The Beat Goes On

Investors who lost a lot of money in the market last year are getting nervous again. After a 50% run up in the markets over the past 5 months from the March lows, people who stayed invested to recover their losses are wondering if it's time to get out. The so-called experts on CNBC and elsewhere have speculated that a correction is imminent. Economists have said that the recession is ending or already has ended. Inflation is not posing a problem yet, and the housing crisis has bottomed out. So much information. The market has shown time and time again, that it can and will correct itself. If you bet against the market, you bet against hundreds of years of data that shows the stock market beats other investments over time. Your decision is to decide how much to put in to the market, not when to get in and when to get out. Market timers have to be right twice.

So if you're worried about losing money in the market, adjust your allocation to stocks. If you need FDIC insurance, then you need to make sure you can live on 1-2% interest right now. For most people, that is not enough. Talk to your financial advisor to structure your portfolio for your specific goals and objectives and don't forget to add to your investments.

Stocks continue to rally as investors bet recovery is for real

St. Louis Interactive Festival

Today's post is more of a commercial for the St. Louis Interactive event coming up on Oct. 17, 2009. It is being hosted by the St. Louis Blogger's Guild and promises to be a great festival. New to social media or an old pro? Come check out the St. Louis Interactive Festival.

The St. Louis Interactive Festival is a one-day training festival that will allow you to get up to speed in the technology world, market yourself or your business in ways you never thought possible, and get the edge up on your competition.

For more information, go to: http://stlouisbloggersguild.org/2009/08/save-the-date/

Credit Card Relief

People who use credit cards, which is just about everyone in the US, will get some relief from the credit card companies today, who have to comply with some new rules:

Credit Card Relief: Phase One

How New Credit Card Rules Affect Your Wallet

While these new rules will certainly help some people, a better way is to help yourself. Be in control of your credit cards. If you pay your balances off each month, the interest rate they charge doesn't matter. In a post-911 world credit cards are necessary to buy airline tickets, rent cars, and reserve hotel rooms. While debit cards can accomplish this, having your money in your bank account reserved can cause temporary problems and may cause a rash of overdraft fees. Also, you don't have the same protection from billing issues or grievances with debit cards as you do with credit cards. So what should you do? Pay off your credit card debt as soon as possible and only charge on your cards what you have in the bank to pay off each month. Make sure you have a no annual fee card and don't carry more than 2 cards in your wallet or purse. If you really want to get in control of your spending, start using more cash. Some retail stores and vendors will now give you a cash discount for not using your credit card. That's a win-win. Recent studies suggest that Americans are now saving more and paying down their debt. This is a good thing and a silver lining from the recession that many people have discovered.

Read the fine print

A comedian once said, "there is never any good news in the fine print". Or something like that. There is truth to that statement. The fine print is usually disclaimers, exceptions, exclusions, and other legal sounding jargon which can often make a good thing, well, not so good. It's a way that companies protect themselves from lawsuits and loopholes. You see a lot of fine print in the automobile ads in the newspapers. Special financing, super rebates, extra good deals, are usually only for a limited selection of vehicles, for a limited time only, and for a limited number of people who can actually qualify for the deal in the first place. So why do they do it? Advertising! All car manufacturers and dealers want people to come buy their cars and trucks. They want you to think that they have the best deals in town. But in most cases, it's buyer beware. You might think the salesperson likes you but he likes himself better. He wants to make a sale to make money and possibly qualify for a sales incentive bonus. Right now, the Cash for Clunkers program is drawing in throngs of people to car lots all over the country. But, even though this is a government program, there is some fine print to be aware of: Waivers. Since some auto dealers have not been paid by the government for the rebates that they have passed on to the consumers, some dealers are now asking buyers to sign waivers stating that if the selling dealer does not get the government rebate, the new car buyer will either pay the dealer the $3500-4500, or return the car! Here are a couple of other things to be aware of when buying a new car in the Clunker program: 3 Clunker Traps Car Buyers Should Avoid

So do yourself a favor, read the fine print. You'll be glad you did!

Taking profits

If you look at the historical charts of the Dow Jones and S&P 500 stock indexes, you can't help but notice that over time the indexes go up and they go down. In general, they tend to go up more than they go down which is why people like to be invested in the stock market. With the recent return of 50% in the S&P 500 over the past 5 months, most stock watchers would suggest that it may be time for a pull back. While most people have not recovered their losses from last year, this recovery since March has been a welcome surprise to those who were overly pessimistic and were predicting the Dow Jones to go down to 5000 (it's in a 9200-9300 range right now!). So what should you do? If you agree that it's time for the market to take a breather, you can sell some positions where you have gains and take some profits. If the market drops 5-10% in the short term, you have cash to buy back in at lower prices. You will have to decide how much you want to sell for your repositioning, but do not sell everything. If the market continues to climb, having some positions still invested will help you. Remember, it's better to be wrong and see the market continue to go up, than it is to be wrong and watch the market tank before you could get out. The market will be watching the Fed today to see how they think the economy will effect the markets in the short term. While this is entertaining to some, its not terribly important for long term investors.

Time for a checkup

Now that the stock market has gained 50% in the past 5 months, it might be time to check your accounts for asset allocation rebalancing. For an asset allocation calculator, click here:

Asset Allocation Calculator

Why rebalance now? Well, now that you've made up some of your losses from last year, it might be time to protect your gains from further losses. After all, the market does not usually have 50% run ups very often, so bank some of your gains. Of course, the market could continue to go up further, so don't take everything out of the market. This is why asset allocation is important. Obviously, your age, investment experience, goals and objectives, and time horizon are very important factors in the asset allocation equation. Everyone is different. As in life, learn from your mistakes and use your life experiences to gain wisdom and capitalize from it. What if you had protected some of your gains in October of 2007 at the previous market high? You wouldn't have suffered nearly the losses that you did. So don't beat yourself up for past mistakes. Focus on the future and move on. You'll be glad you did! Oh, and keep saving and paying off debt. These are good things! Don't let anyone tell you otherwise.

Cars are not investments

Unless you own a 1963 Corvette Split Window Coupe or some such other vintage sports car from yesteryear, your vehicle is most likely worth less now than when you bought it. New cars can lose 20-30% of their value when you drive them off the lot! Now to be sure, in America and especially the Midwest, a car is a necessity for most people. Public transportation is not adequate for most people needing to get to and from their places of employment, much less stores, shopping centers, and other places of business. While the Cash for Clunkers program is getting all the press this week, most people do not benefit from this program or should not buy a new car this way. If your vehicle is worth more than $3500-4500 then you should sell it yourself. You will always get more when you sell it yourself, than when you trade it in to a dealer. When you do buy a "new" car, buy one that is "pre-owned", not brand new. Your best value will be vehicles that are 2-4 years old because most of the depreciation is taken off and it should still have relatively low mileage. Pay cash when at all possible for your new ride. Finance charges and interest add up and cost you a lot of extra money in the long run. When you pay off your car, keep making payments to yourself. Set up a new savings account for your next car and save up until you have all or most of the money needed to purchase you next vehicle. Keep your car 6 years or until you have 100,000 miles or more on it. You will spend a lot of extra money in your lifetime if you buy a new car every 2 or 3 years. Sure it's fun to buy a new car, but cars are expensive. Ultimately, a new car or truck purchase is an emotional one and usually not a necessary one, unless you really do have a clunker that just died in your driveway. There are lots of reasons you can find to buy a new car, but there are also lots of reasons you can probably think of to keep the one you currently have another year. Some of you might want to know what kind of car I drive. Well, if you really want to know, it's a 2003 Dodge Durango. I'd like to get a new ride, but it's only got 52,000 miles on it. Should be good for a while longer!

Cash for Clunkers waiting game

While the fate of the Cash for Clunkers program still waits the decision of the Senate, the debate continues as to whether or not this is a good program for Americans. One view, is that this is good for the economy, a gov't stimulus plan that is really working. Battered auto dealers are getting much needed car buyers into show rooms across the country and buying new cars which puts money into the hands of dealership owners and the pockets of the salespeople. Jobs are being saved and possibly the dealerships themselves. Another view, is that the Cash for Clunkers program doesn't really help the average American. People who are struggling to get by should not be buying new cars, but rather used or pre-owned. What's more, the Clunkers program actually takes the real affordable, lower priced vehicles off the market, because they end up in the junk yards instead of being listed for sale by owners. For more on this view, read a commentary from yesterday's St. Louis Post Dispatch writer columnist, David Nicklaus:

Despite popularity, "clunkers" program is a lemon

What do you think? Let's hear from you and see who you believe has the better argument. Post a comment.

Cash for Clunkers End Game

Astute readers of this blog may remember that I first wrote about the Cash for Clunkers program on May 1st. At that time the details were not yet clear, but I wanted to prepare my readers of the new Gov't program coming to the aid of the Nation's Auto Dealers. Fast forward to August. The Cash for Clunkers program appears to be heading for an abrupt end. It now seems that the program was a victim of it's own success. While the program was to last until November, more consumers brought in their "clunkers" for trade and the $3500-4500 rebate than planned, and the program quickly ran out of funds. Debate over the weekend has the White House, Congress, and Senate at odds over whether or not more money should be added to keep the program going. Car Dealers are concerned that they may be left holding the bag on deals that are still on the table or have not been processed. One huge complaint from dealers is that the program has too much red tape and the paperwork is too cumbersome for their employees to handle. What's more, the gov't website that is required to be used to process the paperwork, has crashed many times as it cannot handle the load of incoming deals from around the country. So unless the Senate approves more funds, this government program could be over as early as Tuesday! So what does this mean for consumers? Strike your deal for a new car soon, but don't be surprised if your local car dealer has already pulled the plug on Cash for Clunkers. Here's a thought: maybe the car dealers should just lower their sticker prices by $4500. That seems to be enough to bring in some much needed sales and move some inventory. If you can't sell your clunker on your own, then give it to a charity or take it down to the junk yard yourself.