Recently a number of clients have expressed an interest in hiring a financial planner to provide a roadmap toward retiring or saving money toward a child’s college education. They asked me what they should look for when hiring such an individual. Here is my advice. (more…)

“Let’s call out names, names, I hate you more

Let’s call out names, names, for sure”

Blame Game by Kayne West

If it wasn’t such a national embarrassment, the finger pointing going on among our so-called leaders would be comical. Nonetheless, it is March 1 and time is up. Bring on the Sequester.

Our congressional leaders made a big show today at the White House Sequestration meeting. It was their first such meeting on the subject to date.  I considered it a photo op at best. This week, rather than attempt a compromise, both Democrats and Republicans spent their time blaming each other for the Sequester.

From the GOP point of view, it is “the president’s sequester” while the president is blaming the cuts on the Republican’s failure to act responsibly. Since it was the Budget Control Act of 2011that first authorized the Sequester, (if the bi-partisan “Super committee” couldn’t come up with a compromise solution to reducing the deficit), let’s look at how the final vote panned out.

One hundred and seventy-four Republicans voted for the measure but only ninety-five Democrats. The final tally was 269 to 161 with just about all of today’s GOP leadership voting yes. These are the same characters who now claim it was Obama’s fault. All of this name calling is a smokescreen to hide an even more important deadline that occurs at the end of March.

On March 27, Congress will need to pass a “continuing resolution” (read short-term spending plan) or funding for the Federal government will expire. Yes, my long-suffering readers, without a deal between the two parties the government shuts down.  Continuing resolutions are stop gap measures that keep the lights on in Washington, absent a formal budget. We haven’t had one of those in years because of political partisanship.

The threat of a shutdown actually will force congress to act since, unlike the more subtle and slower paced sequester cuts, a total shut down of the government would be highly visible and extremely disruptive. It would not be pretty. Either congress will agree to keep the sequester cuts as is or it will have to come up with an alternative set of revenue increases and spending cuts.

In the meantime, both parties will have had almost a month of dealing with irate airline passengers, defense contractors, various agency heads, parents of Head Start children and the like.  So this week’s failure to compromise is simply setting the stage for a bigger cliff hanger, much more drama, and, I suspect, heightened volatility in the stock market.

Readers may have noticed that over the last two weeks volatility has escalated among the averages. We will most likely see more one percent up and down days as March unfolds. Washington seems to be providing the justification for the pullback I have been expecting. So with headwinds strengthening, one wonders just how long the markets will be able to shrug them off. But let me be clear: I don’t expect a market route, simply a nice pullback that stocks sorely need in order to advance further this year.

Chiropractors are seeing more patients than ever and that trend is expected to continue as Baby Boomers grow older. The popularity of alternative medicines and Americans newly-found caution towards pain killers only increase the demand. But the real question is can the industry get paid for it? (more…)

Will Washington cut spending?

Here we are less than two weeks from the March 1 deadline implementing $1.2 trillion in automatic spending cuts and suddenly investors are getting concerned.  How convenient is that? (more…)

I don't want to go to college

If you think a 7.8% unemployment rate in this country is terrible, ask an unemployed 18-year-old how their job search is going. (more…)

When was the last time anyone seriously considered a choice like that? Over the last fifty years, most Americans considered a college education as the only ticket to their slice of the American dream. The high cost of that education, coupled with declining incomes and fewer openings for today’s college grads make me wonder if there isn’t a better way forward for a large portion of our work force. (more…)

Markets continue to grind higher with several averages, like the small and mid-cap indexes, hitting record highs.   What little profit-taking occurs is met by buyers anxious to get into the market. I suspect this stage will continue for a bit longer. (more…)

On the eve of what is supposed to be one whopping big snow storm here in the Northeast, one can only wonder if Mother Nature is preparing us for yet another horrendous weather year. Last year was one of the costliest on record. (more…)

Over the last three weeks or so the averages have been hovering around the same levels. That’s made it tough for the talking heads and the rest of the financial media to hold your attention. I’m hoping for more of the same. (more…)

On the technical front, more and more indicators are flashing warning signs. The markets look extended and investor sentiment points to extreme bullishness. Those are usually signals that we are due for a sell off.

That does not mean that the markets won’t go higher but the higher the averages climb without a pullback, the sharper the decline will be when it does occur. Remember too that pullbacks are good for the markets. Two steps forward and one step back is the rhythm of just about everything and the markets are simply a reflection of that fact of life. We have had a good run over the last few weeks and the averages are close to historic highs for good reasons.

The traditional Christmas rally was postponed last year because of concerns over the Fiscal Cliff. Prior to that, in November, some investors vented their disappointment over the re-election of President Obama by selling the market. They were convinced that without Mitt Romney the world would come to an end.

As a result, since the beginning of the year, many investors have been playing catch-up. As predicted, once the Cassandras had been proven wrong on tax hikes, spending cuts, the growth of the economy, the debt limit and whatever else they were fretting about, the bears have been making up for lost time and have been throwing money at stocks hand over fist.

As I explained last week, we may also be seeing the beginnings of a shift out of U.S. Treasury bonds and into stocks over the last few weeks.

All of this good news has kept the markets propped up.  I expect that enthusiasm will continue over the very short term, but somewhere up ahead lies the possibility of a correction of up to 10%. That might sound like a lot (and it is), but those kinds of corrections normally occur once or twice every 12 months or so. We are overdue for this one.

“Should I sell now?” asks a client.

My answer depends on your circumstances. If you know that at some point over the next few months you will need to raise cash for college tuition, a new roof, an auto or other big ticket purchase, then it probably makes sense to take some profits now and make sure you have the money available for when you will need it.

On the other hand, if it is simply fear and greed spurring your desire to sell, I would advise against it. I have never met anyone who can consistently sell at the highs and buy back at the lows. The majority of times, those who try lose more money than they make.

“So I’m supposed to just sit here and take a 10% hit?” the client asks.

My answer is yes. The next thing long-time readers will point out is that over the past few years I have taken action on many similar declines. Why not now?

If I thought that something serious was lurking out there in the bushes, something that could drive the market down a lot further than 10%, then I might advise you to step to the sidelines. But I don’t see anything like that.

Europe is recovering, not failing. The Fed is easing and the government appears to be getting its act together. Globally, I see more growth ahead. No matter how much I beat the bushes, I just don’t see the kind of dangers that we have had to navigate over the last few years.

There is no way of telling when a correction will occur.  We could easily gain another 4-5% before it occurs and there is no guarantee that if it does occur it will turn out to be 10%. It could be less, a lot less. In which case, selling now will be an exercise in futility. My advice for most investors is simply weather the decline if it occurs. I have a strong feeling that the markets will ultimately make back any losses they may incur and then some.