Iowa Indy Corn 250 and the Ethanol Boondoggle

A departure from the usual financial oriented blog, I spent last weekend in Iowa at the Indy Racing League (IRL), Iowa Corn 250 with my 18-year-old son, Sean.  That said, view the video then read the financial implications of our trip to the corn state!

Being from Indy, having been to over 20 Indy 500 races, but never having ventured beyond, this was a real treat.  I TiVo every IRL race each week.  I have come to eat and breathe IRL like I do Butler basketball.  Hey, I am a kid from Indy!

Life Lesson

Spend more time with your kids!

Investing Lesson
For the past four IRL seasons, the league had an arrangement with the ethanol industry, of which all cars, all season, ran on ethanol.  For the 2011 season, this is no longer the case as the cars are now running on that nasty fuel...gasoline!

Rumor has it that Congress is close to reversing the 50 cents per gallon subsidy for ethanol. If it does so, the fuel is not cost competitive. The most reliable studies on ethanol have revealed the following:

1. Without the 50 cents per gallon subsidy, the fuel is not cost competitive with gasoline.
2. Regardless of subsidy, the boondoggle of artificially promoting a "greener" fuel has had widespread, negative implications.
3. The cost of corn has skyrocketed over the past five years, causing Americans of all incomes to suffer an "ethanol grocery tax."
4. The amount of energy that it takes to produce a gallon of ethanol exceeds the "carbon footprint" of producing a gallon of gasoline.
5. Game, set, match.

We have the world's greatest natural gas reserves and have not figured out that natural gas is the wave of the future.  Why, you might ask?  Lobbying of course!  Hopefully, Congress, on the latest and third try, will pass an energy bill that places natural gas incentives as the number one way for America to more quickly move towards energy independence. Don't hold your breath!

There you have it!

Money Anxiety Index: Latest Sign of Double-Dip

Great article from CNBC about the increasing potential for a double dip recession.  Click on the blog title above to access.

Investing Lesson
The time to prepare for a storm is before it hits.

Stock Market Declines For 7 Weeks In A Row, The Longest Losing Streak In 10 Years

Investing Lesson

The chances of a "double dip recession," which I predicted last summer, but was obviously early about, is again fair game.  I believe it is better to be early and correct, than late and wrong when it comes to assisting our clients in navigating these turbulent financial times.

Why Paying the Annual Fee for the Amex Platinum Card is Worth It

I have an American Express Platinum Card that has a $250 annual fee. I pay this fee because:

1. They have a real, U.S. based service team that you are able to contact.
2. This card replaces the need for a AAA membership when you experience issues with your car.
3. When I lock myself out of my Savannah condo, they send over a locksmith.
4. They repaired a flat tire on my snowmobile trailer in the Wayzata High School parade, which they did not have to do.
5. They assist my children with any issues that may arise when they are traveling in another state.
6. They provide access to free beer and free internet when you need it the most! Example: I am currently sitting in the Charlotte airport in the U.S. Airways VIP Lounge, which this card grants me access to. I was sitting here last week, too!
7. My flight to Minneapolis has been delayed so free beer number one is almost done. Don't worry, they will page me when and if I can make it home today.
8. Free beer number two is almost ready to begin .... okay, I did tip the bartender, that is not included.

Well, I will now send off this blog for posting, relaxing in a nice leather chair while waiting to be paged for my flight. It could take five minutes; it could take five hours. Either way, there is no lower-stress way to deal with this situation or the others that I have listed.

Note: Beer number two has begun, cheers!

Life Lesson: All of this is worth the $250!

401(k) Retirement Plan is a Misnomer

Have you ever noticed that when Wall Street tries to sell you something they will go to all lengths to make things sound good?

A typical spiel might go like this, "All you need to do to retire with comfort is use our Target Date fund. Your plan sponsor, acting as a fiduciary on your behalf, has chosen the best funds for you to utilize in your 401(k) retirement plan."

The way the message really should read is "We wined and dined your bosses. Now we get to collect management fees from you. Good luck with your retirement."

Have you tried finding a Target Date fund for the exact year you want to retire? In all likelihood, your retirement would need to coincide with a year that ends with a 0 or 5, nothing in between, please.

Or try asking your Target Date fund what your withdrawal rate in retirement should be. I am 99.9% certain you will not be getting an answer.

A 401(k) plan is nothing more than an investment account, not a road map to retirement. It does not analyze your individual financial situation and will not provide a customized retirement plan.

Investing Lesson: If you and your loved ones want a real retirement plan, do not rely on your company's 401(k) Retirement Plan or Wall Street's latest fad. Work with a fee only financial planner like WFG, a true fiduciary who truly puts You First.

History Bodes Ill for Stock Market

"There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines."

Mark Hulbert

Read more of Mark's article by clicking on the above blog post title.

Investing Lesson
I watch the Shiller PE 10 Ratio very closely and am concerned about its current high reading. That said, it has been above 20 for over one year. Markets can remain over or under valued for long periods of time, before a significant adjustment takes place.

Covered Call Strategy Explained

Selling call options against stocks you hold is a great way to generate additional income for your portfolio but there are several problems with executing such a strategy in individual accounts:

(1) Call options can only be sold in 100 share increments.
(2) You need to be approved for selling covered calls by your broker.
(3) Commissions often eat up most of the premium you receive when you sell only one call.

Fortunately for investors in the Wade Core Destination Fund, we are able to execute the covered call strategy within the fund which overcomes the above limitations. In fact, we have sold covered calls against 25% of the individual stocks held in the fund.

When selling a call option in the fund, we allow for a cushion to capture additional upside in a stock's price while collecting a premium from selling the call.

This is a clear example of one of the many advantages of investing in the Wade Core Destination Fund.