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  • Treasury Bonds - The Next "Lost Decade?"

    Much has been written about the 'lost decade' in stocks, a 10-year period (2000-2009) in which the major stock indexes produced a negative return. This dismal performance may be one of the reasons that retail investors are flocking into bond mutual funds, according to data from the Investment Company Institute.

    However, there are some analysts who are predicting that the next 'lost decade' may be in bonds, and especially long-term Treasury bonds which are usually more susceptible to interest rate movements. With interest rates at all-time lows, it would seem that yields have nowhere to go but up - pushing bond prices down. The bottom line is that retail mutual fund investors may be setting themselves up for another extended period of low, or even negative annualized performance.

    This week, I'm going to discuss some of the reasons why bond investors may be setting themselves up for disappointing results. I'll also revisit a bond investment that has the ability to trade long-term Treasury bond mutual funds on both a long or short basis, providing the potential for gain no matter what long-term Treasury yields do in the future. You'll definitely want to read about his program, and even attend our upcoming webinar this Thursday featuring this innovative Treasury bond investment program.

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  • Bonds: What the Smart Money is Doing Now

    Responses to my March 23 E-Letter about the possibility of another serious financial crisis in the future continue to roll in. Many of these respondents want to know how to position their assets in case another financial apocalypse is waiting around the corner. This week, I'll begin to answer that question by focusing on a debt/equity hybrid of sorts known as convertible bonds.

    More specifically, I'm going to revisit one of the most innovative and unique bond strategies that I have ever encountered. Greg Miller, CPA, founder and CEO of Wellesley Investment Advisors, has developed a trading strategy that relies on strict fundamental analysis to select among the various convertible bond offerings available. Plus, I'll let you in on a special feature found in many convertible bonds that can actually serve to further reduce the risk of this special investment class.

    I have a major allocation of my personal portfolio with Wellesley, and suggest that you seriously consider this program. With interest rates near all-time lows and the possibility of rising rates in the future, you owe it to yourself to consider Wellesley's convertible bond strategy as a possible replacement for your current bond allocation.

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  • Why the Economy May Disappoint in 2010

    This Friday we will get the first report on 4Q GDP, and most forecasters expect it to be a very good one. While most forecasters believe the economy rebounded strongly in the 4Q, largely due to inventory rebuilding, these same analysts are lowering their estimates for growth in 2010. Why is that? Mainly because consumer spending is not rebounding as many had expected. With unemployment remaining above 10%, most consumers are worried about the future, as they should be. This week, we take a look at the latest economic reports, and I bring you one of the best articles I have read regarding how we got in the mess we're currently in. It all should make for an interesting letter.

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  • My Genes Made Me Do It!

    For many years, I have written about the Dalbar Organization's Qualitative Analysis of Investor Behavior (QAIB) study. Now in its 15th year, this study has consistently documented how investors' returns do not match those of the major market indexes because investors constantly jump from one hot investment to another. While Dalbar showed us how investors returns suffered, we were left wondering why investors acted as they did.

    The answer to the 'why' question may now be found in a recent study showing the part genetics play in a person's investment behavior. The 'Nature or Nurture' study found that up to 45% of a person's investment behavior may be attributable to genetics. Some genetic influences are good while others are not. The Nature or Nurture study also found that genetic investment behavior can persist even after considerable investment education. In other words, nature trumps nurture.

    I recognized long ago how some investors can be their own worst enemies, and now I know that their genetics are likely at fault. Fortunately, I developed a way to overcome some of the detrimental genetic behaviors long ago. If you've ever made a bad investment decision and kicked yourself later on for doing so, you need to read this week's E-Letter.

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  • Mutual Fund Managers Don't Invest in Their Own Funds!

    In my June 24, 2008 E-Letter, I wrote about a shocking Morningstar study that revealed that only 47% of mutual fund managers invest their own money in the funds they manage. As I wrote at the time, I suspected that the Morningstar study would result in more fund managers putting some of their own money in the funds they manage. But to my surprise, the numbers have gotten even worse!

    The latest Morningstar report finds that an incredible 51% of mutual fund managers have not a dime of their own money in the funds they manage. Frankly, I am stunned once again. Why over half of all highly paid fund managers have none of their own money on the line is beyond me, and I find it very troubling.

    I, on the other hand, have my own money invested in EVERY program I recommend to my clients. I would have it no other way. If I don't have my money on the line, why should I ask you to? Let's talk about it.

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  • Dalbar Update: Investors Still Lagging The Market

    The Dalbar organization recently completed the 15th update of their landmark Quantitative Analysis of Investor Behavior (QAIB) Study. As long-time readers know, I have often quoted statistics from these annual updates that show average investors receive inferior long-term returns when compared to gains posted by stock and bond mutual funds. The reason, by and large, is that investors switch from fund to fund chasing hot returns. In doing so, they often end up with low returns, and sometimes even losses. Most interesting, however, is that the 2009 Dalbar QAIB Study update finally comes to the realization that traditional buy-and-hold approaches do not work, and that investors continue to panic and trade out of stocks when losses run high. In other words, emotions often trump rational investor behavior. This week, I'll update you on the most recent Dalbar Study findings, and also discuss our solution to emotional trading that we discovered back in 1995.

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  • The Stock Market Conundrum

    The market goes up, the market goes down. Will we have a sustained rally, or is this just a 'sucker rally' that will soon end with a significant downturn? As we look to the experts to help answer these questions, we find that their predictions are all over the map. Many quantitative models are saying the market is severely overbought, while those relying on fundamental analysis say the market is fairly priced. It seems that the more 'expert' opinions we get, the more confusing it becomes for investors to know what to do.

    The biggest question for investors who are currently on the sidelines is whether they have missed the majority of the bull market rally, or if it still has a way to go. This is especially true in the case of Baby Boomers, whose retirement nest eggs have been hit by two major bear markets within a decade. They need the growth that the market has the potential to produce, but can't stand another major down market, which may also be in the cards.

    This week, I'm going to discuss the various viewpoints both for and against a sustained market rally. As you will see, both sides are supported by facts, figures and historical precedent. They can't both be right, but both could be wrong should the market be headed into a broad trading range.

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  • A Case of Mistaken Identity - The "Other" Gary Halbert

    The Internet is a wonderful thing, but it can also be very frustrating when there is a case of mistaken identity. I have written a number of times about another 'Gary Halbert' that appears when readers do a web search on just my first and last names. And even though Gary C. Halbert died two years ago, he still has a very prominent presence on the Internet. So prominent, in fact, that I don't appear on most searches until somewhere on the second page of links.

    If that's not bad enough, Gary C. Halbert has a number of very unflattering posts related to his activities when he was living. Whether these are accurate or not, they create a problem for me if my current or prospective readers or clients were to think these negative posts are about me. This week, I'm going to again discuss why it's always important to use my middle initial "D" when you do a web search on my name. I'll also provide some background information on myself and my company so that you can feel more comfortable with the person writing to you each week.

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  • Institutionalized Deception

    Some of you may remember the colorful radio ads featuring Eddie Chiles, CEO of the Western Company. He was famous for his 'I'm mad as hell and I'm not going to take it any more' commentaries. I remember seeing scores of cars sporting an 'I'm mad too, Eddie' bumper sticker. I just have to wonder how mad Eddie would be right now concerning the institutionalized deception going on in the financial services industry. At a point in time when the public is calling for increased integrity from their financial institutions, just the opposite seems to be happening. Unfortunately, most Americans have no idea the wool is being pulled over their eyes. Read on to see if you have been the victim of 'institutionalized deception.'

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  • More On Teaching Your Kids To Save & Invest Wisely

    It is my opinion that, as parents, we have an obligation to teach our kids about saving and financial matters in general. I believe that teaching our kids about saving and financial matters is just as important as teaching them about honesty and integrity, and even sexual matters. Yet many times parents are not comfortable talking to their children about the importance of saving and investing wisely. This week, we will revisit those issues and I will offer some ideas and suggestions that will hopefully help you with your own kids and/or grandkids when it comes to handling their money. In fact, you may want to send them this information. Let's get started....
  • Millionaires' Club - Record Plunge In 2008

    A new report released earlier this month found that the global slump in property and equity markets last year cut the number of millionaires worldwide by 15% to 8.6 million, wiping out two years of increases in wealth. The value of the world's millionaires' assets fell 20% in 2008 to $32.8 trillion, after a 9.4% increase in 2007, according to the latest report. The study also found that the super-millionaires ($30 million and up) got hit even harder than the mere millionaires, which is even more interesting. Even if you are not a millionaire, there is a lot to be learned from this annual report from reputable sources....
  • Coming From Behind - Investment Lessons From Sports

    As long-time clients and readers will recall, I have been actively involved in coaching my kids in their various sports for over a decade, and still am. As I have written in the past, the lessons I have learned from being a sports coach all these years have served me very well in my career in the investment business. In many ways, I feel I am my clients' investment coach. In sports, I have always stressed that you must have both a good offense and a good defense to win championships. The same is true for your investments. You can't just swing for the fences in your investments; you also must protect against huge losses (bear markets), as we have seen over the last year. This week, I will reflect on how sports analogies can make us all better and more successful investors....
  • On The Economy, Bonds & Bear Market Rallies

    Last Wednesday the government reported that 1Q GDP declined at an annual rate of 6.1%, thus confirming that we are still in a deep recession. While the GDP report was worse than the pre-report consensus, it was very much in line with what I predicted in my April 21 E-Letter. I continue to believe that we will be in this recession all year.

    Several recently released studies highlight the fact that long maturity Treasury bonds have outperformed stocks over the last 40+ years, and by a substantial margin over the last 28 years. I will examine these reports as we go along. Does this mean you should put all of your money in bonds now? I'll tell you why I believe that would be the wrong move to make at this time.

    Finally, we get calls every day asking if the recent rally in the stock markets means that the bear market is over, or if this is just a bear market rally. While no one knows for sure, we will take a look at some past bear market rallies to keep things in perspective. I think you'll find this week's letter interesting....
  • Insurance Companies - The Next Shoe to Drop?

    Over the last year, the financial media has focused primarily on the major banks and their solvency issues. We have heard relatively little about the major insurance companies, which were not eligible to participate in federal bailout programs such as the TARP. As I will detail in the following pages, most of the major insurance companies are in financial trouble due to the recession and the credit crisis; some major insurers are large players in derivative instruments such as Credit Default Swaps and Collateralized Debt Obligations which have gone bad. In addition, many property and casualty insurers were dealt a blow by the natural disasters (hurricanes) that occurred last year. Some in the industry predict that if we have another bad hurricane season this year, a number of the nation's largest insurers will go out of business entirely.

    The publicly-traded insurers will be releasing their required 10-Q financial statements for the 1Q in the next few weeks, along with their 10-Ks for all of 2008. I am told that these reports are going to look very negative on balance, and this could be quite disturbing to the financial markets including stocks. As we go along, I will tell you specifically what to look for in these financial reports to judge the credit worthiness of your particular insurer. This may be one of the most important and timely E-Letters I have published....
  • More Buy-And-Hold Myths Debunked

    This week, I continue my efforts to keep you informed regarding the sometimes misleading arguments used by Wall Street in support of buy-and-hold investment plans. While these studies and publications are often based on accurate market data, they are skewed in such a way as to reach a deceptive conclusion. I would bet that most investors have seen buy-and-hold promotions that advise against "timing" the market since you might miss the best 10, 20, etc. best days in the market. What these promotions don't tell you is what happens if you miss the worst days in the market. I'll fill you in on the missing information, and you will be surprised at what it reveals.

    Then, I'll take on the tired old buy-and-hold argument that you shouldn't move to cash in bear markets because the gains of a new bull market are concentrated in the first few months. Thus, if you are in cash, you'll likely miss out on these early gains. What these shameless promotions conveniently leave out is that this is true only if you are at or near the actual market bottom, which is very hard to predict. I'll balance out this argument by showing what losses you might miss out on if you move to cash, and how missing these losses may more than compensate for any gains lost in a renewed bull market.

    Unfortunately, many investors swallow buy-and-hold arguments hook, line and sinker without asking critical questions. It is my hope that resources like this week's E-Letter will empower you to resist these purposely misleading Wall Street promotions. I also encourage you to forward this week's E-Letter to anyone you feel may benefit from this knowledge....