Look out, the stock market is scaring people again! There is no doubt that falling stock markets are scary and unnerving to a lot of folks. It’s not much fun watching something go down when you have no control over it. Last week, the market caught the attention of some folks, but on Monday, February 5, 2018, everyone was paying attention.
In terms of points lost, it was the biggest loser in stock market history. But that’s not the whole story. In percentage terms it was a large loss but nothing close to some of the biggest drops in history. However, that bit of news may not be that comforting.
In light of that, I spent some time today preparing a 10-minute video presentation to help put current events into perspective. I hope it helps with the nerves and maybe it will lower your blood pressure a bit too. Please feel free to share this with anyone who you think it might help.
On the program this week, I talk about the concerns raised by a trio of professors regarding the health of capitalism in the United States. The professors are calling into question one of the basic tenets of capitalism, the idea of creative destruction. Their argument is America is headed towards a system of winner take all. This is where large companies continue to gain market share and dominate their industry. They argue the primary cause for this is a lack of anti-trust regulation and enforcement. In the first segment of the program, I give you my thoughts on why I think they are off base with this argument. HINT – I think it is a byproduct of the artificially low interest rates that we have experienced for a decade.
Here is a link to the article by Jason Zweig that I mentioned at the beginning of the segment.Jason Zweig Article
In segment two, I spend time talking about one of the few initial public offerings in recent months. Snap Inc. of Snap Chat fame enjoyed a snap, crackle and pop opening (who could resist) on its public debut.
Segment three is another take on the “success” of the Snap IPO. Why does Wall Street continue to dominate the IPO process and the pricing structure? Snap, which burns money at an incredible rate, sure could have used an extra billion dollars that Wall Street passed on to its best clients by pricing the IPO below what the public market would pay just a few minutes later.
Finally, in segment four, I cover, what in my opinion is one of the worst investments for most retirement plan savers. The funds are called many things, but they are commonly known as Stable Value Funds. I believe that most people would reject this investment if they truly understood how it worked. Let me put it to you another way. Would you be interested in an investment where you lock in a low rate of return and give up approximately 75% of the profit that your money generates? It is called spread income and it is not disclosed anywhere to retirement plan participants (Employees) or plan sponsors (Employer). Spread income makes Stable Value Funds the most profitable portion of a retirement plan vendor’s business. And that profit comes at your expense!
I hope you enjoy this week’s program! – Gary
Gary’s Contact Information
If you would like to contact Gary about your financial situation, the best way to reach him is via email atGary’s Emailgallen@prudentllc.com. You can try to reach him at his office, but he is often on the move! 916.436.8331.
How Most People Feel About the Financial Services Industry
I wish I was only talking about sleazy salespeople from a classic Saturday Night Live skit, but sadly, that is not the case. Too often people have been taken advantage of by salespeople in the financial services industry that are not as easy to spot as the famous characters above.
Over the past 18 years I have heard so many horror stories from my KNBR listeners about their situation. Often there is a common theme of expensive or inappropriate financial products often sold by people they don’t trust. The road is littered with expensive products, high fees and outrageous commissions that have damaged the financial future of many people.
I happen to believe that most people are interested in a straight-forward, transparent relationship that is free of conflicts of interest and always in their best interest. Most financial advisers fail to deliver on these basics and rely on greed and fear to sell products.
For 18 years I have been on KNBR personally delivering straight-talk without the B.S., talking about business and investment issues that matter to most people. I want to thank my listeners for making my program so successful and popular over the years. Many people have asked why I don’t do workshops for people around the Bay Area. I have had a number of reasons not to, but after so long, I have run out of excuses not to provide them.
However, I will not compromise on my integrity and my commitment to provide my listeners with straight-talk and no B.S. So my workshops will have a very different feel from the usual provide food, sell something hard and then sell it some more events that people in my industry use to take advantage of you.
I will deliver education and information just like I do on my radio program. At the end of the event I hope you have a better understanding of how I think you should invest and take care of your financial life. If you would like to meet me I would enjoy meeting you as well. If you want to know what my firm does and how we help people that’s fine too. But you will never and I mean never get a hard sales pitch from anyone I work with. We educate people and give you the opportunity to make your own well-informed decisions. It is your money and your life!
One of my concerns is a lot of people might sign up for the event and then for whatever reason not attend. This means other people who would like to go cannot. It also makes it very hard to manage from a numbers standpoint. As I thought about this, just like magic, one of my listeners provided me with a great idea.
Instead of making it a free event like I planned, we will charge a nominal fee for the event and then donate every penny to charity. Each event will have a fee of $10 for an individual or $15 for a couple. And no we will not be checking to see if the couple is married, living together or whatever. Just sign up and come. Thank you Ed from Palo Alto!
I need your help. Where should I hold the workshops? Please help me out by using the form below to get on our workshop list and to let us know where you would like to see one held. By the way, please share this with your friends. Thank you in advance for helping me on this and I look forward to meeting all of you in person after all this time!
Jim Cramer of Mad Money fame on CNBC has popularized fame with his fast paced show that has its roots in the production values of the Jerry Springer show. You may laugh, but Cramer’s Mad Money show is the brainchild of Susan Krakower, the former producer of the over the top Jerry Springer show. If you think about Springer, sports talk radio and a touch of a traditional financial show, you have the secret sauce that became Mad Money.
The show has seen a ratings decline in recent years but the frenetic energy remains. Adding some spice, this weekend a new movie titled Money Monster starring George Clooney has opened across America. But the focus of my story on the show this week is a research report that also was released on Friday. That report from researchers at the Wharton School of Business look into the track record of Cramer’s stock picks.
It may come as a surprise to some, but I was not caught off guard by the results of the research report. Bottom line, Cramer has not done well compared to the S&P 500 with his charitable fund. While Cramer is just one example, he is the poster child for “smart” active management. At this point the numbers are in and Cramer like most of his peers trail the returns of the stock market.
The Living Wage Movement For A Few
Everywhere you turn these days, people are protesting for a living wage. Currently, the living wage benchmark according to the protestors and their supports is $15 per hour. However, the part of the story that most protestors are missing is who will be left working once $15 per hour becomes reality.
Fast food workers are some of the primary protestors pressuring employers to raise the minimum wage to $15. Too often companies are vilified for underpaying their workers and having profits that are too large. Are there companies that take advantage of their workers, of course, but I never remember anyone until now talking about a fast food job being a place to work to support a family of four.
Fast food jobs and most retail jobs have traditionally been entry level positions for young and or unskilled workers to enter the workforce. In my opinion, the majority of the workers currently protesting for $15 per hour will be worse off if they achieve their goal. The reason is simple, automation will replace most of the jobs and they will be unemployed. A fraction of the current workers will be left earning $15 per hour watching customers order and pay for their own meals at self-service kiosks, while a couple folks will be left in the back feeding machines that prepare most of the food. Wendy’s this week became the first major fast food chain that said it will install these kiosks this year at all of its locations.
The problem is not $15 per hour for entry level jobs. The problem is too many low or unskilled workers who do not have access to training or education opportunities to improve themselves.
Gary Allen on Business – Sunday, May 15, 2016 – Podcast
The Cramer story and $15 for the few highlight the show this week. Hope you enjoy the podcast. – Gary
If you would like to contact Gary, the best way is through email at firstname.lastname@example.org. Or you can try to reach him at his office at 916.436.8331.
Communication is such an important thing. Countless books have been written about the subject yet we still struggle to communicate with one another. In the world of financial services, some miscommunication is unintended while some happens to be on purpose. It is hard to question the advice or the validity of an investment strategy when you cannot understand it. The real trick is to know when someone is struggling to communicate with you or if they are purposely trying to talk circles around you. The first is irritating and CAN cost you a lot of money, while the second WILL cost you a lot of money!
I spend some time on the program trying to translate financial speak into common sense. It is hard to translate but well worth it. The difference can mean thousands of extra dollars in your pocket instead of in the pocket of the person trying to sell you a product.
The Active Management/Passive Management Debate (Case Closed)
Later in the program, I provide the basic facts of how active management fails to deliver on its promise of beating the market. I still wonder why so many people believe in the Wall Street Santa Claus of superior performance when study after shows that the Grinch is alive and well in the canyons of Manhattan.
As always I hope you enjoy the show. – Gary
If you would like to contact Gary the best way is through email at email@example.com or you can try him at 916.436.8331.
Is it a good time to be in the market? What about timing the market? When is a good time to get in or get out of the market?
All of these questions are somewhat similar because they are asking if I have some kind of ability to know in advance what it going to happen. Unfortunately, I don’t have that power and by the way nobody else does either. Although Andrew Bogut of the Warriors predicted a Curry 3-pointer before he dropped one in… but aside from that, no one has the ability to predict the future with any certainty.
Later in the program, I cover the total wealth equation, which is a combination of human capital and financial capital. If you can understand this basic concept, it provides you with a much clearer understanding of the trade offs in life between spending and saving.
Finally, I spend time discussing how Wall Street and most firms have been wrong about your number for so long. Most financial firms talk about building wealth and reaching for some big number. That number represents a nest egg of wealth. However, for retirement, the real number should be income. People need an income to survive. Wealth is not tied to inflation or retirement and is a difficult concept for people to understand. Next week on the program, I will dive deeper into this important concept.
I hope you enjoy the program this week. As always, thank you for listening to my program on KNBR.Thanks to my great product Justine for always doing a great job.
If you have any questions or would like to contact me, email is usually the best firstname.lastname@example.org or you can try to call, but I am often unavailable 916.436.8331.
A large drop in oil prices has been fueling lower prices in the stock market recently. A strong US dollar has been one of the linchpins of this newfangled relationship. A stronger dollar is tough on US exporters and that strong dollar is a drag on oil prices as well. However, short-term market driven volatility is no reason to upset anyone’s well laid plans.
On the show this week, we spend time discussing two persistent myths about main street investors; the panic syndrome and market capitulation. It turns out that history shows that the average person does not panic and market bottoms usually happen with a whimper.
Later in the program, I go through eight points about managing money that our firm follows through good times and bad. It provides a road map for anyone to follow. And finally, I discuss the cost of bad investment advice.
There certainly are many things to be concerned about, but a disciplined investor understands they cannot control nor predict world events. These events make life interesting but are simply noise that can distract us from our purpose. Hopefully, you can ignore the bad advice that is driven by greed, fear and current events and develop a long-term plan that works for you in good times and bad.
Stock Market Jitters… Stock Market Predictions 2016… What To Do?
The New Year has not been kind to financial markets. In the back of people’s minds I sense fear of another meltdown like 2007-2009. Unfortunately, no has that answer until after the fact. That is why it is so important to make sure your investments are aligned to your individual circumstances. Depending on someone to time the market or to pick individual securities only adds to the level of risk you face.
On the program this week, I cover the market downturn as well as the abysmal record of Wall Street and other financial professionals (United Kingdom and Australia) for predicting market returns.
Since it is the beginning of the year, I do provide you with a list of 10 forecasts that I feel very comfortable about. These forecasts provide you with some of the reasons why it is so hard for market prognosticators to provide any value.
Finally in the last segment, I remind people to focus on what they can control and not to worry or focus on what you cannot. In this segment, I give you a sneak peek at a project we have been working on for a while. We feel that Wall Street and its beat the market mantra has led so many people down the wrong path. Hopefully, soon, we can let you know about a completely different path that should provide investors a better chance at success.
Conventional wisdom says that Wall Street helped build America. But what if the role of Wall Street has changed in recent times. That is the argument that financial columnist Bob Veres makes in a recent article entitled, The Case Against Wall Street.
In this excellently written article, Bob takes on the role of a prosecutor trying to convince an imaginary jury that Wall Street has become a drag on the American economy and consumers. Bob argues that Wall Street has been artificially inter positioning itself between those who have capital and those who need it and charging ever increasing and unnecessary tolls along the way.
Bob provides a convincing argument that Wall Street has been able to maintain this “cartel” by unduly influencing regulators and lawmakers through its outsize political contributions and a relationship that has become too cozy with the regulators.
On the program this week, I start the program with a quick summary of 2015 and then move into a review and comments about Bob’s article.
Here is the show from this week. I hope you enjoy it.
Thank you to Justin Siddhu, my great producer for an awesome year. And of course, thank you to all of my listeners over the years who make it all worthwhile. I hope that all of you enjoy a healthy and prosperous 2016!
Stock Market History: A Crash Course for Investors
About two years ago, our friends at Sensible Investing (from Birmingham, England) put together an eight-part series on the history of the stock market. It is an excellent piece of work, well worth anyone’s time even if they only have a passing interest in investments.
For those who are interested in finance, you might be surprised by what you find in this chronicle of financial history. The production is high quality and filled with great information.
I highly recommend the series for my listeners. – Gary Allen
Here is a link to the program by Robin Powell from Sensible Investing: