Investment Cost Basis

Starting 2011 brokerage firms will have to report to Uncle Sam what clients paid for their stocks. In the past this was between the investor and the tax man and brokerage firms did not have to report purchases . No longer will the IRS allow a ‘Gentleman’s Word’, and it is expected this bit of reporting will create billions of new dollars for the IRS. This year it is only stocks but beginning in 2012 it will extend to mutual funds and most exchange traded funds and those shares acquired through dividend reinvestment plans. In 2013 fixed income investments will be added to the reporting rule.

Most importantly the new rules can impact those stocks that were acquired through gifts. Assume a person received a stock that was originally purchased for $100 but at the time of the gift the market value was $80.00. If the recipient sells the stock for $90.00 he/she will not be able to write off shares as a loss since the price was above the price when they received them. Brokerage firms will need to keep track of carry-over cost basis value as well as its market value.

Most investors and their tax professionals are good at understanding how cost basis works and the reporting of gains and losses. The most important aspect is the original price of the investment shares plus any subsequent dividends and capital gains that have been reinvested and added to the original shares.

The problems in the past has been when investors change advisors or brokerage firms and expected the cost basis to automatically follow them. It did and does not.

Tax professionals occasionally have tossed out or shredded original brokerage statements under the misunderstanding that they can always request the same from the investment firm and why clutter up their own files. They soon discover that brokerage firms go out of business; brokers die, move and retire and this may not be so easy going forward. Then there are a few accounting firms who want brokerage firms to do the actual cost basis calculation and provide them with the finished product. Unless shares were held direct at a fund company this often turned into a paperwork and relationship nightmare.

The rule is fairly simple for all taxpayers who have investment accounts and that is to keep the original buy statement in a separate file just in case you move to another brokerage firm or the current firm shuts its doors or the broker dies or retires. The accountant can traces back dividends and capital gains to add to your cost basis completing that part of your tax form in relatively short order.

But remember this changes for all investors by 2013 and for all stock investors this year. As always  this concept is shared with you by someone who is not a tax professional and you should always talk to your tax advisor first to get information that fits your needs.

Questions call Paul@ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was – 4th Week March

• Th..th..th..that’s all, folks! Expect cell phones and cost of usage to get more expensive ( or maybe not?) as ATT&T girded its loins for an extensive battle with regulators to acquire T-Mobile. It’ll take a year to get to an outcome but in the meantime a rising tide will benefit Verizon and, some folks think Sprint. Domestic markets moved 178 points on that and other news. Gold back to where it was pre-tsunami and oil over 103 a barrel.
• Financials moved up last week as the Commerce Department revised US GDP for the 4th quarter.  Regional banks were among the strongest performers.
• Citi plans a reverse stock split 10-1 plus a dividend. Usually a reverse stock split is the kiss of death for a company but AIG pulled it off and it worked only after AIG stock was hit by short sellers and then reversed direction and almost doubled. CEO Pandit, in Bloomberg’s Businessweek, plans on more exposure to emerging markets even as the company currently earns more than half its profits in developing countries. This is one of those stock plays you watch and watch and watch.
• Michael Dell of Dell (the computer company) just bought (OK, not now but the week before)  another $150 million dollars of his company stock. Pundits say the company is no longer relevant and Dell is saying, it is not over. On December 7th Michael Dell spent $100 million for shares. What does Michael know that no one else does?
• Since the financial crisis sent US stocks to a 13 year low in March 2009 the market has staged it biggest two year bull run since the Great Depression. …and it did that despite high unemployment, the European debt crisis, and a devastating oil spill. In 2011 with high oil, uprisings in the Arab world and Japan’s earthquake, tsunami and threat of a nuclear meltdown the S&P-500 index is up three percent!- Bloomberg BusinessWeek.
• The bank behind AT&T is JP Morgan who put up a $20 billion bridge loan ONLY if AT&T used the bank as an advisor on the deal. The WSJ reported, ‘So much for trying to whittle banks down to more manageable size!’
• Detroit now the size of Columbus, Ohio. 
• Hoarders in the office, according to a recent Office Max survey: 46% of employees said they had trouble prioritizing what to throw out, 59% said they hid office supplies from co-workers and (gasp) 56% said they took supplies home. One worker stole 400 rolls of toilet paper, 160 bundles of paper towels and 12 soap dispensers. (clean body, clean mind, take your pick. kingston trio.)
• Wondering why your processed frozen dinner is going up and up in price? Wheat since June, 2010 +27%, Cocoa doubled since 2007, Coffee beans since 2007+104% and milk powder + 23% since November 2010. Adding a commodity based mutual fund to your portfolio will help you take advantage of rising prices.
• Warren Buffett would like to buy something in India but worries about foreign ownership issues. He expressed an interest in a company that is simple and that he could understand like candy or chewing gum. (Source 3/22/11 Reuters).
• Tuesday last markets off slightly with oil up on…what else…Mid-East concerns and also as Japan released an additional 22 days of oil reserves to stricken areas. On commodities grain fell but cotton was up.
• Aluminum is up 33% from the second quarter last year but copper is insane in its increase in price. Aluminum takes a lot of electricity for its production and Rio Tinto CEO Albanese does not see electric power getting cheap anytime soon nor anywhere in the world. Albanese think that scientists will find ways for aluminum to replace copper.
• Ah, the worm turns….as the National Credit Union Administration or NCUA is threatening to sue Goldman Sachs, Bank of America, Merrill, Citi and JP Morgan Chase for misrepresenting the risk of bonds to wholesale credit unions. Those CUs sold the bonds to the retail credit unions with a loss of $50 billion in mortgage backed securities. It could be the lack of sophistication at the credit unions made them the perfect suckers for those products. Sellers knew this and exploited the issue.
• Euro extends losses Wednesday last as Portugal rejects austerity plan and PM resigns.The pound also down slightly and the Yen relatively unchanged.
• Copper trading into the stratosphere trading at all time highs even though rising inventories added to investors unease. Oil hits new high for the year but copper, which usually traded lockstep, is faltering.
• Turmoil caused…well, everything was pretty much up last Wednesday as materials bolstered a pretty sour  market into double numbers as gold and oil also gained.
• Bestest smartest phone according to Walter  Mossberg, who does that sort of investigative hard thinking for WSJ.com, is the Verizon ThunderBolt. The man literally gushes about the thing.
• Ouch! Fed objects to Bank of America for a modest dividend increase. The reason is that BA is a definite laggard between the big four banks in capital. Experts say it is not the mortgage mess that got BA the kibosh but its unsecured credit card loans. The bank can resubmit its request for increasing dividend while investors are left to wonder what part of BA’s capital plan may have caused Fed discomfort.
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• The Flip Side from Barrons.com and in their recent ‘Barron’s Take’ is that BAC (ticker) is a buy and the recent selloff as an excellent opportunity to add or buy shares. Anthony Polini at Raymond James rates Bank of America a strong Buy with a $24 price target. Other experts disagree stating that $15 is the price the stock is range bound until the company gets rid of some of its problems or at least clarifies what its problems are to investors.
• Add Syrian dissidents to the global turmoil and still the domestic markets did well posting over an 84 point gain on the Dow. Oil over 105 as Euro Pacific chief global manager  Schiff blames the policies of inflation and higher oil on the Federal Reserve. (Yes, darling, you’re right!) Toyota will restart production on Monday following the lead of Nissan after shutting down since March 11th.
• How much does the world depend on Japan for exports and imports?
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• According to Thomas Kosteigen’s Ethic Monitor in MarketWatch.com water is looked at as a policy issue rather than the scarce resource should be looked at as a business. (Excuse me, has Tommy ever seen the movie Chinatown and/or reviewed history on the building of the west by cattle barons and farmers? In some parts of the country the local water commissioner is more powerful than the governor.) Of course water is looked at as a business and a political tool in many parts of the country. It’s just not that well globally organized. For those interested there are Water Funds and ETFs. The list should grow as more become aware.
• First Palin and now some say Bachmann as the darling of the Tea Party. Puleeeeze. Old toast seems smarter than Bachman while Palin is simply a no pretence opportunist. Has anyone heard of Lisa Murkowski?
• Friday markets up 3 day Bull, just cranking upward. Libyan war and Japan nuclear possible Chernobyl-like meltdown concerns aside revised GDP gave continued momentum Dow up 50 with oil and gold off slightly. For the week IT, Materials and Energy led the gainers.
• Who loves you, baby? Seems Invesco Van Kampen Kevin Holt likes both Concast and  Citigroup.
• All Hedge Fund Managers not omniscient. Take Philippe Jabre, one of Europe’s best known (not the richest or smartest note) hedge fund managers bought Japanese stocks on the earthquake news and then lost 13% as the Nikkei Stock Average tumbled. Philippe lost his nerve faster than Butch and Sundance being chased by the Pinkertons and sold for a $300 million loss before the markets bounced. (How do you say, ‘Oh, poop!’ in French?)
• Jason Zweig reports in the WSJ’s Intelligent Investor that FINRA (The Financial Industry Regulatory Authority) which oversees the brokerage business looks to alter the maximum 5% broker charges. (To be fair many brokers discount far below the recommended full commission) For the record Yours Truly charges 1%.
• Next Door Neighbor’s Government fails or falls and elections for new faces for the 4th time in 7 years. I went on line to understand how the Canadian’s government works and ended up confused. Seems the Queen is still the head of everything with the Governor General appointed under her who is more of a figure head and then the Prime Minister who is really the elected official who does the heavy lifting.
• With radioactive threat in Japan it seems coal (we have jillions of tons of the stuff) has been a beneficiary of the upwards price. This will continue as I have been a big advocate of client’s owning energy in a diversified managed fund that contains oil, natural gas and coal.
• Finally: FDIC closed a small bank in Illinois bringing the total for 2011 to 26.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Spring Cleaning – Tossing Your Old Mutual Fund

I don’t like annual rite of cleaning out the garage, basement or closet  because I seem to find reasons to keep my old junk instead of getting rid of it and at the end of the day get absolutely nowhere.

The same can be said when reviewing investment statements. Investors look at their quarterly results and think that just maybe they should look for a replacement for one or two of their laggards and then inertia sets in and nothing is done. The reason is that not making or even losing money is not reason enough to sell something that an investor has owned for years and buy something they don’t know much about. The old mutual fund, even if it has mistreated them, is a known quantity much like a tight pair of shoes, and investors know what to expect. A new fund may look good on paper but once bought there’s no guarantee it doesn’t belly-up and die just like their old fund.

Almost all the disappointing funds in a portfolio are actively managed. That means that at the mutual fund company there is a group or individual who makes an effort to buy and sell stocks and bonds in an effort to make money for shareholders. How well those managers do is based on their plan, their computer programs, their knowledge and experience of the overall investment world. There doesn’t seem to be any concrete evidence that suggests some fund companies purposely lose money for clients. That doesn’t mean that losing money for a quarter, a year or even more doesn’t happen. It does and when it does an investor better be prepared to take his or her money elsewhere. Losing money is not the only reason for moving assets, here are a few more:

• The Mutual Fund Company decides to change portfolio managers. The manager may be fired, he may quit or retire. In any case a change is not usually a guarantee of better results. Give the new manager a year, no more, and then check his or her results with the overall averages.
• Change of Philosophy: Investors get a letter stating that their Large Cap Domestic Growth Fund is going to allow more foreign investments. If investor already owns world or foreign mutual funds this may mean an allocation that skews more in one direction than is comfortable. It may be time to look for that pure domestic fund.
• Performance lags that of similar funds over several years. This may be an indication that fund managers are in over their head, the fund has gotten too large or there is some internal problems investors don’t know about.
• Fund managers do not invest their own money in what they manage.
• Fees and expenses go up for some reason even as the mutual fund company has increased in size.
• Stealth. Investors notice the mutual fund getting more conservative or aggressive in what is known as style drift. There is no notice the mutual fund is changing its style but the manager(s) are buying investments not consistent with the stated investment philosophy.
• Too Large. Some fund companies rather than close mutual funds and return cash to investors simply roll assets from a poorly run fund into a successful fund in the mistaken belief that more money can only mean more success. This dumping ground may or may not work and give it a year before you make a decision to stay or move on.
• Risk and efficiency change from stated goals. Investors can check the Beta and Alpha of their fund against the indices and see deviations that may in fact be injurious.

Next week I’ll discuss how investor can go about rebuilding their portfolios.

Questions call Paul at 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was – 3rd Week March

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• Monday March 21st Oil jumped overnight on bombing of Libya $2 a barrel. Libyan supply disruption had been priced into oil prior to this morning’s hike but Gadaffi could cause disruptions to ships traveling the Med.
• AT&T over the weekend announced buying T-Mobile which would increase customers to 130 million or almost a third more than Verizon. Long-time and suffering suitor Sprint was critical of the deal and said they would raise concerns with FCC and the Justice Department. Sprint shares had soared last week in anticipation of them making some sort of a deal with T-Mobile.
• Radiation is the supreme fear as Japan manufacturers everything from electronics to pharmaceuticals. The US officials recommended evacuating U.S. citizens 50 miles from the failed reactors which stunned the Japanese who were told that 12 miles was a safe distance. Radiation could circle the globe in two weeks even though UN officials don’t expect the amount to be harmful. In Japan radiation has already been detected in milk and spinach as far as 30 kilometers from the reactors. The dangers are the seepage into the food system as it did at Chernobyl.
•  Just as the Japanese stock markets started gaining traction in 2011 the tsunami devastated the country, setting it into rebuilding mode. Radiation on Monday was leaking at lethal levels and their markets dropped 6% as investor hurried into cash and cash equivalents then the following day dropped another 10%. In the U.S. on Monday our domestic markets were off slightly as oil fell to under 100 and gold was off highs. Investors ran to Treasuries for safety.
• Markets ended up last week but hedge funds were off. Paulson’s hedge fund lost 6%.
• Markets see-sawed all week basically because of no news. There were 3 conflicting stories: The Japanese government, the utility that ran the power plants and the US experts. Investors did not know who to believe or what the real story was.
• Experts timed it wrong. Behind the Money, Executive Producer for Fast Money John Mellow reported Monday that in February investors put more money into Japanese exchange traded funds than only one other area and that was the US energy sector. It was more than 1 billion dollars that flowed into various Japanese funds in February according to Biriniyi Associates data.
• What stocks have the highest exposure to the Japanese markets? According to Barrons.com Pru, MetLife, Aflac. Coach and Tiffany.
• Warren Buffett, in the meantime, with Berkshire Hathaway investment dollars bought a company right in his wheel house. A meat and potatoes easy to understand type basic company with nothing to do with high tech or software-Lubrizol, a specialty chemical maker. As he has done in the past with well run companies Buffett kept management intact with the marching orders to keep doing what you’ve been doing.
• Mushy bananas and temporary closure into Iranian markets drove Dole Food to a loss.
• Other stock impacted by the Japanese disaster were Toyota –7.9%, Sony –9.1% and GE –2%.
• NFL lockout may impact broadcasters.
• HP hikes dividend 50% and ‘promises’ a full cloud stack. CEO Apotheker said HP plans to build upon its financial strength by focusing growth, operational excellence and quality.
• Keeping ‘big brother’ home. Rivals NYSE and NASDAQ may still play together as the younger exchange has made a bid to keep NYSE from becoming part of the German Deutsche Borse, AG. The Naz was in talks to line up financing.
• SEC investigates Las Vegas Sands for possible violations of the Foreign Corrupt Practices Act, aka greasing the palms of foreign officials/non-officials  in regard to it’s Macau operations. The stock has been a high flyer and been put on Hold from Buy by Jeffries and Company analyst David Katz until investigation is over.
• Tuesday domestic markets fell by over 300 points on the Dow but came back as investors saw value and cut those losses to 130 on the Dow. Asian markets on Wednesday rebounded as investors finally figured that the sell-off was overly done. 
• Coming back from being beaten up were Asian automakers Toyota and Honda along with tire manufacture Bridgestone.
• Compelling was the price of oil as it is traded in dollars and investors ran to Treasuries for safety oil fell, Treasuries up and gold, for some reason, also down. Oil is still expected to hang with some volatility as Saudi discontent with Bahrain continues and Iran makes disparaging remarks. As the tragedy in Japan ebbs the oil story still continues.
• Barton Biggs, former chief strategist at Morgan Stanley, who now runs hedge fund Traxis Partners said he was buying shares in Japan. He bailed from Japanese investments in 2005 but states he is back arguing that the rebuilding will boost the Japanese economy.
• First Eagle Management has also been adding to their Japanese exposure albeit selectively. Unknown to many fund investors some of the world/foreign sector mutual funds have slowly been adding positions in Japan as that economy has been improving the last few years.
• Forgettaboutit! Don’t expect massive nuclear power construction anytime soon in the US of A.  Barrons,com in the Tuesday Barron’s Take solidly recommended  Exxon Mobil (XOM). ‘We see big oil as offering a favorable risk/reward opportunity in an uncertain environment.’  Yes, dear reader, expect coal, oil and natural gas to be the energy power commodities for quite some time.
• Wednesday’s domestic and global markets again reiterated the global concern of ‘not knowing’, and this coupled with the Japanese Utility in charge of the nuclear reactors in question with a history of ‘not providing’ information. Oil and gold up. Briefly the Yen outpaced the dollar. Domestic markets beat down across the board. Tokyo markets recovered some from off their day lows. Japan accounts for about 9% of the global gross domestic product compared to when it was 18% back in 1994.
• Yipes and Holy Smoke, Batboy and girls! Apple on Thursday was downgraded to Market Perform from Outperform. Analyst at JPM Securities Alex Guana said this was to reflect the deceleration in its primary manufacturing partner Hon Hai in Taiwan. Barrons.com wrapped up by stating that investors with a longer horizon will likely find their portfolio healthier for buying Apple on today’s dip.
• Japanese mutual fund managers are staying the course according to the WSJ on Thursday ayem. Neil Hennessy, portfolio manager and CIO of Hennessy Funds which include 2 funds specific to Japanese companies said in the last 2 days his funds lost 20% of their value.Taizo Ishida, portfolio manager of the $87.5 Matthews Japan Fund is staying the course with his current allocation which is heavy in Japanese industrials and consumer discretionary stocks. Japanese auto companies still not manufacturing cars as of Thursday. 
• Domestic markets got a Value jump Thursday last as the markets had oversold. Nike got a push off the cliff as numbers for the Swoosh legend were disappointing and shares fell 5.5% while inventories rose 18%. Diet Coke makes it #2 soft drink behind…taa dah..Coke, knocking off Pepsi. Natural gas big winner in this crisis as fuel heading to Japan. Yen surged and then was forced down by a consortium of banks. A strong Yen would make it more difficult for Japan to recover as their products would become more expensive to sell. Tokyo shares were up with a 2.7% gain.
• Michigan communities just got a hand to protect them from possible Bully Labor. The Gov signed a law allowing communities in trouble to have the state assist in negotiation and providing the state with powers over local governments and ‘school districts’. If this wasn’t a stab at the state’s strong Teacher’s union I don’t know what is/was. The new law motivated Raul Garcia, president of the Flint Firefighters Union to put forward a list of new concessions saying, ‘I would rather give concessions that I would like than have an emergency financial manager come in and say that this is what you are going to do.’
• Janus Funds came out with their perspective on the Japanese crisis and reminded us that the Kobe earthquake in 1995 was in a more industrialized part of the country and experts predicted a 4% drop in the GDP which didn’t happen. The current crisis is in a fairly light industrial region.’ Janus didn’t mention that the Kobe quake didn’t create a nuclear disaster.
• Germany has suspended nuclear power operations at seven plants and Switzerland has announced a moratorium on new nuclear plants pending safety reviews.
• Domestic utility funds were hit as many held shares in nuclear power plants. Franklin Utilities owns holdings in such plants but was up slightly at the close on Friday. Exelon, a Chicago electric and gas utility with significant nuclear exposure also saw a sell-off as did Shaw Group, a Baton Rouge, La., construction company that works in nuclear sector.
• Apple with the iPad2 may find itself with no product.
• Demand for natural gas and coal seem to be a natural  for increased demand, according to Shawn Reynolds an energy analyst for the Van Eck Global Hard Assets Fund.
• GM halts two European factories as supplies are cut short from Japan. Craig Fitzgerald of Plante & Moran of Southfield said that Japan is a critical supplier of electric components used by virtually all automakers. Supplies were in short supply before the crisis. If supplies are interrupted from China this could close domestic manufacturing.
• Disappointing. American Mutual Funds reported nothing to the registered representatives in a recent update except they were monitoring the situation in Japan. I expected more from one of the world’s largest money managers. Dumb.
• Banks given green light to pay stock dividends and buybacks. According to WSJ 17 of the 19 largest have issued statements as such. Citigroup said it expects to return capital to investors starting in 2012. The extensive list and specific may be found online. The news of possible and slight increase to existing payouts was enough to bolster the markets.
•  Junk Bond meltdown? It’s when income hungry and greedy investors pile into a sector which is already stretched to the max. YTD high yield is up about 3% according to WSJ ‘Weekend Investor’. A better play for investors, according to the article, is emerging market bond funds which offer higher yields without the debt problems that many developed countries have. PIMCO’s Bill Gross is a huge fan of this play as I reported last week.
• Finally: After 9/11 the our domestic markets fell 5% but rebounded within 6 months. The Chernobyl’s meltdown cost 3% of the market but was short lived. I would expect that the tragedy in Japan has created buying opportunities for those investors willing to take the risk. The Japanese markets were recovering from their decade long struggle prior to the tsunami and Japanese stocks are now selling about the same as they were at the economic global crisis of 2008.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Aftermath and Going Forward – Japan 2011

Wednesday morning Tokyo markets closed higher as investors figured stock sell off was overboard. Tuesday our domestic markets recovered half their losses before settling at over 130 points down on the Dow. Some information as we move forward:

• Nuclear energy dead for at least a decade. That leaves oil, natural gas and coal as primary energy fuels and expect costs to continue to rise. Mid-East tensions continue with Saudi putting down dissidents in Bahrain.
• On Monday ETFs that specified Nuclear energy fell NLR –13%, NUCL –11%. Uranium ETF URA –18%.
• Up were ETFs that specified Solar, Wind, Natural Gas and Clean Energy.
• Oil down since it is traded in dollars. Flight to safety caused Treasuries to rebound and dollar strengthen. Don’t expect oil to remain below $100.
• Almost all commodities off as dollar strengthened.
• Gold fell and according to Mark Hulbert there is and was no fundamental reason why. Euphoria has been in the gold market lately and this usually leads a selloff. Bullish sentiment has pulled back from those overheated levels, according to Hulbert, and he suggested to sell gold first and ask questions later. He doesn’t have an answer to the reason why expect it is time for gold to settle down and then trade on fundamentals rather than emotion.
• Domestic stocks with huge Japanese market exposure according to Barrons.com: Pru, MetLife, Tiffany, Coach and Aflac.
• GE fell 2% but experts not worried about liability for reactor.
• Biggest losses among US mutual funds investing in Japan: Brandes Institutional International Equity Fund with 33% in Japan fell 2.7% on Monday and Columbia International Value Fund owned by Ameriprise fell 2.5%.
• Barrons.com suggested Exxon Mobile as strong buy going forward on Wednesday.
• Hedge Fund owner Barton Biggs made it clear he was buying Japanese stocks on Tuesday, adding to his portfolio as fundamentals were more attractive. Also mutual fund family First Eagle were being more selective in adding certain Japanese company stocks to their Worldwide fund portfolio.
• Most vulnerable holding in First Eagle Worldwide portfolio, according to them, may be MS&AD Insurance Group Holdings and SKSJ Holdings, two Japanese insurers.
• Many investors believe that the tragedy may in fact boost the Japanese economy forward when rebuilding begins.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com.

That Was The Week That Was – 2nd Week March

•  The week started bad and ended bad and there was nothing anyone could do as the forces of nature put an exclamation point on Friday.
• It all started on Monday and Magic couldn’t keep the markets  from tumbling and oil from rising as the dollar tanked and there was mixed reaction from traders. The week opened with markets lower. Even Apple and Google saw a sell- off as fund managers cut their stake in two of the tech bellwethers stating that the icons of the web needed more hits and they couldn’t foresee that happening.
• The dollar was crushed and threatening to break through a leading bearish indicator. The fact that the dollar has not been a haven of safety during the Middle-East crisis has some traders alarmed. As oil spiked the dollar fell and since oil is  traded in dollars worldwide made oil relatively the same in price to everyone except us during the Middle East crisis. 
• The Magic Show continued last week with the Ben Bernanke supposedly focusing on domestic core inflation when in fact he was manipulating the price of oil even as Traders thought they were.
•  Morgan Stanley UPGRADES Starbucks and according to Barrons.com it is on track to becoming the fastest growing large cap restaurant.
• All it takes is confidence to set the markets roaring as a triple digit Dow gain Tuesday last was sparked by positive comments by Bank of America’s CEO Brian Moynihan who said he ‘believed’ the bank had the ability to earn between $35-$40 billion in pre-tax earnings when the business normalizes. He went on to say the bank was focusing on returning every dollar in capital to shareholders through regular dividends, share buybacks and special cash dividends. Barrons.com apparently agrees in their weekend on-line commentary, saying the bank has the possibility of having shares go higher. 
• Not everyone was giddy with BofA’s bluster. Howard Ward, Chief Investment Officer of growth equities at Gamco said, ‘They can take market share from one another, but its an industry facing no growth and a lot of regulations that haven’t been sorted out yet.’ Cue the Hallelujah Choir.
• FDIC seized two banks; one in Milwaukee and another in Oklahoma bringing the stealth total to 25 banks for the year. It ain’t over.
• According to the UN food prices hit a record in February. ‘Millions more people are sliding into poverty as they struggle to afford basic food supplies.’
• Sprint & T-Mobile back to talks…again…but expect nothing ….soon…. Sprint up but continues to disappoint and is a darling of the trading range set.
• Barrons.com reported that a report from Spectrum Group, an Illinois consulting company that survey the rich and retired, found that 75% of the R&R expected a call back from their financial advisor within 12 hours of their initial call and that the #1 pet peeve was that their advisors did not! Seems 57% of the glitterati would switch advisors if given bad advice but 73% would leave when ignored. Lesson, dear reader, is to find a polite but ignorant advisor.
• Say bye-bye to Smith Barney as Morgan Stanley decides to remove name of wealth management firm it now fully owns. It bought 51% in 2009 from Citi and recently negotiated buying the rest of the company.
• Does anyone remember Dunkin Donuts cereal? It was Big in the 80s.
• Wednesday last another ugly day as Moody’s downgraded Spanish government debt triggering a drop in the Euro with gold and oil both slightly off.
• China swings to a Trade Deficit! and the sky didn’t fall and ‘shut-my-mouth’ markets didn’t tumble into an abyss as February imports exceeded slightly exports.  Good news as this may temporary alleviate pressure against the government to make the Yuan stronger against the dollar.
• Besides wanting to know from Maury ‘Who’s the daddy’ other interested folks are wanting to know where the price of oil is heading. The wise folks at Barrons.com were accommodating and interviewed energy analyst extraordinaire Greg Priddy who said, ‘There is going to be a continuation of some risk premium in crude as we head into the future. And there is still a possibility of additional disruptive events. However, I don’t think another major disruptive event in the near term is the most logical scenario. But with this political unrest percolating…we are not going to see the fear premium come out of crude anytime soon.’
• From The Leave It To Beaver Department of Nostalgia: In 1990 unemployment was 5.3%, gas cost $1.16, a first class stamp was 0.25cents, a new home was $149,800. But no one was any happier because we had Dan Quayle as vice-president!
• Thursday opened with markets in disarray after Wednesday’s punishing triple digit drop across all indices including metals and oil. Japan hit with a  tsunami and fears of it striking Hawaii and the western mainland. Saudi police fired at about 200 civilian protestors as unrest spread into Arabia. Too much bad news and not a glimmer of good is forcing Bulls into retreat.
• Management unrest at GM as the CFO called it quits.
•   Bill Gross of PIMCO eliminated all Treasuries from his Total Return Fund. That is most telling. I spoke with PIMCO dealer services on Thursday and they told me that Gross liked emerging market debt a lot.
• Friday the markets mixed with gold down a skosh and oil down about three dollars a barrel. But the amazing thing is that the markets didn’t panic. 3M led the day with Caterpillar following; a bet that rebuilding in Japan would benefit the stock. The yen jumped as nervous Asian investors brought home their currency. There was also some relief as demonstrators were peaceful in Arabia and not violent as predicted.
• Football (what are we to do with our Sunday afternoons?) may be delayed or cancelled for the season as the Player’s union decertified and it’s every man and bruiser for himself. Expect courts to determine what’s next.
•   The venerable Las Vegas Sands Hotel and Casino is no more. The last place I had the pleasant olden day experience of 2 deck blackjack dealt by hand is …sob…closed forever. Business simply stank..or is it stunk?
• Lehman probe by US attorneys is over, done, fini, ended, cancelled as the government knows it cannot prove its case. Everybody is off the hook. Even if the prosecutors had a slight edge it would take until the middle of this century to prove any kind of criminal endeavor.
• Finally-European markets were down 2% , oil ended at $100., retail in February was up 1%, the Dow and S&P were both off 1% for the week while Nasdaq was down 2.5%. As 2 nuclear reactors were in crisis the Bank of Japan propped  up the Yen with massive infusion of cash but it was a temporary measure. This was the last thing Japan needed as they were just digging themselves out of a lousy decade of deflation. Expect more turmoil this coming week.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

Value versus Cost –Full Service Broker or On-Line?

This past weekend I was finishing my taxes and in the process of looking up deductions found this piece written almost a year old hiding behind a receipt from Gus’s for a few Coney dogs and Cokes. 

Some years back my family and I were driving back from a Florida vacation and happened upon a Georgia pecan stand. There were dozens of cars surrounding the open air shed and we sampled a few pecans and then bought several bags to take with us. Fifty miles up the highway we dug into them only to discover the seller had switched them for moldy pecans assuming correctly that we’d be miles down the road and unlikely to turnaround to hand out grief. It was a lesson in making sure to confirm what we bought when we bought no matter if it’s pecans or common stock.

Last week Blogger went kaput and I couldn't upload news of the week and kept getting an error message every time I tried along with a line of numbers that resembled distance to the edge of the universe and back again. It seemed I wasn’t the only one affected as there were posted messages complaining about Blogger being down and since my skills on the internet are limited  to pushing the on-off switch I spent an hour digging up a phone number for Google that operates the site. I called. I waited. I waited. I waited some more and finally a nice lady answered at Google and when I explained my problem she informed me that the only way to communicate with anyone at Blogger was to write an email. I said all I wanted to know was if anyone at Blogger knew that they had a problem, was anyone planning on fixing it, could it be fixed, should I go to another blog host or was there anything wrong on my end? There was nothing she could do. Write an email.

Google, a company that make dandy products and services and oodles of dough, oddly does not have a tech number or a 1-800 help phone where idiots like me can simply call, hang on the line for 1/2 the day and find out for sure if things will ever get back to normal, or not. Blogger is a great product. But great products aside if it breaks, is down or doesn’t do what it is supposed to do it is frustrating to the bloggee, namely me.

To put things in perspective Blogger does not charge me  for hosting. That they don’t doesn’t sooth the fear. I counted on Blogger to keep me up and running. Value and price are always conflicted when things go wrong. At least both were in play last week when I would have paid just about anything to get back on line and have everything back to hunky and dory. At the very least I wanted to know did anyone know of the problem and was anyone doing something about it.

I am not trying to represent The Great Georgia Pecan Swindle with Blogger being down. They are two different experiences. On the one I had choices and could have turned the family buggy around on I-75, confronted the pecan fraudster and demanded satisfaction. Cutting my losses by moving on was the most expedient decision.  With the blog being down I was frustrated with absolutely no choice except to email. Yes, the next morning everything was up at Blogger and I still use it and I find it a great product/service but still feel uncertain in case something like this happens again. And, history tells me that indeed it will happen again.

I am so uneasy with this that I am contemplating moving to a blogger site that I pay for as long as I know in advance that there are people I can call if I need to. Somehow paying for peace of mind rather than being a do-it-all cowboy is important to me. For someone else it could be that free is the most important aspect and could care less about the reliability of the product.  In other words if moldy pecans were being handed out for nothing some folks would think it was a great deal and stand in line to get them.

Which brings me to value and cost in the world of investing. How much is your planner or advisor worth or do you need one at all? It’s no secret that anyone and everyone can go on-line and open a brokerage account and get cheap transaction costs, a modicum of research and an 1-800 phone number in case something happens and you need to reach out. The ratio of cost to relative value is on the side of the client if all anyone wants to do is to trade, knows how to trade, understands research and can do the things that brokers do using the on-line tools. On-line trading for those with certain skills is cheap and most times quick.

On the other hand if you’re a buy and hold investor, don’t spend your life with on-line toys or software, and, most importantly, don’t know a preferred from a convertible, well, chances are you choose to work with someone who does that all day long and charges either a fee or commission. 

However assume one day you call one firm or the other and no one answers, you get a voice mail message, or the lines are blocked or constantly busy, and no one returns your frantic messages; with that kind of service neither the on-line broker or your financial planner is not worth a soupcon of  your business.

On-line brokerage firms puff their chests about the only real thing they have going for them and that is price. They do beat everyone in cost because that is what they do. They don’t hold hands, promise to return calls, provide in depth information or do what you’d expect to get from an independent planner or advisor. If you talk to Joe at the 1-800 number on-line firm on Tuesday odds are you’ll never talk to Joe again. There will always be another new person you will have to explain who and what you are. But, if you get the same apathetic treatment from your personal advisor then you are not getting value for your money.

The flip side is if you have an advisor or representative that provides a laundry list of services and products along with the hand holding and research don’t expect to pay them the same fee as an on-line broker. 

The most remarkable thing about weighing the value to cost is that you really cannot gauge it when things are humming along and everything is swell. The time to measure is when things go boom and suddenly you need help and you need it immediately. It’s a lot like your home insurance or the government, most of the time (not lately) we don’t think too much about either but when a crisis arises we expect them to be there and handle the problem. Hopefully whomever you choose as your money managers they work out better then the political types have.

If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

What The Hell Is Going On - Again?

I found this blog stuffed in a small corner of my computer. I wrote it in 2010 and never published and thought it may fit just as well today as the day when the grass was green.

Yesterday, around lunch hour, I stopped by the golf course to smack a small bucket  of golf balls at the range and started talking to the  pro and a few other guys in the club house who all wanted to know what the hell was going on with the stock market. That was the day the South Koreans had about enough with North Korea and one or the other broke off relations, and  Spain had bailed out a small bank and the euro was down again and home prices fell for some inexplicable reason and the Dow was off 2oo points and the S&P was approaching April, 2009 level.  Oil was below $70 and gold was trying to make another run. It was a day with a lot happening but no clear cut reason why our markets were again tanking and a small group of middle-aged guys were hanging around worried if they were going to lose money just as consumer confidence was returning.

They asked what I thought and I pointed out that they shouldn’t forget the new reform law that was soon going to change the way banks and investment firms did business. All looked at me with that squinty eyed look as  they heard broker BS before but I soldiered on, ‘This has a lot of business people scared,’ I explained, ‘and no one really knows how much or little it will impact their ability to loan or their profitability. On top of that unemployment is still a major issue and the experts predict only a small decrease in the numbers before the end of the year. Then you have the European countries with balance sheets that don’t look so hot; namely Portugal, Spain, Italy and Ireland. But, the simple fact is that people are scared and unsure and when that happens they sell risk and run to safety.’

‘Is this a correction or the beginning of a double dip depression people have been talking about?’ One of the guys asked.

‘ I heard the Chief Investment Officer of Northern Trust speak on CNBC today and he said that he did not know and anytime there is uncertainty the professionals simply sit on the sidelines. But, some people think this is simply a correction which has some ways yet to go.’

‘So what can we do?’ Another guy asked waggling a five iron as if he really wanted to hit something.

‘ You can sell all your equities and come back when you feel more comfortable; or you can sell half your portfolio or a quarter or none at all. You can buy stocks that you thought were too expensive a few weeks ago now that they have come down in price, or wait for them to possibly get even cheaper. Another idea is to buy just a little and if the stock goes down buy more. This may be a good time to start picking up some good dividend yielding stocks at a discount. Remember at times like this cash is always king.’

‘All my investments are in mutual funds. I hate the roller coaster,’ another guy said, ‘I went through that in 2000 and again last year and just when I thought things were getting stable this happens. What do you do when all you’re money is invested in mutual funds?’

‘ If you’re still a moderately aggressive investor you may want to shift more into domestic dividend paying funds from your foreign funds. If you are more conservative you may want to increase holdings in the intermediate bond fund just to reduce volatility.  If you’re a contrarian you may want to look at emerging markets or global funds and buy them since they’ve gotten a bit cheaper. Then there is Jack Bogle who believes people should have 1% of their assets in bonds for every year they are old. Unfortunately I have never met anyone who followed Bogle’s advise.’

‘What are you doing with your money,’ another asked me.

‘ Telling you how I manage my money or my client’s money doesn’t do you any good. You have to manage your money for your needs and not your neighbors or co-workers. Here we are four guys with different families, backgrounds, dynamics and plans and you cannot use one blueprint and say it fits all of us. If I told you I was 100% in emerging markets it wouldn’t help and neither would it help if I said I was all in cash. There are two things you should remember: (1) Short term don’t put any money at risk then you can afford to lose and (2) Investing is for the long-term . What happens today, this week or this summer doesn’t qualify as long-term.’

I went and hit my small bucket and left the guys to argue what they would do next.

Today in 2011 Libya is in civilian revolt, Egypt is readying  for free elections, oil is over 100 a barrel, the markets are growling bearish signals after a huge run-up from last September and gold is at its highest. Investors are saying the same things they said last summer.

(This really did happen only I used a bit of poetic license to organize what was a fractured conversation.)

If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was – 1st Week March

•   The current crisis in the Middle East could represent the beginning of the return of the region’s leadership in commerce. Jim O’Neill, Chairman of Goldman Sachs Asset Management wrote in a letter to clients, ‘A post-revolution Middle East and North Africa could rival emerging markets of Brazil, Russia, India and China.’
• Don’t expect things to settle down this week. More to do with perception regarding oil than the loss of.
• The GAO reported that the U.S. has 15 different agencies overseeing food safety, 20 helping the homeless and 80 for economic development. In addition there are 82 federal programs to improve teacher quality, 80 to help disadvantaged people with transportation, 47 for job training and employment and 56 to help people understand finances. Reducing or combining could save billions. (Insert your punch line here.)
• The biggest news service in the world no one has heard of is World News Connection. WNC is paid from a classified budget of the CIA. Don’t ask, I get nervous just blogging about it.
• According to those that know the very first trading day of the month is the best for the S&P 500 index.  According to Lawrence G. McMillan of MarketWatch.com report that 94% of the S&P500 gains in 2010 was on the first trading day of the month. (didn’t happen in March)
• Barrons.com reports that a boom is brewing for 2011 but before ‘Happy Days’ is harmonized expect a huge hit late this year and into 2012 as corporate tax write offs contribute to sell off. So sayeth Randall W. Forsyth.
• Investors still cautious while stocks in the S&P 500 since March 2009 287 have doubled while 405 have moved up by at least 50%. According to some traders negativity is stronger today than it was one year ago. Today’s investor is more likely to sell on any bad news as to buy.
• Hello, gold. Goodbye, gold. Jim Lowell, editor of the ETF Trader newsletter said in a podcast with Chuck Jaffee of MarketWatch that there is a big fly swatter that’s about to squash gold bugs. ‘As soon as the world banks decide one way to bail out of their fiscal mishaps will be to sell gold at historically high prices – I think you will see a run on gold to the tune of 20% to 30% to the downside.’
• Lowell also said that in the next 12-18 months those holding long bonds are going to see either flat or actual losses. A one percent rise in rates will see the long-term Treasury down 18-20% in terms of return.
• Markets took a hit on March 1st as all indices down on oil and Libya concerns. At the rate and length of civilian protest in the Middle East the concerns on uncertainty may continue to stink up the markets for quite some time.
• Car sales up BIG but stock prices crash as traders are running the markets, the small investor has no clout and all eyes and ears on oil. Gold, too.
• Unrest in the Middle East means, according to Matt Freund, USAA portfolio manager: US dollar and Treasuries outperform, high gas prices could toss us back into a recession, energy companies  should outperform higher oil prices and Europe could suffer more than the US as they depend more on Libya oil than we do. (but we knew all that!)
• Who’s managing your mutual fund? Lots of funds use outside fund managers and investors chase those funds like they chase well known jockeys at the track. Seems like some funds handed over money to outside fund managers who handed over the investment money to…ta dah…Bernie Madoff!  One of those ‘feeder funds’ is Tremont which funneled about $4 billion to Madoff over a 15 year period earning $180 million in finder fees. Tremont is being wound down and is/was a subsidiary of Oppenheimer Acquisition Corp which is a division of Massachusetts Mutual Life Insurance Company. Irving Picard the Asset Hunter entrusted for tracking down Madoff’s billions, is seeking return of some $2.1 billion in transfers from Tremont and its affiliates.
• Higher interest rates will tank bonds for sure but where to go ask the ultra conservative investor? Seems TIPS will also suffer as rates increase (TIPS are swell for inflationary times but  they also lose value when rates increase). The answer may be in senior secured floating rate bank loans that pay interest that floats, with coupons that typically reset every 90 days. Examining a chart when bonds lost value from 1992 through 2010 the floating rate seem to have done exceptionally well except for 2008 when nothing did well .  I’ll soon get a memo out to all interested conservative investors on this.
• In the February 28-March 6 2011 Bloomberg BusinessWeek Mary Meeker ex analyst with Morgan Stanley during the dot com daze reports on the state of the USA as a business. The country has a negative net worth of $44 trillion or an average of $143,000 per capita. Ms Meeker attacks entitlements stating that there is an 82% correlation between rising entitlement spending and falling personal saving rates. There is no doubt she and others are absolutely right as we saw the impact on socialism on recovering economies and peoples from East Germany and the Soviet states. She concludes that there is no secret to making the USA strong again but the wherewithal of politicians.
• Germany is the European export powerhouse and does it by producing and shipping basic but expensive goods while ranking #16 in the Global Entrepreneurship and Development Index. One of their biggest exports are power saws. In the creativity biz the Germans rank just ahead of Puerto Rico and right behind Singapore. Americans think we need to produce cheap and innovative products to compete with the world economies but take a lesson from Apple and see quality plus a premium price to understand what others will buy. (Ford recently refused to cheapen their cars by reducing prices in Europe willing to take a stock hit for long-term value.) Make Made in America a brand that consumers throughout the world want is how to dig ourselves out of the economic hole.
• Thursday last brought relief as markets rebounded and posted their biggest blue chip gains since early December. Oil moved below $102. The euro got support with comments from Bank Prez Jean-Claude Trichet who said the bank could raise rates next month for the first time since the 2008 global beat-down.
• Whispers that FedEx is in a buying opportunity from Weekday Trader at Barrons.com. Shares are off 9% as of this writing and analysts say that FedEx could benefit from a domestic pricing recovery and continued volume strength from international express biz.
• Hot but not are the currency IPOs that some $4 trillion a day in trades are run through. Stocks of FXCM and Gain both are below their IPO price and have regulatory issues and lawsuits from customers who content that their trading platforms punish profitable investors by shuttling them to a ‘slow server’ causing trade execution to slow down.
• Too Big to fail just got bigger. Sheila Bair the tough talking FDIC chief said the government is not coming to the future rescue of the Big Banks if they stub their toe. The biggest institutions before the global crisis are even bigger today. Go figure. (Too bad Sheila won’t be around when it happens).
• Jobless rate falls to under 9% a smidge but what the data doesn’t show is the participation rate of people dropping out of the Labor Force.I know people who lost their job at a job shop and now getting social security after a decade of off and on again employment. You too?
• Standard & Poor's downgrades Toyota bonds to AA- from AA. Reasons is the company profitability may take years to recoup.
• Food is costing more and farmers are expected to plant more and ramp up yield which should reduce costs going forward. Analysts, however, say supply of agricultural commodities will outstrip supply. Which is the reason I like the commodity funds for just about every investor. (The average investor shudders when someone mentions commodities as if it were a bad word.)
• Bill Gross, Bond Trader Extraordinary, isn’t sticking around to see what The Ben Bernanke is going to do in his second act later this year. Bill has reduced holding of Treasuries in his flagship mutual fund Pimco Total Return Fund, according  to Randall W. Forsyth who keeps tabs on stuff like that.
• Stocks fell Friday after a huge up day Thursday but still ended up for the week. Oil closed at $104. This week expect more of the same.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

Why Commodities Now

 At times when I mention the word commodities I may as well use a four letter foul word because investors have mentally linked commodities with speculators, high risk, hocus-pocus manipulators of the market. The sector is the only one that in normal times is a decent hedge against inflation and a pure diversification from stocks and bond assets. The following are a list of commodities  in the DJ-UBS Commodity Index. Buying one or two of the industries may pose unrealized volatility but by buying an active managed fund that mimics the index itself (much like any active managed index) the investor gets exposure across a wide range of products.

Water is one commodity not represented in the index but agricultural products along with most of the energy products and basic metals are. Much recently has been reported on higher food prices, cotton reaching highs not seen since the Civil War and precious metals soaring. Owning just one commodity could put an investor at risk; owning all creates a diversified mix that fits in just about every investor’s portfolio.

• Natural Gas
• Crude Oil
• Unleaded Gas
• Heating Oil
• Live Cattle
• Lean Hogs
• Wheat
• Corn
• Soybean
• Aluminum
• Copper
• Zinc
• Nickel
• Gold
• Silver
• Sugar
• Cotton
• Coffee
• Vegetable Oil
• Soybean Oil

As an investor if you believe in inflation, higher food prices along with sustainable energy costs investing in the commodity  index using an active managed mutual fund makes sense to round out a portfolio. The myths and manipulation of certain commodities have always come regarding a singular product or industry such as the Hunt Brothers attempting to corral the world’s silver market.

Unlike my antipathy of rebalancing an equity stock portfolio a commodity allocated fund using rebalancing smoothes out the risk from speculation. As always, if you have questions and interest call or e mail me.

Call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog and idea with people that are concerned about their money.

 

Re-Balancing Your Portfolio -Redux

   Last year I wrote that rebalancing your investments is something most investors can forget. The reason is that rebalancing is simply selling high and buying low with no guarantee that whatever you’re buying low would perform well going forward.

Rebalancing is selling your winners and buying more of your losers.

The way rebalancing works is if you own two mutual funds and your allocation is 50-50 and one fund makes money this year and the other does not by the definition of rebalancing you simply take a portion of the profits from one and invest it in the one that did not do so well. (It’s like giving one hundred dollars to your dead-beat brother-in-law and hoping he’ll find a job otherwise he’ll be back on your stoop and you’ll be shelling out another hundred and then another.)

Along comes Burton G. Maikiel, professor of economics at Princeton, while updating his book, ‘A Random Walk Down Wall Street’, writes for the WSJ that Buy and Hold is still a winner, rebalancing is something every investor should do and index funds outperform two-thirds of all active managed mutual funds. He goes on to say that his studies have shown that rebalancing into an allocated portfolio has increased returns over time by 1%.

As someone with a solid third grade education I am just dumb enough to take umbrage with the good professor. The problem, as I see it, is knowing which index fund to buy, what allocation to rebalance into and not holding either an index or mutual fund that languishes in investor Purgatory for an extended period of time. These bits Professor Maikiel specifically does not share with us but provides clues in his book so individual investors can establish their own personal investment plan.

It makes little difference in the wisdom of Burton that the best portfolio managers such as Danoff at Contra Fund, Bill Miller at Legg Mason or even Warren Buffett ignore indexing, eschew buy and hold forever (except for the odd stock here and there), and have never stood on their hind legs and voted for rebalancing. They are also some of the best active managers in the business and while certain indexes have languished over the past decade this trio, among others, has made money for its shareholders only because they are active money managers.

The single biggest sin investors make is holding onto losers while selling winners in the mistaken belief that losers may one day become winners.

In the beginning of this decade I was hosting a radio show and a listener called and said he was taking a beating on his S&P 500 index fund and his wife suggested he sell it and move on but he felt it was a good investment for the next decade and he agreed to leave the decision to me. I told him I agreed with his wife that there were better opportunities and he hung up telling me we were both nuts. He wasn’t looking for advice he was seeking affirmation. It is little solace that I was right and he was wrong.

Investors have to be wary of those investment disciples who preach a belief in a system as if it were the only way to manage money. There are some very successful investors who own portfolios that have stood the test of time that have only one or two funds, have never rebalanced and trusted their active portfolio manager to modify their individual holdings.

Last by not leastest; (if Palin can make up words so can you and I) researching the good Professor Burton a bit more I came across some scribbling and ramblings where he pointed out, albeit ala pianissimo, that he agrees with what I’ve always believed because; some markets are evidentially inefficient, exhibiting signs of a non-random walk and while he is partial to index funds he does think it is viable to actively manage ‘around the edges’ of such a portfolio, as financial markets are not totally efficient. In other words, indexing is good but not the only way to build a portfolio.

In a nutshell there is theory from them Ivory Towers, dear reader, and then there is common sense. Then, of course, there is the selling of books.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.