The panic triggered by the collapse of Lehman Brothers Holdings in September saw investors head to Treasury money-market funds in record numbers. But that influx of cash, coupled with record-low interest rates, threatens to cut off the supply of these funds and reshape the industry.
Retiree Hell Isn’t as Bad As You Might Think It Is
Given that southwest Florida has a high concentration of retirees, the collapse in the real-estate and stock markets has hit especially hard. Retirement savings have been decimated. These are people whose prime working years are behind them, who thought they had saved adequately. Since they’re retired, they can’t replenish their losses by working. Their life expectancies probably aren’t long enough for the markets to recover and recoup their losses, let alone contribute to gains. They’re furious with their brokers and financial advisers. I was asked repeatedly: “What can we do?”
Thoughts: Diversification IS REALLY important!
Where the Financial Gurus Are Putting Their Own Money
A sampling of high-profile industry veterans, academics and brokerage-firm chiefs reveals that many are hanging on to holdings battered by last year’s market slide and busily hunting down new opportunities, particularly among bonds and beaten-down value stocks. Some are snapping up municipal bonds, inflation-indexed securities and steady-Eddie dividend-paying stocks.
And they’re generally upbeat about the prospects for long-term retirement savers.
“I think this is a marvelous time to be investing,” says Rob Arnott, the 54-year-old chairman of Research Affiliates LLC, an investment-management firm in Newport Beach, Calif. “There are more interesting opportunities out there now than any of today’s investors have ever seen.”
Thoughts: We have to be careful to stick to our long-term plan, course correcting when needed, despite our current urge to give in to short-term panic.
With Stocks Unsure, Bonds In GRATs
Corporate bonds are making an unusual appearance in a popular form of wealth-transfer trust amid uncertainty over how other assets will fare in the coming year or two.
Low interest rates and slumping asset values have created an excellent environment for grantor-retained annuity trusts, commonly used to transfer wealth without paying gift tax.
GRATs tend to hold high-octane investments such as stocks, hedge funds and sometimes private equity, but U.S. Trust has created a number of them with bonds in recent months.
Bonds “rarely go into GRATs,” but they are a more attractive bet now because they seem less uncertain than traditional equities and perhaps have a greater chance of outperforming a key interest rate, said Mitchell A. Drossman, national director of wealth-planning strategies at U.S. Trust, Bank of America Private Wealth Management.
Thoughts: Estate Planning Alert…if you know what a GRAT is you will find this interesting.
In the Fight Against Bill Creep, Every Extra Fee Is the Enemy
Mr. Creep isn’t particularly discriminating, but he is consistent and persistent. And if you need to slash your spending to reduce your debt, make up for lost income or simply rebuild your savings after last year’s stock-market debacle, his sneaky habit of regularly boosting your monthly expenses must be corralled and cut back.
Thoughts: Small tweaks make a big difference over time.
What Red Ink? Wall Street Paid Hefty Bonuses
Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.
Thoughts: Not sure when this will change but I think it will be when we all decide ENOUGH!
