My session with author Nick Murray today

I spent a good part of my morning listening to a presentation by author Nick Murray.  I don't expect you would recognize the name as he is really considered an advisor to advisors.  His whole message in a nutshell is that no one can predict what the markets are going to do and when.  The only thing we really know is that over long periods of time (30 years), we need to be owners of companies that make this country great (stock owners).  Any attempt to prognosticate, predict or in any way try to think we can be smart enough to know what is going to happen next--is a complete waste of time, an effort in futility.

I agree wholeheartedly.  So what am I to do?  How am I to function in a world where most people I know including other advisors think that my job IS to predict, IS to know what is going to happen next, IS to pick the next hot sector or stock.  I asked Mr. Murray this question (at which time he became very impatient with me and the length of my question..he is a cranky guy).  He said I should tell the truth to as many people who will hear it.  This is what I try to do every time I post on this blog.

So what can you expect from me as your financial advisor--or for that matter, from any financial advisor? Here is my definiton (I am going to send it to Webster): a financial advisor's job is to advise you how to reallocate your resources in a way that will allow you to meet all of your goals.  Let's make it simpler; I am going to tell you if you are saving enough, I'm going to make sure your investments are properly diversified, I am going to be a source of information for all things financial.  But most of all, I am going to make sure you won't be seduced by the latest investment fad or be seduced by fear. I will help you solve problems and  I will help you make sensible, realistic decisions.

So don't be confused when I post about market returns.  This is just for information purposes--to show you that markets go up and markets go down and that there are very different segments of "the market".  But all that I do cannot be contained in market returns--it is really about everything other aspect of your financial life.

Nick Murray does have one book that is perfect for non advisors.  It is called Simple Wealth, Inevitable Wealth which can be purchased at his website :     http://www.nickmurray.com/books.html

Thanks for reading.

One Year Later

If you had invested in small or mid cap stocks on October 23, 2008---when it seemed like the end of the world was near, you would be up over 30%.  Those who did buy on the dips (rather than sell), are now reaping the benefits.  Large company stocks are only up about 10%.   This data was reported by Morningstar in their weekly market report to financial advisors.

Free annual credit report

The commercial on TV advertising freecreditreport.com is not actually the place to get the free reports as mandated by law.  The actual website that will allow you to get your three free reports, one from each of the major credit companies is www.annualcreditreport.com.  You should check your credit reports occassionally but especially if you expect to be applying for a loan or mortgage in the near future.  Your credit score and history will play a big part in the interest rate offered to you.

Its only a number

The media is making a huge deal about the DOW crossing 10,000 yesterday.  What most have failed to mention is we are still well below the 14,000 high mark reached in mid 2007.  More importantly, the DOW has crossed 10,000 before, the first time was in March of 1999.  At that time, oil was $20 a barrel and gold was $200 an ounce.  Today oil is about $75 a barrel and gold is over $1,000 an ounce--the world has changed dramatically yet the media is still hung up on the DOW at 10,000.  As usual, the media needs something to get fired up about--even though it just isn't that big a deal.  Granted, I am happy the market is up--we all are.  But for many, threats of lay offs still prevail and the ranks of the unemployed continue to grow.  From an economic perspective, things have turned only marginally--but we're partying like its 1999!

I think, and I hate to think out loud in public, but anyway: I think the next big dilemma the market is going to have to deal with is the dollar.  I do not believe it can continue to be devalued--not when we are dependent on foreigners to buy our debt to fund our deficit.  Eventually, they will get annoyed in holding paper that is worth less every day. If the dollar starts to go up, what does that mean for commodities? international investments? and domestic investments?   Something to think about.

Vanguard Issues Mild Warning

The title is "Strong 2009 Performance Warrants Yellow Flag" on Vanguard's website referring to being careful before chasing the returns of recently hot funds.  The funds they cite are:

• Vanguard Capital Value Fund: +68.5%
• Vanguard Emerging Markets Stock Index Fund: +62.6%
• Vanguard Precious Metals and Mining Fund: +59.9%
• Vanguard High-Yield Corporate Fund: +32.4%

I think Vanguard's advice makes a lot of sense in that we investors should not be looking to bet large sums of money on the latest hot fad because we think the investments will continue to maintain their stellar performance.  The truth is, the market dislocations that existed at the end of last year and early this year, which created fantastic buying opportunities, are now mostly gone.  The market does that--it will become irrational for a short time, create great opportunities, then comes to its senses and those opportunities evaporate.  Which is why it is so important to be level headed while the markets are crazy so you can take advantage of these opportunities.  Now we sit and wait.  In the meantime, dollar cost averaging is appropriate for any idle cash and adjusting asset allocations that may have gotten out of balance makes good sense.

A year later

Here is data from www.wsj.com taken from Lipper that shows returns for different mutual fund sectors.  These are not indices, these are returns for actual mutual funds that you and I are invested in.  Pretty amazing how we all thought the end of the world was coming last year at this time.  And now it looks like we are having a truly great year in all markets--bonds, stocks, and international.  Just another cycle of greed, to panic and possible to greed again.  A cycle we have seen many times before and I'm sure we'll see many times again.  Here are the numbers--check out the year-to date especially:

Lipper Indexes

Find Historical Data | WHAT'S THIS?

Tuesday, October 06, 2009

Lipper indexes are based on the 30 largest funds by asset size within the Lipper objective and do not include multiple share classes of similar funds.

		% CHG FROM
Equity Fund Indexes	Last	1-day	1-wk	YTD
Large-Cap Growth	3125.72	1.50	-0.38	28.70
Large-Cap Core	2303.40	1.42	-0.49	21.19
Large-Cap Value	10145.71	1.40	-0.52	18.84
Multi-Cap Growth	2872.12	1.74	-0.44	30.70
Multi-Cap Core	7674.91	1.44	-0.55	27.42
Multi-Cap Value	4282.24	1.36	-0.63	20.91
Mid-Cap Growth	786.29	1.52	-0.58	34.39
Mid-Cap Core	767.09	1.38	-0.97	31.36
Mid-Cap Value	1153.38	1.32	-0.79	31.89
Small-Cap Growth	551.80	1.87	-0.81	30.62
Small-Cap Core	455.24	1.73	-0.94	28.32
Small-Cap Value	739.29	1.83	-1.24	27.30
Equity Income Fd	4469.77	1.34	-0.52	17.06
Science and Tech Fd	706.80	1.72	-0.48	45.51
International Fund	1107.56	2.03	-0.11	31.22
Balanced Fund	5874.01	0.91	-0.21	18.92
		% CHG FROM
Bond Fund Indexes	Last	1-day	1-wk	YTD
Short Inv Grade	298.04	0.11	0.28	9.10
Intmdt Inv Grade	380.03	0.05	0.37	13.10
US Government	510.48	-0.12	0.26	4.30
GNMA	575.38	0.03	0.32	7.96
Corp A-Rated Debt	1348.79	-0.01	0.24	13.84

Source: Lipper

September Update

Here we go: a timely exhibit of various market index returns through September 2009:  I'll have more about this past year and my reflections on what we have been through in my next post.

The Monthly Index Report for September 2009

Index	Sep-09	QTD	YTD	Description
S&P 500 Index*	3.6%	15.0%	17.0%	Large-cap stocks
DJIA*	2.3%	14.9%	10.7%	Large-cap stocks
Nasdaq Comp.*	5.6%	15.6%	34.6%	Large-cap tech stocks
Russell 1000 Growth	4.3%	14.0%	27.1%	Large-cap growth stocks
Russell 1000 Value	3.9%	18.2%	14.9%	Large-cap value stocks
Russell 2000 Growth	6.6%	16.0%	29.1%	Small-cap growth stocks
Russell 2000 Value	5.0%	22.7%	16.4%	Small-cap value stocks
EAFE	3.9%	19.5%	29.6%	Europe, Australasia & Far East Index
Lehman Aggregate	1.1%	3.7%	5.7%	U.S. Government Bonds
Lehman High Yield	5.7%	14.2%	49.0%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	2.0%	1.4%	-2.2%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of September 30, 2009. *Return numbers do not include dividends. ** Returns are estimates as of September 29, 2009.