Recent Articles

BULLS & BEARS: Why diversifying may not accomplish what you think

July 23, 2007
What is the one thing nearly every investment adviser, financial planner or grandpa would tell you is the most important attribute of a solid portfolio? Diversify. In other words, don't put your eggs in one basket-right? It makes perfect sense to any rational person and is almost a religion among some in the financial-planning community. Planners use fancy-schmancy software to "optimize" asset allocation and will plot your portfolio vs. "the efficient frontier" in order to fine-tune your risk and potential...

BULLS & BEARS: Don't expect market assumptions to be true

July 9, 2007
The other day, a client asked me the following question about the stock market: "How are we going to play the downside when the next president is a Democrat and raises taxes?" That question has three assumptions in it: Presidents who are Democrats raise income taxes. The stock market will drop if taxes are raised. The next president will be a Democrat. For more than five decades, tax rates on personal income have basically been dropping. In the 1950s, the...

BULLS & BEARS: Reflect if you must, but look ahead, too

June 25, 2007
Let's peer back to a time a few years ago to see if there are any similarities to today. "Back then," corporations were buying back their own stock as never before and pundits talked about the massive liquidity flowing into stocks. "Back then," the U.S. market hit new all-time highs in the first half of the year, although professional investors were skeptical since the strongest global economy was in Asia. "Back then," the economy was in the fifth year of...

BULLS & BEARS: Today's trust company isn't your grandfather's

June 11, 2007
Over the last few months, I've gotten to know an expert in the trust business by the name of Charlie Mosbrucker. He is a former trust officer and lawyer who spent more than 22 years working in various trust departments. Over the last decade or so, the trust business has evolved and, as he says, "Today's trust company is not your grandfather's trust company." When I think of a trust company, my image is that of a chubby white-haired guy...

BULLS & BEARS: Market history suggests election lead-up will rock

May 28, 2007
Two weeks ago, I mentioned that there could be a way to profit from now until the big election late next year. The election is still more than 500 days away, and I already am tired of the sound bites. But if there is a way to make a nickel from the candidates' hot air, the race might be tolerable. On a recent television appearance, Rich Karlgaard of Forbes said he thought the Dow Jones industrial average could hit 18,000...

BULLS & BEARS: Why ETFs are gaining on mutual fund industry

May 14, 2007
The big election is 18 months away. Is there an investment you can use to play it? I think so if you look to a rising star that is attracting the attention of the wealthy as well as the common man. This star's popularity has gone from relative obscurity a decade ago to a media frenzy now. If this were 1958, you would think I was talking about JFK, and today Obama comes to mind. But I'm not thinking of...

BULLS & BEARS: Sectors of stock market swing in and out of favor

April 30, 2007
I hated chemistry class in high school. Beakers and Bunsen burners were fun, but memorizing the periodic table of elements was torture for my ADD brain. All those little boxes with different colors stacked up in rows with the twoletter symbols and numbers of protons and neutrons boggled my mind. Today, though, a periodic table provides valuable instruction in my business. I am not talking about the periodic table with hydrogen, einsteinium and nobelium on it. The table valuable to...

BULLS & BEARS: Embracing unloved stocks great way to make money

April 16, 2007
Proverbs 30:19 states that there are "four things I'll never understand, how an eagle flies so high in the sky, how a snake glides over a rock, how a ship navigates the ocean, and why adolescents act the way they do." Having had three adolescents, I will agree they are beyond understanding. If there had been a stock market in the 10th century B.C., the author might have added one more item to the list. Besides adolescents, he probably wouldn't...

BULLS & BEARS Market poised for big run, so put your money in now:

March 19, 2007
After the market swoon a few weeks ago (which I said in this column on Jan. 8 and Feb. 5 was overdue), you might be feeling a bit woozy. You might be weak in the knees, but it's time to take a big whiff of smelling salts and turn bullish. Even if you are a bull, you are not bullish enough. With the pullback, you might have been lucky enough to catch the market wiggle, but it is time to...

BULLS & BEARS: Amid all the complaining, U.S. continues to prosper

March 5, 2007
A few weeks ago, I heard Ben Stein speak about politics and the economy. The noted lawyer, writer, actor and economist spouted off various positive statistics about the U.S. economy and then lamented that the public seemed morose about the financial sunshine. Even though our standard of living is at an all-time high, it seems as if Americans like to grovel and complain. Stein said, in his best Ferris Bueller drone, the American public was the most "unhappy happy society"...

BULLS & BEARS: Despite myriad challenges, there's cause for optimism

February 19, 2007
A week or so ago, I spent a few lovely days at a conference in sunny San Diego while the mercury dropped below zero in the Midwest. For once, my timing was excellent. Weather aside, the days were filled with several thought-provoking speakers. Below is a smattering of takeaways that were interesting enough to share. Paul McCulley, an economist muckitymuck who sits at the right hand of bond investment guru Bill Gross at Pimco, made the observation that the world...

BULLS & BEARS: My past predictions were not all hot air

February 5, 2007
One benefit of writing a column is, the reader rarely remembers for long what the writer says. Maybe readers don't remember what stock market columnists prognosticate because they think we're windbags and change our opinions willy-nilly. For example, a month ago, I wrote the market was looking like it might pull back 10 percent and two weeks later wrote about the case for a market "melt-up." Willy-nilly? I don't think so, because both events could happen. But a year from...

BULLS & BEARS: Are ingredients in place for a market 'melt-up'?

January 22, 2007
A couple of years ago, I quoted legendary market analyst John Mendelson, who predicted the "mother of all short squeezes," causing a market "melt-up." So far, nobody would say we've experienced anything resembling a melt-up. In the two years since Mendelson's report, I haven't seen the words "melt-up" used. That is, until the last couple of weeks, when I saw it twice. In early January, Barron's columnist Michael Santoli was describing the state of the market. He said valuations by...

BULLS & BEARS: We might be overdue for 10-percent pullback

January 8, 2007
The year-end entertainment tabloid news shows were full of young Hollywood starlets using questionable behavior and sultry wiggles to shock us viewers. On other channels, reports cheered the successful year stock market investors enjoyed while simultaneously expressing awe over the size of Wall Street bonuses. Last year provided lots of market gyrations, but the market never pulled back 10 percent or more. In fact, the stock market has been unusually calm for a long time. The last 10-percent drawdown occurred...

BULLS & BEARS: This year has been good, but 2007 might be better

December 25, 2006
If you are reading this before Christmas Day, you most likely have only about 24 hours of shopping time left to find that last stocking stuffer. What are you doing reading this now? Get out there and finish shopping! Or, if you are reading this after Christmas Day, I hope Santa was good to you. Unless something dramatic happens to the stock market in the last two weeks of the year, your portfolio should be shouting "hoho-ho" with gains for...

BULLS & BEARS: Firms that raise dividends often good investments

December 11, 2006
A couple of weeks ago, I explained that if in your golden years you place too little of your portfolio in stocks, then live too long, you run a high risk of running out of money before you run out of time. For older people, their fear is permanent loss of principal. Although people in their 60s, 70s, and 80s all know they need growth of principal, the fear of loss keeps many of them from getting enough growth to...

BULLS & BEARS: Conservatism could spoil final years of retirement

November 27, 2006
A 65-year-old, recently retired couple came into our office the other day seeking advice on portfolio allocation. The husband had a 401(k) rollover with $1 million in it and wanted to take out $50,000 a year for income. Within the first few minutes of the meeting each said, "We can't afford to take much risk with this money because we won't make any more, and it's all we will ever have." Followed by, "We can't afford the risk of the...

BULLS & BEARS: Aging investors won't lose taste for stocks

November 13, 2006
A popular theory is swirling around the investment community. It posits that in a few years stock markets will fall because of selling by the baby boomers. The theorists believe the baby boomers will become increasingly conservative with their savings, selling stocks to buy bonds and other income-producing investments. From my experience, this is a load of hooey. I'm guessing the theorists are in academia and not actually doing investment management with real people. The firm I co-founded manages investment...

BULLS & BEARS: Move over, value stocks; it's time for growth to shine

September 4, 2006
A comic named Irwin Corey, who calls himself the Professor, once said, "If we don't change direction soon, we'll end up where we're going." You had better open up your statement and listen to the Professor, because where your stocks are going might not be where you want to end up. If you have a big position in a value stock, or value mutual fund, it's time to make some changes. It's time to increase your exposure to good, old...

BULLS & BEARS: Fuss over our trade deficit is much ado about nothing

August 21, 2006
I'll preface this column by telling you I am not an economist, just an observer. How many times have you heard a sobering news report on the trade deficit? The gist of these reports is that the deficit will weaken the dollar, cause all kinds of job losses, and be the ruin of our economy. The typical deficit TV news report begins with a picture of some old, rusty U.S. factory. It closes with video clips of construction cranes building...

BULLS & BEARS: Investors have new tools to soften market whiplash

August 7, 2006
Being a super-bear or super-bull just got a lot easier and cheaper. Until the last few weeks, if you had been bearish on the market and wanted to profit from that bearishness, you only had a few ways to play it. One was to short an index exchange-traded fund, or ETF, in a margin account. The second was to buy an inverse mutual fund from Rydex or Profunds. Or, last, if you knew what you were doing, you could use...

BULLS & BEARS: Read the fine print to identify conflicts

July 24, 2006
Let's say you need advice and you are going to pay a fee to someone to provide sound, unbiased counsel on any number of s u b j e c t s - f r o m plumbing to taxes. After you meet with the kind, presentable and seemingly competent adviser, you decide to use his services. The adviser's contract has a lot of small print, like all contracts do. But before you just sign it, you heed your dad's...

BULLS & BEARS: History suggests market ready to make large run

July 10, 2006
Two weeks ago in this space, I pointed out that investors are close to joining an exclusive club-there are only three previous seven-year periods where an investor lost money in the U.S. stock market. The last seven-year dry spell was from the start of 1968 through the end of 1974. In that span, $100,000 an investor put to work withered to $90,000. By the end of 1974, inflation, oil-price spikes, an unpopular war and an unpopular president had left investors...

BULLS & BEARS: Sure, market's slumping, but better times lie ahead

June 26, 2006
As I write this, the stock market has fallen off a ledge and given up, depending on the index, between 7 percent and 12 percent in a bit over a month. After that kind of fun, you might be ready to throw yourself off a ledge, or at least cash in what's left of your portfolio. Yes, the last few weeks have been trying, but being an investor in U.S. stocks since the beginning of this decade has been no...

BULLS & BEARS: Big investors have clout to drive stock prices up

June 12, 2006
I have said before in this space that in the long run the only thing that propels a stock's price is earnings. As Ben Graham said: In the long run, the stock market is a weighing machine, but in the short run, it's a voting machine. He meant that, over a period of years, a company's stock is valued-or weighed-quite efficiently, but between now and Labor Day the value is subject to the whims of fickle traders who vote with...

BULLS & BEARS: Commodities are passé; time to invest in laggards

May 29, 2006
As you may recall from my column a fortnight ago, Bill Miller is the manager of the Legg Mason Value Trust. It's the mutual fund with the longest winning streak vs. the S&P 500-16 years. In the last column, I shared why Miller believes commodity prices are close to their peak and why he feels commodity stocks, especially oil and metals stocks, are too risky for their potential return. The rest of this column quotes Bill's quarterly letter to his...

BULLS & BEARS: Sage investor: Time to buy commodities has passed

May 15, 2006
In February, I mentioned the Legg Mason Value Trust, managed by Bill Miller, as the fund with the longest-running winning streak vs. the S&P 500. The streak runs 16 years. A couple of weeks ago, Miller put out his quarterly market letter. I'm beginning to think I'm profound because I agree with his thinking. Below is a paraphrased summary of what he wrote: The Financial Times'' headline on April 10 read, "Commodity Prices Set to Soar." Then Miller thought back...

BULLS & BEARS: We have a long way to go bolstering financial literacy

May 1, 2006
It's the first of May, hip-hip-hooray, American investors are smarter today! Why are they smarter? Well, they must have improved their financial acumen because Congress designated last month as Financial Literacy Month. In fact, April 25 was Financial Literacy Day in America. Do you mean to tell me the big day came and went and you didn't even know it? That's OK. If you subscribe to this periodical, you have a higher net worth and income than the average American,...

BULLS & BEARS: Expect irrational behavior, and learn to profit from it

April 17, 2006
Investment theories that have dominated thinking in the last half century or so have all stemmed from the efficientmarket hypothesis. These theories assume investors make rational decisions, all financial information is known by everyone, and all markets are efficient because prices are a combination of all those things. But in the last decade or so, behavioralfinance studies have postulated that irrational behavior by investors is actually a strong driving force behind markets-and that irrational behavior can be measured and acted...

BULLS & BEARS: Studying psychology can help investors earn money

April 3, 2006
In 1843, Charles MacKay wrote an investment book that even today remains a good-seller. It's titled, "Extraordinary Popular Delusions and the Madness of Crowds." In it, he argues the crowd is always wrong and that its irrational and manic mentality pushes prices to extremes. Throughout history, we all have witnessed many examples of this irrationality. The Holland tulip-bulb mania of the 1600s, various stock market crashes, and the willingness of kids to drain their piggy banks and frantically buy Pokemon...

BULLS & BEARS: I'm all for optimism, but be skeptical, too

March 27, 2006
When viewing the historical record of the stock market, it is clear investors who maintained a positive longterm stance have been rewarded with attractive compounded returns, despite some significant zigs and zags in between. Americans are, on balance, an optimistic bunch, especially when it comes to our outlook for the future. A "best is yet to come" policy has served us well, providing the drive to innovate and improve our country's standard of living. Nevertheless, when it comes to making...

BULLS & BEARS: Stop-loss orders might cost you in long run

March 20, 2006
Every fortnight, my firm sends out a newsletter to clients, prospects and friends. In it, we opine on the stock market, the economy, pop culture and politics. If you read this column, you have a general idea of the tone of the letters. This week, we got "fan mail" from neither a client nor a friend, but from a gentleman we had presented our services to about 18 months ago. He started his letter stating he found our writings "informative,...

BULLS & BEARS: Rantings lift TV ratings, but not portfolio values

March 6, 2006
If you own individual stocks, you know they periodically drop or pop in price for no apparent reason. A big company's total value can easily swing several billion dollars with seemingly innocuous news or comments from an influential analyst. One of the guys who can influence investor behavior is James Cramer, host of CNBC's "Mad Money." It is one of CNBC's highest-rated shows and is entertaining, if you like stock market TV shows. If you hate those kinds of shows,...

BULLS & BEARS: Trading too much in stocks a great way to erase profits

February 20, 2006
A common hindrance to creating wealth from stocks is overtrading. Investors feel compelled to take a profit because, as they like to say, "If you don't sell, the gain is just 'on paper.'" However, some of the world's best investors commit funds to a stock and hold it for fairly long periods; not forever, but quite a while. According to the mutual-fund-ratingservice Morningstar, there is an inverse correlation between turnover and performance in the funds they monitor. Sure, some folks...

BULLS & BEARS: Foreign stocks aren't shield against bearish U.S. market

January 30, 2006
A client of mine recently expressed concern her portfolio didn't have foreign stock-market exposure. Because of this lack of diversification, she said, her account had just been "muddling along" for the 22 months we had been working together. Her concluding statement: "You haven't bought me any foreign stocks to protect my portfolio in case the U.S. market suffers a calamity!" You know how a dog's head quizzically tilts to the side when you talk to it? I think my head...

BULLS & BEARS: Foreign stocks aren't shield against bearish U.S. market

January 23, 2006
A client of mine recently expressed concern her portfolio didn't have foreign stock-market exposure. Because of this lack of diversification, she said, her account had just been "muddling along" for the 22 months we had been working together. Her concluding statement: "You haven't bought me any foreign stocks to protect my portfolio in case the U.S. market suffers a calamity!" You know how a dog's head quizzically tilts to the side when you talk to it? I think my head...

BULLS & BEARS: With or without recession, next few years look good

January 9, 2006
In recent days, the yield curve inverted as the 10-year Treasury note yield dropped below the two-year Treasury yield by 100th of 1 percent. This miniscule inversion caused a freakout on Wall Street and sent stocks into a swoon. Here's why: The Fed has tightened rates eight times in the last three decades, according to Merrill Lynch economist David Rosenberg, and five times it resulted in an inverted yield curve. Within one year of each of those five inversions, the...
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