Page 34 - 2 November 2012

I don’t know about you, but I prefer to make a return ON my money and not just a return OF my money.
Billy Peterson, CFP ® Peterson Wealth Services, Inc. 877-470-4002 www.petersonwealthservices.com
by Billy Peterson
Everyone has to do something with their money. Decisions are made, sometimes hastily, sometimes emotionally and often times these decisions prove
to be dead wrong. One of the things I love most about my job as a financial advisor is getting to meet lots of people and hear their stories. I hear about their values, their personal and professional goals, their children, parents, hobbies and life passions. But one question that I always like to ask is “what are your fears?”
A fear inhibits us and causes us to make emotional decisions rather than pragmatic logical decisions. The most common fears I hear lately are of the presiden- tial election, the European crisis, unemployment,
the fiscal cliff, tax policy and our government debt. People in general and investors in particular have become increasingly fearful and consequently they are choosing to keep a much larger portion of their investable assets in cash alternatives (i.e. savings, checking, CD’s or money markets). Many of these “cash” assets are currently paying enough interest to come close to the inflation rate on an annual basis.
In furthering this point I have also assisted a number of government employees who are participants in the government sponsored TSP (thrift savings plan). In many cases these investors have selected government bonds as their sole investment choice.
Business owners we meet with are largely refusing to invest in capital assets, expand product lines or hire new employees. I don’t know about you, but I prefer to make a return on my money and not just a return OF my money. When large amounts of individual investors flock into a certain asset or industry, it might be time to consider reducing or exiting that space with your dollars. Likewise when investors exceedingly abandon an asset class, there may be significant value and upside for patient long-term investors.
Some of these areas that investors have recently contributed to substantially are gold and various types of bonds; especially government bonds. Areas
that have seen substantial outflows include equi- ties; especially foreign and emerging market stocks. Foreign and emerging stocks currently carry valua- tions significantly below those of the U.S. Stocks
As we have seen the horse racing industry itself expand globally, we encourage investors to also think globally. Sixteen of the top 25 companies ranked by Fortune Magazine are located outside the U.S. These multinational companies do business generally in many countries and sometimes derive most of their revenues from areas of the world experiencing much stronger growth than the U.S. or Europe. Emerging countries such as Brazil, India, Australia and China are in fact in better shape than that of “developed” nations based on debt to GDP ratios.
The election will come and go and people will accept the outcome as they have always done. Congress will hopefully provide some clarity on tax policy
which should lift that cloud. European leaders will do whatever they can to remain in power and that means keeping the Euro intact. Our Federal Reserve has adopted a policy of accommodative policy in order to spur economic growth. This has led to very low interest rates so savers and retirees are generally unable to sus- tain their living needs by way of income generated in savings accounts. So is cash really king? I would argue otherwise at least in this context.
There will always be fears and reasons to convince you that doom and gloom is heading our way.
That has been the case throughout history and will continue into the future. Those who choose to fall victim to their fears and may not see a loss in value but they could experience a loss in purchasing power due to inflation. They will also most likely miss
out on any market gains while they wait for the bell to ring signaling all is clear; as is the case with the 17.75% total return with dividends reinvested as of October 8, 2012 on the S&P 500 and according to the Morningstar Report.
Is cash stIll kIng?
are cash assets always the best bet?
DISCLAIMER: Speedhorse Magazine makes no endorsements and bears no liability for your use of the information provided in this column.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investments mentioned may not be suitable for all investors. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Any opinions are those of Billy Peterson and not necessarily those of RJFS or Raymond James. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is rela- tively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. International investing involves additional risks such as currency fluctuations, differing financial and accounting standards, and possible political and economic instability. Also, investing in emerging markets can be riskier than investing in well-established foreign markets. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual Investor’s results will vary. Past performance does not guarantee future results.
32 SPEEDHORSE, November 2, 2012
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