No doubt, some of your clients have blamed you for the economy and the market, but hopefully none have taken it to the extremes of these guys ( for full details see the story in the Daily Telegraph (http://tiny.cc/DeVxN:)

Pensioners 'kidnap and torture' financial adviser
A group of wealthy pensioners have been accused of kidnapping and torturing a financial adviser in Germany after he lost £2 million of their savings in the financial crisis.
By Allan Hall in Berlin
Published: 6:11PM BST 23 Jun 2009

The men, dubbed the "Geritol Gang" by police after an arthritis drug, face up to 15 years in jail if found guilty of subjecting German-American James Amburn to the alleged four-day ordeal.

Two of his kidnappers are said to have hit him with a Zimmer frame outside his home in Speyer, western Germany, before he was bound up with duct tape, bundled into the boot of a car and driven 300 miles to the home of two of the abductors on the shores of Lake Chiemsee in Bavaria.

Posted at 05:20PM Jun 24, 2009 by Pamela Black in General  |  Comments[0]

As if to flip the bird to the public and the government, CEOs of TARP-imbibing big banks are merrily taking private jets to vacation homes and resorts. It’s an open sign of the greed and privilege that led to the big banks’ overzealous investments in crappy mortgages in the first place.

The story, reported in the Wall Street Journal, lists 14 TARP related banks, their CEOs and estimated costs of their private jet trips. For example, Citigroup’s former CEO Sandy Weill flew by corporate jet to his Adirondack vacation home numerous times after the bank had received billions in TARP money. On the day that he publicly announced waiving his contractual right to use Citigroup aircraft, claiming that he “recognizes the extraordinary commitment of the American taxpayer,” the N.Y. Post revealed that Weill family members flew aboard a Citigroup jet for an eight-day vacation in baja California over New Year’s.

The list goes on to indict Regions Financial, Bank of America, PNC, Morgan Stanley and others as if they were deliberately flyng in the face of the Treasury’s recent announcement that TARP recipients must limit luxury expenses like private jets.

It’s this kind of cynicism and flaunting of wealth that has gotten our economy into tatters in the first place and that has aroused the justifiable hatred and anger of the tax-paying public. I would think that CEOs of big banks would at least have the decency to show, if not contrition, at least an appearance of consideration for those who have rescued their miserable necks. Instead they have potentially given advisors on the ground another thing to make excuses about. The public may have a short memory, but such actions are sure to re-invigorate a sense of outrage! 

Posted at 09:23AM Jun 22, 2009 by Pamela Black in In The News  |  Comments[0]

While less pessimistic pundits acknowledge the economic wasteland, they’re pointing out signs of regrowth. Not so Nouriel Roubini.
The prominent economist who predicted the global credit crisis isn’t lightening up any in his prognostications. For every “green shoot” other market mavens pin their hopes on, Roubini, head of economics research firm RGE Global Monitor, sees “yellow weeds,” he told the Reuters Investment Outlook Summit in New York earlier today.
Roubini says we’re likely facing a double-dip recession, and his thinking is of course sound—the economy is dogged by raging unemployment and industrial production just keeps falling.
But naysayers like Roubini are at least part of the problem—business sentiment is also down, and that’s because executives and their financiers don’t feel confident that now is the right time to be lending money, hiring workers and making products. Why not? Because of dire warnings that the sky is falling by naysayers like Roubini.
I prefer Warren Buffett’s wary pragmatism. He admits he isn’t able to predict the future and that he’s done “some dumb things” over the past year in an effort to make the best of a bad lot, but what he hasn’t done is gone out of his way to rattle investors. Buffett knows many market participants look up to him, so when many investors were tripping over themselves to sell out of stocks, he sold billions in bonds and with an heroic flourish put that money into equities.
Buffett is a glass-half-full man even when the glass is cracked and that’s the kind of worldview we need right now. I’m not arguing Roubini doesn’t deserve credit or that his warnings weren’t prescient—of course they were; the economist’s wisdom is not in doubt—but there’s no reason to keep poisoning the well. In this terrible market, ruptures are inevitable because investors are human and they panic. Predict a sudden market decline and before long you’ll look prescient too. Predict it when you’re the market’s new oracle of doom and you may even play a part in bringing it about.

Posted at 05:14PM Jun 16, 2009 by Howard Stock in General  |  Comments[0]

The number of passengers flying private jets through London City Airport increased 44% in May compared with the previous month. Who are these friendly fliers? Why financial services people "starting to travel again to do deals after the recovery in market conditions" says an airport spokesperson, according to the efinancial news Wealth Bulletin. 

Apparently the number of passengers flying private jets peaked in June 2007 at 2,532 along with the FTSE 100. A steady slide in both followed, with the number of private jet fliers (PJFs) being halved to a low of 878. In May the number of PJFs rose from 989 to 1,430.http://tinyurl.com/nnehv6

Posted at 04:08PM Jun 15, 2009 by Pamela Black in General  |  Comments[0]

Advisors in Illinois, Maine, Nebraska, New Mexico and Texas take note: Investors in OppenheimerFunds' 529 college savings plans might get back some of the money they lost in the downturn, if an agreement between the asset manager and the Illinois Treasurer’s Office bears fruit.
Under the terms of the agreement, according to an article in The Wall Street Journal that cited a report by the Chicago Sun-Times, Oppenheimer may end up paying back $77 million of the $85 million lost to the state’s residents in the downturn from a supposedly conservative bond fund. At issue is the fund’s ownership of commercial mortgage-backed securities, which is why the standard boilerplate about investment risks doesn’t apply. If the agreement holds, advisors may soon have a good reason to contact clients.

Posted at 01:18PM Jun 15, 2009 by Howard Stock in General  |  Comments[0]

If you want some gurus to follow to stay informed about the economy, the list below, c/o the Wealth Bulletin  would be a good place to start.

These economists, investors and prognosticators all got it right about the current financial crisis. For the full story (http://tinyurl.com/qq2st3)

In addition to Nouriel Roubini, Nassim Taleb, and Robert Schiller, the article acknowledges

Raghuram Rajan, professor of finance, University of Chicago Booth School of Business

Peter Schiff, president, Euro Pacific Capital

Jeremy Grantham, chairman, GMO

Jim Rogers, commodities investor, co-founder of the Quantum Fund

Sean Egan, co-founder, Egan-Jones Ratings Co.

Posted at 04:29PM Jun 12, 2009 by Pamela Black in General  |  Comments[0]

Interesting results from today’s Employee Benefits Resource Institute report… Only 24% of employees are very confident that they are well allocated in their workplace retirement savings plans, down from almost half 10 years ago.
The truth perhaps lies more with the 54% of the 1,000 people polled for EBRI’s retirement survey who say they’re only somewhat confident. While “somewhat confident” sounds recklessly bullish in the current economic environment, that’s pretty much as close as most people get to peace of mind with their 401(k) allocations. The truth is, most people look at their 401(k) provider’s suggested allocation to equities and fixed income, they make a vague attempt to cover the bases with their international, small-, mid- and large-cap allocations and they hope for the best.
Most people who are able to take part in their company’s 401(k) plan do so—77% of eligible workers participated in their employers’ 401(k) plans, up from 73% in 2007, according to a separate Charles Schwab study. While automatic enrollment no doubt buoyed the proportion of 401(k) contributors among U.S. workers, their dogged persistence in payments shows the success of the message that people are personally responsible for their own retirement and also, perhaps, their woeful ignorance: Only 6% of 401(k) participants changed their asset allocations during the first quarter of last year despite mounting losses.
Most 401(k) contributors, then, share many of the traits advisors look for—they’re committed to long-term goals, they don’t seeming panic even in dire market conditions and they’re not quite sure they know what they’re doing. The one trait they share that advisors aren’t so interested in is that they’re not rich—Fidelity says the downturn has reduced its average 401(k) account value 27% to $50,200. But there is clearly an opportunity for advisors looking to drum up future business to work with companies’ employees once or twice per year on their asset allocations.
It might not pay off in the short term—although picking up the odd 529 plan is a distinct possibility—but by offering free advice when retirement savers are at the beginning of their financial journeys, altruistic advisors stand to benefit from rollovers, retirement plans and other significant financial life events as these indefatigable savers, U.S. workers, evolve into target clients.

Posted at 03:30PM Jun 11, 2009 by Howard Stock in General  |  Comments[0]

Our friend, San Francisco money manager Gary Wollin, has a habit of calling the markets right. For example, he turned bearish on November 30, 2007, with the Dow at $13,371.

His latest prediction is for a BUYING PANIC, writes Dan Dorfman on the Huffington Post. Wollin believes the economy has bottomed and the market has turned and he expects the $3.8 trillion sitting on the sidelines to come rushing into the stock market driving the Dow back up to 95000 to 10,000 by July 4. He says the buying would have to be fueled by some good news such as a clear statement by a creditable public figure that the economy is bottoming, a comment from a big company like IBM or Intell that orders are picking up, a statement by a large bank that it has plenty of capital and is lending in a meaningful way, a sign that rising job losses are peaking and an easing of tensions with Iran or North Korea.

http://tinyurl.com/q3j7to

Let's hope he's right!

Posted at 04:29PM Jun 05, 2009 by Pamela Black in Overheard...  |  Comments[0]

A rumor is going around that Merrill Lynch head of Global Wealth and Investment Management, Dan Sontag, a Merrill veteran and partisan will be replaced by BofA's wealth management guy Keith Banks. Banks who was head of wealth management before the merger was placed under Sontag after the merger, by way of "reassuring Merrill brokers that they would be treated well in the new corporate structure," according to a Business Insider article. Compensation threatens to become opaque under BofA as well. Check it out (http://www.businessinsider.com/bank-of-america-coup-at-merrill-lynch-roils-financial-advisers-may-cut-their-pay-2009-6)

Posted at 04:52PM Jun 04, 2009 by Pamela Black in Overheard...  |  Comments[0]

PEARLS OF WISDOM--JOHN BOGLE (from the Morningstar conference):  
JOHN BOGLE is the founder of the Vanguard Group and president of the Bogle Financial Markets Research Center.

ON THE CREDIT CRISIS:
I had no idea two years ago that the credit crisis had reached the devastating proportions it had, I had no idea of how many of these ninja mortgages had been sold or the amount of speculation going on in derivatives. It was not on my radar screen. One event piled on another getting us into this catastrophic decline, which will take a long time to get out of. This is a crisis in capitalism. Capitalism has failed us; I blame the capitalists even more.

The businessmen looked around and saw the bankers’ earnings were growing faster than ours. So directors say you better get on the bandwagon and follow. The way I was raised, there were some things one didn’t do. But now the ethical standard seems to be if everyone else is doing it, I can do it too. If everyone else is doing these mortgages I should do it too.

I don’t blame government for this. The CEOs blame the government for allowing them to do what they should have had enough brains not to do in the first place. The government had to step in. It’s not their fault they have to own 35% of the banks. Business brought it on themselves.

We went from service economy to financial services economy taking $600 billion out of the pockets of investors each year, which went to fees for brokers and mutual funds. We want to be able to build something instead of doing too much swapping money back and forth. We’re subtracting value and in the long run a financial services society cannot survive on that.

ON RETIREMENT:
We need a more intelligently designed retirement system; the 401k system has to be fixed. The government should establish standards for firms to participate in the system and do what we can to return to from short-term speculating to long-term investing. I don’t know anyone who can fix it better than the government. Can’t let investor borrow from the 401(k) or take it when they change jobs, imagine doing that with social security.

ON INVESTING:
I have never felt more confident in my beliefs and strategy. Of course the stock index fund is down as much as the market. The difficulty of picking active managers is that we come in after they’ve proved how good they are. I wrote in an article: “If you’re gonna own an actively managed fund just be prepared to lose in one year out of three.” My friend from Dodge and Cox Stock Fund, said, “Wrong again, it’s one out of two.” Indexing is probably going to have a better investor return than even the wonderful Dodge and Cox fund.

Buy and hold is never dead. Let me divide S&P500 into two sections, 50% buy and hold and 50% traders, who trade with each other and pay croupiers for their trading. At the end of the day, buy and holders capture 100% of market return because they have no costs. Traders capture 50%. Trading is just pitting one investor against another does not work. Buy and hold works. Avoid all that trading like the plague. Active managers lose one out of every two years. Indexing does a better job.

There’s a policy portfolio out there and it’s what we all together hold, say its 40% bonds and 60% stocks, that means if you increase your policy allocation to stocks, someone else reduces their policy allocation. There are a certain amount of stocks out there and a certain amount of bonds and it’s that simple. It’s very misguided to think that policy portfolio is something to extract yourself from or enhance your return with.

ON FUTURE RETURNS: Bond returns have been easy to predict. The current coupon has a 91% correlation to what it will deliver over the next 10 years. The combined government and corporate rate now is 5%. The return on stocks have two components, one is investment return or dividend, 3.5%, some earnings growth, around normalized $50 a share, and throughout history earnings grow at about the same rate as GDP. If real growth is 2%, nominal growth with inflation 5%, earnings might grow a little more, say 6% plus 3.5% yield gives you a 9.5% yield. Easing of price earnings downward might take a point off of that—7.5% to 8%. I lean to being a little more conservative.
There’s a high probably stocks will outperform bonds.

ON DIFFERENT INVESTMENTS:
Money market funds: Don’t bother with money market funds as I said in my book, short-term bond fund goes up on a higher slope if you can handle the short term jags.

Commodities: I have no conviction that commodities belong in anyone’s portfolio at any time under any circumstances. Stocks and bonds are investments, they generate an internal rate of return. The internal return on a commodity is zero, it is total speculation in the long run. It’s a gamble.

Munis: I love munis, they are paying 4.8% to 5% on intermediate-to-long bonds, that’s 8% tax-free, it’s got to be very rewarding. But buy them very diversified and high quality: A and AA and buy a portfolio that has 1,000 bonds in it. Buy the lowest cost muni bond fund. If you’re really worried avoid long-term muni bonds.

Target date portfolios: I’m increasingly nervous about them. The fact that you’re going to retire in 2015 means something very different for different investors. Say one has social security and the other doesn’t have much. A little bit too clever a solution when an investor can take charge of own portfolio and rebalance once a year or when proportions get distinctly different. Not amused by this race for the top in terms of equity allocations. There’s pressure for firms to raise target allocation when the markets are going up. That seems to me to be totally irresponsible. They should have lower costs across the board.

Absolute returns, no one can give you an absolute positive returns. They’re greatly oversold with returns all over the place. They have 2% expense ratio. 1-30-30 funds says the manager doesn’t have enough smarts to buy the stocks but does to sell them. We innovate for the sake of our marketers. It just leads you down this primrose path of thinking there’s something better than the tried and true.

The index fund is and must be the gold standard.Why does this industry create all these lead ingots?

ETFS: My skepticism is increasing. Maybe ETFs will do a few basis points better than index funds. But the ETFs are mutual funds that you can trade all day long in real time. What kind of lunatic does that? The turnover is staggering in the spdr, a $700 million share market, with $80 billion shares traded. Thanks to Morningstar we can compare time weighted return on mutual funds with dollar-weighted returns, which is what the investors get. And the ETFs lose out to mutual funds every time. They get into hyperactivity. The rule should be don’t do something just stand there.

Posted at 02:50PM Jun 03, 2009 by Pamela Black in General  |  Comments[0]