The Investment Contrarian

Watching Paint Dry Can Be Exciting!

2012-02-02T10:02:00.006-06:00

We used the Con-Val® process to identify an undervalued company with solid earnings and a proven track record. We set a price target which was achieved and after reevaluation we decided to take our profits. Back on December 15th, 2011, Wade Financial Group bought a paint supply company in our concentrated growth model and in our mutual fund called Kronos Worldwide at $17.27 a share. Today, February 1st, 2012, we sold the stock for $23.75 a share or a 37.5% gain!

Investing Lesson: Using the Con-Val® approach is a profitable investment strategy!

Paid-To-Wait® Model Trades

2012-01-24T10:08:00.010-06:00

A crucial part of our portfolio management process is the beginning of the year rebalancing of our model portfolios. During the month of December, the WFG Investment Department performs an extensive review of all portfolio holdings. Along with this review, we consider hundreds of other investment ideas to determine the best mix for the next year.

Last week, we finished executing the rebalancing in our Paid-To-Wait® model portfolio. The Paid-To-Wait® model is designed to achieve an attractive yield while investing in solid, blue-chip companies. The screening process emphasizes companies that have a long track record of both paying and increasing their dividends. The portfolio is designed to have a low turnover.

Following is a list of the trades that were implemented in the Paid-To-Wait® model:

Buys

· Archer Daniels Midland (ADM)

· AFLAC Inc (AFL)

· BlackRock (BLK)

· CenturyLink (CTL)

· Eaton Corporation (ETN)

· J.P. Morgan (JPM)

· Northrup Grumman (NOC)

· Old Republic International (ORI)

· Union Pacific Corp (UNP)

· Walgreens (WAG)

Sells

· Arthur J Gallagher (AJG)

· British American Tobacco (BTI)

· Colgate-Palmolive (CL)

· Campbell Soup Company (CPB)

· First Energy (FE)

· Lockheed Martin Corp (LMT)

· Pfizer (PFE)

· Rogers Communication (RCI)

· Transcanada (TRP)

· Exxon Mobil (XOM)

Investing Lesson: Using the ConVal® process of rebalancing and seeking opportunities can enhance returns!

One Man's Tax Loss is Another Man's Treasure

2012-01-19T13:35:00.003-06:00

One of the strategies we used during our year end research process was to look for investments that had been hit by tax loss selling. Investors will sell to realize a loss on a security as part of their year-end tax planning; thereby pushing the price of a poorly performing security down even further. Often this drop in price is only temporary and reverses in January as the tax loss selling ends.

On December 29, we were looking for an investment that fit this criteria for our mutual fund, Wade Tactical L/S. We had recently sold a closed end fund at a gain and had the proceeds available from that sale to reinvest. One of the sectors we focused on was emerging markets because that had been one of the worst performing sectors in 2011.

Our Con-Val® research process led us to buy the ING Emerging Markets Fund, IHD. It had started trading earlier in the year at $20/share but had dropped to about $13/share by the end of December. We thought there was potential for a quick return of 10% as the shares rebounded from the tax loss selling.

We were able to realize that return this week with IHD hitting our sell target on Wednesday, for a return of 10% in just three weeks!

Investing Lesson: By continuing to apply the Con-Val® process, we believe we’ll come out
ahead and, therefore, so will our clients!

Global Completion Model Trades

2012-01-19T10:46:00.020-06:00

A crucial part of our portfolio management process is the beginning of the year
rebalancing of our model portfolios. During the month of December, the WFG Investment Department goes through an extensive review of all portfolio holdings. Along with this review, we consider hundreds of other investment ideas to determine the best mix for the next year.

On Tuesday, January 17, we finished executing the rebalancing in our Global Completion model portfolio. The Global Completion model is used to complement other portfolios such as Paid To Wait®and Concentrated Growth by providing international diversification. The portfolio includes alternative investments, i.e. managed futures and real estate funds.

In addition to offering this diversification, we invest a portion of the model in specific sectors of the market that we believe will outperform the market for the next year. In 2011, those sectors were health care, energy and utilities. The utility sector was a tremendous performer over the course of the last year with a gain of nearly 24%. Using our Con-Val® process, we decided to sell our investment in the utilities sector and move into a sector that we believe is currently undervalued: The basic materials sector. We will continue to hold onto the energy and health care investments as we believe they will perform well in the coming year.

Following is a list of other trades that were implemented in the Global
Completion model:

Buys

· First Trust REIT Index Fund
· Natixis ASG Managed Futures Fund
· Steelpath MLP Select Fund
· First Trust Materials AlphaDEX

Sells
·DFA Global Real Estate Fund
·DFA US Core Equity Fund
·Ishares US Real Estate Sector

We also increased our exposure to emerging markets Brazil and India.

Investing Lesson: Using the Con-Val® process of rebalancing and
seeking opportunities enhances returns!

Waxing Philosophically: The Tale of The Financial Predator

2012-01-11T01:02:00.038-06:00

I recently met another victim of the financial predators that it has been my relentless cause over the past decade to expose.

In my 27-year career, I have seen it all. One of the things that never goes away, because it has been present since the beginning of time…..is the deceptors. I have written on this topic many times, the Madoffs, the Tom Petters, IPM Realty and Oxford Financial, to name a few. If you recall, it was yours truly on my radio show 6 years ago that warned Minneapolis radio listeners to run for the hills from IPM Realty, a sponsor on the same station. Three years latter, MN investors had lost $150 million dollars. I also warned the SEC about Oxford Financial, who was running a Ponzi scheme out of the VanDusen mansion. Less than two years later, over $200 million was gone and the orgies and other sorted activity that went on in the mansion were revealed.

Financial predators take advantage of the trusting, the well informed and the uninformed. While they say a sucker is born every day, the financial predator lures their prey with a sweet sucker of lies that sound like the truth. In the end, the financial predator wreaks havoc on many, ruins lives, causes the trusting to become untrusting...........and eventually either are rewarded with pain for their sins or simply end up living in a van, down by the river, eating government cheese and drinking PBR. Ayn Rand in her famous novel, "Atlas Shrugged," calls these guttersnipes “looters."

It is lonely at the top for the successful individuals who have clawed their way to achieving success, the honest way. It is lonely “up there” because the truly successful are under constant attack by the vipers that desire only one thing, to confiscate the wealth of the men and women of honest success, by any means. These priceless few, having trusted in the beginning and along the way, have the scars from the many knives placed in their back.

For these reasons, the men and women of this type typically have a very small circle of true friends, trust few and spend the majority of their time with people that knew them when they were young.

While it is may be lonely at the top, those who have achieved honest wealth often do at the same time achieve great happiness by having meaningful and deep relationships with what I have coined “foxhole friends." Unlike the “looter-fox” with the knife, foxhole friends will jump in front of a knife or bullet for one another. Ironic isn’t it, the fine line between taking a knife in the back from a looter, not seeing him coming in the dark vs. stepping between the guttersnipes to save the worthy.

In the end, the fate of the looter-fox, guttersnipe and their many brethren is the same. They all meet their maker, are required to atone for their sins and are then cast into the burning fire of hell, where their craftiness is the language by which exchange takes place among the vermin that exist there.

INVESTING and LIFE LESSONS

If it sounds too good to be true, IT ALWAYS IS.
The world is full of liars and cheats, for which there is no vaccination or cure other than incarceration to prevent them from their perpetrator ways.
Never ignore your gut instinct. Remember that in the movie, “Basic Instinct”, Sharon Stone uses sex to seduce her victim, much like the snake in the Garden of Eden.
Do not, at all costs, look the other way when you smell a stench, just so that there is fresh air on the other side for a little while.

Don't Take the "Bait"

Attention to those still willing to listen to annuity pitchmen.
Visit WFG’s website, http://www.wadefinancialgroup.com/ and click on the Consumer Advocacy tab and scroll down to the bottom. View the full episode from ABCs "To Catch an Annuity Predator." View these videos as often as needed to inoculate yourself.

Foundation Trades

2012-01-09T13:20:00.003-06:00

A crucial part of our portfolio management process is the beginning of the year
rebalancing of our model portfolios. During the month of December, we, as an investment department, go through an extensive review of all portfolio holdings. Along with this review, we consider hundreds of other investment ideas to determine the best mix going forward for the next year.
On Thursday, January 5th, we executed the rebalancing in our Foundation model portfolios. Foundation portfolios are a core holding for many of our clients and there are five Foundation models with varying levels of equity exposure. In addition to having well diversified equity and/or fixed income portfolios, we invest a portion of the model in specific sectors of the market that we believe will outperform the market for the next year. In 2011, those sectors were health care, energy and utilities. The utility sector was a tremendous performer over the course of the last year with a gain of nearly 24%. Using our Con-Val® process, we decided to sell our investment in the utilities sector and move into a sector that we believe is currently undervalued: The basic materials sector. We will continue to hold onto the energy and health care investments as we believe they will perform well in the coming year.

Following is a list of other trades that were implemented in the Foundation models:

Buys
· First Trust REIT Index Fund
· Natixis ASG Managed Futures Fund
· Steelpath MLP Select Fund
· First Trust Materials AlphaDEX
Sells
· DFA Global Real Estate Fund
· Wisdom Tree Managed Futures Fund
· DFA Five Year Global Fixed Income Portfolio
· Utilities Select Sector SPDR
Investing Lesson: Using the Con-Val® process of rebalancing and seeking
opportunities enhances returns!

Gold Hedge

2011-12-14T13:25:00.006-06:00

As we described in our Client Workshop last week, we hedged gold when it was over $1,800 an ounce because we felt it was over-bought and had strong price appreciation in a short period of time. Since August 24th, 2011 when we put the hedge on, gold has fallen over $200 an ounce. A hedge is designed to make money when an asset, like gold, declines. Since initiating the hedge, it is up nearly 20%. On December 14th, 2011, we decided to take these profits. We still like gold long term as we feel it is in a long-term uptrend.

Investing Lesson: Wade Financial Group continues to use its Con-Val® approach to take advantage of unique opportunities not seen by others.

Black Friday Sale!

2011-11-30T15:20:00.002-06:00

Shoppers were not the only people buying things on Black Friday! At Wade Financial Group, we added to our Chevron (CVX) position at $93.00 / share last Friday. Consistent with our Con-Val® approach, we continue to buy stocks at prices we feel are trading at discounts. The purchase was made in our Paid-To-Wait® portfolio and is yielding 3.48%. Oil stocks continue to be an area we are increasing our equity exposure.

Investing lesson: Buy securities on sale!

"Jeff" be Nimble, "Jeff" be Quick!

2011-11-16T15:34:00.005-06:00

At Wade Financial Group, our Con-Val® (contrarian value) strategy is to buy bonds at attractive yields. Generally, when we buy a bond, we hold it to maturity. Sometimes, we will sell a bond before maturity if an extenuating circumstance arises. This could be because of substantial appreciation in the bond which allows us to lock in profits. Another scenario would be changes in the company that cause us to rethink our risk of holding to maturity. Jefferies group falls into the latter category.

Wade Financial Group subscribes to a robust array of research and monitors it daily. One source identified Jeffries as a company that could run into trouble because of its holdings of European debt. We analyzed the issue and came to the same conclusion. Therefore, we recently sold all of our Jeffries Group bonds. While the price we sold at was slightly lower than the purchase price, we were able to collect the 8.5% coupon during the time we held the bond and still realized a substantial positive total return. Think about the paltry 1-3% rates of many other bonds during this time!

Investing Lesson: Individual investors too often overlook risk management. Risk management is exceedingly important, especially in the current environment we live in. Always manage and monitor your risk!

Built Ford Tough

2011-11-08T10:13:00.010-06:00

At Wade Financial Group, we have been buying Ford and GMAC bonds since 2006 at attractive high yields. We were originally getting yields north of 6-7%. The individual investor has been scared to invest in the auto industry.

On October 21st, Ford had their credit rating upgraded by two notches to BB+. You may be asking yourself, what does this mean when my bond is upgraded? It means you invested well and got a good deal!

When a bond gets upgraded, the price of the bond goes up because the market is more confident that the company is stronger and more solvent than it was previously. In other words, people who now buy the same bond you already own are paying more for the same thing! We were ahead of the curve and got on this trend before the crowd. This is a prime example of the ConVal approach in action.

This also means we will most likely be buying smaller amounts of Ford bonds in your account because it is harder to find value in Ford bonds, and the yields are now lower, around 3-4%. We will, however, continue to search other investment opportunities and find value in additional sectors.

Investing Lesson: Contrarian investing can lead to profitable investment opportunities!

True Contrarian Investing

2011-10-14T13:46:00.001-05:00

True contrarian investing expands across all investment opportunities and asset classes. As you’ve seen in the news lately, the media has been painting the ugliest picture possible for Sprint Co.
Opportunities for potential growth exist now that the company can enter the iPhone market despite the bad image they have received recently (evident by the recent volatility in their stock price shown below over the last 10 days).

At Wade Financial Group, we were able to buy Sprint bonds for some of our accounts that mature in March 2012 and are yielding over 7%.

Investing Lesson: Remember one key point to contrarian investing, follow the herd and you will get slaughtered!

Are You Living Above, At, or Below Your Means?

2011-10-05T10:20:00.010-05:00

Why is it that there are families with household incomes of $40,000 comfortably making ends meet and saving for retirement with no debt or at the worst, with one outstanding mortgage, while others, that make hundred of thousands of dollars, are having trouble keeping their heads above water? The answer: Living outside your means.

Though many individuals feel the need for the finer things in life, it is possible to live at, or even below, your means to improve your life after retirement. Read the article, "The Secret to Living Well on $40,000 a Year," published this week in U.S. News & World Report to see how a father of two was able to support his family at a comfortable level.

Investing Lesson: Though changing your lifestyle may not be ideal, it can and at times should be done. A dollar that you save today, will be a dollar, plus more, that you have for tomorrow.

Stocks Have Worst Quarter Since '08 Financial Crisis Hit, WFG Holds Up Well

2011-10-04T10:45:00.000-05:00

Major stock indices took a beating during the third quarter, making it their worst performance since the financial crisis kicked into gear in late 2008 following the implosion of Lehman Bros.

Our forecast for 2011 has been for both a potential third leg down for the stock market and a double dip recession. The double dip recession appears here as we head into Christmas season.

Our defensive stance has proven appropriate for our clients. WFG's assets under management declined by approximately 4% for the calendar quarter ending 9/30/11. This compared to 18% to 22% losses for the U.S. and World stock indices. See the chart below:

Below is a chart we published earlier in 2011 when we felt then that further market declines might be in the future:

INVESTING LESSON(S)

What goes up too much too fast, for reasons that are more "manufactured" than real, eventually comes down in order to correct the "overshoot."
Defense wins championships.
"It ain't over 'til it is over."
It ain't over yet (my view).
We began adding to our stock positions in our no load mutual funds several weeks ago, with limit orders priced to buy in stages into the weakness that we believed was coming.
The fund now sits at approximately 34% equity vs. 30% a month ago.
We like to buy "on sale" and will continue to implement WFG's ConVal^®investment process.

Update On Hedging Our Gold Position

2011-09-29T17:08:00.001-05:00

On 08/26/11 We Wrote a Blog With the Following:

With Gold continuing its parabolic ascent, we made the decision this week to hedge 50% of our exposure to Gold ETFs owned in our no load mutual fund. We still believe the secular bull trend for the yellow metal remains intact but Gold is long overdue for a shorter term price correction downward. Silver experienced such a correction several months back.

To say that precious metals have hit a rough patch, is an understatement. Over the past month, the SPDR Gold Shares (GLD) is down almost 12%.

In the long term, is the secular bull run in precious metals over? We believe the answer to be no.

The short term technical picture for metals is ugly. Yet, regardless of how bad metals look right now, it's short-sighted to conclude their bullish run is indefinitely over.

Despite their recent drop, precious metals are still outperforming stocks (VT) along with the broader commodities market (GCC). On a year-to-date basis, GLD still has a gain of 12.62%. Furthermore, it's perfectly reasonable to expect a severe correction in precious metals because over the past decade they've been on a tear.

INVESTING LESSON

We had been expecting to see a 20-30 percent correction in precious metals from their overbought levels over the past six months. As it turns out, GLD peaked on August 22 at $185 and now finds itself in the midst of a spiral at $157 today. Per our original 8/26/11 blog, this was expected.

At sometime in the correction, both Gold and Silver will offer attractive "buy more" opportunities. We believe the potential "bottom fishing" trading range to potentially be between $129 to $148.

We still believe the bigger picture, long term, secular profit opportunity in the precious metals market remains to the upside. Those that missed the bull run in metals the first time are being given a second opportunity, which means a pullback can be used to capitalize, not run and hide.

The Role of "Alternative" Investments

2011-09-21T10:32:00.003-05:00

Members of WFG's portfolio management team attended an Alternative Investments forum in Minneapolis this week representing managers from across the country.

Alternative strategies (Managed Futures, MLP's, Commodities, Hedge Funds, etc.) have been available for years but are often both misunderstood and misused by financial advisors. They are too often "sold" as a stand-alone investment vs. part of a well-designed portfolio strategy. In the majority of cases, Alternative Investments carry high initial and ongoing costs and can have sketchy track records.

WFG has been researching Alternative Investments for our 17 years of managing wealth. We pan through all the "sand and dirt" looking for nuggets of gold as part of our ongoing ConVal® investment research process.

We use these strategies both offensively and defensively. The common misperception is that they are only used for offense- to produce greater returns. WFG generally uses these strategies on a defensive basis. In other words, they are used to protect and reduce volatility in our portfolios while generating a given level of target return with a reduced level of risk by their skillful use.

In several WFG models, as well as in our No-Load Mutual Fund, we hold a variety of these assets, such as Managed Futures, Commodities, and MLPs.

INVESTING LESSON: Don't forget that defense wins championships!

Grade Yourself on Your Personal Finances

2011-09-14T09:10:00.001-05:00

Failing can be a part of life. That said, the most detrimental place to fail is your personal finances. Jerry Wade is known for stating, "You end up with what you end up with." Let's make a checklist of things that you can do to improve "what you end up with."

Do you have an emergency fund. Unfortunately in life we have to expect the unexpected. The last thing that you want to do is get caught off guard needing to pull money from your investment accounts, high interest rate credit cards, etc. when something goes wrong or the market is already down. We recommend that you have an emergency fund with at least six months to a year's worth of expenses liquid.
Know what's in your bank accounts. Overdrawing a checking account by just a few cents could result in a lot of expensive and unnecessary banking fees. Run your household finances like you would run that of a business.
You don't understand the difference between a want and a need. One of the biggest impediments to getting your financial house in order is the inability to properly distinguish between a want and a need. When taken down to the most basic level, all of us have only a few primary needs: Food/water, clothing (not high-end designer clothing), shelter, transportation and health care - high-end cars, boats, luxurious vacation homes, etc. are a WANT, not a need.
You don't know how much you spend. It's pretty simple, the amount that you save is the difference between how much you make and how much you spend. It is important for you to look at this and realize that if you aren't saving anything that you need to adjust your lifestyle to decrease your discretionary spending. Not saving should not be an option for anyone!
Your tastes exceed your spending capabilities. Many individuals are first generation wealth and are fully aware that they can live on less expensive items than they do. If you are shopping at Byerly's instead of Sam's Club or Neimann Marcus instead of TJ Maxx, this may apply to you. If you are not saving due to this spending you, have some self-evaluation to conduct.

Investing Lesson: Hitting the reset button will likely take some self-analysis and some decision making but these are all decisions that will improve your personal financial report card. The more money that you spend now, the less money you will have in retirement, the longer you may have to work or both! That is the simple fact.

Beware of Gold Coin Offers/Dealers/Pitch Men

2011-09-12T09:28:00.001-05:00

Many of you may consider gold coins a good investment, a way to balance your investment portfolios and reduce your risk with what many consider the world's oldest and most trusted asset. Some of you have informed us over the years that you have bought gold when in fact you have been sold gold coins.

There are a number of issues with buying gold coins, unless you are an experienced buyer who knows what you are buying and what "dealers" are selling. Some of the problems include:

The transaction costs. Some quick research shows that premiums can be as much as 5% over the price of the gold coins PLUS there is a cost to shipping. I am going to guess that you would lose that premium when you went to sell this trusted asset at a later date.
You have to know what it is you are buying. All coin dealers will claim you are buying a rare and valuable coin (at a premium, may I add) when in fact the coin you are buying will have no value beyond its bullion (if it has any).
Coin dealers can be crooks! We are unlucky enough to have some of these Ponzi schemers locally.

Charles Ponzi

On September 8th, the FBI raided the downtown Minneapolis coin firm, International Rarities Corporation (IRC) - a local firm that sells investors a "solid investment:" Gold coins!

IRC is being charged with pitching a number of their gold coin buyers shares in a Nevada company. Private offering documents say that they were seeking to raise $10 million to take the firm public. On August 19th, IRC filed for Chapter 11 bankruptcy and it is likely the investors will be left "holding the bag" again. The Minnesota Attorney General's Office is currently investigating complaints specifically about IRC's coin sales.

INVESTING LESSONS

The ads and the dealers all echo the same message: The coins they are selling are one-of-a-kind, available for a limited time and will only increase in value. The truth is, the ads are meant to dupe those who don't understand the investment and those who will rely on emotion and not knowledge.
If you are interested in buying gold, contact us and we will help to insure that you are not taken by individuals like those who were running IRC.
WFG has recently completed our national research on the numerous Gold dealers and have a bulletin you can request with the details. Jerry Wade recently bought a small quantity of the yellow metal from one of the dealers in the bulletin.

Never Forgotten

2011-09-10T22:53:00.002-05:00

Sunday, September 11th, 2011 marks the 10th anniversary of that unimaginable day in which the world froze with stunned horror as our country was attacked. We watched the World Trade Centers collapse, along with the simultaneous attack on the Pentagon and the hijacked United Airlines Flight 93 in Pennsylvania.

One of the heroes on that plane was Tom Burnett of Minneapolis. He and others are believed to saved the plane from hitting its ultimate target, the White House.

Tom Burnett

We mourned as a nation over the tremendous loss of life and over the pain and fear that these acts inflicted upon the United States of America and its citizens.

All across the nation there will be events and ceremonies to pay tribute to those lost as well as the heroes who came to the aid of our nation on that tragic day 10 years ago. The Senate has established a National Moment of Remembrance that will take place at noon CDT.

Americans are asked during this minute to cease all activities for one minute and to take the time to remember those that lost their lives, the loved ones they have left behind and the service/military men and women who risk their lives each day to serve and protect this country and our freedom.

I will be observing this moment of remembrance and it is my hope that all of you will also. Regardless of political affiliation, race, sex or creed, we as a nation lost almost 3,000 Americans on this day 10 years ago. It is important for those left behind to know that their loved ones are gone but that they will never be forgotten.

"To find a safe journey through grief to growth does not mean one should forget the past. It means that on the journey we will need safe pathways so that remembrance, which may be painful, is possible." ~ Donna O'Toole

How to Make Student Debt, Smart Debt

2011-09-08T14:29:00.001-05:00

How to Make Student Debt, Smart Debt

College classes have started which means that tuition bills are due. With college costs still rising and scholarships decreasing, an increasing amount of students and their parents will be forced to become first-time borrowers. Of incoming freshman, 53 percent reported using loans last fall, the first significant increase since 2004, according to ULCA's Higher Education Institute.

With a volatile economy and high unemployment rates, it is important that college students and parents of college students don't load themselves up with unnecessary debt and that they choose the debt wisely.

Unless students limit their debt burdens, choose fields of study that are in demand and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.

Here are some tips from Kiplinger.com if you or your children intend on borrowing money to pay college tuition:

Choose a school that fits into the family budget. Families seem to be learning that picking a school is an economic decision as well as an academic one. In a survey by Fastweb.com, 45% of students ranked “quality of major” as their top reason for choosing a school. But “scholarship or financial assistance” (43%) and “total costs” (41%) came in a close second and third -- even higher than “academic reputation” (38%).

Among students who leave school with no debt, 85% graduated from public colleges, according to a report by Mark Kantrowitz, publisher of Fastweb.com and FinAid.org. Selecting an affordable school doesn’t have to mean sacrificing quality. To find public and private schools that deliver both, see our Best College Values special report.

Bypass the four-year route. Starting at a community college and transferring to a four-year school can save a lot. You can also slice a year off your expenses if your child takes Advanced Placement courses in high school or qualifies for college credits through the College Level Examination Program.

In Kantrowitz’s study, half the students who graduated with no debt graduated from a community college (one-third graduated from a public four-year college). Other hallmarks of students who graduate debt-free: They tend to spend less on textbooks -- $1,000 or less per year and are more likely to live at home with their parents.

Use money you don’t have to pay back. It’s never too late to save, especially if you live in a state that gives you an income tax break for contributions to state-sponsored 529 plans. Visit FastWeb.com to look for scholarship and grant money from schools and other sources where your student’s grade point average or other achievements would make him a standout.

If you must borrow, borrow smart. Start with government-sponsored loans, which offer flexible repayment options -- such as lower payments and deferral -- and fixed interest rates. These include Perkins loans, for eligible students, and Stafford loans, which may be subsidized if your student qualifies. Also, look into PLUS loans for parents or a home-equity line of credit. (For more information on student loans, go to StudentLoans.gov.) With that combination, you shouldn’t need private loans, which carry a variable interest rate and generally require a co-signer.

Apparently, many students don’t realize that federal loans are the most attractive. “A majority of undergraduates who take out risky private loans could have borrowed more in safer federal loans instead,” reports the Project on Student Debt.

It’s also smart to pay all or part of any loan interest as it accrues so that it isn’t added to the balance that has to be repaid. And remember that even the best student loan can be a dual-edged sword, encouraging a student to borrow more than he should.

Know what you’re getting into. Use the Student Loan Advisor calculator at FinAid.org. It provides an estimate, based on starting salaries of various professions, of the maximum in student loans your child should take out and how much it will cost to pay it back.

One rule of thumb is that students should try to limit their total borrowing to no more than their expected starting salary when they graduate. FinAid warns that “if you borrow more than twice your expected starting salary, you will be at high risk of default.”

And possibly the most important, choose a marketable major. Moody’s is right on the money in suggesting that students pick fields of study that are in demand. That doesn’t mean your child has to major in engineering or computer science. But if he/she is majoring in economics, it couldn’t hurt to take accounting. If he/she is studying history or government, he/she could learn a foreign language. And if he/she insists on studying something as precarious as journalism, he/she should minor or concentrate in another subject -- such as business, health or computer skills.

Investing Lesson: Borrowing at times is unpreventable but making sure that you are doing it in the smartest fashion is key!

Dividend Increases For WFG Paid to Wait Stocks®

2011-09-06T09:39:00.000-05:00

More WFG Paid to Wait Stocks^® have recently boosted their dividends. For example (as of 09/01/11):

Altria (MO) 7.9% increase with the new annual yield at 6.1%
Target (TGT) 20% increase with the new annual yield at 2.4%

Social Security has not increased in over two years, Money Market accounts yields sit at 0.50% and 5 year CDs at 1.7%.

INVESTING LESSON
What this means for you, the WFG investor, is increased cash flow from your stock portfolio!

WFG Top Stock Picks in "Good Company"

2011-08-31T12:43:00.001-05:00

The primary time of year for my/our robust stock and portfolio analysis is November and December. This time period allows for a full review and appraisal of all current holdings and consideration of potential changes as we enter a new calendar year. We, of course, evaluate all portfolios and holdings throughout the year, but desire to give each year's top picks time to run, unless new information comes to light that provides a cause for a making a sale or adding a new position that we believe meets our ConVal^® security selection criteria.

The table below reflects what Morningstar calls the top picks at any given time of their "Ultimate Stock-Pickers." With our short public track record and small asset base, WFG would not be considered for evaluationn at this time to make their list.

It is very interesting to see that of the 70 stocks WFG currently owns via our ConVal^® process, all of the stocks on the list above are owned by WFG, except Wells Fargo. These stocks were either already owned in 2010 or purchased in January of 2011. Of greater note is that WFG identified many of these stocks as top picks earlier than the M-Star "Ultimate Pickers" did.

Investing Lessons

1. Bigger is not always better

2. WFG's ConVal^®process is a winner

It Was Time to Hedge Our Gold Position

2011-08-26T12:44:00.000-05:00

With Gold continuing its parabolic ascent, we made the decision this week to hedge 50% of our exposure to Gold ETFs owned in our no load mutual fund. We still believe the secular bull trend for the yellow metal remains intact but Gold is long overdue for a shorter term price correction downward. Silver experienced such a correction several months back.

Investing Lesson
It's never a bad idea to take some chips off the table and protect your profits when any particular investment has run very far, very fast. Knowing when to do this and how to do this is what separates a "good" professional money manager (hard to find) from the self-directed investor, who more often than not will do the exact opposite; buy high and sell low!

The Proof is in the Pudding

2011-08-03T19:41:00.000-05:00

After a day like yesterday, I feel it is a good time to remind clients why Wade Financial Group, Inc. (WFG) positions our no-load mutual fund the way that we do. When the S&P 500 was down -2.56%, the Dow Jones was down -2.19%, and world markets (ACWI) were down -2.09%; our no-load mutual fund was down only -0.31% or about 1/8th of what other markets were down!

How?
As we have illustrated continually over the last six months, a defensive stance in times of turmoil is the optimal situation.

Here are some figures on our current holdings and their performance yesterday:

Cash: 12.29% of our mutual fund
Short S&P: 6.03% of our mutual fund; +2.56%
Build America Bond: 2.16% of our mutual fund; +1.44%
Silver: 2.07% of our mutual fund; +4.00%
Volatility Index: 1.32% of our mutual fund; +4.85%

Out of the entire Morningstar universe of funds in our category, we were in the top 10% yesterday! These numbers demonstrate the proof is in the pudding.

One more illustration of my point is demonstrated by comparing the S&P 500 and our no-load mutual fund's YTD figures of:

S&P 500 - YTD Return -0.29%
WFG's No-Load Mutual Fund - YTD 1.25%

Investing Lesson
In conclusion, if you're beginning to feel anxious or concerned about the markets: DON'T! That is why you have hired WFG so we can manage these types of situations for you!

You Know The U.S. Government Is Screwed Up When ............

2011-08-01T09:24:00.000-05:00

Who's ready for iAmerica?

As reported by the BBC and backed up by the company's financials records, the software company Apple has more cash on hand than the United States federal government.

Apple's quarterly financial report shows that the company responsible for the iPad, iPod and the iPhone now has $76.4 billion in reserve cash while the U.S. Treasury Department is sitting on just $73.7 billion.

In my opinion, the feds could probably learn a thing or two from Apple's success. Congress remains embroiled in a debate over spending and whether the federal government, which currently owes trillions in debt, should be allowed to borrow even more. International credit rating agencies have threatened to downgrade the national debt for the first time in the nation's history if Washington doesn't come up with a solution to lift the $14.3 trillion debt ceiling while implementing a concrete plan to get the nation's "financial house" in order.

Meanwhile, Apple's financial report shows that the company's profits, even through the last recession, are booming!

Investing Lesson

When all is said in done, when it comes to politicians, more is said than done.

My Opinion

It still pays to be very conservative at this point in time. The numbers on the U.S. economy came in Friday and were unfavorable. There is still at least a 50% chance that before this market cycle is over, the economy may slip back into another recession, with the market taking a final 30-50% swan dive downward. If and when that happens, it will then be time to load up the truck and invest aggressively. Patience, is a virtue, but difficult for many to maintain. I remain resolutely patient.

PS: Any agreement on a balanced budget amendment will not be worth the paper it is written on, but will be hyped as a great victory, with no details and the teeth of someone with their dentures sitting in Polident.

The Power of Perspective

2011-07-22T18:04:00.000-05:00

Carl Richards has become famous for his ability to create cartoon drawings, that are simple in nature, yet communicate powerful financial concepts. I have shared his work with a number of WFG clients.

Carl has now moved into video blogging.

Watch the short video on:
The Power of Perspective

Investing Lesson
Many things in life are often harder than they look, including investing!

Iowa Indy Corn 250 and the Ethanol Boondoggle

2011-06-28T22:44:00.019-05:00

A departure from the usual financial oriented blog, I spent last weekend in Iowa at the Indy Racing League (IRL), Iowa Corn 250 with my 18-year-old son, Sean. That said, view the video then read the financial implications of our trip to the corn state!

Being from Indy, having been to over 20 Indy 500 races, but never having ventured beyond, this was a real treat. I TiVo every IRL race each week. I have come to eat and breathe IRL like I do Butler basketball. Hey, I am a kid from Indy!

Life Lesson

Spend more time with your kids!

Investing Lesson
For the past four IRL seasons, the league had an arrangement with the ethanol industry, of which all cars, all season, ran on ethanol. For the 2011 season, this is no longer the case as the cars are now running on that nasty fuel...gasoline!

Rumor has it that Congress is close to reversing the 50 cents per gallon subsidy for ethanol. If it does so, the fuel is not cost competitive. The most reliable studies on ethanol have revealed the following:

Without the 50 cents per gallon subsidy, the fuel is not cost competitive with gasoline.
Regardless of subsidy, the boondoggle of artificially promoting a "greener" fuel has had widespread, negative implications.
The cost of corn has skyrocketed over the past five years, causing Americans of all incomes to suffer an "ethanol grocery tax."
The amount of energy that it takes to produce a gallon of ethanol exceeds the "carbon footprint" of producing a gallon of gasoline.
Game, set, match.

We have the world's greatest natural gas reserves and have not figured out that natural gas is the wave of the future. Why, you might ask? Lobbying of course! Hopefully, Congress, on the latest and third try, will pass an energy bill that places natural gas incentives as the number one way for America to more quickly move towards energy independence. Don't hold your breath!

There you have it!

Money Anxiety Index: Latest Sign of Double-Dip

2011-06-22T22:19:00.000-05:00

Great article from CNBC about the increasing potential for a double dip recession. Click on the blog title above to access.

Investing Lesson
The time to prepare for a storm is before it hits.

Stock Market Declines For 7 Weeks In A Row, The Longest Losing Streak In 10 Years

2011-06-19T00:18:00.001-05:00

Investing Lesson

The chances of a "double dip recession," which I predicted last summer, but was obviously early about, is again fair game. I believe it is better to be early and correct, than late and wrong when it comes to assisting our clients in navigating these turbulent financial times.

Why Paying the Annual Fee for the Amex Platinum Card is Worth It

2011-05-07T16:16:00.002-05:00

I have an American Express Platinum Card that has a $250 annual fee. I pay this fee because:

They have a real, U.S. based service team that you are able to contact.
This card replaces the need for a AAA membership when you experience issues with your car.
When I lock myself out of my Savannah condo, they send over a locksmith.
They repaired a flat tire on my snowmobile trailer in the Wayzata High School parade, which they did not have to do.
They assist my children with any issues that may arise when they are traveling in another state.
They provide access to free beer and free internet when you need it the most! Example: I am currently sitting in the Charlotte airport in the U.S. Airways VIP Lounge, which this card grants me access to. I was sitting here last week, too!
My flight to Minneapolis has been delayed so free beer number one is almost done. Don't worry, they will page me when and if I can make it home today.
Free beer number two is almost ready to begin .... okay, I did tip the bartender, that is not included.

Well, I will now send off this blog for posting, relaxing in a nice leather chair while waiting to be paged for my flight. It could take five minutes; it could take five hours. Either way, there is no lower-stress way to deal with this situation or the others that I have listed.

Note: Beer number two has begun, cheers!

Life Lesson: All of this is worth the $250!

401(k) Retirement Plan is a Misnomer

2011-05-04T12:37:00.006-05:00

Have you ever noticed that when Wall Street tries to sell you something they will go to all lengths to make things sound good?

A typical spiel might go like this, "All you need to do to retire with comfort is use our Target Date fund. Your plan sponsor, acting as a fiduciary on your behalf, has chosen the best funds for you to utilize in your 401(k) retirement plan."

The way the message really should read is "We wined and dined your bosses. Now we get to collect management fees from you. Good luck with your retirement."

Have you tried finding a Target Date fund for the exact year you want to retire? In all likelihood, your retirement would need to coincide with a year that ends with a 0 or 5, nothing in between, please.

Or try asking your Target Date fund what your withdrawal rate in retirement should be. I am 99.9% certain you will not be getting an answer.

A 401(k) plan is nothing more than an investment account, not a road map to retirement. It does not analyze your individual financial situation and will not provide a customized retirement plan.

Investing Lesson: If you and your loved ones want a real retirement plan, do not rely on your company's 401(k) Retirement Plan or Wall Street's latest fad. Work with a fee only financial planner like WFG, a true fiduciary who truly puts You First.

Trading in Toyota for Honda

2011-05-02T12:05:00.002-05:00

While we are all saddened by the tragic earthquake that hit Japan, as money managers we were required to evaluate the risks and opportunities for our investment portfolios.

We initially bought Toyota after its market valuation dropped due to product quality issues. Our research indicated that the company's strong fundamentals would allow it to recover over time leading to a higher stock price.

While our reassessment of Toyota after the earthquake did not change our view, it did lead us to look at Honda Motor. Our detailed analysis led us to the conclusion that the drop in market value for Honda was too extreme. Yes, the company is suffering from short-term production problems due to damage to their factories in Japan, but the issue should be resolved within the next 6 to 12 months.

Honda's balance sheet is as strong as Toyota's but it does not have any product quality issues. We believe that Honda's stock price will have the stronger recovery as production goes back online. Thus, we sold Toyota at a 1.5% gain and replaced it with Honda in our portfolios.

History Bodes Ill for Stock Market

2011-04-26T10:30:00.008-05:00

"There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines."

Mark Hulbert

Read more of Mark's article by clicking on the above blog post title.

Investing Lesson
I watch the Shiller PE 10 Ratio very closely and am concerned about its current high reading. That said, it has been above 20 for over one year. Markets can remain over or under valued for long periods of time, before a significant adjustment takes place.

Covered Call Strategy Explained

2011-04-14T14:15:00.005-05:00

Selling call options against stocks you hold is a great way to generate additional income for your portfolio but there are several problems with executing such a strategy in individual accounts:

(1) Call options can only be sold in 100 share increments.
(2) You need to be approved for selling covered calls by your broker.
(3) Commissions often eat up most of the premium you receive when you sell only one call.

Fortunately for investors in the Wade Core Destination Fund, we are able to execute the covered call strategy within the fund which overcomes the above limitations. In fact, we have sold covered calls against 25% of the individual stocks held in the fund.

When selling a call option in the fund, we allow for a cushion to capture additional upside in a stock's price while collecting a premium from selling the call. For example, we just sold covered calls against our position in Exelon that allows us to further participate in another 21.5% of price appreciation while collecting a 2.2% premium. The premium added to the stock's 5.1% dividend yield significantly increases the income generated by the position.

This is a clear example of one of the many advantages of investing in the Wade Core Destination Fund.

Dividend Increases For Paid To Wait Stocks

2011-04-14T13:02:00.004-05:00

More Paid to Wait Stocks have recently boosted their dividends. For example:

Abbott Labs boosted their dividends by 9%

Procter & Gamble increased their dividends by 9%

Trans Canada grew their dividends by 5%

What this means for you, the investor, is increased cash flow from your stock portfolio!

Still Kicking the Can Down the Road

2011-04-11T10:30:00.002-05:00

What is going on in Washington is a joke. A dangerous, bad joke.

Our country needs to "restructure our finances," much like a business going through a bankruptcy or foreclosure process. Unfortunately, our leaders are unwilling to chop the fat, and our citizens only want their neighbors to go on a diet and shun any needed changes that would impact them personally.

"There is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen... the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."

Frederic Bastiat

Bernanke will be judged later as a "bad economist."

3 "Paid to Wait" Stocks Other Value Managers Like

2011-03-24T10:47:00.003-05:00

I have opined in the past that there are only a select few "value driven" money managers that I respect for their skill and have a good track record over complete market cycles. One such fund is the Jensen Fund (JENSX). Click on the above blog title to read an article from www.theStreet.com.

NEW YORK (TheStreet) -- Health-care stocks barely budged last year as worry over legislation kept them from joining the broader equity-market rally. Robert Zagunis, manager of the Jensen Fund, says this year will be different, especially for companies such as:

Medtronic(MDT)
Abbott Labs(ABT)
Stryker(SYK).

I agree with Robert's conclusion. Medtronic was purchased in 2010 in our portfolios, with Abbott and Stryker added the first week of January 2011. All three of the above mentioned stocks qualify as WFG Paid to Wait stocks and are owned in our privately managed accounts and our no load mutual fund.

Mama Said There Would Be Days Like This ... Part 2

2011-03-16T21:22:00.032-05:00

On 1/28/11 I wrote a blog post with the same title above with the following quotes:

"The eruption in Eygpt is a prime example that on any given day,
the investment climate can suffer an earthquake."

"There are multiple risks on a worldwide basis
that could take the stock market down 20-40%."

I was using the word "earthquake" as a metaphor, meant to convey that the world can be a dangerous place. Governments can implode, wars are fought, cyber terror is real and yes, earthquakes are among the myriad of dangers that can topple a seriously over stimulated and over valued world stock market.

The mutual fund I manage was down 0.39% today.

That is 80% less than the S&P 500 (SPY) with a 1.95% decline
and
84% less than the world stock market (ACWI) with a 2.45% decline.

Our significant downside protection today was a result of:

A 37% allocation to stock investments (verses a 50% neutral and 65% maximum)
Short China
Short U.S. Small Company stocks
Positive performance of positions in two funds that employ risk management hedging
Positive performance from various energy holdings
Positive performance from our three Managed Commodity Futures positions
Our Gold positions were flat for the day
Our long position in U.S. Treasury bonds was positive
Our recent addition going long, the VIX Volatility Index, was up sharply

Days like today validate our Contrarian Value ( ConVal^®) approach.

Our mutual fund was lagging the S&P 500 index by almost 5% less than two weeks YTD 2011.

As of today, our fund is +1.32% YTD
The S&P 500 has dropped to +0.33% YTD

Growing and preserving our client's wealth is a marathon, not a sprint.

Paid to Wait Stocks Shine in Market Sell Off

2011-03-15T20:05:00.011-05:00

All of the major U.S. stock averages are now on pace to close at new lows after all peaking on February 18th. Leading the way on the downside are the Nasdaq and Russell 2000, which are both down more than 5% from their highs.

Source: Bespoke Group. Data as of 3/14/11.

WFG is overweight high quality Paid to Wait stocks, underweight small company Russell 1000 stocks entering 2011 and short Russell 1000 stocks in our mutual fund.

200 Years Later and Still No Wiser

2011-03-09T12:43:00.003-06:00

More than two centuries ago, Adam Smith warned of the dangers of having financial institutions that were "Too Big To Fail." The paragraph below was taken out of a recent Barron's article:

Adam Smith discussed at length the 1772 collapse of the Ayr Bank in Scotland, which ended up costing the Duke of Buccleuch and other investors. It was laid low by "chimerical projectors…who would employ money in extravagant undertakings, which, withal the assistance given them, they would probably never be able to complete." It was important, Smith claimed, to limit the size of enterprises so that one bank failure wouldn't incinerate the entire financial system.

Does the above look familiar to you? Unfortunately, even after our most recent experience with the 2008 financial collapse, lessons still have not been learned. Wells Fargo, JP Morgan, Bank of America and Citi Bank are four major banks that got bigger, not smaller.

Even worse, now more than ever the housing markets are relying on Fannie Mae and Freddie Mac to help finance mortgages--two companies standing at death's door with outstretched hands asking for donations from the taxpayer.

We have come out of the 2008 crisis with even more financial institutions that are Too Big to Fail. What will the next round of profits and greed bring when the cycle turns down? More pain, not less, we suspect.

Uncle Sam's Growing Bill

2011-03-08T09:11:00.001-06:00

In the most recent newsletter from Grant's, it was projected that net interest expense (payments less income) for Uncle Sam would be $658 billion at a rate of 5.8%. The average maturity of debt issued by the treasury is five years. This means that by 2016, the U.S. government would need to refinance the majority of its debt. If net interest costs went up by 1%, the annual interest payment goes up by $151 billion. If rates were to hit the highs seen in the early 80s, net interest payments would be $1.49 trillion. Notice that is a T for trillion.

Are we worried about the government deficits and the road the U.S. economy is headed towards? You bet we are. Economic risks are very elevated right now, and it is not the time to be aggressive. We believe that patience that will pay off in the long run.

Paid To Wait Dividend Increases

2011-03-07T13:21:00.001-06:00

Central to WFG's Paid To Wait stock portfolio strategy is to buy companies with strong balance sheets which gives them the ability to contineously grow their dividends. Below is a list of companies that we are invested in that have recently increased their dividends.

An increasing dividend stream allows you to get paid in all market environments.

Doug Kass Agrees With Jerry Wade-Be A Contrarian "It Ain't a Popularity Contest"

2011-03-02T18:47:00.007-06:00

Doug Kass is one of the few financial experts that gets quite a bit of media airtime that:

Knows what he is talking about.

Has been right much more than wrong with his market forecasts.

Click the blog title above for an excellent article just penned by Doug at www.theStreet.com.

Gulf Stock Markets Slide-WFG Already Exited

2011-02-21T09:21:00.005-06:00

Based upon the Egypt turmoil that started weeks ago, I felt it prudent to sell our 1% position in Templeton Frontier Markets Fund owned in our no load mutual fund, shortly thereafter.

My concern was then, as it is now, that the turmoil may continue to spread and infect a host of other countries in the region.

It was time to as musician Steve Miller would say, "Take the Money and Run."

If you are an internet subscriber to the WSJ online you can click on the above blog title for access to an article from the WSJ on the topic.

Word of Caution From Doug Kass

2011-02-17T12:05:00.001-06:00

Doug Kass is one of the few financial experts that gets quite a bit of media airtime that:

Knows what he is talking about.
Has been right much more than wrong with his market forecasts.

Click the blog title above for an excellent article just penned by Doug at www.theStreet.com.

Why NFC Could be Another Game-Changer for Apple

2011-02-16T13:09:00.002-06:00

Many investors wonder how high and how long Apple can continue its ascent.

Click the blog title above for an excellent article from www.theStreet.com as to how Near Field Communications (NFC) could be another game-changer for Apple.

WFG owns Apple in our stock portfolios and our no load mutual fund.

Is This The Time To Be Going LONG - with a 70 Yard Pass to Randy Moss?

2011-02-10T20:45:00.014-06:00

The following is from Contrarian Guru Extraordinaire, David Rosenberg.

"Sorry, but that time has passed. But we will probably get another kick at the can because we are sure that the “event risk”, which caused so much turbulence and buying opportunities in 2010 will come around again in 2011. But this is one overextended U.S. stock market, that is for sure.

We have a dividend yield on the S&P 500 of 1.8% with a 10-year bond yield at 3.7%. Somehow that is just slightly less appealing than the 3.6% dividend yield and 2.8% bond yield we had at the March 2009 market lows.

The dividend yield, by the way,
is where it was at the market peak in October 2007.
Food for thought.

The cyclically-adjusted P/E ratio on the S&P 500 is now 23.3x, where it was back in May 2008. At the lows, it was trading at 13.3x.

So if we are talking about the best entry point from a value perspective,
it was then, not now.

Amazingly, the Investors Intelligence survey now shows 53.4% bulls and 23.3% bears. At the March 2009 lows, these numbers were basically reversed. Equity portfolio manager cash ratios today are at 3.5%; at the March 2009 lows they were closer to 6%. As an aside, the last time the liquidity ratio was as low as it is today was in September 2007. Gulp!

… well, you know which way it’s going from here".

Toyota - True Contrarian Investing at Work

2011-02-09T12:50:00.008-06:00

Back in February of 2010, we added Toyota to our portfolios just as it was facing mounting bad press regarding its vehicles having sudden acceleration problems. In investing, the best time to buy is usually also the hardest time to buy, when there is "blood in the streets."

Buying low and selling high is how an investor earns a positive return, but buying low just because a stock has fallen in value is not a sufficient reason to buy. WFG's research into Toyota at that point, in time, convinced us it was a great opportunity to add the company to our portfolios.

Toyota was a financially sound company that had the resources to both deal with lawsuits while simultaneous fixing its quality issues.
It had strong brand recognition and excellent brand loyalty.
It continued to be an innovative company with roots in building automobiles of the highest quality.

In our view, this was a temporary crisis that would cause management to put their focus back onto quality control and customer satisfaction with profits taking a back seat.

Since we added Toyota to our portfolio, it is up about 22%. WFG believes it still has room to run.

WFG Recent Stock Addition, EOG Resources: Oil Boom Play

2011-02-08T18:11:00.016-06:00

We recently added EOG Resources (EOG) to our no load mutual fund and our privately managed Concentrated Growth Portfolio.

Click the above blog title for an informative article on who EOG is and what the growth opportunity is.

Investment Lesson

It pays to stay informed. You are smart if you are a client and read this blog. We call it "being engaged" with your advisory firm.

A Tanker Company

2011-02-08T12:27:00.001-06:00

We added shares of Nordic American Tanker Shipping (Symbol NAT) to our Growth portfolio in August of 2010.

Why invest in a company that is in a highly cyclical, capital intensive industry with low barriers to entry you might ask?

There is a lot to like about Nordic American's business model:

The company has traditionally carried little to no debt giving it great financial flexibility, especially in economic downturns. This is a huge competitive advantage in a capital intensive industry.

Its tankers are newer double hulled ships, meaning it does not face the need to replace obsolete tankers.

It continues to have access to equity markets where it issues new shares to purchase new tankers. While management of many companies issue shares to fund "Empire Building," Nordic American's management has been very disciplined in using the cash it receives from equity issuance to grow the fleet of tankers.

While the stock price has suffered through most of 2010 due to falling shipping rates, the best time to buy into shipping companies is when shipping rates are down.

Although the company continues to pay a variable dividend based on operating performance, management still continues to have the goal of paying out the majority of operating profits to shareholders.

Think about it: An investor who bought a share of NAT on 9/30/1997 at $18.75 would have received $41.51 in dividends through 2/3/11. Not too shabby a return.

Complacency

2011-01-31T19:23:00.006-06:00

All I can say is.......wow.

With stock futures down all weekend long, the world stock markets today acted as if there was no current and/or future turmoil in the world.

Again.....wow.

Mama Said There Would Be Days Like This ..

2011-01-28T19:11:00.049-06:00

Well, Momma actually did not say that regarding investing, but yours truly did.

The eruption in Eygpt is a prime example that on given given day, "The investment climate can suffer an earthquake."

Almost on cue after two months of a huge stock market run up, I have had a number of clients question my current defensive stance in our portfolios with their money. Hey, don't get me wrong, it's their money and a very legitimate question. That said, having been doing this for 26 years, I understand the cycles of investing and more importantly, how what's going on in the world can heavily influence our collective grey matter!

My response to clients has been as follows:

I believe the stock market to be overvalued.
I believe that a stock market can remain overvalued for longer than it should.
The longer a market that is already overvalued moves in a further overvalued condition, the greater the future cardiac arrest (2000-2002 and 2008-2009).
The U.S. stock market has been fueled by government stimulus, not fundamentals.

There are multiple risks on a worldwide basis that could take the stock market down 20-40%.

I do NOT have a crystal ball.

It is like walking by a house each week that seems to have lots of people in it, having a great party. It is normal human behavior to feel like you are missing out on the fun.

It is a great party, until the music stops and there are not enough "safety seats" for the majority of the people in the room.
I want my clients to have a safety seat!

I have dedicated an extensive area of my company's website (www.wadefinancialgroup.com, click on WFG Advocacy) to the topic of behavioral finance. Lots of great articles, with tons of empirical data suggesting that our brains have been wired since the stone ages to have a two position on/off switch between greed and fear. That's it, no five-position dial.

The single greatest role a professional financial advisor plays is assisting their clients in finding the "middle switch position." That is hard to find on their own.

A day like today was not a matter of if, but more a matter of when. That said, who knows what will happen beyond today. Just so we are clear, no one knows. I repeat, no one knows. If you think you know, or a friend tells you they think they know, well, think again. These are the facts!

What You Should Do
The best course of action remains as follows:

Do not be an "extreme" investor. This means sitting all in cash because you believe the sky is falling. It never works.
As important, walking into the party at 1 a.m. and getting more into stocks when they are overvalued has proven equally as costly.
The prudent, proper, experienced, appropriate, yet often very hard, thing to do is continue to allow a professional investment advisor who operates from a contrarian investment philosophy to keep you well diversified across an ever dizzying array of investment choices.

Please note: The mutual fund I manage was down 0.55% today.
That is 69% less than the S&P 500 (SPY) declined, 76% less than the world stock market (ACWI) declined and 83% less than the Emerging Markets (EEM) declined.

My investment approach changed as a result of the "sea change" in the world economy that started in 2008. We are now about "making it and keeping it" and less about "making more and then losing it."

In baseball terms, singles and doubles win ball games over time, not home run swinging.
In real estate terms, we are about "owning" lower, reliable, more consistent returns vs. "renting" higher, unreliable, inconsistent returns.

WFG Paid to Wait Stock Is A Classic Contrarian Investment

2011-01-10T13:42:00.001-06:00

Pfizer: Hated by Wall Street, pays a dividend and posses several catalyst that might drive the stock price up in the future--just the kind of stock WFG loves.

Several of the catalyst that WFG had identified that could increase the stock performance eventually were also highlighted in a recent Barron's article:

A big stock buyback or an increased dividend.

The retirement of CEO Jeff Kindler would allow Pfizer to shed assets.

The sale or spin off of higher-value businesses, like animal health and infant nutritionals, could help generate shareholder value.

A reduction in Pfizer's huge $9 billion research-and-development budget could improve profits.

What actions Pfizer will ultimately take to increase shareholder value is not known yet. In the mean time, the company just increased its dividends 11.1%. As investors, we get paid a handsome 4.4% annual dividend while waiting. Classic WFG ConVal investing at work.

More Examples of Fund Managers Who Fail To Invest In The Funds They Manage

2011-01-06T12:40:00.002-06:00

Article From Morningstar
A version of this article appeared in the November 2010 issue of Morningstar FundInvestor. Greg Carlson is a mutual fund analyst with Morningstar.

Morningstar has conducted multiple studies demonstrating that the majority of mutual fund managers don't invest heavily in the funds they manage.

Morningstar strongly believes that a significant level of ownership better aligns managers' interests with those of shareholders. Let's take a closer look at some funds in this situation.

Managers Micro-Cap MMCFX  None of the managers at any of the four subadvisors who divvy up the fund's assets own a single share of it, according to its most recent Statement of Additional Information. One of those subadvisors came on board in December 2009, and portfolio managers' holdings in the fund were last disclosed as of October 2009. But the 11 managers from the other subadvisors have all worked on the fund since December 2007, so they've had time to build up stakes in it. They simply haven't.

While it's true that subadvisors are less likely to invest in funds they run, that's no excuse. There are a number of subadvisors who own hefty stakes in their charges, such as Jim Barrow of Vanguard Windsor II VWNFX, and Bill D'Alonzo, David Herro, and Dick Weiss of the Masters' Select funds.

Wasatch Ultra Growth WAMCX  Manager Ajay Krishnan had between $100,001 and $500,000 invested in the fund at the end of 2009. That's not a small amount on an absolute basis, particularly for a small-cap fund. But given his 16-year tenure at Wasatch, including 10 years as manager of this fund, and the firm's intense focus on smaller companies, it's fair to expect a larger commitment. It would make the fund's expense ratio a bit easier to swallow.

Putnam Multi-Cap Growth PNOPX and Putnam Growth Opportunities POGAX  These large-growth funds are both on the pricey side. Both funds are run by the same manager, Robert Brookby. He's steered the smaller Growth Opportunities since January 2009, and after a solid start there, he was tapped to take over the $3.5 billion Multi-Cap Growth in April 2010. As of Growth Opportunities' November 2009 Statement of Additional Information, he had between $100,001 and $500,000 invested in its shares. Not bad, but given the fund's aims to be a core holding and Brookby's five years as a portfolio manager, we hope to see a bigger stake in the future.

AllianceBernstein Growth AGRFX  As of July 31, 2010, William Baird (who's served on the fund since late 2006) had between $100,001 and $500,000 stashed in the fund, while Vadim Zlotnikov had between $50,0001 and $100,000 invested in its shares. Meanwhile, Frank Caruso didn't own a single share of the fund. Amy Raskin joined as a fourth manager in November 2010 on the date of the fund's last SAI.

Investing Lesson
Only invest in investments that the financial advisor you work with has a substantial stake and commitment in. I am the largest shareholder in the no load mutual fund that I manage for WFG's clients. This is called "eating your own cooking."

Bullish Sentiment Indicators Reach High

2011-01-05T16:23:00.001-06:00

Late December of 2010, surveys of bullish sentiment from Investors Intelligence (II) and the American Association of Individual Investors (AAII) showed the ninth highest combined reading since 1987, and it was the sixth period ever where the combined reading was above 120%.

One place where the holiday spirit is not in short supply is the equity market.

Investing Lesson
Be wary of all the "good news"and "good feelings" as we enter 2011.

Can You Trust The "January Effect?"

2011-01-04T14:05:00.001-06:00

The information below comes courtesy of www.etfguide.com, Technical Forecast (TF) email to WFG, January 2, 2011.

According to the Stock Trader’s Almanac, the January barometer has a 90% accuracy ratio since 1950. The premise of the January Barometer is simple: As January goes, so goes the year.

The December 19 TF featured charts of the S&P’s performance in January 2007, 2008 and 2009, all of which were down months. However, over the past three years a new pattern has emerged. Year-end euphoria has culminated into sentiment extremes and January sell-offs.

Therefore, the January barometer has proved correct only five times over the past decade, a 50% accuracy ratio.

January 2001 was an up month, but the year ended down. January 2003 and 2005 were down months, but the years ended up. And of course, January 2009 and 2010 were down 8.6% and 3.7% but finished the year strong with returns of 23.5% and 12.6%.

As discussed over the past several weeks, sentiment extremes point towards a January correction and a down month. A down January, however, would contradict another high probability seasonality, the Presidential Election Year Cycle, for example. A pre-election year, such as 2011, sports the best historical performance of the four-year cycle. In fact, the last pre-election year loss was recorded in 1939 (Dow down 2.9%). The last significant pre-election year loss occurred in 1931, during the Great Depression.

The pre-election year performance pop is credited to each administration's efforts to pump up the economy (or at least the stock market) to finish strong and persuade voters to re-elect whoever is in office.

However, this time around much money has been pumped into the economy before the pre-election year (bailouts, low interest rates, QE1 and QE2). There is a chance that this premature shot of liquidity alters the cycle and mortgaged the market’s otherwise rosy future.

Investing Lesson
Past performance has proven to be a unreliable indicator of future results!

Still Like Gold, But.....

2011-01-04T09:33:00.004-06:00

It has been decades since it first came out but Sean Connery as James Bond in the movie classic, Goldfinger, is back in vogue. When gold shows up on the front page of the New York Times, you know that a lot of the news is in the price (see TV ads running 24/7 and radio). We remain big fans of the yellow metal and still see potential for $2-3,000 an ounce over the next decade, as its hedging properties against the integrity of the global financial system will likely remain intact.

The reality is that gold has made such a continual upward move over the past several years that speculative fervor is evident, and the fact that gold is now a front-page story makes it susceptible to near-term pull-backs. Nonetheless, it can correct all the way down to $1,200 per ounce without violating any long-term trendline.

INVESTING LESSON
As in 2006-2008, when real estate schemes were all the rage, investors need to be careful when any asset class receives so much attention that your cab driver is talking it up. We will continue to add to the precious metals area at opportune times during 2011. On a related note, our Lithium ETF position has done quite nicely since added to our mutual fund portfolio.

Europe's Slump = USA Slump = What Should We Do?

2011-01-03T14:45:00.002-06:00

Firms Hurting as Europe Slumps
Wall Street Journal
By CARI TUNA And ELLEN BYRON
12/7/2010

Multinational companies in a range of industries are seeing slowdowns in Europe and bracing for what could be many months of weakness.

Companies in the technology and health-care fields are under pressure from government efforts in Europe to cut costs, while consumer-goods makers have to contend with sluggishness in nations including Spain, Ireland and Greece. They are responding, in some cases, by cutting jobs and investments, steps that will themselves weigh on Europe's economic climate.

"There will be less people working, less people paying taxes, which will weigh further on government finances—all of this is linked to weakening economic growth," said Media Eghbal, a Western Europe analyst for market-research firm Euromonitor International Inc.

The euro-zone's economic growth slowed sharply in the third quarter, as business investment stalled, signaling that companies aren't confident enough to commit more capital. Spain's economy stagnated, and Greece's contracted. Pressure to cut public-sector spending is rising as government debt climbs.

"Central government budgets in many of the countries in Europe are being reduced dramatically," a spokesperson for Cisco said in a conference call with analysts. That factor, among others, led Cisco, which makes routers and switches that connect computers to the Internet and each other, to announce a weaker-than-expected sales forecast, sending its stock price tumbling over the past quarter.

OPINION-What Needs to Happen, But Most Likely Will Not (Jerry Wade)
Unless the U.S. does the right thing (start balancing the budget), which our elected officials have shown a clear lack of guts to do thus far, we will likely relapse into recession. In my opinion, we have never really left the current recession. What needs to happen as soon as possible in America is the following:

American households modify their lifestyles in such a way that they achieve positive vs. negative cash flow.

American households modify their lifestyles in such a way that they quit spending from investments while still working and instead, start saving more for retirement..

Federal Government makes the hard changes necessary to achieve positive vs. negative cash flow.

State Governments makes the hard changes necessary to achieve positive vs. negative cash flow.

Pension plans are restructured to provide lower current and future payouts, or risk running out of many for all current and future retirees.

Social Security restructured to provide lower current and future payouts, or risk running out of money for all current and future retirees.

Labor Union Benefit packages for millions of employees are restructured to provide lower current and future payouts, or risk running out of money for all current and future retirees.

And yes, higher taxes, for a limited period of time, for all who earn an income.

The impasse we have seen thus far is the Republicans want to cut expenses and not raise taxes. The Democrats want to raise taxes and spend more money. The labor unions do not want any changes; pension plans are inept thus far at seeing that they have a problem; and the folks currently on Social Security and future recipients want nothing to do with any cuts.

Without shared sacrifice, across all the above groups,
the good old U. S. of A. will experience further financial collapse.

Investing Lesson
At this point in time, it is prudent to err on the side of safety vs. taking too much investment risk.

Having an Advisor Who is Ahead of the Game

2010-12-30T13:35:00.001-06:00

Why Is The Stock Market Continuing To Climb?
Financial markets have an annoying tendency to reach overvalued or undervalued conditions that can continue for several years prior to reaching a critical turning point. On a short-term basis, the stock market has been called a "voting machine," driven by either "greed" or "fear" as the source of direction. On a long-term basis, the stock market is considered to operate as a "weighing machine." In other words, the weight of the evidence of true valuation will eventually overtake the herd mentality of the voting machine. Recent examples include:

1. The Tech Bubble of 2000-2002

2. The Real Estate Bubble of 2008-2009

3. The current 2009-? "Artificial Stimulus" Bubble, where stocks are rocketing upward. I believe that this current rocket does not have adequate fuel to pierce through the atmosphere and will likely, run out and come crashing down to earth instead.

Feelings About 2011
As we entered 2010, I was on record stating many concerns that influenced how aggressive (or not) I have been in WFG portfolios that allow me the discretion to alter the allocation to stocks. I appear to have been early. That said, I have not changed my opinion and based upon the current economic landscape and stock market levelsm I am equally concerned as we enter 2011.

The Punishment For Being Ahead of the Game--But Right Nonetheless
In the past, investors have severely punished financial advisors who were perceived as too cautious as stocks and real estate kept growing towards the moon.

Jeremy Grantham Example
His world-class investment firm had its assets under management shrink 45 percent in the late 1990s as his pessimistic outlook for high-priced technology stocks spurred clients to buy better-performing mutual funds. While ultimately being right, like all humans, he was unable to predict with precision the exact date that the earth would stand still. The 49 percent plunge in the S&P 500 from March 2000 to October 2002 proved Grantham, 72, was right to warn of overvalued U.S. shares.

The Herd is Overweight Emerging Markets
Investment strategists at Bank of America Corp., Credit Suisse Group AG and Societe Generale SA have all said in the past month that emerging-market stocks may climb above levels justified by companies’ assets and earnings because of surging economic growth and the Fed’s efforts to reduce yields on debt securities.

Investors poured more than $60 billion into emerging-market stock mutual funds in 2010. Professional investors are more bullish on emerging markets than any region, according to a Bank of America survey last month.

“Everyone and his dog are now overweight emerging equities, and most stated intentions are to go higher and higher,” Grantham, who helps oversee about $104 billion, wrote in his quarterly letter to clients posted on the firm’s Website. Developing nations’ faster expansion “will give a powerful impression of greater value,” he said.

Valuations are the “most stretched” in emerging markets, making them vulnerable to a selloff should global growth disappoint investors, Bob Janjuah, the co-head of cross-asset allocation strategy at Nomura International Plc, said in a Bloomberg Television interview on Oct. 27.

Stocks, bonds and currencies in developing nations are likely to climb to bubble levels as the Fed has rolled out another round of bond purchases, Michael Hartnett, Bank of America’s chief global equity strategist, wrote in an Oct. 21 report.

Credit Suisse’s London-based global equity strategist Andrew Garthwaite says the combination of high savings rates, negative real interest rates and rising asset prices has made emerging-market countries including China and India vulnerable to speculative inflows.

“If ever the stage were set for an emerging market bubble, we think it is now,” Garthwaite wrote in an Oct. 27 research report.

Summary
“The headache posed by bubbles depends on the asset managers’ perspective,” wrote Grice. “For skeptics, the pain is on the way up; for true believers, it’s on the way down.”

I am still more comfortable at this juncture accepting the "pain of being early" vs. not safeguarding our client's wealth from what I believe is another bubble brewing.

Savannah Film Festival Review Summary

2010-12-30T09:20:00.001-06:00

Below are my reviews of the movies I saw at the Savannah Film Festival this fall, followed by some additional comments.

Reg: Regular Hollywood movie with big budget.
Ind: Independent film with low budget.

Movie	Type	Genre	Movie Stars	Rtg	Comments
Black Swan	Reg	Suspense	Natalie Portman	4	Stunning
The Conspirator	Reg	True story Lincoln Assassination	Unknowns	4	Redford movie filmed in Savannah
Beneath Hill 60	Ind	True story WW I	Unknowns	5	A must see movie
Nice Guy Johnny	Ind	Modern day “The Graduate"	Ed Burns and unknowns	5	Very funny!
Automorphosis	Ind	Documentary about people who turn cars into art	Unknowns	4	Very interesting
Night Catches Us	Ind	Objective story about the Black Panthers	Actor from the Hurt Locker	4	Very informing
You Don’t Know Jack	Reg	The true story of Jack Kevorkian	Al Pacino, John Goodman, Brenda Vaccaro	5	Very good
Don’t Go Into The Woods	Ind	Slasher/Musical about teenagers	Unknowns	4	Very funny for a certain audience
The Kid	Ind	True story of boy that grew up with child abuse. Goes on to become best selling author	Unknowns	5	Moving
Gods and Monsters	Ind	True story of the H-wood director of Frankenstein	Ian McKellen Brendan Fraser	4	Funny and interesting
Blue Valentine	Ind	Drama about poor relationships	Ryan Gosling, Michelle Williams	1	A downer
Made in Dagenham	Ind	True story about equal pay for women	Unknowns	4	Very informing
Another Year	Ind	Story about relationships	Unknowns	2	Too slow with thud of an ending
127 Hours	Reg	True story about hiker who cuts arm off to stay alive	James Franco	1	Tedious film about survival

Additional Comments:

Beneath Hill 60: Simply one of the best war films ever made. A true story about an unknown aspect of how WWI was fought. A drama with no core and a love story to boot!

Nice Guy Johnny: Made by Ed Burns on a $25,000 budget. Can download via iTunes. Number seven at the Apple Store at this time.

You Don't Know Jack: Regular movie with Hollywood budget but a must see.

Don't Go Into The Woods: Young people will like this movie. A "B" style horror movie that the actors sing songs through!

The Kid: A true story about how even with the worst upbringing, the human spirit can prevail. Also shows how big an impact positive role models can have.

127 Hours: Do not waste your money. If you think James Franco is hot, rent another movie he has been in.

In Closing
I will follow up this blog with some observations about various, powerful life learnings that impacted me by various films.

Mark Twain and Investing

2010-12-28T09:32:00.000-06:00

BUYERS BEWARE
Not only is sentiment wildly bullish on stocks and equally as bearish on bonds, but history says that when yields and equity values soar in tandem, as they did in the summer of 2007, we almost always see a reversal in both markets. On average, equity prices corrected 12% in the next six months.

On a similar note is Barron's Outlook 2011 ― none of the 10 strategists see a down market, the average forecast is for a double-digit advance and the range is 1,250 to 1,450!

To quote Mark Twain ...

“When I find myself on the side of the majority, I know it’s time to find a new place to side.”

INVESTING LESSON:
Only by standing against the prevailing winds-selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

What Types of Stocks to Own in a Sideways Market

2010-12-17T22:12:00.016-06:00

Vitaliy Katsenelson, a Denver-based money manager of whom I respect, just published a "bible" on investing. He asserts that he is looking for a “sideways” market and screening for “companies that have a lot of cash.” He has a ton of cash too — a 35% cash position and lays out the reason very clearly: Nobody “can win buying an overvalued asset and hoping it will appreciate.”

The above is 100% consistent with WFG's Paid to Wait approach of buying companies that:

Are cash rich
Have low debt
Have paid dividends over a long period of time
Have a record of increasing their dividends
Have a high return on capital
Have strong competitive positions within their business sector

Investing Lessons

1) If you are going to invest in the stock market, why not get Paid to Wait? Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

2) Investing is a marathon, not a race. The future winning professional money managers will be the current laggards of 2010, who continue to pursue the virtues of capital preservation and income-orientation strategies over speculation.

3) If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets. Investors who make all or nothing, 100% in or out bets with the stock market, are proven over the course of time to have shot a large hole in their foot. If there were only "financial gun permits" to protect them from the emotions that lead to ill timed decisions based upon the news media and fear.

4) I personally have a very low overall exposure to stocks of 38%. This is about as low as any long term investor should ever go.

I Still See The U.S. Stock Market As Over Extended

2010-12-17T22:00:00.007-06:00

From David Rosenberg:

"Market sentiment is wildly bullish.The latest Shiller P/E ratio jumped to 21.87x in November from 21.38x — we have not seen it this high since June 2008 (and recall that the market went down 45% from there to the lows of 2009). According to this metric, the U.S. stock market is overvalued by 33%. Yikes! And the typical Wall Street strategist thinks this market is cheap!"

INVESTING LESSON:
Only by standing against the prevailing winds-selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

Recent Stock Additions As We Enter 2011

2010-12-11T08:55:00.000-06:00

The Christmas season is one of the times during the year that I devote substantial time to "shopping for stock bargains." To qualify, the stocks that make the buy list possess many of the following attributes:

They are an out of favor stock, in an out of favor industry.
Their recent performance has been poor (possibly over the last year).
If they are smaller companies they need to have some ownership by insiders.
They need to pass the analysis of various research providers that we value and trust.
They should be owned by other value driven investment firms that we follow and trust.
We have an expectation that they will hold up better in a stock market correction.
We have an expectation that with patience, these stocks can make up lost ground in a flat or up market.

We "shopped for the following bargins" today in WFG portfolios: The following stocks were new additions: CFFN, COV, CSCO, IBKC, INTC, KMB, PBCT, PFE, SCHW, SYK, VPFG. The remaining stocks we already own and are adding to existing positions.

INVESTING LESSON:
Only by standing against the prevailing winds-selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

Opportunistically Selling A Bond

2010-12-02T09:10:00.001-06:00

Just last Wednesday, we sold a Bank of America Bond with a 5.375% coupon that was purchased for clients in early 2009. You might be wondering why we would sell a bond with a 5.375% coupon that matures in less than one year when similarly rated corporate bonds are yielding less than 1%.

There are several reasons why we decided to sell this bond:

1) It was trading above par ($100) which is what an investor will receive at maturity. The difference between the total amount that could be received at maturity (principle and interest) and the sale price now was very small.

2) Selling now meant paying taxes at the lower long-term capital tax rate on the gains as opposed to the higher income tax rate on interest payments.

3) Selling now allows holders of the bond to pay a known 2010 capital gains tax rate as opposed to an unknown 2011 income tax rate. (Will the lame duck congress act to keep tax rates low? Who knows.)

4) The sale allows WFG to reinvest the proceeds into other fixed income opportunities that yield more than 1%.

Investing Lesson: Keep the big picture in mind when investing; both potential returns and taxes must be considered.

Lockbox Investing: Actively Monitoring Performance

2010-11-30T13:21:00.008-06:00

There has been the misperception that WFG's "lockbox" investing approach is a passive strategy where after conducting research on companies to invest in, we purchase our top picks, put them in the "lockbox" and throw the key away.

While we believe that the stocks of companies we purchase can be held for the long-run, we still actively monitor their performance. WFG will use the key to the "lockbox" to add or remove companies based on stock valuations and our economic outlook. For example, during 2008 as oil was on its way to $147 per barrel, we removed many of the energy names from the "lockbox." In the early part of 2009, we added most of those positions back into the "lockbox," as the price of oil fell and the stocks once again became attractively priced.

WFG will continue to actively monitor all the positions we are invested in and make changes as market and economic conditions change.

Investing Lesson: Buy and hold is not the same as buy and ignore.

401(k) Piggy Bank

2010-11-08T14:27:00.004-06:00

In the first half of 2010, 17.5% of 401(k) participants had loans outstanding in their accounts and 2.1% of participants took withdrawals from their 401(k) plan paying a 10% penalty on top of taxes to Uncle Sam.

When taking out a 401(k) loan, you also run the risk of needing to pay the loan back in full within 60 days if you leave your job. If you are unable to pay back the loan, income taxes and the 10% penalty must be paid on the loan amount. To read more on this, click on the following link: Yahoo Finance.

INVESTMENT LESSON: Raiding a 401(k) plan will only serve to delay retirement! No amount of financial planning can overcome spending retirement funds prior to retirement.

The Contrarian "Predictive Nature" of Magazine Covers

2010-11-04T12:40:00.000-05:00

It has been well documented that, when it comes to searching for time tested, reliable indicators of where the stock market is headed, magazine covers predicting either a bull or bear market have been wrong the majority of the time.

One of the "professional" indicators I watch closely turned bullish over 30 days ago, but with so much on the line short term, combined with the massive quick run up in stocks, I had been "biting my lip of patience" a bit. As of today, I have released my lower lip and am comfortable being a bit bearish with the latest from Barron's, dated 11/1/10:

INVESTING LESSON
Only by standing against the prevailing winds – selectively, but resolutely – can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the "momentum of the herd" vs. fundamental valuations. A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

Great Data From Fellow Contrarian, David Rosenberg

2010-11-04T09:29:00.000-05:00

The quote below is from David Rosenberg's, "Breakfast With Dave," dated 11/01/2010.

"In any event, the survey of the Big Money Poll from Barron’s shows that 62% of portfolio managers see equities as the top performing asset class in the next 6-12 months — versus 15% for precious metals, 6% for cash and 3% for bonds.
You don’t have to be much of a contrarian to understand what it means to have twice as many investors more bullish on cash than on bonds. It’s otherwise known as a herd mentality. Fully 72% are bearish on Treasuries, only 5% are bullish (versus 60% and 15%, respectively, for equities) and yet 62% believe bonds are in a bubble.

How can bonds be in a bubble and at the same time be so detested? One of life’s greatest inconsistent thought processes at the current time!

Not only that, but 70% see little chance of another economic contraction. And, 70% favour the stock market on expectations of better jobs data, a stronger economy and rising profits. To top things off, BusinessWeek runs with this article to boot — Stocks and Bonds Are Bullish on the Economy (come again?) on page 47. At least we know where the surprise will be, if any!"

INVESTING LESSON
Only by standing against the prevailing winds – selectively, but resolutely – can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the “momentum of the herd" verses fundamental valuations. A contrarian style of investing is the ONLY method that has proven, over time to reduce risk and take advantage of opportunities.

How To Avoid Losing Your Money, Part 3

2010-11-04T09:25:00.000-05:00

Click on the blog title above for an outstanding article from TheStreet.com, titled:

"4 Fraud Traps to Avoid"

INVESTING LESSON
Print and save my recent three-part blog series "How To Avoid Losing Your Money" and then place them in between you and "hucksters" that will try and separate you from your hard-earned money.

How To Avoid Losing Your Money, Part 2

2010-11-03T13:59:00.032-05:00

Above is a sample of "financial lewdness" that passes as financial journalism to consumers that they use too often to make investment decisions. Please do not forget the following:

99% of financial information comes from organizations that generate 100% of their revenue from selling advertising.
Just as entertainment, in the form of gossip and indecency, sells so do great sounding article headlines.
A news organization is funded by advertisers, has no investment professionals, but too often portrays their "words" in such a way that it both sounds like advice and people actually use it as if it were reliable advice.

Let me expose what the above article contained:

"They just get more attractive" is a great teaser headline. Just as effective as, "You'll never look better," from a plastic surgeon. It may sound good, but you better stay away or you will end up with irreversible results!
Master Limited Partnerships, many of which have gone up over 75-100% in value over the past several years.
REITs, many of which have already gone up over 75-100% in value over the past several years.
Telephone company stocks, which operate in a vicious, dog-eat-dog business. WFG recently sold one of the stocks profiled, Century Telecom (CTL). They are suggesting you now buy it!

The S&P 500 index barely yields even 2%. WFG's Paid to Wait stock portfolio currently yields around 3.5%. So, am I stupid or smart based upon the above? I will let my 26 years of experience lead you to the right answer.

INVESTING LESSON
Never, ever use financial lewdness as the basis for making investment decisions. Just as freedom of speech is permitted, so is being unintelligent. Kind of harsh I know, but needed if I am going to make even a small dent in the armor of the billion dollar Wall Street and Madison Avenue marketing machines.

Savannah Film Festival Movie Reviews

2010-11-03T11:09:00.001-05:00

This is my second trip to the Savannah Film Festival (SFF). It used to really upset me when the majority of the awards kept going to Indie movies at the Oscars. A number of years back, thanks to Ebert and Roeper constantly plugging independent movies that I had never heard of, I ventured out to my first Indie movie. I have been hooked ever since.

I quickly understood that Indie movies represent the exact opposite of big budget movies. They walk at a slower pace and often fill your heart with the fullness of what life is all about. I knew I was really onto something when I was finally able to get my brother to go see a movie with subtitles and then have him turn around and suggest that I go see, "The Girl With The Dragon Tattoo."

Last year, I had the pleasure to see the final Indie film circuit screening of "The Hurt Locker." A then undiscovered actor, Jeremy Renner, took the the stage after the movie, along with the film's female producer and talked about how the movie came about. You all know what happened after that. At the Oscars, a movie America had never heard of came home with a number of the big awards. It is similar to what happened with my beloved Butler Bulldogs last year in the NCAA finals. You go from "nobody knows who you are" to worldwide recognition overnight!

I am now three days and six movies into the seven-day festival. For the coming week, I will, in addition to blogging about finance, also blog about some of the films I am seeing. We all need to live a full and balanced life.

The first film I will start with is one by Edward Burns. The "new normal" for the world is definitely making its way into the movie business. "Nice Guy Johnny" was filmed for $25,000 and will likely not make it into mainstream theaters. Instead, they are using viral marketing and social networking to launch the movie. It is currently ranked number seven on iTunes rentals and is available on Comcast via Video On Demand (VOD). This movie is a modern day, "The Graduate," and in my opinion a solid 8 out of 10.

Another "ah hah" moment happened Tuesday night while watching the first ever "slasher musical." It was a movie called, "Don't Go Into The Woods." The concept that came from Mark Twain was quoted that you need to "kill all of your darlings." More on the personal and business use of this metaphor as the week unfolds.

At this time each year at the SFF, there is a treasure trove of both emotions created by the magic of film and actual take aways that will impact both my personal and professional life. Stay tuned for the reviews that will follow.

Dividend Stocks for the Next Decade

2010-11-03T08:34:00.001-05:00

Click on the above blog title for an article with some excellent analysis of six Paid to Wait stocks that I own in WFG portfolios and in my no load mutual fund.

I forecasted (correctly) 18 months ago that large cap, high-quality dividend-paying stocks would begin to pick up steam. These are businesses with solid earnings, low debt and global exposure.

This is just the beginning of the potential leadership of Paid to Wait stocks. The information provided is from the fine folks at www.dividendgrowthinvestor.com. portfolios.

Investing Lesson

If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

Kass: The Fed's Quantitative Easing 2 Is a "Con Game"

2010-11-02T13:53:00.001-05:00

Click on the above blog title to read a vivid summary from Doug Kass regarding why he and I believe we currently have a very fragile U.S. economy and world stock market.
INVESTING LESSON
Cash is not trash!

How To Avoid Losing Your Money, Part 1

2010-11-02T10:15:00.003-05:00

I recently met with a client that asked me to explain how bright people get sucked into Ponzi schemes and other high risk investments. My answers were very simple and straightforward:

Humans are motivated by two primary emotions: Greed and fear.

Greed is what leads to being swindled and/or losing money with an investment that had much more risk, but the only "song you wanted to hear" was how great it was going to be.

Investors seldom read the fine print.

Investors seldom request personal financial information from someone selling them an investment. Doing so would be very revealing, usually in a bad way.

In the last week, I also had the opportunity to write the narrative for a new Comprehensive Wealth Management client, who desires to find out what their retirement picture looks like. Below are some of the "hits" from their financial plan:

Avoid getting sucked in by any investments or people selling investments that seem to offer projected annual rates of return that exceed that of what WFG is projecting as safe, reliable returns.

Rule # 1, there is no such thing as a free lunch (IPM Realty, Madoff, Markman).

Rule # 2, there is no such thing as a free lunch (Oxford, Trevor Cook, Tom Petters).

Rule # 3, there is no such thing as a free lunch when it comes to annuity products. They promise the moon but deliver the lack of oxygen found on the moon.

We will take the first sentence back; there is such a thing as a free lunch (or dinner) as this is the number one marketing method for staging the annuity “pitch."

Jerry Wade sold annuities while at IDS/AEFA for 10 years.

He has not sold them the past 16 years. There is a reason!

Does Your Mutual Fund Manager or Financial Advisor Invest Alongside You?

2010-10-31T16:20:00.033-05:00

Morningstar believes that money managers should "eat their own cooking." They call it, "The Cooking Test." In other words, how much money does the typical mutual fund manager have invested in the fund they manage?

Answer: Not much.

Here are the shocking stats from Morningstar and Lipper:

-Average mutual fund manager age: 24
-Average mutual fund manager tenure on a fund: 4 years
-Number of complete economic cycles experienced while managing: 0.2
-Managers with at least $100,000 invested in their fund: Less than 20%
-Managers with over $1,000,000 invested in the fund they manage: 3%

INVESTING LESSON
In an investing world full of "look alike" investment options, Ponzi schemes and two 48% stock market declines in the past decade, the only way to invest is right alongside an experienced professional who has significant "skin in the game." With 26 years of experience, I have over $1.5 million invested in the no load mutual fund that I manage. Believe me, I pay pretty close attention to how "our" money is invested! 

Stock Buy Backs or Dividends, Which Is Better?

2010-10-14T09:30:00.002-05:00

Companies often buy back stock and claim that it benefits shareholders. What you are not told is that companies often buy back shares with borrowed funds or are simply buying back shares to offset stock options exercised by employees.

Simple math tells us that if there are less shares and the same level of earnings, then earnings per share go up. Unfortunately, the value of a company is not determined by the number of shares outstanding, it is determined by how much a company actually earns. A company with only one share that is earning nothing will be worth $0. Just ask the shareholders of Enron, Lehman Brothers and Bear Stearns if share buy backs helped the value of their investment!

Dividends on the other hand are ACTUAL cash that is returned to the investor.

That is why I like to invest in high quality dividend paying stocks or Paid To Wait Stocks, as we like to call them here at WFG.

0% Rates Are Just Not Working

2010-10-13T12:09:00.003-05:00

The FED has dropped short-term rates to 0% and is buying Treasuries to keep long-term rates low, yet economic growth is still very weak. Low rates will only spur growth if spending occurs. Unfortunately, no one is spending.

(1) Consumers are saving more and reducing debt. The consumer savings rate was at 5.8% in August 2010. Think about it: It was negative prior to the recession starting.

(2) Businesses are saving more and cutting costs (not hiring). Cash on the balance sheets of many companies is at record highs.

(3) Banks are holding onto cash as opposed to lending, due to uncertainty about potential changes to regulations.

Low rates only work if they cause consumers and businesses to spend. Low rates will not aid economic growth if everyone is just holding onto cash. Until spending picks up, continue to expect a weak economy.

Great Article on Two "PTW" Stocks Owned by WFG

2010-10-13T09:30:00.001-05:00

Click on the blog title above to read about what www.theStreet.com has to say about two "Paid to Wait" stocks that WFG owns.

Investing Lesson

If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

What Does The Republican Momentum Mean For Taxes?

2010-10-11T08:53:00.002-05:00

So much hinges on the outcome of the midterm elections: Will the balance of power in Washington change? Will Congress extend the Bush tax cuts? The most popular question we are getting from our clients is—what does all this mean for my portfolio?

ANSWER
The stock market operates in a anticipatory fashion, meaning that the expected election results are already baked into prices of stocks already.

As a long-time, card-carrying Contrarian investor, I expect the following after the elections:

Do not be a bit surprised if the market sells off and ends 2010 in negative territory. I would place the odds of that outcome at at least 50/50.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

Analysis of WFG "Paid to Wait Stocks:" McDonalds and Lockheed Martin

2010-10-11T08:40:00.006-05:00

The information below is courtesy of http://www.dividendgrowthinvestor.com/

From Dividend Growth Investor

In the world of investing, there are thousands of companies that pay dividends. While companies do not have any control on their stock prices, they do have full control over the rate and frequency of dividend distributions that they pay to shareholders. Some of the strongest companies in the world also happen to generate a lot in excess cashflow. As a result, they have managed to increase distributions consistently like clockwork for many years.  

One such company is McDonald’s Corporation (MCD), which together with its subsidiaries, operates as a worldwide food service retailer. Over the past week, the company raised its dividend by 11% to 61 cents/share. This was the 34th consecutive year of dividend increases for the company, which is a member of the elite dividend aristocrats index. Yield: 3.25% (analysis).

Another company, which has consistently raised dividends for several years includes Lockheed Martin Corporation (LMT). It engages in the research, design, development, manufacture, integration, operation and sustainment of advanced technology systems and products in the United States and internationally. The company recently raised its quarterly dividend by 19% to 75 cents/share. The company has raised dividends for 8 consecutive years. Yield: 4.10%.

As Close To A Legal Ponzi Scheme As You Can Get: Wall Street Products Designed For The Greedy and Gullible

2010-10-04T09:15:00.001-05:00

Charles Ponzi is long dead, but the scams live on
and play out each week.

There is a corner of the stock market where products are designed to:
1) Sell some "sizzle" in advance of an IPO.
2) Remove some money from the investor's wallet (5%) at time of sale.
3) Appeal to the "greed" section of the human brain.
4) Offer you an ongoing "yield" (watch this word closely) that knocks the socks off everything else.
5) Pretty much make sure that over time your investment continues to decline.

What lies in this murky corner?

Answer: Closed End Funds (CEFs). Specifically, "Managed Payout" CEFs. It gets worse. Even reputable mutual fund firms have rolled out such funds over the past several years, all in an effort to "three card monte" the shareholder.

Click on the blog title above to read an outstanding blog from
Dividends For Life.

Note that WFG owns six of the stocks listed as superior alternatives to the scammy CEFs.

Investing Lesson
Greed and fear are the two greatest factors that typically separate investors from their hard earned capital.

WFG Contrarian Strategy Differs From Most, But is Working in 2010

2010-09-29T10:01:00.002-05:00

One of the smartest investment guys on the planet is David Rosenberg. I read his report every day. Like myself, he is a contrarian and is in the minority of strategists who believe the economy is not going to get better any time soon and could go "double dipping" (double dates were more fun!) The table below is his advice for investors. I shifted WFG portfolios in this direction over one year ago.

WFG Scorecard On The Above
1) Check
2) Check
3) Check
4) Check
5) Double Check!
6) Double Check!
7) Check and moving towards Double Check!

INVESTING LESSON:
Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

More WFG "Paid to Wait" Stocks Increase Dividends: Microsoft & McDonalds

2010-09-27T10:35:00.002-05:00

On 9/21/10, Microsoft (MSFT), the world’s largest software company, increased its quarterly dividend $0.16/share, a 23% increase. The new yield based on the new payout is 2.60% as of last week.

McDonald’s (MCD) also announced that it is increasing its quarterly dividend $0.61/share, an 11% increase. The dividend is payable on December 15. The new yield based on the new payout is 3.25% as of last week's price. The company has raised its dividend for 34 consecutive years.

Investing Lesson

If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

WFG "Paid to Wait" Stock Philip Morris Increases Dividend

2010-09-27T10:15:00.004-05:00

The information below is courtesty of www.dividendsforlife.com, well known as a reliable source of quality information on the topic of dividend investing.

Philip Morris Int’l (PM), comprising the international operations spun off by Altria (MO) in early 2008, is the largest publicly traded manufacturer and marketer of tobacco products. On September 10th, the company increased its quarterly dividend 10.3% to $0.64/share. The dividend is payable on Oct. 8 to shareholders of record on Sept. 24. The ex-dividend date is Sept. 22. The yield based on the new payout is 4.67%.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

Dividends Matter

2010-09-21T09:56:00.004-05:00

Here are some interesting return numbers when looking at where to put your money:

Year to Date, the S&P 500 is up 0.94% excluding dividends but is up 2.42% including dividends.

Over a one-year time period, market fluctuations account for 80% of returns but over a five-year time horizon, dividend yield and growth account for almost 80% of returns.

Ned Davis Research produced the following return figures: Since December 31, 1929, $100 invested in S&P 500 price only index grew to $4,989. That same $100 invested in the S&P 500 total return index grew to $177,774!

Since 12/31/1929, 95.8% of returns in the S&P 500 are accounted for by dividends and their reinvestment into the index.

Moral of the story, Paid To Wait stocks should be a part of every investor's portfolio.

Opinion From John Hussman

2010-09-15T12:20:00.002-05:00

The comments below are taken from John Hussman's most recent weekly market commentary. I agree with his opinion.

September 13, 2010
Impulse Response
John P. Hussman, Ph.D.
www.hussmanfunds.com

Overall then, we are facing the likelihood of a fresh near-term deterioration in U.S. economic activity, as part of a longer multi-year adjustment, which is typical post-credit crisis behavior. My impression is that Wall Street is eager to treat the present cycle as a "V-shaped" recovery. We see little evidence to support that view, and the best evidence we do observe is more consistent with a double-dip (if not a continuation of a single ongoing recession).

The most serious risk

Yet, even the near-term risks to employment and the economy are not the greatest risks that investors face. Rather, the most serious risk for investors here is the persistent and misguided eagerness of Wall Street to value long-term assets based on short-term earnings results. Investors have priced the S&P 500 in a manner that is far too dependent on the achievement and maintenance of profit margins about 50% above historical norms. This is a mistake. Profit margins normalize over time, and on the basis of normalized earnings, the S&P 500 is about 40% above robust historical valuation norms (and even further above valuation levels that have represented "generational" buying opportunities such as 1974 and 1982, when well-covered corporate dividend yields averaged about 6.7%, versus the current 2%).

Deleveraging Is By No Means Done

2010-09-15T12:14:00.011-05:00

There has been about $1 trillion of debt deleveraging that has occurred in the U.S. household sector over the past two years and to normalize debt/asset and debt/income ratios, there is another $6 trillion to go, and it will likely last another five years, if the historical record is any indication.

When the consumer is paying down debt, there is less money being "spent" in the U.S. economy. In addition, baby boomers are still too heavily weighted in stocks, with not enough in bonds and will be shifting money out of stocks for years to come.

Despite all the advertisements to buy gold, the average investor has less than 1% of their net worth invested in gold. Despite the current price of gold, the secular theme is in place for gold to continue to perform well over the next decade.

INVESTING LESSON:
Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

Has the Economy Turned the Corner or Just Turned Over?

2010-09-13T12:36:00.024-05:00

It is fascinating to watch how emotions shift each week. Some view that the economy as turning some sort of corner. Keep in mind how equity markets behaved in the summer of 2000, the fall of 2007, the spring of 2008 and the fall of 2008 too — all huge head fakes.

The S&P 500 stood at 1,109 last Friday, 9/10/10.

The S&P 500 was also at 1,109 back on 4/1/88, over 12 years ago.
That is 12 years of nothing and the majority of talking heads believed/believe we were/are in a new bull market.

The S&P 500 was also at 1,109 back on 11/16/09, 10 months ago.
That is 10 months of nothing and the the majority of talking heads believed/believe we were/are in a new bull market.

Over this 10-month period, the S&P 500 has see-sawed above and below the 1,100 mark 15 times. Can you say roller coaster!

At what level would I be more bullish? Approximately 20% below 1,109 is a level I would consider to offer compelling value.

INVESTING WISDOM

“It is impossible to produce a superior return unless you do something different from the majority.”

Source: Legendary value investor, Sir John Templeton

"Paid to Wait" Analysis of Illinois Tool Works (ITW)

2010-09-02T11:03:00.016-05:00

The following analysis of ITW is courtesy of Kelly Wright and the excellent research from his company, Investment Quality Trends.

Illinois Tool Works (ITW): Based in Glenview, Illinois, Illinois Tool Works is a multinational manufacturer of a diversified range of industrial products and equipment with approximately 840 operations in 57 countries. Illinois Tool Works reports in the following eight business segments: Transportation, Industrial Packaging, Food Equipment, Power Systems and
Electronics, Construction Products, Polymers and Fluids, Decorative Surfaces and All Others.

Over the past year, Illinois Tool Works has generated an 18.20% Return on Equity (ROE), which represents a 21% increase over the previous year. Additionally, the 10% profit margin is significantly higher than the 5.90% industry average.

Founded in 1912, ITW has paid an uninterrupted cash dividend since 1933 and has consistently increased the dividend for the last 47 consecutive years.

Investing Lesson
If you are going to invest in the stock market, why not get "Paid to Wait" for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

WFG Paid to Wait Stock Increases

2010-09-02T10:58:00.013-05:00

The following WFG "Paid to Wait" stocks recently increased their dividends:

Altria, (MO): 8.57%

Illinois Tool Works (ITW): 9.68%

Walgreens (WAG): 27.27%

Take that, CDs!

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

Jive Talking!

2010-08-31T13:56:00.002-05:00

Federal Reserve Chairmen have an uncanny ability to combine words in such a way as to use "jive talk" ('70s method of speaking) to confuse the reader.

“The economic outlook is unusually uncertain.”

Federal Reserve Chairman: Ben Bernake

WFG Mutual Fund and an 80's Rock Band

2010-08-30T19:31:00.049-05:00

"Should I stay or should I go now? If I stay there will be trouble - and if I stay there will be double."

The Clash

At my firm, Wade Financial Group, the above chorus line from The Clash is applicable to our current economic outlook and portfolio positioning:

Question: Should I stay or should I go now equals should our mutual fund be primarily "in" or primarily "out" of the stock market?

Answer: Primarily out.

Phrase: If I stay there will be trouble - and if I stay there will be double. Meaning that:

Being bullish (greater than 50% in stocks) at this time, we believe would equal trouble - defined as exposure to significant downside risk.

We also believe that potential downside risk is at least double the potential upside opportunity of staying "too much in," in what we believe is an overall overvalued world stock market.

Recent Market Movements

The last three out of four trading days have seen declines of over 1% in the U.S. and world stock markets. Our mutual fund declined as if it had 11%, 15% and 21% stock market exposure on the three down days. Why this is notable is that the our mutual fund strategy is/has been invested with an overall recent allocation of approximately 25-30% equity exposure over the past month.

Recent Portfolio Moves

Last week, we made the following portfolio moves:

1) Added "ugly duckling" oil and gas drilling companies of which each company possesses two qualities we love:

a) Strong corporate balance sheet

b) A very ugly looking stock chart! Each stock was added near the 52-week lows for each.

While the current political atmosphere is "offshore drilling is bad," the future reality is that we believe that this too will pass. When it does, we expect each stock to have the potential for quick, possibly violent, upside movement. These stocks are owned in our "special situations" section of our tactical portfolio and will be sold if, and when, these potential profits come to pass.

2) We also:

Increased our gold and silver holdings.

Increased our short exposure to: Foreign Europe/Asia, Emerging Markets and China.

We added a new short position on the S&P 500.

INVESTING WISDOM

“It is impossible to produce a superior return unless you do something different from the majority.”

Source: Legendary value investor, Sir John Templeton

WFG Paid To Wait Stock Illinois Tool Works Hikes Dividend By 10%

2010-08-10T10:09:00.002-05:00

Illinois Tool Works Inc. dividend rate as of today stood at 2.7%. The 10% increase will take the annual dividend based on today's price to 2.97%. Take that CDs!

The following is from www.zacks.com:

Illinois Tool Works Inc.’s (NYSE: ITW - News) Board of Directors approved a 10.0% hike in the company’s quarterly dividend rate. The revised quarterly rate now stands at 34 cents per common share compared with 31 cents previously, resulting in an annual rate of $1.36 per common share.

The revised dividend will be paid on October 13 to shareholders as of the close of business on September 30. Illinois Tool Works follows a consistent policy of returning cash to shareholders via dividend payments with roughly $1.7 billion distributed over the last three years. During the second quarter of 2010, the company paid around $155.8 million in dividends. Cash and cash equivalents at the end of the quarter were $1,265.2 million and net cash from operating activities was around $338.4 million. Illinois Tool Works is one of the leading manufacturers of industrial products and equipment.

The company operates through 800 business units in 57 countries. In the second quarter of 2010, the company reported earnings per share of 83 cents, which reflected an increase of 131% compared with 36 cents in the comparable quarter of 2009. Operating revenue went up 20.1% year over year to $4,076.3 million, compared with $3,392.9 million in the second quarter of 2009.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

Paid to Wait Stock: Chubb

2010-07-30T09:32:00.023-05:00

The information below is courtesy of www.dividendgrowthinvestor.com. The information is believed to be reliable. www.dividendgrowthinvestor.com is well known as a reliable source of quality information on the topic of dividend investing.

The Chubb Corporation (CB) provides property and casualty insurance to businesses and individuals. Chubb has increased dividends for 45 years in a row. The company announced a 5.70% dividend increase in February 2010, plus a 14 million share repurchase initiative.

Dividend Growth

Over the past decade, this dividend stock has delivered an average total return of 5.90% annually.
Annual dividends have increased by an average of 8.70 % annually since 2000.
A 9 % annual growth in dividends translates into the dividend payment doubling almost every eight years.
Looking at historical data, going back to 1984, Chubb has actually managed to double its dividend payment every nine years on average.
The dividend payout ratio has been on the decline and is lower than our typical 50% threshold. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Current Stats

Chubb is trading at 9.20 times earnings, yields 3.10%
In comparison, rival Travelers Cos (TRV) trades at a P/E multiple of 8 and yields 2.90%, while Cincinnati Financial (CINF) trades at a P/E multiple of 9 and yields 5.90%.
Berkshire Hathaway (BRK.B) is also a competitor, although it trades at a P/E of 22, and does not pay a dividend.

Future Potential

The company allocates significant cash flow on stock buybacks, which could prove beneficial in the long run since it could provide above average dividend growth over time for the same effort.
We like the company and its business model. Chubb (CB) is a way for investors to fill in the need for exposure to the financial sector, after companies like Citigroup (C) and Bank of America (BAC) cut their distributions.
We believe that the company is attractively valued at this time and we would add to our position if a significant pullback were to occur.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

Paid to Wait Dividend Increases

2010-07-19T08:40:00.010-05:00

The following stocks that we own in our Paid to Wait Portfolios have announced dividend increases:

Clorox
Increase: 10%
Payment date: 8/13/10

Price as of 7/19/10: $65
Yield as of 7/19/10: 3.4%
New Yield: 3.73% (assumes price remains $65)

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock that you own to unfold over time and ignore the day-to-day ups and downs!

WFG "Paid to Wait" Stock Profiles

2010-07-15T12:03:00.017-05:00

Dividend investing has always been a very popular way for shareholders to see a strong return on their investments. Dividend stocks that consistently pay reliable dividends to investors are very attractive in choppy markets.

While many companies today pay dividends, these Paid to Wait stocks have been doing it for decades. The following companies all boast a dividend yield of at least 2.5% with several of them returning more than 5% of their stock's price to investors. And best of all, these high-yield dividend stocks have delivered these payouts for many years -- some of them for more than a century!

3M (MMM) and its subsidiaries operate as diversified global technology companies. 3M currently boasts a $2.10 yearly dividend or 2.5% yield. This technology company has been offering its shareholders a dividend for 94 straight years.

Chubb (CB) is a holding company for several casualty insurance companies, including commercial insurance, personal insurance and specialty insurance. Founded in 1882, Chubb has been paying a dividend for 108 years. It currently pays a dividend of $1.48 annually or 2.8%.

Coca-Cola (KO) is a nonalcoholic beverage manufacturer and distributer that has been paying a dividend for the past 117 years. Coca-Cola currently boasts a $1.76 dividend, good for a 3.3% yield.

Procter & Gamble (PG) sells consumer packaged goods in the following industries: Beauty, health and well being, and household care. Procter & Gamble currently offers shareholders a $1.93 dividend for a 3.1% yield and has been paying a dividend for 119 years.

Exxon Mobil (XOM) is an oil company that is a product of the 1999 merger between Exxon and Mobil and is currently worth nearly $279 billion. Exxon Mobil has paid a dividend for 128 years. Exxon Mobil's current dividend yield is 2.9% or $1.76 annually.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock that you own to unfold over time and ignore the day-to-day ups and downs!

Six Stocks With 45+ Years of Boring, Steady Annual Dividend Increases

2010-06-28T15:19:00.023-05:00

Dividends Provide Investment Stability

In a troubled market, WFG’s Paid to Wait Dividend Appreciation Stock Portfolio^SM (PTWDAS) provides a degree of stability to your portfolio. It is now common knowledge that the last 10 years was the lost decade for the typical stock market investor. It was not a lost decade for WFG clients and also not a lost decade even for investors who followed a PTW approach to 100% stock investing. Investors in dividend growth stocks continued to see their income grow over the decade.

Dividends Are Real

Unlike earnings, dividends can’t be manipulated or faked. I take great comfort in a company with a strong balance sheet, strong cash flows and a consistent history of increasing cash dividends.

Good Companies Pay Dividends; Great Companies Grow Dividends

Each dividend and dividend increase provides the investor with reassurance that the strategy is working. We shoot for an annual dividend growth rate of 7% across our PTWDAS portfolio.

Dividends Are Perpetual

Unlike WFG’s prior approach to generating income for retirees, where we often had to sell securities to generate enough annual cash flow, our new Wade Retirement Theory^SM approach of spending only dividends in retirement does not harm or erode your principle investment.

Less Worry
You may not want to spend your retirement worrying about your portfolio. Dividends from a quality, well-diversified PTW style portfolio are much more predictable than the movements of the stock market and best of all, they are passive. You don’t have to do anything, they just show up in your brokerage account each quarter. Inflation? Little worry, the PTW companies we buy/own routinely raise their dividends well in excess of the inflation rate.

Dividend “Can Be” Very Reliable
Choosing the “right” dividend stocks is critical to success. We know how to do this at WFG. Below are examples of six stocks owned in WFG’s PTWDAS portfolio that have excelled over the decades and have rewarded their shareholders with over 45 years of consecutive annual dividend increases. That's right, they have NEVER NOT INCREASED THEIR ANNUAL DIVIDEND!

(PTWDAS) Company	Consecutive Years Dividend Grown	Yield 6/28/10
Colgate (CL)	47	2.70%
J&J (JNJ)	48	3.70%
Coca-Cola (KO)	48	3.50%
Cincinnati Fin. (CINF)	50	5.80%
3M (MMM)	52	2.70%
P&G (PG)	53	3.20%

INVESTING LESSON
Only by standing against the prevailing winds – selectively, but resolutely – can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the “momentum of the herd" vs. fundamental valuations.
A contrarian style of investing is the ONLY method that has proven, over time, to reduce risk and take advantage of opportunities.

Presidential Analysis and the Economy

2010-06-24T17:32:00.000-05:00

Joined At The Hip
Economics and politics are intertwined. This analysis is in no way a political statement. To ignore the past/current/future success or failure of the economic policies of Washington would be to ignore reality. As pictured above, neither party can claim that they are better than the other at implementing political decisions that have/may result in better economic outcomes for Americans.

Current Situation
At this point in time, President Obama is likely headed towards an outcome reminiscent of the Carter presidency. Carter was a very likable guy, just like Obama. Being likable does not, however, equal success. Obama has made many of the big decisions he wanted to make and at least thus far, they do not seem to be working. Our economic analysis has the U.S. economy on the brink of either:

a) A double dip back into recession
or
b) Possibly worse

What To Watch For
Between now and 2012, the Obama administration and the House and Senate will need a miraculous turnaround for the U.S. economy to get reelected. Barring a much better second half of the football game, Americans will once again seek change, hoping that change may foster a better economic result. I am on record as stating that of the two choices that were given, Hillary Clinton would have made a much better choice for a host of reasons. These include: More experience, more bipartisan, more pro business, more realistic about what the priorities should be and how much of the apple you can bite off at a time. I have no idea who the Republicans will choose in 2012, but I will not at all be surprised if Hillary breaks rank and runs against Obama.

The Men Above
Of the men pictured above, I could vote for Kennedy, Reagan and Bill Clinton. Nixon could have made the list, if not for Watergate. Bill Clinton, even with some stumbles along the way, gets a pass because he ran the economy very well.

INVESTING LESSON/OUTLOOK
Elections matter. Economic policy matters. Some get lucky; others do not. We can look back years later at our leaders and realize some had skill, while others did not. Only the history books can tell.

Regardless of what party occupies the White House, as an investment manager, I am left to navigate the markets, which I cannot overemphasize are impacted by many other factors than just current politics.

Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising, based upon the momentum of the herd vs. fundamental valuations. Our portfolios at WFG lagged a bit in the past six months as I was too early to reduce our equity exposure, not expecting the market to run up as far as it did. I believe that today, we now sit near the top, looking down the other side of the hill. With that in mind, our reduced equity exposure in our balanced accounts can allow for "shock absortion", if, and when, the footing takes the markets further down.

A contrarian style of investing is the ONLY method that has proven, over time to reduce risk and take advantage of opportunities.

Support For Why 60% In Stocks Is Too High For Retirees/Pre-Retirees, At This Time

2010-06-06T13:25:00.018-05:00

Recent bulletins to clients of my advisory firm, Wade Financial Group, Inc., have focused on why I believe that a 60% allocation to stocks is too high at this point in the economic cycle. The chart below makes a very important point: You must have a VERY long-term time frame for the odds to be in your favor-and that's IF you start retirement from a favorable stock market valuation.

Percentage chance of exceeding a 3% "real return" (return after inflation) with a 60% equity and 40% bonds portfolio (1889-2008)

INVESTING LESSON:
Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the momentum of the herd vs. fundamental valuations.

A contrarian style of investing is the ONLY method that has proven, over time to reduce risk and take advantage of opportunities.

Hostess Twinkies and Your Wealth: A Must Read

2010-06-03T17:38:00.021-05:00

Seth Klarman is one of the most successful investors of all time. In a recent speech, he indicated that he is more worried now than at any time in his career.Below are several quotes from his speech.

"The possibility that the government will continue to print money to solve our economic problems has left me more worried than at any time in my career. There are not enough dollars in the world to do that, unless we greatly debase them."“A Hostess Twinkie is something that has made many childhoods slightly happier with totally artificial ingredients. That metaphor explains the prevailing environment in the U.S. over the last year, when virtually every market condition was maintained by the government, which kept interest rates at zero, bought up mortgage-backed securities, and installed far reaching lending programs. We don’t know the full extent to which we were manipulated. The government wanted people to buy equities, to invest so that the market would go higher, to build the wealth effect so that people would feel better, and to restore a degree of optimism so that the economy might recover.”

"I am worried about what would happen to the economy and the market if those artificial ingredients were removed and we realize it was in effect a Twinkie."

"That high degree of government involvement continues, with the gargantuan European bailout program, which is not likely to work and merely kicks the can down the road, serving as the latest example. It is one more manipulation tempting people to own things. It’s almost like the government was in the business of giving people bad advice. 'We’re going to hold rates at zero, so please buy stocks or junk bonds that will yield at least five or six percent so you might make something.’ In effect, it is forcing unsophisticated investors to speculate wildly on things that are fully too overvalued.”

Comments To Investors
I recently wrote a very important market update bulletin for clients of the firm I own and manage money for, Wade Financial Group. I also penned a separate bulletin on the topic of how our mutual fund is currently positioned. If you are a reader of my blog, but not a client, feel free to email kay@wadefinancialgroup.com for a copy of each. At our website, www.wadefinancial group.com, a must read is:

Wade Retirement Theory^SM