The economy works better on higher interest rates!

 I spent 20 years as an Institutional Bond Broker and Bond Portfolio Manager. I was the Asset/Liability Manager for the 4th largest S&L [before the S&L crisis].

It seems to me that interest rates are way too low to get money to Main St. Lending institutions can’t afford to make risk loans and a great many people have few if any assets to pledge against loans. Interest can be written off as a cost of doing business and, as a former homeowner, I loved being able to write my mortgage interest off on my taxes because it allowed me to write off other things as well. Getting over that hurdle to be able to write off certain expenses is a great bonus! Also, higher interest rates put money in the pockets of savers and retirees — many of which use it as income and spend it in the local community.

The low interest rates have benefited the stock market, but that really doesn’t help Main St. If people don’t have enough money to buy Christmas gifts, they really don’t have enough money to buy stock. It amazes me when I see pundits wondering why the ‘retail investor’ is out of the stock market! Heck, they don’t have any money to put into the stock market.

Why All Companies, Public and Private, Should Write Annual Reports

An annual report isn’t just for shareholders.  Writing an annual report forces you to look deeply into the activities of the past year and see what worked and what didn’t. Those insights are vital to planning your next 12 months.

An annual report also creates a history of your decisions and their outcomes that can be used for future planning and dealing with unexpected problems. Being able to find an answer to a current problem by looking back through your annual reports for that similar situation you remember from eight years ago is a big time-saver and can help you dig into other records that you used to create that annual report.

This article gives you an idea of how to write a good annual report:

Simplified Structure of an Annual Report

An annual report is necessary if your company is a corporation with shareholders or limited liability company with members. Even if you have a sole proprietorship or a one-person corporation, writing an annual report can be a beneficial exercise. If you apply for a loan or hire professional services, you may be asked for a copy of your annual report. A simple document of a few pages in length is adequate.  MORE

How to Write a Vision and Scope Document

You should be doing this whether you are just starting to plan your new business, working on your plans for the new year, or preparing a presentation for funding.

Sitting down to write a vision document and a scope document helps you see holes and inconsistencies in your business activities and can give you a great new idea …

http://smallbusiness.chron.com/write-vision-scope-document-73586.html

Vision and scope documents define what your customer or company has in mind as well as describe the work process necessary to reach that vision. For example, entrepreneurs benefit from writing a vision and scope document to define their business ideas and list how to develop them into reality. Project managers use such a document to identify the expected result of the project and to set forth the methods and activities necessary to achieve that result.

For 2014 I Resolve to Resolve Something Else

For 2014 I Resolve to Resolve Something Else

Dealing with reality and injecting a little rock and roll …

Happy Holidays and best wishes for health, happiness, prosperity and darn good luck!

Victoria Duff

Hedge Funds Liquidating but Retail is Buying

A solemn crowd gathers outside the Stock Excha...

A solemn crowd gathers outside the Stock Exchange after the crash. 1929. (Photo credit: Wikipedia)

This is something that I have been talking about recently. It is a sign that:

[1] portfolio managers are taking their profits early so they can post good results at the end of the year

[2] the professionals are moderating their stock market positions because they see trouble ahead while the retail buyers are jumping in out of greedy desire to make a lot of money in what they think will be a continued rally — a ‘slam dunk‘ attitude — a legendary bad sign …

BofA Merrill Lynch equity strategists report data on what their clients are doing in the U.S. stock market on a weekly basis.

Last week, BAML’s hedge fund clients unloaded the most stock since 2008, while institutions and retail clients were net buyers.

 
Something strange is happening in the economy and the stock market. I remember the words of my first Wall Street boss, William K. Beckers — one of the big Wall Street names back in the 1920s and beyond. He was the floor broker on the NYSE for Spencer Trask & Co. and watched Morgan, Giannini and other leaders of banking and industry come on to the floor, buying to support their stock prices. In his office he had framed a fading piece of ticker tape that read the volume and “October 29, 1929 Good Night” 
 
He always said about the 1929 market crash: we all knew something was happening, we just didn’t know what it was going to be.
 
In the 40+ years that I have been watching the economy, the equities markets and the fixed-income markets, I have never seen anything that compares to what is happening now. I confess I don’t know what is going to happen, but things have reached a point where it is clear there is something on the horizon. We will find out what it is, and it doesn’t appear likely to make life any easier for anyone.
 
Again, as you plan for next year, consider some contingency planning.

Time for Caution …

A friend sent me the following chart and part of an article that claimed moderation of margin rate of change is an indication of continued rally in the S&P 500.  I added the notes in the yellow text boxes

Image

This is what I think of the claim that moderating margin debt might be an indicator of a further rise in the S&P 500 — First, computer trading has been in the market since the mid-1990s and if you look closely you can see the Crash of 1997 and the rise in margin debt as the Fed pumped money into the system. In 2000 it was the demise of the dot-coms followed by 9/11 and cautious use of margin following a peak. Well I think the peaks are retail investors and some less-than-bright hedge funds driven by greed to get into the market for what they expect to be a big rally [I feel claims of potential rally conditions are “jaw boning” – a Wall Street term for spinning things to draw in unsuspecting investors]. Right now the professionals are being careful and if the rate of margin increases, I would think that is the ‘stupid factor’ coming into the market, which signals a coming crash.
 
Look at the above chart in conjunction with another article that I believe supports what I am saying about conditions in the marketplace. CNN’s Fear-Greed Index:
 
What this all means to entrepreneurs, and anyone else for that matter, is BE CAUTIOUS.
 
 
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The Jaws of Death – Entrepreneurs Beware!

The Jaws of Death - Entrepreneurs Beware!

This is an article from Kitco everyone should read!
http://www.kitco.com/ind/Taylor/2013-10-11-The-Jaws-of-Death.html

It shows a likely stock market crash on the way, and that brings on very difficult times for everyone. In this case, on top of the most sluggish and prolonged recovery from recession I have ever witnessed, it could quite easily create a situation much worse than the Great Recession.

I know you get sick of hearing me warn about over-expanding before you know what is around the corner … well … this just might be the monster around the next corner.

I know you are also tired of me warning about taking on debt at this time, but if things look like like what this chart is showing, debt will strangle you!

And, although I no longer carry my mountains of securities industry licenses, and I can’t give investment advice, I can say that you might want to read up on the subject of “Protective Puts” if you have any investments in the stock market.