Monday, October 03, 2005

The Meridian Quarterly Update

The Meridian Quarterly Update

4th Quarter Commentary & Update

The third quarter actually saw some movement in the price of stocks. The first half of the year was quite flat, and the third quarter for the S & P 500 was also pretty flat, only up 2.73% for the year. Diversified portfolios are faring better due to small, value, real estate, and international stocks having a decent year. A diversified portfolio 100% invested in stocks is up around 7% through the third quarter, not bad. Many experts are predicting a great 4th quarter (similar to last year), I have no prediction. Short term predictions are a crap shoot, anything can (and usually does) happen.

I still believe that the long term prospects for a globally diversified portfolio are bright; though I do not expect similar returns as we’ve had in the past five years. My expectations for a diversified portfolio 100% invested in stocks would be in the 9 – 11% range, however this may be optimistic. Many believe returns will come in at the lower end of the spectrum at 7 – 9%.

For the last five years diversified portfolio’s have shined and taught everyone the value of diversity, however we must remember that their was a five year period previous to that where a diversified portfolio trailed the overall market by a wide margin. We must all be prepared to stick with a diversified portfolio even when it feels like it may not be the right thing to do. I have no idea what the next five years hold, but I do know that the best probability of capturing the returns that are available is through a globally diversified portfolio.

I could spend the next few pages writing about what everybody else is hearing about in the news: Oil prices, Interest rates, Hurricane Katrina’s effects, and real estate but I don’t feel that will add any value to your day as I cannot predict the effects of any of the events related to those news events. I have written about much of those events or linked to articles about those events on my blog at Predicting the future is a fool’s game, planning for the future continuously and using probabilities to sharpen your planning is the wise way to go.

Instead, I have a few announcements for you.

Enclosed you will find a copy of the invoice for your third quarter management fee. You do not need to do anything with this except review it for accuracy and file it (unless you normally by the invoice by check). The fee will be automatically debited from your Ameritrade account.

Mississippi Trip – Out of the Office from October 8th – October 15th

I have the opportunity to go to Mississippi this coming Saturday for a week to help rebuild homes destroyed by Hurricane Katrina. I do not know what my communications will be like during this time period as I doubt they have high speed internet access. I will have my cell phone, but don’t know if it will be working or how often I will be able to check messages.

In my place while I am gone a good financial planning friend of mine has volunteered to take any “emergency calls” from my clients, his name is Scott Brewster and his contact information is as follows:

Scott Brewster
Brewster Financial Planning
Phone 646-249-9880

I ask that you not contact him for routine information, but only if you truly need help immediately. I will only be gone for five business days and can address most concerns as soon as I get back.

No 3rd Quarter Reports Due to Switchover

I am happy to announce that I have signed a contract with a company that will enhance the existing performance reporting capabilities of Meridian Wealth Management. Over the past four years I have spent nearly $10,000 and hundreds of hours working on a portfolio accounting system that just hasn’t worked out. Though I was using the top software in the market it was clunky, inefficient, and occasionally inaccurate. After a near two year search I believe I have found a company that will be able to provide a solution for me and you that will be truly beneficial.

The new solution will allow you access via the internet to all your accounts in one place and allow you to run any report you want at any time. I will be meeting with you to introduce the different reports that will be available and you can choose which one’s you want to see. I will still be mailing or e-mailing you a consolidated quarterly report as well.

As I get this system up and running I am sure there will be some difficulties so I ask that you bear with me. I need to transfer all cost basis information into the new system and this may take some time, in fact it may take most of the fourth quarter. I also will be setting up individualized target portfolios for each client so that you will be able to see where your portfolio is in relation to where we want it to be.

Many of you have accounts that are held outside of Ameritrade and TIAA-CREF and thus I don’t have daily downloads for those accounts. In the past I have manually entered in the statement information each quarter in order to give you an accurate picture of your portfolio. The new system has additional capability that will allow many of your accounts to be downloaded electronically and thus eliminate me manually inputting the information, I hope this part of the system will be up and running before January 1st, 2006. I cannot guarantee outside accounts will be available by that date, but I am working hard to make it happen. The goal is to produce a report that is true and captures all your assets. In some cases there will be an additional fee for the outside account service, I will communicate this directly to you.

I am confident that once up and running this new system will provide great value to you as well as to me. I hope to meet with each of you during the fourth quarter to introduce you to the new system and get you a user name and password. Due to the transition no 3rd quarter reports will be issued.

Thank you very much for your patronage, in many ways it is because of you that I am able to leave for a week to Mississippi to help serve others who have had their lives torn apart, I am in your debt for this opportunity.

Scott Dauenhauer, CFP®, MSFP
Meridian Wealth Management