Archive for Economy and Investing

Groundhog Day: webinar now available for viewing

Economy and Investing, TheLiveBigWay® Digest, Videos, Webinarson November 22nd, 2010No Comments

“History may not repeat, but it sure does rhyme.” Mark Twain

Our latest webinar was a review of some of the enduring characteristics of the economy and the markets and how, even amidst the seeming chaos, it’s still possible to craft investment strategies that can carry us to our goals.

Click here to stream the full audio/video presentation.

Here are the slides only (Acrobat format).

How to Know What to Do When It’s Hard to Know What to Do

Economy and Investing, Financial Planning, TheLiveBigWay® Digeston August 30th, 2010Comments Off on How to Know What to Do When It’s Hard to Know What to Do

I thought it was time to address some of the gloom and doom that has so dominated the news of late.  Not, by the way, with the intent of dispelling it (or supporting it, for that matter) but more with the aim of addressing the question of what we can best do to operate in an uncertain world. To begin, allow me to recap some recent developments:

The pace of economic recovery is slowing.  Second quarter economic growth in the US was revised downward last week from 2.4% to 1.6%.  At the same time, unemployment moved up a notch and home sales moved down a notch (or two).  Fed Chairman Ben Bernanke, observing these developments from the monetary policy meeting in Jackson Hole, suggested on Friday that a little more fiscal stimulus might be welcome.  He knows, of course, that this is currently a political non-starter.  Writing in yesterday’s New York Times, meanwhile, Laura Tyson, UC Berkeley economist and past chair of the president’s council of economic advisors, made the case for why the slowing recovery calls unambiguously for a second stimulus.  And just to round things out, Nobel Laureate economist Paul Krugman has declared that this is not a recovery in any meaningful sense of the word unless the pace of growth is fast enough to bring down the unemployment rate quickly and significantly. Few are predicting that the economy will resume such a pace this year.

The news is not all dire on the policy front, however.  Notwithstanding the lack of consensus for a second stimulus, the White House is pressing forward with several initiatives that could help.  None are anywhere near the scale of last year’s stimulus package, but each could have an incremental impact.  And, while noting that the Fed does not possess unlimited power to regulate economic growth, Chairman Bernanke nonetheless observed that the central bank still has policy options in its toolkit and made clear its commitment to using any and all of them to keep the recovery on track.

One of the things holding down the pace of recovery is the “savings binge” that consumers have engaged in as they work to pay down the excessive debt levels acquired during the real estate boom.  Businesses, likewise, are holding back on new hiring and fixed investments that could create a much needed boost.

While the “animal spirits,” as John Maynard Keynes termed business sentiment, have left American business people in a pessimistic mood, sentiment can change suddenly, dramatically, unpredictably. In this vein, it’s worth noting that American businesses are now sitting on a record $1.6 trillion in cash reserves, the deployment of which would cause a dramatic shift in direction for the economy.  Consumer and investor sentiment is likewise subject to unpredictable swings.  In the long run, I suspect that one counts out the American consumer at one’s peril.  Today, in fact, it was reported that consumer spending had risen in July, after four months of decline.

The real point of enumerating the foregoing pluses and minuses is this: I don’t know what’s going to come next for the economy.  No one does.  No one you see speaking on TV and no one you see quoted in newspapers or magazines knows what’s coming next.  There is sometimes an illusion of prescience, created by the fact that every possible outcome is being predicted by someone, every minute of every day.  As we look back at how events have unfolded, inevitably someone will have “called it right.”  That in itself isn’t particularly impressive.  What would be more so is if the same person got it just right again and again and again.  There’s not much evidence for that.

Of course, if someone did possess perfect foresight, they would never diversify.  Diversification is only a reasonable strategy in the absence of such prescience.

So, coming back to my opening question:

How are we to know what to do when times are so scary?  The answer, prosaic as it may sound, is to show up with a plan from the start.  And then stick to it (scuba divers like to say “plan your dive and dive your plan;” a good motto for our financial affairs as well). There’s a reason this is so hard to do, however.  As I’ve noted in prior writings, neuroeconomists have established that the prospect of financial loss activates the part of our brain called the amygdala. The amygdala is where our “fight or flight” responses live, so, naturally, when this part of our brain lights up, we feel the urgent need to DO SOMETHING!  This is certainly a functional response when one is being physically attacked, but far less so when it involves one’s portfolio.  As long as there are sufficient cash reserves to serve as an emergency fund, and as long as there are sufficient stable bond reserves to meet spending needs in retirement for five or six years, there really is no reason to take action when it appears that the economy might be hitting a bump in the road.

So, the motto should be: Plan Your Life and Live Your Plan.  And the next time the doomsayers are splashed across the front page of your newspaper, put it down and take the dog for a walk.  You’ll both feel better for it. And as Roger Lowenstein, pointed out in Friday’s New York Times (Taking Stock): “it is generally more lucrative to sell prophecies of doom than to act on them.”

The Yeske Buie Team

Our Story So Far . . .

Economy and Investing, TheLiveBigWay® Digeston July 7th, 2010Comments Off on Our Story So Far . . .

I just thought I’d drop a short note from Amsterdam on global economics and stock market volatility before heading out to visit a few museums.

For a quick refresher on how we got here, you might want to revisit our webinar from April of last year, “The Perfect Storm: How We Got Here and Outlook for Recovery” ( Following that webcast, the markets began a steep recovery, with the Dow gaining nearly 60% from its March 9 lows by the end of 2009.  The index is currently off that year-end mark by about 7%.

One of the things we’ve always been clear about was that the dramatic recovery in the markets after the first quarter of last year was more about the “Armageddon scenario” being taken off the table than it was about immediate prospects for economic recovery.  Markets do a good job of processing information about the prospects for the economy in general and stocks in particular, but late 2008/early 2009 was a time when information about the true scope of the problem was in short supply.  Under such circumstances, investors often assume the worst.

Everything that followed was – and will continue to be – based on expectations for the pace of economic growth.  Which brings us to the recent turmoil in the markets, driven, at least in part, by renewed concerns that the recovery here and abroad will be anemic at best.  Even Federal Reserve chief Ben Bernanke has recently suggested that the projected rate of economic growth – estimated at 3.5% for 2010 – won’t be fast enough to provide rapid relief from high unemployment rates.

A slower than average recovery, however, isn’t the end of the world.  A few have suggested that we’re witnessing a paradigm shift, that “this time is different” from prior economic downturns and subsequent recoveries.  Well, in some sense that’s true, as every downturn and every recovery follows its own unique path.  But as Mark Twain famously quiped: “history may not repeat, but it sure does rhyme.”  The fact is that “the economy” is nothing more than the aggregation of the individual decisions of consumers like you and me and everyone we know about how to spend and save and invest.  It’s likewise the aggregation of all the collective decisions that you and me and everyone we know make as part of businesses and other enterprises in adapting to changing external conditions.  Human beings are ultimately creative and adaptable, which is why economies, absent major structural hurdles, tend likewise to be creative and adaptable. The isolated counter-example doesn’t disprove the fundamental truth in that statement.

How we manage risk in the face of the uncertain path of economic recovery has several components.  First, we ensure that you have adequate stable reserves to meet your projected needs in the short run.  These stable returns take the form of cash and bonds.  You may recall that we increased your allocation to bonds late last year when we updated your portfolio targets.  Next, it’s important to broadly diversify any allocation to stocks.  Stock allocations should be spread across different size categories (large, mid-cap, and small) and all around the globe.  You should also be broadly diversified within each of those categories.  Finally, there needs to be a disciplined approach to monitoring and rebalancing in place, so that we can exploit the subtle shifts among asset classes and continuously position the portfolio to capture whatever returns the markets choose to offer.  We use all of these techniques in positioning your portfolio for an uncertain future.  You can get an extended description of our philosophy and approach from our webinar “Sound Portfolio Management” (

As always, you will find extensive portfolio and tax reports on your Client Private Page.  Don’t hesitate to check in with us if you need help accessing it.

Take care and talk to you soon,


“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? Your playing small does not serve the world. There is nothing enlightened about shrinking so that others won't feel insecure around you. We are all meant to shine. And as we let our own light shine, we unconsciously give others permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” ~Marianne Williamson