An Endangered Species

No, it’s not an animal or plant that is facing a high risk of extinction.  It’s STOCKS…. publicly trading companies.

The number of operating companies investors can buy stock in, measured by the Wilshire 5000 index (Do They Change the Index name to Wilshire 3,678), has been steadily declining as firms are delisted, go private or are bought out. Meanwhile, the number of IPOs, which is supposed to replenish the stock market with new companies to invest in, has been weak and well below 200 a year.

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Dell, US Airways, Heinz and OfficeMax are just a few of the iconic American companies that this year announced plans to no longer trade as independent companies.

The number of publicly traded companies always ebbs and flows, but the current number has fallen steadily since at least 2000. At 3,678, the number of companies available for the public to invest in is much closer to the low of 3,069 in February 1971 than to the high of 7,562 in July 1998.

Public companies have been the locomotives of capitalism since they were invented in the mid-19th century. Public companies triumphed because they provided three things that make for durable success: limited liability, which encourages the public to invest, professional management, which boosts productivity, and “corporate personhood”, which means businesses can survive the removal of a founder.

Public companies are in danger of becoming like a fading London club. Their membership is falling. They spend their time fussing over club rules. And, as they peer out of the window, they see the bright young things heading elsewhere.

Capitalism…. is it going extinct?

Source: USA Today, Economist

2013
05/17
CATEGORY
Stock Market
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Haircut.. How Short Do You Want It?

I have gotten funny looks when I have commented that the US beat Cyprus to the punch in regards to seizing depositor funds. The catch is that we have just used smoke and mirrors better than our counterparts around the world.

Bill Gross had a piece in today’s Baron’s online that speaks specifically to this point:

But the point of this Outlook is that even IF… even IF QEs and near zero-bound yields are able to refloat global economies and generate a semblance of old normal real growth, they will do so utilizing historically tried and true “haircuts” that rather surreptitiously “trim” an asset holder’s money without them really knowing they had entered a barbershop. These haircuts are hidden forms of taxes that reduce an investor’s purchasing power as interest rates lag inflation. In the process, governments and their central banks theoretically reduce real debt levels as well as the excessive liabilities of levered corporations and households. But they represent a hidden wealth transfer that belies the vaunted phrase “good as money.”

We have been running at 0% interest rates for several years with inflation running at a 2% rate, so silently our government has seized 10% of your assets in banks without you really realizing.

Click here for a link to the full article.

2013
05/01
CATEGORY
Federal Reserve
Government
Interest Rates
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Do You Have This Dilemma?

At times in your life it becomes very apparent that each day is a blessing. The tragedies in Boston, MA and West, TX are vivid reminders of how quickly life can change on a dime.

As financial planners, we focus on helping our clients develop a blueprint to follow to enjoy a long life. The real challenge becomes the balancing act between saving for tomorrow or living for today. You can’t completely ignore either one!

The following are some of our suggestions:

1. Favor your spending on experiences not things.

2. Set life goals. What would you like to do, have and be during your lifetime.

Our goal is to have clients that are happy with their lives, not just how much money they accumulate during their lifetime. Our Discovery Process at Landmark is designed to allow us help you balance the scales between living in the day and planning for the future.

We welcome this dilemma and look forward to being a partner in helping you define your life.

Enjoy the weekend!

2013
04/26
CATEGORY
Financial Planning
Philosophy
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Improve Your Future Success

“The best thing about the future is that it comes only one day at a time.” Abraham Lincoln

I wanted to summarize some great points in a recent Journal of Financial Planning interview with Dr. Lowell Catlett from New Mexico University.

What is one change that people can make to help improve their success in life?

“… To me, the most valuable thing about almost everything about our lives involves accepting and being happy with small, incremental changes.

It’s very much like compound interest. You don’t see the results for a time, but you do see the results. It’s true for us in dieting; it’s true for us in saving for the future or for a car or whatever else.

Life comes at us in increments that, if we will take advantage of them, we can have most of the things we want.”

This is a great way to approach change and growth in my opinion. Be patient and stay disciplined and good things will happen in both your financial and personal life.

However, you must remember to take advantage of each new day!

2013
04/26
CATEGORY
Behavioral Finance
Philosophy
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Financial Literacy – Flunking Again

This InfoGraphic came from a study by the National Foundation for Credit Counseling.  Why are we not making the grade?  In my mind it remains apathy.  I remained shocked that 60% of adults don’t budget… no plan leads to poor results.  Change the trend by at least educating your children or grandchildren.

2013
04/23
CATEGORY
Behavioral Finance
Financial Planning
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Give Me An Opinion

We have been very amused with all the news coverage over the recent steep drop and the small subsequent rise in gold prices. The last time we checked gold had very little economic impact (unlike the oil price spike in 2007) as it is not used in any meaningful way outside of jewelry.

We have been consistently asked on several occasions about our opinion on gold. Our problem with gold is that we only know how to value assets with coupons, dividends, or earnings. We believe that gold is a very speculative investment that over time will yield a return that mirrors inflation, which is validated in the chart from Morningstar below.

Stocks, Commodities, REITs and Gold

If you really want to hedge against hype inflation, which we don’t think is in the cards, then commodities (wheat, corn, oil etc…) is probably a better bet than precious metals.

Our opinion hasn’t changed…. Buyer Beware!

2013
04/17
CATEGORY
Precious Metals
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A New Type of War?

The new version of war could take the form of manipulating currency values as the whole world tries to grow. We get lots of questions about inflation, which we still don’t see imminent. In order to get traditional inflation… growth (not the stall speed seen in most developed economies) must be occurring somewhere on the globe.

To enforce this point here is an excerpt from Dr. Ed Yardeni this morning:

In the Brave New World (BNW), robots like Baxter will replace assembly line workers. In this world, the risk of ultra-easy monetary policies isn’t consumer price inflation. Even now as we approach the dawn of the BNW, such inflation remains remarkably low despite the best efforts of the central banks to boost it. The CPI inflation rate among the G7 economies was only 1.6% y/y during February, and even lower at 1.4% excluding food and energy. In the US, PPI inflation rates are close to zero. In the euro zone, the CPI inflation rate is just 1.7%, and 1.4% excluding food and energy. Japan continues to experience deflation despite years of NZIRP and QE.

In the BNW, pumping more liquidity into financial markets won’t stop consumer price deflation, but it will inflate asset prices, a.k.a. asset bubbles. Central bankers like Ben Bernanke at the Fed and Haruhiko Kuroda at the BOJ are still using models based on the 1930s. They are clueless about the BNW. That’s why they are so committed to doing whatever it takes to avert deflation. They can’t even imagine that productivity-led deflation should be welcomed as the best way to boost the purchasing power of all consumers, whether employed or on government support.

This morning we learn that the BOJ voted unanimously to significantly increase its purchases of Japanese government bonds and extend the average maturity of the bonds it purchases from three years to seven years. Mr. Kuroda has previously said that he would do “whatever it takes” to drive growth. Sure enough, the bank added that it would also buy relatively riskier assets such as exchange-traded funds and real estate trust funds!

The Yen is down over 11% versus the US dollar year to date.

2013
04/04
CATEGORY
Government
World Events
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