Meltdown '06? You see it coming

This column by Paul Farrell warmed my heart, though not for what was in the column. It was the classic doom and gloom scenario. Paul asked a question of his readers - what 20 possible triggers could cause a meltdown in 06? He got many responses and was surprised that only 2% of the responses were "optimistic". My question is this: Why would expect an optimistic response when you ask a negative (pessimistic question)? Regardless, I think it is interesting to contrast the pessimistic nature of the respondents to Paul's column with the consumer confidence numbers released this morning that show a three year high. Why are his readers so pessimistic and the rest of the U.S. apparently is not?

I don't know the answer and don't really care to find out. The point of this blog is to communicate to you, my readers, and so far this year most economists have quite upbeat about the economy and the market and its prospects, so upbeat (and in stark contrast to the previous five years) that has scared me. These people are usually wrong and they are upbeat....does that mean things are about to go bad? Then came Paul Farrell's column and his prediction that their is an 86% chance the American Economy will collapse and thus my heart began to warm and my outlook began to change - perhaps, just perhaps this will be a good year for the markets after all!

Ironically, Paul and I have the same advice even though we have different viewpoints, I'll defer to Paul's quote "In my opinion, your best bet in a major collapse is to stick with a solid old-fashioned well-diversified no-load index portfolio. It worked during the 2000-2002 recession and bear."

Of course, now I'm rethinking my advice in light of Pauls!

ScottyD

Your Interest or Theirs?

I love this link, its from an annuity marketing company that is willing to send licensed insurance agents on trips to the Ritz Carlton.......if only they sell certain products through their company.

Whose interest are the agents who give into this baloney protecting, theirs or yours? Selling products to people to earn vacations is what got Morgan Stanley a $50 million fine - guess the regulators haven't caught up to the insurance companies yet.

This is just ridiculous.

Scott Dauenhauer, CFP, MSFP

Doubting the Dow

Smartmoney.com: The Pro Shop: Doubting the Dow

Good article on why watching the Dow is a waste of time.

Scott Dauenhauer, CFP,MSFP

Fund Manager Arnott Raises a Thorny Debt Question

Bloomberg.com: Bloomberg Columnists

"What if today's children grew up and repudiated their parents' debts?
Suppose they walked away from the bills accrued via government deficits, not to mention all those credit cards. Imagine the global tumult if they simply refused to carry the burden of under-funded pensions and the U.S. Social Security system."


Interesting article....though Arnott is being rather alarmist. I use his fund in the minute possibility he is correct, but I don't buy into the chicken little scenario some are espousing.

Scott Dauenhauer, CFP, MSFP

What Investors Can Expect From the New Year

What Investors Can Expect From the New Year: The Future for Investors - Yahoo! Finance

Jeremy Siegel is quite bullish on stocks this year and next, of course the future is impossible to predict with any certainty and there are a number of things that could derail the rise of stocks.

This is a good article on what to expect this year, though I feel its a better article as to what to exepct over the next decade.

Scott Dauenhauer, CFP, MSFP

Thinking About The Rest Of Your LIfe

Lee Eisenberg, author of The Number was on the CBS Early Show this morning talking about his book. I'm still reading, but so far so good! If you have a few minutes read this interview, it's interesting. Also, pick up the book and spend some time reading it.

Scott Dauenhauer, CFP, MSFP

Secrets of the Wirehouse 2006

Since the publication of Lee Eisenberg's book The Number, I have decided to update my piece Secrets of the Wirehouse. You can now view it at my website or by clicking the above title. Lee features me in his new book and discusses conflicts of interest in the brokerage industry as I wrote about them five years ago.

Enjoy,

Scott Dauenhauer, CFP, MSFP

The Magic Number

Finances: The Magic Number - Newsweek Periscope - MSNBC.com

About a year ago (November 2004) I spent about an hour with Lee Eisenberg on the phone. I didn't know who he was, but he told me he was writing a book and wanted to interview after he read my expose "Secrets of the Wirehouse." His book just came out and it is in bookstores across the country (just go into any bookstore and it is front and center). Lee's book is being reviewed quite well by nearly every major book reviewer, newspaper, and magazine and he is appearing on all the right T.V. shows. His book is titled "The Number: A Completely Different Way To Think About The Rest Of Your Life" and I am just about to start reading it. I won't hesitate to recommend it if only because my name appears in it and nearly three pages are dedicated to our conversation. I will read it this week and report back to you, but I encourage you to pick the book up. The Number, by Lee Eisenberg.

This is the 4th book that I know of that my name has appeared in (I think the number is five, but can't remember the name of it)! Of course, like the others the book is shaping up to be quite good despite my name being associated with it...

Scott Dauenhauer, CFP, MSFP

Dow 'Catching Up' Closes Above 11,000

Chron.com Dow 'Catching Up' As It Closes Above 11,000

Another "Why is this news" headline.....From the headline and the story you'd think people hadn't made any money since June of 2001, you'd be wrong of course. A diversified portfolio of stocks has done great since June of 2001 as has a portfolio of stocks and bonds. Had you invested in June 2001 (the last time the Dow was at 11,000) in a diversified portfolio of stocks you would have a total return in the 75% range (a 13% annualized return). A portfolio that was 60% stock, 40% fixed income (all diversified) would have returned a total of 52% (a 9.5% annualized return). Heck, even if you invested solely in the S & P 500 you'd be up an annualized 1.45%.

The news isn't that diversified investors did fine during what has been deemed a "bear" market, it has been that the markets haven't moved in four years and nobody has made money - this just isn't true.

Remember, the financial news media is not here to give you news and perspective, they are hear to sell advertising. Nothing wrong with that, but just remember that sensationalism sells better than facts. The facts remain that throughout time diversified portfolio's have continued to hold up.

Scott Dauenhauer, CFP, MSFP

Want To Earn More on Your Savings?

I speak with a lot of people everyday and one thing I hear consistently is "why can't I earn more than 2% on my savings account at my bank." My answer is that you can, as long as your comfortable with the web. The above link is a list of online banks (many of them offshoots of banks that have been around for many years - all FDIC insured) that offer interest rates of about 4% with no minimums and no fees, check them out.

One that I use for my clients on occasion is www.emigrant-direct.com, currently paying 4%.

Scott Dauenhauer, CFP, MSFP

History Repeats Itself

Smartmoney.com: Ahead of the Curve: History Repeats Itself

The fearmongers are out in full force touting the inverted yield curve as the next sign of gloom and doom. Luskin, in the above article does a good job explaining the yield curve and why it doesn't indicate the world is coming to an end. It's well written and quite understandable.

Scott Dauenhauer, CFP, MSFP

Bill Miller beats S&P for 15th Year

Well, Bill Miller of Legg Mason Value Trust has done it again, beat the S & P 500 that is. He has now beaten the S & P 500 15 years in a row. But why is this news? I was under the impression that the vast majority of mutual fund managers consistently beat their benchmark index, if this is so than why is it a big deal that a mutual fund manager did what he is SUPPOSED to do?

The mere fact that the press and investment community celebrates the fact that ONE mutual fund manager has consistently beat his benchmark is another point of proof that active money management is a loser's game.

What is more interesting is the fact that more money managers should be beating their benchmark than actually are. Even in an efficient market there will be those managers who are lucky and will beat their benchmark by no skill of their own, statistically speaking their should be more than just one. It is quite telling that beating the S & P 500 for 15 years is news. What would really be news is if the majority of managers beat their benchmarks consistently for 15 years.....but of course that could never happen.

Scott Dauenhauer, CFP, MSFP

P.S. Though Bill Miller beat the S & P 500 he did not beat a diversified portfolio of stocks.