Rants from the Advisor’s Desk

I have the greatest job in the world… building and protecting clients’ wealth so they can do the things they want to do. It’s about enhancing and changing people’s lives. Not bad for a kid who switched majors from pre-med in his junior year at Cal because he didn’t want to be around sick people. Call it imparting financial wellness.

This morning had a drop-in visit from a couple. Politely, he entered my office. “I don’t want to disturb you. You’re probably up to your elbows in responding to the 500+ point correction. ” Please come in. It’s relatively quiet. We had already made our preemptive strikes. We circled the wagons some time ago.

The vast majority of our clients behave prudently in troubled times. They feel that we understand them. But I know people are uncomfortable, and some maybe nervous. There’s a ton of varying opinions about double dip recession, demise of the dollar, and investment strategies. I expect to hear fear and concern. And I expect to get calls when the spaghetti hits the fan (market sell offs) – and grateful for ‘atta-boy’ calls. Not a complaint… rather a reality of our job.

I’ll share some good natured rants from my desk when clients have the urge to wring my neck in rocky times.

Just do something. Anything. Some people equate ‘activity’ with ‘value.’ And standing idle when things are declining may illicit “Why am I paying you?” Sometimes it’s more beneficial to stand still. The financial plan drives the investment plan – not market conditions. Granted, specific segments may adjust, but not the entire investment strategy. Don’t chase performance. Picture your dog chasing seagulls at the beach… eventually the hapless hound grows weary and plops in the sand.

Crystal ball conundrum – “Everybody predicted _ _ _. Why didn’t you see it coming?” Sorry, but my crystal ball is not better than yours in predicting the short term. However, I do believe in long-term trends. I haven’t met a consistently accurate prognosticator. There have been a dozen or so water walkers on this earth (Jesus, Buddha, Mohammed, et al), none of which I believe carried business cards as Registered Investment Advisor, or broker extraordinaire.

Expect volatility – There’s plenty of restlessness… sluggish economic and job growth, debt and deficit problems, wonky policy makers, etc. Extreme volatility occurs during extreme economic times. Per the WSJ’s “All-Time Largest One Day Gains & Losses” tables… of the top 20 largest % declines (down 7% to 20.5%), 13 occurred around the Great Depression and 4 during our recent Great Recession. And, as expected, the largest % one-day gains (up 7.5% to 12.5%) coincided (16 of the top 20 gains occurred around the Depression, and 2 during the Recession).

If you’re paying for advice, know why, and have realistic expectations. And when the going gets rough, be certain you have the right person in your foxhole. There’s an old Yiddish saying, “Never marry a man until you’ve seen him sick or stressed.” Good luck.

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