December 31, 2015

2015 - Dow and S&P 500 lose, Nasdaq gain

So another year in the books.  2015 was the first year since 2008 that the DJIA lost value.  S&P500 too but the Nasdaq gained so where do you stand?

Dow down 2.2%
S& P 500 down 0.7%
Nasdaq up 5.7%

Have you heard from your financial guy lately?
Same ol' same ol', we are in a stock pickers market, expect volatility, blah, blah, blah.

If it was a stock pickers market, should I assume your financial guy beat the market?

More than likely, he fared worse than the market and do you know why?

Two reasons.

1) he basically buys the market (something you can do yourself)
2) he charges a fee (takes money out of your account)

Learn more here.

September 30, 2015

Down 7% In One Quarter, What Is Your Financial Guys Strategy, If Any?

What exactly are you paying for?
Why do you have a financial guy?
When the market is down 7% in one quarter, what is the strategy?
These are all good questions for you to ask yourself and your financial guy.

Remember that financial guys get paid by taking money out of your account, either by fees or by commissions.  That is the job, period.  Make no mistake and it takes more clients to make more money which is why you don't hear from him very often if at all.

What are you doing to yourself?

August 21, 2015

Dow Off 500, How Many Financial Guys Have Seen This?

So with the DJIA off more than 500 points today and the correction firmly in place.  The biggest question I have is how many financial 'advisors' are new to the business in the last 7 years and what are they likely to do with their clients money?

USA Today Article -

The financial is like most industries, they seem to have very bad timing.  They have been hiring new financial advisors at a pace not seen since (you guessed it) 2005.

Now that the DJIA is firmly in correction territory, down 10%, the analysts and Wall Street crowd will all be pointing fingers.  You will be hearing stuff like volatility, correction, bear market and why they think its going lower or higher, what you won't hear is who told you to sell at Dow 18000 because no one did!

Just Sayin'.

June 8, 2015

Calpers doing what you should - lower your fees!

Bottom line is that fees are everything.

The investment business is built on the fallacy that they can invest better than you can.

Not only that, they will charge you a fortune to invest your money regardless if they beat the indexes or not.  WOW.

Finally, the country's largest pension fund, Calpers sees the light.  Read the NY Times article here.

April 21, 2015

Flash Crash in 2010 was a buying opportunity

So today one guy, one trader was charged with causing the flash crash in 2010.  That one guy can cause that kind of damage is amazing. See line though, is that the DJIA was approximately 10000 that crazy day and if you panicked, you sold at a terrible time, the DJIA in now approximately 18000.

I was very young in the market in 1987 when the market plunged 22% in one day and truly thought the world was over.  But as I learned over the years, again, if you panicked and sold, you look pretty silly right now, the DJIA was 1800 then.  Link here, see  The DJIA has risen 10x since then!

The point is that traders may care alot about intraday moves and that is unfortunately who you see on the news so it is natural to get likewise scared but learn from these moves that they are temporary and in most cases, awesome buying opportunities for long term buy and hold investors.

Remember, passive investing beats active investing.  Don't get rattled by intraday and short term moves.  Buy quality and let others sweat it out.

March 3, 2015

Index Investing versus Hedge Funds (and it's not even close!)

Warren Buffett has a message for public pensions, colleges and the like: Stop pouring money into expensive, high-end money managers.
"The commission of the investment sins listed above is not limited to 'the little guy.' Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades," Buffett wrote in his latest letter toBerkshire Hathaway shareholders.
Buffett has long been a critic of so-called alternative investing, a category that includes hedge and private equity funds, among others. The reason is the cut they take for their services, which can make billions of dollars for the managers but far less for clients, according to the man sometimes called "The Oracle of Omaha."
"A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool's game," Buffett wrote on underperformance.
Institutional investors include pension funds, university endowments, foundations and sovereign wealth funds managed on behalf of countries.
Buffett already has his money where his mouth is. His famous "Million-Dollar Bet" with hedge fund-focused investment firm Protégé Partners is that a simple S&P 500 index fund managed by Vanguard would beat a mix of five funds of hedge funds over 10 years.
Through seven years, Buffett's index fund is up 63.5 percent while the five funds of funds selected by Protégé are up an estimated average of 19.6 percent, according to a Fortune report in February.
Buffett's renewed criticism comes as institutions are giving record amounts to alternative investment managers. Many view such funds as a way to limit risk and volatility in various asset classes, such as stocks and bonds. 
Consultants and institutions argue that the distinguishing factor is picking the right managers. Buffett acknowledged that some do outperform, but said selecting them is too difficult.
"There are a few investment managers, of course, who are very good—though in the short run, it's difficult to determine whether a great record is due to luck or talent," Buffett wrote. "Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship."
Alternative funds have long argued they do add value, especially if the goal is to help generate steady returns in the mid-single digits—performance that is designed not to beat the stock market in many years.
"Hedge funds help institutions provide retirement security for millions of workers and their families, scholarships and research funding for universities, and resources for grants and other philanthropic work to benefit communities across the nation," the Managed Funds Association wrote in its most recent annual report.
The average hedge fund return over the last 10 years was 5.67 percent net of fees, according to the HedgeFund Intelligence Global Index, which tracks funds across strategies. That compares to an annualized return of 7.65 percent for the S&P 500 index over the same period. (Many hedge fund strategies don't focus on stocks, making such simple comparisons misleading, according to industry proponents.)
The private equity industry also likes to tout its high returns: a PE benchmark average gain over the last 10 years ended June 30, 2014, is 14.3 percent net of fees, compared to 7.8 percent for the S&P 500, according to the Private Equity Growth Capital Council.
"Private equity has experienced strong investment volume because, year after year, it generates superior returns for institutional investors," a PEGCC spokesman said in an email in response to Buffett's comments.

February 18, 2015

Retirement Rules for Financial Advisors and Brokers May Tighten

This article from the WSJ.  It is about time that brokers should have to put their clients interest first.  I'm amazed that it hasn't always been a requirement!?

Retirement-Account Standards May Tighten
Brokers Would Have to Put Clients’ Interests First

WASHINGTON—Brokers who recommend retirement-account investments would have to put their clients’ interests ahead of personal gain under rules expected to be endorsed by the Obama administration as soon as next week.
At present, the brokers’ recommendations for 401(k) plans and other retirement accounts generally have to be “suitable,” a weaker standard that critics say permits high fees that eat into investors’ returns.
A White House announcement of the so-called fiduciary rules is expected to generate significant pushback from Wall Street, which says it already faces robust regulation and warns the rules’ likely costs could make it uneconomical for brokers to serve lower-balance accounts. It likely would take several additional months for the Labor Department, which is drafting the rules, to collect public feedback before it can move to implement the rules.
The administration is concerned investors aren’t aware that brokers benefit financially by selling products that may not be in a client’s best interest but still rise to the lower standard of being suitable investments.
“The current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year,” Jason Furman, chairman of the White House Council of Economic Advisers and CEA member Betsey Stevenson, wrote in an internal memo last month.
The White House memo argues that investors lose as much as $17 billion annually in retirement dollars—or “at least” 5% to 10% of their retirement savings over 30 years—because of “excessive fees” and “conflicted” advice—amounts disputed by the industry.
“We think the data and studies are less than conclusive and in many cases dated,” said Kenneth Bentsen, president and chief executive of the Securities Industry and Financial Markets Association. “It’s designed to cast aspersions on the broker model,” he added.
The potential for so-called fiduciary rules has triggered debate over the past five years, pitting brokerage firms against investor advocates over the way in which retirement accounts are sold to investors.
The standards, if finalized, could end up cutting into payments brokers and others collect from mutual-fund and insurance companies when they sell plans to retiree clients. Brokers have pushed back against stricter rules, warning they will drive up costs and reduce retirement choices.
The rules are expected to be more flexible than a 2010 proposal the Labor Department withdrew amid an outcry from Wall Street, which complained it would have barred many routine payments to brokers, including commissions.
They won’t bar commissions for those who sell retirement investments but would ensure brokers and other financial professionals have an overriding responsibility to keep their clients’ best interests when giving financial advice.
The proposal is expected to address what critics view as loopholes in existing law that allow brokers to skirt a fiduciary duty, such as when they only provide one-time, as opposed to ongoing, advice or by saying their recommendations weren’t the basis of an investor’s decision to buy an investment product. The proposal is also expected to tighten fiduciary rules to advice provided to individuals looking to roll over 401(k)s into individual retirement accounts when they leave a job or retire.
Industry groups and some lawmakers have urged the Labor Department to wait until the Securities and Exchange Commission decides on its own definition of a fiduciary standard for investment advisers and brokers working with mom-and-pop retail investors. The SEC, under the 2010 Dodd-Frank law, gained authority to write such standards but isn’t required to do so. The agency’s efforts apply broadly to advice about securities like stocks and mutual funds but not to workplace retirement plans.
The SEC has consulted with the Labor Department on the rules, and SEC Chairman Mary Jo White and Labor Secretary Tom Perez have met at least twice to discuss the department’s proposal, according to people familiar with the matter.
Labor Department officials declined to spell out details of the proposal. But the measure is expected to soon advance to the White House Office of Management and Budget for review, after which it would be subject to public comment.
—Byron Tau contributed to this article.

January 18, 2015

Some Financial Guys, Stockbrokers and Advisors do provide value

For those that follow this blog, you know that I beat up and bruise financial guys often.  Most are not worth your time and certainly not worth managing your hard earned money - BUT NOT ALL.

Some financial guys do provide value!  Yes, I have repeatedly said that paying 1% (which is alot of money over time) is not worth it when you can probably do as good or a better job yourself.

But there are circumstances and certain financial guys that ARE worth the fees you pay.

Let me explain.

If you use a financial guy and all he/she does is buy you mutual funds or etf's or so many stocks that it's like owning the entire market then you are wasting your money.

The guys that provide value do something different and act more like a consultant than a salesman!  I'm not talking about taking you to lunch or golfing, that's what salesman do.  The guys that provide value might sell calls against your stocks.  They go to cash occasionally.  They call you with a great income idea (something you didn't read in the WSJ).  They have a great tax saving idea.  You get the point.

So next time I beat up on your financial guy, and I will, remember, I don't mean ALL.