Issue 28.10

You may remember the single day two months ago when the Dow Jones Average fell nearly 1,000 points, only to gain most it back by the time the market closed. It has become known as the “Flash Crash” because it all happened so quickly. There were some panicked people on that day, and the radio talk show guys were playing it up like the world was coming to an end. A few days after the event I ran into a friend on the street who said, “So were you worried when that was happening?” I responded that I would have been worried if I, like the guys on the radio, only had a one day time horizon. He thought for a moment then laughed.

For most married couples today it is expected that at least one of them will live into their nineties. Therefore we must think of retirement as being 30 years without a paycheck. Though the stock and the real estate markets can be volatile in the short term, they have historically provided strong growth over the long run. If we allow the “Flash Crashes” to scare us away from these long-term markets, then we are left with the possibility that our money may not last as long as we do.

Before I tell you why I believe that now is a great time to invest, I want to establish my second ground rule. Understand the time horizon for your money. Some of it you will need to spend today, some next week, some in 10 or 20 years or later.  As I speak of investing in the stock and real estate markets of today, I am speaking about that portion of your money that you will not be needing for the next five years. We will be looking at opportunities to buy things for significantly less today than what I believe they will be selling for five years from now. Then when a “Flash Crash” occurs we can ignore it. Likewise, if the market soars on a single day we will ignore that as well.

There is a place for some low risk, and low return investments. They protect money that we will need in the near term. There is also a place for investing in the future of America, which future I believe to be very bright. Now we are ready to discuss what I believe that future will be… (continued next week)

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 27.10

Over the weekend I attended a family wedding. It was a very special event as weddings always are but this one was uniquely emotional. Before anyone even said a word the groom began to cry. It was a touching scene and soon his emotions had spread to the entire room. As I looked around I could see there was not a dry eye, except mine of course. It isn’t that I don’t feel emotions for I most certainly do, but they have always seemed to take a back seat to my analytical personality. If we are watching an unusually funny movie Launa will often turn to me and ask, “Why are you not laughing?” My standard reply has become, “I am laughing on the inside.” 

Because of my overly logical approach to most things in life, In High School my friends simply called me Spock. Being a “Spock” can have its drawbacks in some social settings, but it has served me very well as a financial advisor. Emotions are the tools (and sometimes weapons) of politicians, talk show hosts, and product salesmen. A friend who recently attended a free dinner seminar said to me, “When it was over I hadn’t learned anything but I was sure worked up.” I was not surprised at that reaction. Investors can be very emotional creatures and very often it is those emotions that create the problems in their portfolios. Unable to see logically past the noise of the day they tend to buy when they should be selling, and sell when they should be rushing to buy.

As we begin this multi-part series on why I believe now is a great time to invest, I need to first establish some ground rules. First and foremost I will ask you to check your emotions at the door. Save those for that guy on the radio who wants you to convert your life savings to gold bars and ammo. Instead I would like to take a logical and analytical approach to what I believe is going on in the financial world. This journey will not be easy because those sneaky emotions will constantly try to sneak back in and steal the stage. It is not always easy being a Spock, but for a few weeks let’s give it a try. Perhaps a little logic will help all of us to “Live long and Prosper.”

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 26.10

A pilot awoke to a beautiful Florida day and decided to do some sightseeing. Like thousands of other pilots he enjoyed soaring over the marvelous views of the Florida coastline that only a pilot can appreciate. 

Several miles away another gentleman gazed out on the same clear Florida morning and decided it would be a perfect day for jogging. He quickly dressed and headed out to the beach. As he jogged along he passed many others who had awaken with the same idea and together they enjoyed the beauty that only a jogger on a Florida beach can appreciate.

Suddenly the engine that had performed so faithfully for years jerked to a halt and the pilot found himself looking for a place to make an emergency landing on the beach.  Coming down without power he successfully avoided all the joggers, except one. Tens of thousands of aircraft fly everyday without incident. Millions of joggers run every day without problem. But on this rare day, a series of unfortunate events brought the two together in a tragic outcome that lead to the death of the unsuspecting jogger. Statisticians call these “Black Swan” events because they are rare, but occasionally do happen.

Flying has been one of our generation’s greatest blessings. The benefits outweigh the risks by a thousand fold, and yet every once in a while a black swan event like the one in Florida leads to tragedy. Wouldn’t it be even a greater tragedy if, as a result of this accident, people decided to stop flying? Or perhaps some might give up jogging for the “safer” activity of TV watching.

The world of investing also has its black swans. If given undue attention these events can lead investors to give up what has been so good to them in the past, and hide their money in what they consider a “safer” place. If you factor in inflation, you will find that many “safe” investors today are “safely” losing money.

For many decades the stock, bond and real estate markets have provided tremendous wealth to wise investors. Today, great investment opportunities still abound. Yet I fear many are missing out because they allow the occasional black swan event to cloud their view. In the next couple of weeks I will lay out why I consider 2010 to be a wonderful time to invest. Until then, look up and wave – I am going flying.

Dan Wyson, CFP® is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 24.10

Last year Colgan Flight 3407 crashed on final approach to Buffalo and landed on a house. Fifty people including both pilots died in the horrible accident. In the end it was determined that the crash resulted from a very poor decision of the pilot. As the aircraft descended on final approach the wings began to accumulate ice. This reduced the lift of the wings and led to a near stall situation. As the stall warning systems of the plane began to sound their alarms, the pilot did the worst thing he could have done.

The solution to an airplane entering a stall, in the simplest of terms, is to increase the airspeed by lowering the nose and adding power. Tragically, rather than lower the nose to increase airspeed, the pilot of 3407 raised the nose in an attempt to climb. Investigators determined that since the pilot knew he was close to the ground, his human instincts kicked in and his greatest desire was to climb away from the ground. Raising the nose was a fatal error as the plane could not increase airspeed while being forced into a climb. The pilot knew this from years of training, but in panic his emotions took control. The more he fought to force the plane to climb, the more helpless the situation became, until eventually the aircraft simply stopped flying and fell to the ground.

I have seen many investors, and even financial advisors, react in the same manner as this pilot when they face difficult times. They spend years following an organized and well-thought out approach to their investments. They often build wonderful portfolios following sound investing strategies. Then something dramatic happens. Perhaps it is a recession. Maybe there is high market volatility. It may even be that the nightly news is continually pounding them with negativity. Whatever the cause, investors and their advisors sometimes forget what they have learned and begin to react emotionally. Fighting against common sense they jerk the controls of their financial aircraft and try to fly it on emotions. When this happens, the results are often unpleasant.

It is estimated that most Americans will spend 30 years in retirement. That means 30 years without a paycheck. That is a really long time to live on your investments if your financial airplane is stalled because you panicked and pulled up, when forward airspeed was what you really needed.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 23.10

Thirty years ago a brilliant young real estate investor set out to make his fortune. Like many others he was seeking to capitalize on a very difficult real estate market brought on by the high interest rates of the Carter presidency.  I remember going to my local bank in those days and seeing a sign in the lobby that listed the current prime interest rate. I watched as that rate climbed through 13%, 18% and finally surpassed 21%. Those were difficult economic times that were filled with much fear and anxiety for many investors.

With interest rates at record levels and inflation on the rise, businesses began to struggle to stay alive. Our young real estate investor, we will call him Chris, like many others saw opportunity. As he drove around town he found businesses closing and commercial real estate properties going vacant. Unable to find suitable financing, many property owners were forced to just walk away. This left tragedy for those who were losing their properties but opportunity for courageous investors willing to take a chance.

Watching others take advantage of the situation, Chris sought to get pick up some nice properties himself. As he drove around town looking at all the vacancies a thought suddenly occurred to him. If he bought distressed properties and rode out the real estate slump, where would that leave him the next time a slump came around? Perhaps he would be the one stuck with the vacancies. While in this thought he made a remarkable decision that would forever change his future investment style. He decided that rather than look for distressed sales, he would seek out properties that were successful despite the recession. Chris determined that a real estate slump was the best time, not to find bad properties, but to indentify the truly good ones.

It was a remarkable decision that seemed to go contrary to the thinking of so many others at the time. Thirty years later Chris is CEO of one of the most successful real estate investment firms in the nation. His policy of buying only the best properties served him well through all those years. Even today, while so many others are struggling, his firm continues to deliver solid returns for his investors. Naysayers keep whining about how bad the investing climate is today. People like my friend Chris continue to prove them wrong.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 22.10

While watching the Disneyland firework show last week I marveled at how every spark seemed to obey the Disney command with exactness. I was there with Launa’s children’s choir for a performance in the park. We perform at Disneyland because we want the kids to experience working with an organization that not only strives for, but achieves exceptional results in everything they do. In a world where mediocrity is praised, we want the kids to know that excellence is still possible. At a time when “No child left behind” really means no child may move ahead, we want our little singers to know that greatness is still available for those who seek it.

Walt Disney’s first great success was the movie “Snow White.” The profits filled his bank accounts and launched the Disney Studios. However, his next two movies, “Pinocchio” and “Fantasia” were financial flops. Disney was on the verge of bankruptcy and his new studio was teetering on collapse. Selling everything he had including his only car, Walt made payroll and pressed forward. The Disney brand today is a testament to a man who would not accept failure. It stands as a monument to American ingenuity and determination and a reminder that exceptional people can do exceptional things.

Today we are facing a continued threat from the “mediocrity mentality.” Even some investors and financial advisors have fallen into the trap of believing there is nothing great left in America. They preach daily that we should accept lower standards, reduced expectations, and hope only that we can survive until we die. I loudly reject this attitude. I have spent enough time working with the youth in this community to know that America is still producing great people with big dreams. Our schools are filled with thousands of more yet-to-be-discovered Walt Disney’s. Most businesses in America are run by ambitious entrepreneurs who risk everything, while making life better for all of us.

These people know that success is not born of fear nor does greatness grow out of pessimism. Like Disney, they are optimists who believe in themselves and in America. As a financial advisor I believe in and am continually searching for the Walt Disney’s of our day.  I firmly believe that as he led his company to success during difficult times, so shall many of the great businesses and investors of today find a way to thrive in the face of our current troubles. The Disney Way, is still the American Way.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 21.10

In the musical “Dr. Doolittle,” the greedy circus owner, upon first seeing the very rare pushmi-pullyu, sings the song “I’ve never seen anything like it in my life.” As I have listened to all the “experts” analyze our current financial situation, I have heard them “sing” that same song. They keep reminding us that we cannot know the outcome of this financial mess because we have never seen anything like it before.
Let’s take a look back in history and see if that expression is really true. On “Black Monday” in 1987 the Stock market fell over 20% in one day. We had “never seen anything like it” yet several months (not years) later the market indexes had fully recovered. In 1962 the Cuban missile crisis brought the world to the brink of nuclear war, and the stock market plunged because, “We had never seen anything like it” before. The following year the market had rebounded and those who sold in panic lost out.
In 1974 President Nixon resigned in disgrace. Once again we had “Never seen anything like it.” The stock market crashed as people bailed out in panic. A quick look at stock market history will show that Gerald Ford took office and the market recovered in dramatic style.  What a shame for those who sold on Nixon’s news.
The S&L Crisis, the Oil Embargo, the Kuwait War, the Twin Towers, and many more represent events in our history of which could be legitimately said we had “Never seen anything like it in our lives.” Yet from the rubble of all these disasters arose new bull markets every single time and investors who remained invested were rewarded. Let us not forget that the biggest bull market in history began during the severe recession of 1993-94.
When our current crisis is over I believe history will record it as just one more in a long line of strange market animals that we had never seen before in our lives, yet somehow we managed to get through it.  Some say I am overly optimistic. My optimism springs from several sources, not the least of which is my belief that history is on the side of those who do not panic when times get tough.  Or as my wife would say, when you’re having a bad day, just take the Doctor’s advice and start singing.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC

Issue 20.10

I mentioned in my last article that I had the best job in the world. On Thursday May 6th that statement was put to the test. I was quietly working at my desk when the headlines flashed that the Dow Jones Average had fallen nearly 1,000 points. I knew the doomsayers would be out in force that day and wondered if my clients would be overly concerned. My next thought however, brought a smile to my face. It was only the day before that I had sent an email to my clients telling them I was expecting a near-term 5-10% market correction and that they should not be concerned by it. One of them emailed me back on Thursday and asked if I would please tell him who was going to win the NBA championship in 2010.J

I then remembered the panic of Black Monday, October 1987 when the stock market fell 22% in one day. On that day I spent the morning, first digesting the news, then looking for investing opportunities. It wasn’t long before that loss was fully recovered and those who took a longer-term view were greatly rewarded. A repetition of Black Monday today would require about a 2300 point drop in the Dow.

When I opened up my client accounts to see the effects of Thursday’s market activities, I was pleased, but not surprised, to see that our client accounts were only being mildly affected by all the commotion. Sometimes there is a misconception that financial advisors just put all their client’s money in the stock market. My over 30 years of investment experience, and training as a Certified Financial Planner®, have taught me to focus on not one but multiple areas of financial planning. I break down a client’s investments into what I personally call the “Four Pillars of Investing.” The stock market is only a part of that strategy. Intelligent diversification does not guarantee success, but history shows it makes it much more likely.

As Thursday ended I called my associates into my office to point out how quiet our phones had been that day. I reminded them that panic in times of turmoil is for those who are not prepared. Anyone can be a hero when the market is up, but when the phones are quiet on a turbulent day, that is when I know I really do have the best job in the world.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC.

Issue 19.10

It is easy to be negative. It requires no education or intelligence to complain about all that is bad in the world. Additionally, being a doomsayer is apparently quite profitable as well. Turn on any radio talk show and listen for a few minutes. You will be bombarded with gloom and doom followed by commercials telling you to buy gold or bury your money somewhere supposedly “safe.”

I had a banker in my office who asked what my secret was for success during such difficult times. He noted that many financial firms had failed during the recession and yet not only was Wyson Financial still in business, but thriving. I told him the answer was simple. I look for that which is good in the world and then invest my client’s assets in it.

Unlike commissioned salesmen, as a Certified Financial Planner® my success is directly tied to my clients success. If they do well then I do well. If their accounts go down, so does my income. Simply put, it is in my own best interests to provide good investment advice. I have never been ashamed of the fact that I have a very good income. My income is after all, a reflection of my client’s success.

I have many rewarding meetings with my clients. Recently after reviewing with a good client his account results over the past couple of years, he gave me a big handshake and smile and said, “Dan, you are not charging me enough.” I smiled back and told him I would take that counsel under advisement.

I always say I have the best job in the world. I help wonderful people find the good in investing so they can then enjoy the good in life. Together we wade through a sea of negativity seeking for that which is positive. Life is like a battery. The negative side is dull, boring and non-productive. You need to hook up the positive side if you want to fire up that engine. Of course if you are content to just sit in the mud while others pass you by, then the negative terminal will be just fine.

It is an honor to be able to work with so many good people. I am grateful that together we have succeeded where so many preachers of negativity insisted that we couldn’t. But what do those pessimists know anyway? They are still hoping to jump start their stalled cars with that old negative terminal.

Dan Wyson, CFP®  is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC

Issue 18.10

There has been an ad running locally offering short term CD’s at above market rates. The ad states these CD’s are FDIC insured. With quoted rates around 3.5% these ads are obviously drawing a lot of attention. The company running the ad does not issue the CD’s but instead claims that it will shop all the banks in the country and find the very best rates for you.

Sometimes I wish I could spend more time writing about more positive and exciting things, but when my phone starts ringing with people asking me to check these things out I feel an obligation to share my findings. The first thing to remember is that the cost of money doesn’t change all that much from one place to another. When you see CD rates at double and even triple the normal rate, a little red flag should start flying. Remember the great rates once offered by the now defunct ANB Financial? And they were only about 25% above average.

A recent report by CBS Moneywatch® details the findings of an investigation into the company offering these CD’s. The conclusion yielded some interesting information. They found that the particular CD’s offered were coming from banks with low credit ratings. This does not mean the CD’s were not still insured under FDIC, but remember that in case of default FDIC is only required to return your principle up to the insured amount, not your interest.

The report also found that an insurance company was actually running the ads. At this point red flag number two should start flying. Undercover reporters found when they went to buy the offered CD’s, tremendous pressure was put on them to also purchase an insurance product. When I was younger we used to call this type of advertising “Bait and Switch.” Despite this practice becoming increasingly more common, it is still regarded as false advertising and therefore constitutes fraud.

The reporters also found that the claimed rate of return actually included a bonus which was paid, not by the bank, but by the insurance company. In short, this was an attempt to draw people seeking CD’s into the office of a salesman with another agenda. Please call my office and I will gladly provide you a copy of the investigation. Or just listen to your mother who warned you about things that sound too good to be true.

Dan Wyson, CFP® is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 – Securities offered through LPL Financial member FINRA/SIPC