Strategy Update ... What's Yours?

Dear clients and friends:

In this difficult financial market, I’ve spoken to many investors near and far. The interesting thing about all of the musings and opinions out there, is the amount of mis-information and ill-fated strategies that I hear from folks. The differentiation between prudence, fact and opinion is a huge gapping hole. I am not denying anyone their say – the 1st amendment is still on the books last time I checked.

One popular myth: "If I own this good, quality, blue chip company, the stock price will recover so I will continue to hold it". Fact: Sure many firms are strong and cyclical whose shares do follow the general market, but many do not. We all remember the mess of 2000-2002 better dubbed the “tech wreck” where the Internet and computer stocks soared then plummeted due to excess speculation and, in hindsight, faulty business models. In just 13 months the 2000's will end, and it's not been a great decade so far for investors of most stripes either. Meanwhile, inflation is at least 25% higher so far this century.

Consider this update ...here are some household names that have experienced serious trouble this decade for stock portfolios. Their current status: Oracle - $45 in 2000, today, $17, a loss of 62%. Citigroup - $57 in 2006, today $6, a loss of 89%. Bank of America - $52 in 2007, today $15, a loss of 71%. Home Depot - $70 in 1999, today $21, a loss of 70%. SunTrust Bank, - $94 in 2007, today $28, a loss of 70%. Motorola - $26 in 2006, today $4, loss of 85%. I'll stop here.

I purposely picked on the banks, due to their implosion this past year and my friend's reference to Bank of America, a holding. Some no doubt will survive, many have not and will not. As I told my friend this week, even if you can offer up a solid story for a turnaround, whose to say your bank won’t merge with another bank at a low price. It’s happened this year – then your chance for price recovery is thwarted. Losses of 60% - 90% are tough to recover from; you need doubles, triples or more just to get back to even. That's very unlikely to happen, and if it does, can take years, during which your money could be working harder for you in other areas.

In this vein, William O’Neil, founder and publisher of Investor’s Business Daily, conducted a study of stock market leaders covering over 100 years, and found that just 12% of stocks that were big winners in the last bull market continue to lead in the subsequent bull market. The Motorola’s, Cisco’s, Dells, Citigroup’s of the world – those dogs most likely have seen their day. Sure, many can continue to employ workers and crank out their widgets or services, but they have grown (or shrunk) to the point of mediocrity – their widgets are now a commodity, or their balance sheets are wrecked beyond repair.

The stock market has just rallied for the third time over 1,000 points within this bear market in the Dow Jones Industrials since the end of August. I did not think the October 10th low would be breached, but it did, so I was wrong, and has now bounced off Dow 8,000 again. The Wall Street adage, "the market will prove you wrong by 10% of your worst case forecast" came true for a short period of time. The markets dislike uncertainty, and there’s still much out there both economically and politically.

What to do now; if you still cannot sleep well, use these stock rallies to move some funds from stocks into safer bonds or indexed annuities; lessening your level of risk. Consider bond swaps to upgrade your credits in fixed income. That should increase your income also as rates have been rising in bonds of late.

Lastly, a new BULL market will emerge from all of this, so keep watching for opportunities from your advisor or your own research – better times usually emerge when you least expect it. Bill O'Neil's book, "24 Essential Lessons for Investment Success" is a good read from whom I often borrow facts. It's $10.95 retail, but I've seen it under $9 on Amazon.com. Consider it between the leftover turkey and football games.

Have a great Thanksgiving Holiday.
Barry Unterbrink (954) 719-1151

Holistic Retirement Planning

In late October, I hosted a retirement planning workshop with about 20 interested folks here at a local hotel. We enjoyed some timely discussion and a nice buffet lunch. I thought it helpful to review a few of the topics I presented to perhaps help yourself or someone you know in these financial areas.

* Multi-Generational IRA's
If you own a retirement account (IRA, 401k, 403b, etc.) you had better make sure it's not a tax bomb waiting for your heirs. By structuring your IRA as multi-generational, you can give your heirs many options to continue to defer the growth and tax on your IRA for perhaps 30-50 years or longer beyond your death.

* Estate Protection
Do you have accounts or investments earmarked toward your family or favorite charity after you check out? Is your performance low in this environment - are these investments costing you taxes on dividends or interest? If so, you may want to consider an insurance policy that can ensure your legacy with tax free dollars.

* Nursing Home Protection
One in three of us will need some type of custodial care during our lifetimes. With assisted living and nursing homes costing 40 or 50 thousand dollars a year; learn how to protect your estate with a plan to avoid the Medicaid spend-down provisions.

There were a few more topics discussed then: lessening the tax on your social security benefits; how to check on your broker/advisor's past regulatory and criminal history right on the Internet, and lastly some "safe money" strategies to consider that I've spoke on recently in this blog. See the links to the right for past posts.

Just give me a call - I'm very sure I can solve one or more of your money concerns.
Be well until next time.

~Barry Unterbrink (954) 719-1151
Retirement Planning Counselor

Near the Maximum Point of Pain Yet?

click the link for my retirement seminar details.

http://retirementworkshop.eventbrite.com/

Is the stock market near a bottom? What strategy are you using?

The stock market fell apart again Thursday, falling another 7% or so.

First, I will admit that the 30% worse case fall that I alluded to in my August 11th post was too kind. We're now 40% off the highs registered one year ago this week. I again will forecast that the market is closer to a bottom. The signs: there is a sense of panic among investors that is reaching a point of maximum pain. I've had calls from friends outside Fla. have called me asking for advice that their broker is not providing them. They are really worried that their money may not be around. Maybe they are partially correct; but history is not on their side.

Hopefully, you have implemented a few strategies that I've taught you this year:

* diversify across various market sectors using stocks and mutual funds
* add more money (dollar cost average) into stocks from cash or bonds when prices are down
* only owning stocks and bonds in line with your risk tollerance (if not hedge your bets).

Unless you are needing the money to spend in the next 2-3 years, you should have a stake in the only asset class that historically will earn you the highest return, keeping you ahead of inflation and taxes - stocks. It's really painful now to send in that payment or to see part of your paycheck going into the 401-k plan when prices are falling, but that's always turned out to be the best course.

Re-read my past posts on the markets, and you will see that's the case - Jul. 1st, Aug. 11th and Sep. 2nd. I'll reiterate my lesson plan for you here.

1> Don't base your performance on the highest values of your monthly statement - you will be disappointed. You can rarely predict the highest price to sell; the markets are too tricky to allow that. Instead, review things every 3-4 months and set parameters on how you are going to re-allocate your monies. Say, 60% stock mutual funds, 25% bonds, and maybe 15% cash or money market funds. If stocks do well, and are now 70% of your mix, sell some and get back in balance. If stock values decline to 50% of your total, buy 10% more stock. An old, good conservative rule to follow for your allocation; take 100 minus your age, and devote that to stock-based investments. Time will make you wealthy, not your timing or gut reactions. Hope and prayer are admirable in your faith, but aren't good as investment strategies.

2> Seperate your money into various pots, based on risk and objective. Sometimes having just one account makes investing more confusing, and you may make moves that get you into trouble without realizing it. By using 3 accounts, you could allocate some money to a riskier aggressive stock or mutual fund account, and then hold bonds or fixed income in another safer account, and finally have a "safe money" flexible annuity account that you can put away savings for retirement in 10,15 or 20 years with no risk of loss. Move money from a riskier pot to more conservative pots as your "pots" grow in value.

3> Learn how to read a stock or mutual fund chart. "If you can't measure it, you can't manage it", says a saavy investor on the television. How true. Looking in the Sunday newspaper for a quotation is not enough. You need to understand supply, demand and a few other indicators that the big boys use with stock and mutual fund charts.

I am hosting a Retirement Planning Workshop on October 21st here in Fort Lauderdale. If you are nearing retirement, or know someone who is, please send them the link above to register. It's FREE. Thanks.