Before you go on a long road trip, it’s always smart to make sure you have water, flashlight and other emergency supplies in your car. We think of your life and your money as a long road trip – we all have a destination, goals along the way and a few unexpected turns in the road, but with a good road map, some emergency supplies and a little common sense, your financial road trip can fulfill your goals and get you to your destination. We think it’s wise to be educated and prepared in life and investing.
In investing, here are a few turns in the road that might be coming up: a weakening U.S. dollar, inflation or deflation, upheaval in the bond and stock markets, or changes in the real estate market. These can all risks to your capital, or can be used to your advantage, depending on how prepared you are.
Understanding market movements is like your road map on that long car trip. You have to realize what inflation and deflation will do to your capital, and what your on-ramps are (meaning when and why you put your capital to work) for investing.
You need to know what your “off-ramp” is as well – what is your exit strategy for your investments? What is the circumstance in which you would sell your stocks or bonds and are you even aware of what you own?
These changes in the markets can be very confusing if this is not your full-time job, which is why we are here – making podcasts, writing on the blog and helping you make decisions. If you are not sure about your financial goals or you just want a second opinion, please call us at 888-300-3684. Our advisors want to help this investing road trip be a pleasant one and help you get to your destination in the best way possible.
We are watching oil prices closely, and it’s interesting to note that almost every past recession has been associated with high oil prices. We’re not predicting a recession, but we do think that the U.S. economy will slow down in the second part of 2012, and this is a reason we think investors should be cautious with their capital.
Also, in February, the U.S. set a record on deficit spending. We believe this trend is a problem and a good reason for everyone to have their personal finances in order. You can read more about our perspective on budget deficits in this recent blog-post.
This week on the podcast, Doug Fabian read several emails on the air and addressed listener concerns. If you’d like an opportunity to hear Doug’s take on your questions or opinions, please send an email to askdoug(at)dougfabian(dot)com
Also, if you want to see and hear our perspective in person, hear some other great speakers and enjoy a getaway in Las Vegas, sign up for the Money Show, May 14-17 2012. Doug will have six different opportunities to present and it’s always a great event, so please check out moneyshow.com to register.
Another great way to stay in touch is our free e-newsletter, the Making Money Alert, and also our special report for advice on how to invest wisely in 2012. As always, if you have questions about your personal portfolio, please call us at 888-300-3684 and one of our advisors will be glad to help.
We’ve been blogging and podcasting for some time about the uncertainties in the market right now, and so we thought we’d expand on fixed-income strategies today.
We advise three broad investment categories for income:
Fixed income (bonds)
Dividend equities
High-yield alternatives
We think that asset allocation is what makes or breaks an investment strategy, and we are advising our clients to put a high allocation of their portfolio into fixed income at this time. We have several vehicles for this and can advise you in more detail if you call our office. Please call us at 800-391-1118 for a free portfolio review.
We also believe that now is a bad time to get into dividend equities, and we are advising our clients against saddling their portfolios with over priced investment vehicles at this time. Instead of the either-or choice of safety vs. yield, we’ve developed a strategy designed to maximize income while at the same time managing the various risks inherent whenever you put money to work in the market.
We believe that the most successful people are on top of the issues of the day. Being well-informed and staying well-organized will help you to succeed, so for the next few weeks we will be outlining six exercises for you to stay informed and ready to make good decisions. Those six exercises are:
Making a calculation of your net worth
Taking inventory of financial assets
Understanding your cash flow projections
Examining your expenses
Making sure you have an updated estate plan and living trust
Taking stock of all insurance policies – health, life, long term care, annuities, etc.
This week, we are talking about insurance: health insurance, life insurance and annuities. Insurance is an essential expense, and we encourage everyone to take a look at what you own, what you have and what you need.
There is such a thing as being “over-insured”. Sometimes life insurance can move from being an asset to becoming a liability, so getting a professional to look over your life insurance and what you need is essential. Todd Clucas is our insurance expert on staff and can help with any issues at 888-300-3684.
Annuities are a very powerful tool, but we believe that they are sometimes over-sold. Not everyone needs an annuity, but it’s important to know if you do need that option, and whether it’s worth the investment. Again, please get in touch with us if you have any questions about this or any other part of our personal finance exercise series.
Once you know what you have to can set clear, reachable goals. Tune in next week for more on Doug Fabian’s Monday Market Update. (Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
If you can believe it, 10% of 2012 has already passed us by… what will you do with the 90% you have left?
As we’ve been discussing on the podcast, Europe is going to be an important part of the next investment year. Risk is still very high and Europe’s crisis has not resolved, so we are still cautious with any investment capital. Be patient, because we believe that opportunities are soon to come.
In domestic news, the Federal Reserve recently announced that they plan to keep interest rates low until 2014. Now, why would the Fed keep interest rates at 0% if the outlook in the U.S. is so good? We think it’s because there is still great risk in the markets – another reason why we advocate careful investing and defensive postures.
To zoom in even closer to home, we recently read an article on how well Californians are fiscally. 30% have no savings, 43% have no liquid assets – no 90-day savings. These statistics made us think about our personal finance series, which we are tackling weekly on the podcast and the blog.
We believe that the most successful people are on top of the issues of the day. Being well-informed and staying well-organized will help you to succeed, so for the next few weeks we will be outlining six exercises for you to stay informed and ready to make good decisions. Those six exercises are:
Making a calculation of your net worth
Taking inventory of financial assets
Understanding your cash flow projections
Examining your expenses
Making sure you have an updated estate plan and living trust
Taking stock of all insurance policies – health, life, long term care, annuities, etc.
This week, we are making sure that we have an updated estate plan and living trust. About 80% of Fabian Wealth Strategies’ clients have an estate plan, will or living trust of some kind, but many haven’t looked at them in years. A living trust is what we encourage all of our clients to invest in. Without a living trust, all of your assets are frozen and subject to court order if something should happen to you. Here in California, if you have a million-dollar (gross value) estate, the minimum cost of your probate would be $47,000. Revocable living trusts can be changed at any time, but it keeps a judge from determining what happens to your assets if you are unable to do so.
But you have to make sure that all assets, all stocks, bonds, properties, etc are included in your living trust, or else those assets will end up going to probate. Remember that you can stipulate who is to be the guardian for your minor children, medical power of attorney, gifts to organizations or individuals and much more in this document. You need to pay attention to these details in order to protect those you love, and this is a very important personal finance exercise. We have a trust attorney that we recommend for our clients, so if you’re interested in having his contact information, please send us an email here.
All of these exercises are relatively easy, and you need to start the new year off right by looking at this. Again, if you need guidance on what needs to be held or bought, how this inventory works and our advice for your assets, don’t hesitate to get in touch with us at 888-300-3684.
Once you know what you have to can set clear, reachable goals. Tune in next week for more on Doug Fabian’s Monday Market Update, and the next exercise to preparing yourself for a successful investment future. (Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
Thanks for reading the first part of our podcast summary. The next installments of our podcast summary will be published later in the week, and if you want more details then what is discussed on the blog, please listen to the full podcast here.
We begin our summary with a look at the market. International markets seem to have a good first month of the year. Earnings have been pretty good, but no one is talking about better numbers moving forward, which reveals some cautiousness on the part of the business community.
Last week, there was a detailed, two-day Federal Reserve meeting, which revealed, among other things, that Ben Bernanke plans to keep interest rates low for the forseeable future (until 2014). It’s surprising to us that announcement didn’t create more of an uptick in the market. Again, we think that this indicates that a defensive posture with your capital is wise.
We’ll get to Europe and the bad news from across the pond in tomorrow’s podcast summary (to hear it all now, click here) but there has been some bad news in the U.S. as well. The recent MF Global disaster has been a real blow to consumer confidence and is evidence of a disturbing trend of crony capitalism in this country. (For more information, read the Wall Street Journal’s excellent piece here.)
Check back tomorrow for the next installment and more news out of Europe.
For a complete recap of our January teleconference, please click here. We encourage you to listen to the teleconference as well, and you can do that by clicking here.
As we’ve stated before, these are volatile, tricky markets. We still believe that the long-term market trend is heading down even though the short-term might trend upwards. However, we think that Europe and its impending financial crisis will be a key player in any investment, whether you are prepared for it or not.
In the teleconference, I talked about the investment themes of gold and emerging markets, and both of those are showing great promise for the beginning of this year. If you’d like more information on those markets and what our predictions are for them, please listen to this podcast in its entirety and/or the teleconference.
Bonds are still performing quite well and we’re impressed with the action in the bond market. Interestingly, it seems that the bond market is telling us that the economy is weak, but the stock market is telling us that everything is OK. One of these markets obviously has to be wrong, and it will be interesting to see how this plays out this year.
European Update:
Many countries in Europe were downgraded last week, which means that these countries will have higher interest rates for any further borrowing.
Greece has been negotiating the payment of their bonds, and their refinancing negotiations fell through last week as well, which means that they’ve encountered yet another hiccup in getting their financial issues worked out. This is a negative piece of news for Europe as a whole.
Also, Germany is experiencing a slight recession and slow-down at the end of 2011, despite being the strongest economy in Europe.
As we’ve said before, we believe the problems in Europe will affect U.S. investors, so this is something that we are watching closely. If you are concerned about the impact of a European recession on your investments, please listen to the teleconference for a more complete discussion of our strategy in 2012.
Personal finance exercise, part 3:
We believe that the most successful people are on top of the issues of the day and have a plan of success. Being well-informed and staying well-organized will help you to succeed, so for the next few weeks we will be outlining six exercises for you to stay informed and ready to make good decisions. Those six exercises are:
Making a calculation of your net worth
Taking inventory of financial assets
Understanding your cash flow projections
Examining your expenses
Making sure you have an updated estate plan and living trust
Taking stock of all insurance policies – health, life, long term care, annuities, etc.
This week, we are figuring out how to understand your cash flow projections. Going through these inventories and personal finance exercises will help you to understand what you have and what that means. Also, this will hopefully give clarity to anyone who might have to manage these accounts in the event of a family tragedy or other emergency. It’s just a good idea to look at these things every now and then, and today we’re going to examine our income.
Income can come from a paycheck (W-2 or 1099 income), rental or royalty income, an investment, a pension or some other source. Figure out how much income comes in monthly, whether it actually appears monthly or not. See what those income sources are, and what you expect those income sources to be and produce in the coming year. Cash flow projections is one of the key issues of financial planning – if you’re not happy with your current cash flow, how can you make it better?
Instinctively, we know that cash flow can make or break your wealth management choices, but most people don’t actively try to fix problems with their cash flow. As you figure out how to achieve your cash flow and income goals, remember that we are here to help you make these decisions and work out solutions to your personal financial situation.
Tune in next week for more on Doug Fabian’s Monday Market Update, and the next exercise to preparing yourself for a successful investment future. (Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
As we open the new year with the first Monday Market Update of 2012, welcome and thank you for listening. You can listen to Doug Fabian’s full podcast here, or keep reading for a summary of what we’ve discussed on the air.
As we look back at 2011 (and forward to 2012), the biggest financial news item is the crisis in Europe. After all, the U.S. is not doing that poorly, and was seen as a safe haven for investments by many in the global marketplace. In many ways, even though certain industries are looking up (biotech and healthcare are up 10% each, for example) others, like banks and big financial services firms took heavy hits in 2011. Essentially, this means that we are still in a state of capital preservation, and we will need to take the global slowdown seriously, particularly in Europe.
Europe represents a significant portion of global economic activity, but it is saddled with some serious economic issues, like debt load, not enough income through taxes to support outflow and a generally stagnant economy. Basically, if Europe was a business, it is not a good one to invest in, because it is too expensive to buy in to at this point.
One great example of this appeared in our hometown paper, the LA Times, on New Year’s Day. The front-page story opens with these vivid descriptions: “…’It’s as if someone is “holding your throat and choking you slowly.’ That’s how one analyst vividly describes the squeeze on lending in Europe these days. Scared by the euro debt crisis and a flat-lining economy, banks have been tightfisted with their money, refusing to issue many of the loans that companies desperately need to keep their operations running smoothly or to take them to the next level.”
“Here in Britain, Prime Minister David Cameron’s office reckons that banks have already entered a second ice age. In other parts of Europe, especially the weakest of the 17 nations that share the euro, credit has also begun freezing up, analysts say. The squeeze has sent businesses scrambling for new ways to finance their activities and fostered an alternative market that bypasses Britain’s big ‘high street’ banks in favor of lending houses and venture capitalists.”
We all know that all companies need access to capital, and when those credit lines are removed, as is happening in Europe, this is a problem for business.
Unfortunately, many of these economic problems have been coming for some time, but governments don’t tend to share bad or politically incorrect news very well. This means that we generally don’t have all the information until it’s too late, which is why Fabian Wealth Strategies is encouraging our readers and listeners to really pay attention to these news reports and other signs of distress. Even though the U.S. is still doing OK, there is bound to be blowback because of Europe’s crippling issues – we encourage you to not be impatient or underestimate the real problems.
Also, don’t feel pressured to be in the investment game daily. Like the old song says, you “need to know when to hold ‘em and when to fold ‘em”, and when we take a step back and note the many forces at work in the marketplace, we’ll be better informed and wind up with better results. Remember, patience is a virtue!
Plus, in this podcast, we are going to help you understand strategic advantage and timing of your investments – in other words, we won’t just tell you to be “patient” forever, but we’ll help you create a plan in which that patience pays off.
We believe that the most successful people are on top of the issues of the day. Being well-informed and staying well-organized will help you to succeed, so for the next few weeks we will be outlining six exercises for you to stay informed and ready to make good decisions. Those six exercises are:
Making a calculation of your net worth
Taking inventory of financial assets
Understanding your cash flow projections
Examining your expenses
Making sure you have an updated estate plan and living trust
Taking stock of all insurance policies – health, life, long term care, annuities, etc.
Today we’ll focus on making a calculation of your net worth, because implementing any strategy requires knowing what you have and what to do with it. You need a starting place for your financial affairs – a calculation of what you own, what you owe, and what your plans are for growing what you have.
So ask yourself these questions, to get started on this exercise:
How much cash in the bank do I have? (not investments, just cash)
What are your real estate holdings worth?
What retirement plans do you have and what is each one worth?
What’s your small business worth?
What are your liabilities? Credit cards, loans, mortgages, etc.
Count your two types of assets: liquid (stocks, bonds, etc.) and illiquid (real estate or other assets that are not easily converted to cash) How much do you have of each?
Once you know what you have to can set clear, reachable goals. Tune in next week for more on Doug Fabian’s Monday Market Update, and the next exercise to preparing yourself for a successful investment future. (Also, if you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
