quarta-feira, 5 de novembro de 2008

Election Thoughts and Obama Props

It's finally over.

The overwhelming victory last night by now President-elect Obama proved two very important things. First, it showed that despite the absence of a tremendous amount of life experience, if you have a truly charismatic personality -- and if the tide of history is on your side -- you can achieve quite a lot.

You know the saying that it's better to be lucky than smart? Well, certainly President-elect Obama is a smart and extremely talented politician, but he also was the beneficiary of some really good luck in the form of the market crash of 2008.

He also benefited from one of the most feckless presidential campaigns in recent memory, the effort waged by the grossly overmatched, poorly packaged and utterly spasmodic John McCain.

Before I move on to a little market talk, I want to say just a few final words about this election. If you were a McCain supporter, fear not. The world is not going to come to an end. Terrorists are not going to crush America. Your money is not going to disappear into thin air and we are not going to turn into a totalitarian state because Sen. Obama is headed to 1600 Pennsylvania Ave.

If you are an Obama supporter, don't be so naïve as to think that the world will undergo some kind of magical transformation just because your man is moving into the White House. Islamo-fascists are not going to suddenly embrace The Great Satan, world peace is not going to break out, the economy is not going to turn on a dime and come roaring out of the financial mess we're in, and you aren't going to be guaranteed a better job, a nicer house or a better life.

Contrary to what the pundit class would have you to believe, politicians are not demigods. They are not going to make proclamations from Mt. Olympus capable of turning your life around. Nobody -- not a president, not a Senator, not a Congressman -- is going to make your life better. That responsibility is solely in your hands, and nobody is more concerned with your life than you are.

Finally, I just want to congratulate President-elect Obama for his amazing achievement. The historical significance of his victory is nothing to take lightly, and I do wish him all the best in his efforts to help make this country a better place for us all. I know I will be doing my part to help this country become a better place, and the best way I know how to do that is to continue helping you preserve and grow your wealth with sound investment advice.

Embrace the Forgotten Asset Class

Now that the election is in the books, Wall Street can refocus on corporate America's books. Unfortunately, those books aren't going to be an uplifting read.

All of the major economic metrics will likely be much lower in the fourth quarter, and that's following an already dismal third quarter. The unemployment rate likely will continue rising, corporate earnings probably will come in well below expectations, and consumer and capex spending is forecast to be the worst it has been in many years.

These recessionary conditions mean one thing for the market -- more bearish sentiment, more selling, and a whole lot more risk baked into the investment cake.

Amid all of the negativity pervading Wall Street right now, there is one theme common to nearly every mainstream investment advisor out there. That theme is a reluctance to embrace what I call the forgotten asset class -- cash.

The chart here of the S&P 500 certainly proves that equities aren't the place for your serious money. Yet despite the pernicious declines in the market, most advisors still are telling their clients to stay the course.

Look at the table below, which outlines the performance of the major indices throughout multiple time frames.

As you can see, no index has been safe from the mass sell-off that's hammered so many investors for so long. The real problem here, as I see it, is the column above in yellow. That column shows how far below the all-important, 200-day moving average each respective index currently is trading. The fact that equities are so far below the 200-day average means that it will be a long, long time before it's safe to go back into the equity waters.

Despite the overwhelmingly negative economic metrics, and despite the current state of the major market averages, most advisors are telling clients they have too much cash in their portfolios.

I recently talked with a client that had more than $1 million in cash generated from the sale of a home. She told her broker she wanted to stay conservative with the money, but his first reaction was to sell her some kind of product. He told her cash wasn't a good place for her money. Instead, he sold her corporate bonds, some of which are now worth only 2 cents on the dollar!

This kind of financial malpractice is a symptom of not wanting to embrace the forgotten asset class of cash. Cash is absolutely king when it comes to surviving a big market downturn, and if you haven't done so already, I recommend that you take a serious look at increasing your cash allocation.

So, why do most mainstream advisors avoid cash? It's simple; there's nothing in it for them.

You see, you can't charge big fees on cash. You can't charge a commission on a money market fund, and because a broker doesn't make any money for himself when you are in cash, there is no incentive for him to recommend that you stay there.

Fortunately, I don't have that incentive. My only incentive is to help you safely navigate this market storm.

In an ode to just how much I like cash right here, subscribers to my Successful Investing advisory service have held an overwhelmingly high cash position throughout most of the year. This high allocation to the forgotten asset class has helped my subscribers handily outperform the market.

If you'd like to find out more about how Successful Investing can help you use the forgotten asset class to protect your wealth in these perilous times, click here.

The New President, The Markets, and Your Money

The results are in, and now we all know that Sen. Barack Obama will be the 44th President of the United States. Now that the uncertainty has disappeared as to who will move into the White House, the uncertainty as to how President-elect Obama will address the problems facing this nation will begin.

That uncertainty will certainly weigh on Wall Street, especially now (thanks to the Bush/Paulson/Bernanke bailout plan) that the Treasury Department will have so much power over the economy.

I can't remember a time in my life when financial markets and presidential politics overlapped so acutely. With the equity and credit markets now set to respond to the unknowns of an Obama administration, you have every reason to be extremely worried about the markets and your money.

If you want to lift that burden of worry from your shoulders, and if you want to be prepared for whatever comes out of Washington, then I have just what you need.

Before the vote was held, I presented a seminar along with Fairway Capital President Kevin Yurkus. Our presentation aptly was titled, "The Election, The Markets, and Your Money." Now you can listen to this seminar, and you can download a seminar workbook and PowerPoint presentations by clicking on this link.

The risks and opportunities coming out of the latest voting season have made this the most important election in recent memory. That is why Kevin and I are so concerned about the future of the credit markets, taxes, the stock market, and your investments.

I encourage you to listen to this most-interesting seminar, especially now that the election results are reality.

ETF Talk: Going Short Goes Mainstream

Going short in the stock market once was something that only sophisticated investors felt comfortable doing. However, the advent of exchange-traded funds (ETFs) now lets mainstream investors take short positions with relative ease.

Of course, you only want to invest a limited portion of your overall portfolio in short positions. You also need to pick your spots carefully. Having said that, what a short position allows you to do is take advantage of the decline in the overall market or in specific market sectors.

In my ETF Trader service, I captured some nice gains in the past month by taking short positions. I also gave back some of those gains when I tried the strategy a second time. Overall, I'm ahead from those recent trades but I want you to be aware that short positions can go either way and you need to be cautious when making such investments.

I actually think that the current market volatility is conducive to shorting this market. If you want to profit from the current fluctuation of stock prices, and you also have a strong tolerance for volatility, then check out my ETF Trader service. To do so, click here.

One of the ETF fund family leaders on the short side is ProShares Advisors. Another is Rydex Securities. Both investment firms offer short ETFs for domestic and foreign markets. Rather than buying a basket of stocks as an ETF taking a long position typically would do, short ETFs use derivatives. Those derivatives include index futures contracts and so-called swap agreements.

I realize that derivatives, index futures contracts and swap agreements are sophisticated investment instruments. The beauty of buying a short position through an ETF is that investment professionals handle those transactions for you. You simply buy the short ETF when you expect the sector or market that it tracks to fall. Ideally, you then sell at a profit and exit before that sector or market rebounds. Of course, it helps to have a good financial advisor helping you determine when to buy and when to sell.

If you have any questions about shorting ETFs, feel free to let me know. In addition, you are encouraged to e-mail me any questions that you have about ETFs in general. To do so, click here.

Thinking of Letting Your Term Life Policy Expire? Why Not Turn it Into cash? 
By Kevin Yurkus, President, Fairway Capital

Chances are you have owned a term life insurance policy for years. You probably purchased the policy to provide for a beneficiary after your death. However, for many term life insurance policyholders, the purpose and value of the policy begins to change with each passing year. The policy may be about to expire, and converting that policy into another insurance product likely would be too expensive.

If you're in this situation, a life settlement could be the solution for you.

A life settlement is a financial transaction in which a life insurance policy owner sells an unwanted or unneeded policy to an institutional investor for a lump-sum dollar amount. The institution becomes the new owner and beneficiary of the policy, and is responsible for all subsequent premium payments.

A life settlement gives you cash to use however you like -- right now. You can pursue a professional dream, travel the world, help a grandchild with college tuition, or whatever else you see fit to do with your money.

While life settlements have become an integrated part of estate planning for people over 65, "early life settlements" now have become available for people who are between 56 and 70 years of age.

The sale of an existing term life insurance policy transforms what is often seen as a liability or a necessary evil into a resource that can and should be managed as part of an overall financial plan.

It's estimated that approximately 73 million Americans currently have life insurance policies, yet many people don't realize how powerful an asset their policy can be in the battle for maximum wealth appreciation.

Instead of letting your term life policy expire without paying you a benefit, you can use an early life settlement to your advantage. Here are just a few of the reasons why you should consider leveraging this new opportunity:

  • You can turn an expiring asset into liquidity for your estate
  • You can take advantage of other investment options
  • You can stop paying high insurance premiums each month
  • You can realize an immediate gain from your future asset
  • If the status of your estate has changed, and life insurance is no longer needed to pay estate taxes, then you can shed that wasting asset

Many savvy investors now see the true value of their term life insurance policies. Given the current decline in traditional assets such as stocks and bonds, now could be the best time ever to realize the power and flexibility that has been locked away in your term life policy.

If you have an expiring term life insurance policy and want to learn how you can convert it into cash, call Fairway Capital today at 800.338.1035. Our team of experts will evaluate your current policy at no cost to determine if you are eligible for an early life settlement.

About the Author:

Kevin Yurkus is the president of Fairway Capital, a leading life insurance and financial services firm based in Newport Beach, Calif., serving clients nationally and internationally. Fairway Capital specializes in innovative solutions tailored to high net worth senior citizens, ranging from estate planning to life settlements. Contact Kevin at 800.338.1035 or see the firm's Web site atwww.fairwaycapital.net

Democracy: The Aristotelian Perspective

"In a democracy the poor will have more power than the rich, because there are more of them, and the will of the majority is supreme."

— Aristotle

I give you this contrarian bit of wisdom today, of all days, because if you are reading this I assume one of your goals is to become rich. I also want you to be on notice that the richer you get, the more you'll be susceptible to what Aristotle calls "the will of the majority." Consider yourself forewarned.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else.

Doug Fabian

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