Archive for Asset Allocation

Conventional Wisdom

Wall Street and the media continue to treat Americans like lambs going to slaughter. Their attitude is that the public is stupid and needs simple dictums to appease the public’s fears (sounds similar to most politicians – right?)

“The masses cannot think for themselves and these same people do not want to hear the truth.” Yes, that is what Wall Street and the media thinks of you. Consequently, they have come up with simple sound bites that always lead Americans, who follow their advice, into financially bankrupt retirements. This transpires because they put everyone into the same “cookie – cutter” investments.

Their assumptions are that everyone they talk to or that reads their advice has the exact identical factors; namely; they are all the same age, make the same income, have the same number of kids, all will send their kids to the same college, all will retire on the same day, all will need the same retirement income, all will die on the same day, and they all have the same goals, fears and desires. Do you see how ridiculous this is?

These are just a few assumptions that Wall Street makes about you. Then why else do they make the same asset allocation and “truisms” for everyone. Here are a few truism examples you have been beaten over the head with:

(1) Your annual retirement income should be 70% to 80% of your pre retirement gross income.

This is horse manure!

Don’t some people want to travel more than others, some may have 3, 6 or 12 grandchildren to visit and/or have more health costs than others and so forth! So the number is not the same for everyone. Many of the clients I work with will maintain or increase spending in retirement because every day is Saturday in retirement!

(2) You need 3 to 6 months of living expenses in emergency savings in retirement!

Sheep Manure!

This formula is okay when you are working and have income from employment. You can stay with this formula (which we do for our clients) only if you have set up safe, guaranteed income to cover your retirement living expenses (no volatility or loss of principal is in this guaranteed program). Thus, the sale guaranteed income we produce looks like a lifetime, no cut contract paycheck. Additional assets can be set up for “play checks” in retirement.

(3) Subtract your age from 100 to determine how much you should hold in stocks. [By the way since people are living longer they have changed the formula from 100 to 120]

Chicken Manure!

Boy, with all this manure you are going to have a great garden! Go back to my original premise: Wall Street and the media think everyone has the same risk tolerance, fears, dreams and goals etc! Is this making any sense? In my 45 years as a Financial Advisor I have never had 2 clients (not even a husband and wife) with the same goals, risk levels, fears and dreams. After drafting thousands of financial plans in my career the solutions are different for everyone. No two people ever have the same truisms.

To prove my point:

Is your portfolio structured with the same asset allocation as Trump, Buffet and Gates? Of course NOT because Wall Street wants to place all the “masses” into the identical cookie cutter investment. Wall Street is trying to put you in a corral like the other horses, sheep and chicken. Forewarned is forearmed!


As gold prices exploded through $1800 and $1900 per ounce, people continued to ask me, “Should I buy gold now?”” It has more than doubled in the last few years. My response, as usual, was, “Why didn’t you buy it when it was $700-$800 per ounce before it took off?” The classic answer was…it was too low then. Oh, I see. So you do not believe in buying low and selling high? The majority of American investors are “wired” backward at the factory when it comes to investing. They buy high and sell low. Here is proof, again:

Many people that recently bought gold at over $1900 per ounce have told me they just sold it, as I write this today, with prices at $1690 per ounce!!!

You do not buy gold to make money. It is a hedge against a devaluing dollar, a safety net against war and financial crises. As gold went up over the last few years, all your dollar asset values were dropping due to the devaluation of the dollar so you did not make or lose anything. It is a hedge. It is simply an insurance policy.

Will it go higher from here? Here are some notes from some gold experts who see prices rising due to the following:

•China’s gold jewelry consumption has exploded and will continue to do so as their wealth increases and the affluent buy finer things.

•Although the Chinese government did open up the gold market for jewelry sales in the early 1990s (isn’t that nice of the controlling government to do that?). There still was a value added tax of 17% on gold jewelry and a monopoly in sales by the Chinese government.

•In 2003 most of the controls and taxes were removed in China and thus helped push the price up recently. Demand for gold bars has grown even faster due to (1) rapid income growth, (2) lack of investment alternatives, (3) low interest rates on bank deposits, and (4) as a local currency hedge.

•China is the world’s largest gold producer, but, still must import a great deal to meet demand.

•Also, a growing concern in China over rapidly increasing inflation encouraged the purchase of gold as a safe haven.

•Massive worldwide marketing is also creating more demand in all corners of the globe.

So, should you buy gold now? If you look at the government policies that have created the demand for gold, and you think those negative policies will be reversed quickly, then I would not buy. If you see these negative policies staying around, world income levels rising and it taking a while to solve the world’s financial crisis, then I would be a buyer.

How much gold and at what price? See your financial advisor…. Isn’t that why you pay them their hourly fee?

If I had my way, I wish for the price of gold to drop to zero. Then, there would be peace, harmony and love all over the world. People would be holding hands and singing all day long. With that in mind, I have a bridge in Brooklyn to sell you along with swamp land in Florida! And…a very special deal for you…. I can get Bernie Madoff to be your investment advisor from behind bars. Are you laughing yet?

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