July 2010


I'd like a GOOD SAFE STOCK, please.  
As you know, I am dedicated to managed money and intelligent diversification, with limited reliance on individual stocks. Recent events demonstrate just one of many good reasons for that.
BP (formerly British Petroleum) was a GOOD SAFE STOCK. It was a well capitalized company, controlling the entire supply chain of an essential resource, of which the world consumes essentially all that is produced. It had a solid history of growth and a consistent and growing dividend, on which many people depended. It is probably held in as many pensions, trusts and public funds as any other stock. It was a core holding of many retirees.
Then, in the blink of an eye, it all changed. Perhaps another day I will address the environmental, political and social issues surrounding this incident, but for now I just want to talk about what most thought was a GOOD SAFE STOCK. First, the price plummeted. It may recover and all the retirees who hold it may be fine, but it could be forced into bankruptcy.  Nobody could have anticipated this. Now the company has eliminated its dividend. Even if it does recover and one day pays dividends again, those lost payments are gone forever. In comparison, no one in The American Financial family missed a single distribution payment. That is just
one reason why the Intelligent Decision is to always diversify and limit your reliance on any single position.

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Look for the next regular issue with a discussion of The Alternative Minimum Tax.



As I look at the world today, I believe, as we stand here peering at the abyss, that we are actually poised for a new American Renaissance, greater that we have ever seen before. I realize this may not be the typical view - it is certainly not the noisiest view - but it is my view.
It is not blind optimism either. Rather it is based on a single irrefutable truth - We are Americans!
Yes, we are in perhaps the most troubling and challenging time of our lifetimes, but as a nation we have seen worse, and we have always triumphed. We have survived a horrible and bloody civil war, recessions and depressions, natural and man made disasters, foreign and domestic attacks on our people and our way of life and unspeakable tragedy. Following each, we emerge stronger and better. It is in our DNA. It is who we are.
Most recently, we survived the near complete collapse of our banking, real estate and insurance industries, essentially our entire economic system. We may disagree on the tactics used but the fact is we survived and are rebuilding and that is what Americans do! I will tell you that I disagree with the tactics but it didn't matter. Regardless of what the government did or did not do, we would have survived. That is what we always do. Today, despite all impediments, every where I look, I see entrepreneurship and innovation. It's just who we are; we cannot be stopped.
One of the great things about a Democracy (a Constitutional Republic, really, but that is a topic for another day) is that the pendulum always swings. It has now swung about as far as it can go in one direction, and the wonderful correcting mechanism of free people and free minds moves into action. Can it still swing farther, you may ask. No, to go much further would be to break and we are Americans and we don't let that happen. As you may know, my normal optimism has been tempered for quite some time now, but I see a real change happening around me. Everyday Americans are engaged in the process of moving, pushing, FORCING that pendulum back. Sadly, I believe it will be a slow, long process but it will happen. The entrenched powers are not stronger than the American people, but they are strong, and we have a very big hole out of which to dig.
We hear the pundits talking of a "double dip recession", meaning another near economic collapse will follow the one we just survived. That is not going to happen. They tell us the huge tax increase scheduled to come next year will choke the recovery and throw us to the mat again. (Income taxes, alternative minimum taxes, dividend taxes, capital gains taxes, estate taxes and more are all scheduled to rise dramatically on January 1st.) I don't believe that will happen. Congress won't let it happen. The people won't let Congress let it happen. Sadly, I can't say they will repair the whole system right away, but they will "patch" it enough to allow Americans to go on doing what we do best - solve problems and make a better world for our children and grandchildren. The momentum will grow, the national engine will accelerate, and we will see that new American Renaissance. We will see an America even greater than ever.
You have heard me say it before and I will say it again  -
The Intelligent Decision is to never bet against America!
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