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"There can be no friendship without confidence, And no confidence without Integrity"
Posted by John on 11/09/2009 at 09:08 AM in Financial Markets | Permalink | Comments (0) | TrackBack (0)
Posted by John on 11/02/2009 at 09:34 AM | Permalink | Comments (0) | TrackBack (0)
Posted by John on 10/29/2009 at 10:11 AM in Investments | Permalink | Comments (0) | TrackBack (0)
I've seen a number of articles lately on the role of the financial advisor. I've also been asked lately where do I think the markets are headed. Both thoughts dovetail nicely I think.
The financial advisor's role is to help protect and build your asset base. You have worked hard over the years to build up a 401k balance, own a nice home and build, hopefully, a taxable investment portfolio as well. You have also tried to save money for college, for retirement and for future generations. You want to retire earlier than your parents did and enjoy the "fruits of your labor". This is where the advisor comes in.
Most of us do not have the ability to forecast the future with precision. Thus, our objective is to forecast as best as possible and hedge the potential risks we expect to encounter along the way. We will attempt to protect your assets via financial and estate planning techniques so that you keep as much as possible of what you have earned and have the best opportunities to pass on a legacy to future generations of your family. A number of risks are encountered in this process - legal and regulatory changes, economic cycles, etc. Not all can be forecast with certainty and the advisor should account for that uncertainty.
With regard to investments, I believe advisors should be focused on constructing portfolios that attempt to meet basic goals - generate an absolute return that exceeds inflation plus a spending percentage and hedge against potential downside risks. These are competing goals and thus require constant examination. Asset allocation is not dead but does need to be revisited conceptually. I believe that rather than regarding asset allocation as an equity/fixed/other combination, advisors should be viewing asset allocation as core-satellite or on a risk basis. The allocation decision is driven by risk targets first, then by return. So the objective is to properly allocate risk among various assets. In this assessment, lower risk strategies are considered core strategies and can be fixed income, equity or other assets. Same goes for riskier assets (satellite). This does involve a degree of tactical asset allocation which involves trading more the riskier assets more frequently. I'm not trying to time the perfect entry and exit, rather, I'm trying to take advantage of volatility to provide excess return when assets are moving up and hedge downside risk when assets are declining. It's not perfect but I think better addresses my primary objectives than the traditional asset allocation approach.
So the financial advisor is attempting to preserve and grow what you've acquired. We should be more conservative than you most of the time and should be the "voice inside your head" attempting to reason you out of more aggressive decisions. We're not perfect, but if we successful one more time than we're not, we should do well for you.
As to where the markets are going, I don't know. I'm always skeptical (never truly a bull or a bear) and always more comfortable with a portfolio that has some "insurance" against a market decline. I think the "premium" paid to hedge some of the downside volatility is worthwhile.
Posted by John on 10/27/2009 at 10:45 AM in Financial Markets, Financial Planning, Investments | Permalink | Comments (0) | TrackBack (0)
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Financial markets were mostly flat for
the week as investors took advantage of continued better than expected
earnings reports to take profits built up over the past 6 months. Treasury
yields moved higher ahead of record note sales planned for the coming week. Economic
data was uneventful as chain store sales were slightly positive, consumer
sentiment fell slightly, the Fed suggested the economy was stabilizing in
some areas and recovering in others and the index of leading indicators
improved.
· Consumer
confidence fell suggesting consumer spending will not lead the nascent
recovery · The index of leading indicators rose for the sixth
consecutive month to a 2 year high · Sales of previously owned homes improved to a 2 year
high Upcoming
Items of Interest Earnings season has ended and
investors will now focus on holiday retail sales for evidence that consumers
will be contributing to the economic recovery via holiday spending. Investors
will also note the 10 year note sales, durable goods orders, GDP growth, jobless
claims and personal income and outlays reports. Data source: All information is based
on sources deemed reliable, but no warranty or guarantee is made as to its
accuracy or completeness. Neither the information nor any opinion expressed
herein constitutes a solicitation for the purchase or sale of any securities,
and should not be relied on as financial advice. Past performance is no
guarantee of future results. The Dow Jones Industrial Average (DJIA) is a
price-weighted index composed of 30 widely traded blue-chip |
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Posted by John on 10/26/2009 at 05:01 PM in Current Affairs, Economy, Financial Markets | Permalink | Comments (0) | TrackBack (0)
Posted by John on 10/20/2009 at 08:25 AM in Economy | Permalink | Comments (0) | TrackBack (0)
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Equity markets moved sharply higher
during the week thanks to several rounds of positive news including continued
better than expected earnings. The weight of the evidence continued to suggest
to market participants that the rate of recovery for the economy could
support higher equity prices.
·
Inflation
remained sanguine, up 0.2% in September but down 1.3% from last year. ·
Oil
and gold continue to rise while the dollar continued to fall suggesting
investors are looking for a dollar alternative. ·
The
ISM index rose above 50% for the first time in a year. An index reading over
50 suggests the economy is growing. Upcoming
Items of Interest Earnings reports continue this week
along with updates on housing starts, wholesale inflation, leading economic
indicators and existing home sales. Earnings will continue to be of
particular importance as investors look for top-line growth to improve. Top
line improvement could be seen as strong evidence that the economic recovery
is sustainable. Data source: All information is based
on sources deemed reliable, but no warranty or guarantee is made as to its
accuracy or completeness. Neither the information nor any opinion expressed
herein constitutes a solicitation for the purchase or sale of any securities,
and should not be relied on as financial advice. Past performance is no
guarantee of future results. The Dow Jones Industrial Average (DJIA) is a
price-weighted index composed of 30 widely traded blue-chip |
Posted by John on 10/19/2009 at 08:48 PM in Economy, Financial Markets | Permalink | Comments (0) | TrackBack (0)

