Your Beliefs Determine Your Destiny.

Posted on August 31, 2015 by Tony — No Comments ↓

Your mindset and beliefs control your actions and, to a large extent, determine what happens to you in the future.

If you take control of your beliefs you can purposefully choose new ones or modify the old ones to change your destiny.

Money beliefs are very powerful.

When you take control of them you can tap into amazing opportunities for wealth creation.

Your beliefs have been formed by the financial media hype and fear. They lead you to believe there is someone who can predict the future. They lead you to believe that someone out there can determine the direction of the market. They know investors are looking for an answer.

These ‘someones’ don’t know what they don’t know. Or even more likely they know they cannot predict the market direction. However, in order to sell their ‘solution’ they must convince you that they can in fact predict the future.

As I have said many times in the past. The equity markets in the U.S. and around the world are random and unpredictable.

All the available information is already in the price of the security. This is evidence of an efficient market. Dr. Eugene Fama won the Nobel Prize in economics for 2013. His winning theory is called the Efficient Market Hypothesis which he wrote in 1965. Think of that it took nearly 50 years to prove he was correct. Truly a man ahead of his time.

So the choice is yours do you believe in the financial media hype AND fear or do you believe that the equity markets are efficient? Do you believe there is an expert who can tell you what will go up and what will go down? Or do you believe the markets are random and unpredictable?

I believe the later to be true so I invest accordingly. I ignore short term volatility and focus on the long term. Like an investor should.

If you focus on the short volatility and invest on that premise you are essentially a gambler or speculator.

Over the long term investing will reward you with great market returns without the stress and anxiety.

If you focus on the short term you must stay connected to the market news daily. And even sometimes minute by minute.

To me this is no way to live a happy life.

To reach your financial destiny you must own equities…globally diversify…rebalance.

Is Now A Good Time To Invest?

Posted on July 28, 2014 by Tony — No Comments ↓

Predictions…What Are They Good For?

Absolutely nothing.

Each day I hear new predictions on what to expect next.

The Dow will reach 60,000 within 10 years
The Dow will reach 28,000 within 5 years
The Dow will crash to 5,000
The tech sector is overvalued EXCEPT for these ‘x’ stocks.
And on and on….

These predictions like all the others are good for absolutely nothing. Expect perhaps for the predictor to sell you their ‘timely’ newsletter(s) to unsuspecting gamblers. These Wall Street bullies do not trade on their own predictions. These bullies make money solely on selling worthless newsletters.

Investors are constantly looking for predictions because they want stock market returns with Treasury bill risk. What they get is Treasury bill return with stock market risk. We are all looking to avoid pain and seek pleasure.

Personally, I work out regularly. It keeps me in shape and focused. There is one saying that sticks with me, ‘No pain….no gain’. Well for investors that allow their emotions to guide their investment decisions and avoid risk during down turns I have a similar saying…

‘Short term gain ….long term pain’.

If you allow the Wall Street bullies to guide your investment decisions you may experience the short term gains like the avoidance of a downturn or the exhilaration of a hot stock or asset class. In the long term you will suffer because your portfolio lacked diversification AND discipline.

Like everything in life someone will get lucky and make a correct prediction.

And of course, past performance is no indication of future results.

Unfortunately, we as investors have no idea whose prediction will be right. The efficient market hypothesis says all the knowable information about a particular investment is already in the price right now.

This is due to the fact that the markets are random and unpredictable.

An added note Dr. Eugene Fama of the University of Chicago wrote the efficient market hypothesis in 1965 and won the Nobel Prize in Economics in 2013. It has stood the test of time.

Many of you may be saying…’Tony you say the same thing week after week and year after year’. Well you would be right, because no matter how many times the same pattern repeats investors make the same mistakes over and over. So my message will be repeated over and over. This is what coaches do.

Coaches work with you to develop a ‘game’ plan or in technical terms the Investment Policy Statement. As with all plans it is a meaningless exercise if you develop your plan and never implement it. Or follow the plan for a while and then when things change for the worse abandon the plans.

This is where your investor coach really exhibits their value to you and your financial future.

With a solid game plan in place your coach will keep you focused on the long term and remain disciplined.

The opposing team may come up with a ‘trick’ play and score and perhaps win the game. This is due to luck and not skill. However, with a solid game plan and discipline you will win in the long term.

Stop being a victim of the Wall Street bullies. Stop looking for predictions. Do find an investor coach to guide you to a successful plan.

Success Requires Great Coaches!!

Posted on May 19, 2014 by Tony — No Comments ↓

This last week I attended the Matson Money investor coaching conference in San Antonio. As usual it was a great conference. I was even able to fulfill an item on my ‘bucket list’ I visited the Alamo. A visit I recommend to anyone watched the old TV shows such as Davey Crockett. The RiverWalk area is fun as well.

Each week I mention the Wall Street bullies and the need of an investor coach/fiduciary adviser for all investors. Well Mark Matson is my coach. I found Mark after an unfulfilling stint as a stock broker. His message is the same message I learned in financial classes in college and graduate school as well as my studies for the Certified Financial Planner® designation.

The message is:

The Free Markets work (Efficient Market Hypothesis)
Modern Portfolio Theory
Three Factor Model

work. I always found it curious that no one in the industry taught these academic concepts to new brokers. When I questioned this, the answer was those concepts only work in theory and do not work in the real world of investing. They were wrong…dead wrong.

The real reason the Wall Street bullies do not use these academic concepts is that it does not generate enough fees for the bullies. It doesn’t matter to the bullies if the investor is hurt and often severely hurt.

As I mentioned the conference was a great one. I also was able to hear the great Coach Lou Holtz speak, which I also highly recommend.

Essentially his message is the same as I have been writing about. To be a successful investor you need a prudent process and discipline. No one or no group can be successful without both process and discipline. This requires the guidance and vision of a good (great) coach.

I make an attempt to attend these conferences each year because I am reinforced that my beliefs are valid. Each event I attend Mark Matson’s message remains consistent. Follow the academic research provided us and remain disciplined.

We/I can be swayed by the media or public opinion or everyday life. Without the reinforcement of great coaches like Mark Matson we can easily begin to:

Stock Pick
Market Time
Track Record Invest

This in turn is nothing more than gambling and speculating with our investment money. If you are interested in attaining or re-attaining the American Dream gambling and speculating are NOT the answer.

Getting rich overnight, although possible, is highly unlikely. Working hard, saving and prudently investing our savings will lead to your long term goals. The American Dream is still possible however, there are no short cuts.

So, I will commit to attending the Matson Money conferences (at least) annually to maintain my strong beliefs in the free markets. It is up to you to find an investor coach to guide you to your American Dream.

Stop allowing the Wall Street bullies ruin your future NOW!!

Predictions…What Are They Good For?

Posted on January 2, 2014 by Tony — No Comments ↓

At this time of year experts are predicting what the equity markets will do for the coming year. We are continually looking for answers.

What will the future bring?
Where will the markets go in 2014?
Where is the best place for my investments?
How can I earn stock market returns with Treasury bill risk?
Predictions of New Media ala 1974 (Photo credit: Dan Zen)

These are really all unanswerable questions. No one can predict the future with any consistency. However, we as humans continue to search. Many of us read our astrology message each day. Hoping we can learn what will happen to us each day. Even here there are times when these readings appear right but again there is no consistency. When these readings are right it is a matter coincidence rather than some psychic ability of the writer.

Investors continually look to someone on Wall Street or anywhere for that matter to tell them how and where to invest. This search continues regardless of the poor track record of these predictors. For example the prestigious magazine ‘The Economist’ made the following prediction at the beginning of 2013. The magazine noted that while investors were optimistic, the coming year was unlikely to be one to remember.

Another magazine ‘The Financial News’ stated “the political storm clouds loom over the global economy. From Washington to Beijing, the financial markets are in thrall seismic political events.” Obviously neither of these predictions proved accurate.

As 2013 comes to a close the equity markets have had a stellar year.

Regardless of these and other inaccurate predictions, investors continue to search for answers and continue to read and absorb these and other publications. Many investors tell me that the stock market is too risky for them. This is true when your strategy is to listen to the ‘expert’ forecasts and basing you investment allocation of those predictions. When you base your investment strategy based on a forecast of the future you are gambling and speculating with your money.

The real problem is when one of these ‘forecaster’ is right, which is statistically inevitable. These predictors will market this fact extensively. What investors don’t seem to realize is that there is no correlation between past performance and future results. Like I said some of these forecasters will be right but there is no reliable way to know which one(s) will be right going forward.

Dr. Eugene Fama of the University of Chicago won the Nobel Prize in Economics in 2013

for his work on efficient markets. Dr. Fama essentially proved that all knowable information is already in the price of the security. There is no reliable way to predict how the markets will perform going forward.

Throughout my career in financial services I have also continued to search for the ‘answer’ with some success followed by poor results. I finally remembered by finance courses in both college and graduate school. In my studies I learned that there is an academic and scientific method to investing that has proven to be successful in the long term. The issue is that these methods do not eliminate risk but rather work to control it.

Investors would be more successful with less anxiety if they worked with an investor coach. An investor coach will teach you among other things where returns really come from. HINT: it does not come from the hot stock picker or market timer or the manager with the best track record.

Trying to adjust your strategy based on current conditions will result in poor and disappointing results.

When you have a prudent process and the discipline which an investor coach will provide, success will be yours WITHOUT the need for an accurate forecast.

“Those Who Plan – Profit”

Posted on December 2, 2013 by Tony — No Comments ↓

Steve Van Remortel president of SM Advisors a Green Bay based expert strategist has a tagline for his firm of “Those Who Plan – Profit”. It means exactly what it says you will earn a better profit if you develop and follow a plan. Steve has used this process to help a large number of businesses become successful and earn a profit.

This process works very well with investing as well. When you develop a plan and remain disciplined to your plan you will profit over the long term. In most cases like SM Advisors it requires a coach to keep you disciplined. In this case it requires an investor coach.

Since becoming involved in the financial services business in 1992 I have learned that the Wall Street bullies would prefer that you do not have a plan. These bullies would prefer that you invest based on your emotions. They would have you listen to the financial media and trade…trade…trade..

These bullies want nothing more than to have you gamble and speculate with your investment money. A sure sign that you are gambling and speculating would include:

Stock picking.
Market timing (getting into and out of the market at the right time based on some murky predictions).
Track record investing (investing with the ‘hot’ manager or the latest ‘hot’ trend).

In 2013 Dr. Eugene Fama won the Nobel Prize in Economics based on his Efficient Market Hypothesis. In his award winning hypothesis Dr. Fama states

“In [a free] market at any point in time the actual price of a security will be a good estimate of its intrinsic value”.

Another way of saying this is that free markets work and if you believe that

Based on supply and demand the free market is the best determinant of market prices.
All available information is factored into the current price.
Only new and unknowable information and events change pricing.
The randomness of the market makes it impossible for any individual or entity to consistently predict market movements and capture additional returns unrelated to risk.

You will invest using free market investment strategies. Dr. Fama’s Efficient Market Hypothesis needs to be included as one component of that strategy or PLAN.

You can continue to plod along hoping you can increase your return by trading in and out or you can develop a solid plan.

Remember any trade(s) that require an accurate prediction of the future will eventually fail.

A great first step is to determine your current expected return and expected volatility(risk).

With this vital information you can begin to plan for a successful long term financial goal, such as retirement.

Because as Steve Van Remortel states “Those Who Plan – Profit’.

Efficient Markets Rock!!!

Posted on November 11, 2013 by Tony — No Comments ↓

Every week I look for a subject to discuss what I have heard from clients/prospects. Some are questions, some are comments. This week I am going to discuss ‘The Efficient Market Hypothesis’ written by Dr. Eugene Fama in his Phd. Dissertation. Partly because Dr. Fama has won the Nobel Prize in Economics for 2013 and partly because I continue to hear questions on market timing, when to get into and out of the market. I actually had someone ask for the current hot stock(s). YIKES!!

Investment Conference (Photo credit: Salmaan Taseer)

I have mentioned ‘The Efficient Market Hypothesis’ , now Nobel prize winning, many times before. It has also been referred to as Free Markets Work. Dr Fama’s definition of the efficient market is as follows:

“In [a free] market at any point in time the actual price of a security will be a good estimate of its intrinsic value”.

This is just a brief definition because I do not wish to bore you with the entire dissertation. What he is saying is that price of a stock today represents its true value today. It does not represent a forecast of the future, because we all know no one can predict the future. Therefore all the knowable information is already in the price of the stock (security).

Any future movement of that stock is random and unpredictable.

Given this information we know that if you are trying to use

Stock picking
Market timing
Track record investing

You are gambling and speculating with your money. Anyone who recommends you use these tactics with your investment money should be considered a Wall Street bully.

When my financial services career began in 1992 I found it very curious why not one firm that I worked for recommended using ‘The Efficient Market Hypothesis’ or any other academic study I learned in finance classes in both college and graduate school. The research I learned proved these concepts work and making predictions does not.

What I concluded was the Wall Street bullies need you to continue to gamble and speculate with your money because this generates the most fees for these firms.

It has been proven numerous times that there is zero correlation between a stock pickers/market timers ability to pick the right stocks or correctly time the market in the past and their ability to do so in the future. This means that just because any adviser/agent has a good track record in ‘beating’ the market there is no evidence that they will repeat. It is not impossible but highly unlikely.

If this is true then why do investors continually seek out the ‘best’ investments for right now?

Why do these same investors look for someone to beat the market?

The markets offer great returns long term why not concentrate your investment money on capturing market returns?

Most of these questions can be answered by the fact that the Wall Street bullies continue to market gambling and speculating.

There will always be someone making predictions about where investments are going.

Stop being a victim of the Wall Street bullies. Learn about the most recent Nobel Prize winning concept along with other academic concepts to engineer a prudent portfolio. Designed for you.

What Does A Prudent Portfolio Look Like or Is Now the Time To Panic?

Posted on October 14, 2013 by Tony — No Comments ↓

So far we have discussed the Efficient Market Hypothesis also called Free Markets Work. We learned that all the knowable information is already in the price of securities. This led us to the fact that you are gambling and speculating with your money when you:

Stock Picking.
Market Timing.
Track Record Investing.

Next we learned about Nobel Prize winning Dr. Harry Markowitz and Modern Portfolio Theory. This allows us to allocate our assets efficiently and to systematically rebalance.

Now let’s discuss the Three Factor Model. This model was discovered by Kenneth French of Yale and Eugene Fama of the University of Chicago. Without becoming too technical the three factors are:

Equities have a return premium over fixed income.
Small stocks have a return premium over the S&P 500.
Value or distressed stocks have a return premium over the S&P 500.

All these premiums are valid over the long term. Therefore there will be times when these premiums will not be apparent. However, investors will be rewarded by including these factors in their portfolio over the long term.

This brings up a great point, many times utilizing these concepts or any other concept will underperform. Like anything else when you have a proven process and remain disciplined to that process success will be yours. Any attempt to change strategies based on a forecast will lead to disappointing results. I believe this is true not only in investing but in any goal we set for ourselves.

Many brokers/agents will use current circumstances to sell the current popular product.

These brokers/agents will say this is the right solution for now. Whenever you hear ‘for now’ you are market timing which has been proven does not consistently work. These brokers/agents are using your emotions to sell you more product.

This is the main reason having an investor coach will help you reach your long term financial goals. Your investor coach will help you control your emotions during volatile times.

In summary when we combine the following

Free Markets Work
Modern Portfolio Theory
Three Factor Model

we can build a prudent portfolio designed for us. A portfolio that will fight inflation

When we use these concepts we can be confident that our investments are efficiently working for us.

We can be confident that equities are the greatest wealth creation tool on the planet.

During our current budget crisis many investors will sell out of their equity positions because their emotions are guiding their investment decisions. With the help of an investor coach you will follow your investment policy statement and stay the course. In the long run you will succeed.

The Wall Street bullies want you to believe that they can tell you what investments work best at any particular time.

Stop being a victim to these bullies.

As a side note Eugene Fama PhD authored two of our concepts Efficient Market Hypothesis and the Three Factor Model. Dr Fama and two other economists have won the Nobel Prize in Economics for 2013. Their award winning work was “for their empirical analysis on asset prices.”

There is a scientific approach to investing that works.

What Helps Explains Variability in a Portfolio?

Posted on October 7, 2013 by Tony — No Comments ↓

Last week we discussed the Free Markets and the Efficient Market Theory. We learned that:

Stock Picking
Market timing.
Track Record Investing.

were signs that you were speculating and gambling with your money.

English: Markowitz-Portfolio Theory, Investmen... — English: Markowitz-Portfolio Theory, Investment Portfolio Management (Photo credit: Wikipedia)

The equity markets are far too efficient to be able to consistently ‘beat’ the market. Because the equity markets are efficient they are random and unpredictable. We will now explore the next component of a successful investment portfolio. That component is Modern Portfolio Theory.

Modern Portfolio Theory won the Nobel Prize in Economics for Dr. Harry Markowitz. The main component of Modern Portfolio Theory is that diversification works. In fact asset allocation explains more than 90% of a portfolio’s variability.

When we combine asset classes with low correlation we can reduce risk and increase return. Without becoming too technical this means that if you combine low correlated assets in a portfolio, when one is down another has a good chance of being up.

This is best illustrated with the Markowitz Efficient Frontier. Which essentially shows what the expected return is for an expected level of volatility(risk). If you want to earn more return you must assume more risk. So, for example, a young person has a much longer time horizon and therefore would assume more risk to earn a higher return. Conversely, a retired person would assume less risk because their time horizon is much smaller and wishes to take income from their portfolio while keeping up with inflation.

Modern Portfolio Theory has recently been criticized by the Wall Street bullies. During the 2008 crisis all portfolios declined. Critics say that this is proof that Modern Portfolio Theory does not work. They say ‘look all of your low correlated assets are down and Modern Portfolio Theory did not protect you’. Modern Portfolio Theory was never intended to eliminate risk but rather to control risk. The 2008 crisis was an exceptional time nearly unprecedented. I believe that if you build a portfolio to protect against what happened in 2008 you will be disappointed in your return, long term.

As I have mentioned in the past and it bears repeating, from 1926 thru 2012 the S&P 500 earned 9.73% per year. During this time there were 22,040 trading days. Of these trading days 48% were down or approximately 10,579 days down and 11,461 days up. Many of you realize that this is one of my favorite statistics so be prepared to read this again.

Please keep in mind that the Wall Street bullies use financial pornography to sell product. These bullies use fear AND greed to keep investors trading.

If you have a process you believe in and stick with it you will succeed long term. There is no one perfect answer. You will experience down markets and some will be very emotional. You will experience up markets and some will be very emotional. Right now we are experiencing one of those emotional moments with the government shutdown and potential default.

With the guidance of an investor coach you can realize a successful outcome to your financial strategy. On your own in most if not all cases you will allow your emotions to decide how to invest. This can be very destructive to your financial future.

Your investor coach will protect the future you from the current you.

So far we have discussed two of the technical components of a successful portfolio. Next time we will discuss the final component The Three Factor Model. Stay tuned.

What the Wall Street Bullies Don’t Want You to Know.

Posted on September 30, 2013 by Tony — No Comments ↓

During my academic career both undergraduate and graduate I learned what works in investing and what doesn’t. Some of what works has actually won the Nobel Prize in economics. What I learned works is the Efficient Market Hypothesis, Modern Portfolio Theory and The Three Factor Model.

After a career in corporate financial analysis I started my career in financial services. I received what I was told was the best training in the industry. After completion of this training I realized that it was all about sales and nothing about academic research. ‘Sell what and how we tell you and you will succeed’.

When I asked why none of what we sold had anything to do with the academic research that worked. I was told that the academic research did not apply in the real world. The brokerage firm(s) know what was best and just follow their lead to success.

After years of frustratingly disappointing results I finally realized that the brokerage and insurance firms were wrong.

This message will focus on the Efficient Market Theory or that the Free Markets work. “In [a free] at any point in time the actual price of a security will be a good estimate of its intrinsic value.” Eugene Fama. What this essentially is saying is that all the knowable and predictable information is already in the price of the asset.

Therefore if you believe that the free markets work and the markets are efficient you must not follow the advice of the Wall Street bullies. These bullies want you to believe that they can predict the future and sell you the investments which will outperform the markets. These bullies also want you to believe that they can tell you when to get out of an asset class/individual stock to avoid any losses. WRONG.

The markets are random and unpredictable.

Although the markets are not perfectly efficient they are efficient enough not to allow anyone to consistently take advantages of these inefficiencies and ‘beat’ the market.

With this knowledge we can stop being a victim of the Wall Street bullies. If we want to stop being a victim we must not work with advisers who use:

Stock picking.
Market timing.
Track record investing.

If you are really interested in earning market returns you need to follow a process and remain disciplined to that process. Remember earning market returns will lead to success over the long term. Of course no one can guarantee anything.

In future messages we will discuss the other academic research concepts notably Modern Portfolio Theory and The Three Factor Model. We will learn that if we combine all these concepts in YOUR portfolio, success will be yours over the long term.

Keep in mind none of these concepts, alone or in combination, involves eliminating risk but rather controlling how much risk is in your portfolio.

Finally, equities are the greatest wealth creation tool on the planet if we have a prudent process and maintain discipline. This is only possible in most if not all cases if you work with an investor coach.

Given the continued threat of a government shutdown many are forecasting a downturn in the market. This is where an investor coach would keep you on track and prevent you from panicking. Panicking or selling at the wrong time and for the wrong reasons is a top reason investors earn poor returns.

These same investors will blame the markets rather their own poor emotional decisions.

Predictions…What Are They Good For?

Posted on June 17, 2013 by Tony — No Comments ↓

Absolutely nothing.

Each day I hear new predictions on what to expect next.

The Dow will reach 60,000 within 10 years
The Dow will reach 28,000 within 5 years
The Dow will crash to 5,000
It’s the end of America because we cannot recover from all this debt
English: Wall Street sign on Wall Street (Photo credit: Wikipedia)
And on and on….

These predictions like all the others are good for absolutely nothing. Expect perhaps for the predictor to sell you the perfect product to take advantage of their prediction. The Wall Street bullies have a vested interest in keeping your money on the move. In many cases these bullies will develop the fear to generate additional income.

Investors are constantly looking for predictions because they want stock market returns with treasury bill risk. What they get is treasury bill return with stock market risk. We are all looking to avoid pain and seek pleasure.

‘short term gain ….long term pain’.

Like everything in life someone will get lucky and make a correct prediction.

And of course, past performance is no indication of future results.

This is due to the fact that the markets are random and unpredictable.

Many of you may be saying…’Tony you say the same thing week after week’. Well you would be right, because no matter how many times the same pattern repeats investors make the same mistakes over and over. So my message will be repeated over and over. This is what coaches do.

This is where your investor coach really exhibits their value to you and your financial future.

With a solid game plan in place your coach will keep you focused on the long term and remain disciplined.

Remember the three simple rules of investing…although simple difficult to follow:

Own equities
Globally diversify
Rebalance

Stop being a victim of the Wall Street bullies. Stop looking for predictions. Do find an investor coach to guide you to a successful plan.

...a Main Street Solution to a Wall Street Problem...

Efficient-market hypothesis

Your Beliefs Determine Your Destiny.

Is Now A Good Time To Invest?

Success Requires Great Coaches!!

Predictions…What Are They Good For?

“Those Who Plan – Profit”

Efficient Markets Rock!!!

What Does A Prudent Portfolio Look Like or Is Now the Time To Panic?

What Helps Explains Variability in a Portfolio?

What the Wall Street Bullies Don’t Want You to Know.

Predictions…What Are They Good For?

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