First Things First….. – Allow me this one time to gloat…. After graduating from Marine Corps Officer’s Candidate School in Quantico, VA, my oldest son decided to pursue his engineering career and accepted a position as a Petroleum Field Engineer with Halliburton in Texas. He will make nearly triple what the average 2011 college grad makes currently. He graduated last year from UNH with a degree in Civil Engineering. My youngest son just got back from California where he completed a summer internship at the NASA Jet Propulsion Laboratory (aka: JPL for all you science geeks) at Cal Tech in Pasadena. He is a senior this year at UNH majoring in Physics. By the way… I have no idea what either of my sons had for a college class rank or what their GPA was at any stage in college. I never asked them and they never supplied the information. I just believed in them.
Women’s ONLY Investing Seminar… Interested? – After a number of requests by women for a “women only” investing seminar, I have scheduled a seminar at the New Boston Town Library on Thursday, October 18th from 6:30 to 8:30. It will be a casual workshop environment with open discussion on topics including “Common Investment Terms,” “How to Select a Stock,” “Fundamentals of Mutual Funds,” “The Basics of Options,” etc. Westminster Financial’s Senior VP and Research Advisor, Joan Goodman will be available as a guest speaker via remote from Chicago to answer questions on fundamental stock analysis. It is free and open to any woman who wants to learn more about investing in the markets. There will be NO promotions or recommendations of any particular product or investment. This is an informational presentation ONLY. It should be a fun time. Please leave your husbands and significant others at home just this one time. Please shoot me an email at firstname.lastname@example.org or call my office @ 603-232-8308 if you would like to attend. Thanks in advance!
Trivia Question….Who said this? – A certain President relinquishing the White House to the incoming President once said, “ If you are as happy, my dear sir, on entering this house as I am in leaving it and returning home, you are the happiest man in this country.”
Facebook Shares… What gives?… - Those of you who read my posting on the eve of Facebook going public will remember I mentioned that the “lock up” period for people who were awarded shares would start to end soon. The first phase started on August 16th. At noon the shares were down over 6% with many shares (over 93 million!) flooding the market to be sold by people wanting to cash out. That is what caused the sudden drop. This may or may not continue. There is huge “short interest” in the stock already. Short interest is the term for the number of FB shares that have been borrowed and already sold on the market in the hopes that the stock will fall to a lower price so the “borrower” can then buy back the shares in the open market at the new low price to “cover their short position” and pay back the number of shares they borrowed for a nice profit. It’s a nice strategy but sometimes it backfires. If enough shorts jump in to buy back and cover, the result is a considerable uptick in demand for the shares and thus its price. If the public and the computer programs pick that up, then they might buy causing more uptick in demand and price. If the remaining people who are short the stock panic and buy to cover their short position it adds fuel to the fire. That is what is known as a classic “short squeeze.” My guess is that FB shares will continue in a trading range for some time because of the nearly 2 Billion (with a B) shares that are locked up but will eventually all be available for trades. Be careful if you are playing the Facebook game!
What’s a good strategy for my nest egg? – I have always believed that having three rings in the circus is a good way to go. Let me explain. It is rarely, if ever, a good strategy to put “all your eggs in one basket.” (No… I didn’t just make that up). I believe it is prudent to have a portion of your investments directly in equities (stocks, for instance), a portion in fixed income (bonds or preferreds) and a portion in an insured, pension-like vehicle like a variable or fixed annuity or life insurance (there is a reason why almost all worker pensions have an annuity component guaranteed by an insurance company). By the way, you will see more and more 401k’s with an annuity option going forward. The year 2008 proved that you must be involved with your 401K. Way too many people blamed the politicians and the bankers for their losses in their 401K’s because they “assumed” that they were like pensions with guarantees. Not so. And far too many people relied on those “target dated funds” to assure their retirements. Another huge mistake. Work with your advisor on your whole nest egg even if he or she does not have direct access to all of your investments. It is very important to take the holistic approach with your nest egg. You will rarely see me use that word “holistic” because it is used ad nauseam today for everything you can think of. But I believe it does apply here. If you want more detail, a better explanation or need some help, please email me or call. This is what I do.
When I become President someday….. Another of my Presidential directives or executive orders will be… (effective immediately) the phrase “My Bad” will be stricken from the freedom of speech arena not on Constitutional grounds but because it is one of the most insipid and annoyingly egregious uses of the English language, a language that we used to study and hold dear. There are other notoriously bad phrases. But that one is “fingernails on the chalkboard” for me and if I’m the President, it goes. Another of my directives will be… on anniversary dates of 9/11, all television programs will be required to have a brief moment of silence at the times in the morning when both Tower One and Tower Two collapsed and NOT have the Kardashians on talking about their breast augmentations like NBC chose to do this year. Honestly… and NBC wonders why their ratings have been slipping for years!
What about those “Target Dated Funds” you mentioned…..? – I am no fan of Target Dated Funds. Most of you have seen them. They are practically required in all 401K plans today and most mutual fund companies offer them. They are simply funds that have allocations set depending on the time horizon you select. For instance, let’s say you have child now 5 years old who will enter college in 13 years in 2025. A 2025 target fund might be 100% in stocks and no bonds. As you get closer to that 2025 date, the allocation gradually changes from all stock to a balance of stock and bond and eventually all bonds or cash so the money will (or should) be there when you need to take it out. Nice theory. That is great if the market behaves normally like the gradually more conservative target fund does. It is the lazy man’s way of investing. In effect, it is a “one size fits all” approach. For all you ladies out there… have you ever tried on a “one size fits all” dress? I’ll bet you looked great in it, didn’t you. And for the guys… did you ever try on a “one size fits all” Speedo? The picture scares me, not to mention how all the ladies feel. Let’s go back to 2007 and assume you had all your money in a target dated fund for your planned retirement in 2010. Your target dated fund (probably around 80% bonds and 20% or less in stocks) would have lost enormous money and then would have been poorly allocated for the big market rally in 2009 and into 2010. I believe you must customize your portfolio to you, your risk tolerance, your time horizon, AND (perhaps the most important factor) the current markets. If you are two to three years away from your target date and your target dated fund in 90% in bonds and interest rates go on that upward tear that everybody is predicting, you will lose huge amounts of your nest egg in the last three years before you need the money. Not good! If you need more info, as always, please reach out to me. I would be happy to spend the time with you.
My thoughts college education, its cost and value … – An article on Marketwatch on August 23rd by Quentin Fottrell states (from a survey of 500,000 recent grads) that the average starting salary for grads now is $27,000. Over 50% of grads have jobs that do not require a degree. Only 20% of grads have their first job in their field of study. Over the past year, 58% of all job growth was attributed to workers over 55 years old. Unemployment for workers over 55 was 6.2% while it was 12.7% for those 18-29. One student grad, 23 year old Dave Marshall, graduated from the University of Florida with a degree in Sociology. He is a security guard now. He said, “My education is irrelevant, but it’s a job.” I can understand why the President is worried about support from this age group this time around. I don’t know what most jobs pay today, but I’ll bet the starting pay for a full time oil change technician at Jiffy Lube is frighteningly close to the 27K figure. The average cost for a four year degree at UNH is well over 20K per year and climbing rapidly. Yikes! I recently had a conversation with a grandparent about how much they should contribute to their grandson’s 529 college saving plan. My answer was (sadly), “The absolute max you can afford.” Guaranteed “student aid” in the form of “loans” has given all colleges Carte Blanche to charge whatever they want. So, tuition and fees will continue to skyrocket until the public says, “Enough.” The more the government “helps” us by making college “more affordable,” the more college educated sociologist security guards we will have.
Annuities…What’s the deal with them….What do I need to know about them? – Most people don’t have a clue what annuities are, even though they appear everywhere in people’s portfolios quite often. Some are fixed. Some are variable. Some are indexed. Not all are good. And not all are bad. There is not enough room here to explain them all. However, if you would like to know the differences in these investment vehicles, I would be happy to spend time with you to help you understand them. Like options, there are many misconceptions surrounding these products. They don’t bite and there is no reason to fear them; but there are plenty of reasons to understand them. Please call or email on this if you have an interest. Remember… there are no stupid questions, except the unfortunate ones which are not asked.
From the Edna Ferber file…. – The author Edna Ferber was fond of wearing tailored suits. Noel Coward, the famous British playwright and actor, met her on one occasion when she was wearing a suit very similar to the one he himself was wearing and greeted her with the words, “You look almost like a man.” Miss Ferber replied, “So do you.”
What’s going on at the Fed?.... – A recent release of the “Fed Minutes” from the July 31-August 1st meeting has confirmed that further support would be needed “fairly soon” if the economy doesn’t improve significantly. That doesn’t make QE3 a certainty, but it looks a lot like what I have been predicting in this newsletter for months. I see the ten year Treasury coming back down from its recent highs and interest rates staying low for some time. The Fed wouldn’t dare raise rates with and economy just slightly ahead of Europe’s which is already back in recession. If you put new money to work, I advise you do so cautiously. UPDATE… the Fed announced on September 13th that they will indeed continue to purchase around 40 Billion per month of longer dated bonds (30 yr) and mortgage backed securities. This is affectionately known as QE3. What a surprise! They also stated that interest rates would most likely continue to be low until 2016. Inflation (unless we start to see real upward pressure on wages) should also continue to be very low. Bad for savers….but good for home buyers who borrow. So, the never ending search for higher “yield” in our investments should also continue.
From the Noel Coward file…. – During a rather stormy rehearsal of Blithe Spirit which needed many scene retakes, Coward was losing patience with actress Claudette Colbert. Colbert screamed at Coward, “If you’re not very careful, I may throw something at you!” Coward replied, “You might start with your lines.”
Do you offer a “Stock Only” Managed account? – Yes! For those who prefer to invest in stocks, bonds and ETF’s on an individual basis as opposed to mutual funds, etc., I do have stock portfolio accounts that are co-managed with the Investment Policy Committee at Westminster Financial. These accounts are strictly fee based accounts and therefore, commission free. They utilize option strategies along with both technical and fundamental analysis. They are set up and maintained based on your risk tolerance, time horizon and income needs. Careful consideration is given to tax deferred accounts like IRA’s and taxable accounts. If you would like more info on these types of accounts, please contact me so we can discuss them.
Answer to the trivia question…. – James Buchanan said it to Abraham Lincoln
Referrals of Friends or Family – I prioritize the growth of my practice through people referred to me from existing clients’ family members and friends first. If you have a friend or family member you believe would benefit by working with me, please feel free to give them my contact information. Also, feel free to forward any of my monthly market commentaries to them. I would welcome their business.
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Emergency Trading – I travel and meet clients outside of the office frequently. In the unlikely event that you need to make a trade during market business hours (9:30 AM – 4:00 PM weekdays) and I’m unavailable, please call my home office @ 1-800-235-7526 and tell the operator you need to make a trade. Try to avoid trading near the market open or close.
*The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions. This newsletter is not to be construed as an offer to sell or the solicitation of an offer to buy any securities and should not be construed as a recommendation of any specific security. Information provided is obtained from sources deemed to be reliable, but Westminster Financial Securities, Inc. (WFS) does not guarantee the accuracy or completeness of the information or make any warranties with regard to the results to be obtained from its use. WFS shall not be liable for any claims or losses of any nature, including, but not limited to, lost profits, punitive or consequential damages. Past performance does not guarantee future results.
Sr. Vice President, Investments
Westminster Financial Companies
264 South River Rd. - Suite 550
Bedford, NH 03110
Tel: (603) 232-8308
Fax: (937) 898-0119