Monday, April 26, 2010
Pardon Our Website Appearance
Due to a technical mishap we were forced to change the face of the Stock Power website. Please pardon our appearance. The site will be restored as soon as possible. Thank you.
Monday, November 9, 2009
Stock Power
My name is Bill Hudley. I published my first novel last year. The title is "Stock Power". The story is biographical fiction about a stockbroker whose entire life runs into a brick wall.
If you read this book, you will definitely be entertained. You might also become richer! The book is available at Amazon.com. Thanks.
If you read this book, you will definitely be entertained. You might also become richer! The book is available at Amazon.com. Thanks.
Monday, August 17, 2009
American Economy: It's What We Make It
A friend told me about a terrible thing that happened to her roughly six years ago. She was driving her car in heavy traffic on a hot summer day when she smelled something burning. The odor seemed to be coming from under the hood of her car. She tried to drive another fifty miles to her destination, but the car sputtered to a stop before she reached her destination.
I asked my friend (let’s call her Pricilla) when she last had maintenance performed on the car. “Oh, I don’t remember”, she said. “Probably last year. I just don’t get the time to take it in to be checked.”
I was in a restaurant last week when I overheard a patron lamenting about money he lost in his 401(k) plan during the past five years. His voice was a “stage whisper”, and the man didn’t seem to mind that I knew his investments were unsuccessful. I think his name was Newton.
“This economy has really taken its toll on the little guy,” he said to me. “How old is your 401(k)?” I asked. “About 15 or 16 years”, he replied. “It was doing nicely when I first started out. I lost more than thirty percent of my money. That’s the economy for you.”
No, it isn’t.
I asked my friend (let’s call her Pricilla) when she last had maintenance performed on the car. “Oh, I don’t remember”, she said. “Probably last year. I just don’t get the time to take it in to be checked.”
I was in a restaurant last week when I overheard a patron lamenting about money he lost in his 401(k) plan during the past five years. His voice was a “stage whisper”, and the man didn’t seem to mind that I knew his investments were unsuccessful. I think his name was Newton.
“This economy has really taken its toll on the little guy,” he said to me. “How old is your 401(k)?” I asked. “About 15 or 16 years”, he replied. “It was doing nicely when I first started out. I lost more than thirty percent of my money. That’s the economy for you.”
No, it isn’t.
Granted, the markets responded to the greed and corruption that nearly blew up Wall Street; but that’s not the only reason Newton lost his shirt in the market.
No one forced Newton to stay invested from January 2007 ‘till now while clinging to the dream shared by millions that 401(k) plans are synonymous with retirement security. Pricilla can’t blame the breakdown of her car on the heavy traffic she was in. Quite simply, she wasn’t prepared for the inevitable mishap.
What do these two misguided wayfarers have in common? The answer is they both were irresponsible, being too casual with their planning and conservation of important assets. In other words…
No one forced Newton to stay invested from January 2007 ‘till now while clinging to the dream shared by millions that 401(k) plans are synonymous with retirement security. Pricilla can’t blame the breakdown of her car on the heavy traffic she was in. Quite simply, she wasn’t prepared for the inevitable mishap.
What do these two misguided wayfarers have in common? The answer is they both were irresponsible, being too casual with their planning and conservation of important assets. In other words…
THINK ABOUT THIS...
WHAT IF YOU EXCHANGED YOUR MUTUAL FUND SHARES FOR MONEY MARKET SHARES EARLY IN 2008?
S&P chart courtesy of Yahoo! Finance.
Just think, if you had $100,000 sitting in various funds in your 401(k) plan in January 2008 and exchanged your shares from equity and bond funds into a traditional money market fund, your account would be valued at approximately $104, 000 today (assumes a 4% compounded growth rate), regardless of what happened to the rest of the market!
The Merrill Lynches of the world would not have sold you out - FOR A FEE - and, if a few million alert investors did the same thing, the economy would not be in its current condition. That's because enough Americans would have more money to spend - or save for retirement.
The Merrill Lynches of the world would not have sold you out - FOR A FEE - and, if a few million alert investors did the same thing, the economy would not be in its current condition. That's because enough Americans would have more money to spend - or save for retirement.
Unfortunately, untold millions of employees did not hear from their financial advisors in time or their 401(k) fairies were at a convention for the past year.
Please take this short quiz on the American Economy.
1. You believe The Recession is over
2. You expect the Dow Jones to hit 10,000 by December 31, 2009
3. Making money in the stock market is all a game of chance4. More jobs will be lost in 2010
4. Holding on to your stocks for the long term is the best strategy
5 The Federal Reserve is an agency of the U.S. government
6. Mortgage-backed investments are not safe
7. If you continue saving in your 401(k) plans, you will have enough money to retire in 10 to 15 years.
If you answered "Yes" to three or more questions, read my recent novel:
You may place your order at Amazon.com or
Contact Us: info@wlhcommunications.com
ALL RIGHTS RESERVED - 2009
WLH COMMUNICATIONS INC NEW YORK
WLH COMMUNICATIONS INC NEW YORK
Saturday, April 4, 2009
U.S. Economy: Not A Rocket Science
It is no longer a secret that, when elected officials get entangled with personal interests and corporate corruption, tax-payers pick up the tab for the damages and the economy shrinks.
American citizens have been hit so many times by the effects of greed and the self-serving attitudes in Congress that a rippling crisis was imminent. I believe we needed a collapse in order to pause and reflect on the price of conspicuous consumption and complacency.
Americans, on the whole, are the world's most prolific consumers. That's because our incomes are higher than anywhere else, and merchants have found highly sophisticated techniques for getting us to spend our money. Unfortunately credit has been abused in three major markets - housing, automobiles and credit cards. The result of rampant consumer spending is the current global financial crisis.
So, what else is new?
If you are a TV channel surfer, you are aware of the focus on the economy from every popular financial talk show. I am amused by some of these forums because they are repetitive and often confrontational. The problem I have with the media, which I have expressed boldly over the past decade, is that the commentators hardly get it right when presenting their views on solutions to our economic dilemma. I am convinced that they are more interested in being photogenic.
That doesn't deter me from espousing on the way our nation's plight is being treated. Economic growth is measured by one thing only: how businesses and consumers spend money, in that order. Layoffs are infectious and they must be stopped.
Strategic capitalization is the answer to that problem. Since banks are in business to finance corporate America, a remedial program must be activated to help restore this basic principle. Apparently, the only source for available capital, at this juncture, is the United States government, in which case, a commission should be set up to safeguard all capital that is earmarked for America's struggling corporations. If anyone ever asked me, I would propose a standardized business plan that would be implemented when companies receive new bank loans.
Corporations and large institutions have been left alone to treat money as if it grew on trees. The sad truth is that these groups will continue their monetary practices until something really bad happens, such as total insolvency and bankruptcy. While these robber barons are enjoying their spoils, the rest of the public has been enthralled in repetitious conundrums about the solution to our national financial crisis. It bothers me, and possible some of you, that so much time is spent on talk and criticism.
I gave our situation a lot of thought. Naturally, I consider myself to be just as reasonable as any of the so-called gurus on television. It has been my view that the solution to the nasty mess we are in is not very complicated. I believe the more we argue about it, the more indiscernible the solution will become.
Looking at a problem from the bottom upward is most often an efficient way to solve a problem. In my opinion, the economy would begin to grow again if consumers had job security and money to spend. Ok. If small businesses had sufficient cash flow they would not have to layoff employees. Instead, they might even be able to increase their human resources. If that were true, banks should be able to provide business loans to businesses to make all this happen. There are no arguments to refute these principles.
So, how does the grand scheme of finance come to life? The answer to this question is not so simple, but it's also not a rocket science. Given, there extenuating circumstances involved with stimulating the economy, an extremely well planned, simplified funding program (no, it's not TARP!) should be designed to provide liquidity in the credit markets. It would be systematic, measurable and accounted for by the Federal Reserve Board. The FOMC meetings would include a thorough monitoring and evaluation of the funding program periodically, as needed.
The Fed has the money. Why don't we bypass as much governmental posturing as possible, commit to a $500 billion guarantee to commercial banks and get on with it? The GDP could grow by 10% in the second half of 2009 if consumer spending increased by 15-20%. Yes, I am aware that I'm too late and missed the congressional invitation that was sent to the wrong address. I believe springs eternal.
God bless America. Cheers to President Obama!
American citizens have been hit so many times by the effects of greed and the self-serving attitudes in Congress that a rippling crisis was imminent. I believe we needed a collapse in order to pause and reflect on the price of conspicuous consumption and complacency.
Americans, on the whole, are the world's most prolific consumers. That's because our incomes are higher than anywhere else, and merchants have found highly sophisticated techniques for getting us to spend our money. Unfortunately credit has been abused in three major markets - housing, automobiles and credit cards. The result of rampant consumer spending is the current global financial crisis.
So, what else is new?
If you are a TV channel surfer, you are aware of the focus on the economy from every popular financial talk show. I am amused by some of these forums because they are repetitive and often confrontational. The problem I have with the media, which I have expressed boldly over the past decade, is that the commentators hardly get it right when presenting their views on solutions to our economic dilemma. I am convinced that they are more interested in being photogenic.
That doesn't deter me from espousing on the way our nation's plight is being treated. Economic growth is measured by one thing only: how businesses and consumers spend money, in that order. Layoffs are infectious and they must be stopped.
Strategic capitalization is the answer to that problem. Since banks are in business to finance corporate America, a remedial program must be activated to help restore this basic principle. Apparently, the only source for available capital, at this juncture, is the United States government, in which case, a commission should be set up to safeguard all capital that is earmarked for America's struggling corporations. If anyone ever asked me, I would propose a standardized business plan that would be implemented when companies receive new bank loans.
Corporations and large institutions have been left alone to treat money as if it grew on trees. The sad truth is that these groups will continue their monetary practices until something really bad happens, such as total insolvency and bankruptcy. While these robber barons are enjoying their spoils, the rest of the public has been enthralled in repetitious conundrums about the solution to our national financial crisis. It bothers me, and possible some of you, that so much time is spent on talk and criticism.
I gave our situation a lot of thought. Naturally, I consider myself to be just as reasonable as any of the so-called gurus on television. It has been my view that the solution to the nasty mess we are in is not very complicated. I believe the more we argue about it, the more indiscernible the solution will become.
Looking at a problem from the bottom upward is most often an efficient way to solve a problem. In my opinion, the economy would begin to grow again if consumers had job security and money to spend. Ok. If small businesses had sufficient cash flow they would not have to layoff employees. Instead, they might even be able to increase their human resources. If that were true, banks should be able to provide business loans to businesses to make all this happen. There are no arguments to refute these principles.
So, how does the grand scheme of finance come to life? The answer to this question is not so simple, but it's also not a rocket science. Given, there extenuating circumstances involved with stimulating the economy, an extremely well planned, simplified funding program (no, it's not TARP!) should be designed to provide liquidity in the credit markets. It would be systematic, measurable and accounted for by the Federal Reserve Board. The FOMC meetings would include a thorough monitoring and evaluation of the funding program periodically, as needed.
The Fed has the money. Why don't we bypass as much governmental posturing as possible, commit to a $500 billion guarantee to commercial banks and get on with it? The GDP could grow by 10% in the second half of 2009 if consumer spending increased by 15-20%. Yes, I am aware that I'm too late and missed the congressional invitation that was sent to the wrong address. I believe springs eternal.
God bless America. Cheers to President Obama!
Contact Us: info@wlhcommunications.com
ALL RIGHTS RESERVED - 2009
WLH COMMUNICATIONS INC NEW YORK
Sunday, March 1, 2009
Wall Street, Both Goldmine and Carnival
There is no other place on this planet as sophisticated and resourceful where you can make big money and get fleeced without leaving your armchair. The money craze on Wall Street has called attention to a new era for investors.
"Yessiree, step right up and play the game everybody loves! You sir, yes you with the big bear tee shirt. This is your lucky day! I'll tell you what I'm going to do for you. Give me a half million dollars and I will guarantee that your investment earns twenty percent per year EVERY YEAR for the next five years and longer. Trust me.
(Pitch continued...) "This investment is one of a kind and we only offer it to special investors who seek above average returns. I'm giving you our confidential brochure documenting the returns over the past ten years. As you can clearly see from the charts and the sincere look in my eye (doesn't matter which one), this is a phenomenal opportunity backed by our proven history of outperforming the markets."Now, who in their right mind would fall for a scam like the one described above. You? If not you, who?
The shell game on Wall Street has been marketed in various forms.If you didn't quite like the cologne worn by the scam artist offering you twenty percent on your money, you probably gave a huge fraction of your assets to a giant institution brandishing a recognizable logo for the last fifty years. I'm referring to Merrill Lynch. You sounded like a bug snug in a rug when you told your house guests or close friends (OR ME), "I'm with Merrill."
For decades, Merrill Lynch posed as a monolith owning a legacy of strength and integrity.Who knew the benchmark of investment banking was so reckless while strutting its bullish messages in more tabloids than any financial institution in the world? I had only a small clue, going back twenty years; but I had no idea the company was casting a shadow across the markets that ten times larger than its true size. Imagine, a global investment bank being swallowed up by a bank (Bank Of America, NYSE: BAC)! Think about that for a couple of minutes.
Being Rich Has New Meaning
"The rich get richer" is an old adage that we have all heard for most of our lives. Forget it. These days the rich are becoming more corrupt by the hour, losing their integrity to the lure of money an preying on investors that need the money the most. It's about time we all learned that any service or series of transactions that require new capital to be successful is a virtual Ponzi scheme!
Roughly three decades ago, Woody Allen described a stockbroker as someone who invested your money until there was none left. In the past decade, distributions of wealth have been a one-way system that benefits corporate executives more than any other class in the United States; and we taxpayers are now asked to take a flying leap of faith in hopes that our government will put the brakes on the inequities of Wall Street. Unfortunately, it hasn't happened, yet.
While Democrats and Republicans debate who's right and who's wrong, the swindler's beat goes on. Unjustifiable use of company jets, lavish junkets to softer climes and additional perks to the best dressed executives will continue until President Obama finds a way to pull the plug. In my view, he is somewhat intimidated by the likes of Nancy Pelosi and Barney Frank. Who wouldn't be? Those two bureaucrats began hobnobbing on Capitol Hill before Mr. Obama left law school. In my opinion, they represent the monkey wrench (think pork) in the recovery program.
About Hope
I believe no one doubts that our greatest commodity is hope.
Government, being what it is, will grind through waste to achieve the economic restoration this country needs, albeit in a much longer time frame than actually necessary. Supposedly, the buck will stop at the Oval Office, and hard-nosed decisions from the top will be exercised.I think of the solution to our financial crisis can be characterized a a gigantic jigsaw puzzle.
The banks have to be reclassified and refurbished, jobs must be secured and looting of investors' pockets must cease, all within a singe time frame. Progress in these areas has to be achieved quickly in order to keep the glimmer of hope alive around the world.
If there was ever an opportunity for a U.S. President to be lionized as a the champion of America's future, now is the time - a feat that would be registered as one more magnificent moment in history.
Hudster
"Yessiree, step right up and play the game everybody loves! You sir, yes you with the big bear tee shirt. This is your lucky day! I'll tell you what I'm going to do for you. Give me a half million dollars and I will guarantee that your investment earns twenty percent per year EVERY YEAR for the next five years and longer. Trust me.
(Pitch continued...) "This investment is one of a kind and we only offer it to special investors who seek above average returns. I'm giving you our confidential brochure documenting the returns over the past ten years. As you can clearly see from the charts and the sincere look in my eye (doesn't matter which one), this is a phenomenal opportunity backed by our proven history of outperforming the markets."Now, who in their right mind would fall for a scam like the one described above. You? If not you, who?
The shell game on Wall Street has been marketed in various forms.If you didn't quite like the cologne worn by the scam artist offering you twenty percent on your money, you probably gave a huge fraction of your assets to a giant institution brandishing a recognizable logo for the last fifty years. I'm referring to Merrill Lynch. You sounded like a bug snug in a rug when you told your house guests or close friends (OR ME), "I'm with Merrill."
For decades, Merrill Lynch posed as a monolith owning a legacy of strength and integrity.Who knew the benchmark of investment banking was so reckless while strutting its bullish messages in more tabloids than any financial institution in the world? I had only a small clue, going back twenty years; but I had no idea the company was casting a shadow across the markets that ten times larger than its true size. Imagine, a global investment bank being swallowed up by a bank (Bank Of America, NYSE: BAC)! Think about that for a couple of minutes.
Being Rich Has New Meaning
"The rich get richer" is an old adage that we have all heard for most of our lives. Forget it. These days the rich are becoming more corrupt by the hour, losing their integrity to the lure of money an preying on investors that need the money the most. It's about time we all learned that any service or series of transactions that require new capital to be successful is a virtual Ponzi scheme!
Roughly three decades ago, Woody Allen described a stockbroker as someone who invested your money until there was none left. In the past decade, distributions of wealth have been a one-way system that benefits corporate executives more than any other class in the United States; and we taxpayers are now asked to take a flying leap of faith in hopes that our government will put the brakes on the inequities of Wall Street. Unfortunately, it hasn't happened, yet.
While Democrats and Republicans debate who's right and who's wrong, the swindler's beat goes on. Unjustifiable use of company jets, lavish junkets to softer climes and additional perks to the best dressed executives will continue until President Obama finds a way to pull the plug. In my view, he is somewhat intimidated by the likes of Nancy Pelosi and Barney Frank. Who wouldn't be? Those two bureaucrats began hobnobbing on Capitol Hill before Mr. Obama left law school. In my opinion, they represent the monkey wrench (think pork) in the recovery program.
About Hope
I believe no one doubts that our greatest commodity is hope.
Government, being what it is, will grind through waste to achieve the economic restoration this country needs, albeit in a much longer time frame than actually necessary. Supposedly, the buck will stop at the Oval Office, and hard-nosed decisions from the top will be exercised.I think of the solution to our financial crisis can be characterized a a gigantic jigsaw puzzle.
The banks have to be reclassified and refurbished, jobs must be secured and looting of investors' pockets must cease, all within a singe time frame. Progress in these areas has to be achieved quickly in order to keep the glimmer of hope alive around the world.
If there was ever an opportunity for a U.S. President to be lionized as a the champion of America's future, now is the time - a feat that would be registered as one more magnificent moment in history.
Hudster
Thursday, January 15, 2009
Madoff, American Piranha
I am an ex-convict, as of January 15, 2002. The prefix is permanent, but the root word is not. I was fortunate enough to get the message during my first week in prison. Although I was sentenced to six years’ confinement in a correctional facility, there was no way I could have survived the stark change in my environment. I appealed to the superior court to be re-sentenced to a shorter term was successful. I served a total of seven months on a farm in South Jersey and will never return to the prison system.
My mind is totally changed. The corruption that evolved in my thinking has been replaced with a permanent commitment to be a benefactor to society for the rest of my life.
I wish I could say the same for Bernard Madoff, but I cannot. He is a much different kind of animal.
A reporter called me about a week ago. After he introduced himself as a member of a global news organization, he said he was working on a story about Bernie Madoff and would like to know what I thought of the man. My immediate reaction was to recoil with a complaint I had been harboring about the local newspaper that included my name in a caustic report, sparking the reporter’s interest. After making it clear to the caller that Madoff and I had nothing in common, except for gender, was given an opportunity to describe the quality of advising I performed for nearly twelve years, prior to succumbing to a gambling addiction.
My overall answer to the reporter’s initial inquiry was probably too brief, in retrospect. I said Madoff is an evil person with little or no self-respect. Today, I could easily expand my assessment. This man began an adventure that was based on a desire to steal from the rich. His commitment was so strong, it allowed him to become extremely successful in his pursuit. So much for Bernie Madoff.
The Other Half of the Equation.
Some investors (and corporate managers) are the greediest people on earth, a point that I make in my book, Stock Power. In order to run a successful ponzi scheme, you need to have a sizeable market of gullible participants, just like you need both buyers and sellers in the stock market.
It’s most unfortunate that some of Madoff’s victims were captive investors along for the ride; but a decision maker who is persuaded to make an egregious pledge without verification of the validity of the return on investment is a fool. Regardless of the impression a solicitor makes with references and facades of extreme success, the age-old principal still stands. A sucker is born every day (P.T. Barnum). Apparently, wealth isn’t necessarily the modifier.
Since the late eighties, major markets have crumbled when investors pursued false promises of extraordinary gains. In the 1987, it was the junk bond market. Some twenty years later it was the housing markets. Meanwhile, con artists, large and small, have preyed upon hapless and hopeful zealots who might still believe in the Fairy Godmother.
True Story
In 1995, I discovered a timber producing company called Rayonier Timberlands, LP (NYSE: RYN), operating in several countries including the U.S. At the time of my discovery the stock was paying a dividend of approximately 1% per year along with a monthly payout of approximately 30% (annualized) that represented return of principal. My research revealed that the company would continue to make similar payouts until January 2000. The key caveat was to beware of any early downturn in the company’s revenue streams. The value of the stock increased by 11% from January thru December of 1995, and I think I know why.
Every one of my clients to whom I introduced this investment was told about the risk of the investment. Therefore, they understood why they were getting an annual rate of over 30% while conventional dividend stocks paid 8. A handful of investors did not question why the stock was paying an incredible annual income but still wanted to participate. I told them how the investment worked, regardless, and they thanked me. That’s how my reputation continued to rise in the mid-nineties.
Even in today’s environment, there are several investment vehicles that will provide an annual return of 10% or better. Well advised investors know about these opportunities and will prosper if they allocate the right fraction of their total holdings. Why anyone would abandon the age-old principles of asset allocation is a mystery to me, except to say that money can skew the senses.
So, we wait and watch, in unprecedented disbelief, while this sordid sage about a horrible caper plays out. I hope Bernard Madoff is served the maximum penalty for his crime and that his soul is redeemed.
Hudster
My mind is totally changed. The corruption that evolved in my thinking has been replaced with a permanent commitment to be a benefactor to society for the rest of my life.
I wish I could say the same for Bernard Madoff, but I cannot. He is a much different kind of animal.
A reporter called me about a week ago. After he introduced himself as a member of a global news organization, he said he was working on a story about Bernie Madoff and would like to know what I thought of the man. My immediate reaction was to recoil with a complaint I had been harboring about the local newspaper that included my name in a caustic report, sparking the reporter’s interest. After making it clear to the caller that Madoff and I had nothing in common, except for gender, was given an opportunity to describe the quality of advising I performed for nearly twelve years, prior to succumbing to a gambling addiction.
My overall answer to the reporter’s initial inquiry was probably too brief, in retrospect. I said Madoff is an evil person with little or no self-respect. Today, I could easily expand my assessment. This man began an adventure that was based on a desire to steal from the rich. His commitment was so strong, it allowed him to become extremely successful in his pursuit. So much for Bernie Madoff.
The Other Half of the Equation.
Some investors (and corporate managers) are the greediest people on earth, a point that I make in my book, Stock Power. In order to run a successful ponzi scheme, you need to have a sizeable market of gullible participants, just like you need both buyers and sellers in the stock market.
It’s most unfortunate that some of Madoff’s victims were captive investors along for the ride; but a decision maker who is persuaded to make an egregious pledge without verification of the validity of the return on investment is a fool. Regardless of the impression a solicitor makes with references and facades of extreme success, the age-old principal still stands. A sucker is born every day (P.T. Barnum). Apparently, wealth isn’t necessarily the modifier.
Since the late eighties, major markets have crumbled when investors pursued false promises of extraordinary gains. In the 1987, it was the junk bond market. Some twenty years later it was the housing markets. Meanwhile, con artists, large and small, have preyed upon hapless and hopeful zealots who might still believe in the Fairy Godmother.
True Story
In 1995, I discovered a timber producing company called Rayonier Timberlands, LP (NYSE: RYN), operating in several countries including the U.S. At the time of my discovery the stock was paying a dividend of approximately 1% per year along with a monthly payout of approximately 30% (annualized) that represented return of principal. My research revealed that the company would continue to make similar payouts until January 2000. The key caveat was to beware of any early downturn in the company’s revenue streams. The value of the stock increased by 11% from January thru December of 1995, and I think I know why.
Every one of my clients to whom I introduced this investment was told about the risk of the investment. Therefore, they understood why they were getting an annual rate of over 30% while conventional dividend stocks paid 8. A handful of investors did not question why the stock was paying an incredible annual income but still wanted to participate. I told them how the investment worked, regardless, and they thanked me. That’s how my reputation continued to rise in the mid-nineties.
Even in today’s environment, there are several investment vehicles that will provide an annual return of 10% or better. Well advised investors know about these opportunities and will prosper if they allocate the right fraction of their total holdings. Why anyone would abandon the age-old principles of asset allocation is a mystery to me, except to say that money can skew the senses.
So, we wait and watch, in unprecedented disbelief, while this sordid sage about a horrible caper plays out. I hope Bernard Madoff is served the maximum penalty for his crime and that his soul is redeemed.
Hudster
Thursday, October 9, 2008
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
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
Sunday, October 5, 2008
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
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
Friday, July 18, 2008
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
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
Saturday, May 31, 2008
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
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
Thursday, May 29, 2008
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
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
Sunday, May 18, 2008
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
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
Saturday, May 10, 2008
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
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
Saturday, May 3, 2008
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
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
Wednesday, February 27, 2008
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
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
Monday, January 28, 2008
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
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
Sunday, November 25, 2007
We All Know Who Freddie And Fannie Are, Right?
More than a decade has passed since I last touted these two financial giants as the safest investment vehicles second only to U.S. Treasuries. For those who might still be a little fuzzy as to who Freddie and Fannie are, I am referring to Freddie Mac (FHMAC) and Fannie Mae (FNMA), the mortgage industry's largest guarantors of home loans.
Back in my "hay day", between 1995 and 2000, I helped investors understand that getting 1 to 2 points over 10-year T-Bills was a sweet deal. Beside being more lucrative, mortgage securites were often much more liquid in a strong market. Those were the days---when rates were at or above 8.0% on paper "equivalent" to 10-year bonds.
The more things change, the more things change.
The recent ripple through the credit markets has caught up with Freddie and Fannie, providing confirmation to a critical underlying dilemma in our economy. Both of these giants need more money to build reserves after suffering from some bad mortgages in recent years. Refinancing has caught up with investors and institutions seeking to extend the defunct bullish trend in real estate. Now the same financial monoliths that were, at one time, my absolute favorite sources for fixed income are under the gun with the startling potential of losing their status as safer investments, at least from an equity standpoint.
Both of these mortgage buyers need to raise a few billion dollars. You might already know that Fannie Mae recently drummed up a pittance of $500 million in preferred stock; but the stock does not have the value it would normally have because the shares are "non-cumulative". Although an annual percentage rate of 7.25% can be seen as attractive in this environment, the dividend is not guaranteed. One missed dividend payout - there goes your annual rate!
It will be interesting to see what the magicians of Wall Street come up with in the way of alternative financing. I suspect a slick packaged derivative of some kind, to buy time, might be in the offing. How would you like a high-yield, short-term, zero coupon EFT? Don't laugh!
Hawk
Back in my "hay day", between 1995 and 2000, I helped investors understand that getting 1 to 2 points over 10-year T-Bills was a sweet deal. Beside being more lucrative, mortgage securites were often much more liquid in a strong market. Those were the days---when rates were at or above 8.0% on paper "equivalent" to 10-year bonds.
The more things change, the more things change.
The recent ripple through the credit markets has caught up with Freddie and Fannie, providing confirmation to a critical underlying dilemma in our economy. Both of these giants need more money to build reserves after suffering from some bad mortgages in recent years. Refinancing has caught up with investors and institutions seeking to extend the defunct bullish trend in real estate. Now the same financial monoliths that were, at one time, my absolute favorite sources for fixed income are under the gun with the startling potential of losing their status as safer investments, at least from an equity standpoint.
Both of these mortgage buyers need to raise a few billion dollars. You might already know that Fannie Mae recently drummed up a pittance of $500 million in preferred stock; but the stock does not have the value it would normally have because the shares are "non-cumulative". Although an annual percentage rate of 7.25% can be seen as attractive in this environment, the dividend is not guaranteed. One missed dividend payout - there goes your annual rate!
It will be interesting to see what the magicians of Wall Street come up with in the way of alternative financing. I suspect a slick packaged derivative of some kind, to buy time, might be in the offing. How would you like a high-yield, short-term, zero coupon EFT? Don't laugh!
Hawk
Monday, August 6, 2007
Retirement Bully
Are we seeing more reports about American workers who cannot afford to retire, or is it my imagination?
Just the other day, I saw a news report indicating that nearly 40 percent of baby boomers will have to work for the rest of their lives. My first reaction to that information was: "so what else is new?" When I decided to backtrack with my thinking, I immediately began to question such a broad prediction.
One of the reasons I think the media gets it wrong is that sifting through and analyzing data is not required to publish a sensational story. In other words, I don’t take mass media seriously when I want to know what’s happening financial markets. That’s not where you get information for future planning. No sir (ma'am).
Just from studying the statement above for a minute, one starts to wonder, why?
My best guess (a mighty good one, too) is that there is an abundance of surveys taken from suspects who are given the universal treatment of measuring current income, savings, investments and real assets in what might be loosely called 'realistic' or standard investment models. This is where the projections fall short of being functional and investors start to frown.
When I first became an investment broker, I took the position that mutual funds are to financial planning as aspirin is to bodybuilding. Sure, you can try each one, but you’d better have a deeper, well-designed personalized program if you want to reach your objective. I was right in 1988 about my views on financial planning, and I am assured of being more correct today.
In up and down markets, I have seen dozens of individuals, with three, five and ten year goals, meet their marks on or close to schedule. The key was in the right counseling that helped them make critical decisions about their money. Mutual funds were not at the center of their success. As time permits, I will continue this series on the dilemma and the solution for most workers who would like to retire in fifteen or twenty years.
It's time some of us broke away from public inertia. We'll be back with some really good news!
Hudster
Just the other day, I saw a news report indicating that nearly 40 percent of baby boomers will have to work for the rest of their lives. My first reaction to that information was: "so what else is new?" When I decided to backtrack with my thinking, I immediately began to question such a broad prediction.
One of the reasons I think the media gets it wrong is that sifting through and analyzing data is not required to publish a sensational story. In other words, I don’t take mass media seriously when I want to know what’s happening financial markets. That’s not where you get information for future planning. No sir (ma'am).
Just from studying the statement above for a minute, one starts to wonder, why?
My best guess (a mighty good one, too) is that there is an abundance of surveys taken from suspects who are given the universal treatment of measuring current income, savings, investments and real assets in what might be loosely called 'realistic' or standard investment models. This is where the projections fall short of being functional and investors start to frown.
When I first became an investment broker, I took the position that mutual funds are to financial planning as aspirin is to bodybuilding. Sure, you can try each one, but you’d better have a deeper, well-designed personalized program if you want to reach your objective. I was right in 1988 about my views on financial planning, and I am assured of being more correct today.
In up and down markets, I have seen dozens of individuals, with three, five and ten year goals, meet their marks on or close to schedule. The key was in the right counseling that helped them make critical decisions about their money. Mutual funds were not at the center of their success. As time permits, I will continue this series on the dilemma and the solution for most workers who would like to retire in fifteen or twenty years.
It's time some of us broke away from public inertia. We'll be back with some really good news!
Hudster
Thursday, May 24, 2007
Stock Power Soon To Be Released!
We have had our share of delays in the past six months; but, Stock Power (The Novel) is on its way to the presses!
The story within a story is that this new epic novel has finally reached the point of no return - a date with Trafford Publishing of British Columbia, Canada. Thanks to several individuals who have shown their faith, moral and financial support, my dream will come true at the book stores in about six weeks from now. It won't be a minute too soon.
We are hoping for a decent return on our labors within the next six months. During the next six weeks, there will be plenty of publicity about the story, its author and locations where the book-signings are likely to take place.
To all of my supporters, many thanks for your interest and patience with this long awaited book. I am hopeful that your patience will be compensated by an enjoyable adventure with Bill Haydon.
The story within a story is that this new epic novel has finally reached the point of no return - a date with Trafford Publishing of British Columbia, Canada. Thanks to several individuals who have shown their faith, moral and financial support, my dream will come true at the book stores in about six weeks from now. It won't be a minute too soon.
We are hoping for a decent return on our labors within the next six months. During the next six weeks, there will be plenty of publicity about the story, its author and locations where the book-signings are likely to take place.
To all of my supporters, many thanks for your interest and patience with this long awaited book. I am hopeful that your patience will be compensated by an enjoyable adventure with Bill Haydon.
Monday, April 16, 2007
Money Wins Over Grass!
I was invited to speak at an investment club inauguration. The group represented several distinct age groups. Toward the end of my presentation, I asked for a show of hands from people who would prefer to watch money grow rather grass.
Fortunately, the consensus was that, as a spectacle, grass was less attractive.
Although, I knew what to expect from my compliant audience, I was also not surprised to find out that less than half of the attendees knew whether or not CitiGroup would be considered a growth stock. Worse than that, only four people had reviewed their investment accounts within the past thirty days. Yet, these same investors were excited about the new investment club they had just organized. There were nearly fifty members present.
“Why do you want to start an investment club?” I asked.
The spokesperson reiterated what she told me during our first conversation. Most of the members did have an ambition to learn more about investing in stocks. Their premise was correct. The few that approached me at the end of the meeting confirmed that they were happy about the knowledge they received in forty minutes.
In my opinion, this story reflects the disposition of thousands of Americans who, either because of busy schedules or social distractions, domestic or otherwise, are not in touch with their investments. A quick “drive by” at any lay financial forum on the Internet confirms this view. If index funds were band-aids, Johnson & Johnson should shut down all of its non-band-aid operations and go vertical.
I use the plastic strip analogy to build an image of how thousands of people relate to index funds and diversification. You might want a better metaphor. Nonetheless, facts show that billions of dollars have been transferred away from other investment vehicles, in favor of market tracking funds. This behavior has created a dilemma for investors who plan to retire soon or rich or both.
Just like drivers who don't look in the rear view mirror, investors use diversifaction (same as index funds) as the wherewithall to their monetary goals, and it is a mistake.
I measured the 5-year performance of the popular Vanguard 500 Index Fund from January 2, 2001 to January 3, 2006. The total gain in the net asset value (NAV) of the fund was a paltry 8.84%! And that's for the enitre 260 weeks. (Of course, in retrospect it was a good time to buy the shares.) But, stop and think what numbers can do for a mutual fund sales brochure, depending on which numbers you choose. It is true, that [eliminating the months immediately prior] this portfolio has averaged a little over 6% per annum during the most recent five-year term. Dozens of intermediate bond funds funds have done better.
Of personal concern is whether or not the share price will get back to, or exceed its February high and for how long.
I rest my case.
Hudster
Fortunately, the consensus was that, as a spectacle, grass was less attractive.
Although, I knew what to expect from my compliant audience, I was also not surprised to find out that less than half of the attendees knew whether or not CitiGroup would be considered a growth stock. Worse than that, only four people had reviewed their investment accounts within the past thirty days. Yet, these same investors were excited about the new investment club they had just organized. There were nearly fifty members present.
“Why do you want to start an investment club?” I asked.
The spokesperson reiterated what she told me during our first conversation. Most of the members did have an ambition to learn more about investing in stocks. Their premise was correct. The few that approached me at the end of the meeting confirmed that they were happy about the knowledge they received in forty minutes.
In my opinion, this story reflects the disposition of thousands of Americans who, either because of busy schedules or social distractions, domestic or otherwise, are not in touch with their investments. A quick “drive by” at any lay financial forum on the Internet confirms this view. If index funds were band-aids, Johnson & Johnson should shut down all of its non-band-aid operations and go vertical.
I use the plastic strip analogy to build an image of how thousands of people relate to index funds and diversification. You might want a better metaphor. Nonetheless, facts show that billions of dollars have been transferred away from other investment vehicles, in favor of market tracking funds. This behavior has created a dilemma for investors who plan to retire soon or rich or both.
Just like drivers who don't look in the rear view mirror, investors use diversifaction (same as index funds) as the wherewithall to their monetary goals, and it is a mistake.
I measured the 5-year performance of the popular Vanguard 500 Index Fund from January 2, 2001 to January 3, 2006. The total gain in the net asset value (NAV) of the fund was a paltry 8.84%! And that's for the enitre 260 weeks. (Of course, in retrospect it was a good time to buy the shares.) But, stop and think what numbers can do for a mutual fund sales brochure, depending on which numbers you choose. It is true, that [eliminating the months immediately prior] this portfolio has averaged a little over 6% per annum during the most recent five-year term. Dozens of intermediate bond funds funds have done better.
Of personal concern is whether or not the share price will get back to, or exceed its February high and for how long.
I rest my case.
Hudster
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