Monday, October 27, 2014

The Challenges of Writing My Quarterly Commentary

To grow old is to gradually cease to understand the times you live in. 

- Norm Fisher (quoted in the November 2014  Shabala Sun magazine)

Can any of you relate to this? Are you as bewildered by technology as I am?
I'm experiencing many techo-challenges lately, including not wanting to write my periodic website update that you are now reading.  Maybe technology angst is just my newest excuse for procrastination.  I recently discovered my first client newsletter (Spring of 1994) with a different excuse:

"Finally, in late February, I had to commute nightly to Lillehammer to compete in the Luge Dancing Olympic competition.  As you may have seen on TV, I had the bronze medal firmly in my grasp until the judge from Uzbekistan gave me those incredibly low marks for style."

I wrote and mailed my four-page newsletter for fourteen years.  The final paper copy (November of 2008.  #45) was titled, "President Barack Obama, How Cool, I Hope."  Unfortunately my hope cooled rather quickly after that.  That's also when I started emailing my commentaries and posting them to my website.  This saved money, lots of time, and paper, but most were not as cool as my low-tech newsletters were.

Norm Fisher's quote reminded me of my on-going challenges with technology.  I passively use Facebook, though I know being more active is good for business and keeps me better in touch with old friends.  I'm on LinkedIn, but rarely link.  I don't Tweet, and I have no idea what Instagram is.  I don't consume much social media and contribute to it even less.  I hope to change that.

I'm writing this commentary about writing this commentary to prod myself to communicate with you more frequently, possibly monthly, even when it is just a few paragraphs.  It might be thoughts about the stock market, reassuring words in a time of anxiety, sharing an interesting article, or promoting a coming photo show.

Naturally, please let me know if you want to be taken off this mailing list.

May peace be with you and may you never forget your complex passwords. 

Tuesday, July 29, 2014

Are You Part of the Richest 1%?

Have you ever wondered if you are a member of the esteemed (or notorious) top 1% made famous by the Occupy movement? I suspect most of you already know. To qualify by income as a “one per center” your adjusted gross income would need to exceed $389,000 according to 2011 IRS statistics. The 1.4 million Americans in this group received 18.7 % of the income and paid 35% of all income taxes.

But income may not be the best determining factor. If you received $500,000 in tax-free bond income or you chose not to report the half million dollars from an illicit or overseas activity, you would not officially be part of the 1 %. You might not have paid any federal income tax.

For this reason, wealth, or net worth, is a better measure of who is rich, but net worth is harder to quantify. To become part of the richest 1% by net worth (assets less liabilities), your wealth would need to exceed $9 million according to New York University Economics professor Edward N. Wolff.

Wealth is growing most rapidly for the richest one hundredth of one percent. That 's not good news for the remaining 99.99% of us. According to Business Week, this group owns over 11% of America's wealth, the highest percentage it has been since the “Roaring Twenties,” over 90 years ago. In the 1970s, they owned 3% (see first link below).

"An amazing chart (see second link below) from economist Amir Sufi, based on the work of Emmanuel Saez and Gabriel Zucman, shows that when you look inside the 1 percent, you see clearly that most of them aren't growing their share of wealth at all. In fact, the gain in wealth share is all about the top 0.1 percent of the country. While nine-tenths of the top percentile hasn't seen much change at all since 1960, the 0.01 percent has essentially quadrupled its share of the country's wealth in half a century."

If you want to learn more about expanding income inequality and the Incredible Shrinking Middle Class, I’ve included some interesting links below. Fascinating statistics

Tuesday, May 27, 2014

The Flat Stock Market

Since the start of 2014, the Standard and Poor's 500 Index is up about 2%. Not bad, but when this proxy for the overall stock market has averaged a 21% growth rate per year over the last five years, a relatively flat stock market seems awfully boring.

I like flat markets. For one thing, they are better than rapidly declining markets. Secondly, plateaus like this give the market time to rest after a meteoric rise. It gives investors, big and small, time to evaluate if stocks are over-priced or under-priced in the current economic situation. Despite what the media analysts say about why the market went up or down on a particular day, what usually moves the market is whether an individual stock is perceived as cheap or expensive.

Flat markets don't necessarily lead to rising markets, but the domestic economy is relatively healthy, and most economic indicators are positive. There are no looming reasons for a sharp drop in the stock market, but it has been over 20 months since the S+P has dropped more than 10%. This is a normal occurrence during a long-term positive stock market. Major declines are usually caused by major political events or unexpected economic jolts. Barring one of these events, I believe the stock market is positioned for cautious, sporadic long-term growth.


Most of my clients' accounts are invested in well-diversified mutual funds. As a result, performance will generally be less than in the S+P during good times and not as poor during bad times.

You cannot invest in the above indexes and averages. Indexes are unmanaged groups of securities and are not directly available for investment. Past performance is no guarantee of future return. Investing involves risk, including loss of principal. Passive benchmarks are unmanaged groups of securities and are not directly available for investment.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or specific investment advice, nor should it be considered as a recommendation to purchase or sell a security.

Monday, February 10, 2014

What a Difference a Year Makes

For thirty five years I've followed the stock market as part of my profession. For the twenty prior years, starting at about age ten, I was a spectator and minor participant. During those 55 years, I've learned that the stock market is not predictable. Good years don't necessarily follow good years and bad years don't continue indefinitely.

During the best markets there are reasons to worry that a serious decline is around the corner. When awful markets drag on and on, there is always glimmer of hope. No one knows what will happen next year.

When your time horizon is longer, say to five or ten years instead of one year, it's more likely that the following time period will be similar. But this last five year period, 2009-2013, was dramatically better than the previous 2008-2012 period. The one-year return for the Standard and Poor's 500 Index* in 2013 was an INCREASE of 32%. Last year replaced 2008 when the S+P Index LOST 37% of its value.

The average five-year return from 2008 to 2012 was only 2% per year. The next period from 2009-2013 showed an astounding 18% per year return. Unfortunately many investors got out of the market in 2008 and have not yet returned.

I apologize that my inner financial geek has taken control of my web commentary, but I have a point to make. Don't get too excited when the market is good and don't get too cautious when the stock market is scary. When you invest for the long-term, you need to be patient and not get too wrapped up in how the current stock market is behaving.

* See Index performance chart on my website. You cannot invest in the above indices and averages. Indexes are unmanaged groups of securities and are not directly available for investment. Past performance is no guarantee of future return.