Frustrated that your portfolio’s not back to its October 2007 peak? Doubting the old conventional buy and hold wisdom? Well folks, I’ve discovered the answer (you can now forget about all that asset allocation and rebalancing garbage I’ve been preaching for so long). I literally spent every afternoon last week watching CNBC and I’ve come up with THE strategy for making money in the market.

Here’s what you do. Beginning this week, set your DVR to CNBC from 2 to 4pm Monday through Friday and spend just two hours every evening after work (the spouse and kids won’t mind – after all, you’re gonna be rich) watching your replays of the Mad Money and Fast Money programs – I promise you’ll learn everything you need to know about making crazy-fast money.

That’s right, just listen to the Mad Money guy and not only will you get some can’t-miss stock tips, you’ll find out where the market’s headed near-term. Or listen to the panel of expert traders on Fast Money and you’ll know what “tomorrow’s trade” is going to be. Sometimes you’ll even get advice on what to do in the morning versus the afternoon.

Then, armed with all that info, you’ll simply log onto your trading account right at 6:30am every day to make the “morning trade”. Put in your limits and your stops, then check your positions from work every few minutes. Or if you want to get insanely rich even faster, you can trade puts and calls like the options guy on Fast Money…

Now if for some strange reason this doesn’t work, I have a backup plan. There’s this radio commercial I keep hearing for a new program called “Hindsight Trading”, this could be even better yet. In the ad, one guy tells his buddy that with this program he only has to spend like a half hour every morning on the computer placing a few trades. The dude’s making big money every single day!

I wish I knew all this twenty-five years ago!

ApRiL FoOls!!!

Don’t laugh; people really do buy this stuff…

Interest Rates on The Rise?
Those of you I work with know I’ve been concerned about the bond market of late, due to the fact that interest rates are the lowest they’ve been in the history of our planet. And I can give you a half-dozen reasons why rates are (ultimately) going up. For starters, the Fed stops buying mortgage backed securities this Wednesday. Then there’s the growing (albeit tepid) economy and the fact that stocks are looking a whole lot more attractive than bonds these days. But the three most obvious reasons rates can’t help but move higher would be government deficits, government deficits and government deficits. And when the ten-year treasury goes from 3.8 to 4.something, other bond prices are gonna fall right along with them (prices (principal values) move inversely to yields).

Now I’ve always been painfully aware of my own simplemindedness, but lately I’ve been wondering if I’m not worse off than I thought. I keep hearing these bond gurus offer up chapter and verse on how to make money in bonds in a rising rate environment. In fact, I just signed up for a conference call later this week sponsored by a premier bond fund manager. It’s titled something like “how to make money in bonds in a rising rate environment”.

While I’m afraid, quite certain in fact, that I’ll not emerge from the session with any great epiphany, I’m interested nonetheless in hearing what folks way smarter than me have to say about things I think I know a little something about, particularly when we disagree… I promise I’ll keep an open, albeit simple, mind.

Now my open (yet simple) mind notwithstanding, do not (as implied) expect to hear from me with a recommendation to buy the XYZ Floating Rate Fund, or the “This Ain’t No Junk” Junk Bond Fund. You see, while these brainiacs may indeed have a creative strategy that might not lose, if the stars align just right, I ain’t going there for one simple reason – the fixed income portion of your portfolio is supposed to be the safe portion. And in my humble opinion, it’s perfectly okay to make 0.00001% in money market funds when rates are at 0.00001%. In fact that’s really the only time to be substantially in money market funds. If they were paying say 5%, we’d be owning bonds at say 8% instead – probably expecting rates to drop and bond prices to rise.

Seriously, you don’t want to buy something that goes down when interest rates go up, at a time when interest rates can’t go anywhere but up.

Have a great day!
Marty

When was the last time you called a tech helpline and spoke with an individual who you weren’t convinced was maybe mid-way through his ESL (English as a Seventh Language) course? Put together your own blog site in mid-October and expect to be stalled for a few days while the techs your consultant hired celebrate Diwali (India’s most important holiday) – they’re working from home (New Delhi). Hop on an Air France Jet, slap on the headphones and watch a few movies on the screen affixed to the back of the seat in front of you, doze off four or five times and poof! you’re landing in Barcelona. While relaxing in your ocean-view cabin on your voyage to Monaco, grab your laptop, log on and visit with the kids through your webcam.

In today’s world, if you’re willing to tech-up, you can stay connected 24/7. Technology has not only changed the global playing field, it has made it remarkably small.

So why then did I title this essay It’s A Big World After All? Because as I visit with people day in and day out, I find that so many of us possess a most myopic view of the world. And if you happen to be one of these dear souls who can’t see beyond the challenges in your own community, I hope to expand your horizons.

Let’s take my friend John for example. John is convinced that the United States is headed down a political path of destruction. He’s unusually bright, he’s an independent thinker (for the most part) and he sees his world changing to the detriment of virtually every citizen who works hard for a living. He sees the government taking control of the healthcare system, the banks, the auto companies, the energy markets and anything else they can sink their talons into. He sees aging Baby-boomers becoming more conservative with their money – not supporting the stock market the way they used to. He sees spiraling government deficits, he fears higher interest rates, higher inflation, and higher taxes. He’s thus experiencing higher stress, higher blood pressure, a lower life expectancy. John’s not camping happily these days, to say the least…

Let’s now take my friend Jane. Jane understands and acknowledges John’s concerns. They live in the same city, drive the same streets, listen to the same news. But when you chat with Jane you get the sense that her world is brighter, broader somehow than John’s. She sees beyond her immediate surroundings, the demographics, the politics. She’s freer, doesn’t seem stressed, no meds, no aches. Watch her eyes light up as she turns the topic to the opportunities that abound throughout the world’s markets. Jane believes her portfolio will grow like Jack’s beanstalk as the companies that fill her mutual funds find opportunities around the globe. She’ll tell you how capitalism is taking root in places like China and India. How the coming demand for infrastructure in other emerging markets offers unimaginable growth prospects for the companies in those regions as well as for those here at home.

Jane doesn’t see herself as a gambler. She believes that a well-diversified global portfolio, while volatile at times, will give her the best odds of reaching her long-term investment objectives. While John says he’s a capitalist, Jane displays it in her attitude and her actions.

So whom do you relate to and who do you think will be wealthier over time? Heck, forget wealthier, who do you think will be happier? While there’s nothing wrong with being a John, being a Jane, quite frankly, sure seems a lot more interesting. But please don’t go there if you can’t stomach the ups and downs. Or, in the words of that great old rock band ‘America’;

“don’t cross the river if you can’t swim the tide”

I.e., don’t go swimming with Jane if there’s a chance you’ll panic when you hit the strong currents – cause you’ll friggin drown.

Bottom Line: A true capitalist rarely, if ever, broods. A true capitalist finds reason for optimism in every changing trend. A true capitalist never gets tangled in the trees, clearly sees the forest and exploits the opportunities therein.

A true capitalist, ladies and gentlemen, capitalizes!!

I get goose bumps just writing this stuff!

Have a great day!
Marty

P.s. Jane would be a young to middle-aged capitalist… Middle to older-aged capitalists will share her perspective but apply it to a smaller portion of their portfolios…

Once every blue moon someone will ask why we don’t time the stock market. My pat reply is always “I’m afraid we’d totally screw up and get it right the very first time”. Seriously, the worst thing that could happen would be to sell right at the peak – or buy right at the trough – the first time out. We’d think we could do it again. It’d be like going to Vegas and hitting a jackpot on the first pull. We’d keep going back till we’re flat broke…

There’s a virtual plethora of prognosticators who rose to fame (for a little while at least) for predicting the 1987 crash, or the tech bubble-burst, or the recent credit crisis/bear market. Having studied many of their records, there’s one consistency I’ve found among them all – their glaring inconsistencies.

It seems to me that the more one knows (or thinks one knows) about the market, the greater one’s ego. The greater one’s ego, the more apt one is to prognosticate. The more apt one is to prognosticate, truly, the less one understands the market.

In other words, the more one knows the trees, the less one understands the forest…

Last spring a good friend of mine insisted I listen in on a conference call with an institutional money manager who possessed rarely-rivaled credentials. This Harvard Alum foretold a tale of terror. He posed a statistically-compelling argument as to why the economy would continue to flounder and why the stock market would continue to suffer mightily for the foreseeable future. That was about 70% ago by the way…

I’ll not question the expert’s intelligence quotient, but as I’ve implied; the higher a guru’s IQ, the higher the EQ (Ego Quotient) (that’s to the extent the guru identifies with his/her IQ) – and the higher the EQ, the lower the CQ (Commonsense Quotient)…

In other words, the more one identifies with the guess, the less likely the success…

So if you ever start thinking you know what’s going to happen next, please step back and consider the immortal words of Winston Groom’s Forest Gump, one of literatures most CQ-ly gifted characters;

“Life is like a box of chocolates, you never know what you’re gonna get”

But hey, if you hate surprises, you can always buy the box labeled ‘nuts (no pun intended) and chews’. In investing parlance, that would be your T Bills and CDs – which by the way should occupy at least some of your portfolio if you’re in or nearing retirement…

Have a nice day!
Marty

P.s. I expect you expected commentary on the healthcare reform package just passed by the House. All I can say is – whether you’re a Republican, a Democrat or an Independent, whether you’re a union member or a trial attorney, you can’t in good conscience feel good about how this one came down.

You tell me what’s worse; the fact that this legislation (with its lack of tort reform, its union concessions, its ultimate cost, etc, etc, etc.) just won approval by the House of Representatives, or the backdoor deals, the begging, the bullying and the blatant bribing it took to get it done – and what that says about how Washington conducts its business.

Honestly, it’s not this legislation that has me concerned (we’ll make the most of it), it’s the fact that our policymakers are clearly of the mindset that their desired ends justify any means. And that my friends is a little scary, to say the least…

Sectors Outlook
In spite of this politically fine mess we find ourselves in, when we look at the market, sector by sector, things don’t appear to be all that bad. The following by the way is no prediction, just my commentary on the major sectors and their prospects going forward. Your portfolio’s overall allocation (stocks and fixed income) should first and foremost reflect your temperament and time horizon. Once the proper allocation to equities is determined, then the sector considerations come into play.

• Technology: No matter how you slice it, the prospects for tech are good this year. Corporations are holding loads of cash and a chunk of what they don’t use for stock buybacks, mergers and dividends (all on the rise) will be invested in technology. At this stage of the cycle, companies are not looking to hire, they’re looking to gain efficiencies wherever possible.

While this has clearly been a business-lead recovery thus far, the consumer has shown recent signs of life. A continued pick up in household spending should bode well for the tech sector…

• Financials: With the yield curve steeper than it’s ever been, banks ought to be hitting it out of the park this year (they can borrow at zero and lend or invest at greater than zero). And I believe they’ll do well, earnings-wise. The political winds they face however (as I’ve proffered here ad nauseam) may temper what could otherwise be a banner year for their stock prices.

• Healthcare: Lord knows?

• Materials: The weak dollar play is off the table for the moment – largely due to the Euro’s troubles, but also due to the recent rosier economic forecasts for the U.S… If the global economy gains a little steam however, demand will pick up and materials stocks should do okay (although they’re coming off of a huge run in ’09). Longer-term, this sector makes a lot of sense to me…

• Energy: Same story as materials in terms of the dollar and the global economy…

• Gold: The problem I see with gold is that everybody’s talking about it. You show me a commodity they’re selling on TV and radio multiple times a day, and I’ll show you a commodity whose price has peaked. That said, it’s been a pure dollar trade of late – if the dollar tanks again this year (don’t count on it), gold should rally…

Spendaholism
In Milton Friedman’s book “Free to Choose” he likened excessive government spending to excessive drinking. We spend a little, it feels good – A little more, it feels good – A lot more, it feels good – We have a hangover (asset bubbles, etc), it feels bad – Hair of the dog (more spending), it feels good. Eventually however, the long-term deficits (which we’ve been too inebriated to notice) will severely damage a nation’s liver (economy) – and rehab (spending cuts) then becomes a very painful process indeed (just ask the Greeks).

I.e., excessive spending (like excessive drinking) may feel good initially, but it eventually results in misery. The fix is miserable initially, but we’ll feel so much better in the long-run…

Now it’s not too late here at home my fellow co-dependants, my fellow enablers, but it’s definitely time we wake up and stage an intervention on our dear old Uncle Sam. In other words, it’s time we vote in a few policy-makers who are willing to administer some tough love (i.e., cut spending – like corporate America has done big-time of late).

How about we vote in some folks with a little business experience for a change? Then pray they don’t start drinking Washington’s kool-aide right away – cause it’s definitely spiked…

And don’t you dare think this is a partisan diatribe (that would clearly be denial on your part) – the previous administration spent out the friggin whazoo – the current one has simply picked up (and a whole bunch) where the previous left off. And believe me, higher taxes (they’ll just buy more booze) will only make matters worse!!

PLEASE Vote Smart!!!!

Have a nice day!
Marty

Today’s politician
“My interview begins in fifteen minutes. The polls suggest I’m losing ground to an up-and-comer from the dark side. My colleagues’ scandals are killing me – I’m guilty by association. All I’ve worked for, all the strategizing, my ascent to the political heights I’ve dreamed of since my senior class president days is about to go up in smoke. I know my antagonist will go after me for going after the banks, I’m nervous as hell…

My team tells me I have to stay on topic. They say the only thing the consumer hates more than me is the big banks. We have to deflect, we have to take up arms with the little guy – if we’ve ever needed class warfare, good Lord, we need it now. I hate these interviews – she knows – she knows why we’re going after the banks. She’s going to hammer me on the fact that they’ve paid back TARP with interest, that the taxpayer made money on those deals. And here we are going after their execs with our fifty-percent bonus tax. I’ve got to keep her off the autos, we’re in too deep with the unions. But what do I say if she goes there? We’ve given them $85 billion, they haven’t paid back a dime and there’s no way we’re going after our supporters. I pray to God she doesn’t mention Freddie and Fannie!”

Last week I watched a fascinating conversation between a Wall Street reporter and a sitting senator – I’ll leave out the names to protect the guilty. My above characterization of what I believe to be the painfully obvious thought process presiding over Washington these days (any days for that matter) was vividly illustrated throughout the course of the interview.

Yes, the reporter confronted the obvious – she asked repeatedly; “why would you go after the institutions that paid back the taxpayer, with interest, and not the auto companies?” The senator was virtually frozen; his anemic response was simply; “that’s not what we’re talking about here”. That, sadly, was the best he could do.

Today’s CEO
“My conference call with the analysts begins in fifteen minutes. Finally I have something positive to talk about. With layoffs and other cuts, we’ve whittled our expenses down to a level consistent with production. We’re the most profitable we’ve been in six years. We have more cash on the books than we’ve had in ten. We’ve already taken orders that will generate 70% of our revenue projection for the remainder of this year. The top line is coming back and our productivity is outstanding.

But I have to maintain restraint. I can’t be overly optimistic; it’s not the old days when we could scream from the rooftops and watch our stock soar to new heights. These days they’ll kill us if we’re wrong. I have to under-promise, even though the rest of this year is shaping up really well. I just hope Washington stays the hell out of our way…”

CEOs, for the most part, are bullish on 2010 – particularly in the tech-sector.

Today’s Consumer
“According to my advisor my portfolio made 20% last year, and I’m only about 2/3rds in the market. That’s good, still not back from the peak, but it’s nice to see things bounce a bit. He tells me that companies have been beating their earnings estimates, have lots of cash, are “lean and mean” and are confident they’ll do well in 2010. He sounds optimistic, but he cautions that “when it comes to stocks, anything can happen.”

My advisor says that we simply need to make sure my allocation to stocks is long-term and consistent with my age and my personality – whatever that means…”

How else could your average hard-working, money-saving, cable news-watching consumer (with a good advisor) be feeling at the moment?

Yours truly
“Clearly there’s optimism on the corporate front – companies by and large are healthy, at least for now. Stocks present good value relative to earnings and, in particular, relative to interest rates. We all want the world’s governments to get their acts together, but that’s what’s generating all the pessimism – and we need pessimism! Without it, bonds would tank and interest rates would soar to the moon. Too much optimism is a killer for the market. Sure, Washington and the rest of the world need to wake up, but hopefully by then we’ll have something else to worry about. If not, it’ll be time for the next bear market.”

You’ve heard it here numerous times:

“Bull markets always climb a wall of worry” Author Unknown

“A bear (market) tends not to attack when you’re looking for it behind every bush” Yours Truly

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria” Sir John Templeton

Of course this doesn’t mean the next bear isn’t ready to emerge from hibernation and terrorize the picnic grounds once again. It’s just that while we look out the window and see rays of sunshine peaking through the trees, it’s still mighty chilly when we step outside in our jammies and slippers…

Have a great day!
Marty

We Need Business-folk
While the governments of the world have been spending like drunken politicians (drunken sailors look like misers up against today’s politicians), corporate America is as lean, cash-rich and profitable as it’s been in quite some time.

While the governments of the world are loaning money to one another to stay afloat, corporate America is actively buying back its own stock (seeing value there), and its CEOs and top execs are investing substantially in their own companies as well (ditto).

While it remains to be seen whether or not the financial geniuses tasked with managing government balance sheets can maneuver their way out from under this fine mess, corporate America clearly knows what it’s doing (at the moment)…

As I said the other day; maybe, just maybe, we could use some people with real-life business experience on Capitol Hill…

We Don’t (necessarily) Need Reform
Do we truly need financial industry reform, or is it simply more poll-inspired politicking? Are you confident that our lawmakers have the know-how, let alone the honesty and integrity, to effectively re-regulate anything? Please forgive my cynicism, but man!

Shouldn’t we simply punish the law-breakers to the fullest extent, and allow shareholders to deal with the otherwise bad boards of directors?

Wouldn’t the real world ultimately deal with the criminals and the crummy CEOs? Shouldn’t we spend our resources enforcing current laws, rather than manufacturing new ones? I mean the crooks are not turning themselves in, and the inepts aren’t stepping down of their own volition. Seriously, would Tiger have had his come to Buddha meeting with the press if the Mrs. hadn’t enforced her law with a seven iron?

MARKETVIEW INSTA-POLL
Week after week you’ve patiently tolerated my views on the world at large, now I’d like to know what you think. The following is my very first insta-poll. This state-of-the-art blogsite will instantly tally your answers and show the results (i.e., where you all stand on the issues I’m so fond of hammering here). So please, humor me, take just a second to answer the following questions. I’ve kept it very brief as to not take too much of your time. I may put together more of these in the future – depending on the level of participation, and whether or not I agree with your answers (just kidding). This will also aid me in ensuring my future subject matter reflects the topics that concern you most…

As I said, you have just a second to check each answer. I’ll be participating as well. Thanks for your help!

Q#1: Is it necessary for our government, in light of the recent recession, to step in and re-regulate corporate America?
Yes ___ No ____

Time’s up. Wow! 100% of respondents do not believe the government should get into the business of regulating risk…

Q#2: Who/what do you believe deserves the blame for creating the recession?
The Banks ___ The Government ___ Wall Street ___ The Business Cycle ___

Time’s up. Amazing! 100% of respondents blame The Business Cycle for causing the recession.

Q#3: In that those polled hold The Business Cycle responsible for the cause, who deserves blame for exacerbating the extent and duration of the recession?
The Government ___ The Banks___ Wall Street ___ The Consumer___ All 4___

Time’s up. I’m blown away! 100% of respondents assign the blame to All 4.

Q#4: What affect would stiffening regulation on The Banks and imposing the proposed $120 billion tax on a few TARP recipients (the ones who paid it back btw) have on lending going forward? Encourage___ Discourage___

Time’s up. I’m flabbergasted! 100% of respondents believe the proposed regs and tax would discourage bank lending going forward.

Q#5. What affect will the expiration of the early 2000’s tax cuts at the end of 2010 have on the recovery? Help it ___ Slow it down ___ No affect___

Time’s up. This is insane! 100% of respondents believe that allowing the tax cuts to expire will slow the pace of recovery.

Q#6: What do you believe truly inspires the average politician?
Doing what’s right for the public___ Doing whatever it takes to win re-election___

Time’s up. This is freaking me out! 100% of respondents believe the average politician’s actions are predicated upon what he/she believes it takes to win re-election.

Q#7: At the end of the day, do you believe American ingenuity and entrepreneurship will prevail over our present circumstances and ensure a bright future for generations to come?
Yes___ No___

Times up. I’m speechless! 100% of respondents have faith that America will remain a prosperous nation for future generations.

Thank you all for participating! I am amazed at how like-minded we all are? I promise to continue in my quest to cut through all the hyperbole – to bring clarity, objectivity, and a healthy perspective to the issues of the day…

Take care!
Marty