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Sound Advice: September 16, 2020

Beware the Witching SeasonThe months of September and October have historically been among the most difficult of times for the stock market.  On average, September has been the weakest of the year.October has been Ground Zero for the biggest market drops of the last 100 years. Yet despite the fact that has been a period of increased volatility, it has often been a time when weakness has been followed by a significant rebound.Even so, let's not jump the gun.There may be no weakness and there may be no rebound.  For the first seven weeks of this year, stocks were on a tear.Then came the pandemic, which led to a national lockdown and devastation among the nation's businesses.While prices were climbing, so were valuations, almost to a point of excess. Then a new era of volatility showed up, with daily changes in the leading averages often running into triple digits.  In the wake of the plunge, market prices did a sharp about-face.The rebound, however, was largely driven by a handf…
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Sound Advice: September 9, 2020

A Tale of Two Markets"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we were all going to Heaven, we were all going direct the other way----in short, the period was so far like the present period that some of its noisiest authorities insisted upon its being received, for good or for evil, in the superlative degree of comparison only."Charles DickensThe words Dickens wrote 161 years ago resonate eerily with where we are today.For some people, it is indeed the best of times.For far too many others, however, it is among the most difficult of times.Amid the overwhelming flow of each day's news, we learn about the movements of the stock market, which until recently appeared to be on a fast track to the ionospher…

Sound Advice: September 2, 2020

Planning to start investing? Outstanding idea!Want to do it yourself? Well, that’s a bad strategy.
Sure, there’s a wealth of financial data and tools available on the internet. But there’s a world of difference between a professional doing a job for which he or she is qualified, trained, and experienced, and an average Joe doing the same thing after a few hours of online research. After all, would you trust a doctor to operate on you if he would be getting the instructions for the surgery from Wikipedia pages or YouTube videos?
Bad retirement planning can ruin your financial goals and leave you penniless at an age when you need money the most. That’s why it’s critical that you choose a trusted, reputable, and well-experienced personal financial planner to secure your financial future.
Here are just some of the ways in which bad retirement planning can cause big problems. An Emotional Rollercoaster
It’s not an understatement to say that smart investing requires a heart of steel. Most people…

Sound Advice: August 26, 2020

How To Forecast Future Stock Prices . . . Usually
Wall Street research can be extraordinarily useful in helping to gain a better understanding of the inner workings of companies.Having been on the research side of the investment world for many years, I've had extensive experience in exploring the nuts and bolts of dozens of companies, both through analysis of numerous financial reports and regular contact with corporate executives.Some of it was useful; some was not.
In all cases, the goal was to come up with estimates of where company earnings were likely to be in the year ahead and the years beyond. As analysts, we looked for consistency of progress and the potential to grow at above average rates.The task of coming up with these kinds of conclusions was a matter of translating discussions of ongoing operations and developments into numbers that made sense.
Once that was done, we viewed the current analysis against the backdrop of the past.The range of past valuations often provide…

Sound Advice: August 19, 2020

10 Things Investors Need To Know
Market forecasts are totally meaningless.There are numerous seers in the media who with great seriousness provide definitive thoughts about where the market is going tomorrow, next week, next month or next year.What's important to understand is that short-term market movements are heavily influenced by changes in investor psychology, which are unknowable.
And for that matter, please ignore pronouncements from so-called technical analysts who attempt to divine the future from recent price patterns.That is what the Brits call rubbish.
The rewards of real fundamental analysis (profitability and financial health) are reflected in changing market prices over long periods of time, i.e., market cycles of three to five years or more, not in the next few weeks.

Target prices are nonsense.Take a look at Yahoo! Finance, enter a ticker symbol, and up comes information about the stock in question, including a target price.At best, target prices are amusing, but it …

Sound Advice: August 12, 2020

"A goal without a plan is just a wish" Antoine de Saint-Exupery
Planning for one's financial future is a straightforward exercise, but one in which the nuances can dramatically change the outcome.  When you start on the path ahead, you have the option to change direction as you move along toward your goal.  If you don't start, as is the case more often than not, you have no options other than struggling to deal with unforeseen consequences, which may well be less than desirable.
A financial plan has four main elements: what you own (your assets), what you owe (your debts), how much you are earning (your income), and how much you are spending (your expenses).  If your assets are greater than your debts and your income over time exceeds your expenses, assuming nothing untoward happens, you're probably in good shape.
But a plan is based upon assumptions that may or may not be on target.  Among these are the rate of inflation, the rate of investment returns, and the expe…

Sound Advice: August 5, 2020

"If you cannot control your emotions, you cannot control your money." Warren Buffett
As much as all of us would like to believe we can always make rational decisions about our finances, the reality is otherwise.  When our personal situations are promising and the business climate is favorable, we readily respond to questions about risk tolerance and affirm our ability to deal with bumps in the road ahead.  Yet during times of extreme volatility, such as we experienced in late Spring, our rational selves are frequently overwhelmed by our emotional selves.
When this year's roller coaster was headed for its steepest drop, few of us were able to keep cool heads and accept the reality that the plunge was not signaling the end of the world.
There have been many plunges in the past and there will be more ahead.  In only a few weeks, this latest drop approximated the extent of the pullback from late 2008 to March 9, 2009, which took place during the banking crisis.  But, as dramatic…