The Credit Crisis Visulized

The credit crisis has been talked about for two years. The terms are familiar but still no one understands how it all works together. This short video was specifically created to explain the whole mess. It is the best visual explanation I have seen for putting all the pieces together. Does not fix the mess but helps to make sense of it.

Hope you enjoy it.

If I Knew for Certain…

If I Knew for Certain…

A client of mine was remembering an opportunity he had to purchase Chrysler stock 30 years ago when it was trading at $1 to $3 a share. In hindsight, he thought he would have been well off if he had done it. In reality, no one knew for sure if the car company would make it or not and the risk was too great. He did not invest his savings in Chrysler in 1979. Now he has the chance to do it again at similar prices and he remembers why he hesitated the first time.

Similar “opportunities” exist today for many investments. If you could know which investments will make it and which will not make it, you could make a small investment now and pick up a very large check later. If only you knew…

Well, I do know, with certainty, which investment will make it! We discuss it in our seminars and webinars! We coach our clients in it every day. It is well documented. It is academically and scientifically proven! It has never failed and will not fail! You can invest with confidence and peace of mind. Most important, it is simple to understand.

How can I know something with such certainty? This investment relies on the collective genius of over 14,000 businesses in over 39 countries working tirelessly to overcome the daily obstacles of the economy. We coach to Free Market Portfolio Theory. We passively invest in the most efficient, most prudently diversified and most reliable system for capturing healthy returns from the broad market. Individual companies can fail. Actively managed mutual funds can and do fail. The market itself will not fail.

Bring Me Back to October 2007!

This is a short coaching session on “Hindsight Bias”. This little parasite can rob many otherwise prudent investors of their peace of mind. We all do it ourselves and need to see it when it pops into our thoughts and conversations.

Here is how it enters our thinking. You tell yourself the following:

“When the market peaked in October of 2007, I thought we were due for a decline and I was right.”

“I knew the stimulus plan was not going to help and I was right.”

“If I had acted on what I knew I would have saved a lot of money.”

“Next time I am just going to pull out when I know what’s going to happen.”

This is the progression of thought we fall into. The problem: none of it is true!

First, we are never absolutely certain before something happens. We only become certain afterward.

Second, there are thousands of instances that we thought something that did not happen. We don’t remember all the times that we are wrong. We don’t include the wrong decisions in our total investment returns. It would be help our objectivity if we could balance when we are right with all the times we are wrong.

Finally, the progression of thoughts above is rooted in emotions, not in historical truth. The truth does not change. Hindsight is incomplete and often lies to us.

Review our list of important questions that can help you to build peace of mind relating to your invested savings.

Should the Gov’t protect me from failing?

Should the Government protect me from Failing?

Can it protect me from failing?

Many people are looking to the government to safely navigate them through this current economic down turn: Protect their job; get them a better paying job; an education; better health care; a secure retirement. President Obama said last week “our current problem is one that only government can solve.” Is that true? Based on the lack of outcry over the latest “bail out” plan, it is clear to me that most people believe it is true.

I see it differently. My struggles and my failures have forced me to make valuable adjustments that I would likely never have made. I avoid pain and struggle as much as any one, but at the same time I realize that a life with no struggle would be the greater disappointment.

I see this government expansion as a willing step by the American people to get some safety from personal loss in exchange for some personal freedoms. Less free to live with out dependence on Federal government. Less free to make decisions and deal with the consequences, good or bad. Less free to succeed and fail multiple times in my life.

It is true, with current government expansion we are less free. I have always appreciated the passion for freedom that our founding fathers held. Benjamin Franklin is quoted, “Any society that would give up a little liberty to gain a little security deserves neither and will lose both.”

Don’t get me wrong, I am not despairing of the current state of the economy. I am simply applying what I know to be true to the current events. I believe we have taken a step in the wrong direction. I want stand up for what I believe and speak up when I see it challenged.

Another good quote from President Ronald Reagan

“Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children’s children what it was once like in the United States where men were free.”

Stay in touch,

Steve

A Very Flat Week

We continue to wait:

Looking back over the past 7days there has been very little change in the prices of the bonds that represent mortgage interest rates. The chart shows how mortgage bonds peaked and then have come to rest above 5.25% the last half of January and into February.

In my last blog I noted the major known factors that would give the mortgage rates the best opportunity to move lower again.

LOW INFLATION,

POOR ECONOMY,

GOVERNMENT PURCHASING.

These three factors are still in play and have not changed significantly either. There seems to be no strong influence pushing mortgage rates in either direction right now.

What can you do while you wait?

Be careful not to get too greedy. Understand where the current rates and corresponding payments will put you relative to your target rate.

Don’t get too attached to the outcomes. There are no guarantees. We are waiting because the weight of evidence favors mortgage rates dropping in the near term. In the end, the market will move the rates, not our expectations.

Make sure all the conditions of your approval are back to Maureen. We would like to close in a matter of days from when the rates meet your target.