December 2009

Surprise, surprise, surprise!  The Dow is up roughly15% year-to-date as of mid-November, this after a 27% drop early in the year, and continue to push upward.  Stock prices fooled investors through the tough September/October period and are just 40 days and a possible new healthcare bill away from a positive year.  The Fed’s ‘easy money policy’ is both a blessing and a curse for stock and bond investors alike.  The longer rates stay at rock bottom levels, the greater the potential for future pain.  Asset bubbles can be nurtured by easy money.  The Fed has an interesting year ahead deciding when, and how much, to increase rates.  Higher rates have to happen because the US government has a very large deficit and will need to refinance a very large amount of debt soon.  The foreign governments that buy our debt will need to get some interest on their investment or they will look elsewhere to place their money.  The US dollar is crashing against worlds’ currencies.  Higher rates would help to stabilize the dollar.  Rates have to move up sooner or later.

When rates rise, the angst of stock investors begins and the markets will start to play a guessing game on when the fed will stop raising.  Raise too much and the stock market will crack; don’t raise enough and that opens the door to high inflation.   Investors, and savers looking for higher CD rates, are left guessing…feeling lucky?

December marks the end of year billing period for Smart Choice Financial Planning.  I realize it has been a  difficult year for everyone.  Smart Choice operates on razor thin margins, as you might guess from my relentless talk about low fees.  As I mentioned at the start of 2009,  for compliance reasons, I need to show uniformity on fee-based clientele.  Any adjustment to your fees are noted on the enclosed invoice.  Call or email if you have questions or concerns.

My value proposition to you is to invest and monitor your portfolio as a fiduciary without the inherent biases of sales and  commissions.  Many times, patience is needed when investing, and sometimes, doing nothing is the right thing.  Brokers will always find a reason for you to invest now in order to make a sale.  And, there are plenty of advisors out there that will gladly charge you 1% or more of your assets.  Investors pony up because they don’t pay attention or think there is no alternative.   I recently had lunch with a broker from a firm downtown.  He was getting 2.25% for money management!  Think of the size of your investment account and then multiply it by .0225.  That’s a lot of money folks, year-after-year.

This letter goes out to folks that I monitor portfolios for as well as others whom I may have met through a get   acquainted meeting.  If you do not wish to receive these letters, please let me know either by phone at            219-682-7544 or email at jharowski@smartchoicefinancialplanning.com.  Also, perhaps you would rather receive any future correspondence via email.  If this is the case, again, let me know and I will make the changes.

Have an enjoyable Thanksgiving!   Joseph W. Harowski, CFP