Issue 9.10

It has been exactly one year since I did a series of seminars entitled “A Case for Optimism” in which I used historical data and current research to show that a market rebound was likely and that we could expect it would happen so quickly that those who were on the sidelines would likely miss out on much of it.  The stock market today is up over 60% from that time.

My 1999 prediction of the market crash of 2000 is a matter of public record as it was given in a televised address to the St. George Chamber of Commerce.  As the market recovered over the next few years I systematically moved some of my client’s profits to non-market products in an effort to take some money off the table.  Then in 2007, I recommended to my clients that they move substantial assets out of the stock market and into some alternative investments that proved to be just the right place while the market was falling.

Today I have strong feelings about where to invest for 2010.  Unfortunately, as a CFP® and as one of the very few people in Southern Utah who holds a Series 24 Principal Securities license, I am prevented from making specific public recommendations.  Unlicensed individuals may go on the radio and carelessly recommend a single product to all who are listening, but with my licensing I am held to a much higher standard.  I am required (and indeed should be) to know my audience and only make recommendations that are appropriate to all my readers.  Since it is impossible for me to know who reads my articles, and since no single solution is right for everyone, it is only prudent that I should reserve my specific recommendations for my individual client meetings.

I appreciate all the wonderful comments I receive each week from so many of my readers.  I apologize to those who look here for more specific recommendations.  In a strange industry twist, the more qualifications you have, the higher your licensing, the less specific you are allowed to be when speaking in public.  It is a source of constant frustration as I attempt to educate my readers who are continually bombarded with ads and commentary from those who, because they are not Certified Financial Planners® or Securities licensed, are ironically free to say just about anything they wish.

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 8.10

When I was 25 I decided to build a block wall around my yard. I wasn’t skilled in masonry so it took a long time to lay each row.  I was building in 20 foot sections, six feet high.  Every four feet I had installed rebar so I could pour cement down the holes in the cinder blocks and tie the wall to its foundation.  I had been advised to fill these cores as each section of wall was completed.

When I had finished the first 20 foot section I stood back and admired my work.  It was a great sense of accomplishment.  Now it was time to pour the cores with cement.  As I thought about all the work involved in hand mixing that much cement I decided instead to go ahead and start the next section first.  After all, pouring the cores took a lot of time and there was nothing visible to show for your efforts.

Over the course of the next six months I managed to finish eight more sections of wall giving me nearly 180 feet of privacy around my backyard.  The boring task of pouring the cores had been put off indefinitely.  I had decided to leave that “unrewarding” portion of the work for last.

Then it happened.  I awoke one morning to one of those horrible Las Vegas windstorms.  After one huge gust I looked out my window to see all 180 feet of six foot high fence laying flat and broken in my yard.  The memory of that image still bothers me.

A good portfolio, like a block wall, needs a core to provide stability in times of storm.  Broad stock portfolios have traditionally provided good long term returns but they must be stabilized with core investments often consisting of bonds, real estate and others.  The core portion is often boring and lacks the high short term potential of most growth investments.  Plodding along in the background however, the core is designed to provide stability to help protect you when market winds blow.  As our economy moves from recession to recovery, there will be a temptation for investors to lean too heavily towards the more exciting growth investments.  Growth is great, but if you are tempted to bypass the equally important core holdings, please stop by my office and I will show you a picture of that wall.

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 7.10

After a strong start to the year, the market ran into a buzz saw last week.  The cause for the pullback was a shift in focus from profits to politics.  The noise from Washington resounded louder than the real numbers coming from America’s businesses.  In just a few days, the market’s focus moved from economic recovery to political uncertainty. The landmark election in Massachusetts caused the greatest concern. 

It should not be a surprise that activities in Washington greatly impact the pace of this economic recovery and subsequent reaction by the market.  While I believe that government actions, regulatory reforms, and monetary policy of central banks will remain a headwind for this market, I do not believe that it will derail the economic recovery that has begun.

The U.S. economy is on the verge of creating jobs for the first time in several years.  The average work week and overtime hours have been on the rise and manufacturing activity remains in an upswing.  Housing is beginning to stabilize.  Companies are beginning to shift from spending cuts to investing for further growth by increasing production, starting new initiatives for growth, and re-establishing exploration, research, and development efforts.  Profit and sales growth are once again showing up on company’s income statements.  Simply put, this economy is slowly getting better.

Whether Washington acts as a tailwind to help or a headwind to impede, we will find out in the coming months.  Either way, it is the strength and resolve of America, not Washington, which holds the cards for our future.  As the uncertainties of politics and policy in January gives way to a February calendar filled with corporate earnings reports and fresh economic data supporting a recovery, I look for this latest period of weak market performance to be merely a pothole on our journey down the road to recovery. 

I will continue to look for ways to help my clients benefit from the recovery while leaving a significant portion in investments that provide current income.  I will also continue strong positions in areas that I feel will protect against future inflation, “when” not “if” it arrives.  It’s been almost three decades since we have seen serious inflation so many have forgotten how dangerous it can be, but current policy appears certain to head us in that direction.  Fortunately there are options for investors to take advantage of it rather than be run over by it.

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 6.10

I recently heard a speaker say, “Of course I am preaching to the choir here.”  There is a lot of truth in that expression.  In many instances the people who need to hear something are the ones most likely to not be in attendance.

The FAA reports that pilots who take optional continuing education courses are less likely to be involved in an accident.  I wonder if the education reduces accident rates or is it that the safer and more conscientious pilots are the ones most likely to take the courses?

I’ve spent many years teaching courses on investing and financial planning.  Among other things, I currently teach continuing education classes at Dixie State College.  It is very rewarding helping people see and understand things in new ways.  I love teaching.  I love that glow that comes to a person’s face when a difficult concept suddenly comes together for them.

Ironically, as with flying, I have found that those who attend my classes at the college also tend to be the ones who are the most responsible investors to begin with.  Those most capable at managing their own money are usually first to seek out new opportunities to learn.  I am sure it is this attitude that has led them to success in the first place.  Unfortunately, the ones in the greatest need of financial help tend to be those who rarely seek it.  Perhaps they think they are without hope.  Maybe they are afraid of looking foolish.  They may even think they already know everything. The latter being the most dangerous to themselves.

Despite my lifetime of study in financial matters, I regularly travel long distances to hear lectures or attend classes taught by others in the industry.  My goal on those trips is to learn just one thing that will help me be a better advisor.  I have listened to the greatest minds in the industry, and some of the worst, but I have learned from them all.

I invite my readers who would like to learn something new, or brush up on something old, to join me at DSC this month (see accompanying ad).  I offer a special invitation to those who are normally not in “The Choir” to come join us and see what we all might learn together.  I promise you your time will be well spent. And don’t worry, I won’t ask you to sing.

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 5.10

One of my favorite college courses was statistics.  I love to dig for the truth behind the sales pitch.  On my first day of class the professor put a popular advertisement on the board that read, “Four out of Five Dentists surveyed recommend sugarless gum.”  We spent the next hour analyzing that claim and what it really said.  In the end we decided all we knew for sure was that they were able to find four dentists somewhere who recommended sugarless gum.  As it stood the statistic was worthless.

I heard a radio ad wherein an insurance salesman declared that none of his clients had ever lost a dime in the stock market.  That’s an impressive statistic!  Of course his ad failed to mention that since he doesn’t have a securities license, none of his clients had ever been in the stock market.  I suppose Steve Young could accurately claim to have not thrown a single interception in 10 years.  Of course in the 10 years since he retired he hasn’t thrown a touchdown either.

If ever there were a business driven by statistics it is financial planning.  I am grateful to my wise professor for giving me a healthy skepticism towards statistics.  Last week another advisor called to tell me his client accounts were up “60% this year.”  After some questioning I found that he meant they were up 60% since March of 2009, but prior to that they had lost so much money they were still deeply in the red.  He carefully left out that statistic.

Another advisor called to ask my opinion of an investment he was anxious to sell his clients.  He rattled off the glowing statistics as if reading directly from the sales brochure.  I simply replied, “As wonderful as it sounds, in reality that is an investment designed for people who can’t do math.”  He thought my answer was a bit abrupt but when you take responsibility for a person’s life savings you better understand what those statistics are telling you, and more importantly, what they are not saying.

Statistics are not all bad.  If we understand them and their relevance to our situation, they can help us make important financial planning decisions.  Unfortunately, when it comes to financial statistics it pays to remember that four out of five advisors are not Certified Financial Planners®.  Although I can’t say for sure what type of gum they chew.

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 Linsco/Private Ledger member FINRA/SIPC.

Issue 3.10

I published the following article in August 2007 just two months before the financial markets came crashing down.  I reprint it here as a reminder that in 2010 these principles still apply: 

As a boy in a family of 11 kids I was proud to tell my friends we lived in a huge 2200 ft home.  My first car was an old Ford Pinto with pink carpet that the prior owner had thrown on the floor to cover some rust holes.  The upholstery was torn, the tires didn’t match and the paint was faded.  I spent as much time working on that Pinto as I spent driving it.  When I show my kids pictures of that car they laugh, but in 1974 my friends didn’t laugh.  They loved my Pinto.  It was the only car our group had and it usually got us where we wanted to go.  When I bought that car for $800 at the age of 16 I did something that may seem very strange today.  I wrote a check for it from my earnings at the car wash.

I have spent much of my career working with people from a generation that believed that if you couldn’t afford something you didn’t buy it.  Their homes, cars and vacations were in line with the resources at hand, always leaving enough aside for a rainy day.  They patched clothes when they wore out, replaced transmissions to get a few more years out of the family car, and saved empty mayonnaise bottles because “you never know when it might come in handy.”  Their lives may not have been filled with expensive toys but they had what they needed and in retirement had saved enough money to live comfortably and without fear of depending on others.

As I work with those of the next generation I have noticed a startling trend.  Despite relatively high incomes compared to their parents, the money is being used, not to provide for a rainy day but to increase their borrowing power at the bank.  Retirement accounts seem to be the last concern of a generation bent on having every toy, building massive homes, and seeing exotic locations.  Destined to live for today, I fear that many do not see that rainy days will always lie ahead.  History teaches us that if we do not plan for tomorrow, tomorrow will make different plans for us.

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 2.10

It is hard to believe it has been 10 years since all that worry about Y2K.  I used that expression the other day with a teenager and he didn’t even know what I was talking about, yet for those of us who remember, the world was coming to an end that day.  It seems humans love to look forward to the end of the world.  There is something in us that fears, yet secretly yearns for some great disaster.

As a teenager in the 70’s I remember seeing advertisements showing factories pumping out heavy smoke from their smoke stacks.  The warning was that all that smoke would block out the sun and bring on a new ice age.  Though it has been a chilly Christmas week in the desert, I don’t think the dire predictions of a new ice age have come to pass.  I find it somewhat ironic that we now see similar advertisements with smoke stacks but the warning today is that all that smoke is going to trap in the heat and cook us all to death.  I think I will go out on a limb and predict that the doom-sayers will yet be wrong again.

Of course if you are still worried about the earth melting let me put your mind at ease.  Another group of Eeyores, whose message is being played out in a currently popular movie, are telling us that the whole world will end in 2012 based on some Mayan calendar.  I have to wonder, if the Mayans were really so smart about predicting the future why couldn’t they foresee their own demise?  I am not sure they are the ones I want to put my trust in.

I ran into a good friend recently who thanked me for my weekly articles.  Then she added, “You are always the optimistic one aren’t you?”  I took that as a great compliment.  I realize there are many problems in the world.  I also believe that problems are merely temporary roadblocks that need solutions, not a bunch of whining about how we are all going to die.

The coming year will bring with it great challenges and wonderful opportunities.  My goal each week in these articles will be to steer my readers towards the good that lies ahead.  My hope is that you will find there is no good that comes from being an Eeyore. Happy New Year!

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 Linsco/Private Ledger member FINRA/SIPC

Issue 52.09

I have a friend who manages several billion dollars for one of the world’s largest money managers.  While most investors measure the daily movements in their accounts in hundred dollar bills, this man watches his accounts move enough each day to buy or sell several Las Vegas Strip hotels.  I asked him how he dealt with the stress of all that responsibility.  His answer was simple.  He said, “I don’t care where the price of a stock is going tomorrow or next month.  I only care where that company is going to be in five years.”

We often talk about having a compass to guide our life.  A compass gives direction by looking at a distant goal.  As our ship is tossed with the natural waves of the sea, the compass remains fixed on a non-moving point far beyond the horizon.  This man makes decisions every day that affect the life savings of thousands of people.  He makes those decisions by keeping his eye on the compass, while not being concerned about the waves.  His long-term view reduces stress in his job while providing a great benefit to his clients.

During the Christmas season I am often asked if I think we will have a “Santa Claus Rally.”  Of course next month it will be the “January effect,” then the “Spring bump,” and on it goes.  Traders who follow various almanacs are always happy to point out some trend tied to every day of the year.  The reality is, unless you plan on being a day trader, it doesn’t make any difference.  Like my friend who manages billions, where the stock market is going tomorrow has no bearing on whether or not you will be able to enjoy your retirement over the next several decades.

During the time of year when people are setting goals, take a look at your financial compass and make sure it is focused far off on a goal that is unmoved by the waves of the day.  Then you can truly enjoy the “Santa Claus Rally,” which is to rally around those things in life that really matter during this special time of year.  Merry Christmas.

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 Linsco/Private Ledger member FINRA/SIPC

Issue 49.09

My Dad often quoted the classic poem, “As you ramble through life Brother, whatever be your goal, keep your eye upon the doughnut and not upon the hole.”  This seems such simple advice in a complex world.

I began tracking investment markets when the Dow Jones Industrial Average was in the 800’s.  I followed the market news closely everyday but the average investor paid little attention to the goings-on in the financial world.  There just wasn’t very good access to information.  Investing back then was a very different procedure requiring many phone calls and often days before the investor received notification of a trade.  The markets were volatile just as they are today, but few outside the industry appreciated just how much.

Technology has dramatically changed the investing process.  Today news is instant, trading takes seconds, and investors are bombarded with information.  This barrage of news has had the effect of causing far too many investors to lose sight of the doughnut.

In an airplane cockpit during the first and last 10 minutes of every flight, pilots institute a procedure known as the sterile cockpit.  During this time nothing is allowed to be discussed that isn’t directly related to flying the airplane.  Pilots are able to safely execute the very difficult task of landing an airplane because they focus all their attention on it.

Many investors today are tossed to and fro by the winds of distraction that blur their vision and cause them to lose focus.  A talk show hosts recommends buying gold and suddenly they have to have some.  The news reports a falling US dollar and they want to move their investments to Australia (true story).  A salesman scares them about the stock market and they quickly exchange a lifetime of successful investments for so-called “safe” money.  Soon they have forgotten why they invested in the first place.

If a pilot loses his focus while landing, the passengers will surely feel it.  If investors lose focus their accounts will feel it as well.  It is a difficult task in such a noisy world, filled with product salesmen who scream at you like infomercial hucksters, but for those who keep their goal in sight and remain focused many wonderful landings still await.  So turn off that smart phone news feed and go enjoy a nice doughnut.  There are still many delicious ones out there.

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 48.09

I was in Boston last month for some continuing education.  While there I took a few hours to walk a historic tour of the town.  It was sobering to be in such a special place were so many great patriots sacrificed so much for all of us.

As I toured the museum at the Bunker Hill monument I was touched by the courage of the early Americans.  Wearing their farm clothes and armed with hunting rifles they took on what was at the time the world’s most powerful military.  When the patriots ran out of ammunition they fought cannons and guns with rocks and sticks.  In the end, the massive British force was too much for them.  However, though they lost the battle their efforts would go a long ways in eventually winning the war.

The British army, severely handicapped and demoralized by their huge losses at Bunker Hill would never again view these renegade Americans the same.  The battle on this little hill made it clear to many British commanders that this was a war Britain was not going to win.  The significance of the loss at Bunker Hill was summed up later by an American officer Nathanael Greene who said ”I wish we could sell them another hill at the same price.”  And a steep price it was, for both sides.

We fight different battles today but the purpose is the same.  Like the patriots in Boston, Americans today just want the freedom to govern themselves and to reap the rewards, or the sorrows of their own actions.  Like the beautiful city of Boston today, I see a new American spirit rising from the ashes once again.  Our economy has been beaten, but it will not stay down.  Thieves and liars on Wall Street and in Washington have harmed us all, but we will nurse our wounds and move forward again.  We have made mistakes but will learn from them and be better off for the experience.

In the end, America will be what it has always been; a land of opportunity for those with the wisdom and the faith to see it.  I stand firm in my conviction that better days lie ahead of us and in the end, the financial preachers of gloom and doom will be wrong once again.  Like the British at Bunker Hill, they too will learn that Americans are not easily defeated.  And that is what I am thankful for today.

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