Monday, November 28, 2011

What's Really Driving This Crazy Mixed Up Market?

What's Really Driving This Crazy, Mixed-Up Market

Not really all this stuff. Markets don't go down in a straight line or up in a straight line, they have trends and countertrends. The dominant trend could be down but you will still get massive moves in the opposite direction, like today so far. Yes you usually need a few rays of hope to get them off the ground like Black Friday sales and some good news out of Europe, but then they take on a life of their own as short sellers get squeezed and are forced to start massive buying. If you look beyond the main indexes you see that volatility is not down as much as you would expect during a 200 pt up day on the Dow, Treasury yields are down, and the Euro is down vs. the Dollar---all things that make you go hmmm.

Wednesday, November 16, 2011

Where Does it End?

Forget About Italy and Greece, Spain Next on Agenda

We have long said that the risk vs. return potential for this market is heavily weighted toward the risk side. We could get some more upside here but it would likely be capped by all of these problems in Europe. On the other hand, the downside is immense. Until the market dynamics change it just doesn't make sense to take risk in this type of environment. Wait until we get to a period where monkeys throwing darts on the Wall Street Journal can make money.

What Do They Say About the Cobbler's Kids?

CFP Board Sees Bankruptcies Spike Among Planners

Don't take advice from an out of shape personal trainer, a sick doctor, or a bankrupt financial planner.

Friday, November 11, 2011

This Doesn't Give Me a Warm Fuzzy Feeling

From the WSJ this morning:

Buying Bonds for Love of Country .

LONDON—Unable to issue debt at affordable prices to professional investors, European governments and banks increasingly are turning to their citizens and customers for help.

Through post offices and bank branches, governments and financial institutions in struggling euro-zone countries are selling more bonds directly to individual retail investors.

Translation, professional investors know that our bonds aren't worth much but maybe the average person won't know any better.

What happens when they run out of individual retail investors?

Monday, November 7, 2011

Get Real About Your Tolerance For Pain

Interesting article in the WSJ this morning on seven pointers to keep portfolios on course. One of the most important bullet points was about getting real about your tolerance for pain:

When stocks are mostly going up, many investors believe they have the fortitude to tolerate a fair amount of risk. But as soon as prices sink, so does their gumption. They realize they really aren't willing to ride the roller coaster down as well as up.

If you didn't learn your lesson before, learn it now: When your current stock exposure makes you queasy, take advantage of rallies to trim it back to a level—perhaps to around a third of your overall holdings—where you won't be tempted to bail out the next time the Dow Jones Industrial Average plummets 400 points.

But remember that you'll need to own some stocks in order to increase your assets enough for the future. Otherwise, once you retire, you'll have to be ultracautious about how much of your savings you can spend without running short of money, says Mark Cortazzo, senior partner of advisory firm Macro Consulting Group in Parsippany, N.J.

If you are going to come up with a static asset allocation and ride it out then this advice makes perfect sense. However, keeping your stock exposure to a third of your portfolio over the long term also means that your portfolio will never really reach its full potential and that will impact what you are able to do for yourself, your family, and society. A better idea is to be tactical. In times like these, when the risk outweighs the rewards, your portfolio should have little, if any, stock exposure. During other times when the market is in an uptrend you can have much more stock exposure.

Thursday, November 3, 2011

Recap of the 13th Marketing Wealth Management to High Net Worth Investors Summit

I just came back from Toronto where I gave a presentation to the Marketing Wealth Managment to High Net Worth Investors Summit. I wasn't that familiar with how Canadian wealth management firms operate before I went, but they sound just like the wealth management firms in the U.S. Which is a problem since just about all the firms in the U.S. sound the same. Our presentation focused on how important it is to differentiate your firm in a substantive way. When we talk to wealth management firms we always hear the same things: We take a holistic approach, we take time to really listen to our clients, we help our clients reach their goals, blah, blah, blah. Everyone is using Modern Portfolio Theory and goals based planning. Nobody ever seems to stop and think about whether that stuff works or not (it doesn't)they just follow the herd like a bunch of lemmings.

We had a lot of interest and follow up from our presentation so hopefully we will have a chance to make a difference in how wealth management is delivered in Canada.