fbpx
U

In Case of Emergency… Listen to This!

May 28, 2010

Money-Guy 05-28-2010

So we head to Chicago for a conference and the market decides to misbehave! The Euro-Zone deteriorates, there is an oil spill that can’t be stopped, and the Korea’s are fighting. Sure sounds like an emergency to me… But wait, is there hope? My answer is yes…

To start off the show I share some thoughts from a market commentary (soon to be available to Premium Members) that we sent out to our wealth management clients last week. In this commentary I address just exactly what is going on with Greece and the PIIGS. In the show, I explain why these things might actually be good for the U.S. and the global markets going forward. Greece has begun setting the example of making tough decisions that are necessary to fix some of these looming economic problems. Some of those austerity measures include:

  1. Freezing public sector salaries
  2. Cutting off annual 13th and 14th month salary bonuses
  3. Increasing the number of workers companies can lay off
  4. Raising the retirement age from 61 to 65
  5. Altering the pension benefit calculation
  6. Clamping down on tax evasion

From here, I shift gears to a presentation from the NAPFA (National Association of Personal Financial Advisors… the fee-only guys) conference we attended last week. One of the presenters was  Christopher Davis, co-portfolio manager and chairman of Davis Advisor who run the Davis Funds. His presentation, “Is the Recovery Real? And Other Questions Investors Frequently Ask” was, to the say the least phenomenal! It was so good and his slides were so powerful, I thought ‘Man, I have to share some of these with my listeners!’

Unfortunately, because these aren’t my slides and I in no way don’t want to take credit for the work and effort that Davis Advisors has put into these illustrations, I can’t put them out here for you guys. However, I do go through them and share some of the incredible numbers pertaining to how the markets have performed in the past. Because I go through so many slides and share so many numbers, I thought it best to just put some of those more powerful numbers out here for you to reference (please remember, these are not my numbers or the numbers of Preston & Cleveland Wealth Management. I am sharing with you, for illustrative purposes, the numbers we saw at a presentation by Davis Advisors):

  • On Dec. 31, 1999 the  S&P was at 1,465 with an earnings yield of 3% ($48). As of May 10, 2010 the S&P was at 1,110 with an earnings yield of 6%($66 est.) What does lower price with a higher yield mean? It means better value.
  • From 1995 – 2009, if you invested in the S&P 500 and stayed the course for the entire period, you would have annualized 8.0%. If you missed only the 10 best days (just under .25% of the total trading days in that period) your return would have dropped to 3.2%.
  • From Jan. 1, 1990 to Dec. 31, 2009, Dalbar states that the average Stock Mutual Fund return was 8.8%. The average investor in these funds earned only 3.2%. The reason for this is “unhealthy” investor behavior and trying to time the markets.
  • The average holding period of stocks for investors has steadily decreased from right at 10 years in the 1940s to 6 months in 2008.
  • From 1928 – 2009:
  1. On a monthly basis, the stock market delivered a positive return in 607 out of 984 monthly periods (62% of the time).
  2. On a one-year basis, the stock market delivered a positive return in 61 out of 82 one-year periods (74% of the time).
  3. On a rolling five-year basis, the stock market delivered a positive return in 68 out of 78 five-year periods (87% of the time).
  4. On a rolling ten-year basis, the stock market delivered a positive return in 68 out of 73 ten-year periods (93% of the time).
  • On Sep. 3, 1929 the DJIA closed at 381 and on Nov. 23, 1954 the DJIA clost at 383. If you invested $100,000 on 09/03/1929 it would be worth $380,038 on 11/23/1954. That is an annual 5.4% return during a “flat” market. If you started investing $10,ooo every year beginning on 09/01/1929, your total investment of $260,000 would be worth $1.5 million on 11/23/1954. That is an annualized 11.7% return during a “flat” market.

I also touch on some very good (and some interesting) quotes from individuals such as Alan Greenspan, Ben Bernanke, Warren Buffett, and Benjamin Graham. The moral of this show? Develop a strategy, stick to it, and be courageous! When you look back many years from now, you will be happy you did.

Most Recent Episodes

How to Win With Money in 2023!

Financial resolutions are always near the top of the list of Americans’ most popular New Year’s resolutions. Whether you want to save and invest more, pay off debt, or have other financial goals, we will give you the tools you need to win with money in 2023.   In this...

TikToks That INFURIATE Financial Advisors

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

5 Levels of Wealth AND How to Achieve Them! (2023 Edition)

We believe there are five distinct levels of wealth, but they aren’t solely dependent on income or net worth. We’ll walk you through each of the five levels - including how to know where you are at, how to advance to the next level, and signs you are doing it right.  ...

Average Net Worth By Age in 2023!

It’s time for one of our most anticipated shows of the year: our annual Net Worth By Age show! In this year’s edition, we’ll shared updated numbers and data for 2023 and discuss the most important things for you to focus on in each decade.   In this episode, you'll...

Win Financially During a Recession! (Everything You Need to Know)

The bear market we've experienced in 2022 has been longer than many in recent memory - and some are concerned that the economy may soon enter into a recession. Here's everything you need to know to stay on-track and win financially during a recession!   In this...

The Fed Just BROKE the Car Market! (What You Need to Know)

Car prices have been on a rollercoaster ride the last few years, and it looks like they might finally be coming down. In this episode, we’ll discuss what you need to know about the current car market, pitfalls of buying a car, and how to do it the right way.   In this...

Top 4 Money Mistakes People Make During the Holidays!

There’s a reason why financial resolutions are always near the top of the list in January - many Americans spend the holiday season making financial mistakes. In this episode, we’ll discuss the top money mistakes people make during the holidays and how to avoid them....

Financial Advisors Share What They WISH They Knew About Money Earlier!

Have you ever felt like if you just knew this one thing about money earlier your finances would be in a better spot? In this episode, we’ll share the five biggest things we wish we knew about money earlier!   In this episode, you'll learn: What we wish we knew earlier...

Dave Ramsey vs. The Money Guy: Which Strategy is The Best?

Dave Ramsey has an incredible legacy of helping folks get out of debt and take control of their financial lives. We agree on a lot of things, but there are a few points of contrast. In this episode, we’ll discuss differences between The Money Guy Show and Dave Ramsey...

Top 4 Financial Mistakes We Saw This Year! (2022)

We saw some wild financial mistakes this year during the bear market. From making extreme changes to portfolio allocation, chasing the hot dot, and using too much leverage, we’ll talk about some of the biggest financial mistakes we saw in 2022 in this episode.   In...