Friday, December 31, 2010

Friday, December 24, 2010

Happy Holidays?

For many people this has not been a happy year. Lots of people have lost their job or at least had their hours cut or their pay cut, still others have lost their homes to foreclosure or have had to delay the purchase of a new home because they couldn't sell their current one; and on and on. But I just read a story about a woman in Florida who has apparently lost her job because she would not say "Happy Holidays" when she answered the phone. What has this world come to? Now that I work for a large, national company that employs over thousands of people, I had to go through something called "diversity training" when I first started working for them. This was part of a full week of instruction for new employees of the firm, and it was mandatory. In it, we learned to respect all of our fellow co-workers and to be careful of what we say and do around them because they might not share our same beliefs, morals, and sexual orientation. It was designed not as much to prevent hurting a co-worker's feelings as much as it was to show that the employer had provided training on these topics to thwart legal action from sexual harassment suits and the ACLU. But what bothers me more about not being able to forward funny e-mails, and telling jokes in the office, is this whole "Happy Holidays" thing. Now think about it. Obviously not everyone celebrates Christmas, most notably the Atheists. But unless you work for Walgreen's, just about everyone I know takes Christmas day off, even the Atheists. Now, I would not be offended if a Jewish person wished me a Happy Hanukkah, or if an African-American wished me a Happy Kwanzaa. I love holidays and wish we had more of them. I have always been a big proponent of Boxing Day and I have always gone out of my way to wish people a Super-fantastic Groundhog Day! So what's the big deal about saying Merry Christmas? After all, it is a National holiday! If I say to someone, Merry Christmas, I am wishing them a wonderful day off to celebrate with their friends and families, in their own family traditions. Even though it is a Christian holy day that is marked as the day to celebrate the birth of Jesus, I am not saying that if you don't believe in Jesus you are going to Hell (future blog topic)! So relax. It still says Christmas on my calendar, so I will say Merry Christmas instead of Happy Holidays! If you don't agree, well, air your grievances. There's Festivus for the rest of us!

Tuesday, December 21, 2010

Would you like to donate a dollar?

I want to talk about a disturbing pattern I've noticed lately among retailers. Now we've all seen the Salvation Army bell ringers outside the grocery stores and department stores, collecting money during the Christmas season. This is something that they have been doing for years and I have memories of giving some change to them when I was a kid. One thing I have noticed that is different lately is how early they begin setting up their kettles. I spotted my first bell ringer this year on the day after Halloween! Yes, November first. And I would be willing to bet that they will not go away until well after New Year's day. But that's not my beef today. Twice in the past week, when I have checked out of a store and was waiting to swipe my credit card in the card reader, I was asked by the cashier if I would like to donate a dollar to some charity, I forget which one. Now I am not a scrooge, I give lots of money to churches, charities, and non-profit organizations, but why does Toys R US or my Mobil "On the Run" convenience store have to ask me if I want to donate to a charity? Isn't that my business? Or why doesn't the charity have their own people in the store asking the same question? Sure one dollar is not a lot, but if you get hit up for a dollar at ten stores a week, that could translate to $50 during the holiday season! $90 if you're on the Salvation Army schedule. The reason why they do it, is because it works. I did give a dollar to Toys R US when I purchased my kids Christmas gifts. What's an extra dollar on a $200 bill? But when I made a $10 purchase at the gas station, I respectfully declined. Not today I said...maybe next time. I knew there would be dozens of more times that this same thing will happen before the end of the year. I'm glad I let my wife do most of the shopping. I wonder what she would do? I better have a talk with her.

Wednesday, December 15, 2010

Cell phone etiquette

Today's blog is kind of a public service announcement for all cell phone users. No, I am not going to comment on the hazards of talking on cell phones while driving. I actually still do that, as I live in a state where this kind of activity is still not against the law. I have considered purchasing a bluetooth, but have resisted so far because I don't like the way it makes you look like you have a beetle attached to your head. One time we had an A/C repairman come to our house to work on our outdoor air conditioning unit, and when he came inside to write up his work ticket, my wife noticed that he had this strange device attached to his ear. After he left, she commented that she felt sorry for him because he had a hearing disability. That's when I said, "that was not a hearing aid, it was a bluetooth!" No what I want to address today is when to actually talk on a cell phone, no matter if it's a bluetooth, a flip phone, a walkie-talkie, a Blackberry, iPhone, Android, or anything else. Nowadays, no one is impressed if you have a cell phone. My neighbor's 7th grade girl has a cell phone for crying out loud. Now I realize that keeping in touch with your friends, family and business associates is important, and that's the beauty of cell phones, you can stay in touch very easily, and can always be reached. But here's my gripe: when you are in a public place, like a store or a restaurant, just let the call go to voice mail and call them back in the privacy of your car or take it outside. Nobody wants to hear your business! I have heard cell phones going off in church, on airplanes, and even in bathrooms! And the crazy thing is, people take these calls! Just yesterday, I called a colleague about a mutual client we are working with, and he took my call, and I immediately noticed that it sounded like he was in a tin can. I thought maybe he was in a stairwell or a hallway that echoed. We talked briefly about the case, and then he interrupted, "Scott,...can I call you back? I'm in the bathroom." THE BATHROOM? Why on earth did you answer the phone if you are in a stall, in the bathroom, I thought to myself? There are some places that you should NEVER answer the phone, and the bathroom is one of them. So here is my plea for cell phone users: Do yourself and everyone else a favor, please do not take that cell phone call if you are in the bathroom, and especially, a public bathroom. For the love of God, this creeps me out! I had to go for a drive and clear my head...oh yeah, and listen to my voice mails.

Friday, December 10, 2010

Don't let it snow...

For a motorcycle owner, this has to be one of the saddest pictures you could ever see. Winter is the season bikers hate. Bring on the spring!

Friday, December 3, 2010

Thursday, December 2, 2010


For most motorcyclists, this is the time of the year that we all dread...fall and winter. The end of the summer riding season. Depending on what part of the country you live in, your season could end in September or October, or maybe extend into November if you're in a warmer climate. For those lucky enough to be in Florida, Arizona or southern California, you don't have this problem, but for people who experience all four seasons, there will be a time when you have to garage your bike. When you get to December, that time is now. Some people in extreme cold climates may decide to winterize their motorcycles, meaning they drain the fluids and disconnect the battery, to keep their bike in good condition through the winter. In this case, you really are done for the season. For those in the Midwest or climates where the weather can be fickle, taking a chance against winterizing may mean you'll get a ride in every now and then if the weather cooperates. I have lived in Missouri for the past 29 years and can remember times when we saw temperatures in the 70's in January! So if you watch the weather trends and see a nice warm spell coming, get out the tender and charge that battery might get a ride in! In the meantime, you may have to pass the time talking up past rides and rallies with your biker buddies at the shop or dealership, or diner. Heck, you could even check out an upgrade for next year. This is the time of the year for deals on new wheels!

Tuesday, November 30, 2010

Friday, November 26, 2010

Just show me the parade already!

Yesterday morning, after eating breakfast and commandeering the TV remote back from my children, I switched over to NBC to watch what I thought was supposed to be the Macy's Thanksgiving Day Parade. I had fond memories of watching this parade as a child and seeing the giant floats and balloons move down the streets of New York City. Once the commercials were over and the program returned, I saw Matt Lauer with Meredith Vieira sitting in the middle of what appeared to be a hundred or so pots of mums. They were announcing the next segment which was some Broadway production number of some kind. Where's the parade I thought to myself? I noticed a timer in the upper right hand corner of the screen indicating the parade's arrival at some square. So the parade was happening somewhere, they just weren't showing it. After the Broadway number was over, there was a brief glimpse of the parade before they went to commercial. After the next set of commercials were over, I was greeted by Al Roker, who was somewhere by the parade (I could see a marching band over his shoulder), interviewing someone about their upcoming Broadway Show performances. Why can't they just show the parade, I thought again? After the interview, we went back to Matt and Meredith who were previewing the next Broadway number. Who cares about these song and dance numbers? Where is the parade already? To my amazement and chagrin, the parade was not actually shown (other than behind Al Roker or on a cut to commercial) until 9:54 AM! Virtually a whole hour went by of what was billed as the Macy's Thanksgiving Day Parade, without actually showing the parade at all! How could this be? I guess that in order to see the Macy's Parade anymore, you have to actually go to New York and watch it in person!

Wednesday, November 24, 2010

Thanksgiving gets the shaft

Now that Veterans Day has past, the next big holiday of the year is Christmas. What, you ask? What about Thanksgiving? Oh sure, there will be a Thanksgiving holiday. Most Americans will take that Thursday and possibly the following Friday off to be with their family and eat turkey and watch the Detroit Lions lose to whoever they will be playing that day. But Thanksgiving is a holiday that is going by the wayside. I have already seen houses and businesses with Christmas decorations up. Bell ringers are already stationed at the local grocery stores to beg for your loose change. I even flipped through the radio dial last night and heard a station playing Christmas music already! Now I'm no Scrooge. I love Christmas and what it means to Christians around the world. I love seeing my kids get excited about what they hope Santa will bring them this year. But I think Thanksgiving deserves a little more recognition than just a day to get off work and eat some turkey and pie with your friends and family. We should reflect on what we as a nation are thankful for. Freedom of religion. Freedom of speech. Freedom to vote for whomever we choose to represent us in government. Let's wait until after Thanksgiving to hang the decorations and do our Christmas shopping. Christmas will be here before we know it anyway.

Wednesday, November 17, 2010

Tuesday, November 16, 2010

Night Moves

As autumn unfolds and the temperatures fall along with the leaves, another annual event happens which causes some even more distress: the end of daylight savings time! Yes, although it is nice that the sun is up for most when you awake or at least go to work in the morning, now the sun sets before 5 o'clock in the afternoon! In fact, today's sunset is at 4:47 PM. So what's the problem? Well, for commuters, it means that the drive home is going to happen in the dark. Very depressing, and dangerous. It's a fact that more accidents happen at night versus the daylight. The statistics are even worse for motorcycles. Motorcycles aren't seen as easily by motorists due to their lower profile. You probably won't miss that Mack truck or semi tractor trailer chugging past you, but how many times have you not seen a motorcycle in the lane you were about to change in to? Motorcyclists must be even more cautious and defensive when driving in the dark than they are in the daylight hours. In addition to watching out for inattentive drivers, motorcyclists must carefully watch the road for potholes and debris not easily seen in the dark as in the daytime. Hitting an object or a big hole in the road could mean dumping your bike and possibly being struck by oncoming vehicles following you. Even with lights on, it's not as easy to pick up bumps in the road, so be careful. If you are in a car or truck and see a motorcycle, give him some room and pay attention to the road. Everyone wants to get home and eat dinner. Don't ruin some one's day by not paying attention when you're driving. Be careful out there!

Thursday, November 11, 2010

Veteran's Day

Today is Veteran's Day, a national holiday that has been observed since 1954 (before that it was called Armistice Day). It is a day set aside to honor the country's living veterans who served in wartime or peacetime. Some people confuse this holiday with Memorial Day, which also honors veterans, but is actually to honor those that have died serving our country. Still others confuse both holidays as a day to have a sale! Usually it's the furniture stores, car dealerships, and most any other retail store that chooses to do so. Why? What does honoring a veteran of war have to do with getting 50% off a new couch or end table? If they really wanted to honor veterans, they would close their store like most banks do, and go to a parade or museum with their family. Better yet, call a veteran or go by a local VFW hall, and thank him (or her) in person! I have uncles and cousins who served our country in the military. My nephew is a paralegal in the Army and has recently been accepted to join the Army Rangers. The closest I got to serving was when I was in the Air Force ROTC while in college. I had a pilot slot but dropped out after I failed my vision exam before my junior year. Nevertheless, I honor the many living veterans today who served our country with honor, to give us the freedom that we enjoy today! Thank you for your service to our Nation. May God bless you all the rest of your days!

Wednesday, November 3, 2010

Tuesday, November 2, 2010

Group ride

While there are not too many things more exhilarating than riding a motorcycle, riding in a large group of motorcycles is one of them. I usually ride alone because I tend to make last minute decisions to go out based on weather conditions and family activities, but occasionally I will plan a ride with a friend or two. Recently I was part of a group of 20 or so bikers riding through the winding roads of the Missouri wine country near Defiance, MO. Riding in a larger group brings some additional challenges, but the experience of riding in a large pack can't be beat. While one must be cautious of the riders in front and behind you, the roar of the engines and the looks and gazes of people you pass by makes you proud to be one of the pack. When riding in a larger group, motorcycles usually form a staggered formation to give room in front and back for stopping, but allowing for a tighter grouping of bikes. If the roads become too narrow or have many sharp turns, a single file formation may become necessary. Many motorcycle dealerships organize group rides on a regular basis. The Veteran's Day parade is a time when dealerships, clubs and riding chapters come together for a bigger than life experience downtown. Hundreds, if not thousands of motorcycles will descend upon downtown St. Louis this coming weekend to take part in the annual parade. Motorcycles of all types, sizes, and colors, will bring up the rear of the parade to the delight of children and onlookers alike. I took part in the parade last year and it was definitely a highlight of my year. So if you're a biker, find a group to ride with soon. It sure beats riding alone. And if you just like to see motorcycles, come down to the parade and witness a multitude of bikers like you've never seen before...all in support of those brave soldiers who have fought for our freedom as Americans!

Wednesday, October 27, 2010

Tuesday, October 26, 2010

Rain factor

After last night's storms and the weather forecast for more rain today, I will definitely not be riding my motorcycle to work. While there are more experienced motorcyclists who will ride in the rain, it is not one of my favorite aspects of motorcycling. While riding a bicycle in a rain shower might be fun for children, riding a motorcycle takes on an entirely different element. Instead of a nice pitter patter of raindrops on the check, rain while riding, feels more like small needles hitting you in the face. Your vision is impaired by the raindrops and mist as well, so safety becomes a factor also. Like any vehicle, stopping distance is greater on wet pavement, so greater distance must be maintained between your bike and the cars ahead of you. Like any other motorcyclist, I keep rain gear in my saddlebags in case I get caught in an unexpected summer rainstorm, but I sure don't plan rides when I know I'm going to be heading into rain. Having been caught in a few showers before, the riding experience is not what one thinks of when contemplating a motorcycle ride on the highways and byways of America. No, I'll leave the rainy conditions to those hearty souls who are more comfortable with the challenge and are more experienced in bad weather conditions than I. So I'll take my Durango to work today and hope that better conditions will prevail in days ahead. We've certainly been blessed with great weather in the Midwest lately. One thing is for sure. I'm not looking forward to winter!

Wednesday, October 20, 2010

Tuesday, October 19, 2010

What's your number?

As the leaves continue to fall, along with the temperatures, many motorcyclists are pondering the end of another riding season approaching. While unseasonably warm temperatures have been a welcome surprise the last couple of weeks, the signs that winter is approaching is all around us. The days are getting shorter and even with the temperatures hitting highs in the 70's, the mornings and evenings are noticeably cooler. For the motorcyclist who chooses to ride in cooler weather, this means wearing appropriate gear to handle the colder temperatures. Jackets and gloves are now a necessity, and even overpants or chaps are needed to keep legs warm on the morning rides. Depending on what type of bike you have, face protection may be needed as well. As the days continue to become cooler, with highs dropping into the 60's and later on, the 50's, every motorcyclist will have to decide when the joy of riding vanishes when faced with freezing wind chills while exposed to the elements. I have friends who will not ride when the temperature is below 60 degrees. I know others who ride as long as it's above freezing. For me, if it's 40 degrees or above and no rain in the forecast, I will ride. Obviously, during the week, I have to take into account my schedule. As my job requires me to wear a jacket and tie when meeting with clients, I have to factor in time to put my tie on and comb my hair once I reach my office or destination. But there is nothing like experiencing the open roads from a motorcycle. Driving a car does not compare. Luckily for Missourians, the motorcycle riding season is longer than most. While, not Florida, our winters can include days of unseasonably warm temperatures, so while the riding days are fewer, they don't have to go away completely. If you dress appropriately, you can enjoy the fresh air a little longer. Of course it doesn't hurt to hope for an Indian summer...

Wednesday, October 13, 2010

Tuesday, October 12, 2010

Courtesy Wave

Now that we have entered fall and the leaves are just beginning to change color, I have enjoyed venturing out on my motorcycle lately. This past Saturday was a gorgeous day in St. Louis with temps in the 80's and plentiful sunshine. Besides experiencing driving in a completely different way from behind the wheel of an automobile, the neat thing about being on a motorcycle is the camaraderie with fellow riders. When passing another motorcycle going the opposite direction, it is customary to wave. This is usually done by extending your left arm out low and to the side. Now the thing I like about waving to another biker dude (or dude-ette) is that it makes you feel good and respected. The really neat thing is that for the most part it makes no difference what kind of bike you're on. For example, I ride a Harley, but guys on Honda's and sport bikes wave to me and I wave to them. It makes no difference. This doesn't happen in cars. When was the last time you waved to someone you didn't know, while driving in your car? (and I don't mean the one finger salute!) Motorcyclists are all brothers and sisters on the open road. So check us out, and if you don't have a motorcycle, look into it. Even with gas under 3 bucks, it's nice getting 45 mpg and feeling excited about being on the open road instead of dreading the commute.

Wednesday, October 6, 2010

Do you see what I see?

Driving can be frustrating. There is too much traffic, too many stoplights, and oh those inconsiderate drivers. Most people have been cut off a few times in their life. But have you really watched some of the drivers on the road? I mean, have you observed what they do while they're driving? As a motorcyclist, I have to be much more aware of other cars and trucks than you do. Because motorcycles are not seen as easily as other cars, we have to be much more defensive when we drive on the roads and highways. We are constantly scanning ahead of us to watch out for cars and trucks pulling out into a lane ahead of us, stopping to make a turn without signaling, or coming into our lane without notice. Sure we've all been passed by a sportbike going too fast or maybe even doing a wheelie, but most motorcyclists are very good and considerate drivers. After all, one mistake and it could mean our lives. There has been a lot of press and even new laws about driving and texting, but have you ever considered some of the other things people do while they're driving? Besides searching for a new radio station or putting in a new CD, I have seen people put on makeup, read a book or magazine propped on their steering wheel, and of course how many people eat while they drive? Cell phone use is big, too. When I see a car going slower than the rest of traffic and maybe even wandering in their lane, chances are it's someone on a cell phone driving, not a drunk driver. So now that the weather is nice, roll down the windows and try to imagine yourself riding a motorcycle. Smell the fresh air and try to see things from our perspective. We all share the road and we all want to reach our destination safely.

Monday, October 4, 2010

Sunday, October 3, 2010

Loud pipes

If you've ever been at a stoplight in the summertime with your window down, sitting by a motorcycle in the next lane, you've probably wondered why they are so loud. Now there are some sports cars and old jalopies that are loud too, but in general motorcycles are louder than cars. Well for one thing, motorcycle engines are exposed, not under a hood. But another reason is safety. Motorcycles are harder to see than cars or trucks, they have a smaller profile, taking up far less room in the driving lane. So if you can't see the motorcycle, maybe you can hear it. One of the most quoted statements at an accident scene involving a motorcycle is, "I didn't see it officer!". So while some motorcycles are louder than others depending on their size or style, the fact that motorcycles are louder than cars is a good thing. Now some local municipalities have ordinances against excessive noise, but most motorcycles, unless outfitted with after market pipes and accessories, will fall under these guidelines. I don't know about you, but I would rather pull up next to a motorcycle at a stoplight than a teenager with his stereo blasting any day! So look before you switch lanes. Check your rear-view and side mirrors and listen for a motorcycle. We're watching you too!

Saturday, October 2, 2010

Road King


I have decided to change the focus of my blog, and begin writing about motorcycles and things related to motorcycles. I have a 2000 Harley Davidson Electra Glide and enjoy riding. In fact, my motorcycle is my primary vehicle of choice as long as the weather is dry. I ride my bike to work as well as recreation, so I am not a weekend warrior as some others may be, not that there is anything wrong with that. So look for some thoughts on motorcycles, the people that own them, and what I experience on my rides.

Tuesday, September 28, 2010

Negotiation, friend or foe?

The thing most people don't like about buying a new car, is dealing with the salesman and negotiating on the final price of the car. Nobody wants to pay sticker price and the dealer does not want to lower his price more that he has to. Because of this, companies like (now defunct) Saturn came out with fixed pricing. That is, there is no negotiating on the price. Take it or leave it. But for some people, like me, that takes the fun out of it. Again, nobody wants to pay more than they have to for something. But what about when buying other goods or services? Most people assume that you cannot negotiate the price of goods and services at stores and other businesses, but that is not true. In most cases, all you have to do is ask. Most retail stores change their prices all the time when they have sales or promotions, so why couldn't they do it for you on a one-on-one basis? I have a real estate friend who tells me that he negotiates the price on almost everything he buys. Ironically, he admits that he rarely negotiates the fee that he charges for his house buying clients! Just this week, I tried this out by calling my cell phone carrier to discuss the monthly fee that they charge me. I asked if they would lower my bill and was told that they could drop it $10 per month! That's a savings of $120 per year with no change in service plan just for asking! Most people who have traveled abroad have come home with stories about haggling over the price of a souvenir and how much fun it was. But they are afraid to do it here. The worst that can happen is they say no and you pay what you were going to pay anyway. Don't be afraid to negotiate for things you normally would not consider, you just might be throwing away money you could be keeping in your pocket. Like the business man says, don't leave money on the table!

Wednesday, September 22, 2010

Wednesday, September 15, 2010

The case for silver

Gold is back in the news...again. It seems when ever the stock market turns bearish or pessimism hits other asset classes (like bonds), the gold bugs come out of the woodwork to toot their horns. And who would blame anyone for wanting to invest in gold these days? After all, it has been a wild and crazy year to be a stock picker. With all the trouble in Europe, to the oil spill in the gulf, and the now infamous "Flash Crash" in May, people young and old alike are shunning stocks for other, more predictable investments. Suddenly bonds, commodities and gold are all the rage. But let's look at an often overlooked investment that might be a better bet than all of the above...SILVER. Yes, while gold gets all the attention, silver has quietly put together a better year than gold. While gold has returned over 15% year to date, silver has netted over 21%. And for value investors, silver comes in at a much lower price. While gold has topped $1200 per ounce and seems to be headed for $1300, silver can be had for roughly $20 per oz. So even smaller investors can participate in the silver rally without having to fork over thousands of bucks. And here is another thing you may not have considered about silver. While gold has limited use outside of coins and jewelry, silver has many, many uses in technology and industry, which makes it an even more sought after item, something that is a good thing for investors. To be sure, neither gold nor silver pays dividends like stocks and bonds, so this may not be the best investment for those looking to replace their low interest CD's. But silver is certainly something to take a look at more closely if you are wanting diversification in your stock and bond portfolio, and something with a good track record with good prospects for the future. The easiest way to buy silver is by purchasing the exchange traded fund, iShares Silver Trust (ticker symbol SLV). This is very liquid and can be held in almost any brokerage account. Hi Ho Silver, away!

Wednesday, September 8, 2010

Which are you, growth or value?

This is a tough year to recommend purchasing stocks. After all, the stock market is down year to date, but more importantly to investors, it's become too volatile and unpredictable. While most people who look at historical returns know that there are periods of time when the stock market goes up (bull markets) and periods when they go down (bear markets), the swings have gotten more pronounced in recent years (think 2008) that it makes people just give up and throw in the towel. How many times have you heard that the stock market has gone down in the last 10 years, or you can't make money in stocks anymore? But does that mean all stocks are bad? Let's look at two examples of stocks, growth stocks and value stocks. For simplicity think of it this way: Growth stocks are stocks that have had growth, are appreciating, and should continue to grow. Translation, they're making money! Value stocks are stocks that have been beaten down in price. Stocks that are on sale. Stocks that should go up in value and they're a great deal now. Think all stocks have gone down in the past decade? Let's look at McDonald's (ticker symbol is MCD). This stock is up over 21% year to date and over 35% in the past year. In the past decade it's up over 159%. Yesterday, it just hit it's all time high in price, $75.98, and it even pays a dividend of almost 3%! McDonald's clearly knows how to make money in good and bad times, and has become the indisputable leader in fast food restaurants worldwide. Now, let's look at Motorola (ticker symbol is MOT). This company makes cell phones and has seen better days. The stock had a high water price of $26 per share back in 2006, and today trades at $7.83 per share. They had suffered market share due to the success of the Apple iPhone, but have recently climbed back into the fold with their popular Droid phone, sold by Verizon. In addition their shares are being snapped up by company insiders, which is a great buying signal for many, because if the company insiders are putting their own money into this stock, they must think it has a good chance for an upswing. This stock doesn't pay a dividend either, so it's definitely a stock for more aggressive investors, but hey, it's up over 15% in the past 6 months! So there you have it. Two stock ideas, one a growth stock and the other a value stock. One has a great track record, one is a little sketchy. One is pretty expensive, and one is pretty cheap. What kind of investor are you, growth or value? Where will you invest your money when banks are only paying 1-2%? You make the call.

Wednesday, September 1, 2010

The case for dividend stocks

The search is still on for people looking for income. As this crazy, super slow growth, economy trudges on and interest rates stay at record lows, more and more people are throwing in the towel at FDIC insured CD's and money market accounts. With yields generally less than 2% on CD's and less than 1% on money markets, these types of accounts don't pay enough to pay the bills for those that rely on the income they produce. While bonds are a good alternative for many conservative investors, the media is playing up the possibility of a bond bubble so much that some people might be scared off from purchasing these types of fixed income investments. This leaves dividend stocks as another possible solution for folks who are looking for higher yields. Obviously, people know that the stock market presents a higher level of risk, because your principle is not protected. But with that, the reward is higher yields and the possibility for growth as well. We're not talking about start up companies here. We're talking about well established, very mature, blue chip companies with long track records to back them up. Let's look at a few examples. McDonald's, the fast food restaurant (ticker symbol is MCD), pays a 3% dividend. This company is prospering very well in this low budget economy as people still need to eat and kids love chicken McNuggets. Besides the dividend, this company's stock is up 17% year to date! Not too shabby. Want more than a 3% dividend? How about Du Pont, the chemical company and major competitor to Monsanto (ticker symbol is DD). This stock pays a 4% dividend and has grown over 21% year to date! Looking for 6% income? How about Altria, you might know it better by it's former name, Philip Morris. This tobacco company stock pays a 6.35% dividend and has been one of the best stocks you could have owned in the past 40 or 50 years. This stock is up over 13% year to date. Get the point? Don't believe the hype about losing your shirt in the stock market. If you do your research, buy stocks of solid companies with good track records and who are involved in businesses you can understand, you can make some money. Low interest rates are going to be around for a long time. Is 2% going to get you where you need to go?

Wednesday, August 25, 2010

Wednesday, August 18, 2010

Buy Bonds! No, Don't Buy Bonds!

I read an online article yesterday that actually told people that they should buy bonds. Why is this unusual? Because most articles lately have been advising people not to buy bonds. Now who would do that? Do people who write these articles really care about your portfolio or are they just trying to make themselves look good if everything goes according to plan? Let's look at both sides of the argument. First, a little primer on bonds. If you own a bond and interest rates go up, the price of the bond will go down. But the coupon or interest you are receiving on the bond doesn't change. You will continue to get that until the bond matures. Oh and at maturity, you will get back the par value (generally $1000 per bond), so even if the price of your bond drops after you buy it, it will eventually come back to par when the bond matures. Still with me? So why do these writers keep telling people not to buy bonds? They are usually referring to bond funds when they write these articles. Mutual funds made up of bonds instead of stocks. So again, if interest rates rise, the value of the bond fund will go down. So the writers are trying to warn people, possible bond fund investors, that if they buy a bond fund now, and interest rates start to go back up, then you might lose money (on paper) in your bond fund. OK, so why should you buy bonds? The argument for buying bonds is this, bonds are generally considered a safer investment than buying stocks, meaning the probability for loss is generally less when you own bonds than when you own stocks. However, bonds do not have the upside potential that stocks do either. So bonds tend to be best for people who are looking for income, and people who are looking for better returns than one could get from buying CD's or money market instruments, yet do not want the possibility for the big losses that can come with stock ownership as seen in recent years. It boils down to this, if you want safety, don't buy stocks or bonds. Put your money in the bank in an FDIC insured CD or money market account. But if you are looking for interest rates higher than 2%, where are you going to get it? It may be 2 or 3 years before rates go back up and CD's are paying the 5 or 6% interest people want. On the other hand, if you want or need 4-6% interest, you can get it with bond ownership. You make the call.

Friday, August 13, 2010

Friday the 13th

Will today be another unlucky day in the stock market? Will the superstitious traders bring the markets down for a fourth day in a row? Follow me on Twitter @scottjwheeler or for those who don't know what this means, go to and read my tweets and retweets, as we track the stock market today.

Does Friday the 13th make you nervous? Have you had an unlucky circumstance happen to you on a previous Friday the 13th? Will you be taking extra precautions and avoid doing certain things today? What is it about this day that makes people act weird? Share your thoughts on this day in the comment section.

Did you notice that my Twitter handle has 13 letters?

Wednesday, August 11, 2010

Tuesday, August 10, 2010

How much can you risk?

These days are some of the toughest for conservative investors. Those folks who would rather know that their savings are principal protected are faced with less and less options on where to hold their money and get a rate of return they can rely on. For CD shoppers, the interest rates continue to hold in the 1-2% range for people who only want or need to keep their money tied up for less than 2 years or so. For people willing to go a little longer to get a better rate, they can try structured notes, bonds, or longer maturity CD's. I had a client yesterday who told me he was going to put some of his money into a 10 year CD paying 3.75%. I asked him what he would do if the interest rates came up before the end of his 10 year period and he said it would only be a 6 month interest rate penalty to pull out his money early. Times change. This is the same client who told me just last year that he didn't want to tie his money up too long because he was certain rates would start going back up soon. I told him he should consider a bond or bond fund which could get him 4-6% interest with a shorter time frame, but he said he didn't want to take the risk on having something that was not FDIC insured. So he was willing to lock in his money for a fixed rate of 3.75% for 10 years, just to have the peace of mind that his money was insured. Now to his credit, he has a sizable portfolio, and he doesn't need the income off this CD, so he can afford to take a lower rate for now. This is not the case for most people. People who need to live off the interest and dividend income that their investments produce are having to put more of their money at risk for loss, in order to get the higher return they need. For those who need or want an investment paying 4-6%, they need to look at bonds or bond funds, or even dividend paying stocks. For those worried about bond prices going down soon because of rising interest rates, this is a risk that probably won't present itself for another 2 to 3 years down the road. But this type of risk can be managed by utilizing shorter durations or more diversified portfolio construction. Dividend paying stocks will have some price fluctuation, but if you pick a blue chip company with a long track record of paying dividends, you'll be fine. The key is to ask yourself how much you want to make and how much risk are you willing to take to get it. Will your financial goals and objectives be met with a 1-3% return, or a 4-6% return? Need more than that? Let's talk!

Wednesday, August 4, 2010

Tuesday, August 3, 2010

How much are YOU saving?

I recently read an article about saving for retirement. The article gave some basic rules of thumb for people of various age groups. For example, it said that people in their 20's and 30's should be saving at least 10% of their income for retirement, and people in their 40's (my age group) and 50's should be saving at least 15% of their income. Most articles these days, that are about investing point out what types of investments that should be in one's portfolio. This year's market volatility and especially the stock market disaster year of 2008 pointed out (to most people's chagrin) that even when you have a well diversified portfolio, you can lose money in your account. The basic plan for diversifying one's portfolio is to have a proper mix of stocks, bonds, and cash for someone with your risk level (meaning are you aggressive or conservative or somewhere in between?). In recent years, people have further diversified their accounts by also adding real estate and commodities to the mix. But in 2008, all of these investment asset classes lost money (except US Treasuries, if you were lucky enough to get in early). So what to do? Put all your money in cash? Bury it in a coffee can in your backyard? For starters, make sure you're saving enough. The real key to having money to spend in retirement is to save money for retirement. The average U.S. citizen is saving less than 3%! At that rate, most people will not even keep up with inflation and cost of living increases. So yes, it's important to periodically rebalance your portfolio, but it's critical that you save more than the average. Do what it takes to save that extra 7-12% needed to get back on track for your retirement. Unless, you see yourself wearing a spiffy blue vest and telling people, "Welcome to Walmart!"

Wednesday, July 28, 2010

Monday, July 26, 2010

A guaranteed return

Now that the Fed has kept interest rates in the 0.00 to 0.25% range for the past 17 months, people are really not sure what to do with their money. Chairman Bernanke has stated several times that the Fed will continue to keep rates low for the foreseeable future, and this is not expected to change until problems with European economies improve and we see an improvement in the US unemployment picture. So what are investors doing now? There are a few things I am currently noticing people do with their money. CD shoppers are continuing to move money from one bank to another, based on whoever has the best rates, however, people are starting to go a little longer with their maturities to get a better rate. Most people aren't going much more than two years out due to their continued belief that someday soon, the Fed will change course and raise rates. Of course, many experts don't believe rates will go up now until late 2011 or possibly even, sometime in 2012. This poses a problem for people needing income off their CD's. Many people are getting fed up with rates in the 1-2% range and are starting to look for other options. Fixed annuity rates aren't any better than CD's and with people being more focused on the short term, this doesn't bode well for annuities. While some might look to dividend paying stocks for income, the stock market volatility has scared a lot of people away from this option for fear of losing principle. More are now looking to bonds as the safer way to go for higher yield, but concerns of default risk and price movement when and if rates do suddenly rise, are still weighing on people's minds. However, for people who need higher income, rates in the 4-6% range sure sound a lot better than 1-2%, so taking on a little more risk could be warranted for some. Lifetime income riders on variable annuities offer some interesting choices for people who are looking for a way to take income from their portfolios without the fear of outliving your principal. Take the time to be educated on these options before you say no. One last trend I am seeing more of is this, people are deciding that since they can't make anything on their money, they can just spend it, or pay down their debt. While the first option could be shortsighted, the second is gaining popularity as people realize that paying off debt is basically the same as getting a guaranteed return on your money. If you pay off a credit card charging you 8-12% in annual finance charges, you are realizing an 8-12% guaranteed return on your money. I even have had two clients who recently withdrew money from their savings to pay off their mortgages! They realized that the peace of mind that comes with being debt free is worth it's weight in gold!

Wednesday, July 21, 2010

Wordless Wednesday

Christine McVie of Fleetwood Mac

Friday, July 16, 2010

Don't stop thinking about tomorrow

"Don't stop, thinking about tomorrow,
Don't stop, it'll soon be here,
It'll be, better than before,
Yesterdays gone, yesterdays gone."

These lyrics, by Christine McVie of Fleetwood Mac, are not just for those who may long for the Clinton years. They are a good motive for today's investors to not give up on saving for retirement. It will be here sooner than you think, too! My recent time on Facebook has been a reminder of just how fast time can go by. I have been reconnecting with high school friends that I have not seen in over 28 years! For those of you who have given up on the stock market because of the recent volatility over the past year, my question is: what are you doing about your retirement savings? Just because your 401k has lost 10-50% of it's value and your employer is no longer matching a portion of your contributions is no reason to stop saving altogether. If anything, you may now need to save more! Social Security will only amount to perhaps 30% or less of what you will need to live on when and if you do actually retire (future blog). 401k and IRA savings plans are tax deductible, and if set up properly, are on automatic pilot. This means that you do not have to write a check to any financial institution to get your money to them. If you save automatically from your payroll or checking account, you will save more. Why? Because you are paying yourself first. When you pay yourself first, you are making sure that you are saving, instead of getting to the end of the month after the bills are (hopefully) paid, and realizing that you don't have any money left to save. So don't stop saving because you have lost money in the stock market, maybe you need to revisit your tolerance for risk. Saving for your future retirement is more important than ever, now that people are living longer and healthier lives. Oh great! Now I can't get that song out of my head!

Wednesday, July 14, 2010

Tuesday, July 13, 2010

Who's to blame?

I had to have a difficult conversation with a participant in my client's 401(k) plan the other day. He came to me wanting to withdraw some money from his retirement plan to help pay for some bills that he was behind on. I explained to him that he could not just decide to withdraw money from this type of an account just because he was behind on some bills. He said to me, "well it's my money isn't it?" I said, yes it was, but it was for his retirement, not an emergency savings account, and the rules of the plan do not allow for withdrawals or loans unless you have a true financial hardship. What plan administrators consider a financial hardship are things like paying for medical bills not covered by your insurance, college expenses for a family member, funeral expenses for a family member, a new home purchase, or the real help prevent a bank from foreclosing on your home. He had none of these situations. In fact, he already had a loan out from a previous home purchase a year or two earlier. His problem, as he described it, was that he was one or two months behind in bills, including his electric bill, behind on his truck payment, and he didn't want to get in further trouble. He was in a catch-22 that more and more people are finding themselves in today. Growing financial burdens due in part by not saving for a rainy day. Now for this person, it's pouring! To be sure, some of his problems are not entirely his own. He is a mechanic and his income has gone down due to the current economic cycle we are in, because he has less work these days. He gets paid for fixing cars and when he has less customers, he makes less money. I told him that the only thing he could do was stop making contributions to his 401(k) plan until his income and debt situation improved. I'm already doing that he said. Well, you will have to find other ways to save money by cutting expenses I said. By now he was beginning to get agitated and exclaimed that nobody cares, nobody wants to help him, and it's not his fault! I told him that I was sorry for his predicament but there wasn't much I could do for him. I did feel sorry for him, but as he left the room I thought to myself, why didn't he have an emergency savings account? Why didn't he set more money aside when business was good? Why did he buy a new truck instead of a used one? How much money does he spend on non-essentials? Does he have cable TV? How much does he spend a month on his cell phone bill? How much does he spend on cigarettes? The effects of the slow economy is hitting home for many people these days and they can't just wait for the government to bail them out. People have to take responsibility for their actions and/or inactions. You really can't blame anyone but yourself for poor planning. Like one comedian likes to say, you can't fix stupid!

Wednesday, July 7, 2010

Monday, July 5, 2010

Another silver lining

Most people have heard the term "a silver lining" at least once in their lives (probably many times for most). It is usually meant to sooth people during a time of difficulty, by letting them know that there is something comforting or beneficial that can be derived or learned even when something bad happens. The phrase was first coined by John Milton in his 1634 classic poem "Comus", when he said, "Was I deceiv'd, or did a sable cloud Turn forth her silver lining on the night?". Apparently it was picked up by the local media of the day and has been passed on as a proverb ever since. Even today, people are wary about the apparent mixed messages that they seem to be getting these days from the media. On one hand we hear that we are still in the aftermath of a global recession, which is obvious from the stock market declines and global financial mess that we find ourselves in as we enter the 2nd half of 2010. On the other hand, we are told that the overall economy is improving, and job losses are fewer. The worst is behind us. It is a great time to buy stocks and just about any big ticket item, from TV's to cars, to new homes, because of the opportunities left behind from the downturn of our current economic cycle. So are we to save and conserve and hoard our resources, or are we to spend and invest and spread our wealth? The answer is, each person must make their own decision. The problem with magazine articles, newspaper columns and TV interviews with so-called "experts", is that the advice that they give does not and can not apply to everyone. Some people have had a bad year, they lost their jobs or had their hours cut; but others have seen business improve and have had record sales! The silver lining in all this is that many people are taking a serious look at how they do spend their money, and are cutting back on unnecessary expenditures. They are evaluating their needs from their wants and making adjustments. Some people are saving and investing more, most are spending less. These are both good things and healthy habits. Sometimes it takes difficult circumstances to force someone to take a hard look at their future prospects and make adjustments that are needed to ensure the possibility of your goals to be attained. Don't give up whatever you do! We have to make long term decisions in a short term world. Life is a marathon, not a sprint. Remember, the turtle won the race, not the hare.

Wednesday, June 30, 2010

Tuesday, June 29, 2010

Take a tactical approach

If investors have learned anything since the beginning of 2008, it's that buy and hold doesn't seem to work anymore. And even if you think a buy and hold strategy isn't dead, it's just too hard for most people to handle. With the extreme volatility in the stock market today, as noted especially by the markets this year, the average investor must take a new approach. Let's look at the performance of a popular index, the S&P 500. Year to date, if you had money invested in funds that track the S&P 500, such as the SPY, you would be down 3.51%. Over the past 3 years, you would be down a whopping 28.52%. However, in the past year, due mainly to the incredible returns of 2009, you would be up 16%! Wow, that is some roller coaster ride. So what's a better option? Instead of buy and hold, more people are looking at taking a tactical approach to investing. This means being more hands on, making changes to your portfolio, when appropriate, to react to the ever changing conditions of the stock and bond markets. While taking a more active approach to managing your portfolio sounds like more work, and it is, it can help you keep more of your hard earned money in your account. After all, the point of investing is to make money, not lose money. And making up for big losses is much harder than making up for small ones. While the buy and hold index investor is down 3.51% year to date, the active, tactical investor could be up over 4%. That's a difference of over 7.5%! Over the past 3 years, you might be up over 10% instead of being down over 25%. Now you're talking about a 35% difference. So do your homework and talk to your financial advisor about taking a tactical approach to investing, you'll find the ride a little smoother, with less bumps along the way!

Wednesday, June 23, 2010

Fools Gold?

One of the biggest asset classes in the news lately has got to be gold. As the Euro continues to weaken, gold has surged in price over the last several weeks to all time highs in price. Last Friday's close had gold priced at a never before seen value of $1258/oz. Year to date, gold is up over 13% and has gained over 87% in value in the past 3 years. So is it too late to buy gold? Some pundits expect gold to continue to climb to $1500, and some even predict $2000 in the not to distant future. Of course, like anything else, it all depends on your goals and objectives. Are you in it for the long haul or just for a short term play? If the US Dollar strengthens from actions from the Fed or Treasury Dept. moves, then the price of gold may come down a bit. But as long as interest rates stay low and the stock market continues to be extremely volatile, these predictions could play out. Just remember, had you bought gold in the early 80's at the going price of $800 per oz., you would have watched it go down below $300 before it came back up to today's values. Also, adjusted for inflation, the price of gold would have to hit $2400/oz. to really be at an all time high in terms of purchasing power. If you still want to get in on a piece of the action, the easiest way to play is by buying the Gold Trust ETF, "GLD" or the Market Vectors Gold Miners ETF, "GDX". You can hold it in your brokerage account and not worry about the cost of storage fees and safety issues that gold bars and coins entail. Think gold is too expensive? Try silver. It usually follows the path of gold, and is a fraction of the cost. The Silver Trust ETF, "SLV" can be had for $18.42/share at yesterday's close, and silver has actually outperformed gold the past 12 months. It's up over 35%! Happy mining!

Wednesday, June 16, 2010

Tuesday, June 15, 2010

Stocks vs the stock market

When people say that you can't make money in the stock market, it usually means that they lost money in the stock market themselves or they think the stock market is too risky for them to be in. There is a big difference between investing in the stock market through a mutual fund or ETF and buying an individual stock. Let's take a look at a few examples. If you bought the popular ETF (exchange traded fund), S&P 500 "SPY", you would be up a little over 15% from one year ago. But in the past 3 months you would be down about 6.5%. However, if you bought shares of Apple stock, "AAPL", you would be up over 85% from a year ago, and up nearly 13.5% in just the past 3 months. By comparison, AT&T stock, "T", is up only 0.64% in the past 12 months, and is down 2.82% in the past 3 months. That doesn't mean you didn't make money with AT&T however, because AT&T pays a 6.67% dividend. Apple does not pay dividends. So for people looking for income in a world where bank CD's pays 1-2% interest currently, AT&T might be a nice place to make some quarterly income. In fact many savvy seniors have shares of this stock just for that reason. But if you're looking for growth, Apple may be a better bet for you. When looking at stocks, you generally need to have a longer time horizon to overcome market volatility and short term price swings. But if you stick with it, buy more shares when the markets correct, and have realistic expectations, you can come out ahead of CD's by a long shot. Don't listen to your neighbor, do your homework and talk to people who can help you with your investments. It's your money!

Friday, June 11, 2010

Fund Friday

After last week's stock sell off, how are investors doing? Is it time to get out of the market again? Time to throw more money in? The recent stock market volatility over the past couple of months have made most investors very nervous about being in the markets. Problems in Europe, Korea, and the Gulf of Mexico has forced many people to the sidelines. Mutual Fund investors participate in the market indirectly depending on what kind of a fund they own. Stock funds are professionally managed portfolios run by investment teams that try to beat a stock market benchmark like the S&P 500 index. An actively managed fund will try to add value to an investor's portfolio by successfully outperforming the indexes with the right mix of buys and sells. Some do have a higher turnover rate than others which can account for the differences in expense ratios. A long lasting debate is whether actively managed funds can beat the indexes over time, to make up for their higher costs, especially for funds that charge sales loads or commissions when sold through brokers. Index fund advocates say it can't be done, but active management proponents beg to differ. What is your preference? Do you own mutual funds? If so, which ones and why?

Friday, June 4, 2010

Stop orders

Back in the bull market of the late 1990's, many people saw the prices of their stock go up almost exponentially to heights never imagined. Rather than sell at the highs, some thought that stocks would continue to advance. Those that did not see the internet bubble coming and sell out in time, saw their stock position tumble back to earth. In effect, they lost all or most of their gains because they did not sell in time. What could they have done differently? Lock in gains! Let's say you bought shares of stock ABC at $10/share and watched it climb to $20. Rather than hope that it continues to climb higher, you can put in a stop-loss order to sell your shares if the prices drops below $15/share. If the stock climbs to $25, then change your stop-loss order to $20. But if the stock falls from $20 to $15, your sell order will kick in and you will sell out around $15 and book a 50% profit. If you still like the stock, buy it again later. But don't be in a position where you kick yourself for not selling at $20 or $15, when the stock drops down to $8. Don't be greedy! When you buy a stock, have a price in mind that you would like to get out at, and stick with it. You can also use stop-loss orders to limit your losses when you first buy into a new stock position. If you book profits and limit your losses, you will make money in the long run. You can always make adjustments to your plan, but you need to have a plan in the first place.

Wednesday, June 2, 2010

Monday, May 31, 2010

Memorial Day

Happy Memorial Day! Thanks to all those servicemen and women who have died to keep this country free! For some information on the history of Memorial Day, check out:

Thursday, May 27, 2010

Searching for yield

Investors and savers searching for income are starting to squirm. As CD rates continue to drop, those who have maturing CD's have a difficult decision to make. Do I reinvest my 5% CD into a 1-2% CD or take my chances in the stock market by buying a stock with a nice dividend? One option many people forget about is bonds. Bonds come in many varieties, Government bonds, Corporate bonds, and Municipal bonds, to name a few. Many people shy away from bonds mainly because they don't understand how they work. One perception is that they have a very long holding period, like 20 or 30 years. While its true that some bonds when first issued, can have a 30 year maturity, bonds can be purchased in the secondary market with maturities of a year or two. So if you're worried about inflation and interest rates rising again soon, you can buy a bond with a short time horizon. Another mistake is thinking that you will lose money buying a bond. Well, you can lose money buying anything. That's the risk of investing. But the way most people lose money with bonds is because they sell them for less than they paid for them, just like stocks. On the other hand, if you find a bond and buy it at a discount, you will make money if you hold it to maturity. In addition, you will collect some nice interest payments, called coupons, along the way. The other way you can lose money with bonds, is if they default. That is why you need to make sure to buy high quality, or investment grade bonds. These days, investment grade, corporate bonds can be found on the secondary market that are maturing in less than 5 years, that are paying over 5% and can be purchased at a discount. Government bonds, while safer, are not paying anymore than CD's, and municipal bonds are much harder to find at a discount. Most are now selling at a high premium, making them less desirable. So if you need income, and can't stomach the paltry rates that bank CD's are paying, buy bonds! They're not as scary as you think!

Wednesday, May 26, 2010

Friday, May 21, 2010

Time to buy gold (again)?

Now that gold has passed through the $1200 per oz barrier, people are talking about gold again. Should I buy gold, should I sell gold? Like any other investment, it all depends. The main reason people buy gold is as a hedge against inflation. Right now, inflation is still not a problem. So why has the price of gold jumped up lately? Well, the Euro is very weak right now and there has been tremendous volatility in the stock markets due to the problems in Europe, particularly Greece, Portugal, and Spain. Not too mention the so called "Flash Crash" that we had on May 6th. In addition, many people feel stocks had run up too fast and were due for a correction anyway. All this has people all over the world worried, and when doom and gloom prevails people buy gold. Like anything else, if everyone wants something that is in limited supply, the price is naturally going to go up. So some people are buying gold as a diversification tool in their portfolios. Not a bad idea, just don't go overboard. Here are a few key things to remember about gold as an investment. It doesn't pay income or dividends. Gold is strictly a capital appreciation play. What form are you going to buy it in? You can buy gold funds or ETF's which can be held in your investment portfolio, but if you buy gold coins or bars, you have to consider the storage costs and safety issues. Items placed in your safe deposit box at the local bank are not FDIC insured. So what are the alternatives? Many experts believe commodities in general, not just gold, are still in a bull market and have room for advancement. While we may not see inflationary pressures on interest rates anytime soon, the prices of commodities may continue to rise for a while. Silver, while similar to gold, is much cheaper than gold and has many other uses to people and industry than does gold. So what to do? Keep your options open, and if you do buy gold, don't go crazy. Most experts recommend 5 to 10% of your portfolio tops.

Wednesday, May 19, 2010

Tuesday, May 18, 2010

So you want a CD

One strategy for CD buyers looking for higher yielding CD's is to buy CDs that mature farther into the future. That is, instead of buying a one year CD, buy a 3 year or 5 year CD. You may be surprised to know that CD's can have maturities up to 20 years out! Currently, many CD shoppers are buying one year CD's or less, because they are worried that interest rates will go up next year. But what if they don't? The Fed has not changed rates since December 2008, and they haven't given any indication that they will raise rates anytime soon. The risk in CD's is that you don't know what the rates will be in the future. So what's a better approach? Build a CD ladder with CD's that mature in staggered maturities. Many people want their CD's to mature each year so they can access cash for planned purchases or emergencies without penalty. If you build a CD ladder, you will have money available each year to spend or reinvest. So how do you do it? Buy a 1, 2, 3, and even a 4 year, and 5 year CD to begin. As each CD matures, you buy another 5 year CD which will go on the back end of your ladder. After 4 years, you will own nothing but 5 year CD's, but you will have a CD maturing each year, so you can take advantage of available cash, or buy another 5 year CD. Remember, 5 year CD's will always pay more than 1 or 2 year CD's, and if rates start to go back up, they will go up for all CD's not just the shorter ones. So if you are going to buy CD's, do yourself a favor and buy smart, build a CD ladder. For more aggressive investors, the same thing can be done with bonds.

Wednesday, May 12, 2010

Tuesday, May 11, 2010

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. 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 current 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 58,000 miles on it. Should be good for a while longer!

Friday, May 7, 2010

Bumper Guards

Yesterday's wild stock market activity just reinforces the reason why so many people do not invest in stocks. The fear of loss is much greater than the prospect of gains in your account. While most people would love to book 10% gains in their portfolio, they are deathly afraid of a day like yesterday or a year like 2008. But what if you could invest in stocks knowing that your principal was protected? Even better, what if this investment was FDIC insured? So you could reap the benefits of stock market appreciation without the downside risk of loss. Not possible? Doesn't exist? Think again. A relatively new type of investments called "Structured Notes" are now available to retail investors. The most popular kind right now are ones called Annual Income Opportunity CD's. These are like CD's on steroids! Basically you have a CD that is linked to a basket of 10 stocks. Each year the CD's pays interest based on the average return of the basket of 10 stocks. So if the stocks averaged 8%, you would be paid 8% interest. Cash! If the stocks went negative, you would get nothing. But you would not lose anything either. If your CD is held to maturity in 5 years, your principal is returned, guaranteed! Now, the returns are capped, typically in a range of 8-13% on the high side, so last year, if your basket averaged 27% and your cap was set at 12%, you would have received a 12% payment. It's kind of like going bowling with those bumper guards they put up for kids so they can't get a gutter ball. They probably won't get a strike, but they sure won't get a gutter ball! Ask your financial advisor if he or she sells structured notes. If they don't, well, you make the call...

Tuesday, May 4, 2010

Book it Dano

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 32% in the S&P 500 over the past 12 months, most stock watchers would suggest that it may be time for a pull back. While most people have not recovered their losses from 2008, the recovery since March of 2009 has been a welcome surprise to those who were overly pessimistic and were predicting the Dow Jones to go down to 5000 (it's around 11,000 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 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.

Friday, April 30, 2010

Think Long Term

The problem a lot of people have with investing is, they focus on short term performance. This is not entirely their fault. Newspapers publish stock and mutual fund performance daily. Magazines report monthly, quarterly and annual results. While these measurements are interesting, they don't tell the full story. How did your stock, mutual fund, or ETF perform over the past 3, 5, and 10 year periods? Do they perform in good and bad markets? How do they compare with their peers? These are some good questions to ask before you buy (or sell) your investment. This brings up another problem for investors. What is the time frame for your investments? Is it just one year? Most likely not. Most people are investing for 10, 20, or 30 years down the road. Even retirees should have some money in the market. The average 65 year old has a very good chance to live to age 85 or longer. That's 20+ years! Twenty years is a long time to be in CD's earning 1-3% which barely keeps up with inflation, and when taxes are factored in, CD's barely make money at all. If you have enough money to live off the income your CD's generate then that's great, don't take the extra risk. But most people need more growth than that. Sure, stocks and mutual funds have risks, but with risk comes reward. The trick is finding the balance!

Wednesday, April 28, 2010

Tuesday, April 27, 2010

Don't Believe the Hype!

If history has taught us anything, it's that the stock market goes up and it goes down. Over time, it tends to go up more than it goes down. There is never a straight line in either direction. Some people speculate that the recent advance was too fast and we're due for a correction. Others think that traders are just booking their profits over the last 3 months. Still others think that the recent announcements of regulatory changes in the industry is causing a black cloud to form over Wall Street. It's probably a mixture of all three. There are too many variables that influence the stock markets for any one theory to predict correctly. That is both the fun and frustration about investing. So what's a person to do? A few rules of thumb:

  • The best time to buy is when you have the money.
  • Buy on a regular basis. When the market is up you'll buy less, and when it's down you'll buy more.
  • Diversify your portfolio with different asset classes. Besides stocks, you need bonds, cash, real estate, commodities, and even gold or silver.
  • Rebalance or adjust your portfolio regularly. You need to have a more tactical approach these days.
  • If you need help, hire a coach. Talk to a financial advisor you trust. You need a customized plan for your situation, not a cookie cutter strategy you found in a book or magazine.
Don't give up! Investing is a marathon race, not a sprint. You need to consider your time frame, goals, and objectives. What is right for someone else, may not be right for you. For most people, the biggest lesson from this past couple of years was that you need to save more and spend less. There are positive things happening in the world, don't focus on the negative. Turn off CNBC and talk radio and think positive!

Friday, April 23, 2010

Bond myths

For people who have become disillusioned by the stock market but still can't see the value in putting all of your money in low yielding CD's, bonds could be a nice compromise. Let me dispel a few myths about buying bonds. A lot of people think that you have to have a lot of money to buy bonds. This is not true. Bonds are sold in increments of $1000. Now while it is not practical to buy one bond, you don't need to pony up $50,000 or $100,000 to get in the game either. Ask your broker to find you some odd lots. These are small baskets of bonds sold on the secondary market in weird or odd increments, like 8 or 13. Someone who needed to sell their bonds prematurely, sold them back to their broker, who in turn placed them in inventory. Since most big players don't want odd lots, they typically sell at a deeper discount, so you can get a good buy if you find some available. Another common myth is that you have to own bonds for 20 or 30 years. While bonds are typically sold in the primary market with 15, 20, or even 30 year maturities, you can find bonds in the secondary market that mature in 5 years, 3 or even next year. Remember, the bond market is huge, way bigger than the stock market. Ask your broker to search for the time frame you need. One strategy is to set up a bond ladder. It works like this: Buy a portfolio of bonds with staggered maturity dates. Some that mature in 3 years, some in 4, some in 5, and so on. That way, you will have money come available in each time period that you can use for something else or reinvest in new bonds. Then you won't be in a position to have to sell something at a loss in case of an emergency. Most brokers don't deal in bonds that much, that's why they peddle stocks and mutual funds, but if you find a broker that knows about bonds, he can make you some money without the downside risk of the stock market.

Wednesday, April 21, 2010

Tuesday, April 20, 2010

The Best of Thoughts from Scott

Today's blog post is a "Best of" piece from March 29, 2009. I thought it was still appropriate, as are many articles which discuss the virtues of saving money by spending it wisely. It's called, Don't Buy Stuff You Can't Afford, a title I got from an SNL skit. So if you're seeing this for the second time, I hope you'll enjoy it as much as the first: Enjoy!

Friday, April 16, 2010

Stocks, bonds, or mutual funds?

If you do much browsing of financial websites and investment magazines, you'll quickly notice a trend. There are scores of articles touting the "best stocks to buy now" or "must have mutual funds". Some even discuss the virtues of investing in bonds or some other fixed income investment. The trouble with these articles is that the author does not know anything about you or your situation. What might be good advice for one person, may be completely wrong for you. These authors don't know how much money you have already invested in stocks, bonds, or mutual funds. They don't know if you are a conservative investor or an aggressive one. They don't know if you are looking for income or are mainly interesting in accumulating assets. They don't know how long you have been investing or what your income and net worth is. They don't know your goals and objectives for your investments. These are all important questions that need to be answered before recommending which stocks, bonds, or mutual funds are the best for you. Maybe it's none of the above! So while these articles can be insightful and entertaining, they just cannot take the place of a face to face meeting between yourself and a competent financial advisor. Do yourself a favor, go find one!

Wednesday, April 14, 2010

Tuesday, April 13, 2010

Bloggers Bug

As a member of the new Bloggers Bug website, the best website for bloggers and people who like to read blogs, I am linking today's blog to a new post I wrote for that site. I decided to take a day off from writing about financial matters and expound on the virtues of a man known in St. Louis as El Hombre. Others might know him by his given name, Albert Pujols:

Enjoy the moment St. Louis Cardinals fans!

Wednesday, April 7, 2010

How much to save?

If the recent economic recession and stock market crash of 2008 has taught Americans anything, it's that you can't count on your house or your investment portfolio to make money for you all the time. The lesson? You need to save some money! In 1975, the personal savings rate for Americans hit a high of 14.6%. As recently as 2008, the savings rate dropped below 1%, but has since climbed to around 4%. Why have personal savings rates dropped? Two main reasons. Number one: easy credit. Before most Americans had credit cards, people had to save before they bought something. That's right, it was customary to pay cash for just about everything, even cars! Now that most people can qualify for a credit card, people have learned not to save because they can buy on credit and pay off over time. The second reason people stopped saving as much is due to something called the "wealth effect". When stock and mutual fund portfolios soared in the late 90's and home prices spiked in the period from 2000 to 2006, this created a lot of money for the people who were either shrewd enough or lucky enough to sell at the right time and realize their profits. People basically said to themselves why should I save 10% of my income when I can make 30% in the stock market or 100% in real estate over a 5 year period! But as home prices declined after 2006 and the stock market crashed 37% in 2008, suddenly this line of thinking was flawed. Prudent financial advisors will tell you that you need to put away at least 10% of your gross income into some kind of savings vehicle. For those that lost a lot or never got in the habit of saving, they might need to sock away 15-20% to make retirement feasible. Depending on your income level and desired lifestyle during your retirement years, coupled with the fact that people live longer nowadays, you might need $1-2 million in the bank by the time you retire. So stop buying those afternoon lattes and skip the sales at the shoe stores, you need to look at where you are spending your money and start saving more of that green!

Friday, April 2, 2010

Dow 11,000

The Dow Jones Industrial Average (DJIA), or The Dow, is now within 73 points of breaking through 11,000. What does this mean? It actually doesn't mean anything other than it's a nice round number and it's a psychological barrier for many. Of course it's not as exciting climbing back through 10,000 and now hopefully 11,000 because we've been there before. At least once again, we are moving in the right direction. I had a client call me the other day asking if we were due for a correction. Well, nobody knows. There is no formula that says if the Dow goes up this much, in this amount of time, then it must go down. No, the stock market does what the stock market wants to do. No one is in control of it. The market will confound, perplex, frustrate, excite, and fool you every time. But the market is efficient and an effective barometer on what is happening with the stocks of companies that are represented by the index. So go ahead, watch The Dow, map it, chart it, look at the trends, do whatever you want to do, but know this, you can not accurately predict what the market will do, anymore than you can tame a wild mustang horse and make it your pet.

Wednesday, March 31, 2010

Friday, March 26, 2010

$250,000 for health care

Shortly before the new Healthcare Reform Bill was signed into law by President Obama, a study was done to determine how much money retirees might need for health care expenses while in retirement. The answer: $250,000! That assumes an average couple in average health who live to be 82 for the male and 85 for the female.

That is just for medical expenses alone, you know, doctor visits, prescription drugs, lab expenses, etc. So what would this couple need for the rest of their expenses? Food, shelter, utilities, transportation, entertainment and so on. If might take somewhere between $1 million and $2 million depending on your lifestyle needs and wants. Consider this: if the couple above ate dinner at home 6 days a week at an average cost of just $7 per meal and went out for dinner one day a week at an average cost of $40, over 20 years that would cost them more than $187,000! That's just for food and that doesn't even take into account inflation. So take a look at your 401k balance and you might want to think about calling HR to increase your contributions!

Wednesday, March 24, 2010

Tuesday, March 23, 2010

Health Care Reform

Once President Obama signs the new Health Care Reform bill today, new rules governing health insurance will become law. As an insurance agent who sells health insurance, it will be interesting to me to see how the insurance companies will react to some of the mandated changes that will go into effect. Some go into effect right away, while others do not happen until 2014. Children with pre-existing health conditions are to be covered right away (or at least within 30 days). This would seem to me to have an effect on premiums. While it will be good for the children who do not have health insurance now, will their parents be able to afford the premiums? Erasing the lifetime maximums on health insurance benefits will also drive premiums higher in the long run. The only thing that would seem to help spread the risk is the fact that now (beginning in 2014) everyone will be required to have health insurance. This means that healthy people who choose not to carry health insurance (either because they feel they don't need it or because they can't afford it) will have to sign up for coverage or pay a penalty. Sure some families will get government subsidies to help pay for the cost of their health insurance, but with so many people without jobs or with low paying jobs, will they still be able to afford it? I think some will choose to pay the penalty instead. As President Obama said yesterday, "this is what change looks like".

Thursday, March 18, 2010

NCAA Thursday

So today is the beginning of the NCAA tournament. Millions of people have completed their brackets to pick who they think (or hope) will make it to the Final Four. Millions of dollars will be bet on the outcome of these games. Millions of dollars will be distributed to the participating colleges. Millions of dollars will be spent on advertising. Millions of dollars will be spent on tickets, airfare, hotels, restaurants, and merchandise. Millions of dollars will be going into the local economies of the lucky cities that are hosting these games, especially the ones that get to host the regional finals, and the Final Four! College football officials should take a took at what happens every year during what everyone knows is March Madness. This is college sports at it's finest. No other college sport generates this kind of excitement, this kind of following, this kind of revenue. So bring it on CBS. I'm ready! I'm ready to win my $1 million that Yahoo Sports is giving away to the person that correctly picks all the winners. Heck, I'll just take the $10 grand for having the best bracket in the USA. OK, where's my remote?