Need help rolling over your 401(k)?
Call Jena or Lenny now at 866-825-5253 for assistance.
Why a Lifestyle Rollover IRA?
Professional Investment and Portfolio Management regardless of account size
Personal relationship with your dedicated Wealth Manager
Institutional investment philosophy and Tactical Asset Allocation strategy
One-on-one Financial and Retirement Planning
Customized asset allocation and portfolio development based on your investment objectives and tolerance for risk
Account clears through National Financial Services (NFS), a subsidiary of Fidelity
Annual Portfolio Review and Goal “check-up”
Low Cost - $35 annual account fee, $20.50 mutual fund trades, Free Dollar Cost Averaging
New Job? Why you should rollover you old 401(k)
High Fund Expenses – The cost of a company sponsored 401(k) plan is typically passed on to the participants through higher fund management fees (as much as 3%).
Limited Investment Choices – The typical 401(k) platform contains ONLY 15-25 investment choices. This puts you at the mercy of the Fund Administrator to (1) choose top performing funds and (2) identify funds that are appropriate to your life-stage. Unfortunately since most 401k plans are set up to service a wide array of ages and risk tolerance levels, most plans under perform the market and are light on investment choices.
It’s Your Money – Rolling over your 401(k) plan may allow you to keep all of your investment accounts with one institution, perhaps realizing your own “economies of scale.”
3 easy steps to rolling over your old 401(k) or IRA.
Establish a Lifestyle Rollover IRA. Download Application or call 866-825-5253
Contact your old 401(k) plan provider and request a rollover.*
Work with your dedicated Wealth Manager to create a custom Asset Allocation and Investment Portfolio
*This can usually be done over the phone, but some providers require minimal paperwork to start the rollover process. Call us anytime should you need help with the process.Mail the completed Rollover IRA Application to:Lifestyle Portfolios – New Accounts23046 Avenida De La Carlota, Suite 600Laguna Hills, CA 92653Rollover Distribution Information:Please request that rollover check be made to “NFS for benefit of your name”Mailed to: Girard Securities, Inc.9560 Waples St, Suite BSan Diego, CA 92121
Wednesday, February 4, 2009
Thursday, January 22, 2009
Are there any safe investments
T H E
F I N A N C I A L
L A N D S C A P E
I S
C O N T I N U O U S LY
E V O LV I N G
and with these changes come new investment opportunities. Structured
products can complement diversified portfolios by providing efficient market
exposure and unique risk/return profiles. Structured products offer exposure to
specific market sectors, investments and/or strategies that are generally inaccessible
or inefficient for investors to access, such as foreign exchange rates or
commodities. Additionally, investors can take advantage of the economies of
scale and institutional pricing provided by the structured product issuer.
WHAT ARE STRUCTURED PRODUCTS?
Structured products are innovative instruments
whose payoff is derived from the
performance of an underlying asset such
as an equity, index, foreign exchange,
commodity or some combination.
Designed to meet specific investment
objectives such as principal protection or
income, structured products generally
combine a debt security with a derivative
component.
Structured products are a diversification
tool that can help mitigate portfolio risk by
controlling volatility and focusing on financial
goals. With a wide range of
complexities and objectives, structured
products allow investors the potential to
capitalize on a market view, whether bullish
or bearish, and achieve desired
investment results.
Features of
investing in
structured
products:
• Flexibility – Can be structured
with varying market
views, time horizons,
yield requirements and
risk tolerances.
• Simplicity and
Transparency – Provide
access to potential
returns based on multiple
asset classes without the
complexity of replicating
the payoff through the
combination of underlying
derivative instruments.
• Diversification – Allow
investors to diversify a
portfolio by providing
access to potential
returns based on multiple
asset classes.
• Operational and Tax
Efficiencies – May reduce
the complicated credit,
legal and operational issues
surrounding the execution
of derivative strategies
through the investment in
a single security.
To learn more about the current offers in structured products please contact me direclty at 866-825-5253
F I N A N C I A L
L A N D S C A P E
I S
C O N T I N U O U S LY
E V O LV I N G
and with these changes come new investment opportunities. Structured
products can complement diversified portfolios by providing efficient market
exposure and unique risk/return profiles. Structured products offer exposure to
specific market sectors, investments and/or strategies that are generally inaccessible
or inefficient for investors to access, such as foreign exchange rates or
commodities. Additionally, investors can take advantage of the economies of
scale and institutional pricing provided by the structured product issuer.
WHAT ARE STRUCTURED PRODUCTS?
Structured products are innovative instruments
whose payoff is derived from the
performance of an underlying asset such
as an equity, index, foreign exchange,
commodity or some combination.
Designed to meet specific investment
objectives such as principal protection or
income, structured products generally
combine a debt security with a derivative
component.
Structured products are a diversification
tool that can help mitigate portfolio risk by
controlling volatility and focusing on financial
goals. With a wide range of
complexities and objectives, structured
products allow investors the potential to
capitalize on a market view, whether bullish
or bearish, and achieve desired
investment results.
Features of
investing in
structured
products:
• Flexibility – Can be structured
with varying market
views, time horizons,
yield requirements and
risk tolerances.
• Simplicity and
Transparency – Provide
access to potential
returns based on multiple
asset classes without the
complexity of replicating
the payoff through the
combination of underlying
derivative instruments.
• Diversification – Allow
investors to diversify a
portfolio by providing
access to potential
returns based on multiple
asset classes.
• Operational and Tax
Efficiencies – May reduce
the complicated credit,
legal and operational issues
surrounding the execution
of derivative strategies
through the investment in
a single security.
To learn more about the current offers in structured products please contact me direclty at 866-825-5253
Frequently asked questions
Over the past couple of months I think it is fair to say that we have all experienced a tremendous shock to our finances. I know that when markets turn as volatile and confusing as they have, even the most patient investors may come to question the wisdom of the investment plan that they have been following.
I have been fortunate through my radio show program and countless conversations with clients, friends, and neighbors to hear many of the questions that are on most everyone’s mind. Since I think the general rule is that if five people ask it, then 100 people must be thinking it, I thought it might be a great time to have a neighborhood “fireside chat.” I think this will be a great forum to provide answers to many of the most frequently asked questions.
Both events will be held at the Oak Knoll Clubhouse
Refreshments will be provided
Wednesday Evening February 18th at 7pm
Saturday Morning February 28th at 8am
Some of the topics that we will discuss are:
What to do with your current 401k investments – should you continue to contribute?
What does it mean to be diversified?
If you have been separated from a job, what do you do with your 401(k)?
If you want to keep your money “safe,” what are some investment vehicles that you can use?
How can you keep your money invested, but allocated in a way that you are not exposed to the risk we saw in 2008?
What are some solutions you can use for taxes and investments if you own a small business?
Here is what some of your neighbors have been saying:
“You are so knowledgeable in your industry and although I do not understand a lot of the investment industry, you have ideas and opportunities that we would have never thought of” Caroline, Ladera Ranch Resident
“I have had my SEP IRA for years at another financial firm and they have never provided me with direction, it was great to receive that from you and I am ready to buy while values are so low.” Laurie, Ladera Ranch Resident
“It was great to find an alternative investment that actually made money in 2008, thank you for always finding opportunities in this crazy market.” Joanna, Ladera Ranch Resident
Lifestyle Portfolios
866-825-5253
www.lifestyleportfolios.com
jena@lifestyleportfolios.com
I have been fortunate through my radio show program and countless conversations with clients, friends, and neighbors to hear many of the questions that are on most everyone’s mind. Since I think the general rule is that if five people ask it, then 100 people must be thinking it, I thought it might be a great time to have a neighborhood “fireside chat.” I think this will be a great forum to provide answers to many of the most frequently asked questions.
Both events will be held at the Oak Knoll Clubhouse
Refreshments will be provided
Wednesday Evening February 18th at 7pm
Saturday Morning February 28th at 8am
Some of the topics that we will discuss are:
What to do with your current 401k investments – should you continue to contribute?
What does it mean to be diversified?
If you have been separated from a job, what do you do with your 401(k)?
If you want to keep your money “safe,” what are some investment vehicles that you can use?
How can you keep your money invested, but allocated in a way that you are not exposed to the risk we saw in 2008?
What are some solutions you can use for taxes and investments if you own a small business?
Here is what some of your neighbors have been saying:
“You are so knowledgeable in your industry and although I do not understand a lot of the investment industry, you have ideas and opportunities that we would have never thought of” Caroline, Ladera Ranch Resident
“I have had my SEP IRA for years at another financial firm and they have never provided me with direction, it was great to receive that from you and I am ready to buy while values are so low.” Laurie, Ladera Ranch Resident
“It was great to find an alternative investment that actually made money in 2008, thank you for always finding opportunities in this crazy market.” Joanna, Ladera Ranch Resident
Lifestyle Portfolios
866-825-5253
www.lifestyleportfolios.com
jena@lifestyleportfolios.com
Tuesday, July 8, 2008
2008 - A Second Quarter Update
2008: A Second Quarter Update
A quick summary of economies and markets for you.
Well, the second quarter of 2008 was certainly not a banner quarter for stocks. It was a time for investors to hold on, hang on, and persevere – and that is my message to you. Here’s a roundup of 2Q 2008, on Wall Street and around the globe.
The quarter in brief. It was an odd and volatile quarter for the investor, and a trying one for the American economy. April started out well for Wall Street, even as the economic troubles from the first quarter continued: record-shattering oil and gasoline prices, falling real estate prices, and a credit crisis that wouldn’t cease. Were we seeing the depths of a recession? Would we see an upturn from here? The Dow barely averted a bear market as the quarter drew to a close; in May and June, some economic indicators began to subtly improve.
Domestic economic health. In April, the markets performed extraordinarily well. The S&P 500 had its best month in nearly 4½ years, and the S&P 500, NASDAQ and Dow Jones Industrial Average gained between 4.5-6% for the month.1 On April 30, the Federal Reserve made its seventh interest rate cut since September, bringing the federal funds rate down to 2.0%.2 Stock markets in Europe and Asia posted great gains (the Nikkei 225 shot up 11%, India’s Sensex 30 11%, and the Hang Seng 13%) as oil and gas prices set or flirted with records.3 But the consumer was feeling squeezed: oil prices rose 12% for the month, retail gas prices began to spike, and mortgage rates climbed back over 6%.3
In May, the Dow lost 1.4% worth of ground while the S&P 500 and the NASDAQ respectively gained 1% and 4.5%.4 The dollar began to recover from its fall and winter depths, and the Fed hinted that its rate-cutting measures were coming to a halt. On the commodities front, oil futures peaked on May 22 at a new record of $135.09 a barrel on the NYMEX; oil prices gained 13% during May.5 Precious metals had a down month, and many agricultural futures fell sharply. Bits of good news began to emerge in the housing sector: new home construction and housing starts increased. The first wave of economic stimulus checks sent disposable incomes up by 5.7% in May (the biggest one-month increase since 1975) and overall income up 1.9%.6 Overseas, Asia’s stock markets fell 0.3% and Europe’s stock markets 2.8%, in a month in which most of the world’s central banks considered how to battle rising inflation.7
You’ve probably heard that this June was the worst June for the Dow since 1930.8 Oil prices ended June at precisely $140 per barrel, having already flirted with the $143 mark.9 America’s housing market showed signs of increased sales activity, if not quite recovery. The Fed left interest rates unchanged at 2% and released the final 1Q GDP calculation: 1.0%.10 Fed chairman Ben Bernanke said interest rates were “well positioned” and spoke of the Fed’s commitment to a “strong and stable” dollar.11 In fact, during the second quarter, the dollar gained 0.3% against the euro and 6.5% against the yen.12
Major indexes. The bull run of April gave way to the swoon of June – as the quarter ended, investors hoped for pleasant surprises in the upcoming earnings season and a 3Q rebound. Energy stocks performed extraordinarily well in the second quarter; financial stocks didn’t. Note the small gain for the NASDAQ.
% Change
2Q 2008
Y-T-D
DJIA
-7.44
-14.44
NASDAQ
+0.61
-13.55
S&P 500
-3.23
-12.83
Source: CNBC.com, 6/30/0813
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
Global economic health. Policymakers worldwide had one eye on the U.S. markets, the other on the inflationary pressures within their own economies. The European Central Bank has long had a 2% target for inflation, so May’s 3.7% reading and June’s 4.0% reading were cause for worry.14 In Asia, inflation pressure remained much greater: by June, the latest figures had inflation running at 7.7% in China and 1.5% in Japan (the highest inflation rate in a decade).15, 16 The inflation rate was 8.9% in Thailand (nearly quadruple what it had been at the start of the year), 11% in Indonesia, 6.5% in Vietnam and 5.5% in South Korea.17
The European Commission reduced its growth forecast for the EU to 2.0% in 2008 and 1.8% for 2009 (compared to 2.8% in 2007). The EC also projected 6.8% unemployment and 3.6% inflation for 2008 (a 50% rise over 2007’s 2.4% inflation.)18 Also, the Bank of Japan cut its growth forecast for the next 12 months from 2.1% to 1.5%.19
World financial markets. In Europe, the quarterly losses were mild; in Asia, they were more significant. If you think what American investors went through in this quarter was rough, you can always look at China: the Shanghai Composite index fell 21% in 2Q 2008. The Hang Seng (Hong Kong) was down 3.3% for the quarter, and India’s Sensex posted a 14% decline. The bright lights here were Japan’s Nikkei 225 (up 7.6% in the second quarter after an 18% loss in the first quarter), Canada’s TSX (up 8.4% in 2Q), and the MSCI Latin American Emerging Markets index (up 10% for the quarter). As for Europe, the DAX fell 1.8% for the quarter, the FTSE 100 dropped 1.3%, and the CAC 40 in France declined 5.8%.20
Commodities markets. Oil prices gained 39.9% in the second quarter. As the quarter ended, oil prices were up 45.9% for the year. The amazement doesn’t stop there. Look at the rest of these quarterly gains: heating oil, 37%; gasoline futures, 33.9%; diesel, 31.4%; corn, 24.5%; oats, 27.4%; soybean oil, 26.5%; soybeans and soybean meal, 32.1% and 33.6%; cocoa, 36%. Coal topped them all, with a 69.6% gain for the quarter (at the end of 2Q 2008, Central Appalachian Coal futures were up 143.4% for the year). Precious metals eked out gains, even with the dollar showing renewed strength in May and June. Gold prices had gained 9.7% on the New York Mercantile Exchange for the first quarter; for the second quarter, they rose 0.3%. Silver went up 0.1%, copper 1.7%, platinum 1.3% and palladium 2.4%.21
Housing & interest rates. There were some positive signs here. New home construction rose 8.2% in April (the biggest jump in two years), with building permits up 4.9%.22 The pace of new home sales also rose by 3.3% in April.23 Existing home sales rose 2% in May, with the inventory of unsold homes shrinking by 1.4% (although the median resale price 6.3% lower than in May 2007).24 The National Association of Realtors’ Pending Home Sales Index (the number of home sale contracts signed) rose by 6.3% in April.25 However, May 2008 foreclosure filings were up 48% from May 2007 totals (according to RealtyTrac).26 Housing starts fell 3.3% in May; building permits also declined.27
While average interest rates on 30-year FRMs had finished the 1Q of 2008 at 5.85%, the downward trend was reversed by quarter’s end.28 By the last week in June, 30-year FRMs were averaging 6.45%, with 15-year FRMs averaging 6.04%, 5-year ARMs averaging 5.99%, and 1-year ARMs averaging 5.27%.29
Third quarter outlook. Are things stabilizing, as certain manufacturing, retail and housing indicators have hinted? Possibly. The pessimists are looking at the stock market, inflation and oil prices and seeing 1980 again. But it is not 1980, it is 2008, and the American economy really looks pretty good right now in comparison to those times. The economy is much healthier today than it was then: GDP is still in the plus column, we have 4% inflation instead of 14%, and 5.5% unemployment instead of 10%.30 In short, this is not time to panic. This year has posed definite challenges for America and for the investor; the wisdom is in riding them out, and in taking advantage of the market rebound to come.
A quick summary of economies and markets for you.
Well, the second quarter of 2008 was certainly not a banner quarter for stocks. It was a time for investors to hold on, hang on, and persevere – and that is my message to you. Here’s a roundup of 2Q 2008, on Wall Street and around the globe.
The quarter in brief. It was an odd and volatile quarter for the investor, and a trying one for the American economy. April started out well for Wall Street, even as the economic troubles from the first quarter continued: record-shattering oil and gasoline prices, falling real estate prices, and a credit crisis that wouldn’t cease. Were we seeing the depths of a recession? Would we see an upturn from here? The Dow barely averted a bear market as the quarter drew to a close; in May and June, some economic indicators began to subtly improve.
Domestic economic health. In April, the markets performed extraordinarily well. The S&P 500 had its best month in nearly 4½ years, and the S&P 500, NASDAQ and Dow Jones Industrial Average gained between 4.5-6% for the month.1 On April 30, the Federal Reserve made its seventh interest rate cut since September, bringing the federal funds rate down to 2.0%.2 Stock markets in Europe and Asia posted great gains (the Nikkei 225 shot up 11%, India’s Sensex 30 11%, and the Hang Seng 13%) as oil and gas prices set or flirted with records.3 But the consumer was feeling squeezed: oil prices rose 12% for the month, retail gas prices began to spike, and mortgage rates climbed back over 6%.3
In May, the Dow lost 1.4% worth of ground while the S&P 500 and the NASDAQ respectively gained 1% and 4.5%.4 The dollar began to recover from its fall and winter depths, and the Fed hinted that its rate-cutting measures were coming to a halt. On the commodities front, oil futures peaked on May 22 at a new record of $135.09 a barrel on the NYMEX; oil prices gained 13% during May.5 Precious metals had a down month, and many agricultural futures fell sharply. Bits of good news began to emerge in the housing sector: new home construction and housing starts increased. The first wave of economic stimulus checks sent disposable incomes up by 5.7% in May (the biggest one-month increase since 1975) and overall income up 1.9%.6 Overseas, Asia’s stock markets fell 0.3% and Europe’s stock markets 2.8%, in a month in which most of the world’s central banks considered how to battle rising inflation.7
You’ve probably heard that this June was the worst June for the Dow since 1930.8 Oil prices ended June at precisely $140 per barrel, having already flirted with the $143 mark.9 America’s housing market showed signs of increased sales activity, if not quite recovery. The Fed left interest rates unchanged at 2% and released the final 1Q GDP calculation: 1.0%.10 Fed chairman Ben Bernanke said interest rates were “well positioned” and spoke of the Fed’s commitment to a “strong and stable” dollar.11 In fact, during the second quarter, the dollar gained 0.3% against the euro and 6.5% against the yen.12
Major indexes. The bull run of April gave way to the swoon of June – as the quarter ended, investors hoped for pleasant surprises in the upcoming earnings season and a 3Q rebound. Energy stocks performed extraordinarily well in the second quarter; financial stocks didn’t. Note the small gain for the NASDAQ.
% Change
2Q 2008
Y-T-D
DJIA
-7.44
-14.44
NASDAQ
+0.61
-13.55
S&P 500
-3.23
-12.83
Source: CNBC.com, 6/30/0813
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
Global economic health. Policymakers worldwide had one eye on the U.S. markets, the other on the inflationary pressures within their own economies. The European Central Bank has long had a 2% target for inflation, so May’s 3.7% reading and June’s 4.0% reading were cause for worry.14 In Asia, inflation pressure remained much greater: by June, the latest figures had inflation running at 7.7% in China and 1.5% in Japan (the highest inflation rate in a decade).15, 16 The inflation rate was 8.9% in Thailand (nearly quadruple what it had been at the start of the year), 11% in Indonesia, 6.5% in Vietnam and 5.5% in South Korea.17
The European Commission reduced its growth forecast for the EU to 2.0% in 2008 and 1.8% for 2009 (compared to 2.8% in 2007). The EC also projected 6.8% unemployment and 3.6% inflation for 2008 (a 50% rise over 2007’s 2.4% inflation.)18 Also, the Bank of Japan cut its growth forecast for the next 12 months from 2.1% to 1.5%.19
World financial markets. In Europe, the quarterly losses were mild; in Asia, they were more significant. If you think what American investors went through in this quarter was rough, you can always look at China: the Shanghai Composite index fell 21% in 2Q 2008. The Hang Seng (Hong Kong) was down 3.3% for the quarter, and India’s Sensex posted a 14% decline. The bright lights here were Japan’s Nikkei 225 (up 7.6% in the second quarter after an 18% loss in the first quarter), Canada’s TSX (up 8.4% in 2Q), and the MSCI Latin American Emerging Markets index (up 10% for the quarter). As for Europe, the DAX fell 1.8% for the quarter, the FTSE 100 dropped 1.3%, and the CAC 40 in France declined 5.8%.20
Commodities markets. Oil prices gained 39.9% in the second quarter. As the quarter ended, oil prices were up 45.9% for the year. The amazement doesn’t stop there. Look at the rest of these quarterly gains: heating oil, 37%; gasoline futures, 33.9%; diesel, 31.4%; corn, 24.5%; oats, 27.4%; soybean oil, 26.5%; soybeans and soybean meal, 32.1% and 33.6%; cocoa, 36%. Coal topped them all, with a 69.6% gain for the quarter (at the end of 2Q 2008, Central Appalachian Coal futures were up 143.4% for the year). Precious metals eked out gains, even with the dollar showing renewed strength in May and June. Gold prices had gained 9.7% on the New York Mercantile Exchange for the first quarter; for the second quarter, they rose 0.3%. Silver went up 0.1%, copper 1.7%, platinum 1.3% and palladium 2.4%.21
Housing & interest rates. There were some positive signs here. New home construction rose 8.2% in April (the biggest jump in two years), with building permits up 4.9%.22 The pace of new home sales also rose by 3.3% in April.23 Existing home sales rose 2% in May, with the inventory of unsold homes shrinking by 1.4% (although the median resale price 6.3% lower than in May 2007).24 The National Association of Realtors’ Pending Home Sales Index (the number of home sale contracts signed) rose by 6.3% in April.25 However, May 2008 foreclosure filings were up 48% from May 2007 totals (according to RealtyTrac).26 Housing starts fell 3.3% in May; building permits also declined.27
While average interest rates on 30-year FRMs had finished the 1Q of 2008 at 5.85%, the downward trend was reversed by quarter’s end.28 By the last week in June, 30-year FRMs were averaging 6.45%, with 15-year FRMs averaging 6.04%, 5-year ARMs averaging 5.99%, and 1-year ARMs averaging 5.27%.29
Third quarter outlook. Are things stabilizing, as certain manufacturing, retail and housing indicators have hinted? Possibly. The pessimists are looking at the stock market, inflation and oil prices and seeing 1980 again. But it is not 1980, it is 2008, and the American economy really looks pretty good right now in comparison to those times. The economy is much healthier today than it was then: GDP is still in the plus column, we have 4% inflation instead of 14%, and 5.5% unemployment instead of 10%.30 In short, this is not time to panic. This year has posed definite challenges for America and for the investor; the wisdom is in riding them out, and in taking advantage of the market rebound to come.
Thursday, July 3, 2008
An Update on the Financial Markets
The market and the economy have given investors much to think about since my last writing. Many have concerns about both the US and global economic picture. True value and bargains never appear so when presented, but in hindsight seem blatant. Bubbles in asset prices also tend to obfuscate themselves at tops. Historically, bottoms in markets are created around troughs in sentiment while peaks are marked by exceptionally high ebullience. Based on the level of anxiety surrounding equity markets today and the irrational exuberance of commodity markets I expect both may reverse course in the not too distant future. Of course short term commentary is just that, and our investment decisions are made with long term perspective. Consistently however, the near term will test one's resolve. The successful investor is one that can avoid the innate urge to react on either fear or greed.During the course of the second quarter, first quarter GDP was revised upward twice to leave us with final growth of 1%. The surprising growth in the economy has been driven by surging exports. Goods sold to foreign buyers have been turbo-charged by the declining dollar and strong economic growth throughout the world. Real income increased in the second quarter as did the all important consumer and service sectors of the economy. Unfortunately for investors, markets don't trade so much on what has happened as what is expected to happen. The parabolic rise in oil and other commodity prices coupled with devastation in the banking, brokerage, and housing sectors have sent confused investors to the sidelines. With little visibility about the ultimate macro-economic consequence of the financial and energy crisis on the economy, buyers have gone on strike.Through June 30th 2008 the Dow Jones Industrial Average (DIA) is down 13.4%, the S&P500 (SPY) is down 11.9% and the Russell200 (IWM) Index of small companies is down 9.4%. Holding the broader markets hostage was the KBW Bank Index (KBE) down -32.8% and Crude Oil (OIL) up +50.7%. Volatility in financial markets remains elevated as sentiment shifts rapidly with each new economic or earnings report.Expectations of an energy induced rise in core inflation may prove to be a bit too pessimistic. While prices of high frequency consumer items such as gasoline, eggs, and bread have surged, other prices have shown relevant declines. Important for inflation calculations are the cost of housing and the level of wages both of which have dropped of late. Energy prices could decline sharply and rapidly on increased supplies, profit taking, trading regulations, or slowing demand from an anemic world economy. Of much greater relevance to the inflation debate is the supply of currency. The year over year growth in the Fed's balance sheet is barely 1% while the annual growth of currency in circulation has dropped to its lowest level in 47 years. Both of these metrics suggest inflation readings will moderate in the second half.Market volatility brings opportunity and we found no shortage of either in the second quarter. We have continued to take profits in commodities ETFs (DBC). In addition, we have been and will continue to take advantage of tax swap opportunities as they present themselves. Looking forward I expect second quarter economic growth to be supported by the effects of the Economic Stimulus Act of 2008 and continued strength in exports. The headwinds of energy prices, bank woes, and employment should contain both growth and inflation. The net effect should be GDP reports in a tight range around very low or zero growth. Longer term I see exceptional value in equity prices and decent visibility in all sectors other than financials. (XLF) I still expect better earnings reports near the end of 2008 and early 2009 as the economy recovers and companies look back to favorable prior year comparisons.
Investment decisions, emotion or evidence ?
MAKING INVESTMENT DECISIONS
Are your choices based on evidence or emotion?
Information vs. instinct. When it comes to investing, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we many not even be aware of.
Deal du jour. You’ve heard the whispers, the “next greatest thing” is out there and YOU can get on board, but only if you hurry … sound familiar? The prospect of being on the ground floor of the next big thing can be thrilling. But while there really are great new opportunities out there once in a while, often those “hot new investments” can go south quickly. Jumping on board without all the information can be a bit like gambling in Vegas … the payoff could be huge, but so could the loss. A shrewd investor will turn away from spur-of-the-moment trends and seek out solid, proven investments with consistent returns.
Risky business. Many people claim NOT to be risk-takers, but that is not always the case. Most proficient investors aren’t reluctant to take a risk, they are reluctant to accept a loss. Yes, there’s a difference. The first step is to establish what constitutes an acceptable risk by determining what you’re willing to lose. The second step is to always bear in mind the final outcome. If a taking a risk could help you retire five years sooner, would you take it? What if the loss involved working an extra ten years before retiring … is it still a good risk? By weighing both the potential gain AND the potential loss (while keeping your final goals in mind), you can more wisely assess what constitutes an acceptable risk.
The crystal-ball approach. Some investors attempt to predict the future based on the past. As we all know, just because a stock rose yesterday, that doesn’t mean it will rise again today. We know this, but often we “shrug off” this knowledge in favor of hunches. Instead of stock picking, you can exercise a little caution and seek out investments with the potential for consistent returns.
The gut-driven investor. Some investors tend to pull out of investments the moment they lose money, then invest again once they feel “driven” to do so. While they may do some research, they are ultimately acting on impulse. This method of investing can result in huge losses. For example, let’s say you have $100 and are given 10 opportunities to bet $10 on a 50/50 chance event. If you lose the bet, you lose the $10. But if you win the bet, you make $25. What would you do? How many times would you bet? While the outcome is based on chance (and therefore impossible to predict), we do know this … if you were to bet at every single opportunity, you’d stand an 87% chance of ending up with more than $100. If you bet sometimes and not other times (based on your gut), the probability is that you would not do as well. So this is yet another argument for long-term investing.
Eliminating emotion. Many investors “stir up” their investments when major events happen … including births, marriages or deaths. They seem to get a renewed interest in their stocks and/or begin to second-guess the effectiveness of their long-term plans. It’s a case of action-reaction: they invest in response to short-term needs, instead of their long-term financial goals. The more often this happens, the more incoherent their so-called “financial strategy” becomes. If the financial changes they make are really dramatic, it can lead to catastrophe. Many times, there is no need to fix what isn’t broken, or make a U-turn away from what they’ve done right. By enlisting the assistance of a qualified financial professional (and relying on their skill and expertise) you can be sure that investment decisions are based on facts, and made to suit your long-term objectives rather than your personal, changing emotions or short-term needs.
Are your choices based on evidence or emotion?
Information vs. instinct. When it comes to investing, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we many not even be aware of.
Deal du jour. You’ve heard the whispers, the “next greatest thing” is out there and YOU can get on board, but only if you hurry … sound familiar? The prospect of being on the ground floor of the next big thing can be thrilling. But while there really are great new opportunities out there once in a while, often those “hot new investments” can go south quickly. Jumping on board without all the information can be a bit like gambling in Vegas … the payoff could be huge, but so could the loss. A shrewd investor will turn away from spur-of-the-moment trends and seek out solid, proven investments with consistent returns.
Risky business. Many people claim NOT to be risk-takers, but that is not always the case. Most proficient investors aren’t reluctant to take a risk, they are reluctant to accept a loss. Yes, there’s a difference. The first step is to establish what constitutes an acceptable risk by determining what you’re willing to lose. The second step is to always bear in mind the final outcome. If a taking a risk could help you retire five years sooner, would you take it? What if the loss involved working an extra ten years before retiring … is it still a good risk? By weighing both the potential gain AND the potential loss (while keeping your final goals in mind), you can more wisely assess what constitutes an acceptable risk.
The crystal-ball approach. Some investors attempt to predict the future based on the past. As we all know, just because a stock rose yesterday, that doesn’t mean it will rise again today. We know this, but often we “shrug off” this knowledge in favor of hunches. Instead of stock picking, you can exercise a little caution and seek out investments with the potential for consistent returns.
The gut-driven investor. Some investors tend to pull out of investments the moment they lose money, then invest again once they feel “driven” to do so. While they may do some research, they are ultimately acting on impulse. This method of investing can result in huge losses. For example, let’s say you have $100 and are given 10 opportunities to bet $10 on a 50/50 chance event. If you lose the bet, you lose the $10. But if you win the bet, you make $25. What would you do? How many times would you bet? While the outcome is based on chance (and therefore impossible to predict), we do know this … if you were to bet at every single opportunity, you’d stand an 87% chance of ending up with more than $100. If you bet sometimes and not other times (based on your gut), the probability is that you would not do as well. So this is yet another argument for long-term investing.
Eliminating emotion. Many investors “stir up” their investments when major events happen … including births, marriages or deaths. They seem to get a renewed interest in their stocks and/or begin to second-guess the effectiveness of their long-term plans. It’s a case of action-reaction: they invest in response to short-term needs, instead of their long-term financial goals. The more often this happens, the more incoherent their so-called “financial strategy” becomes. If the financial changes they make are really dramatic, it can lead to catastrophe. Many times, there is no need to fix what isn’t broken, or make a U-turn away from what they’ve done right. By enlisting the assistance of a qualified financial professional (and relying on their skill and expertise) you can be sure that investment decisions are based on facts, and made to suit your long-term objectives rather than your personal, changing emotions or short-term needs.
A Review of Recession
A REVIEW OF RECESSIONS
This economic slump could be just another “bump in the road.”
Economists widely agree: America seems to be in a recession. Important economic indicators show declining manufacturing, a constricting retail and service sector, and poor GDP. So is the sky falling? Is this the end of the world? No. Recessions have occurred throughout our history, and the economy has bounced back.
The National Bureau of Economic Research has identified ten American recessions since World War II; this would be the eleventh.1 Let’s take a look at some notable recessions in recent decades, and the way Wall Street reacted to them.
The 2001 recession. This one lasted eight months, by NBER’s estimation, and it followed the longest economic expansion in U.S. history (1991-2001).2 It accompanied the last bear market, which lasted roughly from mid-2000 to late 2002. In 2002, stocks tanked: the Dow Jones Industrial Average was down 16.8% for the year, the S&P 500 sank 23.4%, and the NASDAQ fell 31.5%.3 But in 2003, the market made a powerful comeback: the Dow gained 25.3% on the year, the S&P 500 26.4%, and the NASDAQ an amazing 50%.4 The bulls kept running right on through 2007.
The 1990-91 recession. Some trace the roots of this one back to Black Monday in 1987, others to the S&L failures and junk bond collapses of the late 1980s. The first three quarters of 1991 represented the depths of this recession, which did much to thwart the reelection of President George H.W. Bush. Interestingly, this one occurred in the middle of an 18-year bull market. Between the start of 1990 and the end of 1991, the Dow rose from 2,810 to 3,100.5
The 1981-82 recession. This one was quite severe, lasting 16 months.1 Some historians blame this recession on the Federal Reserve, which tightened its monetary policy in response to the runaway inflation of the late 1970s. But economists see it differently, arguing that Fed chairman Paul Volcker had to do something – and something drastic – to get the economy back on its feet. The Fed ended up hiking interest rates all the way to 21.5% in December 1980 (the all-time record), and during this recession, the jobless rate was higher than at any time since the Great Depression.7 But the Fed’s tactic worked. By 1983, inflation was down from double digits to 3.2%.7 Between February 1983 and August 1987, the Dow climbed from the 1,100s to 2,700.5
The 1973-75 recession. Ah, yes. Remember waiting in line for gas? Remember buying gas only on even or odd days according to your license plate? This one occurred not only due to the OPEC embargo, but also as a byproduct of the U.S., U.K., and other key nations going off the gold standard in the early 1970s. That move devalued the dollar and other benchmark currencies. So in October 1973, OPEC decided to price oil relative to the price of gold instead of the value of the dollar. Its member nations also cut production levels. Over the next few months, crude oil prices quadrupled.8 Commodities prices took off. The bull market in commodities lasted until the dawn of the 1980s. When the OPEC embargo hit, Wall Street was already in the middle of a bear market. Yet just a short time later, in July 1976, the Dow hit 1,011, its highest point between January 1973 and October 1982.5
Some perspective. Until the last quarter-century or so, recessions commonly and cyclically occurred every few years. Only two post-WWII recessions have lasted longer than a year.1 Some analysts feel this is due to the evolution of the U.S. economy over the years: today, consumer spending and the service sector are huge drivers, not just manufacturing. While no one has a crystal ball, what is apparently the first recession in seven years may fall in line with recent economic examples, to have only brief and temporary effects.
This economic slump could be just another “bump in the road.”
Economists widely agree: America seems to be in a recession. Important economic indicators show declining manufacturing, a constricting retail and service sector, and poor GDP. So is the sky falling? Is this the end of the world? No. Recessions have occurred throughout our history, and the economy has bounced back.
The National Bureau of Economic Research has identified ten American recessions since World War II; this would be the eleventh.1 Let’s take a look at some notable recessions in recent decades, and the way Wall Street reacted to them.
The 2001 recession. This one lasted eight months, by NBER’s estimation, and it followed the longest economic expansion in U.S. history (1991-2001).2 It accompanied the last bear market, which lasted roughly from mid-2000 to late 2002. In 2002, stocks tanked: the Dow Jones Industrial Average was down 16.8% for the year, the S&P 500 sank 23.4%, and the NASDAQ fell 31.5%.3 But in 2003, the market made a powerful comeback: the Dow gained 25.3% on the year, the S&P 500 26.4%, and the NASDAQ an amazing 50%.4 The bulls kept running right on through 2007.
The 1990-91 recession. Some trace the roots of this one back to Black Monday in 1987, others to the S&L failures and junk bond collapses of the late 1980s. The first three quarters of 1991 represented the depths of this recession, which did much to thwart the reelection of President George H.W. Bush. Interestingly, this one occurred in the middle of an 18-year bull market. Between the start of 1990 and the end of 1991, the Dow rose from 2,810 to 3,100.5
The 1981-82 recession. This one was quite severe, lasting 16 months.1 Some historians blame this recession on the Federal Reserve, which tightened its monetary policy in response to the runaway inflation of the late 1970s. But economists see it differently, arguing that Fed chairman Paul Volcker had to do something – and something drastic – to get the economy back on its feet. The Fed ended up hiking interest rates all the way to 21.5% in December 1980 (the all-time record), and during this recession, the jobless rate was higher than at any time since the Great Depression.7 But the Fed’s tactic worked. By 1983, inflation was down from double digits to 3.2%.7 Between February 1983 and August 1987, the Dow climbed from the 1,100s to 2,700.5
The 1973-75 recession. Ah, yes. Remember waiting in line for gas? Remember buying gas only on even or odd days according to your license plate? This one occurred not only due to the OPEC embargo, but also as a byproduct of the U.S., U.K., and other key nations going off the gold standard in the early 1970s. That move devalued the dollar and other benchmark currencies. So in October 1973, OPEC decided to price oil relative to the price of gold instead of the value of the dollar. Its member nations also cut production levels. Over the next few months, crude oil prices quadrupled.8 Commodities prices took off. The bull market in commodities lasted until the dawn of the 1980s. When the OPEC embargo hit, Wall Street was already in the middle of a bear market. Yet just a short time later, in July 1976, the Dow hit 1,011, its highest point between January 1973 and October 1982.5
Some perspective. Until the last quarter-century or so, recessions commonly and cyclically occurred every few years. Only two post-WWII recessions have lasted longer than a year.1 Some analysts feel this is due to the evolution of the U.S. economy over the years: today, consumer spending and the service sector are huge drivers, not just manufacturing. While no one has a crystal ball, what is apparently the first recession in seven years may fall in line with recent economic examples, to have only brief and temporary effects.
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