Mission Accomplished
Summer 2007
Depending on your political persuasion, this quarter’s title may have several meanings.
For Clarus Financial, it means only one thing.
The goal that we set out in our Spring newsletter of transitioning to a fee-only financial life planning and investment
management firm by June 30th has been reached.
90 days ago, that goal seemed like a very high mountain to climb, but with your cooperation and the staff’s dogged
attention to details, “we got ’er done.”
Our thanks go out to you for signing and working through those large (and some not-so-large) packets we sent you!
We believe that the long term benefits of this move far out weigh the effort required to get there.
Most of the tangible benefits were detailed in the prior quarter’s newsletter.
However, on the less tangible side, our move to fee-only registered investment advisor status substantiates our desire to be on the same side of the table with you when we make decisions on how to manage and implement your financial life plans. The more concise definition of this position would be that of a fiduciary. This fiduciary platform will be the one we use going forward to make the best decisions we can on your behalf. Several days after I wrote last quarter’s newsletter, a complex legal battle was decided by a federal appeals court ending a controversial SEC ruling that permitted brokers to offer “fee-based” accounts without having to register as investment advisors, as we are. The public is the clear winner here because of the clarity it brings in defining two different financial service models, one commissioned based and one advice driven. While there are situations where commission based products are an appropriate fit, allowing brokers to create “advisory” accounts and then not hold them to the same standard that I must maintain as a fiduciary, was not in the public’s best interest. So thanks as well to a few judges who got it right! (This time)
Early Fireworks
After a lackluster first quarter, global stock markets took off in skyrocket fashion in April and May. In fact, May 30th marked the first time the S&P 500 rallied to a new record high close since March 24, 2000 – that’s seven – seven long years! The Wall Street Journal put that fact in perspective stating, “The last time the index hit a record, Bill Clinton was president, the iPod had not been invented yet and ‘American Beauty’ was two days away from winning Best Picture.”1 The record close of 1,530.23 for the S&P 500 boosted the index up 7.9% year to date. The Dow Jones Industrial Average, not to be outdone, posted its 25th record close of the year on May 30th, bringing it to a 9.4% gain for the year.
All these fireworks were behind a backdrop of rising bond yields and choppy seas in the Chinese stock market,
factors normally not friendly to the stock market.
But, by June, the “inverted” yield curve we talked about last year and once referred to by the former Fed Head,
Allan Greenspan, as a “conundrum”, was appearing to be back to its old self again.
This normal curve slopes upward as bond maturities increase, rewarding long term investors with higher rates.
According to James B. Stewart, “This kind of ‘normal’ yield curve is usually just what investors want.
It’s traditionally a harbinger of steady, if unspectacular growth.”2
Don’t light the Roman candles just yet.
Remember Wall Street takes the summer vacation thing seriously.
The old admonition “Sell in May, then go away” may again prove why it’s called an “old admonition”
after all.
The selling we saw in June would support the trend that the market’s performance is generally
“marginal, but sometimes much worse, from May to mid-October.”3
With inflation running under 3% annually, gas prices dropping under $3.00/gallon and the 2nd quarter’s
overall strong performance, we’d probably say it’s safe for you to take your summer vacation too and let
Mr. Market have a little rest.
We wish you safe and happy travels wherever your summer plans take you.
Please feel free to call us with any questions, comments or even if you just need help reading the new
Schwab monthly account statements. Have a great summer!
Greg Busch, CFP
Clarus Financial, LLC
2Smart Money, June 2007. Deciphering the Yield Curve, James B. Stewart www.smartmoney.com.
3The New York Times, June 4, 2007. Summer Doldrums? Maybe Not, Conrad De Aenlle www.nytimes.com .
This newsletter and the ideas expressed herein are my own and is provided for informational purposes only, and does not constitute an offer or solicitation to buy or sell any security discussed herein.
Information and any statistical data contained herein is obtained from other sources which we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. All opinions expressed and data provided herein are subject to change without notice.
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Newsletter Archives
Autumn 2008 »
Maximum Optimist
Summer 2008 »
It’s Déjà Vu All Over Again
Spring 2008 »
March Madness
Winter 2008 »
Year In Review 2007
Autumn 2007 »
Roller Coaster Ride ’07
Mid-Summer 2007 » A Mid-Quarter Briefing From Clarus Financial
Summer 2007 » Mission Accomplished
Spring 2007 » Our Interests May Not Always Be The Same
Winter 2007 »
The Year In Review
Autumn 2006 »
FILL’ER UP
Summer 2006 »
Summer Doldrums?
Spring 2006 »
Presidential Cycle: market indicators for an uncommon 2nd term president