ITA Wealth Management

Many investors are asking the question, “What Do I Do Now?”  Here are a few suggestions.

• In taxable accounts consider selling so as to take advantage of tax losses.
• Check your asset allocations and if you have available cash, consider adding to asset classes that are under-weighted.  Move slowly.
• Since value stocks are already beaten down, considering adding to value ETFs first.
• Examine the StockCharts for each ETF of interest.  More information is provided under Technical’s over on Premium Content.  See if the ETF is priced to buy.  Also, if you are a Morningstar Premium Member, check what they have to say about the ETF of interest.
• Stick with the liquid ETFs we frequently discuss on this blog.  Do not chase esoteric ETFs.

Lowell Herr

Photograph:  Oregon Coast - the bleak day is in keeping with the volatile market.

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Shares of VBR were picked up via a limit order near the close of the market today.  I will report on which portfolio took on this ETF.  Premium Content subscribers should check in around mid-day tomorrow for all the details.

Lowell Herr

The oldest portfolio built around asset allocation continues to perform much better than the VTSMX benchmark.  As of 9/26/08, the Passive Portfolio (PP) has an IRR of 5.1% over the past seven plus years.  During that same period, the VTSMX benchmark has a positive IRR value of 1.9%.  Keep in mind that this period spans one of the worst bear markets in history and the recover has been modest at best.

All the details for the PP are available to Premium Content clients.  One can download the portfolio and view all the transactions since 12/01/2000.

Lowell Herr

Photograph:  What is better than a cup of coffee in the woods in Central Oregon?

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J. S. Bach’s Mangificat and Vivaldi’s Gloria can be found on this outstanding EMI Classic recording.  Nevelle Mariner conducts the Academy Chorus of St. Martin in the Fields.  Both are highly recommended pieces.

Photograph:  Part of historic facility guarding the entrance to Cartagena, Columbia

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The “Creme & Sour” lists are now available for the week of 9/26/08.  The “Top Ten” should be available early next week.

Lowell Herr

With a financial agreement about to be reached this weekend or next week, now is the time to begin to nibble or repopulate any asset classes that may be out of balance.  The term “bailout” is somewhat inflammatory, although it does contain an element of truth — depending on the final plan.  Another term one might use is “investment.”  Based on how the final agreement is structured, it is highly likely the U. S. Government will make money over the long term, particularly if they can pick up hard assets at 20 cents on the dollar and resell then in a few years for 50 to 60 cents on the dollar.  One can only hope the U. S. Taxpayer will participate in the profits should any occur.

My suggestion is to carefully examine the technical charts using StockCharts as a first order entry point guide for different ETFs or individual stocks.  More on the use of StockCharts can be found over on Premium Content.

I’ve been attending an investment meeting for a few days so I am behind in updating portfolios.  Next week will be a busy one over on Premium Content, particularly with end of the month and end of the third quarter data to report.

Lowell Herr

For your continuing education, here is an interesting web site with a focus on ETFs.  I just ordered the “iMoney” book so you may want to hold off making that purchase until I review it thoroughly.  I also ordered another ETF book and I hope to use these two volumes as material for new blog posts.  Stay tuned over the next month.

Within the etftrends web page you will find this reference to recession proofing your portfolio. Anytime you see “specialized” ETFs, take a careful look at the expense ratio.  If the cost is above 40 bases points, ask yourself if you want to pay that much for an ETF that is somewhat out of the main stream.

Lowell Herr

Photograph:  Big Deschutes, Central Oregon

Bryce Ward is a staff economist at ECONorthwest in Eugene, OR.  Ed Whitelaw is a professor emeritus of economics at the University of Oregon and founder and president of ECONorthwest.

In last Sunday’s Oregonian they write, “The U.S economy will endure this crisis, though many in it will suffer severely, as many have already.  Perhaps we’ve seen the worst, but few believe it.  There is a chance that we are on the verge of a severe recession.”

“…we’ve added approximately $200 billion to $300 billion to our national debt, and Harvard economist Kenneth Rogoff thinks that we could easily spend $1 trillion to $2 trillion in taxpayer dollars trying to keep this crisis from spreading.  Those closest to the sources of the meltdown in the housing and financial service industries are likely to take the biggest hits, but problems of this magnitude likely will burden all sectors of the economy.”

“The 30-year push to eliminate (government) regulation must end.  Markets require clear rules and mechanisms to enforce those rules.  Without rules and enforcement, crises occur and people lose trust in markets.  Without trust, markets fail and the economy suffers.  Government must play a vital role in restoring trust.  One of the presidential candidates clearly understands this.”

Hence, the question - “Which Candidate Understands the Problem?  The one who claims to be a deregulator and is now apologizing for this stance, or the other fellow? Is it the one who graduated number 894 out of 899 at the Naval Academy or the one who was head of the Harvard Law Review?

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Over the last few weeks I note that we are picking up new readers and there has been an explosion in readership from outside the United States.  With nearly 500 entries on the free side of the blog and another 170 over on Premium Content, where does one begin to gain an understanding of the investment philosophy behind the asset allocation strategy.

The obvious and best starting place is to go back to Valentine’s Day (February 14) of 2008.  That is when I started posting investing information.  If you don’t wish to start at the very beginning, at least you are not ready to do that right now, then mover over to “Categories” and click on “Beginning Investors.”  This will get you started.  Then do a search from Fama, French, Hebner, Bernstein, or Ibbotson.  Such searches will bring up a number of entries that are fundamental to this approach to investing.

Serious investors will look up some of the books I recommend.  Authors such as Bernstein, Gibson, Ferri, and Hebner are critical.  Over under “Links” you will find a link to a long list of books to consider.  Also identified are a number you can easily skip.

I am a strong advocate of saving as much as you can as early as you can.  Develop a plan for your portfolio and that plan should center around the concept of asset allocation.  Many examples are given and the Premium Content goes into more depth of both construction and management of the portfolio.  Learn what it means to rebalance.  While we stress using ETFs for valid reasons, we will use some individual stocks.

I want to extend a special welcome to readers from Poland, Hong Kong, Dubay, Italy, South Africa, Spain, New Zealand, Australia, Canada, Russia, United Kingdom, European Union, Japan, Malaysia, India, Viet Nam, Singapore, Turkey, as well as many cities here in the United States.  Thank you for checking in on this blog.  We appreciate your readership.

Lowell Herr

Photograph: Art hanging above a garage in Central Oregon.

Later this morning I will be posting a new data table on the portfolio performances.  Since September 17th, when I last showed the performace data, nearly all of the seven portfolios improved in an absolute sense, and they also improved with respect to the VTSMX benchmark.  These are encouraging results in light of this bear market.

The data will be made available over on Premium Content in a few hours.

Lowell Herr

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