Yesterday, AEP left a brochure on our door explaining they were replacing our electric meter with a new "smart" meter.  This meter will transmit data to the electric company automatically thus no more manual meter reading.  That translates to no more meter readers which are people. I don't know how many meter readers there are in this country, but most likely that is a lot of people that will be (or already are) out of work.  I have been saying that I felt companies laid off a lot of people and replaced them with technology.  They spent money on technology that does the jobs that people used to do.  The downturn in the economy forced the layoffs but they had to find a way to keep production going with fewer people. 

I had to do the same thing.  When Mark resigned a year ago, the economy was in the tank and I did not want to spend the money on replacing him.  So, I had to figure out a way to automate some or all of what he was doing.  My brother taught me how to write scripts and I built some spreadsheets with complicated formulas and macros and automated that process.  In addition I have automated almost all our manual processes.  This leaves more time to analyze client portfolios and investments, and it gives me more time to spend with clients. 

I believe this is what is happening around our country.  Companies are investing in technology to do the work that people manually used to do.  This is not bad, but it means that our kids need to have college educations.  They must have knowledge to do the jobs computers cannot do.  They cannot afford not to have a college degree.  There will always be certain low income jobs that cannot be automated.  However, I believe the number of those jobs is getting smaller due to automation. 

Jobs are still hard to come by apparently, so if you are looking for work, you have to bring something special to the table.  You have to set yourself apart from the hundreds of people applying for the same job.  It is not enough just to fill out an online application and/or send in your resume.  You have to be different.

When our son turned 16, we made him get a job (he was playing too many video games!).  I made him create a resume and told him to dress like he was going to church, because all the other kids were applying for jobs by just filling out applications and showing up in ratted out jeans, shirts that were un-tucked and running shoes that were untied.  He started to apply for jobs and did not take the resume and dressed like all the other kids.  He received no job offers after a week of looking.  I gave him a deadline of midnight that day to find a job.  He dressed like I told him to and hand delivered his resume to the managers of the businesses he went to.  He went to 5 businesses and got 5 job offers.  He set himself apart from everyone else. 

I am not saying that getting a college degree guarantees you success.  I know many people who are extremely successful who have no college degree.  However, unless you plan to own a business, you chances of success without a college degree are getting smaller due to technology changes.  You have to have a skill that computers cannot do. 

Pass this on to someone who is looking for work, and maybe it will help them get a job.  Pass it on to a kid you know who is thinking about not going to college, it might change his mind.

THE STOCK MARKET: The second quarter company earnings reports have been great for the most part and the stock market responded very favorably.  July was a good month.  The stock market closed above the 200 Day Moving Average yesterday.  I have mentioned this technical indicator many times before.  This indicator is at an important inflection point. The stock market fell below its 200 day moving average in May. If it can hold above that level, then we will most likely see a continued rise in the stock market.

Investors are feeling a little better because of the earnings that companies are reporting and Europe may not be as bad as originally thought.  Also, volatility has come down some.

I plan to commit the cash we are holding if the market sells off 3-5% or it holds above 1114 on the S&P 500 for several days.  We have been performing well against the market even though we are holding 12% cash.  My moves to remove the more volatile holdings has helped a lot.

One thing being talked about a lot on CNBC is “high frequency traders”.  These are investors who use computer programs to trade very frequently.  I read somewhere that they account for 75% of the volume traded in a day.  These investors are driving the volatility in the market.  This has become more of an issue since so many retail investors have left the stock market. 

I just heard on CNBC that 80% of money going into mutual funds has been going into bond funds.  This is when companies’ earnings are improving.  When a pendulum swings so far one way, it usually swings back the other way.

The stock market is definitely different from what it used to be.  Investors can trade on their phones.  I was flying to California for a wedding last week and was connected to my computers the entire flight using my iPad!  I even made a trade.  Technology has made it much easier to trade and is contributing to the volatility we are experiencing.  But, panic has also been driving the market the last two years.  That panic feeling seems to be settling out some lately.  Hopefully, investors will get back to normal investing.

THE BOND MARKET: There has been little change to the bond yields.  They are  still extremely low.  Once the panic in the stock market subsides, I would guess you will see many people moving out of bonds and into stocks.  

NEW TECHNOLOGY: Our new vault system is ready!  This quarter’s reports will go into your vault.  You will be receiving an email with your username and password.  You will need to login within 24 hours of receiving the email, or you will have to notify us so we can reset your password.  Once you login, you will be asked to change your password.  After you change your password, the system will take you to a section of the vault titled “Unread Files“. This section contains the reports we have uploaded that you have not viewed.  Once you view the report, it will be moved out of “Unread Files” and into one of the directories we have created.  We will be emailing a set of instructions that tells you how to navigate within the vault.  We are going to upload the June report, AND we are going to start uploading monthly reports.  So when you login this first time, you are going to see two reports (June and July).

This is going to be a much more secure and efficient means of distributing reports to clients.  In addition, we are going to create accounts in the vault for your accountants so they can login and get your tax information without you having to provide it to them.  We have contact information for many of our clients’ accountants, but email or call us with your accountant’s name and email address and we will set up an account for them.

I hope you like this change!

Investors are extremely bearish, but I just read in one of the newsletters I get that a investor psychology gauge just moved into their lowest category.  This has only happened twice before since 1990.  One time was in October 2002 and the other was in October of 2008.  The market bounced higher 20% after that October 2002 low but then went back down to that low by March 2003, but then moved dramatically higher.  After the October 2008 low, the market moved up about 10% but then sold off significantly to the low made on March 2009.  But, then the market moved dramatically higher from there.  

The stock market has had a strong bounce this week following a bad couple of months.  Companies will start announcing second quarter earnings next week.  It is expected that they will announce good earnings, but investors want to see what they say about the future.  As I said in the newsletter this week, if they do not indicate growth going forward, then we will see another sell off in the market most likely.  On the other hand, good projections will most likely cause stocks to go up hard. 

There are a lot of investors “short” the market.  That means they think the market is going down.  If the earnings reports are good, they may get “squeezed” out of their positions.  That means they have to buy stock to cover their shorts.  This will provide significant fuel for stocks to go higher.  We are at a pivot point in the market. It is tough to pick which way it is going to go.  So, we are going to sit with the cash we have and see if the market can break above the trading range we have been in.  If the S&P 500 can close above 1100 on the S&P for several days, then we are most likely going to go higher. 

I want more weeks like this week!

THE STOCK MARKET:  The month of June saw the stock market continue its slide.  I raised a little more cash when making trades to remove more volatility from our holdings.  I feel I have a pretty good balance and now have about 12-13% (of the money that is designated for the stock market) in money market for most clients.  The stock market is very “oversold” again and the S&P 500 Index closed below the 1040 support level at the end of last week.  This is not viewed as a good sign.  It has held close to that level the last few days. 

There are a lot of negatives that are preventing investors from buying.  It is not that there are a lot of sellers, there simply are no buyers.  I believe they are waiting for a catalyst.  The economic data that has been coming out is pointing to our economy (and the world economies) slowing down.  Many are questioning whether we are going to have a “double dip recession”.  That means we may go back into a recession.  That would not be good for the stock market.  Most believe this will not happen.

Companies will start announcing their second quarter earnings.  These earnings reports need to be good, and investors will be looking to see what companies say about their future.  If they report strong earnings and have good things to say about their future, then we will most likely see a strong up-surge in the stock market.  However, if earnings are not strong and/or they cannot paint a good picture going forward, then I expect the market to fall further.  I will raise more cash if the latter occurs. 

Investors differ widely about what they think will happen in the stock market.  Some talk very strongly that the market is near a bottom and others say we have significantly more to the downside to come.  Investor pessimism is extremely high.  When we are in a situation like this, one trigger can cause a huge swing in either direction. 

The moves I made in the second quarter were to try to tone down the volatile moves.  They worked, but we still lost money in the second quarter. 

The bond market is signaling that growth in the second quarter is going to be slower than expected earlier in the year.

THE BOND MARKET:The 10 year Treasury bond yield is  used to project what economic growth (GDP growth) will be.  Right now, the 10 year yield is 2.9%.  So, roughly the bond market is projecting GDP growth of less than 3% in the second half.  We want growth to be higher to get the economy running better.  The extremely low yields on bonds are also indicating that there is a huge demand for safety.  This condition has persisted for a couple of years.  Yields keep going down.  Many are referring to this as a “bond bubble”.  There is going to come a time when investors are no longer fearful and will start demanding higher yields.  It is certainly not right now.  But, many believe when this turn occurs, bonds will go down in value quickly.  When I make this comment, clients ask “should we sell our bonds”.  As long as we hold our bonds to maturity, the moves in market value do not really matter.  Also, if we sold bonds now, then we have to have somewhere to invest the money.  The only way that game works is if you buy bonds with longer maturities, but right now I don’t want to lock in these low yields for long periods. 

NEW TECHNOLOGY: Our new vault system is almost ready.  This quarter’s reports will go into your vault.  You will be receiving emails explaining how the system is going to work.  There will most likely be a learning curve, but we will work through the issues.  In the long term this is going to be a much better and more secure system.  You will be able to easily look at past reports too.

Another round of company earnings will start in just over a month.  Investors may wait to see what companies report.  It is not uncommon for the summer months to be down, flat or move in a trading range.  There still is a lot of pessimism among investors.  That actually is good.  It is said “the market climbs a wall of worry”.  It will not take much to make the stock market move big in either direction when investors are so nervous.

THE BOND MARKET:The volatility of the stock market still has investors running to bonds, which is driving down yields even more!  It is hard to believe how low interest rates are.   Right now, many investors just want to preserve their capital and do not care how much interest they can earn.   Eventually, that will change, and they will demand higher yields.  But, we are stuck with these low yields as long as the worries in the world are as great as they are. 

NEW TECHNOLOGY:I continued on with our technology changes this past month and completed the security audit as well as encrypted all our computers with sensitive client information as well as our back up drives that I take off site.  So, our office, our data and client files are now locked down as good as I can get it.

The next project I want to tackle is to get the “vault” set up.  The vault is where you will go to get your reports.  It is also a place you can safely store important documents if you want.  This will require you to login to your vault, which will be more time consuming than simply clicking on an attachment to an email.  However, this will be much more secure than emails, plus you will be able to see your past reports there.  I am going to set it up to delete certain reports after a certain time period, but I am going to leave the year end reports and tax information in the vault. 

FINAL COMMENT:I know the market volatility is getting to many investors, but know that I’m worrying about your money as much if not more than you are!  Just ask Donna!

May 20, 2010

There is always a trigger that sends the stock market down. Right now the trigger is Europe, which is in chaos. Investors always see to look for the next negative and something to worry about. It is hard not to get caught up in all of it. I have to remind myself that we are long term investors, but that does not stop me from watching it on a minute by minute basis. The correction that I wrote about on May 6^this definitely in full swing. Panic is starting to set in. The stock market has now broken some key support levels. 

The S&P 500 Index has broken through the “200 Day Moving Average” this morning. This is an important level and causes automatic computer trading to kick in and send sell orders out. This will speed up the decline. Sometimes the market will bounce back up after reaching the 200 Day Moving Average line, but other times it will be a signal that things are going to get worse. 

We have been holding some cash waiting for the pullback and now that it is happening, I am trying to decide when to put it back in the market. Usually, when it feels the worst, it is the best time to invest. It feels pretty crummy right now! If we are thinking long term then now is a better time than a month ago. I guess you are paying me to worry about that, right?

As I wrote last time, the difference now than in 2008 to 2009 (the Great Recession), companies are doing a lot better. The consumer is spending a little more, and they have reduced a lot of their debt. The earnings companies just reported were really good. However, now some headwinds are forming. China is trying to control their inflation and is slowing their economy. Europe is trying to keep countries from defaulting. Our problem was financial institutions failing, but their problem is one or more COUNTRY failing. This is a big concern to investors. 

More investors are moving their investments to the United States. We reduced our foreign (Emerging Markets) exposure back on March 25^th. I sold half of our position which we had profits in. The emerging markets did great last year, but have been lagging the market this year. I am considering rotating out of that position entirely. 

To close, I will say that this correction could easily continue. Selling will typically accelerate as we get near the bottom of the correction. I want to wait to see what develops over the weekend before deciding whether to invest the cash. Fridays have not been great days to make moves as investors worry about what news will come out over the weekend. The European Union is meeting this weekend for a critical vote. Investors are anxiously awaiting the outcome. If you wanted to travel to Europe, it is a whole lot cheaper now than it was just a few months ago because the Euro has dropped a lot against the dollar. 

Well, that’s it for now. You’ll probably hear more frequently from me for awhile as I attempt to keep you informed on what is going on.

The pullback was overdue and the financial troubles in Greece and other parts of Europe have investors nervous. Then, the big oil spill in the Gulf raised that nervousness. The bottom line is that traders and hedge funds were looking for a reason to sell, and these events have become their reason. Volume has not spiked up a whole lot. Companies are reporting great earnings growth. Cash is building in those companies. In addition, people are starting to spend money again. My brother-in-law in Dallas said he is seeing restaurants filling up again. 

There is still a lot of nervousness about the stock market by the individual investor, but that is actually good. It is called “climbing a wall of worry”. That just means the market tends to go up when there is a lot of nervousness by investors. 

In addition, interest rates remain very low. This is being caused by investors piling into bonds, and the Fed keeping rates low. 

In summary, I do not believe this pullback is a reason to panic. On the contrary, I believe it is a time to invest back into the market. I believe this pullback could last a couple of weeks to a couple of months. It is not uncommon for the summer months to be not that great. There is an old saying “Sell in May and go away”. That did not work so great last year! I am not convinced that will work this year either. 

THE BOND MARKET:The stock market pullback causes some bonds to go up in value (which makes yields go down), so it is still very tough to find any bonds with very good yields. I look constantly. Clients call me all the time and tell me their CD is maturing and they want to know if I have any better yields. The bottom line is that if you want to stay as safe as CD’s then it is very difficult to increase yields much. I’m still not wanting to lock in low rates for a long period. Rates will undoubtedly rise due to all the government debt.

NEW TECHNOLOGY:I started last month telling you about changes I am making to our technology and security. Since then, I have had a monitored alarm system installed in our office. In addition, I have contracted with a computer security firm that has already strengthened our firewall to prevent intrusions into our computer network. They are testing our network for vulnerabilities from inside and outside of our network. They are going to “encrypt” all our computer hard drives (internal and external). This just means that if someone steals a computer or tries to hack into it, it will lock down to protect our clients’ data. I spoke with a software vendor yesterday, and she told me that she knows of no other Investment Advisor who has encrypted their drives. That does not mean I am the first, but at least I am at the head of the pack! Finally, I have started setting up the “vault” system that I mentioned last month. I will send out more information about this, but this will be a secure system for you to retrieve you reports and documents. More later on this! All this is an effort to protect your identity.

April 13, 2010

I’ve had five different people in the last two weeks tell me their business is much better. I just read something that said that employment for small businesses grew in March. First quarter earnings start coming out this week. So what should we expect?

Companies (both small and large) reduced payrolls and refrained from new capital expenditures as much as possible last year. They have been hoarding cash. Individuals did the same thing and have been reducing their debt. Now, the stock market has had a huge rebound, and cash is building. The higher income individuals are starting to spend again based on some reports I have read. Most professional investors that I have heard or read expect companies to report great earnings. The stock market may have run up too much ahead of the earnings, and we could see a minor pull back. However, I would view any pullback as a buying opportunity. 

For the last eight months at least, I have been hearing over and over that commercial real estate is the next shoe to drop. From what I have heard, commercial real estate construction has all but ceased. However, the funds I track, that are in commercial real estate, are running up this year. I just heard a report on CNBC that commercial real estate partnerships, that are publicly traded, are doing well. So, perhaps that shoe is not going to drop after all, and perhaps we have seen the worst of it. Who knows?

The stock market is behaving much more normally this year compared to the last couple of years. It has had a substantial run since the February 8th low, so I fully expect some pull back as I said above. 

Interest rates are still very low, but I have bought a couple of bonds this past week with some reasonably good yields. Right now, it looks like it will be several months before interest rates rise significantly. Investors continue to snap up all the bonds our government is issuing. Each auction is over-subscribed. That is good for our government, but it is keeping yields low. 

I would love to hear from you as to how well your business is doing. That is one way I keep tabs on the economy. 

February 25, 2010

The stock market started the much anticipated 10% pull back on January 20th. But, the S&P 500 only sold off about 8% before it then bounced back. It looks like we may be in trading range. This simply means we will go up and then go down. It looks like it is going to be a tight trading range, which means it might move up and down 3-5%. Trading ranges will cause the market to move sideways to down.

There are some headwinds holding the stock market back: Greece, the threat of tax increases, and health care reform. It is the uncertainty of all of this that is causing investors not to buy stocks with conviction that all is going to be well. Even though companies just reported good earnings and revenues this past quarter, the conviction is not there that the economy is improving. Today, the weekly jobless numbers were released and they increased instead of decreased. It could be due to all the snow around the country, but regardless of the reason, it was enough to cause the stock market to sell off. So, the top of the trading range appears to be around 1100 on the S&P 500 Index and the bottom of the range may be around 1050. That is only about a 5% range. 

On the bond front, I continue to be amazed at how low the yields are on the bonds I can buy. I am finding the best yields in the municipal bond market right now. I am focusing on bonds backed by the Texas “public school fund guarantee”. I asked one of the bond brokers what the percentage of municipal bonds default, and he said less than 1%. So, I am trying to stay with these Texas school bonds, insured bonds, and highly rated “General Obligation” bonds. This just means we are staying with the higher quality municipal bonds. 

I am finding some corporate bonds, but only a few clients are willing to take the risk associated with those bonds. CD’s are not paying enough, so I have not bought a CD in several months. The bottom line is that bond yields are ridiculously low, and I am unwilling to lock in those low yields. The yields would not be this low if the demand for bonds was not high. This means that investors are still running from the stock market. I am not sure when this will change and yields will start rising. I keep thinking it has to occur, but interest rates remain stubbornly low. 

In summary, the key things investors are worried about are unemployment and what changes to our laws will occur. The trading range I have described will remain until unemployment begins to fall and there is more clarity of what changes to our taxes and healthcare system will occur. 

January 14, 2010

This time last year and through just six or seven months ago, people were talking about another Depression. Now, they refer to it as the “Great Recession”. It is believed the recession is over. Officially, that is not announced until after the fact. Either way, it still feels bad to many people and businesses. Larger businesses are starting to recover, but cities and states are struggling. The bond market is telling us that panic is still alive and well. I am amazed that investors are willing to lock in these unbelievably low interest rates. The good news is stability is returning in the credit markets and the stock markets.

I hope to forget how I was feeling this time last year. 2008 to 2009 was the toughest period of my career that I can remember. I was not alone in that feeling from what I have read and heard from others. We went from a period of protecting what we had left to be willing to go back into the stock market even though things seemed so uncertain. Many people left the stock market and probably will never come back to it. More money flowed into bond funds than stock funds in 2009 even though the stock market had an unbelievable snap back from the March 9th low to the end of the year. The fact is that many do not believe this market rebound is real. Many are calling for a correction. They have been calling for one since last July. We have not seen a substantial pullback (10% or more) since the low on March 9th. We are overdue for one. But, had we sat out of the market the last quarter of last year to now, we would have missed out on about an 11% run. 

Currently, the trend is up for the stock market, but I am taking profits when one of our holdings runs up a lot in a short period. For example, that OIH (exchange traded fund), that I have written about before, ran up 20% in the last month. We had owned a couple of different purchases since October 23rd and November 16th. They had been down most of that time. Then, after this strong run it had, I decided to take the profits as I feel (based on the charts) that it will most likely sell off then I will buy it again. 

The volatility has come way down in the stock market. That just means we are not seeing the huge swings from day to day. That is good. Interest rates remain very low and this is providing fuel to the stock market. The stock market moved somewhat sideways most of the last quarter, but then started a run up around December 18th. It has stalled a little this week. I am not sure what is going to happen near term. We are eventually going to get a pullback, but if I had to guess, I am thinking it will happen in the second quarter. I don’t think it will be severe, and in fact will probably provide a buying opportunity. That is why I am looking to take some profits and hold some cash. The other possibility is that we simply move sideways for awhile. Usually when that happens, there will be opportunities to trade the market for small gains. We will see how this plays out, but long term I feel the stock market is still a good place to be until rates start to rise significantly.

Unemployment is still very high, and this will most likely keep rates low for much of this year. That will produce a good environment for stocks. Earnings season started this week and will heat up in the coming weeks. If companies report solid earnings, then the rally most likely continues. If the earnings are weak, we will most likely see that pullback. Alcoa announced this week with better revenues but lower earnings per share. We need to see better revenues AND better earnings. It is always something to worry about!

November 4, 2009

I am getting notifications almost daily from Morgan Keegan (a long bond broker) of new issues on municipal bonds. I have also gotten numerous notifications from corporate bond issuers wanting to refinance their bonds. The significance of this is two-fold: 1) They want to reduce the interest rate they are paying on their debt, and 2) They are able to successfully issue debt in the markets.

There is an appetite for bonds. Yields are incredibly low, yet investors continue to buy the low yields. It is good that companies and municipalities can issue debt, especially because they are able to reduce their interest costs. However, a “bond bubble” is developing. Demand is high for bonds (which is good on one side because someone needs to buy all the debt being issued by our government and companies) which is driving prices up and yields down. Nothing goes up forever. Eventually, investors will be less worried about the economy and will seek higher yields from bond issuers or go somewhere else. I am already having conversations with clients who are looking to improve their yields and willing to take more risk. I would be hesitant to invest in bond mutual funds right now, since you cannot hold a bond fund to maturity, and most likely bond prices will decline as interest rates rise. 

On another note, I had conversations with two stock brokers this week and each were very stressed due to the volatility of the stock market last week. Each said that clients who used to think 5 years out are now thinking 5 days out, if that! The fear is still there. There is still concern about the economy. I do not think anyone believes the all clear signal has sounded, but there have definitely been improvements in company earnings and in some sectors of the economy. We have a long way to go, though. They say the stock market “climbs a wall of worry” In other words, the stock market goes up when there is a lot of investor worry, and then rolls over when they get complacent. One well respected professional investor said on CNBC last week that he had never seen a time where half of really smart professionals are on one side and the other half is on the other. That uncertainty is adding to the volatility of the stock market. The bottom line is no one knows what the stock market is going to do, but the stock market is still significantly off its highs and company earnings almost have no place to go but up. So, I believe that the stock market has room to go up. We will undoubtedly have pull backs. The market never goes up forever.

October 14, 2009

The DOW index closed above 10,000 for the first time since over a year ago. The DOW is not as significant as the S&P 500 Index but it is a psychological hurdle. We have gone from talking about the “next Great Depression” to DOW 10,000 in just a few months.

Most professional investors believe the stock market has gone “too far, too fast”, but those same people are saying “don’t fight the tape” and buy into this market. At some point, we will see a significant pull back. So far, the pull backs have been around 5% or less because there is a lot of money that has not come back to the stock market. That is still the case. Bonds are providing investors very little yield, and investors are becoming increasingly willing to take risk. Some of those investors will go back to the stock market which will fuel this upward trend. However, there will be bumps in the road. The unemployment rate is simply too high to have rapid growth. 

The economy is improving, but it is slow growth. I have talked to many business owners, and very few are saying they are doing better than they were a year ago. Many are saying things have stabilized, but few are saying things are improving for them. 

No one knows what is going to happen in the stock market, but I would not be surprised to see this market stall sometime toward the end of this year. We might see the market go up another 5-10% by year end, but then I think it will pause to let the companies’ earnings catch up to it. It won’t take much to trigger a sell off because many professionals expect a big pull back. They will simply sell into any sell off. 

Inflation is a big question. Many (including me) believe all the government borrowing will cause inflation. Thus far, inflation has stayed down, and there are even some deflation fears. Look around. Car prices are about what they were several years ago. There are sales at most clothing stores. It has become normal to have storewide sales, even to the point that consumers are not buying unless it is on sale. So, inflation is not rearing its head yet.

The value of our dollar has been sliding. At some point this becomes really bad, but right now it is helping companies who export their goods to other countries. The stock market has been moving up as the dollar moves down, and vice versa. 

So, here we are at DOW 10,000 and no one knows for sure where we go from here! I believe long term that we can stay in the market, but we just need to remember there will be pull backs along the way. 

September 24, 2009

The stock market has had a tremendous run off the March 9th low. Each time the market starts to pull back, those with cash start buying in which stops the decline. The declines have been limited to less than 5%. September is known as the worst month of the year. However, so far that has not been the case this year. The entire year has been different than normal. Nothing seems to be occurring like “normal”. 

I am using almost every down day to buy into the market as the trend seems to be up, and it appears that things are stabilizing in the economy. I am seeing many companies refinancing their debt through the bond market. We have had four companies, whose bonds we own, offer to buy back their bonds. I have only exercised one of them. This is a good sign. It means they are able to go to the market and get financing, which translates that the lending markets are loosening up. Also, many companies have issued more stock successfully to raise capital for their business. There is an increasing appetite for risk. I believe that is because interest rates are unbelievably low. Investors are less fearful of a complete meltdown of the economy, so they are willing to take more risk than just a few months ago. This is driving bond prices up (and yields down) and it is driving stock prices up. 

It is healthy for the stock market to at least take a pause, and most likely it will go down some. But, it does not have to go down a lot. Many are calling for only a 5% pull back. I am using the pull back as a buying opportunity. I am still buying and selling the OIH exchange traded fund. 

We were able to find some great bonds this year, but the well has virtually dried up on finding high yielding bonds. I am using a TIP exchanged traded fund to hold some of the cash we have been holding. This is very easily sold and the yield has been great thus far. We are keeping maturities on the bonds we are buying really short unless we can lock in a high yield. 

It is not time to relax (on my part), but the fear of total collapse has mostly left. Chairman Bernanke said it in a speech that the recession was over. Investors are going to key in on the company earnings reports that will start being released in a few weeks, and they will be watching the jobless reports. We need to see improvement in both company earnings and in much fewer job losses. I read an article that indicated that the unemployment rate could be near 10% through all of next year! That is not good. We need to see that rate come down. 

Please call if you have any questions.

August 14, 2009

I just heard a report that only 8% of purchases are being put on credit cards and not being paid off each month. He said this was an all time low. People are spending less and trying to get their finances in order.

I created a system years ago that I refer to as a “Cash Flow Management Plan”. I used this system to help clients get their finances in order. I shared the system with one of my clients (Chuck Boecking) and he used the system on his own. He used it primarily because of how it defines and control spending. He liked the system so much he encouraged me to create a website for it. We partnered together (and subsequently brought in his brother, Brent) to build www.runawayfinances.com. The idea behind the website was to provide a tool that people could use who could not afford to hire me to do it for them. As the website evolved, I realized that the online “spending tool” we created was a great tool for other purposes. 

I was recently meeting with clients and asked them about their financial goals. Most were talking about retirement but some were talking about college, weddings and the like. These clients could not give me a definite amount that they were spending each month or year to pay their bills. They had no idea what their fixed expenses were and how much their discretionary expenses were. 

It is extremely difficult to know what you can afford if you do not know what you are spending. That decision seems easy if you have money in savings, but if you commit to some payment, it may cause you to burn through savings if you do not have enough income coming in to cover it. That seems like a simple concept, but how does anyone know what they can afford if they do not know exactly what they are spending? 

The Runaway Finances website has an online tool that allows you to enter in your income and expenses over the last 12 months. It is simple and only takes a couple of hours. Grab your last 12 bank statements and simply enter in your income each month into the tool, and enter only the fixed expenses (not discretionary expenses) into the tool. There is a section called “Weekly Cash” in the tool. The tool processes your income and fixed expenses and calculates how much you can afford to spend weekly on discretionary expenses.

The tool builds in “fat” into the system, so you will most likely have more than enough to cover your bills each month. In other words, it does not take a simple average of your bills. We are working to add some total columns so you can more easily see what your total fixed expenses are. This number is important in determining what income you need for retirement. 

The weekly cash will show you what you can afford to set aside for college, a car purchase, a wedding, etc. I have never met someone who could not reduce his/her discretionary spending if they wanted to. This tool helps you do that if you want to.

In summary, what I realized is that this tool is not just for people who need to control their spending. It is useful for all of us who are planning for retirement or some capital expenditure. I recommend you update your plan each month you get a bank statement. Just replace the previous numbers with the current numbers. The plan will automatically adjust for you. By the way, none of us accesses the database. We will not know what your numbers are. You can print it out and show it to me if you need my help, but I have no access to your numbers. Our hope is that this tool helps people with their finances.

August 8, 2009

The July jobs report was just released and it was not as bad as was expected. We only lost 247,000 jobs in July. Only! We are still losing jobs each month. In fact, that is 19 straight months that we have lost jobs. However, the number is now declining each month, which means that we are on a pace to get to where we are adding jobs eventually. The stock market reacted positively to this news and the bond market reacted negatively (which means interest rates went up). Both those reactions mean that investors feel we are on pace for a recovery. Things are less bad, and that is viewed as good. 

The stock market has had a powerful run off the March 9th low and continued that run in July. The stock market is now extremely “overbought”. That means it has run too far too fast, and should pull back some or at least take a breather and not go up much until earnings catch up. However, there are still a lot of investors who have money that is not invested that are buying in every time the market drops some. That is probably what has kept this market going. We have reached another “resistance” level, which means the market can break through on the upside or fail to break through and go down. These resistance levels make money management really tough!

There is little doubt that many people are still struggling financially. I was in the Dallas area this past weekend, and we had no trouble walking into a restaurant and getting a table. There are no waiting lines. We ate a Friday’s for lunch on Tuesday and there were only a handful of tables filled during the lunch hour. People are still cutting back on their spending and are saving more. Many people have lost jobs, and many have had their hours and/or pay cut. All this is to say that our recovery is going to be slow. It is going to take a while for all the wounds to heal. The unknown is how the stock market will react through this recovery.

I believe that the stock market will continue to rebound as long as earnings start to grow. Companies have been reporting substantial drop in revenues, but have been reporting higher earnings per share than was expected. They have done this by reducing costs, primarily payroll. Hopefully, companies have reduced their payrolls as much as they need to, and now we need to see their earnings grow. Generally, a company’s stock price should rise proportionately with their earnings. There is much more involved, but this is a general principal. I believe that companies have cut costs a ton and have allowed their inventories to dwindle to the point where there is going to be a supply issue. We will see production ramp up big when demand returns. This will cause a huge spike in earnings. I am focusing on sectors of the market that will benefit from that ramp up. I also believe that there will be significant spending on infrastructure, so I am investing in those sectors. 

I do not believe we are returning to the lows of March. We will have pull backs and we probably will have one sometime soon, but I do not think they will be severe. Pullbacks happen in the market all the time. I will use those pull backs to continue buying back into the market.

July 8, 2009

I just had a client ask a great question. “Should I keep putting money in my 401K?” The answer is somewhat involved. First, everyone should have some savings outside of retirement plans. Some call this an “emergency fund”. I believe you should divert some of the money you are contributing to a 401K plan to an emergency fund IF you do not have an adequate fund built up. Others, like me, have been paying for college and weddings. Sometimes events like these may necessitate that your retirement savings be put on hold while you save for those expenses. Ideally, you have enough money to do both.

Once you decide how much you have available to contribute to a 401K, you should answer the question of how it should be invested. Many people are stopping their contributions to their 401K plan because they are losing money in the stock market. Don’t stop contributing to the plan. Instead consider changing how it is invested. Look at all your investments together (including the 401K and investments outside of the 401K). Develop an investment strategy for all the money. For example, I asked this client how much his 401K balance is to his total investments. He answered that it was about 5%. The only stock market investment he has is in his 401K plan. Therefore, he only has 5% of his investments in the stock market.

I believe that it is important to have a diversity of investments. By this I mean different asset classes like your business, real estate, stocks, bonds, CD’s, life settlements, etc. There are many ways to your invest your money. No one asset class will be the best asset class all the time. Diversification among different asset classes will provide you an opportunity to make money in at least part of your investments most of the time. Occasionally, there will be periods where many asset classes will go up or down at the same time. Many asset classes went down in this current economic crisis. 

Many people are tired of the stock market. They are trying to decide whether to throw in the towel. No one can guarantee that the stock market will go up from here. History says it always has, but that does NOT mean it will. Everyone should do an assessment of their investments and financial goals, then develop a strategy for their investments to meet their goals. The stock market is just ONE asset class.

May 28, 2009

The stock market rise may have stalled and interest rates are going up.

The stock market has had a huge run off the bottom on March 9th, but it seems to have run out of steam. It has been running up because signs have been appearing that things are “less bad”. But, now investors want to see improvement. They want to see signs that things have bottomed and are now improving. That is most likely going to take awhile. How long, no one seems to be able to agree on. Many are still expecting a pull back as that is totally normal after a strong run in a short time. Most believe we are NOT going to go back to the March 9th lows, but it is common to retrace 50% of a run up. I have not heard many think we will pull back that much. The main reason for this is there are many professional money managers who still are sitting on a lot of cash, and want to be back in the stock market. We are in that camp.

We have held a high percentage of cash mainly to protect the downside during these uncertain and volatile markets. However, now the threat of another Depression seems to be off the table. The problems have not totally disappeared though. Commercial real estate, credit card defaults, unemployment, and further home foreclosures are still looming problems. Any significant bad news will send the market down. The stock market has stalled between 930 and 880 on the S&P 500. The low on March 9th was 666. 800 would be a 50% retracement. Many believe it will go back to 850. All this is to say the downside risk is expected to be 5-10% and the upside potential is unknown. 

Switching to the bond market, 30 year government bond yields have gone from a low of 2.5% in mid-December to 4.6% today. Most believe inflation is inevitable due to all the government borrowing. I agree with this and that is why I am not rushing to lock in long term bonds right now. The panic is subsiding and investors are willing to take more risk. This means they are demanding higher yields on bonds. Right now, if you want to be totally safe, CD’s are providing the highest interest rates. However, those rates are really low. We are buying mostly secondary CD’s (ie. ones people are selling) and have gotten some reasonably high rates. Unfortunately, we cannot buy as much as we want. 

We are finding some relatively high yields on lower grade corporate bonds. We are only buying ones of well known companies and bonds with very short maturities (typically less than one year but no more than three years), Interest rates could get very high like they were in the late 70’s and early 80’s. We want to be able to lock in those high yields, so that is why we are keeping maturities very short now. 

I think our country still faces lots of problems. There is no way we can go from almost a depression to everything is great in 6 months. This is going to take some time to work through all the problems. I do think things are “getting less bad”, but there are still many issues. I am very concerned about many of the decisions coming out of Washington. We undoubtedly will see higher taxes and higher costs of doing business, as we cannot spend our way out of this problem forever. I will admit to being an optimist, and I believe Americans will figure out how to adjust and make a profit from all this mess. 

I have read several doom and gloom reports, and most of those claim to have predicted this last market decline. Many of them have been predicting a decline for a long time. Eventually they are going to be right! So, I do not put much stock in any one of them, but try to accumulate as much information I can to formulate my own opinion. I am not one that believes the stock market is a bad asset class. I do, however, believe that we need to spread our money among several asset classes. I also believe each one of us needs to establish financial goals and develop and investment strategy that will get us to those goals. We are in the process of reviewing each of our client’s strategy with them. In that process, we are going to help them establish financial goals. This process will take some time, but is very worthwhile. 

April 21, 2009

The stock market has had a fantastic run off the low made on March 9th. Normally, off this kind of rally off a bottom, we would see a pull back of some kind. I do not believe we are going to revisit the March 9th lows, but the market is “overbought” and there should be at least some sideways movement for some number of days. The good news is that there seems to be more hope that the problems have at least stabilized.

Companies are releasing their earnings for the first quarter, and they are beating the analyst’s estimates. However, those estimates had been lowered significantly. Their earnings are way off their earnings for the same period last year. Few disagree that there are still a mountain of problems in the economy, but many are more hopeful then they were just a couple of months ago. There is significantly more optimism than there was. 

There is an old saying “sell in May and go away”. They mean go away for the summer. The third quarter of the year is not great many times. With the recent run up in the stock market, and with the charts indicating that stocks are generally overbought, it is possible we will see a gradual decline in the stock market over the coming weeks. I’m no longer worried of a major pull back, though. I will most likely work money back into the market on days the market is down. 

If you pulled out of the stock market earlier this year in your 401K plans, then you might do the same thing. At least, start putting your new contributions back into the market. Your existing money can be moved into the market in small pieces, and preferably do this on days that the market is down, especially bid down days. 

As I said, there is a chance we will get some kind of pull back, but I do not think it will be huge. This will be a time to buy in. I still believe that there will be times where we need to take profits, let the market settle down and then buy in again. The volume (ie. the number of shares trading) is increasing. This is happening on up days which means we are getting buying volume. This is good. In summary, it appears the level of fear is subsiding, and buyers are returning to the market. The volatility index is still high, so we can expect big swings in any given day. 

March 23, 2009

Treasury Secretary Geithner finally announced his plan for the “toxic assets” on the banks’ balance sheets and the stock market reacted strongly to the upside (+7.13%). I am not sure that necessarily says that it is a good plan, but who cares at this point! What is amazing to me is that the market is up 20% off its low, yet it just now got back to where we sold out! In other words, it feels like the market has run way up, but it is still way down from the start of the decline. There is still room to the upside, but most (including me) believe this is going to peak and come back down. We are at a critical level because we closed above 800 on the S&P 500 Index. This is an important support level. Many believe the market will continue to run up if it will stay above this level. I am watching this very carefully each day as I intend to take profits when I think we have run as far as we are going to.

There are some incredible yields on some corporate bonds. I have been looking daily for them. I am looking for big companies I am familiar with (like Xerox, Motorola, etc.) whose bonds are trading either at the bottom end of “investment grade” or just below investment grade. I’m finding yields of about 10% for 1 - 2 years. Many of these bonds were trading at full value last August and before, but the credit crisis panic drove the prices down. I am especially looking for high yielding bonds that mature in less than 1 year. Yields are so low on highly rated bonds that I am hesitant to lock them up, so I am looking for these short term bonds just to get some yield while we wait for yields to come back up. Many of our bond clients do not want to take this kind of risk, so I am not using them for all clients.

My wife and I decided over the weekend that we should all turn off the news, because we are not seeing the signs of a bad economy around Texas. I have heard of very few instances of businesses who are struggling. Many say their business is off, but one guy said yesterday “Our business is down this year compared to the last couple, but we are significantly higher than back in 2000.” I thought that was a great way to look at things!

March 13, 2009

Most believe A “Bear Market Rally” is underway. This means the stock market stages a rally within a bear market (ie. a market that is trending lower), and by definition, it will not last. A rally like this can last for several weeks and be very strong. The last one we had (November 21 to January 6) ran up about 24%. This rally started on Tuesday of this week and has already run 10% in 3 days. We started buying in yesterday. We plan to invest more on “dips”. We most likely will not go 100% invested, but we want to take advantage of an opportunity. We are buying in at lower values than where we exited the market, so that is good. We plan to take profits on these trades as the rally continues, as we believe this rally will rollover and come back down.

This rally started when Victor Pandit (CitiBank’s CEO) sent a letter to his employees stating that they were profitable in the first two months of this year. Then, JP Morgan’s and Bank of America’s CEO’s said the same thing the next day. Then, yesterday GM announced that they will NOT need the $2 billion from the government that they thought they would need. This was huge news and the markets loved it. Also, yesterday retail sales were announced and they were not as bad as was expected. These are small glimmers of hope, and this caused the markets to respond strongly upward. 

Each piece of positive news will have a powerful effect on the markets. However, big negative news will have a huge negative effect, because investors are very nervous. One of my reasons for wanting to go back into the market is that there has been a huge increase in withdrawals from the stock market by retail investors. This usually signals a bottom. That fact combined with the fact that the market was extremely “oversold” (ie. it had sold off a lot since January 6th) set the stage for this rally. 

Most believe this rally has more room to go. In fact, many believe this will run another 15-20%. As I said, we plan to buy more on dips. We buy during the day so we can buy on dips in the middle of the day. We are buying exchange traded funds (ETF’s) as they trade like stocks. Mutual funds only trade at the end of the day. So, it is harder to buy dips in your 401K’s, but you can buy on down days. Watch the S&P 500 Index. It is at about 750 right now. Some believe this rally will go to 900. 800 is a critical level. If we can get above 800, then it can run further. We will go 100% out of the market again once we feel the rally shows signs of exhaustion. The longer it lasts, the longer we can afford to wait to get out. 

I wanted to keep you informed on what is going on. Call if you have any questions.

March 6, 2009

The trend seems to be down for the stock market day after day. Just a couple of weeks ago, everyone on CNBC said the stock market was heading lower. Now, some of the most negative people are starting to buy into this market. They are “nibbling” which means they are buying small pieces and not doing it all at once. Many are saying we should get a bounce any day now. Some are even predicting a “vicious” bounce. We got out of the market a couple of weeks ago with about 60% of the assets and then the rest last week. This has been a great move thus far, but now we have to determine when to go back in. I want to explain what we are looking for in today’s comments.

We watch the “intraday” (during the day) movement of the S&P 500 and the Nasdaq 100 (100 of the largest Nasdaq stocks which are mostly technology and healthcare stocks). We also watch the intraday volume of the S&P 500 Index. We have been seeing the volume pick up when the market is selling off, and the volume decrease when the market is going up. This means there are more sellers than buyers. We need to see increased volume when the market is going up. That would mean buyers are stepping back in. The market has been going down mostly with low volume. That means there are no buyers and frankly not many sellers. The volume has picked up since February 20th and those have been mostly selling days. We are watching carefully to see if the buying volume picks up.

We have also noticed that the market sells off in the last 30-45 minutes of the day. The last hour of the trading day is commonly referred to as the most important hour of the trading day. That is because this is when most professional investors make their trades. The emotional trading is typically done in the morning. We are watching for buying to pick up in the last hour of the day. 

In summary, we want to see buying volume increase, and we want to see buying at the end of the day. Once we see 2-3 days of this, then the market may be starting the bounce and this bounce could be huge. I still do not believe it will last, but it might be one we want to invest in with some of our money. Each day the market goes down gives us more room to decide this move. We are still not seeing any positives developing in the economy. But, once all the sellers are done selling, the market typically will bounce up hard ahead of the good news. The key is that investors get to the point where they say it may go down, but they do not want to miss out on the rebound, so they start buying. Then, more and more start buying. That is why the bounce will most likely be very strong.

It is amazing how beaten up some stocks are. I keep thinking they cannot go lower but they do. These are unbelievable times.

February 5, 2009

The stock market keeps coming down to the 800 level on the S&P 500 Index and then bounces up off of it. It has only violated that once (November 20th) and it bounced back above 800 the next day. Small bits of positive news are starting to surface and less big, negative news is coming out. The S&P 500 Index came down to about 820 this morning and now has bounced up sharply. People seem to be more accepting of risk and less willing to earn the very small returns in government bonds.

There still will be more layoffs announced and businesses will continue to report bad earnings. However, most companies I have seen that have reported earnings are still making money. They are just not making as much as they were. Think about this too….it is widely being reported that consumers are NOT spending, yet most of those people still have their jobs and are still earning the same wage as they were when they were spending. So, where has their money been going if they are not buying things? I think they are paying off debt and/or saving money. I read where the savings rate is over 7% right now. Americans were NEGATIVE savers in 2007. 

I believe the fact that Americans are starting to live within their incomes and are reducing debt is a healthy change. It hurts our economy initially, but we will be a stronger nation in the end. Hopefully, as Americans get their individual financial houses in order, we will demand that our government get our federal financial house in order. Most economists agree that some financial stimulus is necessary. The question is will it be the right stimulus package. Time will tell. 

March 2, 2009

About a month ago I talked about the stock market was bouncing off the 800 level on the S&P 500 Index. It blew through that level, and today it may close below the 700 level. This is a HUGE support level. There will undoubtedly be further declines if it falls below 700. So, how low does it go and when do we get back into the market?

The quick answer is “I don’t know” on both accounts. The long answer starts with this market continues to fall as long as there are more sellers than buyers. We moved completely out of the stock market over the last couple of weeks, because I felt it was important to protect our downside primarily. The model I am using was not indicating that the market would go up on a long term basis, and virtually everyone talking on CNBC was saying it was going down. At some point, those same people will start saying “I think we are at the bottom”. When everyone starts believing that, you will see buyers come back into the market. I think that is several months away at least. I do not know why this is, but most bear markets end in the September-October time frame. That would fit our model if the market were to sell off more from here. Right now the model is saying late July as the juncture when the market will turn up. 

A lot of positive news would have to come out for this market to move up. We would need to see companies stabilizing, layoffs slowing down, and signs that the economy was stabilizing. Once the good news starts surfacing, then I expect to see a very strong bounce in the market. The question will then be how long it will last. Based on my model, if that bounce were to occur now, I would not expect it to last long. I am not totally sure how long “long” is. It may last a month, but then I would expect it to rollover and come back down. The reason this would happen is that “traders” (those just in for quick profits) would start buying, but would then take quick profits. This run up will sucker some investors in thinking the market is finally going to make a run to the upside and they do not want to miss the run. But, then the traders start selling to take profits, and the market falls back down. 

The question is what to do with the money that is currently in money market accounts. For the short term, we sit in money markets IF we plan to go back into the stock market. We do not plan to go back into the stock market for some clients, so that money will be invested in bonds ultimately. We are also looking for other investment opportunities, some of which are not correlated with the stock market. We are searching every day for other investment opportunities, but for now, I think it is prudent to take a breath and pause. 

These are extremely stressful times for many people. We are experiencing historic events that we will probably never forget. I have learned a lot through this period, as I am sure many other have as well. 

January 29, 2009

I am hearing people say that they are not contributing to their IRA’s and 401K’s because they don’t want to lose any more money. Don’t link the two! The decision to save is two-fold. First, decide whether to save or not, then decide where to invest it. You do NOT have to invest your IRA and 401K in the stock market. You can use money market account or bond funds to reduce your risk.

One of the main problems that caused the crisis we are in is debt, which translated to Americans were spending more than they were earning. Thus, we were not saving. I always encourage people to save. It concerns me when people tell me they stopped contributing to their retirement plans because they were losing money in the stock market. We need to be saving, so if you stopped your contributions, start back up. Just choose the money market option if you don’t want to be in the stock market. 

Right now, many people are saying they don’t want to lose any more money. It is all right to protect your downside and say enough is enough. So, you can pull your money out of the stock market, but I encourage you to decide now when you intend to go back into the market IF that is your plan. Most people will wait until it feels good and that is too late, so I generally say you probably should never go back into the stock market if you pull out now.

January 7, 2009

Last year was one of the worst years for the stock market in a very long time, and there are many opinions as to what will happen in 2009. They say you learn in bear markets, and I want to share what I have learned.

At its worst point the market was down about 50% last year. November 20, 2008 was the low for the year. The S&P 500 Index has bounced up about 24% from that low through yesterday. Bonds also had a tough year but have rebounded significantly. There was a lot of panic in the last quarter of the year. 

I kept asking myself “how could I have seen this coming”. Many money managers were asking the same question, I’m sure. These bear markets occur every 3 to 5 years and I realized there is an excess of some kind associated with every end of a bull market. This time it was sub-prime mortgages and real estate prices going through the roof. Last time it was the “tech bubble”. Previously, it was a savings and loan blowup, junk bonds, etc. There is always an excess. I noticed that the market gets very volatile at the end of a bull run (when the market has run up a lot and for a long period) and at the end of a bear run (when the market has sold off a lot). Both these volatile periods will last for 2-6 months I have noticed. Finally, I noticed that the model I use to decide when to get into or out of a stock also works for the stock market generally. 

All of these things I have learned is pointing to what I have been saying lately….the stock market is going to move up and down for a few more months before it will start another long term trend up. It has been doing this now for almost 3 months. I believe it will continue for at least another 3 months, but most likely until the summer. This first half of the year is undoubtedly going to give us some bad news. This will keep people from taking risk. Most people I have talked to say they are not spending much. They are nervous and do not want to commit to anything big. People are pulling out of the stock market and will most likely not return ever or for a very long time. Most professionals are saying now is not the time to pull from the stock market. I am expecting pull backs and bounces up, so the market will continue to be volatile for the next several months.

The credit markets (bonds) have begun to loosen up some. Companies are still finding it difficult to borrow at what they think are reasonable rates, but it is getting better. In the panic of September to December, many investors ran from stocks, corporate bonds and municipal bonds and ran into government bonds. This caused prices of all non-government backed bonds to fall dramatically, and it caused the prices of government backed bonds to rise dramatically. Nothing goes down forever and nothing goes up forever. Yields on government bonds were near 0% on short term bonds. Even 30 year government bond yields got down to about 2.5%. Eventually investors want to earn more and will be willing to take on more risk. When that happens, government bond prices will come down and yields will go up. These investors will move into stocks, corporate bonds and municipal bonds. This will drive those prices up and yields on those bonds down. This is beginning to happen. More are moving into the corporate and municipal bonds than they are stocks. Eventually, they will move into the stock market when the yields on corporate and municipal bonds are too low. 

In closing, we are trading in and out of the stock market as we get the bounces up and down. We are also buying corporate and municipal bonds as well as CD’s for our bond clients. A couple of clients wanted to come out of the stock market and become less risky, so we are buying bonds and CD’s with that money. We have found some really attractive corporate and municipal bond yields over the last few months. We are looking every day for bonds and CD’s to buy. 

These have been extremely difficult months for many of us. I know it is hard to see your investments and retirement plans get hammered in the stock market. However, America has always solved its problems. Americans have always been innovative and found ways to improve their businesses. The stock market has always exceeded its previous highs. I am confident we will come out of this economic downturn. No one knows how long it will take, but we will undoubtedly come out of this, and we will be better and stronger individually and as a country. I feel Americans will start saving more and have less debt. That is a very positive thing. I also believe the stock market will rebound, and we will regain what we have lost. It will take time, but it has always happened in the past.