Fortune Watch

Investment markets got you down, Bunkie? Been blown away by derivative stun guns? When will portfolio market values move back to 2007 levels— and then what will you do about it?

It’s time to overthrow the evil Masters of the Universe and deactivate their weapons of financial destruction. Let’s outlaw the brainwashing that has changed how average investors look at and value their investment portfolios.

It’s time to exorcize the Wall Street demons and return to stocks and bonds— and to QDI, “the Force” for long-term investment portfolio security.

Speculating is complicated, even for financial rocket scientists. What most of us want (or would certainly settle for) is simplicity, stability, and reasonable growth in our productive working capital.

A return to plain vanilla investing strategies with operating procedures that minimize risk and encourage understanding of the financial markets needs to become part of our financial force field.

As bad as things have been since this black hole appeared, investment models true to fundamental concepts, simple strategies, and disciplined operating rules have probably bettered the market numbers in at least six important ways:

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The mantra of the times is cost cutting. The axe of cost cutting invariably falls on the employees. It is either through wage reduction, reduced bonuses, reduction of other benefits, reduced work hours or in a worst case scenario in the form job losses.

In most countries unemployment rates are hitting close to double digits, the worst case scenario might soon become a reality for anybody including you. In such a situation, it is imperative that you should have a plan B ready.

Instead of waiting for a surprise and acting re actively, it is important for you do a realistic assessment of your current situation.

Each and every one of you must have an understanding of your employer’s financial situation and strategy, your own function/department current state and whether there is any danger of retrenchment at your level. Once you access the macro and micro level picture, you need to play your next steps accordingly.

You may not have a choice but to look out for alternate employment if you feel that you may be in the firing line. It may not be easy in the current situation. However the current economic situation gives you an excellent opportunity to do what you always wanted to do.

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Everyone I know is sick of this recession, and sick of hearing about this recession. For one, the media’s attention to the global financial situation is depressing. But as many have pointed out, we are in this situation because of our own devices. On the individual level, poor financial and debt management, have exacerbated outside factors such as the housing market collapse and high rates of unemployment. For others, indiscriminate consumer debt has led to a number of individual crises. But in such a climate, there is a lot that can be learned. While it would have benefited everyone to know this several years ago, here are twelve personal financial lessons that can and should be learned during this recession.

Learn How to Plan Ahead

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It’s no secret that poor planning contributed to why so many people are currently in untenable financial situations. Don’t Panic. Figure out where you are at, where you want to be and put in place a realistic plan for getting there. The majority of businesses without plans in place before they start operations do not succeed. So if you are serious about creating a way to get ahead, or even just caught up, this step could not be more necessary. Unique circumstances will come up and cause you to stray from your plans temporarily, but structure is necessary in order to monitor your progress, and stay focused.

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The Working Capital Model (WCM) looks at investment performance differently, less emotionally, and without a whole lot of concern for short-term market value movements. Market value performance evaluation techniques are only used to analyze peak-to-peak market cycle movements over significant time periods.

Security market values are used for buy and sell decision-making. Working capital figures are used for asset allocation and diversification calculations. Portfolio working capital growth numbers are used to evaluate goal directed management decisions over shorter periods of time.

WCM tracking techniques help investors focus on long term growth producers like capital gains, dividends, and interest— the things that can keep the working capital line (see Part One) moving ever upward. The base income and cumulative realized capital gains lines are the most important WCM growth engines.

The Base Income Line tracks the total dividends and interest received each year. It will always move upward if you are managing your equity vs. fixed income asset allocation properly. Without adequate base income: 1) working capital will not grow normally during corrections and 2) there won’t be enough cash flow to take advantage of new investment opportunities.

The earlier you start tracking your dependable base income, the sooner you will discover that your retirement comfort level has little to do with portfolio market value.
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Citigroup became the latest bank to post better than expected results for its first quarter. The bank on Friday said net income of $1.6 billion, compared with a loss of $5.11 billion in the quarter a year ago. Citigroup’s problems are far from over, but it had its best quarter since late 2007.

The bank reported a loss to common shareholders of $966 million after massive loan losses and dividends to preferred stockholders. But before paying those dividends, the bank had net income of $1.6 billion.

Overall, Citigroup’s results were better than expected. The company reported a loss per share of 18 cents, which was narrower than the 34 cents analysts predicted. A year ago, Citigroup suffered a loss of more than $5 billion, or $1.03 a share.

Citigroup’s revenue doubled in the first quarter from a year ago to $24.8 billion thanks to strong trading activity. Its credit costs were high, though, at $10 billion, due to $7.3 billion in loan losses and a $2.7 billion increase in reserves for future loan losses.

Citigroup has been one of the weakest of the large U.S. banks, posting quarterly losses since the fourth quarter of 2007. But in March, CEO Vikram Pandit triggered a stock market rally after he said that January and February had been profitable for Citigroup.
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The year 2008 has entered the record books for all of the wrong reasons; the Dow Jones had its worst year ever! So what about 2009, how will stock markets from around the world perform and which are the stocks to follow?

Well in reality you need a crystal ball to be able to answer these questions. 2009 may well be another tough year.

I am a person who enjoys investing on the stock markets and I have to say that I am a bit of a gambler; I am quite prepared to take a risk with my disposable income in the hope that I can increase it etc. Just a quick note however, I am a financial adviser and anything that I write or suggest in this article should not be seen as advice.

I personally believe in investing an amount of money (an amount that I can afford) on a monthly basis instead of investing lump sums. This way I am able to take advantage of what is commonly referred to as Dollar cost averaging in the United States. This is where when prices are high your monthly contribution may buy fewer shares or fund units but that when prices are low your investment buys more shares or fund units.

During these volatile times this method of investing may prove to be the most prudent. Even though stock markets had a very poor 2008 and is therefore quite low there may well be significant falls ahead.
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President Barack Obama pressed Congress Monday night to urgently approve a massive economic recovery bill, using the first prime-time news conference of his presidency to warn that a failure to act “could turn a crisis into a catastrophe.”

With the nation falling deeper into a long and painful recession, Obama defended his program against Republican criticism that it is loaded with pork-barrel spending and will not create jobs.

“The plan is not perfect,” the president said, addressing the nation from the East Room of the White House. “No plan is. I can’t tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans.”

When the stimulus bill passed the House, not a single Republican voted for it. On Monday an $838 billion version of the legislation cleared a crucial test vote in the Senate by a 61-36 margin, with all but three Republican senators opposing it.

Obama said the federal government was the only power that could save the nation at a time of crisis, with huge spending outlays and tax cuts that he contended could save or create up to 4 million jobs.

“At this particular moment, with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back to life,” Obama said.
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“Absolute Truth” well science maintains there is there is no such thing like that, but from the current global financial crisis it is evident that there is no absolute free market. Truth is always relative, just like freedom.

It is important to look for positive points to find a way out of the financial crisis, apart from philosophic controversy.

All countries, whether separately or collectively, are working hard to contain the crisis, or at least to reduce losses, despite the gloomy picture of the global economy and the pessimistic atmosphere blanketing the entire world.

Although it is difficult to speak about positive points while the entire world is facing such a crisis, there must be some positive aspects.

The first of these positive effects is that the financial crisis ushers in an end to the domination of the sole magnate in international financial relations, which was a major cause of the crisis.

Wall Street was the world’s most powerful investment house, just a few months ago, where investments used to pour from the East and the West. Now Wall Street means bankruptcy, and investors in fear of losing their money do their best to avoid it.

At present, there are regions in Europe and Asia, including the Gulf region, emerging as hubs of huge investments, which will bring about more stability to the world financial system. This shift is important for restructuring international relations in the post-crisis stage.
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As the growing number of foreclosures and the value of stock portfolios hit bottom, news reports from the US of the financial fallout are growing increasingly dire.

Layoffs, foreclosures, cutbacks – there are plenty of grim economic stats out there this holiday season. Here’s perhaps the grimmest one of all: Calls to National Suicide Prevention Lifeline hotline have soared by as much as 60 per cent over the past year.

Mental health experts say the sour economy has turned what usually manifests as seasonal blues into a full-blown crisis. The fear of losing one’s job and pressures caused by a downturn in business, demotion or pension plan cutbacks can be bad for mental health and therefore increase suicide risk.

“Fear is the No. 1 emotion we’re hearing. People are feeling hopeless and helpless because of the economic crisis, and many feel that things aren’t going to get better. Now many of the calls are from people who have lost their home, or their job, or who still have a job but can’t meet the cost of living.”

A 90-year-old woman in Ohio shot herself while being served an eviction notice. A 45-year-old businessman in Los Angeles murdered five members of his family before turning the gun on himself, saying in a suicide note that he had done so because of his troubling financial situation.

While these stories put a human face on the toll the financial crisis has taken, the Director General of the World Health Organization this may only be the tip of the iceberg. As people struggle to cope with losing their homes or livelihoods, she said, “It should not come as a surprise if we continue to see more stresses, more suicides and more mental disorders.”
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The near-term outlook for global stock markets is for continued volatility, with little chance of sustained progress until we see an end to corporate earnings downgrades and an improvement in economic leading indicators.

In this note we comment on the problems facing emerging markets, and some broad thoughts on why capitalism remains a reasonable starting point for economic systems.

What is our market outlook?

The threat of a global financial meltdown has diminished thanks to massive central bank and government intervention, which has addressed the liquidity and solvency issues of many US and European banks. However, corporate earnings estimates for 2009 still look too optimistic in light of the poor economic leading indicators that we are seeing, such as consumer and business confidence levels. Therefore, sandwiched between the possibilityof an immediate short-term relief rally and a positive long-term view that equities are currently cheap, we have a near-term view that markets will remain volatile and are likely to trade sideways while the US, Europe and Japan endure a recession.

Emerging markets: the real threat would be a rise in global protectionism.

If the worst is over regarding the US and European banking crisis, it certainly is not for some emerging markets. Hungary finds itselfwith a massively over borrowed consumer sector, with foreign currencyborrowings in Swiss francs and Japanese yen. As these safe havencurrencies appreciate, the risk of widespread default on mortgages and other bank loans increases. The Ukraine economy is coming down with a bump as foreign lenders are put off by 25% inflation. Other emerging markets are suffering from a mix of problems that can include an overvalued currency, excess consumer borrowing (in local and sometimes foreign currencies), falling prices for commodity exports, domestic politics and a drop in demand for exports as the G7 enters recession.
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