As a Professional Investment Advisor I help my clients allocate their money appropriately for retirement or extra income for their emergency funds. The announcement by the Fed yesterday to embark on QE3 so soon stunned many people. Ben Bernanke announed he will authorize the fed to buy $40 billion monthly of mortgage bonds essentially creating $40 billion dollars out of thin air each month.

This is how it will impact you:

The Fed is making a committment to keep interest rates low, this will help keep mortgage rates down but continue to hurt savers with their money in CDs, Bonds, or Savings Accounts. Even "High Yield" Savings Accounts won't yield enough to even outpace inflation.

With the creation of $40 billion dollars a month this will have to devalue the dollar, it is simple supply and demand and the charts are showing it.

My advice, instead of getting frustrated use it to your advantage. Understand that savings accounts and CD's just aren't going to get it done and find a quality advisor to work with to invest your money just as conservatively as possible. There are many high yielding dividend options out there OTHER THAN STOCKS you could put your money in.

This is one of THE BEST times to be an investor that I have ever seen.

If you need any help you can call me or follow my blog

Michael Goldberg
Goldberg Financial, LLC
in Clifton Virginia
Follow My Blog Here: http://financeinlife.blogspot.com/2012/ ... t-now.html

my advice, fire your financial advisor and stick to your plan. Most certainly, there is not any more need for these assclowns now than there was 2 days ago.

If anyone needs help, I can point you in the direction of some excellent literature. There are also MANY financially saavy people here and I have never seen anyone get flamed for asking a stupid question (and yes, there are stupid questions). It takes work, but it is well worth it.

I completely understand the frustration and lack of trust in financial professionals. Honestly the industry has done a terrible job of working hard for anyone other than the elite and rich. I decided to start my company to help people who have as little as $5,000 to invest and TREAT THEM LIKE REAL PEOPLE.

Another issue is that just because someone calls themself a financial advisor, financial planner, or broker, doesn't mean they even have an investment management specialization. Some might just push products for commissions.

I agree with you all in general financial advisors have been almost useless, perhaps saying I am different is a moot point but I started out just like you all in this forum reading books, educating myself, and then deciding to start a business because there had to be a better way to invest!

Thats why I am here

Follow my blog here: http://financeinlife.blogspot.com/2012/ ... t-now.html

Michael,

I don't care what "you are about." I will not click on your link to your blog and I would encourage others to not do so as well. Until I am convinced that any type of Financial Advisor does more good than bad, I will continue to steer people away from them. Sure out of indolence some people may desire an FA, but it is far from a necessity.

Please, I encourage to show off your financial advising "badassity" by answering questions and being involved around here without peddling your business. Peddling your business may be allowed (and probably the one reason this thread hasn't been deleted is b/c I responded to it), but I will throw my virtual hissy fits over you preying on the weak.

Michael,

I am not speaking for Mr. Frise although I generally agree with what he is saying on the topic.

A financial advisor might be very nice, well-intentioned, and intelligent but that does not mean he or she adds any value. There is no evidence, and lots of evidence to the contrary, that any manager can beat the market, except sometimes by chance. But then in any given period, chance would lead to about half of all managers beating the market.

If we start with 1000 managers, we would expect that after 1 year 500 have done better than the market. After 2 years, 250 will have done better over the two years, 125 after 3, 62 after 4, 32 after 5, 16 after 6, 8 after 7, 4 after 9. Now, those 4 managers that are left will certainly be advertising like crazy and at least one of them will probably be written up in Business Week. Money will flock to them. Then, they will all underperform.

Meanwhile, the people who stuck with them during those 9 years have paid probably at least 2% fees every year. They are down 18-20% at least. And that's not even considering the 99.6% of clients that lost money with the managers who did not beat the market.

Meanwhile, the intelligent investor who just bought the market by buying VTI and holding it for those 10 years was assured of matching the market return WITHOUT PAYING FEES except for a tiny initial commission.

Michael, I don't have any reason to think that you are anything but a nice, well-intentioned, and smart guy. But like many of the posters here, I know that active management offers no benefit and decreases return by the amount of the fee. You don't work for free nor should you. But any fees you charge come directly from the profits of your clients.

There are of course some people who don't want to manage their own money. For those people an adviser might be appropriate just like some people don't want to clean their own house and hire a housekeeper.

Based on your postings I think your favorite pitch is REITS. Is that correct? Those are paying quite well right now but only because they are risky. Many of the high yielding ones are leveraged funds that invest in mortgages. If there is a surprise in the economy, perhaps a recession caused by the fiscal cliff, or an uptick in defaults because of increasing unemployment, those funds will get seriously hammered like they did in 2008. That's why no one wants them. When no one wants them the price goes down and the yield goes up... as long as they can keep paying out their dividend. As soon as cash gets tight and the dividend is cut - watch out. I hope your clients are aware of that because if they are not, you are going to have to field some very nasty phone calls next time the market shudders.

There is a very big difference between being a good investment advisor and "beating the market." I see this a lot, people want to compare how well somebody does based on stocks alone and compare their performance to "the market." Unless you are a hedge fund manager this should be nothing other than a barometer for those that want to get an idea what the market is doing versus how they are doing. I personally don't accept 40% losses in my account just because the market crashed in 2000 or 2008 and I don't think you should either.

Let me also clarify "active investment management" I am by no means advocating weekly purchases or day trading but just that asset allocation should be adjusted every few months. You state a time period of 9 years in your example below. I can't attach the SP500 chart for some reason to this post so please go to my blog to see what I am talking about here, I have posted a chart of the S&P 500 back to 1994 here:

http://financeinlife.blogspot.com/2012/ ... -1994.html

So I advocate having a general idea for the market trend and basing your investment decisions off of the pricing or trend of the market. There is a very clear pattern here that any one could see. We top around 1550 in the SP500 and bottom around 800. So I would advocate buying stocks around 800 and for those that want very little management holding until 1550 then selling stocks.

So on this chart are you saying that you would have been better off to just buy and hold stocks from 2000 or someother time to now? Excluding dividends just to avoid paying advising fees? I think there are a lot of bad advisors out there that offer no real help but we can all clearly see this chart has a pattern to it. Why not be aware of it? That is all I am saying. Also, this excludes the sense that many people buy in at the tops and sell out at the bottoms. Investors that lost a lot of money in the 2008 crash probably were too scared to get back into the market when it started moving higher again in 2009. We can't just close our eyes and compare our performance to the S&P500 and say it's impossible to time the market in the long run.

With inverse ETF's now you could profit from the entire decline of the market, something an investment advisor like me could do versus a mutual fund manager which I agree is not worth paying. They are too big and it's too hard for them to move money around when the fund gets too large, you and I agree. If you want to own stocks then go ahead and buy the SPY but be prepared to make adjustments to your allocations from time to time. It isn't all about stocks only.

I don't have a pitch, just that investing should be done with a combination of being aware of market trends and adjusting asset allocation as assets move. REIT's are not my pitch but my recommendation here (and 10% lower when I recommended them before) and it makes sense when the Fed announces $40 billion in new monthly purchases of Mortgage Backed Bonds. Just buying and holding forever because you assume the market is impossible to time in any sense at all is silly, almost as silly as paying a mutual fund manager to pick better stocks than the S&P 500 but that is not my angle here. Adjustments should be made every few months, that is all I am advocating.

To reply to your comment on my REIT recommendation: I also understand how dividend yield works or I wouldn't be doing this for a living. Your approach to investing would have kept you out of the stock market the entire move from 800 to 1460 where we are now. Of course when there is a surprise of bad news things are going to sell off, but you can't invest just waiting for the next shoe to drop all of the time. My approach would have got you into stocks around 800 and sold out at 1550 (which we will probably reach next year) a gain of 93% and including dividends over the years to probably over 100%.

And Bichon, I welcome all of your comments and have no issue being engaged on this forum. The two of you can continue to reply to these and lets see where we go. It is not my intention to prey on the weak and my clients would probably take major issue with that. Especially considering many are very pleased with the services I provide.

Uhm.. don't you have to be certified in order to call yourself a "Financial Planner?" Doesn't it imply a level of fiduciary duty? Don't you have to be a CFP?

I don't believe you can just suddenly "decide" to be a "Financial Planner" and hang out your shingle, any more than you can decide to call yourself a "Doctor" without the requisite Ph.D or M.D.

I don't think anyone here is saying they're "useless." We're saying they're HARMFUL. If they were useless, but didn't cause any damage, we wouldn't care.



How do you get compensated for "helping" people? Do you get paid a flat-fee, or do you collect commissions? Commissions, right? So then no, you're not at all "different" from other Financial Advisors. You, like all the rest of them, operate in a perpetual conflict-of-interest that places your interests (maximizing your commission) directly at odds with the interest of your clients (maximizing returns through, among other things, minimizing drag due to fees and commissions).

If it really is that easy, then why has no one ever been able to consistently beat the market?

With all that money at stake, and all the expertise out there, and all the improvements in technology and mathematical modeling, if it's really so simple to just "see the patterns in the charts," then why has NO ONE been able to consistenly beat the market, year after year, even by just 1%?

It's because there aren't actually any patterns. The market is efficient, and as soon as any "patterns" evince themselves, everybody flocks to it and it no longer works. I'll give you an example.

Here in Canada, the deadline for investing money in your RRSP (Canadian 401(k)) is February 28th. That's the last day you can put money in your RRSP and still deduct it from your previous year's income taxes. So every February, the banks all run advertisements encouraging people to stuff some cash in their RRSP's. Consequently, buying activity increases in February, and drops off in March. With more buyers, prices are driven up. Makes sense, right?

So a smart investor would buy a bunch of stock in January, to sell to the herd in February as prices are driven up, then wait until March when buying activity dies down (and consequently, prices recede), and then buy their shares back at a discount (or, at least, less than they sold them to the suckers for in February).

Easy enough, right?

Now, a REALLY smart investor would recognize this pattern, and know that in January, all the smart investors will be loading up on stocks in January to sell to the February lemmings. So these REALLY smart investors will actually buy a bunch of stock in December, and sell it in January to those who are buying stocks to sell to the February buyers.

But of course, the SUPER-DUPER smart investors would buy in November to sell to the December buyers who are planning to sell to the January buyers who are going to sell to the masses in February.

And so on.

My point is, once a pattern becomes known, it no longer works. In the example I just outlined above, the end result is that market activity is smoothed out over the whole year, and as it turns out, there is not actually any noticeable "spike" in prices in February.

Because the market is efficient. Timing doesn't work. Trying to outsmart the market doesn't work. Minimizing expenses and buying to the whole market (to ensure you get the market average return, thus beating 50% of all active traders/managers) works.

The market does not just mean stocks. Individuals have such a broad array of investment vehicles available to them these days that they need only make one real decision - asset allocation. Once a person decides that they want to be 20% in bonds (for example), they can buy a bond index fund with that 20% and put the remaining 80% in a low fee stock fund like VFINX or VTI if you prefer ETFs.

There is no point in trading for the reasons Kombat clearly illustrated. I don't agree with him that timing is NEVER a good idea but I do think timing opportunities are very rare. I think I've made 3 or 4 in the last 12-13 years. I got mostly out of stocks in January 2000 then moved back in over the next few years mostly with new money. I made a similar huge sale in July-September 2008. So I kind of missed the horror. Was I smart? I like to think that yes I was, maybe a little. But I'm too smart to think that I am that smart. I got lucky for the most part.

As mentioned elsewhere, I made a modest move last week so we'll see if I did the right thing. I say modest because I basically sold about 10% of my "total stock market" money to shift into bonds. The truth is, I hope it was a bad move and the market keeps going up. My reason had more to do with allocation and the timing was just a convenience. But the bottom line is that I believe in only a weak form of efficient markets so I am far more willing than Kombat and some others here to believe that some trading can lead to long term profits. But only if exercised very cautiously and infrequently.

So where is the financial advisor in all this? Again, I'm not as hard core anti-advisor as many here. But I do believe that advisors almost never earn their fee. By that I mean that, for an advisor to earn their fee they would need to earn returns for the client more than their fee over what the client would have earned on their own. There are managers who have done this, many for a decade or more. But eventually they all fall short. So I don't believe that a manager can earn excess returns beyond what an informed and educated client can do on their own.

But that does not mean I see no role for professional advisors. There are many people who don't like managing money and want to pay a professional to do it. I don't like doing plumbing so I pay plumbers. In my opinion they are worth their fee, not because I can't do it on my own but because I choose to spend my time in other ways. But with money management it is just so easy these days to successfully do it on your own that I think the pool of people who need to pay advisors is shrinking rapidly.

(I would note that your comment about driving a $75000 car instantly made me think of the quip "But where are all the customers' yachts?"

Oh my God. I haven't posted here in a while but I couldn't pass on this thread.

Over the past few years I have seen some long-term market timing ideas (e.g. using PE10) that, while very questionable, were at least intriguing because they were grounded in some plausible theory. Your "buy at 800 and sell at 1550" idea, Mike, is not one of them. You are looking at the past 20 years, seeing some nominal figures, and extrapolating it into the indefinite future. What about inflation? What about real earnings growth?

Whenever someone is posting such ridiculous ideas, there are only two possibilities: (1) you are in a position to profit by defrauding the gullible and uneducated, or (2) you are really just that dumb. Most "investment advisers" fall squarely into the first category, but I looked at your blog and decided that you are different. I was amused by your bold, and often disastrous, market predictions followed up occasionally with sincere expressions of astonishment and humility when the market did something different.

In December of 2011 you told people to buy DUG (down 29% since then) as well as FAZ (down 57%). You've repeatedly told people to stay away from the S&P 500 (which is up 22% since you started your blog) while telling them to buy GLD (up only 3% since your Dec '11 recommendation) and TNH (up only 2% since your Feb '12 recommendation). What happened? I thought there were "very clear pattern[s] here that any one could see..."

I wish your blog went back to 2008-2009. Were you even involved with investing back then? I ask because you honestly seem like someone in the earliest stages of learning about this stuff. I can recall, when I first started investing, seeing "patterns" and brimming with confidence that I had it all figured out. Then I got an education.

You are a danger not only to your clients, who I truly hope do not exist, but also to yourself. My advice is the following: get a real job, begin saving aggressively, read a book that covers some foundational ideas (I like Bernstein's Four Pillars), and invest accordingly.

Tim

Missed you Tim!



Heeheehee, every crash has a clear pattern of up trend leading right to the brink.

You just illustrated why most advisors do not air their suggestions publicly, except singling out their winners in hindsight. Mr. Goldberg's losses will live forever in the wayback machine for all to see! Something tells me those old posts will disappear soon and we won't see many new predictions.

Wow, what a pile-on! First there's the image of our resident bichon frisé biting at the ankles of a marchand de tapis. Then the pit bulls come in for the kill. Not a pretty sight, but entertaining reading nonetheless.

Well, it is "Get Rich SLOWLY." We don't want the process to be fast. If I got 14% returns I'd be done way too fast. Where's the fun in that?

Seriously, I wasn't going in for the kill. I can see a role for advisors. But I would not want anyone to think that any advisor can do better than the market on a consistent and reliable basis after adjusting for risk.

This made me laugh... a lot.



Thanks. I've still been reading the forums on occasion, but over the last year or so I had to stop posting and spend my time on other things. I've had the pleasure of more free time lately.

Tim