Should auld acquaintance be forgot
and days of auld lang syne?
For auld lang syne, my dear,
For auld lang syne,
We'll take a cup o' kindness yet
For auld lang syne
-Robert Burns (Lyricist)
As we wrap up 2008 it is important to reflect on both our
actions and the actions of others in order to improve ourselves.
Mistakes are embedded in human nature, but so is the ability to
learn from them. Only our willingness to be honest with ourselves
and others stands in the way.
It is true that our financial system is rooted in the confidence
placed therein. Taken in this view, we can (and have) described it
as a "con" game. It is also true that as long as confidence
endures, the system works just fine with all participants
benefiting from increased efficiency and productivity that comes
from investment and consumerism.
The year 2008 holds important lessons for investors and it is
important to explore them so as to avoid repeating them.
|1.||Know your investment partner.|
Early in the year, many investors discovered their investment
partner was working against them rather than for them. As
executives of major brokerage houses were dumping auction rate
securities and other trashy investments from their personal
portfolios, they were at the same time advising clients to invest.
The lesson here is to spend time with your investment partner not
only with the goal of understanding the markets, economy, and
investment strategy, but also to use your human nature skills to
judge whether this person has your best interests at heart. At the
end of the day, you cannot know everything there is to know about
the investment community, but you should know whether you can trust
your advisor to stand by you in the midst of battle.
|2.||Educate yourself and others on
No matter where your cash resides, it is your responsibility to
ensure the safety, liquidity, and yes, even to achieve an
appropriate return. Keep informed of market interest rate levels
and what they mean for defining an appropriate return given your
investment strategy. At the beginning of 2008 five percent seemed
like an appropriate return for corporate cash investors. Today,
zero may be appropriate. Were you aware of this dramatic change in
expectations as it occurred or did you find out
|3.||Ensure due diligence is
In many cases, this means doing it yourself. Don't ever be afraid
to ask severe and probing questions of your investment partner. Any
investment professional worth his salt should be happy to educate
his or her clients and provide full transparency along the way. If
at any point your gut tells you you've hit a wall of silence,
realize there could be something wrong. Many times this year Ronald
Reagan's mantra of "trust, but verify" popped into our heads.
Suggestion number one above addresses the first half, but never
forget the second.
Self-improvement requires self-analysis. Regardless of what 2009
brings, it is up to us to face the new and exciting challenges with
better preparation and greater success than the past.
One other bit of human nature is the desire to exceed our goals.
Here's to all of us exceeding our goals in the New Year! Weekly Review
The holiday last week dictated light trading as market participants
seem anxious to put 2008 to bed. Treasury yields declined for the
seventh week in a row as zero yielding short bills are now the
considered "normal." Once investors feel it is safe to go back in
the water, bill yields will increase though at a moderate pace.
The Bureau of Economic Analysis' estimate of gross domestic product
for the third quarter remained unchanged at -0.5 percent as
expected by the markets. Estimates for fourth quarter action are
much lower at -5.0 percent or worse.
Sales of existing homes fell 8.6 percent to an annual rate of 4.49
million units. Recently, this measure had been treading water
around the 5.0 million mark where it bottomed after the tech bubble
burst. Last week's release proved housing can get worse from here
and with the recent spike in job losses, we expect further
deterioration in this sector.
Recent weakness in the employment sector showed up in the income
data last week as personal income declined 0.2 percent in November
and both September and October data were revised downward.
Continued deterioration will obviously maintain the downward
pressure on consumption and the rest of the economy.