Do Your Investments Need Water to Grow?

Unknown-14Dear Mr. Market:

One of the most fundamental concepts of economics is Supply and Demand.  Demand refers to how much quantity of a product or service is wanted from buyers and supply tells how much is available. We can often apply the law of supply and demand to investments to find the next lucrative opportunity. In general if there is low supply but high demand the price will rise. Conversely, heavy supply with weaker demand should lower prices. What happens if you had a resource in abundant supply but it was also scarce?  Water actually fits this paradox of sorts.

Most people have heard at one point or another that water covers about 71% of the earth’s surface.  Even the human body’s composition is somewhere in the range of 60% to 70% water. Again, although water is abundant it’s also scarce. Over 97% of the earth’s water is seawater and of the remaining 3% that is fresh water, only 1% is available for human use. Saltwater can’t be used for drinking, crop irrigation, or for most industrial applications. Not only is there a global shortage of water but also the demand for it is estimated to double every 20 years!

Investors need to understand where the next great opportunity is before it happens. Hockey legend Wayne Gretzky said it best, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”  This can be applied to investing in oil over the last century as it has driven the headlines and proven to be investment worthy. While that may not change overnight there are other developments and trends to watch for and the price and supply of water is such an example. Continue reading

Earnings Reports: What to look for and how to read them

Dear Mr. Market:

Earnings ReportHere we are in the middle of Earnings Season listening to the various talking heads on TV attempt to decipher the plethora of numbers that companies announce.  As they spew out seemingly meaningless information how is the average investor expected to make sense of it all?  With terms like “diluted earnings, future guidance, write downs, cash infusions and GAAP financial measures” it can certainly be a bit overwhelming!  Ultimately investors simply want to know if a company was profitable or lost money for the previous quarter and what expectations are going forward.  Why does Wall Street have to make these quarterly reports so confusing and talk over the average persons head?

We will attempt to cut through the ‘financial jargon’ and focus on the core numbers and what investors really need to look at each earnings season.   “Creative Finance” is a term that comes to mind as you read through some of the reports that are released by corporate America.  Maybe a more accurate phrase would be “you can put lipstick on a pig…but it’s still a pig!”  There is certainly a lot of window dressing that takes place each earnings season but the key is to focus on what is truly important and not get lost in the data.

The numbers that are released can have a profound impact on the stock itself as well as the entire stock market.   The market usually approaches quarterly earning reports with caution due to uncertainty. If there is one thing the market does not like…it is uncertainty.    Companies that hit or exceed their numbers will see the stock typically rise while the market will hammer companies that disappoint.  For the larger companies analysts will usually have an expectation of what their numbers should be prior to them announcing their actual numbers.  Companies will also often release their own “earnings guidance” in an attempt to set expectations.  If an industry leader stumbles with the numbers shared in their earnings announcement the stock itself and the entire industry or sector could suffer. Continue reading

Should Bonds still be part of your Portfolio?

Dear Mr. Market –

BondsWe are only a little over half way through this year yet you have already taken investors on a very interesting ride.  From posting impressive results through the first half of the year and then allowing volatility to enter the market through various headlines and worldwide economic news you’ve certainly kept us all on our toes.

As investors look at their portfolios and their performance results we have seen one alarming statistic over the last month and half.  In June alone individual investors took over $80 billion dollars out of their bond positions!  Investors moved out of their fixed income positions quickly due to rising interest rates and to chase the impressive returns that the equity markets have been posting.  Bonds are often treated as the ugly stepchild of investing but we find that they are typically not truly understood by the majority of investors.  Lets take a moment to get a better understanding on the basics of fixed income investing and more importantly how and why they have a place in your portfolio.

 Bonds/Fixed Income 101:

In their most basic form bonds are essentially a promise to repay money, with interest, on a certain date in the future.  Think of them as an IOU where the borrower is obligated to pay the lender (the investor) a specified amount of money at regular intervals and then to repay the principal amount at the bonds maturity date.  There are several different types of bonds available in today’s market, the following bullet points will focus on the most common ones: Continue reading

10 Ways to Save Money


(1) Write it down! – You’ve probably heard this before but the act of simply writing down a goal considerably increases the chances of you actually accomplishing it. One of our favorite quotes is: “A goal without a plan is just a wish” – Antoine de-Saint Exupery

One major thing to remember when writing down goals is to make them concrete and specific. “Saving money” is not good enough. “Saving $10,000 for an exotic family vacation” is better…

(2) Set up your “buckets”– Regardless of the stage of life you are in it’s smart to have different accounts (or buckets as we call them) assigned for specific goals and needs. Initially everyone needs to at least start with their “emergency bucket” where at least three months living expenses is tucked away. Get a few other goal buckets lined up as well. If you’re working you’re likely to have a retirement bucket (401k, 403b etc). If you’re self-employed or own a business set up a SEP IRA or a Simple IRA. (there are plenty of choices here but you get the idea) Do you have a “vacation bucket” or an “automobile bucket” ? Get them established and then start filling them up!

(3) Tackle dumb debt Credit cards are NOT dumb or evil; not paying them off in full each and every month is.  We won’t get preachy here and to state the obvious the past few years have truly tested many Americans who had to do their best to make ends meet. What we’re pointing out here is that it makes absolutely no sense to hold a balance on a card when you have cash or other “non-performing” assets elsewhere. For example: If you have $5,000 on a card that charges you anywhere from 13% to 22% and your friendly neighborhood bank is ‘generously’ giving you 0.01% to hold your money….there is a serious disconnect. Continue reading

Why do I own this Annuity and how do I get out of it?

We can’t tell you how many times we have heard investors say something along the lines of, I have this annuity that I was talked into years ago, I don’t really understand it and I haven’t heard from the guy I bought it from since.   annuity pictureAnnuities are one of the most misunderstood and possibly abused financial products in the financial services industry today.  They are layered in promises that are far too often not delivered to the individual that purchased the annuity.  While they look simple in nature they are actually quite complex and it is vital that investors conduct their own due diligence and research before purchasing any annuity product.

The basic structure of an annuity is quite simple; the investor deposits money with an insurance company either in a lump sum or with scheduled periodic payments over several years.  In return the investor will receive a stream of payments either immediately or in the future for a set period of time.  The terms and conditions can vary from company to company and there are many different types of annuities and features that can be added to them.  It is important to always remember that an annuity is a contract between an insurance company and an individual for certain guarantees and that they should never be viewed as investments!  We will attempt to dig in a bit deeper and offer an overview of annuities that will empower investors to make educated and informed decisions. Continue reading