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"FOUR FOUNDATIONS OF WEALTH"- Blog entry.
December 22, 2011
Re: 2011 Open Letter to Clients
Whew!! 2011 is over, and we are now looking at it through our rear view mirror. Borrowing some lyrics from the Grateful Dead, “What a Long, Strange Trip It’s Been”.
We have seen: dictators that were deposed and executed, one of the most dangerous dictators in the world died of natural causes, government revolts caused changes in leadership in places like Egypt, currencies were rendered virtually worthless overnight, the “official” end of a war, companies fail, companies make record profits, one of the most innovative businessmen in the world died, a Tsunami wreaked havoc on Japan, the killing of the World’s Most Wanted Terrorist, the arrival of a new Queen in Waiting in England, the “Occupy” movement, the weakening of the dollar, the strengthening of the dollar, swings of several hundred points up and down on the US stock markets, record low interest rates, “modern record’ high unemployment, the downgrade of the credit rating of the United States of America, etc… Wow, I’m tired just recapping a portion of the events we have seen!!
As I write this letter, the date is December 22, 2011. The Dow Jones Industrial Average began the day at 12,117.53. It began the year 2011 at a level of 11,657.58 (Data per the Wall Street Journal website 12/22/2011 live interactive charts).
With all that we have seen and experienced in 2011, the net effect of all of these events is negligible. The return of the Dow Jones Industrial Average is a positive 3.95% with all of the events that have taken place. What next week holds, no one knows. Whatever it holds, it is likely to be statistically insignificant because there will likely be very little volume to support any moves made, up or down.
What does all of this mean to us in the long run? To me, it means that we need to keep our eyes on the horizon and ignore the “daily noise” that inundates us via our 24 hour news stations. It is time to review 2011 for you, to recap 2011 and set a course for 2012.
As always, we appreciate your trust and loyalty as we work toward achieving your goals. Please call or email us to schedule your appointment. Thank you for making 2011 so successful!!
Darryl G. Barnes, President
Deacon Wealth Management
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
“QUICK BLAST” 9/22/11
The financial markets around the world are undergoing volatile downward swings among many asset classes.
This is a time for all investors to assess whether this is a time to become asset gatherers or asset liquidators.
It is my belief that we are seeing a classic shift of assets to areas that are perceived to be safe from areas that are historically riskier.
As many of you are aware, I liken this behavior to a teeter totter on which investors are balanced. Stocks are on one side, and bonds are on the other. When stocks are perceived to have made higher returns, individuals run from the “bond side” of the teeter totter to the stock side, leading to an imbalance toward being overly heavy on the stock side of investing. When the bonds are perceived to be the “higher side”, individuals run to that side, until it reaches bottom.
It is a vicious cycle, and one that involves “herd mentality”. Let’s not get caught up in the herd. Let’s assess our status and understand why things are happening.
Remember the basic idea that “MONEY ALWAYS SEEKS ITS HIGHEST AND BEST RETURN”, regardless of the asset it uses. Money has run into bonds recently in unprecedented levels over the last couple of years. It seems to be culminating in a crescendo, exacerbated by the Fed’s announcement yesterday of purchasing bonds to keep interest rates low.
BONDS ARE CURRENTLY AT UNPRECEDENTED HIGH PRICES, WHICH CREATE HISTORICALLY LOW YIELDS.Now is the time to assess the direction of our portfolios. There are many stocks that now are very attractive, based upon dividend yields alone.
Keep in mind, we do not have to be invested strictly in either stocks or bonds. We have tools that will allow us to purchase many alternatives to help us sidestep the market volatility, or use it to our advantage.
What individuals cannot afford to do is allow their purchasing power to be depleted by inflation. Lost in the discussion of the Fed’s actions, is the long-term effect on instruments such as CD’s. Rates on CD’s have been low for several years, and are losing the battle with inflation. The CPI (which may be used as a measure of inflation) has been reported at 3.8%.
If an individual receives 1% on a deposit, and loses 2.8% to inflation, real purchasing power is being affected.
PLEASE FEEL FREE TO CALL US IF YOU ARE UNSURE OF YOUR DIRECTION.
WE ALSO WELCOME THE OPPORTUNITY TO HELP YOUR FRIENDS THAT MAY NOW WANT A SECOND OPINION ON THEIR FINANCES.
THIS IS NOT A TIME TO PANIC, THIS IS A TIME TO CAPITALIZE ON HISTORICAL EVENTS TO YOUR ADVANTAGE.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your Financial Advisor prior to investing. All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly. The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.
Stock investing involves risk including loss of principal.