Las Vegas And Your Weekly Update

About a week ago, we travelled to Las Vegas to visit clients there. Really!

Not being gamblers, the place amazes us. Beneath the veneer however, Las Vegas has a thriving business community far beyond gaming itself. Great business people like our clients are the reason why. Great clients always inspire us.

Keeping Las Vegas in mind, this week’s Update takes a moment to look at the vast difference in gambling and investing. While one virtually assures losing in the long run, the other increases the odds of winning by applying sound principles over time.

Enjoy!

All the best,
Lee and Jeremy


This Week’s Quote:

“A dollar won is twice as sweet as a dollar earned.” ~ Paul Newman (1925-2008), The Color of Money


JL Davis Thoughts This Week:

In the movie, “The Color of Money” the emphasis was on gambling and winning. Paul Newman won an Academy Award for Best Actor for his portrayal of Fast Eddie Felson, a pool hustler. Fast Eddie loved to gamble and lived for the thrill of the elusive win.

Smart investors don’t operate like Fast Eddie. They love to save and the thrill for them is in the journey—a journey whose odds favor making money.

Last week, we visited with clients in Las Vegas and we were reminded of the “gambling” terms we so often hear applied to investing. Terms like “going all in”, “roll the dice” or “sit this one out”. Or looking at profits and deciding to “take some off the table.”

It strikes us that many confuse investing with gambling. Yet those same folks own other important assets like their home, art, jewelry, businesses, or real estate. They’d never worry about being “all in” with their home, even though it is one of the largest assets on most folks’ balance sheet. They wouldn’t usually sell the house at to “take some off the table”, then “sit this one out.”

Investment portfolios, which are valued every day, are easy to second guess. Owning stocks amounts to owning businesses—at least a piece of them. So every single day, a headline shouts to you that the value is up or down. If it’s down, they really shout!

In fact, many media reports are designed to take us on emotional, high-stakes rollercoaster ride. They ignore the key fact that the market trend for all of history has been up and down with an upward slant! Rather, they promote checking our portfolio daily to see if we have “won or lost.” We would never attempt to check on the value of our homes or other assets that often, and then fret if it’s up or down!

Imagine living where there is a major military presence. If tomorrow’s headline announced the base was closing, all of the homes in the area would dramatically decrease in value. Your home didn’t change…no hole in the roof, no change in location, and no decrease in square footage.

On the other hand, if Federal Express® happens to relocate their headquarters to your town, every home in the area would increase in value. Your house wouldn’t be in a better location, or have increased square footage, but the value would likely turn up sharply.

Either way, you’re probably not moving.

The same attitude should apply to our retirement portfolios. We own the investments we own based on our financial plan. The real reason we own the portfolio is ultimately to live from it for the rest of our days, most likely. If solid planning has taken place, with consistent risk management and diversification the day to day ups and downs aren’t at issue.

So while Fast Eddie may enjoy the thrill of gambling, most of us don’t. Unlike Eddie, most of us enjoy the satisfaction of reaching our family’s financial goals!**

http://www.brainyquote.com/quotes/authors/p/paul_newman.html
http://en.wikipedia.org/wiki/The_Color_of_Money


Market Week: November 18, 2013

The Markets

Another Dow record on Monday was followed by three more record closes for the index during the week, while the S&P 500 notched its 36th record closing price of the year. Meanwhile, the Nasdaq and small-cap Russell 2000 maintained their year-to-date leadership as the Nasdaq reached a level not seen in more than 13 years.

Last Week's Headlines

• Growth in the eurozone was sluggish in the third quarter, slowing to 0.1%; that represents an annual rate of just 0.4%, compared to the second quarter's annualized 1.2% rate. Powerhouse Germany, which saw 2.9% growth in the second quarter, had less than half that in Q3.
• President Obama said insurance companies that have cancelled existing policies that do not meet the standard of the Affordable Care Act will now be allowed under the act to extend those policies for existing policyholders into 2014. However, state insurance regulators would also have to agree to the extensions. Also, insurers must outline the coverage provisions available under the ACA that are not included in those policies, and notify the policyholders that they may also shop for another policy through an insurance exchange.
• Janet Yellen reassured members of the Senate Banking Committee that if confirmed to replace Ben Bernanke to chair the Federal Reserve Board, she would continue the Fed's current "data-driven" approach to tapering Fed economic support.
• Cleared for takeoff: The Justice Department agreed to settle an antitrust suit and permit the $17 billion merger of American Airlines and US Airways, which will create the world's largest airline carrier. The agreement will require a reshuffling of airline service, since the two airlines will have to relinquish some of their gates, primarily at Washington's Reagan National and New York's LaGuardia but also at five other airports.
• A Miami-based mutual fund company offered to buy portions of the federal government's stake in mortgage guarantors Fannie Mae and Freddie Mac. Fairholme Capital Management, which already owns preferred shares in the two companies, said it would lead a consortium of investors interested in the mortgage-guarantee business. The companies, which have been under federal authority since the 2008 financial crisis, have become profitable; after third-quarter earnings, Fannie Mae will have paid the government almost $114 billion (after having gotten $116 billion in financial assistance), while Freddie Mac will have paid the Treasury $9 million more than the $71.3 billion worth of aid it has received.
• The International Energy Agency said that OPEC countries' role in the global energy market is being diminished by increased production in the United States and Brazil. The IEA forecast that the United States could temporarily surpass Saudi Arabia as the world's largest producer of natural gas and oil by 2016, though that trend would likely reverse by the middle of the following decade. India and Southeast Asian countries will join China in helping to increase consumption by as much as one-third by 2035.

Eye on the Week Ahead

Data on U.S. manufacturing, housing, and retail sales could suggest whether the Q4 economy got off to a good start, while minutes of the Fed's most recent monetary policy committee meeting are always of interest.

Key dates and data releases: international capital flows, homebuilders survey (11/18); employment cost index (11/19); consumer inflation, retail sales, home resales, business inventories, Federal Open Market Committee minutes (11/20); wholesale inflation, Philly Fed manufacturing survey, leading economic indicators (11/21).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2013