“When You Come to the Fork in the Road, Take It!” Yogi Berra

                                                  The Scrambler at the MN State Fair

Trying Times, If You Like to Take Risks

I am told there are times that try men’s souls. I think they’re right. I also think that Ben Bernanke and Janet Yellen would heartily agree. I did a manual review of the volatility they and we have endured over the last couple of years. Through simple observation we have had these ten S&P 500 roller coaster rides in 2012-2013 and the average number of days it took them to happen:

The long, hard grinds up and the shorter, abrupt bungee jumps off the cliff make for enough volatility for a lifetime when we add the 2008-2010 circus. Can you imagine being on the Federal Reserve Board during this debacle?

Punching Bag

Fed likely has the finest information flow on the planet about most everything economic. It has scores of brilliant people to sift through all of it. Even with this advantage, its forward guidance has lacked accuracy. I won’t quite say Fed has been bewildered, but you get the idea. It truly has not been easy. We add the extra volatility knowing approximately 75% of all trades on the major market US Markets are by computer algorithms receiving information and making millions of trades in an instant, you have the ingredients for a short term nightmare. The short term, and I mean really short, dominates daily market activity while most individuals are investing for the long term. In the meantime, Fed continually takes the brunt of thousands of second guessers. Tough position. It continues its course, I think, because it knows its role is crucial to US economic survival in the same way we as investors know our roles are crucial to our financial survivals.

Understanding of the investor’s role in the market can be appreciated reading people like John Templeton, Ben Graham, Warren Buffet, and Bill Gross; all of whom have taken their share of punches, but did exceedingly well. They spent their lives trying to make sense of the markets. They each mention a large amount of luck, good or bad that influences everyone’s short term. Last year it was good. This year could be good or bad. Over the long term, however, logic is more likely to be in your favor. They may be able to determine what a stock should be worth, but they cannot tell you when it will be worth it. Future retirees are in the same boat in that they know they want to Be Done, but there is no longer a company run pension to take them there. I think this is especially appropriate to discuss now. We have had some relief from the debacle that essentially derailed finances in this country for the last six years. There may be a price to pay for the way we did it or it may turn out to be a stroke of genius. No one knows. What we know is that the country must review its current circumstances, make decisions, and move forward.

A Design for the Future

I have never heard of anyone willing to base his retirement on someone else’s whim. “If I win the lottery, if I get that inheritance, if I win Dancing with the Stars I will retire.”  Leaving it to chance just does not make sense. Instead, you purpose to make thoughtful estimates of what it will take to achieve your goal no matter what the Fed, politicians, or anyone else says or does along the way. This is called design. In the nowadays world of personal pensions, this is really, really important to focus on. It is also important to understand that unlike the pensions of the olden days, if you make a big mistake, no one will be there to write a check to shore it up.  A flaw in the design means it just does not work. We do not want that.

The Drill

Over the last thirty plus years of doing this and successfully retiring many, many people I have discovered several truths about successfully Being Done. Over the next few posts, we are going to drill down into what it takes to design and carry out your own pension successfully.

In the meantime, please feel free to contact us at (952)230-1340 to chat about this or any other thoughts or concerns.

Warm Regards,

Chris

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this commentary may not develop as predicted. Stock investing involves risk including loss of principal. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The S&P 500 is an unmanaged index which cannot be invested into directly.  Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.  Past performance is no guarantee of future results.

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