Paul Ferraresi

Over the past 10 years, we have experienced two major bubbles and subsequent crashes. The easy monetary policies of the late 1990s led to the “tech wreck” bubble and crash. Subsequent to that many people ran from the stock market, and with even easier money conditions in place by The Fed, put all their money into the real estate market. The 2006 to present housing crisis is the outcome.

Well, with wounds on both of their knees people ran away from stocks and real estate into “safe” U.S. Treasuries. Because so many people wanted safety, these securities have been bid up. They are overvalued. Their prices make no sense relative to fundamentals.

Let’s look backward – in 1999, did the price of Pets.com make sense relative to the fundamentals? In 2003, did the price of a house in San Francisco make sense relative to fundamentals? No, in any case.

The price of Treasuries has no place to go but down based on the economic environment, the threat of future inflation and the probability of rising interest rates.

You know the sad thing is those same people who bought tech stocks in 1999, houses in 2003 and oil in 2007 are the one buying Treasuries now. They are like a fighter with a “glass jaw” getting ready to be hit by a “heavyweight champion.” Get out of Treasuries before it crashes!!

Many people were given savings bonds from family members many years ago and may have lost track of them. They may not even remember receiving them, or, they bought some on their own.

There are more than $16 billion worth of matured bonds that have not been redeemed. This is the final year Series E bonds earn interest. Thus, a $100 bond from 1960 is now with 700.

You can visit a website to see if you have an unclaimed bond. You could have substantial cash that will stop earning interest. I found a few that I had previously bought. Check out the website: www.treasurydirect.gov/indiv/tools/tools_treasuryhunt.htm.

Good luck and good hunting.

As a prudent investment allocation strategy I have dictated the importance of having gold as one of your asset classes.

Gold is used as an insurance policy on your portfolio, i.e, a form of hedging. In a long term strategy gold will move counter-cyclical to other asset classes. In essence, when certain asset classes drop in value…gold will rise and vice versa. Like any “insurance policy” do not expect to make money in gold, rather, it will balance or offset any undue risks.

Your holding of gold can be done via stocks, mutual funds, exchange traded funds (ETF) and ownership of the buillion (no this is not an excuse to buy gold jewelry).

There are benefits to owning the paper derivatives, namely, stocks, mutual funds and ETFs. With the present administration’s excessive mounting of debt and printing of money it is evident that inflation will be on the rise. Gold is a great hedging mechanism against inflation, war, financial crisis and just plain fear.

Although you may own the paper derivative ownership of gold I highly suggest you also purchase the buillion. But, in purchasing the buillion be careful which items you buy. The present administration is acting much like the FDR administration of the 1930’s and 1940’s. During that period FDR confiscated all the gold buillion from American citizens (see the attached Executive Order).

Executive Order Page 1 (jpg)
Executive Order Page 2 (jpg)

I would not be surprised at all if the present administration does the same as the dollar weakens and Americans collect gold. Get assistance in this area by purchasing the correct items of gold.

If you need help in this area please contact our office. We would be glad to assist you.
Email: paul@fgmci.com or phone: (713) 871-5919

Following up on Part I…what are some of my core beliefs on investing?
First of all, and I include myself in this, people tend to be impatient. Good investing, especially from an individual standpoint, is where you have the luxury of not having to participate in the market at all times. You can pick and choose the most appropriate times when the odds and probabilities of success are highly in your favor. I try to keep that in mind as a professional investor as well.
It’s only through time and patience that you actually tend to build wealth through the power of compounding of returns. But doing that requires perseverance and saving, which involves sacrifice. One of the things I was most influenced by is the writing of Charles Ellis, who said you win by not losing and your primary objective in investment management is to control risk.
A successful investment requires a great deal of courage. And it requires steady nerves to invest in those areas where the greater opportunities are, even though that’s not where the consensus is, and it’s very lonely. The best opportunities to buy stocks occur when it’s been very hard to pull the trigger and buy, yet, all your disciplines would suggest that is exactly the right thing to do.
With the markets in wild disarray it reminds me of a quote I have been keeping in front of me lately. As Warren Buffett said: “Be fearful when people are greedy and greedy when people are fearful.” We have gotten to the point where it pays to be a bit greedy, because there are some unusual opportunities being created right now.
So when markets are either frothing, or, in a deep trough, keep in mind you can be out in the middle of the ocean and not know what’s ahead, so you need to be prepared for stormy seas. It just provides better ballast to a portfolio in case there are surprises. As much as you think you’ve got it all right at various points in time, you always want to protect yourself.

In my 35+ years as an investment professional, this past year for stocks and real estate, has been a real “doozie.” I will assure you 3-5 years from now you will look back to now as one of the greatest investment opportunities of a lifetime. I see so many people flocking to stores advertising 10-20-30% off various products. Yet, these same people, with the stock market on sale @ 40-50-60% off, are running from the “great companies of America.” But, that is a normal human reaction. An example… we as human beings are wired backwards from the factory. You see we are all trained that low prices are good for us and high prices are bad. A recent example… when gas prices were high motorist stayed home and did not buy. Now that prices have dropped in half…they are buying again.
Here is another example…if you went into the grocery store and a sign was up… manager’s special, today only, small can of tuna fish normally 99¢, now on sale for 39¢. If you liked tuna fish you would load up the cart. Next week you come in and see a sign… manager’s special small can of tuna fish normally 99¢, now selling for $4.25. You would tell the manager he was crazy, (probably run home go to the pantry and return the tuna from last week hoping to get $4.25)
Now the low price good, high price bad is true in everything but the stock market. When a stock price skyrockets from $10 to $50 everyone wants to buy at $50. Yet when the price drops from $50 to $10 no one wants to buy. IT IS ON SALE.
Do you buy tuna @ $4.25 and when the price is on sale @ 99¢ do you return the $4.25 cans you bought to the store and hope to sell them back at the sale price of 99¢? Is this making sense?