BizzyBlog » Bizzy’s AM Coffee Biz-Econ Links of the Day (120205): 43% of the Country Believes We’re in a Recession!
Two years ago people thought we were in recession - we weren't even close. Interesting.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Tuesday, January 29, 2008
Monday, January 28, 2008
The Economy Is Fine (Really) - WSJ.com
The Economy Is Fine (Really) - WSJ.com
One of the best pieces I've read in the past month regarding the economy and how it is really doing. As you know I'm not one to make predictions and I don't forecast recessions, if we have one we have one. However, I've felt that the media, the politicians, and many economists have been trying to create a recession. They may be right, we might be heading toward a recession, but the traditional indicators aren't there and I feel we are being played. This article does a great job of explaining our current economy and why it is so different than that of the Great Depression and the 1970's. I encourage all of you to click the link and read it, even if you disagree.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
One of the best pieces I've read in the past month regarding the economy and how it is really doing. As you know I'm not one to make predictions and I don't forecast recessions, if we have one we have one. However, I've felt that the media, the politicians, and many economists have been trying to create a recession. They may be right, we might be heading toward a recession, but the traditional indicators aren't there and I feel we are being played. This article does a great job of explaining our current economy and why it is so different than that of the Great Depression and the 1970's. I encourage all of you to click the link and read it, even if you disagree.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Humor Break
After the last few weeks, I thought you could use a little humor....
Caption: Government Health Warning, Do Not Swallow Chewing Gum...
Caption: Government Health Warning, Do Not Swallow Chewing Gum...
Friday, January 25, 2008
For Investors, a Tumultuous Week
For Investors, a Tumultuous Week (Citigroup, Merrill Lynch, Ambac) | SmartMoney.com
Luskin recaps what has been a crazy week.
Scott
Luskin recaps what has been a crazy week.
Scott
Take This Stimulus and Shove It
Take This Stimulus and Shove It (The Economy) | SmartMoney.com
I agree. This stimulus package is a sham. It is pandering and a short term fix, it does not address our long term fundamental problems.
Scott Dauenhauer, CFP,MSFP, AIF
www.meridianwealth.com
I agree. This stimulus package is a sham. It is pandering and a short term fix, it does not address our long term fundamental problems.
Scott Dauenhauer, CFP,MSFP, AIF
www.meridianwealth.com
Fed Rate Cut - Help Homeowners? Fox News w/ Chip Cummings
The truth about the recent rate cuts and the possible coming rate cuts - they are bogus and don't help.
This is the wrong move at the wrong time.
Scott Dauenhauer, CFP, MSFP, AIF
Luskin: Panic Is Driving Today's Stock Market
Panic Is Driving Today's Stock Market (Ahead of the Curve) | SmartMoney.com
Interesting comments from Luskin, an economist who admits when he is wrong - wierd.
Luskin believes panic is driving the market, not rationality - which is normal. The market can react and overreact as it is driven by emotion in the short term.
I don't like the reaction of the fed or the government to this faux crisis. I'm all for tax reform, but I don't see any fundamental changes that need to take place in our government in order to really help our economy long term.
I do find it interesting that nobody is reporting the big drop in oil prices that has occured - they sure as heck reported the run up in prices.
Scott Dauenhauer, CFP, MSFP, AIF
Interesting comments from Luskin, an economist who admits when he is wrong - wierd.
Luskin believes panic is driving the market, not rationality - which is normal. The market can react and overreact as it is driven by emotion in the short term.
I don't like the reaction of the fed or the government to this faux crisis. I'm all for tax reform, but I don't see any fundamental changes that need to take place in our government in order to really help our economy long term.
I do find it interesting that nobody is reporting the big drop in oil prices that has occured - they sure as heck reported the run up in prices.
Scott Dauenhauer, CFP, MSFP, AIF
Tuesday, January 22, 2008
Ben Stein: Rethinking the Recession
Some interesting statistics about recessions and bear markets, he also puts things in perspective. Please understand that I am not predicting a recession, I don't make predictions. This is a good, short article that you should read.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
Earning Those Returns...Not Easy, But Worth It
If you turn on the news, open up a paper, or click on a financial website it seems the word of the day is "panic" - heck, now its even on my blog. The media has managed to brew up a storm where none existed and in the vein of "if it bleads it leads" is preying on your fear to keep the markets in the news and in decline. What the media rarely gives you during these turbulent market times is perspective. I'd like to give you some perspective and hope that you'll trust me enough to see that the latest drop in market is completely normal.
First, stocks must go down in value every so often, if they don't they would have no risk and thus no excess return above risk-free assets (like Treasury Bills). Risk and return are related and the price for receiving higher returns in stocks is earned by riding out the inevitable ups and downs the markets will go through. This might sound corny, perhaps even self serving - but you want the markets do what they are doing right now, it weeds out the people who shouldn't own stocks and returns those stocks to there rightful owners - the long term investors, not the short term speculators.
I've included a chart below to demonstrate one thing - it is ABSOLUTELY NORMAL and HEALTHY for stocks to go down in value. When they do go down, they eventually go back up and they go higher than they were before they dropped. What follows is the eleven bear markets the U.S. went through from the end of World War II till the end of the century. In a period of about fifty years we had eleven bear markets, which is defined as a drop of 20% from the high of the S & P 500. This means that on average we have a 20% drop in the stock market every five years. Our latest was during the 2000-2002 tech bubble.
My point is simply that panicking is not the right reaction, though it is the perfectly normal reaction. Most people invest on emotion and watching their money slowly wither away can create extreme anxiety. This is why we need to be well diversified and not have all of our money in stocks.
I think what is important to remember is that this morning 95% of people who wanted to work got out of bed and went to work. Even if we do go into recession, more than likely at least 90% of all people who want to work will wake up every morning and go to work. The world will not stop spinning just because somebody on wall street has hit the panic button.
I cannot and will not predict the direction of the markets. They go up and they go down, sometimes a lot. What I will say is that owning stocks is your best bet to achieving a higher rate of return and beating inflation in the long run. This volatility will soon pass and we will be on our way back to record highs. I don't know when, but I do know that if you panic and sell out you will never see those highs, the only way to participate in the new highs the market is sure to make is to stay invested and stay diversified.
Please call me with any questions. I can't guarantee I'll answer the phone right now, but I'll listen to your message and get right back to you (losing quite a bit of sleep with the new baby!).
Keep your head up and stop watching the news shows, go about your daily life, the world is not coming to an end.
Warm regards,
Scott Dauenhauer, CFP, MSFP, AIF
First, stocks must go down in value every so often, if they don't they would have no risk and thus no excess return above risk-free assets (like Treasury Bills). Risk and return are related and the price for receiving higher returns in stocks is earned by riding out the inevitable ups and downs the markets will go through. This might sound corny, perhaps even self serving - but you want the markets do what they are doing right now, it weeds out the people who shouldn't own stocks and returns those stocks to there rightful owners - the long term investors, not the short term speculators.
I've included a chart below to demonstrate one thing - it is ABSOLUTELY NORMAL and HEALTHY for stocks to go down in value. When they do go down, they eventually go back up and they go higher than they were before they dropped. What follows is the eleven bear markets the U.S. went through from the end of World War II till the end of the century. In a period of about fifty years we had eleven bear markets, which is defined as a drop of 20% from the high of the S & P 500. This means that on average we have a 20% drop in the stock market every five years. Our latest was during the 2000-2002 tech bubble.
My point is simply that panicking is not the right reaction, though it is the perfectly normal reaction. Most people invest on emotion and watching their money slowly wither away can create extreme anxiety. This is why we need to be well diversified and not have all of our money in stocks.
I think what is important to remember is that this morning 95% of people who wanted to work got out of bed and went to work. Even if we do go into recession, more than likely at least 90% of all people who want to work will wake up every morning and go to work. The world will not stop spinning just because somebody on wall street has hit the panic button.
I cannot and will not predict the direction of the markets. They go up and they go down, sometimes a lot. What I will say is that owning stocks is your best bet to achieving a higher rate of return and beating inflation in the long run. This volatility will soon pass and we will be on our way back to record highs. I don't know when, but I do know that if you panic and sell out you will never see those highs, the only way to participate in the new highs the market is sure to make is to stay invested and stay diversified.
Please call me with any questions. I can't guarantee I'll answer the phone right now, but I'll listen to your message and get right back to you (losing quite a bit of sleep with the new baby!).
Keep your head up and stop watching the news shows, go about your daily life, the world is not coming to an end.
Warm regards,
Scott Dauenhauer, CFP, MSFP, AIF
Thursday, January 17, 2008
Rebekah Arrives
5 pounds 12 ounces
18 inches long
3 1/2 weeks early!
Born at 4:55 on Thursday, January 17th, 2008.
I got my little girl!
P.S. I am fully aware of the meltdown happening in the stock market. My advice has not changed, the downs are temporary, the ups are permanent. This is normal, the market drops on average 20% once every five year, that would mean about a 2,800 point drop from its high of about 14,000. If we hit that 20% market, we'll be at around 11,200 on the dow - a screaming buy (the dow is a screaming buy now).
Timing the market is not possible, nor has it historically been wise. It is tough to ride out these panics, but ride them out we must. It is the price we pay for the higher returns stocks will generate in the long run.
Scott Dauenhauer, CFP, MSFP, AIF - AKA Proud Papa!
Wednesday, January 16, 2008
Decade of Decay
It looks like the first decade of century may go on record as pretty mediocre. New BusinessWeek writer Roben Farzad says "Don't look now, but we're putting the final touches on the market's Lost Decade, the worst showing for U.S. stocks since the Great Depression."
Farzad calculates that the S & P 500 needs to zoom ahead by 54% between now and 2010 just to match the anemic returns of the 70's. With 2008 starting off so bad, the market has some real work to do.
The question remains - is this to be expected? I've been saying for years (actually since before this decade started) that returns going forward will probably not be as good as they have in the past, though I do expect returns to be better than the 1.7% average gain since 2000. If you look at the chart you will see a classical event in history - reversion to the mean, meaning good times typically follow bad times and vice versa. The 80's and 90's were spectacular for the markets - this decade, not so much.
Farzad fails to mention that the S & P 500 doesn't necessarily represent a diversified portfolio. US investors who only invested in a diversified portfolio of US stocks (meaning something other than just large growth stocks) they would have an annualized rate of return of 8.18% through 12/31/2007. A globally diversified portfolio would have annualized at around 9.91%, not bad.
What does this mean for stock prices going forward? It probably means they have better prospects.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Monday, January 14, 2008
The Case for Recession Is Wrong (Merrill Lynch) | SmartMoney.com
The Case for Recession Is Wrong (Merrill Lynch) | SmartMoney.com
I've said it before and I'll say it again, I don't know whether or not we are heading into a recession or not. Donald Luskin doesn't believe we are, but presents some interesting facts about if we did and teaches us how economists can use numbers to mislead....you know the old saying: Lies, Damn Lies and Statistics.
Luskin points out (after ripping Merrill Lynch) that "Over the pastwar era, stocks have actually performed well during recessions. Over 11 recessions, the average total return for the S & P 500 has been 9.1%." That is a gain, not a loss. The worst case was an 8% loss during 1974-75. This is partially because stocks typically fall before a recession and begin recovering before most people have figured out we are even in a recession.
I don't know if stocks will go up if we have a recession or down if we don't have a recession - nobody knows. What I do know is that a globally diversified portfolio that has low fees, will, end the end win out if you do not panic and just hold tight.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
I've said it before and I'll say it again, I don't know whether or not we are heading into a recession or not. Donald Luskin doesn't believe we are, but presents some interesting facts about if we did and teaches us how economists can use numbers to mislead....you know the old saying: Lies, Damn Lies and Statistics.
Luskin points out (after ripping Merrill Lynch) that "Over the pastwar era, stocks have actually performed well during recessions. Over 11 recessions, the average total return for the S & P 500 has been 9.1%." That is a gain, not a loss. The worst case was an 8% loss during 1974-75. This is partially because stocks typically fall before a recession and begin recovering before most people have figured out we are even in a recession.
I don't know if stocks will go up if we have a recession or down if we don't have a recession - nobody knows. What I do know is that a globally diversified portfolio that has low fees, will, end the end win out if you do not panic and just hold tight.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Annuity Sleaze - What's Driving Those Annuity Recommendations.....?
Annuity Sleaze
Do you really think that the person selling you that Annuity has your best interest at heart? Could it be the 9% commission and the cruise that is driving them to sell you an annuity?
If this isn't proof that the annuity industry is sleazy....I don't know what is. People hawking annuities might be really nice people - but they are not advisors and have no clue, don't fall for there sales pitches.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Do you really think that the person selling you that Annuity has your best interest at heart? Could it be the 9% commission and the cruise that is driving them to sell you an annuity?
If this isn't proof that the annuity industry is sleazy....I don't know what is. People hawking annuities might be really nice people - but they are not advisors and have no clue, don't fall for there sales pitches.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Tuesday, January 08, 2008
Lessons From 2007 - Research
Lessons From 2007 - Research: "Aggressive Wealth Maker"
Larry Swedroe does a great job of laying out the lessons that 2007 taught us about how to manage money. Swedroe and myself have a similar investment philosophy. You'll want to hit the link and read this great piece.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Larry Swedroe does a great job of laying out the lessons that 2007 taught us about how to manage money. Swedroe and myself have a similar investment philosophy. You'll want to hit the link and read this great piece.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Monday, January 07, 2008
Don't Buy the Panic
Ben Stein tells us why its not time to panic. Sure, things don't look rosy - but that's ok he says. The real money is made when things look there worst (and things are nearly as bad as they could be).
He thinks that a recession is a possibility, but perfectly normal and that we will get through it....like we always. I don't know if we'll have a recession and it doesn't matter.
The whole point is that those of us who don't panic will win in the end by staying diversified and continuing to buy during the difficult times.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
He thinks that a recession is a possibility, but perfectly normal and that we will get through it....like we always. I don't know if we'll have a recession and it doesn't matter.
The whole point is that those of us who don't panic will win in the end by staying diversified and continuing to buy during the difficult times.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
Thursday, January 03, 2008
How They Got Housing Wrong
Interesting....the experts get it wrong again.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
2007 Business Week Predictions...Another Waste of Ink
We are in the middle of hearing from the experts again about what they think will happen in 2008. Isn't it funny that none of results of these "experts" past predictions/forcasts are ever printed (unless one of them is right). I decided to dig up some predictions for 2007 and see how the so called experts faired. They didn't do so well. Hit the link above to see the full list of 80 Business Week experts and there 2007 forecasts, I'll summarize.
The experts where to predict where the S & P 500, Dow Jones Industrial Average, Russell 2000 and the Ten Year Treasury bond would end up on 12/31/2007. Of the 80 experts, on one was close to being correct on each prediction, Barry Ritholz of Ritholz Research and Analytics - though he was way off on his prediction of the where the Russell 2000 would end up (off by about 11%). He was even right on with his stock pick - it quadrupled during 2007. Don't rush out to buy Barry's research though, someone had to be right, it just happened to have been his turn. The other 79 weren't so lucky.
Of the 80 predictions only 11 came within 20 points of where the S & P 500 would close - 1,465.61.
Only 13 came within 100 points of where the Dow Jones would close - 13,264.82.
Only 14 came within 25 points of where the NASDAQ would close - 2,651.07.
Only 5 came within 10 points of where the Russell 2000 would close - 766.21.
Finally - only 5 of these experts could predict where the 10 year Treasury bond would end the year at within 10 basis points - 4.035%.
This once again proves my theory that the experts aren't worth listening too. Statistically we would probably expect better results - the fact that we didn't get them is even more proof that wasting your time listening to the top forecasters will not make you any money.
I can't wait till the end of 2008 to do this again!
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
The experts where to predict where the S & P 500, Dow Jones Industrial Average, Russell 2000 and the Ten Year Treasury bond would end up on 12/31/2007. Of the 80 experts, on one was close to being correct on each prediction, Barry Ritholz of Ritholz Research and Analytics - though he was way off on his prediction of the where the Russell 2000 would end up (off by about 11%). He was even right on with his stock pick - it quadrupled during 2007. Don't rush out to buy Barry's research though, someone had to be right, it just happened to have been his turn. The other 79 weren't so lucky.
Of the 80 predictions only 11 came within 20 points of where the S & P 500 would close - 1,465.61.
Only 13 came within 100 points of where the Dow Jones would close - 13,264.82.
Only 14 came within 25 points of where the NASDAQ would close - 2,651.07.
Only 5 came within 10 points of where the Russell 2000 would close - 766.21.
Finally - only 5 of these experts could predict where the 10 year Treasury bond would end the year at within 10 basis points - 4.035%.
This once again proves my theory that the experts aren't worth listening too. Statistically we would probably expect better results - the fact that we didn't get them is even more proof that wasting your time listening to the top forecasters will not make you any money.
I can't wait till the end of 2008 to do this again!
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Top economist says America could plunge into recession - Times Online
Top economist says America could plunge into recession - Times Online
In my previous blog we visited Ben Stein and why he doesn't think there will be a recession in 2008. Well, this is an article about a well known economist who does think there will be a recession and even says that we will see a 35% drop in the real estate prices in Florida, California and Las Vegas.
As you know, I don't buy into predictions of the future, though I do believe the economy is not nearly as weak as people are being led to believe.
I do think a 35% drop is not in the cards - but then again, I have no idea and it is a possibility.
Over the past several years (at least up until the end of 2006) I had many people come through my office and enlighten me about real estate - it can't ever go down.
My response was that real estate can go down, it has gone down before, and it will go down again - many didn't believe me. I told people not to buy unless they had a long horizon, at least ten years - some didn't take my advice and they are hurting. Real estate over the long run will probably go up, historically it has and I like Real estate as an asset class and as an investment - but it has to make sense. Much of what people where buying didn't make any sense at all and a lot of people are paying the price today.
My point - interesting article, though I don't put the odds very high of Robert Shiller being right.....I pray to God he isn't.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
In my previous blog we visited Ben Stein and why he doesn't think there will be a recession in 2008. Well, this is an article about a well known economist who does think there will be a recession and even says that we will see a 35% drop in the real estate prices in Florida, California and Las Vegas.
As you know, I don't buy into predictions of the future, though I do believe the economy is not nearly as weak as people are being led to believe.
I do think a 35% drop is not in the cards - but then again, I have no idea and it is a possibility.
Over the past several years (at least up until the end of 2006) I had many people come through my office and enlighten me about real estate - it can't ever go down.
My response was that real estate can go down, it has gone down before, and it will go down again - many didn't believe me. I told people not to buy unless they had a long horizon, at least ten years - some didn't take my advice and they are hurting. Real estate over the long run will probably go up, historically it has and I like Real estate as an asset class and as an investment - but it has to make sense. Much of what people where buying didn't make any sense at all and a lot of people are paying the price today.
My point - interesting article, though I don't put the odds very high of Robert Shiller being right.....I pray to God he isn't.
Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238
Ben Stein: Bursting the Economic-Fear Bubble
Ben Stein explains that while their are real problems, much of the current "crisis" has been overblown. Ben says "Simply put, the media and the short-sellers on Wall Street are trying to scare us into having a recession." He then goes on to point out facts and figures as to why things aren't so bad.
He's basically echoing what I have said in previous posts. I don't know if we'll have a recession in 2008, but I doubt it. Ironically, after all the recession talk of the past few months, the tide is starting to turn among the "experts" and now they are saying we might not have a recession.....just goes to show why the conventional wisdom is almost always wrong.
If you spend much time listening to CNBC and Jim Cramer, I urge you to make a New Years Resolution to turn the financial pornography on in 2008.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
He's basically echoing what I have said in previous posts. I don't know if we'll have a recession in 2008, but I doubt it. Ironically, after all the recession talk of the past few months, the tide is starting to turn among the "experts" and now they are saying we might not have a recession.....just goes to show why the conventional wisdom is almost always wrong.
If you spend much time listening to CNBC and Jim Cramer, I urge you to make a New Years Resolution to turn the financial pornography on in 2008.
Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com
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