Category Archives: Finance

February 3, 2014

Time, Not Timing

By Doug Sivco

Unless you were completely risk adverse, 2013 turned out to be a fantastic year for many of you stock market investors.  Gains of +20 to +30% were made in stand-alone or retirement accounts. Congratulations. But as we all know, past performance is no guarantee of future success, so we must turn the page.

2014 has started out very differently from the end of last year.  Much more volatility, bigger swings up and down for major stock market averages. The FEDERAL RESERVE’s recent policy move to begin tapering its bond buying has indeed begun to impact capital flows in the emerging markets. Countries from Turkey, Argentina, South Africa, along with Venezuela and the Ukraine are having difficulties. This has caused a surge in the major currencies such as the Dollar, Yen and Euro, and a rally in major bond markets.

When all is said and done, 2014 may be lucky to record anything above a +2% growth rate. This will play out at a time when the FED is mostly likely to continue its tapering policy. While the impact on the domestic economy is likely to be small, if it in anyway contributes to problems in global markets, then our exports will be impacted which would be a negative for growth.

Consequently, January ended up as the first down month for equities in almost a half-year. Without sugar coating it, this will be a tougher year for all asset classes, but stocks remain the best alternative. Bonds, emerging markets, commodities all have much higher risk profiles.  The good news, is that we have the advantage of hindsight. We have seen gyrations in capital markets before. The key is to stay calm and ride out the volatility.  As my mentor at Morgan Stanley once told me, “time, not timing is what wins for investors”.  

December 12, 2013

We sixes and sevens are growing at an astounding rate in America

By Doug Sivco

Hello again,

We sixes and sevens are growing at an astounding rate in America. Currently 13% of our citizens are 65 or older. In thirty-five years, this number will increase to 22%. Politicians already pay more attention to us, because we vote. But younger generations will be forced to treat us more fairly, if not better because of our size.

Our life expectancy has ballooned. In the 1940’s the average American lived to 47. Now it’s 76. This is very good news. The tough part is navigating your later life years while having enough resources to enjoy a reasonable quality of living. Let’s be honest, our Government is not exactly flush. Soaring debt in the U.S.A. has been met with support from the Federal Reserve to keep our economy going. The Fed would like to get out of its quantitative easing policy, but it is in a bind. First, it has a new and very dovish Chairman due to take over next month. Her name is Janet Yellen. Ms. Yellen does not want to do anything to hurt the economy in 2014 when the mid-term elections are due to take place.

Fittingly, she cannot and will not risk causing a major hiccup to the stock market. on the other hand the data is neither improving nor collapsing, so the question is what purpose is now being served by this extraordinary policy. The answer is they simply are afraid to find out what a “tapering down” of fueling the economy might do.

Secondly, there are many programs firmly in the pocket of funds earmarked for our checking accounts. Vast sums of money are being paid out to sustain ballooning costs of welfare, disability, unemployment and illegal immigration. Toss in a new debate about doubling the minimum wage, and you could see further pressure on our already stressed economy.

The key, is to have a financial plan in place, or at least a household strategy to hold onto what you have earned over your lifetime, and try to grow it conservatively (if possible) at the same time.

My father turns 91 near Christmas day. He is part of what Tom Browkaw famously penned the “greatest generation”. A World War ll veteran, Charles is all set with a modest retirement account, monthly social security checks and reasonable outlook on his future. He earned those benefits, and can live comfortably on them. Many of us are not as lucky. Different times require a sharper pen to be sure we can enjoy the golden years as well. After all, we are growing!

October 28, 2013


By Doug Sivco

Hello again.  If you have a retirement plan of any type, odds are its tied in some way, shape or form to the performance of our U.S. equity or bond markets.  The good news, is that since the recession of 2008-2009 began, those asset classes have staged a steady, if not impressive comeback. Your “pile” has probably grown, net of any needed withdrawals. The not so good news, is that stock and bond markets don’t always go up, and eventually, some sort of correction is bound to occur.

According to an analysis of the latest census data, the typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35. We have more investments to protect. But we are living longer as well, so striking the right balance between investing and security has never been harder to achieve. I remember years ago, when as new broker at Morgan Stanley, they encouraged us to employ a “clients age in bonds” strategy. In other words, if you were 69, 69% of your portfolio would be invested in bonds, 31% in stocks… If you were 50, it would be more of an even split between stocks and bonds. This thinking doesn’t work in our current world.

Interest rates from bank CD’s and Money Markets, which used to help pay utility bills or at least a nice dinner out, are so paltry, they don’t cover the cost of inflation. Unless you go into speculative bonds, the yields aren’t much better. If you are counting on your retirement dollars to get you thru, those investments need better returns, and by definition, somewhat more risk.

Dividend paying stocks have become one clear answer. Solid companies which pay quarterly or monthly dividends can give an investor a way to achieve a reasonable rate of return, say 3% – 8%. At the same time, the value of the stocks owned  can increase with a rising stock market. This may be out of some Sixes and Sevens comfort zone, but the new normal requires us to be at least more aware of this low interest rate environment which has been with us for several years now, and will most likely be with us for several years to come.

Remember, the stock market is at all-time highs, and someday there will be a correction. But that day hasn’t come yet. I heard plenty of smart people on Wall Street claim the markets would crumble in 2013, and they were not even close to getting it right.

October 15, 2013

Financial Markets

By Doug Sivco

Financial markets have now become a function of how investors are guessing the drama in Washington, DC will play out. Stock prices on Wall Street are moving up or down based on the latest debating points emanating from Republicans, Democrats and the President.  On the world stage, we are not looking very grown up as the world’s greatest democracy. There will be a resolution, of course. A compromise will be hammered out eventually to preserve the full faith and credit of the United States. But the public relations cost has been an expensive one.

When it is clear that our country has not fallen off a cliff economically, our will focus will turn back to our own financial situation. In our first update, I spoke of the great concentration of wealth 60 and 70 year olds possess. Many of us have worked hard and achieved much. There is, of course, a flip side to this coin.

According to a recent New York Times report, more Americans 65 and older are descending into poverty at a faster rate than ever before. 3.1% of women are now classified as extremely poor, and 2.3% of men. This is not good. The Census Bureau considers someone with a yearly income of $11,011 or less, living alone as extremely poor.  The increase in poverty requires our attention. For the most part, Social Security has protected older Americans from later-life destitution. But some older Americans are among the long-term unemployed, whose jobless benefits have been cut or run out. Or, they could be having trouble qualifying for benefits from the government in the face of administrative cutbacks at the state and federal levels.

My grandfather told me back when he was in college around the start of the first World War,  “we all learned to paddle our own canoe”.  In other words, he and his classmates were expected to take personal responsibility for their situation. Some 100 years later, it’s never been for difficult for less fortunate Americans to keep their heads above water, let alone keep the oars moving.  And the trend is still edging lower.