As I focused my telescope on the craters of a brilliant full moon, the earth began moving directly in front of the sun to cast a shadow over our celestial neighbor. The solar system was aligning in the awesome dance of a full lunar eclipse. Astronomy is a natural science that is able to provide us with a precise time and day of an event. What if investing and financial planning were a science? We probably wouldn’t pay much attention to the goings on in Europe, the budget deficit, or the latest corporate earnings. Imagine plugging in a proven scientific formula for a 12% annual return and watching the stars align to double your money every 6 years.
Surging 490 points or +4.2% on the last day of November, the DOW closed above 12,000 on a rally based primarily on positive financial news from European leaders. The S&P 500 climbed 52 points that day to end ahead by 4.3% to 1,247. A 4% point gain in one day is like 4 years of interest in a current bank CD! With all the bouncing around, the markets are basically flat from a year ago. The S&P 500 was 1,222 a year ago (12/2/10) and closed Friday at 1244. We may be treading water for twelve months, but that’s much better than sinking like most other developed countries (MSCI EAFE Index) -10%, Asia Ex-Japan -11%, and Europe Ex-UK -12%. The best sectors year-to-date have been Utilities +14.6%, Consumer Staples +10.4%, Healthcare +8.3%, and Energy +5%. New home sales rose 1.3% in October, unemployment fell to 8.6%, and private payrolls grew by 140,000.[1]
One investment “formula” used by investors is a strategy called the Dogs of the DOW. Popularized by Michael O’Higgins in 1991, this technique selects the ten highest dividend stocks in the DOW each year on January 1st. The Dogs are barking loudly and running strong so far this year by returning 5.5% versus .4% for the broader DOW as of 11/30/11. However, the Dogs are behind the DOW in 10 of the last 15 years. This value-based method tends to produce poor diversification and “cheap stocks are often ugly, too”.[2]
Tom Petruno, one of the best ever financial writers, has finally called it quits with the LA Times. “After 35 years in daily journalism, I’m leaving to see what else I might do with the rest of my working life.” Here are ten of his tips, strategies and insights: 1. Hope is not an investment strategy…but it’s what keeps civilization advancing. 2. There is $8.6 trillion sitting in cash that could soon look for more productive uses. 3. Financial markets are always about psychology. Right now, the psychology is grim. It’s a good idea to ask how your portfolio might fare if things get better. 4. The worst thing about the 80’s and 90’s was that people came to believe that investing was easy. It isn’t. It requires thinking. It’s work. 5. The best advice if you’re young is to save as much as you can. 6. It’s OK to hate Wall Street, but hating the stock market by extension is dumb. Plenty of companies are going to do very well selling the world what it wants and needs. 7. Investment success or failure is very often about the price you pay for something. ‘Buy low, sell high’ still is the basic idea. 8. If the path out of the debt crisis is for banks to print more money and fuel rising inflation, that will be bad for bonds. 9. One advantage blue-chip stocks have over bonds: dividends can go up, bond interest is fixed. 10. You can’t predict the future, and in this environment that means diversifying your assets as much as possible. Here is the good news: You have more investing possibilities available to you today than ever before.[3]
Last Call: Your IRA minimum distribution forms must be in our office by Thursday, December 15th. If you have already completed your requirements and received your funds, there is nothing further to do. In addition, we are required to update your files regularly and to evaluate your investment suitability…so please allow for a brief financial review soon…in person, by telephone or Skype.
Proving it’s never too early to go green, Stella McCartney has launched an environmentally friendly clothing line for Gap Kids and her new Italian clothing store is to be certified for efficient use of water and energy. The “queen of eco-couture” was #3 last year on Fast Company’s 10 Most Creative Women in Business. Last week, her 69 year-old Dad was rocking out onstage in London with Rolling Stones guitarist Ron Wood. What a family!
In Denver last month to attend a conference of “elite” investment professionals, I returned with a few gold nuggets to immediately incorporate front and center at Pacific Sun Financial. The first is to acknowledge our diversity and cutting edge business. We have an incredible array of services, covering investments, retirement plans, insurance, estate and tax planning. This month, for instance, we are involved with a pre-IPO Facebook offering. It is available by prospectus to super accredited investors only…but we have it. A second idea we intend to initiate is the display of streaming video on our website. A third major area of focus is Social Media. Unfortunately, our use of Twitter, Linked-In, and Facebook is extremely limited by financial regulators. Nevertheless, we continue pressing for greater access to the most modern ways of communication. Last…it has always been our philosophy and emphasis that the best business comes from happy customers. There were five main reasons given by the keynote speaker that are crucial for successful introductions: 1. Clients must value their experience with us. 2. Clients must understand all of our services. 3. Clients have to know that we are accepting new clients. 4. Clients need to know what to say about us. 5. Clients must feel very comfortable about making a referral. Hopefully, you can attest to all or most of these criteria and continue introducing us to successful people. Please feel free to call me or visit the website www.pacsunfinancial.com for details.
In these last few weeks of 2011, there are a few things for you to consider. Use your gains and losses for tax planning. Review your investments, clean out the laggards, and get ready for a fresh start in 2012. Mostly, I hope you spend your December days and nights with the ones you love. Here’s wishing you very wonderful holiday season…and health, happiness, and prosperity in 2012.
Mitch Fisher
Pacific Sun Financial Corp; 95 Argonaut, Suite 105, Aliso Viejo, CA. 92656 Telephone: (949) 716-8646 Fax: (949) 716-8645 Website: www.pacsunfinancial.com
National Asset Management, Inc. (NAM) is a Registered Investment Advisor with the SEC. NAM provides fundamental investment management services. The views expressed contain certain forward-looking statements. NAM believes these forward-looking statements to be reasonable, although they are forecasts and actual results may be meaningfully different. Actual events may cause adjustments in portfolio management strategies. This material represents an assessment of the market at a particular time and is not a guarantee of future results. This information should not be relied upon as research or investment advice regarding any security. One cannot directly invest in an index. Index performance returns do not reflect any management fees, transaction cost or expenses. Indices are unmanaged. The S&P 500 Index is an unmanaged index of 500 common stocks chosen to reflect the industries in the US economy. The DOW Jones Industrial Index is an index of 30 large, publicly owned companies based in the United States. The MSCI EAFE index is designed to measure the equity performance of developed markets outside of the U.S. and Canada. Securities offered through National Securities Corporation, Member FINRA/SIPC. Investment Advisory Services offered through National Asset Management, Inc SEC Registered Advisor and affiliate of National Securities Corporation. NAM or Pacific Sun Financial does not offer any legal or tax advice. One should consider consulting with a legal or tax professional before implementing investment strategies.
[1] J.P. Morgan Asset Management 12/5/11[2] Jack Hough, Smart Money 11/28/11[3] Tom Petruno, LA Times 11/26/11