Grade Yourself on Your Personal Finances

Failing can be a part of life. That said, the most detrimental place to fail is your personal finances. Jerry Wade is known for stating, "You end up with what you end up with." Let's make a checklist of things that you can do to improve "what you end up with."

1. Do you have an emergency fund. Unfortunately in life we have to expect the unexpected. The last thing that you want to do is get caught off guard needing to pull money from your investment accounts, high interest rate credit cards, etc. when something goes wrong or the market is already down. We recommend that you have an emergency fund with at least six months to a year's worth of expenses liquid.
2. Know what's in your bank accounts. Overdrawing a checking account by just a few cents could result in a lot of expensive and unnecessary banking fees. Run your household finances like you would run that of a business.
3. You don't understand the difference between a want and a need. One of the biggest impediments to getting your financial house in order is the inability to properly distinguish between a want and a need. When taken down to the most basic level, all of us have only a few primary needs: Food/water, clothing (not high-end designer clothing), shelter, transportation and health care - high-end cars, boats, luxurious vacation homes, etc. are a WANT, not a need.
4. You don't know how much you spend. It's pretty simple, the amount that you save is the difference between how much you make and how much you spend. It is important for you to look at this and realize that if you aren't saving anything that you need to adjust your lifestyle to decrease your discretionary spending. Not saving should not be an option for anyone!
5. Your tastes exceed your spending capabilities. Many individuals are first generation wealth and are fully aware that they can live on less expensive items than they do. If you are shopping at Byerly's instead of Sam's Club or Neimann Marcus instead of TJ Maxx, this may apply to you. If you are not saving due to this spending you, have some self-evaluation to conduct.
   

Investing Lesson: Hitting the reset button will likely take some self-analysis and some decision making but these are all decisions that will improve your personal financial report card. The more money that you spend now, the less money you will have in retirement, the longer you may have to work or both! That is the simple fact.

Beware of Gold Coin Offers/Dealers/Pitch Men

Many of you may consider gold coins a good investment, a way to balance your investment portfolios and reduce your risk with what many consider the world's oldest and most trusted asset. Some of you have informed us over the years that you have bought gold when in fact you have been sold gold coins.
 

There are a number of issues with buying gold coins, unless you are an experienced buyer who knows what you are buying and what "dealers" are selling. Some of the problems include:

1. The transaction costs. Some quick research shows that premiums can be as much as 5% over the price of the gold coins PLUS there is a cost to shipping. I am going to guess that you would lose that premium when you went to sell this trusted asset at a later date.
2. You have to know what it is you are buying. All coin dealers will claim you are buying a rare and valuable coin (at a premium, may I add) when in fact the coin you are buying will have no value beyond its bullion (if it has any).
3. Coin dealers can be crooks! We are unlucky enough to have some of these Ponzi schemers locally.

Charles Ponzi

On September 8th, the FBI raided the downtown Minneapolis coin firm, International Rarities Corporation (IRC) - a local firm that sells investors a "solid investment:" Gold coins!

IRC is being charged with pitching a number of their gold coin buyers shares in a Nevada company. Private offering documents say that they were seeking to raise $10 million to take the firm public. On August 19th, IRC filed for Chapter 11 bankruptcy and it is likely the investors will be left "holding the bag" again. The Minnesota Attorney General's Office is currently investigating complaints specifically about IRC's coin sales.

INVESTING LESSONS 

1. The ads and the dealers all echo the same message: The coins they are selling are one-of-a-kind, available for a limited time and will only increase in value. The truth is, the ads are meant to dupe those who don't understand the investment and those who will rely on emotion and not knowledge. 
2. If you are interested in buying gold, contact us and we will help to insure that you are not taken by individuals like those who were running IRC.
3. WFG has recently completed our national research on the numerous Gold dealers and have a bulletin you can request with the details.  Jerry Wade recently bought a small quantity of the yellow metal from one of the dealers in the bulletin. 

Never Forgotten

Sunday, September 11th, 2011 marks the 10th anniversary of that unimaginable day in which the world froze with stunned horror as our country was attacked. We watched the World Trade Centers collapse, along with the simultaneous attack on the Pentagon and the hijacked United Airlines Flight 93 in Pennsylvania.

One of the heroes on that plane was Tom Burnett of Minneapolis.  He and others are believed to saved the plane from hitting its ultimate target, the White House.

Tom Burnett

We mourned as a nation over the tremendous loss of life and over the pain and fear that these acts inflicted upon the United States of America and its citizens.

All across the nation there will be events and ceremonies to pay tribute to those lost as well as the heroes who came to the aid of our nation on that tragic day 10 years ago. The Senate has established a National Moment of Remembrance that will take place at noon CDT.

Americans are asked during this minute to cease all activities for one minute and to take the time to remember those that lost their lives, the loved ones they have left behind and the service/military men and women who risk their lives each day to serve and protect this country and our freedom.

I will be observing this moment of remembrance and it is my hope that all of you will also. Regardless of political affiliation, race, sex or creed, we as a nation lost almost 3,000 Americans on this day 10 years ago. It is important for those left behind to know that their loved ones are gone but that they will never be forgotten.

"To find a safe journey through grief to growth does not mean one should forget the past. It means that on the journey we will need safe pathways so that remembrance, which may be painful, is possible." ~ Donna O'Toole

How to Make Student Debt, Smart Debt

How to Make Student Debt, Smart Debt

College classes have started which means that tuition bills are due. With college costs still rising and scholarships decreasing, an increasing amount of students and their parents will be forced to become first-time borrowers. Of incoming freshman, 53 percent reported using loans last fall, the first significant increase since 2004, according to ULCA's Higher Education Institute.


With a volatile economy and high unemployment rates, it is important that college students and parents of college students don't load themselves up with unnecessary debt and that they choose the debt wisely.


Unless students limit their debt burdens, choose fields of study that are in demand and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.


Here are some tips from Kiplinger.com if you or your children intend on borrowing money to pay college tuition:


Choose a school that fits into the family budget. Families seem to be learning that picking a school is an economic decision as well as an academic one. In a survey by Fastweb.com, 45% of students ranked “quality of major” as their top reason for choosing a school. But “scholarship or financial assistance” (43%) and “total costs” (41%) came in a close second and third -- even higher than “academic reputation” (38%).


Among students who leave school with no debt, 85% graduated from public colleges, according to a report by Mark Kantrowitz, publisher of Fastweb.com and FinAid.org. Selecting an affordable school doesn’t have to mean sacrificing quality. To find public and private schools that deliver both, see our Best College Values special report.


Bypass the four-year route. Starting at a community college and transferring to a four-year school can save a lot. You can also slice a year off your expenses if your child takes Advanced Placement courses in high school or qualifies for college credits through the College Level Examination Program.


In Kantrowitz’s study, half the students who graduated with no debt graduated from a community college (one-third graduated from a public four-year college). Other hallmarks of students who graduate debt-free: They tend to spend less on textbooks -- $1,000 or less per year and are more likely to live at home with their parents.


Use money you don’t have to pay back. It’s never too late to save, especially if you live in a state that gives you an income tax break for contributions to state-sponsored 529 plans. Visit FastWeb.com to look for scholarship and grant money from schools and other sources where your student’s grade point average or other achievements would make him a standout.


If you must borrow, borrow smart. Start with government-sponsored loans, which offer flexible repayment options -- such as lower payments and deferral -- and fixed interest rates. These include Perkins loans, for eligible students, and Stafford loans, which may be subsidized if your student qualifies. Also, look into PLUS loans for parents or a home-equity line of credit. (For more information on student loans, go to StudentLoans.gov.) With that combination, you shouldn’t need private loans, which carry a variable interest rate and generally require a co-signer.


Apparently, many students don’t realize that federal loans are the most attractive. “A majority of undergraduates who take out risky private loans could have borrowed more in safer federal loans instead,” reports the Project on Student Debt.


It’s also smart to pay all or part of any loan interest as it accrues so that it isn’t added to the balance that has to be repaid. And remember that even the best student loan can be a dual-edged sword, encouraging a student to borrow more than he should.


Know what you’re getting into. Use the Student Loan Advisor calculator at FinAid.org. It provides an estimate, based on starting salaries of various professions, of the maximum in student loans your child should take out and how much it will cost to pay it back.


One rule of thumb is that students should try to limit their total borrowing to no more than their expected starting salary when they graduate. FinAid warns that “if you borrow more than twice your expected starting salary, you will be at high risk of default.”


And possibly the most important, choose a marketable major. Moody’s is right on the money in suggesting that students pick fields of study that are in demand. That doesn’t mean your child has to major in engineering or computer science. But if he/she is majoring in economics, it couldn’t hurt to take accounting. If he/she is studying history or government, he/she could learn a foreign language. And if he/she insists on studying something as precarious as journalism, he/she should minor or concentrate in another subject -- such as business, health or computer skills.


Investing Lesson: Borrowing at times is unpreventable but making sure that you are doing it in the smartest fashion is key!

WFG Top Stock Picks in "Good Company"

The primary time of year for my/our robust stock and portfolio analysis is November and December.  This time period allows for a full review and appraisal of all current holdings and consideration of potential changes as we enter a new calendar year.  We, of course, evaluate all portfolios and holdings throughout the year, but desire to give each year's top picks time to run, unless new information comes to light that provides a cause for a making a sale or adding a new position that we believe meets our  ConVal^® security selection criteria.

The table below reflects what Morningstar calls the top picks at any given time of their "Ultimate Stock-Pickers."

 

It is very interesting to see that of the 70 stocks WFG currently owns via our ConVal^® process, all of the stocks on the list above are owned by WFG, except Wells Fargo.  These stocks were either already owned in 2010 or purchased in January of 2011.  Of greater note is that WFG identified many of these stocks as top picks earlier than the M-Star "Ultimate Pickers" did.

Investing Lessons

1. Bigger is not always better

2. WFG's ConVal^® process is a winner

It Was Time to Hedge Our Gold Position

With Gold continuing its parabolic ascent, we made the decision this week to hedge 50% of our exposure to Gold ETFs owned in our no load mutual fund.  We still believe the secular bull trend for the yellow metal remains intact but Gold is long overdue for a shorter term price correction downward.  Silver experienced such a correction several months back.

Investing Lesson
It's never a bad idea to take some chips off the table and protect your profits when any particular investment has run very far, very fast.  Knowing when to do this and how to do this is what separates a "good" professional money manager (hard to find)  from the self-directed investor, who more often than not will do the exact opposite; buy high and sell low!

You Know The U.S. Government Is Screwed Up When ............

Who's ready for iAmerica?

As reported by the BBC and backed up by the company's financials records, the software company Apple has more cash on hand than the United States federal government.

Apple's quarterly financial report shows that the company responsible for the iPad, iPod and the iPhone now has $76.4 billion in reserve cash while the U.S. Treasury Department is sitting on just $73.7 billion.

In my opinion, the feds could probably learn a thing or two from Apple's success. Congress remains embroiled in a debate over spending and whether the federal government, which currently owes trillions in debt, should be allowed to borrow even more. International credit rating agencies have threatened to downgrade the national debt for the first time in the nation's history if Washington doesn't come up with a solution to lift the $14.3 trillion debt ceiling while implementing a concrete plan to get the nation's "financial house" in order.

Meanwhile, Apple's financial report shows that the company's profits, even through the last recession, are booming!

Investing Lesson

When all is said in done, when it comes to politicians, more is said than done.

My Opinion

It still pays to be very conservative at this point in time. The numbers on the U.S. economy came in Friday and were unfavorable. There is still at least a 50% chance that before this market cycle is over, the economy may slip back into another recession, with the market taking a final 30-50% swan dive downward.  If and when that happens, it will then be time to load up the truck and invest aggressively.  Patience, is a virtue, but difficult for many to maintain.  I remain resolutely patient. 

PS: Any agreement on a balanced budget amendment will not be worth the paper it is written on, but will be hyped as a great victory, with no details and the teeth of someone with their dentures sitting in Polident.