Next stop…DOW 36,000?

January 27, 2017 | posted in: Blog, Financial Insights | by

With the Dow conquering 20,000 on Wednesday, there is a bit of euphoria out there on “The Street,” along with a healthy dose of skepticism. I’m now fielding questions such as “Is this the start of a new upward leg of the stock market?” or alternatively, “Should I sell my stocks now because they are so pricey?” And, of course there are the general types of questions along the lines of, “What does Dow 20,000 mean?” or “What effect does Dow 20,000 have on my portfolio?” The answer to these questions requires some perspective and experience, and since I’ve been in the investment world since 1975, I believe I maintain a good inventory of both. Let’s travel back to 1999 together for a moment, and let me set the scene. The Dow has risen by close to 18% per year for the prior 20 years* and optimism reigns supreme. I am at an investment seminar in Boston and the huge concern on the minds of the participants and the speakers is the “Y2K problem,” (remember that?), which addressed how computers would handle the century’s turn. Massive spending increases on the parts of corporate IT departments attempting to ward off the potential Y2K disaster are adding fuel to a seemingly unstoppable tech stock rally. During this seminar, I am presented with a signed copy of a book by Glassman and Hassett called “DOW 36000: The New Strategy for Profiting from the Coming Rise in the Stock Markets.” At the time of the book’s publishing in early 1999, the Dow is trading close to 10,000. Many professionals embrace the book’s thesis that a “new paradigm” for evaluating stocks is taking hold – one not as concerned with underlying fundamentals such as price/earnings ratios…Accordingly, stocks are deemed to be underpriced and ready to soar to unfathomable heights. So goes the thinking. Sadly, the book’s publishing was followed by the worst decade in stock market history, which included a tech crash, and later, a devastating full market collapse. After reaching a high of close to 14,000 in October 2007, the Dow dropped to 6,500 during 2009. Glassman and Hassett, the former Wall Street darlings, were eviscerated by the press and in academic circles. As a reminder of what occurred, I always keep my signed copy of the book close at hand to show to clients and colleagues. It invariably draws out a few laughs and stimulates lively discussion. So what does 20,000 mean? On the surface, it doesn’t mean a whole lot. After all, 20,000 is just a weighted measurement of the prices of 30 stocks which comprise the Dow Jones Industrial Average index. But to me, after I dive beyond the surface and reflect on what has occurred in the markets over my career, it actually has much greater significance.. Dow 20,000 means and affirms to me that stock prices DO rise in the long run, and if one holds on to their quality stocks through bad times and good, they will always make money. The ride may be rough, and at times appear to be bleak and hopeless; look no further than the state of economic affairs in 2008-9, during the mortgage and real estate collapse, when the Dow fell to 6,500. But, do the math: a new $1000 investment in the Dow in 2009 would be worth over $3000 today. Good investing takes patience and a long view. At the same time, 20,000 also indicates that it may be time to proceed with caution. It means we must not forget that when markets are frothy, investors can get too optimistic and not see the danger lurking around the bend. Euphoric investors can drive stock prices to unsustainable levels, resulting in inevitable large market corrections. And, as we experienced in recent years, depending on the magnitude of the correction, it may take years for the market to recover. So, Glassman and Hassett were appropriately discredited, but in fact, in one aspect they were right. I am certain the Dow will, indeed, reach 36,000 one day. But when will it happen? That I can’t tell you, and the Dow may very well fall back to 15,000 again before reaching 36,000. But I do believe 36,000 is inevitable, in the same way that rocky markets and large market corrections are. It is the nature of financial markets. Understanding the bumps and turns, and keeping a lid on the euphoria, will serve you well and ensure that you capture the returns that the markets will inevitably bring you. Do I hear Dow 50,000?   *Dow Jones 12/31/79-12/31/99, via AmericanFunds.com/advisor/tools/planning/hypotheticals/update-review/htm   DISCLOSURES: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This is a hypothetical example and is not representative of any specific investment. Your results may vary. Stock investing involves risk including loss of principal.

How people get as much as 88% more from Social Security!

December 30, 2016 | posted in: Blog, Financial Insights | by

Many people may be unaware of the impact various decisions can have on their ultimate social security benefit amount. Timing of election, work income, taxes, spousal benefits, etc., must all be considered in effective social security benefit planning. Regarding the timing of elections, for example, according to a recent study covered by CNBC, someone who retires and begins claiming Social Security at age 70 would receive a benefit that’s 76 percent higher than the one he or she would receive at age 62. The CNBC piece points out that if you factor in late-career earnings replacing a zero-income year, the increase can become as much as 88 percent for women and 82 percent for men. For the full CNBC piece click how to get 88% more from social security.

Time for a replay!

December 9, 2016 | posted in: Blog, Financial Insights, In The News | by

Austin Frye’s take on football & investing in gets picked up by Investopedia.com! It’s football season, people, and that translates to millions of eyeballs fixated on the gridiron. “After watching football over so many years, I have actually found there are many important commonalities between achieving success on the field and working towards achieving success with financial goals. Here are eight key investment and financial lessons I’ve learned from watching football that you can use to work towards financial independence: 8 strategies for success that football shares with Investing!

Special Market Commentary: Presidential Election 2016

November 4, 2016 | posted in: Blog, Financial Insights | by

2016 Election Playbook Our clients are a very diverse group of people representing the melting pot of cultures that make life in South Florida so rewarding and enjoyable for me. Yes, that means different religions, colors, sexual orientations and income levels. As one would expect, when I take your phone calls, read your emails and participate in face to face meetings, I hear many differing views regarding the presidential election and who is the appropriate candidate to lead this nation forward. As an example, yesterday, after completing a call with a Trump supporter who was literally yelling on the phone about how America needs to “drain the swamp”, I immediately took another call from a frantic, crying Clinton supporter who just could not understand how the recent polls were showing a narrowing gap between the 2 candidates.   Read More  »

Midyear Outlook 2016: A Vote of Confidence

July 22, 2016 | posted in: Blog, Financial Insights | by

As we embark on the second half of 2016, the headlines and much of our attention will be focused on the 2016 presidential election, which can distract us with the barrage of promises and heightened political drama. Against that backdrop, however, we continue to encourage investors to remain focused on their long-term investment plans. LPL Research proposes a vote of confidence in the economy, the market, and most importantly, in our ability as investors to remain focused on our long-term goals. This is not always easy; but a vote of confidence means having the belief that someone or something has the ability to succeed. It is more than being positive or negative, a bull or a bear. It is about trusting our assessments of the opportunities—and risks—that may lie ahead, formulating a solid investment plan, and sticking with it through the ups and downs we may face in the coming months and beyond. Looking ahead to the rest of 2016, LPL Research maintains confidence in its existing forecasts, with some minor adjustments. Periods of volatility are also anticipated throughout the rest of this year, but the expectation remains that we will not enter a bear market or economic recession. Here are some of the key influential factors to be watching for: • Federal Reserve (Fed) rate hikes. The forecast for Fed rate hikes in 2016 has been reduced from two to one, with additional rate increases next year. • International growth uncertainty. Looking for clarity around future global growth, due to Brexit, the impact of the U.S. dollar, China’s debt problem, and earnings growth in Europe and Japan. 7 • Corporate America investments. A pickup in economic growth and an energy sector turnaround may boost companies’ investments in their future growth, an element that has been lacking recently. • Second half turnarounds: oil, dollar, earnings. These three turnaround stories are key for the rest of 2016. Should the drags from oil prices and the U.S. dollar continue to ease, an earnings rebound may occur in the second half of the year. The LPL Research Midyear Outlook 2016 provides the “vote of confidence” that the current economic recovery and bull market may continue through 2016 and beyond,with the investment insights and market guidance for what may lie ahead for the rest of this year. http://lpl-research.com/outlook/Midyear_Outlook_2016_spread.pdf The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Economic forecasts set forth may not develop as predicted. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price. The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. This research material has been prepared by LPL Financial LLC. Securities offered through LPL Financial LLC. Member FINRA/SIPC.

Austin Frye Quoted in Piece on Tips for Buying a Kentucky Derby-Winning Racehorse

May 12, 2016 | posted in: Blog, Financial Insights, In The News | by

            “5 Things to Know Before You Buy a (Future) Kentucky Derby-Winning Racehorse” By: Brad Tuttle Excerpt from article… Owning a racehorse can be a heckuva lot of fun. As an Investment News story put it, casual investors should think of racehorses as “an expensive hobby, not a business venture.” “Don’t expect that you are going to make money, but you may get a great temporary ride,” Austin Frye, principal of Frye Financial Center, said to Investment News. After all, gambling can be thrilling, and when you’re involved in the game on a deeper, more personal level, as with thoroughbred ownership, the stakes are high and the payoff can be especially rewarding. Read full article here.