet another down day for the market.
"Could get worse before it gets better" is something I've been reminding for months now. I've also been reminding that market history supports the notion that to sell when the market has taken this kind of hit could be a bad idea. The thing is, market history supported that notion when the Dow was at 9,000 less than two months ago. So if two months ago you had a two month time horizon, you should have sold. If you have a time horizon that extends several years, well then it's an altogether different set of circumstances.
The question we have to ask ourselves is; is this time different? Will the market bounce back in furious fashion when the sideline cash (one day) comes roaring back in - when a real return of 0% in T-Bills is no longer acceptable and it believes the worst economic scenario is finally priced into stocks? Or will it rush to gold, already at record highs, while the economy continues to struggle under the weight of, well you name it? Do we buy into an asset class (gold) that has run through the roof
I write this early Friday morning and it's looking to be yet another down day for the market.
"Could get worse before it gets better" is something I've been reminding for months now. I've also been reminding that market history supports the notion that to sell when the market has taken this kind of hit could be a bad idea. The thing is, market history supported that notion when the Dow was at 9,000 less than two months ago. So if two months ago you had a two month time horizon, you should have sold. If you have a time horizon that extends several years, well then it's an altogether different set of circumstances.
The question we have to ask ourselves is; is this time different? Will the market bounce back in furious fashion when the sideline cash (one day) comes roaring back in - when a real return of 0% in T-Bills is no longer acceptable and it believes the worst economic scenario is finally priced into stocks? Or will it rush to gold, already at record highs, while the economy continues to struggle under the weight of, well you name it? Do we buy into an asset class (gold) that has run through the roof
Tuesday, February 24, 2009
Thursday, February 19, 2009
Private Client Commentary - Technical Analysis
Dear Clients,
Last December I wrote that in the near-term the Dow could certainly drop below 7,500. And it did just that today.
As you
Last December I wrote that in the near-term the Dow could certainly drop below 7,500. And it did just that today.
As you
Tuesday, February 17, 2009
Saturday, February 14, 2009
Private Client Commentary - bad bank and mtm
Dear Clients,
Well so much for the stock market making its turn in the midst of all this bad news. Last week completely erased the previous week's gains while the market found its way closer to the bottom set last November. To market technicians this comes as no surprise, as many have suggested that stocks need to test those November lows at least one more time before they can move higher in any sustainable fashion. Since I'm not a technician I can't say whether or not last week's 5% drop in stocks indeed follows some predictable pattern.
I will say this however; if it's not due to some fifty-two week mountainesque pattern in the charts, or a double top with an inverted head and shoulders breaking through the resistance line (technical jargon), I'm betting last week's drop was simply the market thumbing its nose at Washington for a week of horrendously bad politicking.
Of course I could be missing something, but it's my observation that the market is signaling (with sirens and flashing red lights no less) precisely what it wants to see come out of Washington. Forget the stimulus package
Well so much for the stock market making its turn in the midst of all this bad news. Last week completely erased the previous week's gains while the market found its way closer to the bottom set last November. To market technicians this comes as no surprise, as many have suggested that stocks need to test those November lows at least one more time before they can move higher in any sustainable fashion. Since I'm not a technician I can't say whether or not last week's 5% drop in stocks indeed follows some predictable pattern.
I will say this however; if it's not due to some fifty-two week mountainesque pattern in the charts, or a double top with an inverted head and shoulders breaking through the resistance line (technical jargon), I'm betting last week's drop was simply the market thumbing its nose at Washington for a week of horrendously bad politicking.
Of course I could be missing something, but it's my observation that the market is signaling (with sirens and flashing red lights no less) precisely what it wants to see come out of Washington. Forget the stimulus package
Tuesday, February 10, 2009
Private Client Commentary - Geitner's speech
Just want to pop in and touch on what did not happen this morning. The market is off 3% in the wake of Treasury Secretary Geitner
Monday, February 9, 2009
Private Client Commentary - American spirit
Dear Clients,
In a recent commentary I stated that over the past year plus I have written to you almost exclusively on days when the stock market is down. While my intent is to help you see through the myopic media coverage, in reality, over the past year I didn't have a whole lot of choice - as most days were in fact down for the stock market.
I write you today after a week that was actually positive for the market. I almost don't know how to act! Especially when, at the end of last week, the reported unemployment numbers were nothing short of horrendous - nearly 600,000 jobs lost in January alone. And what happened? The Dow went up 217 points.
Could it be that what they say is true? That the market will begin its turn around in the midst of the worst possible news? My answer is yes. Since that's been my observation over the past 25 years. And that's what the charts of the past century have told us as well.
Now does this mean that we're finally there? My answer is I don't know. The news has felt like the worst possible for months now and the market has done nothing more than tease us with a few false springs. And last week's gains may simply reflect the hope that our leaders in Washington can fashion together a stimulus package that will jump start us out of this recession. But make no mistake, government stimulus or not, sooner or later one of these seemingly false springs will turn into the real deal and lead us right into summer.
With what this bear market has put us through and with all the persistently bad economic news, you might ask how in the world I could suggest that a sustainably positive stock market is in our future.
Honestly, predicting a warm-temperature turn around is the easy part. The hard part, which I won't attempt, is predicting when.
One reason I feel that a very healthy rebound (at some point) is indeed in our future is simply the fact that there's a virtual mountain of cash on the 'sidelines' (money market instruments earning almost zero). According to CNBC this mountain is now 9 trillion feet high. That's right! There's supposedly $9 trillion in cash sitting on the sidelines, earning less than nothing (when you factor in a little future inflation).
OK, but $9 trillion or not, who in their right minds would want to own stocks after what we've seen the past 15 months, you might ask. I'd say only the folks who recognize that the market has recovered from every single recession/bear market history has ever thrown at it. And those who believe that they'll be buying new computers, cell phones, cars, shoes, socks, food, cameras, medicine, houses, furniture, toenail clippers, nose hair trimmers, deodorant, make up, airline tickets, etc, etc, etc, for years to come. Only those silly fools - and I guess I'm one of them.
Yes I know this is the same simple message that I repeat all too often. And I know it's sexier to write about the "Bad Bank" proposal, or more about why I think protectionism is bad news for our economy, or how companies aggressively slash jobs and inventories during the latter stages of a recession. And while these are worthy topics (and I'll no doubt go to these in the future), when it's all said and done, it's the American spirit that makes our economy great. And that spirit has survived a Great Depression, multiple recessions, world wars, impeachments, terrorist attacks, bursting tech bubbles, floods and droughts - you name it, we've survived it. And I see absolutely nothing that will keep that spirit from surviving the recession of 2008/2009.
Now that I have you jumping out of your chair with unbridled patriotism, know that the stock market will continue to be a very volatile place going forward. For the foreseeable future, a whole lot can happen
In a recent commentary I stated that over the past year plus I have written to you almost exclusively on days when the stock market is down. While my intent is to help you see through the myopic media coverage, in reality, over the past year I didn't have a whole lot of choice - as most days were in fact down for the stock market.
I write you today after a week that was actually positive for the market. I almost don't know how to act! Especially when, at the end of last week, the reported unemployment numbers were nothing short of horrendous - nearly 600,000 jobs lost in January alone. And what happened? The Dow went up 217 points.
Could it be that what they say is true? That the market will begin its turn around in the midst of the worst possible news? My answer is yes. Since that's been my observation over the past 25 years. And that's what the charts of the past century have told us as well.
Now does this mean that we're finally there? My answer is I don't know. The news has felt like the worst possible for months now and the market has done nothing more than tease us with a few false springs. And last week's gains may simply reflect the hope that our leaders in Washington can fashion together a stimulus package that will jump start us out of this recession. But make no mistake, government stimulus or not, sooner or later one of these seemingly false springs will turn into the real deal and lead us right into summer.
With what this bear market has put us through and with all the persistently bad economic news, you might ask how in the world I could suggest that a sustainably positive stock market is in our future.
Honestly, predicting a warm-temperature turn around is the easy part. The hard part, which I won't attempt, is predicting when.
One reason I feel that a very healthy rebound (at some point) is indeed in our future is simply the fact that there's a virtual mountain of cash on the 'sidelines' (money market instruments earning almost zero). According to CNBC this mountain is now 9 trillion feet high. That's right! There's supposedly $9 trillion in cash sitting on the sidelines, earning less than nothing (when you factor in a little future inflation).
OK, but $9 trillion or not, who in their right minds would want to own stocks after what we've seen the past 15 months, you might ask. I'd say only the folks who recognize that the market has recovered from every single recession/bear market history has ever thrown at it. And those who believe that they'll be buying new computers, cell phones, cars, shoes, socks, food, cameras, medicine, houses, furniture, toenail clippers, nose hair trimmers, deodorant, make up, airline tickets, etc, etc, etc, for years to come. Only those silly fools - and I guess I'm one of them.
Yes I know this is the same simple message that I repeat all too often. And I know it's sexier to write about the "Bad Bank" proposal, or more about why I think protectionism is bad news for our economy, or how companies aggressively slash jobs and inventories during the latter stages of a recession. And while these are worthy topics (and I'll no doubt go to these in the future), when it's all said and done, it's the American spirit that makes our economy great. And that spirit has survived a Great Depression, multiple recessions, world wars, impeachments, terrorist attacks, bursting tech bubbles, floods and droughts - you name it, we've survived it. And I see absolutely nothing that will keep that spirit from surviving the recession of 2008/2009.
Now that I have you jumping out of your chair with unbridled patriotism, know that the stock market will continue to be a very volatile place going forward. For the foreseeable future, a whole lot can happen
Thursday, February 5, 2009
Private Client Commentary - biggest one point day
Dear Clients,
All I can say again is Wow! Yesterday saw the biggest single day point increase in the history of the Dow. And of course the question today is; is it sustainable? Has the bear market finally done its part in bringing the excesses to light and helping purge them from the system - and are we now ushering in the next bull market? Or, is it a sucker's rally - where the market surges, taking investors with it, only to sell off back to the bottom - breaking hopeful hearts along the way?
Of course you know, I don't know. Timing the stock market is something no one has ever done with any, investment worthy, degree of accuracy. And anyone willing to go on national television and tell us, with great conviction even, that they know where the market is headed, has let his ego run wild with his common sense. I woke up this morning to Bloomberg Television just in time to hear that three "major market strategists" (as opposed to minor market strategists) are indeed labeling this a bear market rally. Two simply stated that, due to the coming deep global recession, investors must sell into this rally; for we are no where near the end of the pain. The other was so bold as to even predict precisely when the market will bottom, which, if you're interested, is mid 2009. As I've illustrated many times in the past, not that these guys are wrong, but even the most popular gurus seldom guess correctly when it comes to forecasting the market.
Now, having clearly stated my position on market timing and my opinion regarding those fortune tellers who would have us bet our portfolios on their predictions, I will say emphatically, that I would not keep these primetime palm readers from making their prognostications for all the tea in China. In fact, if it is indeed time for this market to turn the corner, these guys are essential to making that happen.
Think about it, if everyone turned bullish at exactly the same time, every drop of cash on the sidelines would rush in at once, and I'd guess the Dow would settle somewhere north of 16,000, with nothing to keep it there. And trust me, that's not what we need! We need pessimists, and we need them to remain pessimistic, and we need people (not us) to continue to listen to them. That will help ensure that the liquidity the next bull market needs to move higher at a healthy (sustainable) pace stays in place. There's the old adage, "bull markets climb a wall of worry", implying that they are born, and advance, in the midst of very bad news - and again, we need the doom-sayers to keep things relatively negative, at least for a while.
So here we are, and like our kids suffering through the long drive to Grandma's house, all we want to know is - are we there yet? And all I'm saying is; if we are, we want to keep the air conditioner running and leave the ones sleeping in the back seat (dreaming that they're still on the road) there for as long as possible - while we go inside and enjoy Grandma's apple pie.
And lastly, please do not take this as my prediction that the bear market is finally over. I honestly do not know!! And as I've said many times before, it's not important that it end today, it's only important that this bear market end after, and only after, it's finished its work.
Have a great week,
Marty
All I can say again is Wow! Yesterday saw the biggest single day point increase in the history of the Dow. And of course the question today is; is it sustainable? Has the bear market finally done its part in bringing the excesses to light and helping purge them from the system - and are we now ushering in the next bull market? Or, is it a sucker's rally - where the market surges, taking investors with it, only to sell off back to the bottom - breaking hopeful hearts along the way?
Of course you know, I don't know. Timing the stock market is something no one has ever done with any, investment worthy, degree of accuracy. And anyone willing to go on national television and tell us, with great conviction even, that they know where the market is headed, has let his ego run wild with his common sense. I woke up this morning to Bloomberg Television just in time to hear that three "major market strategists" (as opposed to minor market strategists) are indeed labeling this a bear market rally. Two simply stated that, due to the coming deep global recession, investors must sell into this rally; for we are no where near the end of the pain. The other was so bold as to even predict precisely when the market will bottom, which, if you're interested, is mid 2009. As I've illustrated many times in the past, not that these guys are wrong, but even the most popular gurus seldom guess correctly when it comes to forecasting the market.
Now, having clearly stated my position on market timing and my opinion regarding those fortune tellers who would have us bet our portfolios on their predictions, I will say emphatically, that I would not keep these primetime palm readers from making their prognostications for all the tea in China. In fact, if it is indeed time for this market to turn the corner, these guys are essential to making that happen.
Think about it, if everyone turned bullish at exactly the same time, every drop of cash on the sidelines would rush in at once, and I'd guess the Dow would settle somewhere north of 16,000, with nothing to keep it there. And trust me, that's not what we need! We need pessimists, and we need them to remain pessimistic, and we need people (not us) to continue to listen to them. That will help ensure that the liquidity the next bull market needs to move higher at a healthy (sustainable) pace stays in place. There's the old adage, "bull markets climb a wall of worry", implying that they are born, and advance, in the midst of very bad news - and again, we need the doom-sayers to keep things relatively negative, at least for a while.
So here we are, and like our kids suffering through the long drive to Grandma's house, all we want to know is - are we there yet? And all I'm saying is; if we are, we want to keep the air conditioner running and leave the ones sleeping in the back seat (dreaming that they're still on the road) there for as long as possible - while we go inside and enjoy Grandma's apple pie.
And lastly, please do not take this as my prediction that the bear market is finally over. I honestly do not know!! And as I've said many times before, it's not important that it end today, it's only important that this bear market end after, and only after, it's finished its work.
Have a great week,
Marty
Private Client Commentary - Bernanke
Dear Clients,
As of this moment, the market has re-traced more than half of Monday
As of this moment, the market has re-traced more than half of Monday
Private Client Commentary - investor personalities
Dear Clients,
For this commentary, I thought we'd take a break from investment topics and take a look at the investor. Hope you enjoy it.
Take care,
Marty
What's your mentality, your personality if you will, when it comes to your finances? Having spent the last couple of decades working with individuals in relation to their money, I have a few observations I'd like to share with you.
For starters, it almost goes without saying that money holds a very high position on most people's list of priorities. Many would profess however that, at best, it comes in fourth behind faith, family and contribution to their community. And I wouldn't dispute that for a moment, but this number four priority can lead to serious stress for some people.
At the two extremes, we have what we call the scarcity and abundance mentalities. Over the years I've counseled a number of individuals who I'd consider scarcity minded. These folks are great people; nice, humble and very conservative (financially speaking). However, they can be quite anxious when it comes to money. They may fear they won't have enough to retire. Or, once retired, they fear their money will run out before their bodies do. Many of them (not all) grew up in a financially challenged environment, where their association with money was one of stress and worry. They may have watched their parents worry, complain and even argue about what they felt they lacked materially. I have worked with scarcity minded people who have enviable fortunes (from years of saving diligently and spending minimally), but live like they're just getting by. They clip coupons, live in modest (paid for) homes, keep the thermostat at 84 in the summer, 64 in the winter, take modest vacations, if at all, drive nice full sized cars they paid cash for 11 years ago, and they can worry intensely when the stock market goes down (even though they usually have only modest exposure to stocks). These wonderful soles will die rich (having never lived rich - financially speaking), and leave wealthy heirs behind. For the scarcity minded investor, a conservative to moderate risk asset allocation strategy makes the most sense. These individuals tend to feel real pain when the market heads south (notice I said when), and left to their own devices, many would become the typical investor who, long-term, usually earns a much lower return on his or her stocks than the market indices would suggest. They would likely sell when things get scary, and only buy when they're sure it's safe - which is usually after the market's been going up for a while (sell low, buy high). Their emotional intensity is usually higher during down markets than up markets. In essence, the fear or anxiety they feel when stock prices decline is much more pronounced than the positive sensations they experience when stocks rise. It is highly unlikely that these investors will get into trouble by taking more income than their portfolio can support.
At the other extreme we have the abundance mentality. The abundant minded may also be nice, humble and even conservative in many ways. But this group doesn't seem to experience the kind of anxiety around money that many of the scarcity minded seem to. They believe they'll always have plenty. Many of them (not all) grew up in an environment where money, even when it was scarce, was not a topic that provoked stress and worry in their households. They're more likely to live lavishly - name brands, big homes with big mortgages, they keep the thermostat at 70 in the summer, 70 in the winter, take fabulous vacations, trade in their leased vehicle every three years, and worry very little when the stock market dips. These folks live rich lives (financially speaking for sure), and may very well die rich. A few however tell us that their ultimate goal is to spend their last dime on their death bed (a tough one for us to time by the way). Left to their own devices, they would stand a good chance of earning market returns on their stock portfolios. This is due to the fact that money doesn't scare them and they are therefore less apt to make emotionally driven investment decisions, which is a good thing since they need to maintain portfolios that can keep up with their lifestyles.
I guess I should also touch on another group we, as advisors, rarely see. This third group is tough to name since, in a sense, they seem to possess both abundance and scarcity minded traits. But rather than falling somewhere between, they live beyond either extreme (financially speaking). They're not likely to work with investment advisors, because there aren't any investments to seek advice on. They're abundant minded in a sense, since they have no problem spending money. But unfortunately, they tend to spend beyond their means, seemingly blind to their lack of abundance. So we could label them "abundant blinded". But, like the scarcity minded, I imagine they feel intense stress around money (for good reason), but unfortunately, acquiring new things is how they find temporary relief from their woes - which of course serves only to intensify their stress. So could we label this group the "scarcity blinded"? In either event, these are no doubt some (not all perhaps) of the folks we're hearing so much about in the news these days - the ones who financed expensive homes with interest only adjustable rate mortgages that blew up in their faces when their rates were adjusted up and their home values came down (as the real estate bubble began to burst). While we would never wish this on anybody, in our system, they will survive, and many will look back and see their experience as a blessing in disguise, the great turning point, where they were forced to look inside and make necessary changes in how they approach their lives financially.
So there you have it, the three extremes - keep in mind, these are extremes. We have found that most individuals (our clients at least) fall somewhere between the scarcity and abundance mentalities. They may feel anxiety when they read the headlines during bear markets (which is perfectly normal), but they're not likely to react and make potentially big (emotionally driven) investment mistakes.
As you've experienced, we spend a lot of time and energy helping our clients maintain what we believe is a healthy perspective on the financial realities of our world today. And we will certainly continue to walk you through the ups and downs to come. For yourself however, the next time you feel fear or anxiety as it relates to your money, take a look at your financial reality (give us a call if you need help with this) and consider whether your worry is based on the reality of your situation today, and, if not, ask yourself if you're not perhaps a little pre-wired to worry. If you can relate, who knows, maybe this insight will alleviate some of your stress. On the other hand, if you never worry about money, but wonder how you're going to pay off the VISA after booking the four week African photo safari, and tell yourself - "it's okay, we'll just hit the home equity line of credit, or skip our quarterly estimated tax payment in June, or, better yet, we'll just pull it out of our retirement plan like we did for the six week Mediterranean cruise we took all the kids on last year", ............ WE NEED TO TALK!!
For this commentary, I thought we'd take a break from investment topics and take a look at the investor. Hope you enjoy it.
Take care,
Marty
What's your mentality, your personality if you will, when it comes to your finances? Having spent the last couple of decades working with individuals in relation to their money, I have a few observations I'd like to share with you.
For starters, it almost goes without saying that money holds a very high position on most people's list of priorities. Many would profess however that, at best, it comes in fourth behind faith, family and contribution to their community. And I wouldn't dispute that for a moment, but this number four priority can lead to serious stress for some people.
At the two extremes, we have what we call the scarcity and abundance mentalities. Over the years I've counseled a number of individuals who I'd consider scarcity minded. These folks are great people; nice, humble and very conservative (financially speaking). However, they can be quite anxious when it comes to money. They may fear they won't have enough to retire. Or, once retired, they fear their money will run out before their bodies do. Many of them (not all) grew up in a financially challenged environment, where their association with money was one of stress and worry. They may have watched their parents worry, complain and even argue about what they felt they lacked materially. I have worked with scarcity minded people who have enviable fortunes (from years of saving diligently and spending minimally), but live like they're just getting by. They clip coupons, live in modest (paid for) homes, keep the thermostat at 84 in the summer, 64 in the winter, take modest vacations, if at all, drive nice full sized cars they paid cash for 11 years ago, and they can worry intensely when the stock market goes down (even though they usually have only modest exposure to stocks). These wonderful soles will die rich (having never lived rich - financially speaking), and leave wealthy heirs behind. For the scarcity minded investor, a conservative to moderate risk asset allocation strategy makes the most sense. These individuals tend to feel real pain when the market heads south (notice I said when), and left to their own devices, many would become the typical investor who, long-term, usually earns a much lower return on his or her stocks than the market indices would suggest. They would likely sell when things get scary, and only buy when they're sure it's safe - which is usually after the market's been going up for a while (sell low, buy high). Their emotional intensity is usually higher during down markets than up markets. In essence, the fear or anxiety they feel when stock prices decline is much more pronounced than the positive sensations they experience when stocks rise. It is highly unlikely that these investors will get into trouble by taking more income than their portfolio can support.
At the other extreme we have the abundance mentality. The abundant minded may also be nice, humble and even conservative in many ways. But this group doesn't seem to experience the kind of anxiety around money that many of the scarcity minded seem to. They believe they'll always have plenty. Many of them (not all) grew up in an environment where money, even when it was scarce, was not a topic that provoked stress and worry in their households. They're more likely to live lavishly - name brands, big homes with big mortgages, they keep the thermostat at 70 in the summer, 70 in the winter, take fabulous vacations, trade in their leased vehicle every three years, and worry very little when the stock market dips. These folks live rich lives (financially speaking for sure), and may very well die rich. A few however tell us that their ultimate goal is to spend their last dime on their death bed (a tough one for us to time by the way). Left to their own devices, they would stand a good chance of earning market returns on their stock portfolios. This is due to the fact that money doesn't scare them and they are therefore less apt to make emotionally driven investment decisions, which is a good thing since they need to maintain portfolios that can keep up with their lifestyles.
I guess I should also touch on another group we, as advisors, rarely see. This third group is tough to name since, in a sense, they seem to possess both abundance and scarcity minded traits. But rather than falling somewhere between, they live beyond either extreme (financially speaking). They're not likely to work with investment advisors, because there aren't any investments to seek advice on. They're abundant minded in a sense, since they have no problem spending money. But unfortunately, they tend to spend beyond their means, seemingly blind to their lack of abundance. So we could label them "abundant blinded". But, like the scarcity minded, I imagine they feel intense stress around money (for good reason), but unfortunately, acquiring new things is how they find temporary relief from their woes - which of course serves only to intensify their stress. So could we label this group the "scarcity blinded"? In either event, these are no doubt some (not all perhaps) of the folks we're hearing so much about in the news these days - the ones who financed expensive homes with interest only adjustable rate mortgages that blew up in their faces when their rates were adjusted up and their home values came down (as the real estate bubble began to burst). While we would never wish this on anybody, in our system, they will survive, and many will look back and see their experience as a blessing in disguise, the great turning point, where they were forced to look inside and make necessary changes in how they approach their lives financially.
So there you have it, the three extremes - keep in mind, these are extremes. We have found that most individuals (our clients at least) fall somewhere between the scarcity and abundance mentalities. They may feel anxiety when they read the headlines during bear markets (which is perfectly normal), but they're not likely to react and make potentially big (emotionally driven) investment mistakes.
As you've experienced, we spend a lot of time and energy helping our clients maintain what we believe is a healthy perspective on the financial realities of our world today. And we will certainly continue to walk you through the ups and downs to come. For yourself however, the next time you feel fear or anxiety as it relates to your money, take a look at your financial reality (give us a call if you need help with this) and consider whether your worry is based on the reality of your situation today, and, if not, ask yourself if you're not perhaps a little pre-wired to worry. If you can relate, who knows, maybe this insight will alleviate some of your stress. On the other hand, if you never worry about money, but wonder how you're going to pay off the VISA after booking the four week African photo safari, and tell yourself - "it's okay, we'll just hit the home equity line of credit, or skip our quarterly estimated tax payment in June, or, better yet, we'll just pull it out of our retirement plan like we did for the six week Mediterranean cruise we took all the kids on last year", ............ WE NEED TO TALK!!
Private Client Commentary - win fall profits tax
Dear Clients,
The American Heritage Dictionary defines socialism as; any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.
AHD defines capitalism as; An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.
I swear I have to stop watching the news during the political season
Tuesday, January 27, 2009
Private Client Commentary - fixed income rates
Dear Clients,
Normally I comment on issues related to the equity markets, but today I thought I
Normally I comment on issues related to the equity markets, but today I thought I
Friday, January 23, 2009
Thursday, January 22, 2009
Private Client Commentary - liars and fools
Dear Clients,
NYU Business Prof Nouriel Roubini (AKA Dr. Doom) predicted just a few weeks ago that this recession will go on for another three years.
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
NYU Business Prof Nouriel Roubini (AKA Dr. Doom) predicted just a few weeks ago that this recession will go on for another three years.
Nobel Prize winning economist Paul Krugman (along with 90% of his colleagues recently surveyed) predicts that the recession will officially end sometime during the second half of this year.
Doug Hornig, author of nine books and contributor to Business Week as well as a number of other publications predicts (virtually guarantees in fact) that another
Wednesday, January 21, 2009
Private Client Commentary - Inauguration-Conversation
Dear Clients,
The stock market was none too friendly to Barak Obama today as he was inaugurated to the office of president of these United States. Although the blame for today
The stock market was none too friendly to Barak Obama today as he was inaugurated to the office of president of these United States. Although the blame for today
Wednesday, January 14, 2009
Monday, January 12, 2009
Private Cleint Commentary - Nick Murray Article on Buffett
Dear Clients,
After a few encouraging sessions, the market, at this moment, appears to have picked up where it left off last year. But keep in mind the message of my past few commentaries
After a few encouraging sessions, the market, at this moment, appears to have picked up where it left off last year. But keep in mind the message of my past few commentaries
Monday, January 5, 2009
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