Objective information about retirement, financial planning and investments


A Look Back


I have been blogging for a bit over three years now.  This has been a great outlet for my love of writing.  Working as a

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financial advisor is about the best “job” one could have and I feel fortunate to be able to share what I’ve learned over the years with you.

Just as I often review the assumptions that I use in choosing investments to recommend to my clients, I thought it would be interesting to take a look back at a few of the prior posts on this blog and to update the underlying situations.

2010 The Year of the Fiduciary? 

Well 2010; 2011; and 2012 have come and will soon all be in the books without a uniform Fiduciary Standard that must be followed by all financial advisors dealing with the investing public.  I’ve read that this will be a top item for consideration among the regulators in 2013.  I hope this is the case.  One definition of Fiduciary:

fi•du•ci•ar•y – A financial advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest. 

I think this is the right way for all financial advisors to treat their clients; some very deep pockets in the financial services industry disagree.  

Is Your Financial Advisor Like a Replacement Ref?

I wrote this on September 26th of this year two days after the infamous Monday night game where the replacement refs robbed my beloved Green Bay Packers on a blown call at the end of the game in Seattle.  This was the game that brought the NFL referee lockout to an end.  Since then the Packers have won 7 of their last 8 games and stand atop the NFC North, Seattle has also had a good season and stands a 8-5 and are in the playoff hunt.  Nothing in this update about finance but I have been a lifelong NFL and Green Bay Packer fan.

Lessons From the Groupon and Facebook IPOs

Since writing this shares of Facebook have risen to over $27 per share from just under $18 when I wrote this post in early September of this year.  This is still far below the $38 IPO price in May, but the stock appears to be in the midst of a rally.  Time will tell how the company fares as a publically traded entity.

Groupon went public at $20 per share in late 2011.  The stock currently sits around $4.25 per share almost the same price as when I wrote this post in September.  Since then there has been some excitement as at least one hedge fund has purchased shares and the Board retained founder Andrew Mason as the company’s CEO amid speculation that they had considered replacing him.  Lastly there were some rumors that Google, a former suitor, was once again interested in acquiring the company at what would be a bargain price compared to their last offer.  I fail to understand the economics of the daily deal “industry” and view this IPO as nothing more than a payday for the founders and the investment bankers.

That Nice Man at Church Wants to Sell Me a ….

Since writing this post in January of 2011, Bernard Madoff remains in jail, one of his sons committed suicide by hanging himself in his apartment, and four years after Madoff’s arrest the trustee assigned to try to recover assets has recovered about half of the $17.5 billion that investors lost.

In the interim another famous Ponzi schemer Alan Stanford has been convicted and imprisoned.  Sadly financial fraud, including affinity fraud, is still rampant and all investors need to protect themselves.

Risk, Reward, and Peyton Manning

When I wrote this post in March the Colts had just waived Manning rather than pay him the $28 million due him at the time.  Seemed like a reasonable bet at the time given that he was coming off of neck surgery and had missed the entire 2011 season.

Peyton ended up in Denver and has the Broncos on the cusp of the playoffs with 10 wins as I write this.

Meanwhile the Colts took Stanford’s Andrew Luck as the first overall pick in the draft and he has performed beyond expectations.  He has the Colts in the playoff hunt after the team won only 2 games during 2011.  Further the team has rallied in the face of adversity with their coach being forced off the sidelines to battle leukemia.  Thankfully he is in remission.

Overall a win-win for both teams, both teams are so far being rewarded for the investments they made in Manning and Luck.

Just as with these blog posts, it’s a good idea to revisit your reasons for making financial and investment decisions to see if things panned out as you had thought at the time.  This is not to second guess yourself, but rather to reexamine your assumptions to see if you need to adjust your decision making process in the future. 

As always please feel free to contact me with your financial planning questions.

Photo credit:  Wikipedia

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Lessons From the Groupon and Facebook IPOs


Facebook and its botched IPO is still a hot topic on CNBC and other financial media outlets.  Facebook and Groupon are the two most recent “blockbuster” IPOs and both have been miserable flops to date.

Logo of Groupon

Groupon made its debut in November of 2011 at $20 per share.  It closed at $4.24 per share on September 4, 2012.

Facebook opened trading in May of this year at $38 per share.  It closed at $17.73 per share on September 4, 2012.

While I realize hindsight is 20/20, there are several lessons an investor can draw from these recent large IPOs:

IPOs are risky investments.  As my children might say; well duh!  This goes beyond Groupon and Facebook.  There are numerous examples of IPO flops and also IPOs that have been great investments.  Google opened at $80 per share in its IPO in 2005.  The stock closed at $681.04 per share on September 4, 2012.

Hype doesn’t equal a solid investment.  Both Groupon and Facebook were the subject of intense media hype in the days and weeks leading up to their IPOs.  Don’t listen to the hype and get caught up in it.  Rather with an IPO or any investment do your homework.  In the case of an individual stock holding understand the company’s business model.  What factors will make the business prosper or flop?  Are there barriers to entry for competitors?  Clearly there have been few in the case of Groupon for example.  Even with mutual funds or other managed investments, understand who is in charge, their investment philosophy, and review how they have done in various market situations.

IPOs are a payday for many people; you are not necessarily one of those people.  In the case of both companies the IPO was a means for the senior management, early investors, key employees, and the investment bankers to realize a big payday.  This isn’t necessarily a bad thing, nor does it imply that anyone is doing anything wrong or unethical (any allegations about the Facebook IPO notwithstanding).  My point is that whether with an IPO or in dealing with a commissioned financial sales rep who is trying to sell you an annuity, understand their financial motivations.

Investing is not about the new trendy stock or fund.  If you are investing (vs. speculating or day trading) don’t worry about every new stock, fund, or ETF that comes to market.  Focus on your overall financial plan and tailor your investment strategy towards achieving the goals laid out in your plan.  If something new comes along that you conclude after careful research has a place in your portfolio, then go for it.

It isn’t different this time.  I vividly recall the late 1990s when the Wall Street Pundits claimed that the old rules didn’t apply when evaluating many tech companies.  Don’t be concerned with their lack of a balance sheet or even a credible business plan.  Fast forward to early 2000 and we know how well that turned out.  Technology has made even greater strides since then.  Businesses that we never imagined seem to pop up daily, many of them are innovative and successful.  But investing in today’s new companies is not different.  Before committing money to any investment understand why this is a good place for your money.

I am not an IPO expert and have never invested my own money or any client money in one directly.  Given my heavy use of index funds and ETFs my clients certainly have money indirectly in Facebook, Google, and perhaps other former IPOs.  Investing is about logic, common sense, and research.  This is especially true if you do your own investing.  Even if you use a financial advisor, when they suggest a new investment and/or that you sell an existing holding ask them why.  What is the logic behind their recommendation?  Why will I be better off?

Please feel free to contact me with your investment and financial planning questions.


Photo credit:  Wikipedia


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