Russell Bailyn -

Some baby boomers still think of smart investing as buying and holding a portfolio of blue chip stocks. Such investors, lost in their memories of stable dividends and low volatility, cringe at the idea of trading in their blue chips for index investments. They also cringe at the inclusion of commodities in newer, diversified portfolio models. The reality is that the past decade, plagued by high volatility and market scandals, has changed the investment landscape, quite possibly forever. The recession of 2008-2009 has also caused a major attitude change for investors. Whereas capturing big gains was the priority during most of the past decade, many investors I’ve been speaking with are now more focused on asset conservation and risk avoidance.

Continue reading " Avoiding Losses over Capturing Gains: New Money Management Strategies for 2010 " »

Posted by Russell Bailyn at 01:03 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

There is an interesting article in this month’s Financial Planning Magazine which questions how realistic it is for the dollar to “fail” on a global scale. These sorts of articles aren’t unusual these days as much debate takes place over US debt, continued foreign investment, rising gold prices, etc. The article’s main contributor, Frank Wei of FundQuest, argues that the dollar is too important to both the global economy and the financial system for it to experience a sudden collapse. Any further declines, he argues, will be gradual.

Continue reading " The Dollar: Too Big to Fail? " »

Posted by Russell Bailyn at 04:55 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

I’ve gotta say—I was a bit surprised by the opening life of Evan Simonoff’s column in the October Financial Advisor magazine. He said “Who among us (referring to the financial advisor community) really takes this 60% rally in equity prices seriously.” He then goes on to say its “remarkable” how many observers are convinced this rebound is for real. Evan’s column, The Long View, which I read most months, usually provides careful analysis to its arguments. However, this month I was a bit disappointed. Simonoff cites Liz Ann Sonders throughout the article who, it turns out, is actually pretty optimistic about the big market bounce. I didn’t find much if any of the solid data I would expect from an article which looks to support an overall bearish sentiment amongst advisors. Based on what I’ve been hearing at recent financial advisor conferences around New York City, the sentiment is anything but bearish. So let’s take a look at why some advisors might actually take this rally in equity prices seriously.

Continue reading " Will the Bull March On? " »

Posted by Russell Bailyn at 02:08 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

My clients frequently ask ‘when is the right time’ to start taking Social Security. The most correct answer which is given by both advisors and the Social Security Administration is that you should turn on this income stream when you reach your Full Retirement Age (FRA). Collecting at your FRA is the first opportunity at which you can collect your full benefits and continue to work if you so desire. If you collect your benefits before your FRA they will be reduced and, depending on your earned income, they could be reduced even further. Even so, some people are buzzing about the idea of taking benefits early. After some careful pondering I’ve concluded that this isn’t necessarily the worst idea for some people in certain situations:

Continue reading " Should you consider taking Social Security early? " »

Posted by Russell Bailyn at 04:49 PM | Permalink | Comments ( 2 ) | TrackBacks ( 0 )

I had lunch over the weekend with a fellow money manager specializing in municipal bonds. Because of the growing volume of municipal bond business, I like to gather opinions about where the best opportunities are right now in this space. It’s no secret that the current yield spread between treasuries and municipal bonds is totally out of whack. In case you don’t know the historical norms, here is some background: Because municipal bonds purchased by state residents are often free of state and federal taxes, they typically yield less interest to investors than treasury securities with comparable maturities. Lately, treasuries yields have been abysmal in light of the recession. The ‘flight to safety’ play has treasury prices sky high and yields very low. Similarly, the highest rated municipal bonds (AAA) are paying much less interest than municipals bonds in the A and BBB space. I asked my friend if the depressed prices of these highly graded (but not highest graded) muni bonds are accurately reflecting a serious risk of default, or if this could potentially be an opportunity for investors to get paid while the market recovers. I was told that short-medium term treasury prices are ‘unsustainably high’ and quite possibly nothing more than a hiding spot which may disappear if investor’s appetite for risk continues to climb. We also went through a variety of trading strategies which may be profitable if treasury prices continue falling and municipal bond prices (mid-spectrum) continue to rise.

Continue reading " Tax-Free Munis: Respect the Yield Curve " »

Posted by Russell Bailyn at 02:11 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

I did an interview over the weekend for a Columbia graduate student seeking both professional and participant commentary about the state of the 401k industry. He wasn’t expecting to hear a whole lot of positive considering the recessionary environment, but he genuinely wanted to know how attitudes and advice regarding 401k investing had changed. He even asked: “had I learned (as an advisor) any lessons from the recent and precipitous market declines?” The answer to that question is a resounding yes and I’d like to share what has changed in my practice and comment on the realities which have surfaced in the planning profession in general as a product of the recession.

Continue reading " Clients & Advisors Learn Lessons from Recession " »

Posted by Russell Bailyn at 04:34 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

The recent recession is somewhat unique in that the credit markets have been dragged through the mud with the equity markets. Bondholders, generally considered to be in a safer position than stockholders, aren’t feeling so at ease. Over the past year bonds across the risk spectrum have declined in price amidst speculation that default rates could skyrocket in 2009 and 2010 to levels unseen since the Depression. As a result, investors with a few years on their time horizon may have a real opportunity right now if they pick and choose their investments carefully. Bond prices are down overall and yields are relatively high. The potential payoff could be even greater if the default rates remain contained and the credit spreads start to narrow.

Continue reading " Opportunities in the Bond Market " »

Posted by Russell Bailyn at 04:30 PM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

A recent InvestmentNews survey finds that the majority of money managers in the US don’t think Obama’s economic recovery plan will achieve its stated goal. Frankly, I’m yet to hear any one plan which I’m jumping for joy over. In my understanding of Obama’s plan, the economy would be stimulated using a bottom-up strategy rather than the Republican favored, top-down strategy of across-the-board tax cuts. Obama believes creating jobs through state-government mandated infrastructure projects will jump start consumer spending and pull the economy out of any further immediate danger. It’s nearly impossible to know if this will work. And if it does, will it be a temporary, shot-in-the-arm stimulus which ultimately fails due to excessive debt burdens and mounting inflation? I don’t think across the board tax cuts would work any better if we’re truly aiming to stimulate the economy and get more dollars circulating. Politics will undoubtedly interfere with the Obama plan and marginal tax rates will ultimately increase to balance future budgets and service debt. I am somewhat intrigued by the idea of government assistance for past-due mortgage payments and renegotiations of mortgage rates and terms. This concept would at least chip away at the housing problems which are at the heart of the financial crisis. I also think eliminating mark-to-market accounting is crucial along with restoring the uptick rule. A real concerted effort is needed right now to mitigate the economic problems and restore some badly needed consumer confidence.

Continue reading " Reflections on the Obama Economy & Stimulus " »

Posted by Russell Bailyn at 11:43 AM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

Now that Hank Paulson is a lame duck, and we’ve seen the majority of his contributions as Treasury Secretary, we can begin to assess whether he has been handling the unfolding economic downturn effectively, or as some might suggest, made it worse. As is usually the case with economic policy, we can rarely determine with certainty what was a ‘correct move’ for several months if not years afterwards. My opinion is that Paulson has done an adequate job so far in terms of avoiding a deeper recession or depression, but has made some questionable moves and has been less than sensitive to the needs of Wall Street.

Continue reading " Has Hank Paulson Been A Good Treasury Secretary? " »

Posted by Russell Bailyn at 10:31 AM | Permalink | Comments ( 2 ) | TrackBacks ( 0 )

Whether or not you liked George Bush, his budgets over the past four years have consistently called for more tax cuts and extensions for expiring tax provisions which would otherwise hike taxes. Last year, Bush extended the lower marginal tax rates on ordinary income and the preferential rates on capital gains and dividend income. The goal of these tax cuts was to raise individual incomes, add jobs to the economy and lower unemployment. Well, no luck so far on reaching those goals. On Friday we learned of 240,000 more job losses last month and a national unemployment rate of 6.5%. So now the question becomes, what can we expect from President elect Obama? Lots of people on Wall Street are scared of a scenario in which Obama raises taxes shortly after getting into office presumably in the middle of a recession. Herbert Hoover did the same thing in the early 1930’s. It led to the Great Depression. Are we in a similar predicament? What can we expect over the next four years from Barack Obama in terms of taxes?

Continue reading " Obama and Taxes: What We Can Expect " »

Posted by Russell Bailyn at 03:44 PM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

Last week Nancy Pelosi announced that the completed version of the Economic Stabilization Act of 2008 is now available on the House of Representatives website. I spent a few hours reading through the bill and would like to highlight what I think are the most important parts. What was immediately clear from my review was that the bill sends us into a new period of financial regulation after a decade of deregulation and leverage. As most of you may already know, the bill was passed late last week in both houses and was signed into law by the President. At this point, considering the market turmoil is worse than it was before the bill passed, we wait to see if these new provisions will be successful in the way of instilling confidence to a market system which by most measures appears nearly broken.

Continue reading " Emergency Economic Stabilization Act of 2008 " »

Posted by Russell Bailyn at 03:39 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

I’ve been hesitant to offer my opinion about the proposed $700B bailout package since the news pertaining to that plan is ongoing and constantly changing. But now that rumors are flying and I’ve had clients call in to ‘blame this on Bush’ and to complain that it dumps a massive debt directly on the heads of taxpayers, I feel the need to spell out some truth as I understand it and perhaps some more realistic scenarios. Regardless of what portion of this proposed legislation passes, I don’t think we’re heading into the next Great Depression. The biggest problems with this market the way I understand it is a lack of liquidity, the perils of bank interdependency, and a need for some new regulations in an era of leverage and risk. These are problems we can cope with as a nation with a little cooperation. Here is some clarification about this historical event:

Continue reading " It’s Not a Bailout -- It’s a Government Investment They Say " »

Posted by Russell Bailyn at 02:51 PM | Permalink | Comments ( 3 ) | TrackBacks ( 0 )

There was a spread in the Wall Street Journal at the end of 2007 in which a variety of seasoned financial experts were asked where the markets were headed in 2008. The predictions were mostly bullish - Dow 14,000 - Dow 15,000 - Dow 16,000 - true dreamers. A couple of people more accurately predicted flat markets in the face of staggering oil prices and a weak housing market. But nobody--none of the experts--expected a 10% decline in the first quarter alongside a massive credit crisis. I’ve listened to hundreds of bulls and bears make predictions about market direction over the past five years and I keep returning to the same conclusion: these people have no clue where the market is headed.

Continue reading " Are Market Predictions a Waste of Time? " »

Posted by Russell Bailyn at 12:57 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

As we continue to question the softening economy, I’ve noticed lots of finger pointing in the media. Originally it was let’s blame Greenspan and the old Fed for keeping interest rates too low for too long. Now people are blaming Bernanke and the current Fed for not anticipating the credit crisis earlier and brainstorming a solution. Yet others blame the mortgage brokers and banks for not adequately disclosing the terms and risks inherent in certain loans which we now know to be junk. And of course, why not blame Bush? The president has driven up our federal deficit by paying for a war which is totally out of favor with the public. So who should really take the heat for the current economy? You should.

Continue reading " Market Turmoil: Taking Personal Responsibility " »

Posted by Russell Bailyn at 02:21 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

I have a hunch that food inflation is about to take center stage. Some may have noticed the increase in chatter about farm subsidies and commodity prices already in the early rounds of presidential debate. This is likely to continue into 2008 because agriculture prices are currently in ‘spike’ mode. Take a look at the Deutsche Bank Liquid Commodity Index--up 18.6% since January 1st--as proof.* This index covers wheat, corn, soybeans, and sugar among other commodities. So what’s driving these prices higher? And what can you do to protect a portfolio against agflation (agriculture inflation)?

Continue reading " A Simple Breakdown of Agflation " »

Posted by Russell Bailyn at 05:15 PM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

We’ve been talking in my office about getting a bit more defensive with our investment portfolios. The S&P 500 is up over 9% since January 1st and the year is half over. If you check my post from a few months back, fund manager Curtis Teberg offered a projection of the Dow Jones reaching 16,000 by year end. His reasoning? The 15-month period preceding a presidential election tends to boast big moves in the market. His testing goes back as far as 1926 and hold up fairly well. Yesterday the market closed up over 280 points, shining light on the magical 14,000 level. Are we going to get there by year end? How about within a week? (Note: Past Performance is not a prediction of future results).

Continue reading " Bullish? Or Bearish? It's a Tough Call " »

Posted by Russell Bailyn at 01:21 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )

An article in Registered Rep magazine in November tells the market forecast of Curtis Teberg, a portfolio manager based out of Minnesota. Teberg puts the Dow at 16,000 by December 31st, 2007, a 33% increase over its value on October 1st. Wow! I’d better start loading up on blue chip stocks. Apparently I’ve already missed out on a 6.2% move in the Dow since October 1st! Or, is this an unfounded and spontaneous move? Check out the basis for this forecast and see how it sits with you.

Continue reading " Market Historian predicts Dow Rally to 16,000 " »

Posted by Russell Bailyn at 01:39 PM | Permalink | Comments ( 5 ) | TrackBacks ( 0 )

I’m in my mid 20’s, but I spend much of my time with people in their 50’s and 60’s. These clients are nearing retirement--the point in life where one would like to either cease working, or dedicate substantially less time to work-related activities. The challenge is sustaining an income stream which is sufficient to lead the same lifestyle established during prime working years. I have many answers as to how workers nearing retirement can supplement their savings or find insurance-related products which can mitigate the risk of outliving one’s assets. What I’d like to focus more on is why 90% of the questions I get related to retirement and creating long-term income streams stem from people in their 50’s and 60’s- just the demographic which should be well prepared for these nearing issues. The people who should really start paying attention to their longer-term financial well being are those in their 40's, 30's and younger--those who face plenty of issues of their own.

Continue reading " Retirement Planning & Social Security from a Generation X Perspective " »

Posted by Russell Bailyn at 02:16 PM | Permalink | Comments ( 0 ) | TrackBacks ( 0 )