Friday, February 29, 2008

The Bernanke Reflation -

The Bernanke Reflation -

Is the Fed on the right track? Ben Bernanke is doing everything he can to stave off recession, but at what cost? Inflation.

Recessions are perfectly normal and usually prove to be healthy for the economy (though never fun), why is the fed willing to sacrifice inflation in order to stave off recession? Perhaps this opinion piece will shed some light.

Tuesday, February 26, 2008

Alert: Trying to tap into home equity?

Trying to tap into home equity? We'll see - Los Angeles Times

Home Equity Lines of Credit as flexible, emergency cash tools are a thing of the past. If you have a line of credit and want access to that money, you may be out of luck.

Many lenders are freezing lines of credit due to the drop in housing prices and this is taking people by surprise.

My mom is one of the victims (and I don't use that term lightly). Her line of credit with Countrywide (a firm I truly despise) was frozen, but not until after she made a $50,000 payment on it, not knowing she would not be able to access that money anymore. She never would have made that payment as having access to cash was paramount.

Many borrowers with excellent credit are seeing their lines shut down - they are being treated like sub-prime borrowers and punished because of the poor decisions of the companies making the loans available.

The industry will not recover if people don't trust the industry (lending) - people do not trust the lending industry, they fueled the out of control price increases by making loans that they never should have made, now we are paying the price.

My advice - if you need access to cash in the short term and your line of credit has not been frozen - max it out before they freeze it. If you don't have too, don't make payments on your HELOC over what's required (again, if you think you will need access to cash and this is your only avenue).

The lenders are going to cause a run on the lines of credit, perhaps making things worse than they were before.


Wednesday, February 20, 2008

Ben Stein: Take the Bait, Ruin Your Investing Life

Ben Stein gives us 7 ways to ruin our financial life.

Scott Dauenhauer, CFP, MSFP, AIF

Sunday, February 17, 2008

Keep It Simple, Says Yale’s Top Investor - New York Times

Keep It Simple, Says Yale’s Top Investor - New York Times

David Swensen has run Yale's endowment since 1998 and is one of the most successful investment managers in the world. What is interesting is that his advice in this NY Times article mirrors exactly what I have been telling my clients for the past decade:

Use Index Funds and other low-cost investment options

Stick to your long-term asset allocation (even when the markets are in tumult)


I strongly encourage you to read this short article. Swensen also castigates one of my Hall of Idiots inductee's - Jim Cramer, gotta love it.

Please click on the link, you will not regret it.

Scott Dauenhauer, CFP, MSFP, AIF

O.K.....I never do this, but I know you may not click on the link - so this one time I will reprint the article.....not supposed to, but here goes:

New York Times

February 17, 2008
Keep It Simple, Says Yale’s Top Investor

IT has been a time to worry even the savviest investors. The credit markets have been in a crisis, the domestic stock market has been shaky and overseas markets haven’t been much better.

What should an individual investor do?

Don’t try anything fancy. Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals. That is the advice of David F. Swensen, who has run the Yale endowment since 1988, relying on a complex strategy that includes investments in hedge funds and other esoteric vehicles. The endowment earned 28 percent in its last fiscal year, which ended June 30, beating all other endowments. It finished the year with $22.5 billion.

For most people, he recommends a very basic approach: use index funds, exchange-traded funds and other low-cost instruments, and stick to your long-term asset allocation — even when the markets are in tumult.

Don’t be distracted by market forecasts, he said. “You have to diversify against the collective ignorance,” he said. “I think nobody is in a position to react to these big macro-issues. Where is the dollar going to be or what is G.D.P. growth going to be in China? For every smart person on one side of the question, there is another smart person on the other side.”

For most individual investors, he said, copying the strategies of institutions like Yale is virtually impossible: big investors have access to fund managers and arcane strategies that are beyond the reach of most people.

“The only people who should get involved are sophisticated individuals who have significant resources and a highly qualified investment staff,” Mr. Swensen said.

“Most people do not have the resources and time to pick market-beating managers” of hedge funds, private equity funds or funds of funds, he said. And he said that the techniques used by hedge funds often result in higher taxes than those of index funds.

So he advocates another approach, which he outlined in the book “Unconventional Success: A Fundamental Approach to Personal Investment” (Free Press, 2005). He proposes a portfolio of 30 percent domestic stocks, 15 percent foreign stocks, and 5 percent emerging-market stocks, as well as 20 percent in real estate and 15 percent each in Treasury bonds and Treasury inflation-protected securities, or TIPS.

The real estate investment can be made through real estate index funds. Though the real estate market has declined and your portfolio is below its target allocation to it, he said, don’t try to time the market. Go ahead and rebalance because no one really knows where the market’s bottom is.

Diversification will buffer a portfolio from declines in specific asset classes. For example, he said: “If the dollar declines dramatically, you have foreign and emerging-market equities. And a declining dollar may well be associated with inflation, but a diversified portfolio would include TIPS,” to provide a hedge. “That means if any of these scenarios play out, an investor has sizable chunks of his portfolio that protect against them,” Mr. Swensen said.

When possible, he said, rebalancing should be done in a tax-sheltered account, like an I.R.A. or a 401(k), to avoid tax liabilities. “When you are putting fresh money to work,” he said, “you put it in an asset class where you are underweight and take money out of a class that is overweight.”

He says it is fruitless for individual investors to pick stocks. “There is no way that an individual can go out there and compete with all these highly qualified and compensated professionals,” Mr. Swensen said.

HE criticized the approach of Jim Cramer, the CNBC host, who encourages investors to trade stocks in strategies that Mr. Swensen says cost heavily in commissions and taxes.

“There is nothing that Cramer says that can help people make intelligent decisions,” Mr. Swensen said. “He takes something that is very serious and turns it into a game. If you want to have fun, go to Disney World.”

Brian Steel, a spokesman for CNBC, responding on behalf of Mr. Cramer, said Mr. Cramer “had a long history of success as a trader and fund manager.” He added that Mr. Cramer is a proponent of long-term investing and thorough research.

Mr. Swensen says investors should forget market timing entirely. Once an individual sets up a program, it should be rebalanced quarterly or semiannually, he said, “but it should be disciplined.”

When the markets decline, try not to pay attention, he said. “Let yourself off the hook,” he said. “If you pursue the sensible long-term policy, look at it over a 5- to 10-year period. Don’t look at five months.”

Wednesday, February 13, 2008

That 'Stimulus' Nonsense -

That 'Stimulus' Nonsense -

I've been railing against this "stimulus" package since the idea started, this article gives you a good idea of why it won't have any real affect.

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, February 12, 2008

Dow 18,500? Believe It - Morningstar

Dow 18,500? Believe It - Morningstar Fund Spy

Morningstar is not shy about what they think the market will do - they believe it should goto 18,500 (the Dow) within three years based on a number of measures. Are they right? Does it matter?

While it might feel good to see a prediction such as this, I could post dozens of opposing stories calling for Dow 10,000 or less. The fact of the matter is that we don't know the future for stocks, like the rest of the future - it is unpredictable.

I would tend to favor Morningstar's analysis, but I've also learned that the market can remain undervalued or overvalued for quite some time.

Bottom line - if you have a three year time frame, you shouldn't be in stocks. If you have ten years or more - invest away, especially at what appear to be good prices.

Scott Dauenhauer, CFP, MSFP, AIF

Humor Break: Neighbor's Stuck Cat

I got a knock on my door yesterday, my neighbor had left to run errands and another neighbor boy noticed something weird hanging out of the garage.....a cat. We were able to save it and I had to video it!

Scott Dauenhauer, CFP, MSFP, AIF

Friday, February 08, 2008

Buffett: Bank woes are poetic justice

Buffett: Bank woes are poetic justice | Reuters

A few quotes from Warren Buffet on the current state of things!

"It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,"

"I wouldn't quite call it a credit crunch. Funds are available," Buffett said during a question and answer session at a business event. "Money is available, and it's really quite cheap because of the lowering of rates that has taken place."

He added: "What has happened is a repricing of risk and an unavailability of what I might call 'dumb money,' of which there was plenty around a year ago."

But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the "biggest factor" behind the decline. Still, he said, the U.S. economy will "do very well over time."

Interesting stuff!

Scott Dauenhauer, CFP, MSFP, AIF

Expert Doubts Stimulative Effect of Rebate Checks

Expert Doubts Stimulative Effect of Rebate Checks (The Pro Shop) |

I won't put myself in the "expert" corner, but I agree with this article, sending out rebate checks is bad policy and won't do a thing for the economy. This is pure pandering at its worst and one of the reason Republicans were thrown out of power in 2006 - yet here we are again with a congress that refuses to make wise decisions when it comes to spending taxpayers money. No wonder Congress has such a low approval rating. It doesn't matter if you're a Democrat, Independent or Republican - this "stimulus" package should not sit right with you.

I'm not saying you shouldn't be happy to receiving some extra cash - just don't think that it will help the economy.

Stephen Horan was quoted in the article I'm referring to, here is a portion of it:

"My personal view is that [tax rebates] also continue a precedent, which is now turning into a pattern, of anytime there's economic malaise, the United States government is just going to send out checks to people. It's kind of anti-capitalist. Some would say anti-American. It's not the precedent we want to set."

Happy Spending!

Scott Dauenhauer, CFP, MSFP, AIF
Meridian Wealth Management

Thursday, February 07, 2008

Humor Break: U.S. Takes Out Debt Consolidateion Loan?

This was just to funny to pass up!

Scott Dauenhauer, CFP, MSFP, AIF

Ben Stein: No Pain, No Gain

Ben Stein has some pretty good things to say (other than a couple sentences on variable annuities, which I completely disagree). His advice is to remain calm.

Decent article, if you're panicking or thinking about it, this should be one article that you should read.

Scott Dauenhauer, CFP, MSFP, AIF

Monday, February 04, 2008

Experts Get It Wrong Again....Giants Win!

Other than the New York Giants own player, Plaxico Burress, no expert on the NFL got yesterday's super bowl correct. Every single major pundit picked the Patriots, can someone say groupthink!

This is further proof that listening to so called experts won't get you anywhere. There is no such thing as an expert on the Future. Predicting the future continues to be very difficult - even for the well informed.

Scott Dauenhauer, CFP, MSFP, AIF

Bernanke's Fed

Siegel finally weighs in on the economy and Ben Bernanke's recent fed decisions. What I find interesting is that he endorses them, but only if they work.....otherwise he doesn't! Maybe Siegel should run for President!

P.S. What a Super Bowl that was last night!

Scott Dauenhauer, CFP, MSFP, AIF

Friday, February 01, 2008

Investors, Recession Really Isn't All That Bad

Donald Luskin - Smart Money enlightens us on the implication of if we are having a recession. The chart below shows that even if we are in a recession, this isn't necessarily bad for stocks.

The point here is not whether or not we are or aren't in a recession - the point is that it doesn't matter. If we knew we were in a recession right this minute how should one change there investments? The answer is that you shouldn't as long as you are diversified and have a long time horizon.

Scott Dauenhauer, CFP, MSFP, AIF

Take Advantage of 0% Cap Gains Before It's Too Late

Take Advantage of 0% Cap Gains Before It's Too Late (Tax Matters: Personal Finance) |

2008 is the year to take Capital Gains if your income qualifies you for the new 0% capital gains rate for federal taxes. I've linked to a pretty good article that explains how it works. Basically if your income plus the capital gains you take minus itemized deductions and exemptions is less than particular amounts (see article) you could qualify to pay 0% Federal Income Tax Rate!

Read this article.

Scott Dauenhauer, CFP, MSFP, AIF