Dear Client:
As I compose this over Memorial Day weekend, the rise in the markets, which has been virtually unabated since March 2009, have shown some downward movement over the past month. The purpose of this communication is to give a brief explanation on why a country such as Greece would affect our markets, remember what we can all learn about market corrections, and to introduce our new educational website.
One of the great changes in the investment business over the past 30 years is how all economies are becoming more interrelated. When I first began my career in the dark ages, this was not necessarily the case. Europe, today, represents about 22% of the worlds economy. According to American Funds, a country like Greece has borrowed at the government, corporate, and banking level to finance their growth. Currently, they are having difficulty refinancing their debts because the credit markets have been reluctant to finance anyone that does not have a strong ability to repay their loans. This is not the way it is all through Europe. Germany does not have anywhere near the debt woes of Greece, and since they are major exporters, they have derived a benefit from the 15% decline in the Euro. As in most circumstances, the greatest fear is the unknown, and how this will play itself out. Frankly, the remaining 78% of the world is showing slow, yet steady economic growth. Durable goods orders were up this week, the University of Michigan consumer confidence number was up, and both domestic auto manufacturers have shown large percentage increases. Many bankers would tell you that credit markets are slowly achieving a sense of normalcy, and residential real estate, in large part due to recently expired home buying credits and historically low mortgage rates, have had a healthy spring selling season.
I think it is important that we continue to look retrospectively to what has happened since the downfall of 2008-2009 and how it relates to today. I continue to submit that fear and emotion are the leading reasons why many consumers are unsuccessful investors. When the markets are down they sell, and when the markets are rallying, they buy. You can choose to not believe me, but “Google” “mutual fund buys and sells during times of economic growth and despair” and these statistics will confirm my statement. During most client meetings, we continue to maintain a posture of maintaining a reasonable cash position (and know that the word reasonable means different things to different people) keep debts under control, live within your means, and no matter how the press tries to influence you, maintain a medium to long term focus when it comes to invested money. As a practice, we made changes toward the end of 2009 when the markets were rising. At the moment, unless there was some dire need to do differently, we would advise the status quo. We typically meet with ten to twelve people each week and try to keep a consistent schedule. If, however, you feel a need to meet more frequently, please do not hesitate to call our office and we will be happy to accommodate your needs.
As many of you know, I had the privilege to host a daily radio show entitled Silver Talks Money from 2005-2009. I ended the show because there are still only 24 hours in a day and the grind of doing a daily show, run our practice and try to have “a life” was a bit much after four years. During the past year, I have written articles about financial planning and they are now on our new web site cleverly entitled “Silver Talks Money.” I have always retained a passion to teach people about proper planning and hope this site gives me the forum to do so. We will be adding content regularly, invite you to visit our site, tell your friends and family, and please make suggestions of what you like and dislike. If there are subjects you wish to have addressed, please be in touch and we will do our best to accommodate your needs. The site is located at www.silvertalksmoney.com . We hope you find it informative, entertaining, and educational. Special thanks to Margie, Nancy and Ellen in our office for their input and assistance.
We hope you enjoy the summer season with your friends and family. Do not hesitate to call if we can answer any questions or assist in any way.
Sincerely,
James D. Silver