Wealthy Thoughts – 1

Collection of thoughts and ideas about various things….

Apple stock “started at Outperform” This was the headline in the Wall Street Journal online edition on 3/31/10, citing a stock recommendation by a French brokerage firm, Exane BNP Paribas. Everyday, brokerage firms make recommendations like this. It caught my eye, as Apple stock has risen incredibly over the past year, from the $80s to $235 per share. So after this terrific rise in the share price, why are they predicting it to outperform now?

Apple certainly has great prospects and is a great company, but wouldn’t this have been a lot more helpful at $80 or $150 per share? This is why we find little value in brokerage firm recommendations. It is hard to accurately predict the future, and very few, if anyone can do it accurately over a long period of time. That is why we follow a different investment philosophy, which is not founded in brokerage firm “predictions” about the future.

Record Retention: There was an excellent article in the New York Times, dated 3/31/10, which accurately provided guidelines for record retention rules for tax and other documents. If you have any questions on this topic, please contact us. The article is: “Retain your Records No Longer Than You Must,” by Jennifer Saranow Schultz (see nytimes.com)

Vanity Fair Magazine: This magazine has become a must read for me, as during the past years they have added a number of terrific financial writers, particularly Michael Lewis, who have provided excellent analysis of world economic events, major individual players in Washington and New York, as well as prominent book excerpts on these topics. If you want more in depth information about these topics, I highly recommend you review this magazine. I’ll leave it up to you if you want to pay attention to the numerous fashion ads.

“Bonds Cap Epic Comeback” This was the leading headline that blared on the top of the 3/31/10 Wall Street Journal. But the much more important question, which I’ve written about extensively, is what will the future hold for bond fund investments?

The article states that investors “poured a record $375.4 billion into bond mutual funds during 2009, while pulling out $8.7 billion from stock funds, according to data compiled by the Investment Company Institute.” (a mutual fund trade organization)

We think this is a huge error by investors, as when interest rates rise (which they will do eventually), these investors will face dramatic losses in these bond fund investments.

Our advice to you is as follows: If you have significant bond fund holdings, please contact us immediately and we would be pleased to review these investments, to discuss why this is a bad strategy and what we would advise as a solid alternative.

If you know someone else who has large bond fund investments, do them a favor for which they will be very grateful and have them contact us, and we will review their holdings and advise them appropriately.

This is the next big mistake in the financial world. This is not an if, but a when.

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