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  • Treasury Bonds - The Next "Lost Decade?"

    Much has been written about the 'lost decade' in stocks, a 10-year period (2000-2009) in which the major stock indexes produced a negative return. This dismal performance may be one of the reasons that retail investors are flocking into bond mutual funds, according to data from the Investment Company Institute.

    However, there are some analysts who are predicting that the next 'lost decade' may be in bonds, and especially long-term Treasury bonds which are usually more susceptible to interest rate movements. With interest rates at all-time lows, it would seem that yields have nowhere to go but up - pushing bond prices down. The bottom line is that retail mutual fund investors may be setting themselves up for another extended period of low, or even negative annualized performance.

    This week, I'm going to discuss some of the reasons why bond investors may be setting themselves up for disappointing results. I'll also revisit a bond investment that has the ability to trade long-term Treasury bond mutual funds on both a long or short basis, providing the potential for gain no matter what long-term Treasury yields do in the future. You'll definitely want to read about his program, and even attend our upcoming webinar this Thursday featuring this innovative Treasury bond investment program.

  • Lucky or Smart? A Tale of Two Terrorist Attacks

    This week, I'm going to be discussing something that may be a bit controversial, but needs to be said. Over the span of just a few months, we have been lucky enough to escape two major terrorist attacks - one on a Northwest Airlines flight on Christmas Day, and the other in Times Square in New York on May 1. Had either of these attacks been successful, we could have seen the loss of hundreds, if not thousands of innocent American lives.

    And luck is the operative word. Neither of these attempted attacks was thwarted by law enforcement but, instead, failed because of the poor execution on the part of the would-be terrorists. While the Heritage Foundation has documented 31 terrorist attacks that have been thwarted in one way or another by law enforcement, that was not the case in these last two botched attacks.

    This week, I'm going to explore the uncomfortable idea of what if these attacks had been successful? How might our elected officials, the media and even the markets be different had one or both of these attacks succeeded? Then, I'll discuss the most uncomfortable question of all - what if we're not so lucky next time?

  • Is a Roth Conversion Right for You?

    Since their introduction in 1997, Roth IRAs have become increasingly popular. Unlike traditional IRAs, contributions to a Roth IRA are not tax-deductible, but earnings grow on a tax-free basis if held for the required amount of time. The ability to have completely tax-free income at retirement is a big plus, especially for young people.

    The Roth IRA rules also allow for someone with a traditional IRA to convert it to a Roth IRA. Prior to 2010, only those with incomes under $100,000 could do a Roth conversion, but now anyone can convert their traditional IRA to a Roth. However, just because it is now permissible doesn't mean that it's a wise financial decision for everyone.

    In this week's E-Letter, I'm going to discuss the pros and cons of converting a traditional IRA to a Roth IRA and when such a conversion may be feasible. I'll also let you in on a key factor in the decision to convert and how politics may actually come into play. I think you'll find this discussion very interesting.

  • Record Year For Ponzi Schemes

    Over the years I have been writing my weekly E-Letter, I find myself returning to some recurring themes that are important to investors. One such topic is how to spot and avoid investment scams such as Ponzi schemes that seek to steal your nest egg. A recent Associated Press story noted that the number of Ponzi-type schemes uncovered in 2009 were almost quadruple the number that were discovered in 2008. With so many investors being affected by these latest schemes, I think it is once again time that I provide some ground rules for spotting and avoiding investment scams.

  • Anatomy of a Stock Market "Meltup"

    As the principal of an investment advisory firm, I have to admit that the stock market sometimes causes us to scratch our heads, wondering what in the world it's up to. As the current market rally continues unabated, this is definitely one of those times. In 2009, the S&P 500 Index soared 65% since its lowest closing value in March and ended the year up over 23%. However, this huge rally seems to have driven stock prices beyond where they should be based on the economic fundamentals.

    Even more confusing is the fact that statistics compiled by the Investment Company Institute (ICI) show that domestic equity mutual funds have had net outflows of money (more withdrawals than new investments) over the past five months, meaning that retail mutual fund investors have been heading for the exits in favor of cash or other asset classes. So, how can it be that the market goes up even though investor sentiment for domestic equities is still decidedly bearish?

    The answer may lie in an obscure market phenomenon known as a 'meltup,' which is a momentum-based rally that usually bears little relation to the underlying market fundamentals. This week, we'll delve into the anatomy of a stock market meltup, discuss possible reasons why stock prices went higher even as retail investors were pulling money out of domestic stock mutual funds and speculate as to whether the meltup might continue in 2010.

  • Mutual Fund Managers Don't Invest in Their Own Funds!

    In my June 24, 2008 E-Letter, I wrote about a shocking Morningstar study that revealed that only 47% of mutual fund managers invest their own money in the funds they manage. As I wrote at the time, I suspected that the Morningstar study would result in more fund managers putting some of their own money in the funds they manage. But to my surprise, the numbers have gotten even worse!

    The latest Morningstar report finds that an incredible 51% of mutual fund managers have not a dime of their own money in the funds they manage. Frankly, I am stunned once again. Why over half of all highly paid fund managers have none of their own money on the line is beyond me, and I find it very troubling.

    I, on the other hand, have my own money invested in EVERY program I recommend to my clients. I would have it no other way. If I don't have my money on the line, why should I ask you to? Let's talk about it.

  • The Stock Market Conundrum

    The market goes up, the market goes down. Will we have a sustained rally, or is this just a 'sucker rally' that will soon end with a significant downturn? As we look to the experts to help answer these questions, we find that their predictions are all over the map. Many quantitative models are saying the market is severely overbought, while those relying on fundamental analysis say the market is fairly priced. It seems that the more 'expert' opinions we get, the more confusing it becomes for investors to know what to do.

    The biggest question for investors who are currently on the sidelines is whether they have missed the majority of the bull market rally, or if it still has a way to go. This is especially true in the case of Baby Boomers, whose retirement nest eggs have been hit by two major bear markets within a decade. They need the growth that the market has the potential to produce, but can't stand another major down market, which may also be in the cards.

    This week, I'm going to discuss the various viewpoints both for and against a sustained market rally. As you will see, both sides are supported by facts, figures and historical precedent. They can't both be right, but both could be wrong should the market be headed into a broad trading range.

  • Coming From Behind - Investment Lessons From Sports

    As long-time clients and readers will recall, I have been actively involved in coaching my kids in their various sports for over a decade, and still am. As I have written in the past, the lessons I have learned from being a sports coach all these years have served me very well in my career in the investment business. In many ways, I feel I am my clients' investment coach. In sports, I have always stressed that you must have both a good offense and a good defense to win championships. The same is true for your investments. You can't just swing for the fences in your investments; you also must protect against huge losses (bear markets), as we have seen over the last year. This week, I will reflect on how sports analogies can make us all better and more successful investors....
  • On The Economy, Bonds & Bear Market Rallies

    Last Wednesday the government reported that 1Q GDP declined at an annual rate of 6.1%, thus confirming that we are still in a deep recession. While the GDP report was worse than the pre-report consensus, it was very much in line with what I predicted in my April 21 E-Letter. I continue to believe that we will be in this recession all year.

    Several recently released studies highlight the fact that long maturity Treasury bonds have outperformed stocks over the last 40+ years, and by a substantial margin over the last 28 years. I will examine these reports as we go along. Does this mean you should put all of your money in bonds now? I'll tell you why I believe that would be the wrong move to make at this time.

    Finally, we get calls every day asking if the recent rally in the stock markets means that the bear market is over, or if this is just a bear market rally. While no one knows for sure, we will take a look at some past bear market rallies to keep things in perspective. I think you'll find this week's letter interesting....
  • Beware: Bear Market Brings Out Tall Tales!

    This week, I'm going to share my thoughts about a couple of the recent investment-related articles I have read. The first article documents the day in February when the stock markets hit the milestone of having fallen 50% from their October 2007 peaks. Of course, this means that index investors will now have to earn 100% or greater returns just to get their accounts back to break-even. I'll also note how market action since that article has now taken the major market indexes even deeper into the red. The market's action over the past eighteen months or so highlights my frequent advice to include investments that employ active money management strategies in your overall portfolio. While there are obviously no guarantees, the ability to move to cash or hedge long positions can potentially help to minimize losses, especially during bear markets. This brings us to the second article. Many large mutual fund and brokerage companies have a vested interest in seeing discredited buy-and-hold strategies continue. Thus, it was not a surprise when I learned of a study sponsored by a major mutual fund company that supposedly showed the superiority of buy-and-hold over the active strategy of market timing - even in this bear market! It was also no surprise that the study was based on flawed assumptions that skewed the results in favor of buy-and-hold. I was surprised, however, that the Investor's Business Daily publication reported on the flawed study as if it were legitimate advice. In the E-letter, I'll point out how the mutual fund study was fatally flawed, and hopefully show you how to avoid taking such articles and studies at face value, even when they are published by seemingly legitimate sources....
  • Retirement Focus - Year-End Retirement Sugarplums

    The stock market has been doing a bit better lately with both the Dow and S&P 500 Indexes well above their November lows. This, in turn, has resulted in some well-known financial "experts" saying that the market has hit the bottom and it's now time to invest. Other analysts, however, are not so optimistic and point to continued uncertainty as a reason that the market could still go lower. Nowhere is this debate more important than to 401(k) and IRA account holders with large cash balances and are agonizing about whether to jump back into the market, or remain on the sidelines. This week, Mike Posey provides a possible answer to this question, as well as offering a number of other year-end retirement planning ideas that may be helpful to you....
  • "Gifting" & Things To Be Thankful For This Holiday

    As we near the end of 2008, it is important that we take our eyes off of the gyrating stock market for a while and consider year-end tax planning opportunities. One of the best ways I have seen to minimize the effects of estate taxes is the "gift tax exclusion." In 2008, a couple can gift $12,000 each, for a total of $24,000, to a child, grandchild or anyone they want. This is a great way to remove assets from your estate, but can also be a good way to teach fiscal responsibility, even to adult children. This week, I'll discuss the gift tax exclusion and detail a way it can be used to pass along your investment philosophy to the younger generation. Plus, I'll take time during this Thanksgiving Week to let you in on some of the things I am thankful for, even during these tough economic times....
  • A Misguided Slam On Active Management

    It is not uncommon to have major Wall Street players criticize traditional market timing strategies in the financial media. However, such criticism is somewhat misguided in today's market, when many buy-and-hold investors are suffering major investment losses. That's why I was somewhat surprised to see David Dreman, a known contrarian, tag along with the buy-and-hold crowd in a recent Forbes article. In this week's E-Letter, I'm going to take on Mr. Dreman's recent comments about traditional market timing strategies. I'll also show you his recent performance as compared to that of Scotia Partners, one of our latest market timing managers. You can then decide for yourself which one has had the upper hand in the recent volatile market environment....
  • Retirement Focus - More Post-Retirement Investing

    This week, Mike Posey continues his Retirement Focus series on how to invest during retirement. In this installment, Mike covers the variable annuity option, which is gaining in popularity among retirees. I think this is a very important topic for any investor, especially in light of some of the questionable marketing tactics used to promote these contracts. You definitely need to read Mike's analysis before attending one of the "free lunch" seminars touting variable annuity investments. Mike also includes one of his "Retirement Tidbits," which discusses a retirement resource that I think you may find especially helpful....
  • A Shocking New Morningstar Study!

    Morningstar recently shocked the investment industry with a report showing that less than half of mutual fund managers invest their own money in the funds they manage. Since many investors naturally assume that their fund managers "eat their own cooking," it came as quite a shock to learn that most managers' interests were not aligned with those of their shareholders. This week, I'm going to discuss why an Investment Advisor's personal investment has always been a major requirement for me to recommend an investment program. Plus, I'll discuss other important information that you may not learn from an Investment Advisor unless you know to ask the right questions....