Buck Naked Politics

Market Musings

posted by Chris |  The first quarter of 2008 has mercifully come to a close with the S&P 500 posting a 10% loss. Much to our chagrin we have experienced back-to-back negative quarters with the 4^th quarter of 2007 losing approximately 5%. 

Indeed the bull market that we enjoyed didn’t end with the classic large cap stock run up and along with profound investor glee, but rather with multiple shocks coming from the catastrophe that is the credit markets.

A Pot and a Chicken: Spending the Tax Rebate

posted by Chris |  Now that Congress has passed and the President has signed the Economic Stimulus Act of 2008, those who will receive a check can start making a list of how they will spend their newfound wealth.

Our government borrowed from Peter (our children & grandchildren) to pay Paul (us) because our politicians are concerned about the economy ( its an election year ). The checks may have a slight affect on our overall economic conditions. 

Rather than going out to dinner (stimulating our economy) or buying a new gadget (stimulating the Chinese economy), I would argue that you should look closely at your own economic situation and use this gift wisely.

If My Identity Was Stolen, it Can Happen To You!

posted by Chris |  In early November, I received an unusual looking letter from a bank that had been in the news. I opened it,  because I thought it might contain info about the bank's poor subprime loan exposure. 

What did I find?  That I had a credit card with that bank and that I had submitted an address change to Philadelphia.   I can assure you that I do not, nor have I ever, lived in Philly -- and I never had a credit card with that bank.

Shaken, not Stirred: Thoughts on Market Volatility

posted by Chris | I started in this business in 1985, and I have never witnessed the severe volatility that we are enduring now.  Please understand that the stock market is cyclical by nature.  It appears that these cycles are compressed by time and magnitude. 

From the anecdotal information that I have collected, these swings in the market place seem largely driven by the large institutional companies (brokerage firm trading accounts, hedge funds, etc) not by the individual investor. 

Most companies that are falling in value are not going out of business.  Their earnings growth may be slowing (or worse), but how many companies have gone into bankruptcy?  Not many.  Is our economy going into a depression or recession?

Financial Musings

by Chris |  “Recession is when your neighbor losses his job. Depression is when you lose yours.” They're not my words, they're Ronald Reagan's.

The odd thing about a recession is that you don’t know that you're in one until you receive data (months later) that confirms your suspicion.  I have no idea as to whether we will actually enter a recession, if it will be a touch-n-go recession, or if we will avoid one altogether.  What I do know is that while I see pockets of opportunity, clearly our 2008 expectations need to be muted.

Financial Planning New Year’s Resolutions Part II: for People Over 50

by Chris | Financial Planning New Year’s Resolutions Part II: for People Over 50 If we lived in a dictatorship and I were the dictator, I’d be an especially benign one. I’d let everyone live to age 100. As a benign dictator, I’d also bequeath the following New Year’s resolutions to people over 50. (Resolutions for people 50 and under are here.)

1. Make a Plan. If you don’t already have one, consult with your advisor about a comprehensive financial plan or spend the time with internet calculators and create your own. Most people spend more time planning their next vacation than they do the rest of their life. It’s a valuable excise.

 

Financial Planning New Year’s Resolutions Part I: for People 50 and Under

by Chris |  If we lived in a dictatorship and I were the dictator, I’d be an especially benign one. I’d let everyone live to age 100.

As a benign dictator, I’d also bequeath the following New Year’s resolutions to people age 50 and under. [Resolutions for people over 50 are here.]

1. Buying a House. If you are going to buy a house, use a conventional 30-year fixed-rate mortgage and make an extra payment yearly (better yet a 15-year fixed-rate mortgage). Keep your payment at or below 30% of your take home pay. Do you want such a high payment that you can’t enjoy life? Stay away from adjustable rate mortgages unless your financial planner, tax advisor and spiritual advisor give you the ok.

The Social Security "Crisis" of 2008

Posted by Chris |  As the election year rolls around, politicians will grab Social Security participants and run with them to the polls, holding the promise of their Social Security check like a carrot on a stick. It will be a "crisis" in 2008 because, once again, politicians will use it to rally their base. Let’s take a hard look at Social Security, knowing that Americans will vote on it. 

According to the Social Security Trustees' 2007 report, the fund will run dry during the 2040’s. The actuaries (number crunchers) create 3 different assumptions: low, intermediate and high cost.  To keep this somewhat brief, I'll follow their intermediate-cost assumptions.

What the Dow Jones Industrial Average Means to You

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Posted by Chris

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What is it?

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The Dow Jones Industrial Average (DJIA) is probably the most recognized indicator of the overall condition of the U.S. economy and stock market. The index is a price-weighted average of 30 actively traded, big companies. These stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company); and it was actually started in the early 1900’s. Rather than dividing the total value of the 30 companies equally, the Dow is computed using a price-weighted indexing system. Essentially, the editors at WSJ add up the prices of all the stocks and then divide by the number of stocks in the DJIA. (In actuality, the divisor is much higher today in order to account for stock splits that have occurred in the past.)

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Members of the DJIA (aka components – I sound smart when I type components!) include Disney, Microsoft, Boeing, Merck and 26 more. If you really want to know the rest of the index, send me an email or Google™ the list.

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What does it mean to you?...