With Markets at All-Time Highs, Why Does it Still Feel Like a Recession?

Written by Joe Pitzl, CFP® | 07 March 2013

The following headline caught my attention over the weekend: American Stock Markets Are Surging, So Why Do Americans Feel Like It’s Still Recession?

I was hoping to open the article and read about the need for investors to understand the difference between stock markets and the economy. I was hoping to read that traders react to headlines, while long-term investors don't. I was hoping to read that markets aren't going to wait around until people feel better to revert to more realistic values...either up or down.

Instead, the article touches on the concept of investor confidence,  suggesting at one point that it plummeted as a result of the Great Depression, but then suggests in the next paragraph that falling investor confidence actually caused the Great Recession. 

This article provides a perfect example of how easy it is to get suckered into using the same data to support two completely different opinions. Or in other words, if you have an opinion you want to promote, it is pretty easy to use statistics and data whichever way you want to back it up.

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Are You a Hunter or a Farmer?

Written by Joe Pitzl, CFP® | 08 February 2013

“I consider myself to be a farmer—not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I’m very comfortable planting a few rows and just tending to them carefully.”

– Tom Russo, Gardner, Russo & Gardner

Investing is often referred to as a game, or talked about as if it belongs in a casino. If you invest like a hunter, it absolutely is a game...and the odds are stacked woefully against you.

We all know the hunters. They are never shy about talking about the dragons they have slayed and are full of hypotheses, forecasts and opinions about the next big thing. They make investing sound very exciting and easy. To the hunter, investing is all about the next big score and the only way to win is to out-hunt everyone else searching for prey.

Wall Street's mission is to turn everyone into a hunter. The more activity they create, the more they win. Not only does increased activity create a greater likelihood of mistakes, but more activity creates more trading commissions, so they win regardless of whether you win or lose.

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Why Do Estate Exemptions Exist?

Written by Joe Pitzl, CFP® | 16 January 2013

One of the major breakthroughs in the new tax law surrounds the estate and gift tax system. For the first time in over a decade, we have some clarity over what is going to happen with estate tax rates, exemptions and the "portability" of those exemptions, as we outlined here previously.

One of the hot topics of the fiscal cliff debate was the estate exemption level. This amount was scheduled to be reduced to $1 million in 2013, but the new law kept the existing exemption of $5 million on the books permanently moving forward. While these changes directly affect a very small part of the population, the impact will ultimately be far more widespread.

In this article, we will explore why exemptions exist in the first place, and our next post will discuss why the planning implications will filter down to a much larger number of taxpayers than it may appear on the surface.

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$22 Billion Flows into Equity Mutual Funds - Highest Since 2000

Written by Joe Pitzl, CFP® | 11 January 2013

On the heels of a 16% advance by the S&P 500 in 2012, investors absolutely poured money into stock funds during the first week of 2013 at the highest rate since the year 2000. In fact, this was the second largest week EVER!

Time to celebrate, right? The coast is clear now that we know who our president is for the next four years, we survived the fiscal cliff scare, the economy and housing markets are recovering, and we haven't heard anything about Europe for a few weeks...

As we have stated again and again, the paramount driver of investment success is behavior. Given that behavior is often driven by emotion, investors must resist the urge to act on feelings. The last time we saw inflows like this was on the tail end of the euphoria surrounding the tech boom / bubble...and we all know how things played out from there. 

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