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| OCTOBER 2006 NEWSLETTER “It's tough to make predictions, especially about the future.” Yogi Berra This month we have big news. The research of the H. S. Dent Foundation has led them to make a major modification to their predictions. What has changed? The short answer is geopolitical headwinds combined with the bubble in commodity prices. The long answer is presented in the most recent 22-page October newsletter. (We can provide a copy for your review if you desire.) According to Dent, the most probable, and hopefully worst case, scenario is essentially a doubling of the Dow Jones Industrial Average and the NASDAQ by late 2009. There are other more optimistic scenarios, and while we hope these come to pass, we also feel it is important to prepare your portfolio for what may be an historic, global, bear market. As with everything else the worldwide Baby Boom has caused to date, this too may be “a doozy”. Dent’s demographic cycle research found a 40-year cycle (25 years up and 15 years down) that may peak again as consumer spending drops dramatically and the major saving cycle of 80 million people begins in earnest. These past consumption cycle peaks coincided with the Great Depression and the period of severe economic malaise that began in 1968 and lasted until 1982. Looking at the historic charts, we see that stock investments basically treaded water for fifteen years during each of these periods. This is a great circumstance for accumulators. However, it has proven to be dangerous for a portfolio that provides income supplementation to a retiree. In order to preserve a portfolio, financial scientists advise withdrawal rates as low as three percent per year. We have built your portfolio in preparation for what is normal. We have also always been very aware of Dent’s research as a guide to prepare for something that may not be normal. Remember, we have not had a quadrupling of the world’s population in one generation in the last five hundred years. The media, the economists, even the textbooks have not, and will not, prepare us for something of this magnitude. It took fifty years for the Nobel Prize-winning research of Harry Markowitz to become part of trust law and the Prudent Investors Act. The research of Harry Dent may also become part of the fabric of investment advising fifty years after the fact. You, however, may benefit from these modern theories now. We will continue the process of arranging your affairs and especially your investments to take advantage of, and to be protected from, what may happen in the economy and the investment markets. We have discussed tax and estate planning in preparation for the huge bills that will arise when Medicare, Social Security, and under-funded pensions come due. We have discussed how real estate trends may affect where you live now and in retirement. You are ready for this new adjustment to the future outlook. We just want you to be prepared for more specific observations and shorter timelines for implementing recommendations in order to fine-tune your plan over the next three years. Until next month: Take care.  | |
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The Lagging Healthcare Sector
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Investing in India
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Consistency
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The path Ahead
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Key Demographic Statistics
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Closed-End Funds
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Revising Dent's Expectations
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Service Integrations
IRA ADVISOR NEWSLETTER 2006
Trow profiled in the April Newsletter
MATTHEWS ASIA NOW
NEWSLETTER 2006
The Demographics Issue
BNET BUSINESS NETWORK 2001
Ready to Retire