Friday, July 25, 2008

Another Advisor Thief

The above link to an article about an advisor who stole $20 million is a good lesson. In the Wall Street Journal article I was quoted in last week I stated that you should watch out for people promising high returns with no risk, that is exactly what this scam artist offered. He offered stock market like returns without the risk - impossible. When you believe something that cannot be true you will be taken for a ride. These people could have done a few simple things to ensure there money was not stolen. I'll address this in another post (gotta jump on a conference call!).

Scott Dauenhauer

Tuesday, July 22, 2008

Quoted in WSJ: To Protect Your Nest Egg, Tread Carefully

I was quoted in the Wall Street Journal on Sunday, you can read the entire article online by clicking above. My specific quote was in the High Yield Temptations section "Another temptation, especially among bond investments, is simply to put money in whatever product carries the highest payout. "Don't buy something just because it has a high yield, and don't believe that there are investments that pay high returns with little or no risk. They don't exist," says Scott Dauenhauer, a financial planner in Laguna Hills, Calif."

The article basically outlined whether or not you should be making changes in your portfolio at this time and if so, what to do and what not to do.

Its a short article, but a helpful one. Its always nice to be quoted in The Journal!

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, July 15, 2008

The College Solution - By Lynn O'Shaughnessy

I've been a fan of Lynn O'Shaughnessy for several years. I loved her column in the San Diego Union Tribune and was disappointed when they went with a syndicated columnist who was good, but not as good as Lynn. I've kept in touch with Lynn and since leaving the Tribune she has been doing more writing.

Lynn has recently published The College Solution, a book in which I am going to be reading this week and am quite excited about.

From Lynn's website:

Here are just a few of the things that you'll discover when reading The College Solution: A Guide for Finding the Right School at the Right Price:

1. Bachelor degrees are priced like airline tickets. Passengers routinely pay different prices for plane tickets and so do families paying for college. Price tags are meaningless. Learn how to find the best prices for wonderful schools.

2. Pinpoint academic and financial matches. Some schools are extremely generous with financial aid for needy families, while others shower money on affluent students. Learn how to find the most generous schools for your child.

3. Answering the financial aid question is critical. It's extremely important to figure out if you've got a shot at financial aid before looking at ANY schools. You'll find out why in Chapter 3.

4. College rankings are flawed. There's no reason to rely heavily on U.S. News & World Report's flawed college rankings. Learn how to research academic majors, as well as evaluate individual departments within colleges and universities.

5. Downsize big universities. Sharing intro classes with hundreds of other students may be inevitable when attending state universities, but ways exist to make the educational experience more intimate. Learn how in Chapter 27.

6. Capture opportunities for minorities. Chapter 39 explains how minority students can boost their chances of attending excellent schools with great financial aid packages. Discover a list of top liberal arts colleges that accept minority students at dramatically higher rates than other applicants.

7. Avoid lender rip offs. The recent student lender scandal illustrates why families must be careful when borrowing for college. Discover proven ways to find the best loans.

8. Learn from higher ed good guys. The College Solution pulls from research conducted by many of the organizations that wear white hats in this industry. The include: the Education Conservancy, the Education Trust, The National Survey of Student Engagement, the Teagle Foundation,, the Center of Inquiry in the Liberal Arts, The Journal of Blacks in Higher Education, the Higher Ed Watch blog, the Project on Student Debt, and the Education Sector.

I encourage anyone with kids to pick up this book (heck, pick up a couple copies and give one away!).

I'll hopefully have my review up in a few weeks, but I'm confident that if Lynn wrote, I'll like it.

Scott Dauenhauer, CFP, MSFP, AIF

Monday, July 14, 2008

MAC and MAE's Malaise

I've been getting a lot of inquiries as to my thoughts on this weekend's latest casualties in the ongoing Mortgage Crisis. If you hadn't heard, IndyMac bank, a large California mortgage lender that specialized in "Alt-A" loans has been seized by Federal Regulators. In addition, Fannie Mae and Freddie Mac, the two Government Sponsored Entities that provide a market for home loans are in trouble due to the massive amount of loans that have failed or will possibly fail in the coming months and years. Other news stories are reporting up to 150 banks may fail over the next 12 months. What is an investor to think and do?

I wrote on June 4th that I didn't believe the mortgage crisis was over, in fact that it had a ways to go, I was right, as we are now learning. The good news is that bad news is finally starting to emerge, we cannot face and solve a crisis until and unless we get the cards on the table and deal with them. I still do not believe all the cards are on the table, but I think we are getting closer.

The other good news is that despite the fact that our government essentially allowed the mortgage and housing boom to get out of hand, they seem to have accepted the fate that they are going to have to fix it. Fannie Mae (FNMA) and Freddie Mac (FHMC) will NOT be allowed to fail - if they were the consequences would be devastating (unlike Bear Stearns - which should have been allowed to fail). A failure of FNMA and FHMC would have such a colossal impact on the markets as to most likely wipe out our banking and insurance systems - a complete systemic failure that would essentially be the equivalent of a massive nuclear attack on our financial system. The government cannot and will not allow this to happen under any circumstance, it is in everyone's best interest to keep the FNMA and FHMC stable entities.

I will not get into the failures of government that allowed this to happen, its just way to much information, we can only hope they have learned their lesson (I don't believe they have). I am positive that a bailout of unimaginable proportions will occur and we will foot the bill.

For those of you who think that America has never faced anything of this magnitude I can only point you to the Savings and Loans crisis which saw about 600 S & L's fail in the 80's - taxpayers ended up bailing them out. History tends to repeat itself, yet we should hold our politicians accountable this time and not let it happen again, this potential bailout will be much larger.

As for the markets - I have no idea how this will affect the market in the short term, but I do believe the long term will be fine, as it always has been. Stocks, specifically financials have been battered, but the good news is that they are not insanely overvalued like they were during the last bear market. Stocks may go lower, I don't know, but I believe they will be higher five years from now. I don't know if the next 1,000 point move will be up or down, but I believe the next 5,000 point move will on the plus side (and of course may take several years).

Stocks pay higher returns over time because of the higher risk they pose, these normal 20% drops in the market serve us patient investors with higher returns long term, it is quite simply the price we pay for these higher returns. Remember, the stock market drops by about 20% every five years and 10% every two years.....we are not experiencing anything new.

The bottom line (as I told a Wall Street Journal reporter this week) is to keep costs lows, diversify, don't hold more stock than you need and relax. The patient investor is the rewarded investor.

The headlines will be large and the fear and panic will be splashed everywhere (how else will the news outlets attract eyeballs), just keep your head down and ignore it, those who don't will end up like most investors - losing money and earning poor returns. Don't be like the herd, stay focused.

On another, more sad note, regardless of your political affiliation, I think we can all agree that Tony Snow, the former Fox News Anchor and Former White House Press Secretary was a good man. It was devastating to news to all of us when it was reported that he lost his battle with cancer this weekend. Tony Snow represented what I think we all should strive for, a discourse that was civil and friendly. Our prayers go out to his family. RIP Tony.

Scott Dauenhauer, CFP, MSFP, AIF

Wednesday, July 09, 2008

Five Lessons From a Wild First Half

Another excellent article basically telling us to keep costs low, diversify, rebalance when necessary and stay the course, things will be all right.

I encourage you to read this article, it has some great statistics and is well written.

Scott Dauenhauer, CFP, MSFP, AIF

Cramer: Still an Idiot

I love this article (even though I haven't historically like the authors writings). It attempts to dispel "Technical Analysis" and in the process skewers my Hall of Idiots inductee Jim Cramer, what follows is a snippet, click the link above for the rest:

".....It began when Felix Salmon, who writes the outstanding 'Market Movers' blog for, found the inimitable Jim Cramer urging his CNBC "Mad Money" viewers on June 13th to "buy, buy, buy!" stocks based on a certain reading on a technical tool called the "S&P 500 oscillator." Cramer encouraged his minions to purchase financials, tech and homebuilders in particular - a call that, ahem, didn't turn out so well over the past couple of weeks. The Great Booyah himself backtracked on it just a few days later."

I Love It.......perhaps we'd make more money doing the opposite of Cramer!

Scott Dauenhauer, CFP, MSFP, AIF

NY TIMES:A Bear Market, Mauling Not Included

Great article giving some perspective on what your portfolio's returns might be versus the market, bottom-line: they are probably better because most of you don't have 100% of your money in the market.

This article has some good stats and great advice about surviving the downturn.......stay the diversified and stay the course!

Scott Dauenhauer, CFP, MSFP, AIF

Siegel: Oil’s Increasing Threat to the US Economy

Wharton's Jeremy Siegel explains Oil's impact on corporate earnings as well as our national GDP. He doesn't exactly cover any new ground here, but it is still worth a read.

Scott Dauenhauer, CFP, MSFP, AIF

Monday, July 07, 2008

Oil, the Economy, and the Stock Market

Interesting white paper linking oil prices and US recessions. Many interesting facts, it is worth your time to read. This piece is by Vanguard.

They claim the move from $60 to $90 oil was wholly a factor of the dollar decline........I agree. They can't explain the rest though.

Scott Dauenhauer, CFP, MSFP, AIF

Giant rubber snake could be the future of wave power

I've been linking to and telling you lately about all the different technologies that have been in the works to create energy for sources other than oil, coal, or natural gas - or about additional deposits of oil, coal, and natural gas. One very interesting form of renewable energy comes from the oceans waves, their are a number of ways to take advantage of the oceans waves to produce electricity, the link above takes you to an article about a device that can power 2,000 homes and resembles a sea snake.

While things may look gloomy, remember that a free society will always solve their problems and in ways most of us never even thought of or thought possible. The world may seem likes it on the verge of a global depression - it isn't. It is on the verge of an explosion of technological and biological breakthroughs unlike anything this earth has ever witnessed. It won't happen tomorrow, but the coming decades will knock your socks off.

Scott Dauenhauer, CFP, MSFP, AIF