Friday, August 1, 2014

Finally! A Market Dip!

Finally, we are seeing a little bit of a pull back in the domestic stock market. This is very healthy for the overall market to continue to grow. We were at a point from a chart perspective that showed a top compared to past markets. Generally, the market tends to turn south after it hits this area and that is precisely what has finally happened. Thank goodness, because this brings stock valuations down to more attractive levels, then in turn this further attracts investments.

Nothing to worry about as far as the stock market is concerned in an election year. Typically, election year stock market returns do well. In fact, we are on a pace for the best year since 1999 for both total and private job growth.You can see by this chart from that we have come a long way back up since the recent bottom.

Year-over-year change employment 

State and local governments have turned the corner as it relates to jobs, too. They had declined for four years in a row, but have recently turned the corner and our climbing once again.

State and Local Government

Housing continues to rebound. Serious delinquencies continue to decline at a fast clip. We should be back at the historical serious delinquency rate of under 1% in 2015 or early 2016 according to Calculated Risk. We are not there year, but we are rapidly approaching that 1% level. This kind of proves the cold hard facts that it takes 7 to 10 years to fully recover from a market bubble. It started in 2007 and by the time we get to 2016, it will have been 9 years to recovery.

Fannie Freddie Seriously Delinquent Rate


We might have a flat quarter, or even down a little bit, but as we get closer to the election we should see people getting excited about their side winning. This typically helps the market go up. The point is that it is important to stay invested. It is not smart to get out of the market right now. The underlying economy is doing well. Stay the course.

Thanks to Calculated Risk Blog.

Thursday, July 24, 2014

Genealogy Discoveries

In my spare time, I have been on a genealogical expedition in a quest for finding the first Allison male to come to America. I was born Richard Mark Allison and my name changed when I was 14 to Richard Allison Johnson. My biological father, Billy Joe Allison died when I was a senior in high school and there has always been this black hole in my life as a result. I have always wanted to know more about my Allison family, so I decided to begin an expedition to find out.

There are several sources on the Internet where you can get information, but most of them charge you money every month. Personally, I am not a big fan of paying for information when I might be able to find it for free. There are some free sites that I used to gather the information. One of them is and another is which is the free side of Yet another free site that was very helpful is

With all of these sites, you have to keep in mind that some of these records can be a little inaccurate with misspellings of names. In addition, back in the days of when the census people came around and beat on the door, then took down what you told them and wrote it on a piece of paper. A lot of times, the people being questioned didn't want to give the government their full names, so they would just say R.M. Allison, instead of Richard Mark Allison, for example.

Also, on the Find a Grave site, there are these wonderful people who go through cemeteries and take pictures of the graves. Sometimes, they are family descendants and sometimes they are not. They may not know that another relative who died might be in a different cemetery and the link is missing from Find a Grave. I know in my own search, a lot of times the parents would be listed with some of their children, but not all of them. This could be because they are still alive, or it could be that the person who put the information on Find a Grave didn't know that there was more children.

Anyway, I was able to find the first Allison male to come to America who was born in 1675 in Londonderry, Northern Ireland. After that, I was able to trace the family tree all the way down to me. It was an arduous task, but it has been well worth the effort. That black hole that I had is filled in a little bit now.

I discussed doing genealogical research in my book, Meet Wally Street. The Reason You're Stupid as being a good thing to do if you are retired and bored to tears. If you need any pointers or tips, then don't hesitate to ask me.

Friday, July 11, 2014

All Good Things Must Come to an End

This is an opinion blog and today I am giving my opinion based on my own experience of writing a book. When I wrote my book, Meet Wally Street, I did it with a company owned in some manner by Amazon. I wanted to be able to offer it both in print and as an eBook on the Kindle. At the time, I'll admit that I was a little green about self-publishing. Luckily however, I stumbled across the eBook publisher Smashwords. Smashwords is a company that promotes independent authors like me. They have eBook publishing relationships with Apple, Barnes & Noble and a host of other companies, in addition to selling eBooks themselves.

After I came across Smashwords, I realized what a great American business idea that Mark Coker, the founder had come up with. For someone relatively unknown as an author like myself, there is almost no possible way to get a large publishing house to agree to publish my book. Only the really famous authors get those opportunities. However, this exclusivity is now turning against these big publishing houses. They have a major and I do mean major problem. Authors like me and others want our books to be published and also we want to be able to set our own pricing. With the large publishing houses, this was not possible. Now, however it is thanks to Smashwords.

Smashwords has given me all the tools necessary to sell my book across multiple eBook retailers. They also make it easy to put my eBook on any computer, phone, tablet or other reading device. Mark Coker realized early on that by making arrangements with Apple, Barnes & Noble and others, he could help any and I do mean any author publish their eBook and have it for sale on the top eBook retailer sites. This was a brilliant decision.

Not long after I hit the button with Amazon, I discovered that Amazon wants to try and force you into exclusivity with only their firm and their Kindle Select program. As an author, I want to have my book on Apple iBooks or Barnes & Noble's Nook, too. Amazon however tries to get authors to agree to exclusivity. In fact, I agreed to it before I realized what a bad deal it was for me. I had to wait 60 days for that to expire, then I moved full bore with Smashwords. Now my eBook is pretty much available everywhere.

The large publishing houses would not allow me to give away my eBook for free if I wanted to, but Smashwords will. The large publishing houses will not let me offer discount coupons that can be tracked to specific sales, but Smashwords will. The large publishing houses are going to become much smaller and there will be a lot of consolidation, because they have failed to adapt to a changing marketplace. They are going to find it tough to survive.

This is the way these publishers work today. Suppose you are one of the lucky authors who has a large publisher agree to market your book nationwide at the major bookstores. You basically have two or three weeks in these bookstores to sell your new book. If it doesn't sell, then the bookstores can send them back to the publisher without having to pay anything for the books that didn't sell. As an author, even a well known author, you get two or three weeks. Further, if you as the author want your book to sell, then you have to make the rounds. Get on television, do radio interviews and be interviewed for print publications. All of this needs to happen fast and in concert with your book release. There is a lot of time commitment and cost to doing this without any guarantee of success.

With Smashwords, my book is available for as long as I want it to be for sale. Now from the author's point of view, which is better for the author? Do you see why these publishers are in trouble? That arrogant attitude of turning down author after author over the years is coming back to bite them. Oh don't get me wrong. You will still be able to buy hardcover and paperback books. It will just not be as large a market as eBooks. After all, you can keep a ton of eBooks on your iPad, Nook or Kindle as opposed to a book shelf in your house.

The eBook market is exploding with growth. As more and more authors use Smashwords, and trust me, they are spitting out a bunch of new eBooks everyday, then you will find that Smashwords is liable to be the dominant player in the eBook marketplace for authors. Their growth is astounding and I highly recommend them for any author, even the popular ones.

Pretty soon, you will see hardback books at the antique store instead of Barnes & Noble. Mark my word on it.

By the way, Meet Wally Street, The Reason You're Stupid is only available for FREE for about one more week. After that, I am jacking the price all the way up to $3.99. All good things must come to an end.

Friday, May 30, 2014

In Relation to What?

Anytime that you are looking at the management of your portfolio you want to take a macro view. When you take a micro view, then this is when you get in trouble. For example, let's say you invested some money two years ago. You put a lot of thought into it and invested in a portfolio of investments which could be stocks, bonds, mutual funds, or ETF's. You have completed only one small aspect of the job.

Portfolio management is an ongoing process of research, comparison, evaluation, selling decisions, replacement buying decisions and big picture thinking. What benchmark are you using to compare your portfolio against? What expected level of return are you seeking? What type of risk and volatility are you willing to stomach? How are you going to manage your investment expenses?

Just making the buy decisions in the beginning is only a smidgeon of the portfolio management process. There is constant work to be done along the way.

Occasionally, I meet someone who picks out a time period that has a good return and then they set their expectations at that level. This is a mistake. In fact, investment performance should not be your focus at all. You probably think I am crazy for saying this, but I can prove it to you.

If you invest in an index mutual fund or ETF like the S&P 500 for example, then you will receive the performance of the S&P 500 minus the expenses and the generally miniscule tracking error of the mutual fund or ETF. That's a fact Jack! So, this begs the question, why should you be concerned with the performance of such a mutual fund or ETF if you know it is going to closely track the S&P 500? The truth is that you shouldn't be concerned at all about this particular investment from a performance standpoint. You will get the performance you seek.

On the other hand, if you bought a pool of stocks, or some actively managed mutual funds, then you have a problem. You have just made your life more complicated for one thing. For another thing, now you have to worry about that pool of stocks, or actively managed mutual funds. Is it going to fail to out perform the benchmark? Oh, by the way, what is your benchmark for a pool of stocks or actively managed mutual funds? How will you penalize yourself for failing to meet a benchmark? I doubt very seriously that you would fire yourself, if you failed at meeting a portfolio benchmark, even if you had one in the first place.

Let's take a pool of actively managed stocks, for example. How many stocks are in this pool? Is is 10? 20? 30? or 40? What is the right number? How much are the trading costs going to be? How often will you re-balance? What sectors of the economy are included in your pool of stocks? Did you cover all the major sectors of the economy? What sub-sectors do you have in your pool? Are your stocks value stocks, or are they growth stocks? Are your stocks large company, mid-cap companies, small cap companies, micro stocks or international stocks? Then, once you know what size they are, then again, are they value, or growth tilted? What percentages do you weight towards each stock? Should large company have more than international? Should small cap have more than mid-cap?

Drilling down some more, we want to know how each of these stocks act in a recessionary time period? What can we expect when the market declines? Do these stocks pay dividends? Are we reaching for dividend yields like with preferred stocks that put our portfolio at greater risk? How do they act when the market is doing well? Are we missing out on returns because we are in the wrong stocks? Are we missing out on returns because we are not in the right sectors and sub-sectors? Are we trading too much?

I haven't even covered the statistical aspect of this pool of stocks like what is the beta, alpha, sharp ratio, R squared and other statistical figures that are very, very important to know. Most investors have no idea what any of these are, but they fail to know at their own peril. Yet, people think when they make the decision to buy a pool of stocks, then they can just sit back and watch their money grow. Wrong. There is a whole lot of work that must be done to stay on top of things.

Performance is something to worry about if you are actively managing a portfolio of stocks or actively managed mutual funds. It is nothing to worry about if you are investing in passively managed, low expense index funds or ETF's, because you know that you will get the performance of the index. You see this major difference? It is a huge difference. Believe me when I tell you.

Investors who are actively managing their own portfolios in a bull market fancy themselves as "talented" money managers. Here is the grim reality. When the market goes down, your "talent" goes out the window. You will then realize that this money management stuff is a little harder than you thought. Don't be so proud of yourself when investing in a bull market. Any one can have success by throwing darts at the Wall Street Journal and investing those stocks. It takes more to be a professional. As a professional, I moved all of our clients to cash on October 6, 2008. Do you or your advisor do that? I doubt it. Did they stay in cash until May of 2009? I doubt that also. What is the difference? I am a professional with years and years of money management experiences.

If you picked 40 stocks and diversified them across all the major sectors of the economy, then guess what? You have built yourself your own mutual fund per se that is going to track the S&P 500. Congratulations! Oh, did you know that you could have just bought an S&P 500 indexed mutual fund or ETF and saved yourself a whole lot of headaches? This is the scenario if your pool of stocks performs as it should based on the sectors of the economy that each of those stocks are in. You will simply build your own mutual fund. It's kind of silly, don't you think? It is silly to put all that time and effort into building and managing a pool of stocks when you could have just purchased a passively managed S&P 500 index fund instead. Are you getting the picture now?

What if your actively managed pool of stocks under performs? Uh-oh! Now you are losing money compared to a passively managed S&P 500 index mutual fund or ETF. This not good.

I cannot tell you how many times I see people want to hold onto a small group of stocks, like 3 or 4, for sentimental or emotional reasons. If those 3 or 4 stocks make up more than 30% of your overall portfolio, then your results will be skewed by what those stocks do. Most times, they are crappy stocks or big name stocks where their major growth years are behind them. Look at your account statement. You know that what I am telling you is right. You are sitting there with a bunch of crappy stocks in your portfolio that needs cleaning up. Yet, you are not engaged to do anything about it. That is foolish.

If performance is your main focus, then I would ask a question. In relation to what? I know my plan, process and professionalism is well thought out. Is yours? Quit being so disengaged with your money. Hire a professional with (the three P's) a plan, a process and who is a professional.

Oh, by the way, I am available.

Did you read my book, Meet Wally Street. The Reason You're Stupid? Click the link in the upper right column to buy it at your favorite eBook retailer. Trust me. It is worth all three dollars and ninety-nine cents.