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First, let me apologize for the lateness of this month's newsletter. As you probably know, I love the summer and I am almost always doing something that takes me outdoors, be it softball or boating or just washing the car. June might be a slow month in the financial world, but for me it's a crazy, fun and hectic month of activity.
My son and I and a friend of mine went white water rafting on the New River in West Virginia last month and as an add-on to the trip we signed up for "rock climbing." We thought, "rock climbing, how hard can it be?" The company that does the 3-hour excursion is called Hard Rock Climbing Services--well, their name is apt, since it is definitely hard. For starters they have you climb a sheer, straight-up rock formation for 80 feet. During the climb you are tethered to a line that is anchored by the guide--but our guide Erin, who pleasant and knowledgeable as she was, weighed all of about 95 lbs--with all of her equipment. Simply incredible.
In the end, we made it home safely. For a great trip I highly recommend Songer White Water Rafting in West Virginia and be sure to do the rock climbing one night--you'll love it. You can see my photos on facebook if you are interested.
Now, on to the market. June was another month of correction: for the month the DJIA was down 250, the NASDAQ was down 135.55 and the S&P 500 down 56.59 points (Yahoo Finance). Not a terrible month, but down nonetheless. July has already made up those losses and as I write this morning they markets are nicely above the June 1 opening. So essentially, for those with automatic investment plans like your IRA's or 401K's or 457's, or even dividend re-investments you were able to buy some shares cheap in June. And while those end of June statements might not look so great, the first part of July has made up much of that lost ground.
The argument among market watchers is whether the world economy is heading for a double-dip recession. The term double-dip implies that we actually came out of the the last recession (there are those that say we have not even done that yet.) There is no argument however that we are doing better this summer than we were in 2009 or 2008. Unemployment is still high but at least we are not seeing large scale layoffs--and are actually beginning to see small scale hiring.
The economy is growing, albeit slowly, but many say it is due to Government stimulus which is due to run out soon. For example, May and June saw a decrease in home sales as the first time home buyer's tax-credit expired. The fact that the economy would slow when Government spending decreases comes as no surprise--but the hope was that the private industry growth would ignite quicker than it has. Often Government stimulus merely pulls forward demand. In other words, if you were thinking of buying a new car this Fall, you may have been enticed to buy in the spring to take advantage of the Cash for Clunker's tax credit--so the tax credit merely moved consumer demand for autos from the Fall 2010 to the early Spring.
I believe the uncertainty over the costs of doing business is keeping employers from adding to their payrolls. Taxes and fees and fringe benefit costs are going up, and the actual cost in the future is still not predictable. Employers around the country are holding the line on payroll costs by not hiring any new people. If and when there is some idea of how much new-worker X costs, I think there will be improved hiring. When employment begins to inch up I think the virtuous cycle will gain momentum. In the meantime, I am content with some pretty good prices and decent dividend reinvestments that will really boost our performance in the future. Marty
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Concept of the Month: Financial Planning
There was an interesting article in the June edition of Morningstar Advisor magazine written by Carl Richards, "The Problem with Financial Plans." As a Certified Financial Planner (tm) it caught my eye since I thought it might have been an article critical of financial planning (which would have been something akin to saying Brooks Robinson wasn't a very good third baseman). I mean, really, how can you criticize something so essential as financial planning? Well, it turned out he was only criticizing the Plan not the planning.
These last two years have demonstrated with almost comical regularity that nobody can reliably predict the stock market or the economy in the short term. We've had people screaming "sell sell sell" in March 2009 just before the market rocketed off on a glide path that looked like the space shuttle. And of course we've had people screaming "buy buy buy" in April of this year when the market was about to give back some of those great 2009 returns. Over longer periods of time we know historically the Stock Market has done fantastically--but year-to-year or month-to-month we have certainly seen the gate swing both ways.
The problem with having the Plan (typically computer generated and bound in one of those fake leather-like covered notebooks with your name embossed in gold leaf) is that the software and template used relies on loads of historical data and several seemingly minor assumptions. The assumptions, on top of assumptions, on top of more assumptions are what often turns the fancy document into a fantasy document with lots of colorful charts and mountains that always go from the lower left to upper right.
What Richards says, and what I wholeheartedly agree with, is that you don't need just a plan, you need a planner. Someone who can take that road-map and work it, use it, update it, and revise it as the years go by. Richards makes the analogy of an airline pilot filing a flight plan--a required and important document--but when something changes in the air we would like the person flying the plane to make the appropriate adjustments to get the plane on the ground safely, preferably at an airport.
Now I know what some may be saying, "but Marty--I called last Friday when I saw the market drop 200 points and asked if we should change our investments and you said no, to "hang in there, it will be OK." (For the record, I usually say "hang in there" because it is so difficult to stick to our investment strategy when the daily swings in the market beat us like a piñata at a fifth grade birthday party.) But remember, an investment strategy is totally different than a Financial Plan and I am not speaking here of investment strategies, I am talking about things like how long are you going to work, where are you going to work, should you open an IRA for your spouse, when should you take Social Security, should we put some money into an annuity--all the things that really make a difference in your life--that is what a planner does. The investment strategy is one of the more concrete things in a plan--the rest of the planning is person-specific and I think so much more important.
Marty |
Chesapeake Investment Advisors RADIO!
For those of you in the Listening area of Chestertown and Kent County who might like a summary of market performance from the previous trading activity and a glimpse of the what the current day's "focus" may portend, Chesapeake Investment Advisors has been offering a short radio broadcast each day entitled "Investor Focus" at 8:30am on WCTR 1530AM.
During that "spot" broadcast I provide a summary of the previous day's trading and a snapshot of the credit markets trading from the prior day. I also mention prominently featured "stocks in the news" either for their strengths or their weaknesses.
I hope this "whets" the appetite of anyone who would like to inquire more fully with respect to their financial future, wealth creation, or retirement planning to stop by for a visit with me.
Mike Kelly |
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Chesapeake Investment Advisors Inc. Martin Knight, MBA CFP®
410-810-0735
800-994-0221
Fax: 410-810-3422
Securities and Advisory Services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC |
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