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Investment Commentary, Education, & Insight.
Tuesday, July 15, 2014
If Only
Tuesday, May 27, 2014
Fwd: Me On The Podium Of The NYSE
-------- Original Message --------
Subject: Fwd: Me On The Podium Of The NYSE
From: Becker <captain_average@yahoo.com>
To: "Bern: Bern Becker" <bbecker95@hotmail.com>
CC:
---------- Forwarded message ----------
From: Marc Becker <becker@wiserfinancial.com>
Date: May 24, 2014 6:29 ASubject: Me On The Podium Of The NYSE
To: captain_average@yahoo.coCc:
From: Marc Becker <becker@wiserfinancial.com>
Date: May 24, 2014 6:29 A
To: captain_average@yahoo.co
Me On The Podium Of The NYSE
On the Podium at the New York Stock Exchange
I'm the guy in the brown suit.
Can't quite make me out? I'll make it a little easier momentarily. To be on the floor of the NYSE, let alone on the podium was a tremendous honor. When I received the call, the first thing the guy asked me was if I could be in New York on Wednesday.
I said, "no." There was a long pause so I added, "why?" After that was answered, as it turned out I could in fact be in New York on Wednesday. Here's a few special moments from my trip.
After receiving entirely different subway instructions from 4 very nice city folk, this is me lost in the subway after attempting to combine the routes to come up with an even better one.
Here's the NYSE when approaching from Wall St. about 2:30 p.m. As you can see they don't let anyone near it. When entering, I was a little disappointed they clearly didn't deem me much of a threat.
Given where I was, I figured the universal sign for "I'm getting robbed," was appropriate.
I ran into long time CNBC anchor Sue Herrera outside the exchange. I think it might be time for me to call Bosley.
This is the Board Room at the exchange. Fancy. After the close we came back and had a party in here. It was awesome.
This is the original clock from the NYSE when it opened in 1865. Back then, stocks were traded one at a time. This clock rang every 5 minutes signifying the closing of trading on one stock, and the opening of trading on the next.
One little extra trade couldn't hurt anything...right? The guy belonging to this station emerged a second later. He didn't think this was as funny as I did.
On with the big moment...I've been watching the floor on TV a long time. Men wear blue or charcoal suits to the extent I called ahead to see if another color was allowed. Several of the guys were jealous they didn't think of that.
Well, that's about it, unless you want 50 seconds of live action.
Again, I thank Daniel Gamba, Head of iShares Americas (to my left in the photo above), Mark Carver, iShares Director of Factor Investing (who designed the enhanced index funds this event celebrated opening), and iShares management consultant Sarah Lochner, who was instrumental in helping me make the most of the experience.
As always, I welcome your questions and comments.
Marc Becker, AIF
Managing Partner
Wiser Financial Coaching, LLC
Sunday, March 30, 2014
Rebalancing at Dawn
Rebalancing at Dawn
“The hour is darkest just before the dawn.“ Thomas FullerThis is the kind of quote you’ll hear from seasoned investors in bear markets, after stocks drop in value for an extended period. And you’ll see them act on that optimism.
For example, about 5 months before the market turned around in 2009 Warren Buffet was touting similar catch phrases including, “When others are greedy, be fearful - When others are fearful, be greedy.” The Dow was about 8500 then and few were buying stock. He was 78.The fact is, even though we know the market won’t go down forever, acting on this is counter-intuitive for most people. Likewise, when the market is soaring, it becomes harder and harder to resist.
Coincident to his statements he was converting his all bond portfolio to 100% stock. If we can agree that Buffet is a seasoned investor, then we would have to agree that most investors aren't seasoned. Or at least they don’t behave like they are.
The Investment Company Institute (ICI) is the national association of U.S. investment companies, including virtually every type of investment fund in existence. Members of ICI manage total assets of $16.5 trillion and serve more than 90 million shareholders.
Safe to say, it has mountains of data to track when and where investors are moving their money. ICI is constantly issuing data and reports. If you’re so inclined, you can find interesting research and statistics by clicking here.
Recently, the ICI announced that as of Q3 2013, Total U.S. retirement assets were almost $22 trillion. I’m emboldening this word because it has become somewhat commonplace; yet it is staggeringly difficult to comprehend a number that big.
It’s a number so vast, you’d have to count every second for the next 700,000 years to get in the ballpark of 22 trillion. If considering giving that a whirl, poking around on the ICI site linked above is a better use of your time.
Inside ICI’s Q3 2013 Retirement Market numbers, bonds found themselves “out of favor,” losing 1% for the previous year [as measured by the Aggregate Bond Index] as stocks [measured by the Standard & Poors 500] were up over 20%.
The money flow out of bonds and into stocks in the highlighted rows below are telling. You can decide for yourself if this is seasoned behavior:
If dollars were voters, 29 billion voted for stocks after experiencing double digit returns. 58 billion voters rejected bonds after a decline in value. Plainly put, they voted to buy high and sell low - the opposite of Mr. Buffet’s seasoned example above.
Another issue that arises when investors follow their gut is a systematic dissolution of portfolio diversification. That’s the fanciest way I can think of to say: they sell whatever isn’t doing well right now and buy way too much of whatever is doing better.
The trick to creating wealth over time is to remain invested in a variety of things that perform differently. And the trick to maximizing that experience is to rebalance the investments as values shift. The result is maintaining the approximate weightings you started with.
To illustrate what I mean, let’s create a person. That’s always fun. Meet Franklin McButterpants, who owned 50% equity (stock) funds and 50% bond funds in 2012. A year later, in 2013, Mr. McButterpants’ holds 60% stock funds and 40% bonds because stocks went up 20% and bonds were down a smidge.
Franklin, represented in the cash flow chart above, sold off bonds and bought more stock funds. He did this because, like most people, he prefers to make money rather than lose it. And stocks were the only things making money at the time.
In that light, it seems the right move. But sometimes, in the words of poet Robert Lowell, that light in the tunnel is an oncoming train. When we look at the math, even though Franklin’s investments had become riskier on their own (overweight in stock), he made them even more so. And he bought expensive stuff to do it.
This is why rebalancing a smartly diversified investment mix becomes so important.
A key issue, especially for retirees, is maintaining how risky the overall investment is. Stocks are riskier than bonds. So if we pile up on them we are piling on risk. Rebalancing minimizes risk fluctuation, but it also helps maximize our returns while doing so.
Ideally, McButterpants would have sold 10% of his stock funds to get back to a 50% overall allocation. He would use the proceeds to buy bonds back up from 40% to 50%. Risk exposure remains intact. Yay.Further, Franklin would have done himself a huge favor because at some point, bonds will be the best performers again. And he just bought a bunch on the cheap. What a concept.
Proper diversification and adherence to a rebalancing strategy solves our natural inclination to chase performance. While rebalancing can’t prevent all investment risk or losses, it can help us take the statistically correct action when the hour may seem darkest.
Of course, this isn’t always the easiest decision to make. I mean…it’s dark. It’s hard to see when it’s dark. But then again, things are not always as they appear. Like selling stuff not doing well to buy stuff knocking it out of the park. If that still seems like a good idea, read this again.
I welcome your comments and questions,
Marc Becker, AIF
Managing Partner
Wiser Financial Coaching, LLC
Copyright © 2014 Wiser Financial Coaching LLC, All rights reserved.
Marc Becker
Wiser Financial Coaching, LLC
2741 Campus Walk Ave.
Bldg 400 Ste 400
Durham, NC 27705
Tel: (919) 477-3355
Fax: (919) 477-3366
becker@wiserfinancial.com
Securities offered through Triad Advisors Inc., Member FINRA/SIPC
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Wiser Financial Coaching, LLC · 2741 Campus Walk Ave · Bldg. 400 Ste 400 · Durham, NC 27703 · USA
Knowledge, Power, Cars
Knowledge, Power, and Cars
If you have been considering a new car purchase recently, now might be a good time to take the next step. Automobile manufacturers have suffered more dramatically than other retailers during this harsh winter.
This isn’t surprising. Who wants to test drive cars when it is 4 degrees outside?
Inventories have been rising to what most economists consider unsustainable levels. Yet most auto makers have not slowed down production. The industry expects sales to skyrocket once it warms up.
Regardless of the veracity of that prediction, what that means right now is dealers have too many cars on the lot and not many prospects to sell them to. This is good news for a savvy consumer.
Below is a link containing some great tips when buying a car from a dealership. But I want to share what I believe the most important tip is in negotiating price, which I never see included in tip sheets:
- Be able to justify why they should sell the car to you for the price you want to pay
I purchased a new car on a cold rainy day in late November of 2013. I picked a cold rainy day as fewer people shop for cars on days like that. I picked late November as dealerships begin taking delivery of the new year models typically by early November.
That’s when we start seeing lots of ads about the latest and greatest…in plenty of time to capture holiday shoppers already in the money spending mindset. Inevitably, the dealerships still have what is known as “new old stock” on the lot.
That’s a new car from the previous model year. They don’t just want to get rid of these vehicles, they have to get rid of them and usually offer additional incentives to achieve that.
I told the salesman I would pay the sticker price for the mid-line model, as long as he sold me the top end model. He said his manager wouldn’t go for that.
I explained they had 8 of these on the lot and I knew they needed to get rid of them. I told him specifically why I knew that to be true (as described above). I concluded with my knowledge that every other dealership in town is in the same situation and several competitors have very similar cars.
My final point, I’m ready to buy a car today, but I don’t need a car today.
15 minutes later we had a deal at my price - $3,500 below sticker. I guess knowledge really is power.
Currently, dealers have a similar inventory problem with the added benefit (for the consumer) that they are hungry. Low sales don’t just mean excess inventory, they mean low commissions for salespeople and income for dealerships- another leverage point for buyers.
Some manufacturers are offering extra incentives and rebates right now to help alleviate these problems. So if you’re in the market for a new car, enjoy exerting your power.
Car buying tips
Inventories and incentives rising
As always, I welcome your questions and comments.
Marc Becker
Accredited Investment Fiduciary
Managing Partner, Wiser Financial Coaching, LLC
Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm
Trivia Time
Question: Which country holds the record for the most all-time Winter Olympic medals won?
Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.
The answer will be in the next newsletter!
Last newsletter’s question: Name two teams that the USA will face in the first round of the 2014 World Cup.
Answer: Germany, Portugal, and Ghana.
Source: www.fifa.com
Congratulations to Dick. W. for getting the correct answer! You rock!
Copyright © 2013 Wiser Financial Coaching LLC, All rights reserved.
Marc Becker
Wiser Financial Coaching, LLC
2741 Campus Walk Ave.
Bldg 400 Ste 400
Durham, NC 27705
Tel: (919) 477-3355
Fax: (919) 477-3366
becker@wiserfinancial.com
Securities offered through Triad Advisors Inc., Member FINRA/SIPC
This email was sent to << Test Email Address >>
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Wiser Financial Coaching, LLC · 2741 Campus Walk Ave · Bldg. 400 Ste 400 · Durham, NC 27703 · USASunday, December 15, 2013
Sell Draper, Buy Bogle
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Sell Draper, Buy Bogle
Sell Draper Buy Bogle
This September was the 5 year anniversary of the Lehman Brothers collapse in 2008. While the market had been declining since late 2007, this event marked two major events.
To begin, it was the first tangible evidence something was wrong…really wrong. Second, this event turned a declining market into one of free fall for the next 6 months. Investors were reeling as exhibited in the chart below.
$422,000,000,000 – the amount of money investors moved from stocks to money market funds in 2008
Essentially, half of investors owning stocks threw in the towel and fled to the opposite corners of cash, bonds and gold over an 18 month period. The golden rule, "buy low, sell high," was not strong enough to withstand the worry and pessimism of the time.
Ugh...pass the Pepto.
Enter Don Draper – the iconic main character in the hit series Mad Men.
Like an annoying mosquito buzzing around your head, the Wall Street marketing machine relentlessly pursues any opening to suck the blood (money) out of you. It employs "Don Draper" marketing tactics, packaging tempting products to persuade investors to 'sell that and buy this.'
When tech stocks and gold were hot, there were no end of new funds and coin dealers marketing to capture the consumers' burning desire to get in on big returns. And capture that desire – and money - they did.
As this unique five year Anniversary is Upon Us, Be WARNED:
The marketing machine is now primed to kick into full gear and start selling FIVE-YEAR returns, often making it seem as though the economic collapse left these investments unaffected.
Chuck Jaffe of MarketWatch writes**:
"…at the five-year anniversary of the collapse of Lehman Brothers—the signature event of the financial crisis of 2008—mutual fund companies are watching as the passage of time removes all of that pain from five-year performance records.In fact, according to Lipper Inc., when you take the fall of 2008 off the books the cumulative 5 year return of the average large-cap core fund goes from 37.82% entering September to 94.14% by the end of the year.
This creates a before-after picture that's as startling as the sudden transformation of a 98-pound weakling into a pumped-up, sculpted contender for Mr. Universe.
It will be interesting to see how the marketing machine targets investors and advisors regarding five year returns. The new Dodge Durango campaign utilizing Will Ferrell's character, Ron Bergundy, comes to mind as a possibility.
In these commercials Bergundy says nothing about the car. He spends the ad time joking about Dodge and insulting horses. But the Durango looks great behind him and sales are up 35% since the beginning of the campaign two months ago.
More recently, the entire Dodge fleet is behind Bergundy as he does nothing more than argue with the producer about the pronunciation of the word "Dodge." It's hysterical, only 30 seconds, and most importantly…it's working.
Click here to check it out: Dodge commercial
Maybe the mutual fund companies will hire Ferrell and do the same thing with 5 year 100% cumulative returns in the background. On the one hand you doubled your money if you were invested like this...what else do you need to know? On the other hand, if you were invested in the fund for 6 years instead of five...now you're back to even.
Enter John Bogle
John Bogle, the father of index investing and founder of Vanguard would never be hired by Don Draper. At 84, he still takes the train instead of a limo, wears a $14 dollar watch, and keeps his thermostat at 55 at night. Personally, John isn't the image of success. Even worse is that Bogle's message is boring.
Here's Bogle's sizzle free advice:
Markets will plummet and markets will soar. Marketing will remain ubiquitous regardless of current circumstances. If you feel tempted to do "something" call your trusted advisor first. He/she can be your advocate and objectively assist you in determining if changes are likely to help you meet your financial goals.
- Don't allow transitory changes in share prices to alter your investment program.
- There is a lot of noise in the daily volatility of the market, which too often is 'a tale told by an idiot, full of sound and fury, signifying nothing'.
- One of the greatest sins in investing is to be captured by the siren song of the market, luring you into buying when prices are soaring and selling when they are plunging.
- Impulse is your enemy because market timing is impossible. Even if you correctly sold shares before a decline (a rare occurrence!), where on earth would you ever get the insight that tells you the right time to get back in? One correct guess is tough enough. Two are nigh on impossible.
- Time is your friend. If, over the next 25 years, shares produce a 10% return and a savings account produces a 5% return (right), $100,000 would grow to $1,080,000 in shares vs. $340,000 in savings.
"Every time I did something because of marketing, it was going to be on the long list of things I shouldn't have done." – John Bogle
I welcome your questions and comments,
Marc Becker
Accredited Investment Fiduciary
Managing Partner, Wiser Financial Coaching, LLC
Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm
*source: http://www.ft.com/intl/cms/s/0/baf06c20-d85b-11dd-bcc0-000077b07658.html#axzz2f3zD8GBz
http://www.marketwatch.com/story/mutual-funds-erase-financial-crisis-from-history-2013-09-13
**source: http://www.marketwatch.com/story/mutual-funds-erase-financial-crisis-from-history-2013-09-13
Trivia Time
This week's question: Name two teams that the USA will face in the first round of the 2014 World Cup.
Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.
The answer will be in the next newsletter!
Last week's question: What was the only hurricane in the Atlantic basin to make landfall with wind speeds confirmed at or above 190 mph?
Answer: Hurricane Camille in 1969.
Source: www.wikipedia.org
Congratulations to Dick. W. and David R. for getting the correct answer! You rock!
Copyright © 2013 Wiser Financial Coaching LLC, All rights reserved.
Marc Becker
Wiser Financial Coaching, LLC
2741 Campus Walk Ave.
Bldg 400 Ste 400
Durham, NC 27705
Tel: (919) 477-3355
Fax: (919) 477-3366
becker@wiserfinancial.com
Securities offered through Triad Advisors Inc., Member FINRA/SIPC-->
This email was sent to bbecker95@hotmail.com
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Wiser Financial Coaching, LLC · 2741 Campus Walk Ave · Bldg. 400 Ste 400 · Durham, NC 27703 · USA
Saturday, November 9, 2013
Miserable Money - 11/8/13
Miserable Money
My Dad has a saying, “Money might not buy happiness, but it sure makes misery a lot more fun.”
Few would disagree that money is an important factor in our lives. I’ve heard it described in many ways: a tool, a blessing, and a curse among them. When it comes to my and clients’ savings, I consider money an employee.
I expect it to work toward producing value for the future. So when it comes to “hiring” an investment portfolio, I look for characteristics that increase the probability of a successful investing experience.
I want money employees that will produce consistently and predictably in return for the fee I’m paying – keeping in mind all employees will disappoint at times.
Another attribute is how well the candidate will fit in with the culture. When hiring humans it is difficult to determine in advance if they will play well with others.
When it comes to hiring the players in our investments though, we have a leg up on this. There are known and measurable characteristics in investing that tell us these things.
Early in my career I had the opportunity to study briefly under Dr. Eugene Fama, who was awarded the Nobel in Economics a few weeks ago.
I’m not name dropping here. If we passed each other at the mall he’d have no idea who I am. But I would know who he was…and I’d stop him…and then probably embarrass myself.
Anyway, Dr. Fama introduced me to the world of academia as it relates to structuring market portfolios. Decades ago his work led to the development of The Three Factor model. It’s super simple:
for more click here
Don’t freak out, chances are you already understand what this equation bears out.
1) The Market Factor: Stocks make more than bonds. Stocks are riskier than bonds.
2) The Size Factor: Small company stocks make more than large company stocks. Small company stocks are riskier than large company stocks.
3) The Value Factor: Value company stocks (usually distressed companies) make more than growth company stocks (usually companies with strong financials and market positions). Value companies are riskier than growth companies.*
Though the science of investing is in its infancy, these factors address the most important investor question: how many baskets do I need and how many eggs should go into each one?
Factor investing employs a methodology of predicting how our portfolio employees will perform on their own and with each other over time. Money may belie misery, but if employing it is a guessing game, it may compound it. Miserable money.
As time has gone on other beneficial factors have been revealed. I recently attended a lecture given by Mark Carver, a Director of Factor Strategy for Ishares. His work entails identifying “statistically persistent anomalies” within asset classes.
Before you fall asleep, this is the same thing drug companies do when testing a new medicine. If the drug kills a bunch of people (a persistent negative anomaly) it doesn’t go to market and vice versa (hopefully).
Cause and effect…simple. Mark has helped identify other factors, such as quality, in a portfolio.
For a 2 minute explanation click here and play the video..
Wiser investors (portfolio bosses) always have an eye on increasing efficiency, and that is what the science of investing is all about. I talked with Mr. Carver after his presentation and sent him a copy of my new book.
Should we ever pass in a mall, with any luck he’ll know who I am too.
I welcome your questions and comments,
Marc Becker
Accredited Investment Fiduciary
Managing Partner, Wiser Financial Coaching, LLC
Wiser Financial Coaching, LLC, is a Registered Investment Advisor Firm
*The Factors as summarized above consider the entire asset class of stocks vs. bonds, small stocks vs. large stocks, and value stocks vs. growth stocks. These factors are neither applicable or predictive of individual securities performance nor are a recommendation for any investment in securities. Each factor stated is in reference to the asset classes noted “as a whole.”
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