July 1, 2013

I attended the Morningstar Investment Conference in mid-June and again it was well worth the expense and time. Unlike other meetings where sponsors pay large sums and end up being the speakers, attendees pay to attend and Morningstar analysts pick speakers who they think have the best thoughts on the markets. This year John Bogle, the 80+ year old founder of Vanguard Funds was one of the keynote speakers. He had three takeaway points, the first being that social security is like having a $300,000 bond fund and therefore most people are, in fact, under invested in stocks. Next he discussed the irrational need we have for liquidity. Here he is referring to the “Money Market Fund” business, which has a $1.00 per share price. It is not a guaranteed $1.00 per share price but presumed to be. When The Reserve fund “broke the buck” (the value fell below $1.00), in 2008, it started the entire crash of Lehman Brothers and others. We need to move to funds which are more clearly not guaranteed and have them float around $10.00 a share. His last point was to address the conflicts of interest between the corporate and client fiduciary interests. This is a topic warm to my heart. Integra was founded on this very premise. The old firm I was with was much more interested in their bottom line than yours. Major reforms are needed and companies like Integra need to be better at explaining the differences between large corporations need for profits and your interests.

The markets have continued to rise with the DOW closing the quarter at $14,909, up from $13,860 from January and $14,839 from April. The market seems to be close to being fairly priced and most economists think the economy is getting better and will continue to improve. This is despite the revised downwards GDP numbers from the first quarter from 2.4% to 1.8%.

The seeming off handed comments by Bernanke that the $85 billion bond buying a month will stop at some point in the future sent the markets into a spin. It will end when the economy is strong enough to grow by itself. Inflation is flat and both income and consumption are up. I think the markets are likely to be higher at year-end barring some unknown negative event.

Enjoy the 4th of July holiday and we thank you for your continued trust you place with us.

Yours truly,


Willis Ashby, CFP

Categorized under: Our Articles