Elite Council On Economic Leadership

Call it a special government sponsored think tank, if you will.

It's not clear to me that any one body of legislators or representatives of Wall Street's deep bench of analysts is prepared to propose a solution to the current financial crisis. There is plenty of talent out there, in the corporate world, at least, and I suspect that there is a lot of jockeying for position once the mythical 'bottom' is reached.

In the absense of evidence that a viable plan for reshaping America's financial condidtion, I propose that the government should sanction an elite commission made up of the smartest people in the country to formulate a plan for an economic recovery. This idea should not be too difficult to implement. There are smart people at Princeton University, M.I.T., Columbia University, Morgan Stanley, Goldman Sachs and even in Congress that should be tapped to meet this challenge.

My Kinda Guy

Today (Thurs. Oct. 16, 2008), John Mack, CEO of Morgan Stanley was interviewed in an extensive discourse on factors that have caused the current financial crisis. When Mack was asked by the reporter if he thought the U.S. was heading for a recession, he said, "We are already in a recession. I would have said the same thing if you asked me nine months ago."

Now, that kind of stuff impresses me. More than half the world insists on taking the shallow position that we 'are' or 'might' or 'will' be going into a recession. That mindset is totally ludicrous, and it is part of the reason we couldn't get out of our own way when the sky caved in. (If it looks like a bear, smells like a bear and hugs like a bear, it probably is a bear.)

I was also gratified to hear Mack say that Morgan Stanley was in the group of investment banks that got carried away with leveraged deals. He did not stutter and his references were basically unconditional. Sure, it's probably safer for him to come clean now than it might have been a few weeks ago. Nonetheless, he offered compelling reasons to believe people with his professed ambition for future reform can make a huge difference in the financial markets.

Mack gave Mr. Paulson too much credit for working toward a solution. That's another argument that I am likely to roll out later this week. Meanwhile, the markets need a handful of experts who can come together and focus on the remedies that can heal our economy. In my opinion, part of the solution is to reduce speed and not try to get the money machines rolling too quickly.

Hudster

Mortgage Bonds and The Importance of Class

Class in this discussion refers to both the asset and the market makers.

In 1988, I received my first orientation to Government National Mortgage Association(Ginnie Mae) and Federal National Mortgage Association (Fannie Mae). Emphasis was placed on the safety of investments issued by these agencies. I understood the distinction between the two institutions, meaning, GNMA was an agency of the U.S. Government and FNMA was sanctioned by the government and nothing more.

Several weeks of training followed, allowing me the time to understand the importance of a new era in the bond market. Mortage-backed securities, referred to as MBSs, were designed to provide 50 to 100 basis points more than U.S. Treasuries with similar maturities while enjoying the status of a AAA rating. These investments made a lot of sense when they were first introduced to the market. Investing in a security tied to the ownership of a single-family dwelling was probably one of the best ideas since the IRA was introduced in the '70s.

Soon after I learned how the mortgage market worked, the Colleralized Mortgage Obligation (CMO) was born. This concept became the answer to the wide-spread dissatisfaction over the return of principal from standard mortgage bonds. Investors preferred to have their principal earning interest for as long as possible during the life of the bond. No problem.

I joined the charge in touting the superior performance of CMOs, including the liquidity of the iinvestment. My clients learned enough about this opportunity to earn from 7% to 8% on their money during the unforgettable period between 1991 and 1998 without losing one dime of principal! How could they lose in an environment of falling interest rates? It was a wellspring of capital appreciation.

Deja Vu All Over Again!

It is mind boggling to think both Congress and Wall Street have each contributed to a dilemma that would destroy our economy. There was never a way to avoid a financial crisis if curbs were not placed on the kinds of mortgages that could be underwritten and sold to the bond market. Similar to the infamous junk bond market that reaked havoc in the late 1980's, the mortgage industry which presented a golden opportunity to investors during for almost two decades only to take back its rewards in a devastating scenario.

One can become enraged when studying the reasons this crisis has occurred. Greed, among other things allowed a few individuals, both in politics and in business, to capitalize on the rise and fall of the mortgage bond market. I won't spend the energy to cite cases and individuals here, but reader can certainly learn from recent reports on the character of the financial world.

Two respected sources of detailed information about our economic status are Bloomberg and Forbes. Rather than take the easy route and accept the confusion from so-called economic pundits on television, you might want to search for the answers to your personal financial security, independently. After all, you are probably just as smart as anyone you see in a pin-striped suit.

God bless us all!

Hudster

Why I Wrote "Stock Power"

Most people I meet ask me why I wrote my first novel, "Stock Power". The answer is two-fold. I needed a means of telling a handful of investors how sorry I am for committing a crime that caused me to leave the industry and that I intend to reimburse them 100%. On the other hand, I wanted to give book lovers a story that shows what happens to an ambitious stockbroker when he ignores the rules when success goes to his head.

Bill Haydon, the story's central character, sets out for Wall Street's cornucopia of finance in order to make more money - a perfectly admirable and logical ambition. His basis for seeking an exclusive niche in the market was his acute analytical skills and his desire to outperform in his field. He achieves both of these goals. The reader can follow Haydon through this colorful drama as he struggles with conflicts about his values and beliefs while advising wealthy people on what to do with their money.

Successful investing on Wall Street and a workaholic's addictions to money are the two main themes of this novel. Readers will be rewarded with both a glance at how to think about investing and also what to do about their own destiny. This book is likely to create a sense of urgency about personal finances for readers across North America. I expect it will take me about a year to get the word out. In the meantime, I would like to see the press get a little bit more interested in this project.

Bill Hudley

Stock Power (The Novel) Just Released!

After several months of constant editing and technical challenges, Stock Power (The Novel) was published by Infinity Publishing on Friday, May 30 2008.

Stock Power is commercial fiction (based on the author's life) about a stockbroker who earns the trust of hundreds of investors and acquires a comfortable lifestyle until his morality begins to drift. Ambition and greed set the stage for a horrible termination to his career.

The book is in paperback format only, at present, and is more than 500 pages in length. Price: $23.95.

Stock Power can be purchased at the Publisher's website from its BuyBooks bookstore. To locate the book, please use the following link:

http://www.bbotw.com/Search.aspx?kw=stock%20power&typ=Title

You may also visit the website that is dedicated to the book at:
http://www.stockpower-thenovel.com

Enjoy!

Bill Hudley, Author

How to Avoid Blaming the Market for Your Losses

Invest smarter. There are at least two ways to achieve better results with your investments.

The first is to resist the mindset that makes you think your financial future is at the mercy of the stock market.

The second is to never EVER assume an investment will go back up because it is down 20-50% or because someone told you it will go up.

Try to understand that the phrase “long term” has a different meaning today than ever before. Hoping that the stock market will bail you out from your losses is a lot like sitting at a train station, waiting for a train that has been rescheduled for another time, only you never picked up an updated train schedule.

I was sitting in a health care provider’s office this week and could not help overhearing a patient’s conversation on her cell phone with her broker. My antenna always responds to words like, “how much did I lose?” or “I’m not worried, this is for the long term”. So, in other words, she’s in her car traveling west from New York on Rte. 80 in reverse gear; and it’s not a problem because she doesn’t need to be in Chicago until next month!

I have said it 100 times or more that an inordinate number of investors, quite like consumers, are brainwashed. College funds and retirement funds are objectives for the future, and for several unfortunate reasons, there is no real urgency about the present values of these accounts. This is a horrible shame.

Only a minority of investors are award that the Standard and Poors 500 index, which tracks the market value of 500 mid-to-large size companies, is down 9.5% for the past twelve months. A large number of mutual funds have a similar track record, regardless of their popularity. This is to say you would probably have more capital if you had parked your money in a money market account, instead of an index fund or a growth fund, for the past year.

A cheerful side to this report is that you can find growth and fixed income investments that outperform the market indices by a mile. Here are just a handful of stocks and closed-end funds that can get your portfolio headed in the right direction for your so-called long term investment plan.

McDonalds (NYSE - MCD) - up 15% since June 2007
Capstead Mortgages (NYSE – CMO) up 26.6% since June 2007 (does not incl. dividend)
Annaly Capital Management (NYSE – NLY) – up 22.4 % since June 2007 (dividend not included)

Regardless of the false reports you get and the misstatement heard around the market place, investors will find excellent opportunities to grow their money and be better prepared for the terminus to that life long plan they hold so dearly.

You’re welcome!

Bill Hudley

Lucky For You, Michelle Obama, There Is Still Time!

I am a Chicago born African American male in my early 70s. I have had the great fortune of seeing most of America, either because of business interests or through personal travel. In both cases, I have enjoyed the mutual benefit of knowing a broad spectrum of people from various strata in this country.

Your academic achievements obviously outshine mine by several light candles, and I am sure you worked extra hard to earn your credentials. You're also quite charming. But those are all the virtues I can see, judging from your public appearances. There’s always the chance that a personal acquaintance would alter my current impressions of you.

In a word, I feel badly that your outlook and opinions of life in these United States appear to be bleak and uninspiring. If I were asked, I would say your expressions should be restricted to helping individuals of all racial backgrounds see the promising opportunities available to every citizen of this nation. Lack of justice in this country should never be an excuse for denying ourselves the advancement that comes from optimism and hard work.

I don’t wish to brag about my modest achievements. Yet, I am compelled to mention that, in 1970 I began my career as entrepreneur and business owner in the heart of Manhattan. My clients were representatives from Fortune 500 companies from various parts of this country.

During the last twenty years, I changed careers and became a stockbroker and investment advisor to dozens of wealthy individuals throughout the United States. The rest of this story can be found in my forth coming novel, “Stock Power”.

To call this country ‘mean’ is a conspicuous misnomer. I believe your attitude implies that you have not been able to accurately interpret the conditions for breaking the ranks and competing for a prize that is only available to people who are willing to make sacrifices. I further think it is naïve to think America is not a nation of free-thinking, progressive minds that tend to see the glass as half-full, instead of half-empty.

We blacks have suffered from racial bias for centuries and will continue to be hindered by the color of our skin. Yet, I worry that you, along with thousands of African Americans, have a viewpoint that is more detrimental than any external social stigma. Presenting this country’s faults to the public in terms of fear and contempt is a dangerous, counter-intuitive and wasteful exercise that I sincerely hope you will recognize as one that needs to be abandoned.

Your mission, should you decide to accept it, is to compliment Mr. Obama’s campaign and not detract from it by voicing inappropriate statements that don’t make sense. You are at an enviable age that allows you time to step back, or go to a higher plane, where you can refresh your perceptions enough to see the horizon of a society that has encompassed a history of growth as well as degradation.

I believe you have time and the responsibility to add value to our country by being the visionary you can be without the unwarranted prejudice.

May God bless you and the Senator.

Bill Hudley

Can You Double Your Money In The Next 6 Years?

It's definitely possible. Performance is key (on the part of an accredited investment professional, that is).

A woman asked me if it was possible for her to retire before she's 70. I asked her what her financial goal was. She told me she would feel comfortable with an income of $45,000 per year but that she wasn't sure about how long it would take her to reach that goal.

After a preliminary analysis of her current finances, I calculated that she would need twice the money she has now in order to retire. I told her about a simple, proven strategy that would help her grow her money in time for the 70th birthday, which happens to be six years from March 12, 2008.

The magic number for the average average return on the new strategy is 12% per year! Obviously, this is not your typical portfolio performance these days; but if the return is achieved, my client can change her employment status in 2014.

Hint: No Mutual Funds!

There isn't much chance of an employee getting satisfaction from mutual funds [found in 401(k) plans] over the next three to five years. The broad markets are too soft. In addition, fees charged on managed money absorb too much of the return on investment. If you ask the right professional - not your hair stylist or mail carrier - you can get good information on how to earn an average annual return of 10-12% on your money, starting today.

No kidding!

Bill Hudley

Stock Power (The Novel) Soon To Be Released!

For many months, I have been planning, plotting, pushing and predicting the advent of my first novel, Stock Power. After reviewing its latest proof, I can safely say the book will be published by May 30. The event will herald the beginning of a new future for this author as well as dozens of my readers.

Stock Power was inspired by a series of difficulties that I encountered, beginning with my dismissal from the investment industry. It took me nearly four years to complete this work, not having the resources to hire administrative assistance before arriving at the editing stages. In a few weeks, I sincerely believe readers of my book will cheer and jeer Bill Haydon as he struggles to with his personal conflicts in the world of finance.

Please stay tuned to this blog for interesting short stories and opinions related to current events, particularly the stock market, which is my forte. For an advance introduction to my book, please visit: http://www.stockpower-thenovel.com

Stock Power will definitely provide entertainment and possibly enlightenment on what it means to be rich.

Thank you.

Bill Hudley

Senator Obama, please don't say 'because'

Lately, I have become addicted to the Democratic side of the Presidential 2008 campaigns. To say that I am impressed with Senator Barack Obama’s rise in popularity would be an understatement. The reason I won’t spend time searching for a more appropriate word is THAT I have a more pressing mission here.

In view of Mr. Obama’s poise and oratory skills I feel it is my faithful duty to point out the reason he should avoid the common abuse committed by too many average Americans. While it seems almost natural to use the words, ‘reason’ and ‘because’, in the same sentence, the misusage can deteriorate the most powerful message, especially when heard by an erudite audience.

In short, I wish the senator would listen to good advice with regard to this minor grammatical flaw. You are a speaker, Mr. Obama, endowed with exemplary charisma, and since you are so well spoken and enjoy the power of words, please, PLEASE try to stick with the proper placement of the two words, ‘reason’ and ‘because’. It is redundant to use them both in a single phrase.

Senator, I’m with you all the way to November and wish you God’s speed as the next President of the United States!

Bill Hudley

Performance Is Everything

400-Yard Dash in 53.3 seconds!

I debated whether or not I should divulge a little known fact at this stage in my life, but yes, I ran the quarter mile dash in 53.3 seconds in high school. Fifty years later, there are thousands of humans running the same distance in less than 44 seconds; so, who cares about my athletic history?

The point is that my ability to run holes in the wind at one point in my past is in NO WAY a guarantee of future performance. It takes me nearly the same length of time to get down the stairs to my garage as it did to run 1320 feet in my youth. You may wonder, “why is that?” Maybe not.

Let’s talk about all the impressive ads we see on our TV screens spouting impressive returns from mutual funds for the last five, ten and twenty years. The longer span on performance history is generally a more conventional attempt to reassure us of future financial security. Immediately, the mind projects out to the next long haul and accepts the potential gain as a fact of life. Meanwhile, I could not find any recently advertised performance figures on mutual funds for the two or three years preceding 2004 . If they existed, you needed a hound dog to find them. Marketing strategies use numbers to the promoter’s advantage.

But, if you ask the thousands of people who put their money into the hottest index funds in January of 2001 how they feel about past performance [the Standard & Poors 500 index tanked nearly 30% for a continuous period of 24 months.], many of them will tell you they wish they had been giveen more information. Two and a half years is a long time, considering the time value of money.

The start for year 2008, market-wise, is shaky. The reason for the volatility is most unsettling, which is why I will reiterate my previous warnings about so-called conventional wisdom. While I was channel surfing this past week-end, I caught a prominent female financial guru in the middle of one of the most over-used and inappropriate advisory statements of our times. She used the term - long haul - a little too often while implying that the market will go back up. That kind of advice is very bad news, especially for workers who wish to retire inside the next three to five years.

To be brief, we have a dilemma in the credit markets that is bulging. There has never been a larger glut in the sub-prime lending sector than what we have today. The billions of dollars in bad loans around the world weigh heavily on several major economies, especially ours. Refinancing of low-quality mortgages began more than a decade ago and has escalated at a run-away pace to the extent that equity markets are reacting to the situation. If credit quality does not improve, what kind of performance should we expect from the stock market?

Here's something to ponder: define long haul.

If you want an investment strategy that will help to secure your retirement in the next three to five years, it is time to get more involved with your finances. Start by monitoring your investments more frequently to check their performance. If you have been lulled into believing what goes down must go up, snap out of it! Look for sensible advice. It's not the hardest job you ever had.

Hawk