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March 31, 2011
As we emerge from one of the most difficult investment
environments
in decades, it is important to focus on longer term results.
While many investors are pleased with 2009 and 2010, there
portfolios
still sit substantially below where they were in 2007. The key
question to ask your advisor is the following: what was my
overall growth in assets, net of fees, for the four year period
ending
12/31/10? The reason is that this captures pre and post crisis
results. Now is also a good time to ask yourself how well your
portfolio is positioned going forward.
Substantially all my clients had small positive overall
asset growth for the four year period ending 12/31/10. Clients
did miss a major part of the recovery in 2009 and 2010 yet they also
missed the significant prior declines. Investment math can
be brutal in that if one loses 50 percent, as many did in 2008, a
subsequent 50 percent gain will still leave them 25 percent below where
they started.
On January 15, 2008 Parish & Company adopted a "low risk" focus, generally recommending that equities not exceed 20 percent of assets, in many cases lowering equities to less than 5 percent, due to problems readily visible in the financial sector. In 2007 the focus had been "balanced" in which total equities, both domestic and international, ranged between 40-60 percent. Quality and income were a key focus in 2007, in particular dividend income given that 50 percent of dividend income is now tax-free due to tax law changes.
The shift to low risk in January 2008 was due to uncertainty injected into the financial system by hedge and private equity funds and their creation of derivative financial products. My views in this area were widely reported in both the national and local mediathe media. Clients benefited enormously from this orientation toward wealth preservation given the subsequent problems in the financial markets.
It is astonishing that even today Congress would question the merits of the proposed Volcker Rule, which would prohibit FDIC insured banks from investing in unregulated private equity and hedge funds. Clearly, these funds need to come under SEC regulation in order to restore confidence and necessary transparency.These are indeed times of both extraordinary opportunity and risk in the investment world as investors experienced the best stock market in decades in the 1990's followed by three difficult years and then solid performance again in 2003-2007. Then came the the disaster of 2008 followed by a strong years in 2009 and 2010.
Today many investors are still heavily weighted in low quality equities, funds and long term bonds with weak fundamentals unprepared for a rising interest rate environment. Too often these same investments have been recommended based upon the brokerage firms' goals rather than the clients specific needs and expectations.
Many senior citizens in particular are living longer more exciting lives yet are also frustrated by low long-term interest rates. As a result, they are taking significant risks by being overexposed to low quality equities and ong term bonds. Compounding this risk is the uncertainty generated by higher energy costs.
This makes now an excellent time to have Parish & Company review your portfolio and determine if it is balanced, consists of high quality investments and is squarely focused upon income generation and your goals rather than your investment firms goals.
Today most quality investment choices can be accessed via a discount broker and this is ideal for investors and their advisers like myself. By using a quality nationally recognized discount broker, for example TD Ameritrade, investors are able to gain custodial security and low cost access to individual stocks, additional fixed income alternatives and top quality funds in various fund families, including Vanguard and Barclays, when appropriate.
Parish & Company is recognized internationally for its review of corporate financial matters, in particular mergers, inventory, taxation governance, and compensation practices. This includes detailed studies of Microsoft, AOL/Time Warner, Cisco Systems, Portland General Electric, Berkshire Hathaway, Weyerhaeuser and Citigroup, all of which have been widely used by major media outlets.
This research is known for its consistently high quality and enables me to develop a global network of leading asset managers, financial analysts, regulators, business journalists and university professors. This is, I believe, a key advantage in working with Parish & Company.
Historical Comment: January 2000 - July 31, 2003 and January 2008 - December 2009
In late 1999 and early 2000 I began to focus on the "quality" of corporate earnings, as corroborated by news stories in my press archive and various interviews. This resulted in removing technology stocks and funds over weighted in technology stocks from client portfolios, including the Vanguard Index 500 mutual fund. In 1999 five technology companies accounted for 75 percent of the gain in the S&P 500. At the time I lost 6 clients who were happy yet concerned about my "sudden old economy orientation." Today five of the six are once again clients.
This included recommending in late 2000 the sale of all stocks and stock funds due to the accelerating breakdown in the integrity of corporate earnings , in essence a strong shift to wealth preservation. Clients were therefore largely protected from losses during a very difficult period. There will always be creativity in reporting financial results, that is expected, but again this previous situation was one of historical significance. My focus remained on wealth preservation until the integrity and reliability of financial reports improved, the key date here was June 2003. At this time my orientation shifted back to one of "balance" as I began to again selectively add equities.
In January 2008 I similarly accelerated a process that began in the
fall of 2007 in which equities were sold and replaced with government
security backed money market funds due to a specific concern with
respect to hedge funds and derivatives. This focus upon wealth
preservation made a significant difference for clients, even after
considering the strong market in 2009.
I take great pride in serving my clients and enjoy my work. Thank you for visiting my web site and please do let me know if my services would be of interest. Best regards.
Bill Parish
Parish & Company
10260 SW Greenburg Rd., Suite 400
Portland, OR
97223
Tel: 503-643-6999
email: bill@billparish.com