December 25, 2008

Merry Christmas!

Merry Christmas!

To all of my family, friends, and readers, I wish you a very Merry Christmas!

All the best,
Robby Schultz

December 23, 2008


The past few weeks have been a blur, so I wanted to pass along some of my thoughts on different issues:
  • Madoff Comes Clean - I am all about telling the truth in financial matters, but the revelation the Bernie Madoff had a $50 billion Ponzi scam was too much. In a year when investors are already not trusting the stock market, something like this is just plain absurd. The problem here is that Madoff's firm held the money, invested the money, accounted for the money, and sent the statements. He was the advisor and broker-dealer. The SEC just fell asleep here.
  • Investing - I have recently heard from some neighbors that were questioning whether to ever invest again. I think that the interesting thing here is that most of them have benefited from the growth of the stock market, and now, they want to change that mind set. When I discussed many items with them - 401(k) investing, stock options, company matching of 401(k) contributions, and the lack of return on money markets and CDs - they suddenly decided that we must indeed still invest in the market, but we must "fix" it.
As someone that loves history, I have gone back through everything that I can find, and the issues of 2008, may indeed end up being a positive. If we go back and look at the problems of the late 70's and early 80's, there was a drastic need of change.

Inflation was absolutely out of control. Fed Chairman Paul Volcker set out to get it back under control by raising interest rates to unheard of levels. The "prime rate" for the best borrowers hit 20% - compare that to 3.25% today. This action killed the economy, but it brought inflation under control, and it helped lead to the "bull market" of the late 80's and 90's. What is interesting here is that this was the last time you could have your money in CD's and actually get a decent rate of return (15%+), but with inflation at 18%, you were still losing money.

The main thing I am trying to point out is that the problems of today should be resolved within a short time period. This is not to say the stock market will go straight up, but if the financial system and economy can be "realigned," the country and world economy should start to be back on track. If you remember my last post, all of the programs that came about after the Great Depression - FDIC, Unemployment, Medicare, Social Security, etc. - were in response to that financial turmoil. These are all things that have now benefited the citizens and economy currently.

It has been a tough year in the markets, but with negatives can come positive adjustments. The housing markets and mortgages will be fixed, the financial system restabilized, the automakers (hopefully) revamped, and a system that will benefit both the free markets and government sectors.

If President Elect Obama does come in and spend money on education, it will be a positive both today in terms of jobs and funding, but additionally in the future with better equipped children. Educators are at the forefront of society literally making a difference day in and day out, and there must be a system in place to allow them to continue to succeed.

I wish your families and you a Safe and Happy Holiday season and a prosperous Happy New Year!

December 5, 2008

Taking a Step Back

Over the past few months I have talked with many clients and educators about various financial matters. From questions regarding investing to pensions to annuities to savings accounts, and it is from these discussions that I have learned a great deal that I wish to share.

Being an avid history buff, it is interesting to me that the group of people that seem to be least worried about the market fluctuations are those in their late 70's and older. In talking to them, they stress that this is nothing like the "Depression" that is "talked about on the news."

When I ask them what they think, they let me know that things have come full circle. From humble beginnings where family and friends helped each other with the necessities of life to the growth of materialism... and now back to the little things. I think that is sometimes lost on many of us.

The have pointed to the change in government programs from prior to the Great Depression.

  • There was not a FDIC guarantee at your bank for the your account. When a bank went under, your account was gone. Now we have $250,000 guarantees at FDIC banks.
  • Social Security was non-existent. Now it is an important part of your retirement benefits.
  • Medicare/Medicaid was not even a thought until the 1960's.
  • Unemployment benefits started in 1935.
While some would argue whether these programs are run efficiently, they are still better than nothing. Imagine waking up tomorrow morning, and finding out your checking and savings accounts are gone. A "run on the bank" was a real and ever present danger until the government backed the banks.

No one event or program will move us from our current economic situation back towards a "normal" growth pattern, but if you look at the various moves by the Federal Reserve, U.S. Treasury, Bush administration, Congress, and proposals by the soon to be Obama administration, things are in the works. Just the various rumors about the stimulus proposals by Congress for a package that promotes revamping the infrastructure of the U.S. is promising. If it is implemented with speed, it will mean immediate jobs throughout the country on items that must be done and will take months and years to complete. This is just one of the many ways that we will start the growth cycle again.

I wrote today's blog simply to explain that while the current times may look bleak, our country and economy has weathered and grown through many trials. From these previous trials, we have learned, adapted, and anticipated some of these issues. Changes will be implemented after this latest trial, and if history is any judge, we will be the better for it.

Next time, back to more educator issues.