Managing money and providing sound advice during 2011 was as challenging as anytime during my career, primarily because market performance was dependent upon fear, and not fundamentals. The number of days the market had 1-2% swings appeared to be at record levels, and there was usually no rhyme nor reason for the market acting as it did. At the end of 2011, the Dow was up over 5%, the S&P was flat, and the EAFE (International) was down over 12%. Individual returns would be dependent upon overall asset mix. During 2012, we expect continued growth in the United States with. Does this mean eliminating all International assets? We do not believe that to be the case, as markets tend to turn quickly and trying to “time” the market is typically an exercise in futility. There are many wonderful companies located out of the USA, and given circumstances such as the Japanese tsunami and the Euro banking crisis can cause even the best of companies to experience a correction, whether warranted or not.

The opinions in this article are general in nature and should not be considered specific investment advice or recommendations for any individual.  Indices are unmanaged and cannot be invested into directly.  Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives.  Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.  International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods.  Past performances cannot guarantee future results.

Investment decisions should be based on an individual’s goals, time horizon and risk tolerance.

The end of the third quarter of 2011 has raised as many questions about the world’s economic condition as it has to the dysfunctionality of both the front office and clubhouse of the Red Sox. No doubt you have heard the news reports that the third quarter of 2011 was the worst quarter since 2008. What the media failed to add to that statement was the fact that the markets were up approximately 8% thru June of 2011. The year to date return of the Dow is down about 5%. Certainly not acceptable, but a far cry from what we went through in 2008.

Since our last communication to you about six weeks ago,

frankly, not much is appreciably different. Uncertainty is as prevalent as ever, and much more daunting than actual reality. What’s going to happen to Greece? Is BNP in trouble? What kind of exposure to foreign debt does Morgan Stanley have? In absolute terms we can report as follows. Companies, according to former GE chairman Jack Welch, are doing quite well in an environment which is showing only 1-2% GDP growth. Earnings were quite strong last quarter, and third quarter numbers will be reported in the next few weeks. Auto companies have reported record sales for the past two months (source: WSJ), and oil prices are currently below $76 per barrel. Another interesting statistic about auto sales is that there was a less than 1% default rate on auto loans last year. (Source: CNBC) What has not occurred has been a solution to the housing crisis and unemployment, or the emergence of any leadership on either side of the aisle in Washington. Personally, the thought of going through this type of malaise, coupled with a leadership vacuum leading into next year’s election, makes me want to do much more than just shake my head!

Political uncertainty can always disrupt the market,

and history will confirm that. What drives the market upward are strong earnings, and we have been fortunate to see that, at least domestically. Joe Kernan from CNBC remarked recently that economists have predicted “10 of the last three recessions.” Neither Warren Buffett nor Jack Welch feels as if our economy is headed for the infamous “double dip.” Time will tell who the better prognosticator was. For every person given to doom and gloom, there are actual stats which will repel those dire predictions. For instance, well known bank analyst Meredith Whitney stated one year ago that she would avoid municipal bonds because of the likelihood that many municipalities would default. Just recently, she needed to do a huge “mea culpa” as her dire prediction did NOT come true. We believe the road to any semblance of financial security is paved with the same basics as has always been the case. Live within your means, stay as debt free as possible, maintain a reasonable cash position, and invest for the long term while occasionally rebalancing. Don’t be afraid to take profits off the table, and read and watch the news by taking a deep breath. Fear and greed are everyone’s two worst enemies. Greed is gradual, fear is instantaneous. Don’t succumb to either emotion.

Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trend, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.

Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index. Past performance is not a guarantee of future results

It certainly isn’t a golf day as I write this early Sunday afternoon, and what it has done is give me a day or so to collect my thoughts as we come off a most volatile week, both politically and economically. If you were approaching or are ready to take a step onto “the ledge,” this communication, as all others, attempts to bring a bit of perspective and balance to all of these subjects.

I don’t know if I can say they actually “solved” the debt crisis last week, but what was done was to craft a piece of legislation which allows us to fulfill our financial obligations. I will let the commentators and op-ed writers chime in with their thoughtful opinions on what this means both short and long term. I can heartily recommend a piece in the August 6 edition of the New York Times entitled, “What Happened to Obama?”  The author is a psychology professor at Emory University named Drew Westen, and presents a balanced, thoughtful, and insightful commentary on this administration. No matter on what side of the political dais you may sit, this piece has something in it for you.

Jim Cramer is a name that most of you are familiar with. He is a commentator on CNBC and hosts their successful “Mad Money” program. He is a former hedge fund manager, and is hardly a shrinking violet. He is probably wrong more than he is right, but presents his subject matter skillfully and with an abundance of passion. He was asked on Friday morning, the day after the Dow was down by 512 points, how this resembled 2008. His answer was that there were some similarities, namely sovereign debt, but three years ago we were facing Lehman Bros, AIG, the virtual dismantling of Fannie Mae and Freddie Mac, the sale of Merrill Lynch to Bank of America, and the “fire sale” of Bear Stearns to JP Morgan/Chase. Those crises are all behind us.

Earnings continue to remain strong, with 80% of companies reporting earnings at or above their anticipated amount. (Source: WSJ) In general, markets do not like uncertainty, and this is partially the reason the S&P is only selling at 13 times earnings. Analysts would argue this number is “lower” than normal considering the earnings growth over the past two years. Many would also argue that the current volatility is already factored into stock prices.

Monday morning update: The markets are reacting to the downgrade of United States debt by S&P on Friday evening. Warren Buffett is quoted as saying, “…the United States debt is still  AAA and I’m not changing my mind.”  In addition, Mr. Buffett comments that almost all of his own personal holdings  in cash and equivalents are in T-bills. (Source: CNBC) I might add this is coming from a rating agency which rated mortgage backed securities AAA in 2008, and we all know how that story ended.

You have heard me lament for years that the most emotional thing in the world is dealing with other peoples children; the second most emotional thing is dealing with other peoples’ money. We would welcome any opportunity to discuss the current volatility and how it relates to your individual situation. In the interim, please “Google” a piece in Friday’s Wall Street Journal entitled, “Time to Panic? Just the Opposite,” by Dave Kansas. Again, this is a fair and balanced representation of the situation which reinforces basic principles which the majority of today’s press refuses to report.

We try to systematically contact all of our clients so they are informed about their own accounts, as well as the markets. We try to be proactive in taking profits off the table when the markets are up, especially for clients who receive monthly distributions. At the same time, when fear and emotion are prevalent, it’s equally important to take a deep breath and relax so that you do not make improper decisions which will hurt moving forward.

Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trend, plans or objectives.  Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.

Indices are unmanaged measures of market conditions.  It is not possible to invest directly into an index.  Past performance is not a guarantee of future results

Sometimes, I feel as if we are watching a re-run of “Groundhog Day,” as there are many similarities from 2010 to this point in 2011.  Two examples are a relatively strong first quarter in each year followed by some unrest in Greece and Europe because of their unsettled economic situation.Year to date,

In addition to the mixed political news, economic news was also mixed. There has been inconsistent jobs growth as well as mixed news about a housing recovery. In any economic recovery, it is unrealistic to think that growth will occur in a straight line, because it will not. Many economists have referred to this as a soft patch, and whereas, last year at this time there was talk of a double dip, that particular type of rhetoric has cooled. Prominent analyst Abby Joseph Cohen of Goldman Sachs remains mildly optimistic for the balance of 2011. When thinking in terms of the directions of the markets, etc, I always refer back to Warren Buffet’s favorite quotation…When other people become greedy, I become fearful, and when other people become fearful, I become greedy. So much of investing is psychologically driven. Do not become a prisoner to the media to help make your decisions. Decisions should be pragmatic, not emotional.  Just as an aside, if you have access to HBO, please make the movie “Too Big to Fail” appointment viewing. It describes the financial crisis of 2008 in remarkable detail and the character impersonations are first rate.

This material contains forward-looking statements including, but not limited to, predictions or indications of future events, trends, plans or objectives.  Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties

The use of the word annuity will conjure up as much passion in the financial services industry as a Yankee jersey will at Fenway Park anytime between April and October. Annuities are not the “be all and end all” as many advisors would have you believe. Nor are they worst thing that has ever been invented as some regulators would have you believe. If used properly (and that’s the key phrase), annuities can and will provide a guaranteed stream of income that maybe used to help supplement any Social Security, Pension, and systematic distribution from an investment portfolio. 

I recently came across an article

published in the Wall Street Journal on   March 8, 2011 written by Lavonne Kuykendall, entitled, “Making the Case to Buy an Annuity.” I was impressed with the article because it gave both positive and negative aspects of an annuity purchase, something which usually does not occur.  The article talks about the differences between immediate and variable annuities and how they can serve a place in a retirement portfolio.

According to the article, a 65 year old man has a 33% chance to live to age 90, women a 44% chance.

One of the greatest challenges in retirement planning is to make sure that people do not outlive their money. Annuities, while providing guaranteed streams of income, help to achieve that goal.  Immediate annuities provide an income stream in exchange for loss of control of a lump sum of money. Variable annuities with “withdrawal riders,” can provide income for life while retaining control of the corpus. Since immediate annuity payments are a combination of both principal and interest, they also pay a higher monthly amount.

This subject is complex.

 It should be done in conjunction with a qualified advisor who makes disclosures regarding expenses, fees, and surrender charge periods. It is not a “one size fits all” product.  The above referenced article can answer these and other questions, in greater detail.

Variable annuities are long-term investment vehicles designed for retirement purposes.  The guarantees of an annuity contract, including fixed returns, payouts, and death benefit guarantees are contingent on the claim-paying ability of the issuing insurance company.  Riders are optional, come at an additional cost and are often subject to specific restrictions and limitations.  The investment subaccounts of a variable annuity are subject to market risk and loss of the principal amount invested.

Hope everybody made it through this endless winter and is ready for what will hopefully be a “true” spring, and not 13 weeks of drizzle and 42 degrees, interspersed with a tease or two. In any event, we certainly hope this commentary finds you and your loved ones all well.

The first quarter of this year has been marked by a 4.5% rise in the Dow (source:WSJ) along with rising oil and food prices; but you didn’t need me to tell you that! The market has been on a two year rise since March 9, 2009, and according to Bill Miller of Legg Mason, he does not see the market as overpriced. He remarked this past week on CNBC that even though stock prices have increased by 90% over the previous two years, so have profits. He, along with other experts stated that he feels the markets should have continued growth in 2011. Nobody should take that as a guarantee, as the world’s economy faces a multitude of challenges.

In this country, both parties cannot agree on budget and spending matters. Without going into a diatribe of how disturbed I am with both parties, rhetoric appears to be winning out over problem solving. The Bowles-Simpson recommendations of last fall which dealt “head on” with many of these long term issues have been, for the most part, cast aside. With an election coming up in 18 months, and both candidates ready to raise upwards of one billion (yikes!)dollars to run for office, do you really think ANY of these problems are going to be solved in the near term. I think not.  Without being overly dramatic, I fear greatly for our children and grandchildren. GM paid the price of 50 years of “kicking the can” and bad decision making by filing for bankruptcy last spring. They have emerged smaller and stronger, but not before many people were hurt, namely bondholders and common stock holders. We can only hope this generation of politicians will have a leader or two on each side which can truly lead, and make the difficult decisions which, sooner or later, must be made.  Term limits, anyone?

Relative to our own economy, I feel that, dividend paying stocks continue to be a worthwhile, albeit non guaranteed alternative to cash, as interest rates remain at historic lows. The Fed is scheduled to end QE2 sometime over the summer, but will continue to watch and monitor interest rate levels to make sure they do not impede economic growth. We have had two consecutive months of substantial job growth, but the stated unemployment rate remains at 8.8%. This is much higher than expected given the amount of federal spending which has occurred over the previous two plus years. Our economy is diversified and resilient. As long as government limits regulatory intervention and provides a favorable taxation climate (well, maybe not quite as good as GE) slow sustained growth continues to be the mantra of most talking heads and economic experts. (Source: CNBC and WSJ)

We have notified all of our clients about the “green” initiative from Pershing regarding brokerage statements. I understand change is difficult for many people, and empathize with your concerns. We are here to assist for those of you who wish to participate. On a personal level, we went “green” about six months ago. I receive statements immediately following the end of the month, and have them stored in a “folder” in our e-mail account. In addition, all annual reports and proxy statements are sent electronically. The reduction in the volume of mail has been both welcomed and astounding!

Pershing is not the only firm to affix a monthly fee ($1.00) to receive paper statements.  For those who have checking accounts with Bank of America, they have placed a $3.00 per month charge to receive paper statements.  I suspect it is only a matter of time before this practice is commonplace throughout the entire industry.

Our website, www.silvertalksmoney.com, is continually evolving. We have 15-20 videos as well as 35-40 articles on many phases of personal finance. We have attempted to make the format a bit more spirited and engaging. This may make some of you a bit uneasy at first. It is, however, done with the notion of livening up what can be a rather boring and dry subject. Your comments, both positive and negative are always appreciated.

Investment instocks will fluctuate with changes in market conditions.  Dividends are subject to change and are not guaranteed.

Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives.  Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.

All right, so the Red Sox aren’t off to a great start this season. But I refuse to believe that my cavorting with Bucky F*cking Dent in Florida had anything to do with this pitiful display. Despite my deep New England roots, I don’t put any stock in hexes, jinxes, maloiks or any such Curses. Well, not any more. I do believe that with some solid insights, careful preparation and proper planning, you can put yourself in the best position to succeed and have a good chance of weathering the majority of setbacks, including an 0-Whatever start.

That said, welcome to SilverTalksMoney.com. I’m in the process of revamping this website to make it what I hope will be a useful resource for anyone who wants to get up to speed on some basic (and some not-so-basic) money-related scenarios. The goal is to help you gain some knowledge and confidence when it comes to your financial universe, so you can make better decisions and lead a happier, more stress-free life. (What? As the 2004 and 2007 Red Sox proved, any freakin’ thing is possible, right?)

I’ve posted a number of articles here, along with a bunch of online videos on particular topics, and will continue to do so. Please check them out, and feel free to contact me to let me know what topics you’d like me to tackle for upcoming posts. I hope you tune in, subscribe to the RSS feed, and do all the other digital crap that will keep you in touch with me as I turn this site into a powerhouse of practical information.

Godspeed. Go Sox.