Does your 401k Plan have an Emergency Exit?

By John Berzellini

Without going into the evolution of the 401k plan, I can say with confidence that the defined contribution plan design in large part has failed many hard working people.

This failure creates an atmosphere fear and confusion that can subject employees to ruin in their golden years. The reasons for our situation are many; however, our educational system and complicated 401k plan rules are major contributing factors.

The current interest rate environment, potential for large profits, and sales techniques using sophisticated statistical analysis are making matters more difficult for plan participants nearing retirement.

Many small to mid-sized companies do not have the in house expertise or resources to obtain an expert evaluation as required by the law.  As a result, decisions are often made by the owner, CEO, and sometimes a committee comprised of employees. These committees are normally formed and chaired by the company’s HR department, and in many cases the members of these committees are unknowingly putting their personal asset at risk by accepting a fiduciary responsibility.

Recently a client came to me for advice concerning investment options in her new 401k plan which was selected by a well meaning committee comprised of employees.

For reasons unknown to my client, the company decided to move their 401k plan from a well-known 401k plan provider to relatively unknown money manager who designed a better mouse trap.  It is a better mouse trap; unfortunately my client is the mouse!

It’s a trap is because the committee set in motion processes that are not easily changed in a company that employs approximately seventy people.

The enrollment material presented to me was not professionally produced. Considering the size of the 401k plan, I thought it a bit strange.  However, knowing that one should not judge a book by its cover, I tried not to let that issue cloud my opinion of the overall 401k plan.

As I paged thru the material, I found a line up 21 actively managed funds and 7 exchange traded funds. An employee has the option of using these financial products to build their own portfolios or they could they could choose from 6 model portfolios managed by asset allocators.

The plan seems to be an imitation of a Morningstar Open Architecture 401k Plan that can be found on my web site. Two major differences in the Morningstar 401k plan are the sophistication and resources of its money managers, and the amount of investment options in the plan.

Large institutions can afford to pay for some of the best investment talent in the industry and when it comes to investment options they are experienced enough not to clutter the plan making more difficult for employees who wish to manage their own portfolios.

Whether or not you agree with their investment philosophy, professional money managers employed by large institutions are well trained and focused entirely on managing money.  Asset allocators are a mixed bag, and sometimes can be dangerous to the financial wellbeing of the retail investor.

The greatest danger in the new 401k plan is the model portfolios, which are substitutes for the target date retirement funds offered in the old plan.

These model portfolios have approximately 3 years of historical performance; they involve market timing and each model has a substantial allocation to alternative investments.  Worse yet the plan is so cluttered, employees may choose these models in an effort to simplify their lives.

I advised my 61 year old client to inquire whether or not the plan allows for “in service distributions”.  An “ in service distribution” would allow my client to reap the normal 401k benefits of tax deferral and the employer match,  and at the same time not subject the majority of her nest egg to the speculation of these asset allocators.  As luck would have it, my client was able to rollover of a large portion of her retirement assets into an IRA before the new plan shut the door on any future ”in service distributions”.

“In service distributions” for plan participants 55 year or older should be available in most if not all 401k plans!

Keeping retirement funds trapped in a 401k plan primarily benefits the money manages and the 401k trust provider. This is because their compensation is based on a percentage of the 401k plan assets.

A 401k plan is supposed to be run for the benefit of the plan participants. If you feel this is not the case with your 401k plan, an “in service distribution” may be your emergency exit.

Stay tuned for my next article “Retirement Income and the Monte Carlo Sales Game”.

Viewpoints from AAM – The Case for a Strong 2014 Municipal Market

I have been recommending a transition from corporate bond portfolios to municipal bond portfolios since mid 2013, and today read a new scary article published by the New York Times concerning state pension liabilities. Fortunately yesterday 2/24/14, I was notified that our friends at AAM published a blog article reinforcing my recommendations to high tax bracket clients seeking reliable income streams.


Roberto Roffo’s blog “A Case for a Strong 2014 Municipal Market”—the-case-for-a-strong-2014-municipal-market  echoes my sentiments on opportunities in today’s municipal bond market, and I thought it may be of some reassurance to those who take to heart the half truths prevalent in today press.

Thinking of Hiring an RIA? 10 Things You Should Know.

I’ve authored several articles explaining the benefits of a Registered Investment Advisor (RIA) client relationship, and how the RIA client relationship differs from the bank advisor or stock broker relationship.

Recently Charles Schwab in conjunction with “RIA Stands For You” permitted JBA to share the following link to a reprint of a Wall Street Journal article on the same subject:

Thinking About Hiring an RIA? 10 Things You Should Know

To share this article, send this link:

We think it may be time to consider a different kind of financial advisor.

Managing Retirement Income Cash Flows at JBA

By John Berzellini

When deciding how to take income from their portfolios, persons in or nearing retirement are faced with an increasing variety of investment strategies, insurance products, and asset allocation plans designed to meet income needs during retirement. It seems as though we are at a point where the proliferation of investment strategies and financial products is creating more confusion than solutions.

Implementing understandable time tested investment strategies and effectively managing retirement cash flows are core services offered by JBA Financial Advisors.

When taking income from portfolios, there are two basic techniques: living off interest and dividends; or living off interest and dividends and a portion of principal. The later must be done in a way that does not put the retiree in danger of outliving principal.  Of course, specific strategies depends on each clients facts and circumstances, and whether or not he or she wishes to leave bequests to heirs or charitable organizations.

The methods of taking income from a portfolio can be summarized as follows:

  • Taking withdrawals as needed
  • Living off interest and dividends
  • Taking a fixed dollar amount
  • Taking a fixed dollar amount and adjusting for inflation
  • Withdrawing a constant percentage of the portfolio
  • Taking IRS minimum distributions
  • Varying withdrawals based on the portfolios performance
  • Using a portion of portfolio assets to purchase an immediate annuity

The above methods are not mutually exclusive; therefore, can be used in combinations by creating investment pools for specific goals.

At JBA, the process begins with an overall assessment of the client’s financial situation.

Retirement goals are separated into three categories:  1) Needs (living expenses), 2) Wants (example, country club memberships) and 3) Wishes (example, charitable bequests); using three analytical measures, we test the probability of funding all retirement goals , and will analyze various social security benefit claiming options effect on retirement cash flows.

Depending on the results of our analysis; we may recommend changes to asset allocations, modification to the wants and wishes, additional savings programs, or changes to retirement date. When our stress tests indicate that goal attainment in an acceptable probability range; we will custom design retirement income programs to fund retirement goals.

Since JBA offers a comprehensive retirement planning service, on an ongoing basis, we will manage retirement income cash flows making disbursements as directed, provide investment advice, and consider income tax planning strategies and estate planning needs.

Thru our relationship with Shareholders Service Group and the Bank of New York we make available a number of cash management services including checking account and credit card services.







Premium Bonds

JBA offers Advisors Asset Management (AAM) managed bond portfolios as a standalone investment opportunity. These bond portfolios from time to time own bonds purchased at a premium.

In his article “Why Would Anyone Pay a Premium for a Bond?” AAM’s Mark Gregg; VP, Portfolio Analytics, explains the benefits of these bonds in today’s fixed income environment.

Dynamic Asset Allocation and Monte Carlo Simulation, What You Don’t Know Can Hurt You!

By John Berzellini

The combination of Modern Portfolio Theory,  the Brinson Study, index funds, Exchange Trade Funds (ETF), derivatives and recent stock market volatility has caused a proliferation of an investment strategy called Dynamic Asset Allocation (DAA). DAA attempts to produce high returns irrespective of the performance of the indices used to build portfolios. The “words high rates of return” imply the use of market timing, leverage, alternative investments, and additional risk.

As with strategic asset allocation,  a DAA portfolio’s return is largely decided by the interaction of the various asset classes comprising the portfolios, however a dynamic asset allocation is changing based on some complicated mathematical algorithm or merely a predictions of the future. Of course, in the final analysis, the mathematical algorithms are also predictions of the future.  In many cases validation of the successful DAA model portfolio is done thru back testing. Back testing is a measure of how well a portfolio would have performed had it been in existence.  Maybe FINRA should require the statement, “hypothetical performance is not indicative of future performance”.

These back tested DAA portfolios are sometimes combined with withdrawal programs supported by Monte Carlo simulations and sold to the public as retirement planning. The sale  goes something like this “ Our DAA Model Portfolio was tested with 10,000 Monte Carlo simulation trials  proving you can withdraw 7% and not outlive your retirement savings in 35 years 95% of the time.   Depending on the Monte Carlo software used, the same data can produce output ranging from 50% to 95% success ratios.  The dishonesty with this type of money management focused retirement planning is the computer programs and graphic output can lead us to believe a highly subjective topic is quantifiable.

While listening to our favorite sports talk shows or browsing the internet for a solution to the low interest rate environment; if we hear claims that sound too good to be true, there probably not true. When I was an IRS agent, the agency constantly advertised to taxpayers, that if an investment in a limited partnership seemed too good to be true, it’s probably not true. As it was then it is now, however, this game is far more serious because it has the potential to change your golden years into years of fears.

Remember the famous quote attributed to Mark Twain “there are liars, dam liars and statistics”.

See also: Withdrawing Money from Retirement Savings, Do We have enough to Retire?

Advisors Asset Management – Strategic Times: The 2012 Annual Review and our best ideas for 2013.

JBA Financial Advisors works with other Investment Advisors (IAs) whom are solely focused on the money management aspect of comprehensive financial planning.

All investment advisors we work with incorporate investment strategies based on either broad diversification or those focused on producing income.  In addition to JBA’s money management services offered in conjunction with comprehensive financial planning, we offer several stand alone investment programs, one of which is Advisors Asset Management (AAM) corporate bond portfolio.

My relationship with AAM began in my days with Lincoln Financial Securities Corporation and has grown over the years.  Matt Lloyd, Chief Investment Strategist at AAM, reviews 2012, and shares AAMs best ideas for 2013 in his blog posting 1/3/2013.

I hope you find Matt’s article both interesting and helpful.

Why Don’t We Get a Market Rate of Return On Our Investments?

by John Berzellini

The 2011 spread between the average investor return and the S&P 500 return was 7.85% (see Dalbar on left side bar). As usual, the S&P 500 Index outperformed the average main street investor.

The Annual Dalbar Analysis continually points to investor behavior as the root cause of the failure to realize a market rate of return.

The indexers point to the expenses of active money managers as the reason for underperformance.

The active money managers argue that the returns are net of expenses.

The do it yourself investor has access to analytical tools, surveys, free advice from  dot.orgs,, banks, broker dealers the mutual fund complex, and legions of blogers.

Twenty years of surveys and analysis pointing out destructive financial behavior, direct access to low cost index funds , availability of financial information and education on the internet, modern portfolio theory, the three factor model, absolute return strategies, and ETFs  have done very little to help the main street investor obtain a market rate of return.

What is the problem?

It is the combination of the financial industry’s intentional failure to clearly distinguish financial advice from financial product sales support, the ever increasing complexity in financial products , and a general mistrust created by a lack of transparency in the financial industry’s retail product distribution system.

What is the solution?

1.) Hire an advisor that sits on your side of the table and acts as your financial intermediary in a complicated market place.

In many cases you will find the total cost of independent advice is less than the cost of tainted advice provided by the creators of financial products.  For example, JBA  does not receive trading commissions, and passes along fee based institutional pricing to clients.

2.)Take a comprehensive approach to financial planning.

Contrary to their advertizing;  banks, broker dealers, and insurance companies  do not offer comprehensive financial planning  (see “Defining Comprehensive Financial Planning” posted May 14,2012)

A comprehensive approach is not all about money management.  For example choosing the correct social security claiming strategy and portfolio withdrawal method can go a long way in making sure you do not out live your assets.

Under the right circumstances, a social security strategy alone can add over $200,000 in additional income during a retiree’s life time. Banks don’t make money on this kind of advice!

What should we expect?

Expect a market rate of return less expenses. In the 2011 Dalbar Analysis example above, a market rate of return less a 1% advisory fee produces 6. 8 %  more return than the average investor received in 2011.

Expect a holistic approach to your retirement plan as opposed to a product sale approach.

Expect the peace of mind that comes with knowing  your advisor is working for you rather than some faceless committee in a bank or insurance company.


Another Wall of Worry

by Weston Wellington, VP Dimensional Fund Advisors

Reprinted with the permission of Dimensional Fund Advisors


By John Berzellini

We believe the financial media’s ravings, whether financial exuberance or doom and gloom, are a major factor contributing to the average investor’s subpar returns.  In his most recent article (below) Weston Wellington points out stock prices are on the rise while the financial media is in its doom and gloom mode. Want to be a successful investor? Tune them out!

October 3, 2012

Another Wall of Worry

Weston Wellington

Down to the Wire

Vice President, Dimensional Fund Advisors

Stock prices rallied sharply around the world in the third quarter, with forty-two out of forty-five countries tracked by MSCI showing positive returns in US dollar terms. Total return exceeded 10% in nineteen different markets, while Ireland, Japan, and Morocco registered minor losses.

For the twelve-month period ending September 30, 2012, forty markets had positive returns, with six countries—including the US—delivering a total return in excess of 30%, according to MSCI.

Investors have been confronted with a steady drumbeat of discouraging news over the past year—a feeble economic recovery here and abroad, staggering budget deficits with no solution in sight, the prospect of a Euro zone breakup, an acrimonious presidential election campaign, banking scandals, and a punishing drought across the US. Considering all the uncertainty, it’s not difficult to explain why mutual fund investors have generally favored fixed income strategies rather than equities over this past twelve month period.

Many investors are easily persuaded that successful investing requires constant attention to current events and frequent adjustment of their equity exposure. The news excerpts below represent just a small sample of the issues investors might have dwelled on. We suspect that many investors not only failed to achieve their respective market rate of return over the past twelve months but would be surprised to learn how well stock prices have done in many markets over that period.

  • “Unless politicians act more boldly, the world economy will keep heading toward a black hole… At a time of enormous problems, the politicians seem Lilliputian. That’s the real reason to be afraid.”

“The World Economy: Be Afraid,” Economist, October 1, 2011.

  • “Investors also are nervous because October historically has been one of the more volatile months for stocks.”

E.S. Browning. “Market Nears Bear Territory,” Wall Street Journal, October 4, 2011.

  • “The Dow Jones Industrial Average turned in its worst Thanksgiving-week performance since markets began to observe the holiday in 1942.”

Steven Russolillo. “Investors Go Shopping—Just Not for Stocks,” Wall Street Journal, November 26, 2011.

  • “Over the past three months, investor uncertainty about the soundness of bank balance sheets, manifested in the daily volatility of stock prices, is back up to levels seen historically only in advance of two great crises… This dynamic has played out twice before in the past 85 years—in the Great Depression and the panic of 2008-09—with devastating consequences for the broader economy.”

Andrew Atkeson and William E. Simon, Jr. “The Rising Fear in Bank Stock Prices,” Wall Street Journal, November 28, 2011.

  • “The managing director of the International Monetary Fund has raised fears that the world faces the risk of economic retraction, rising protectionism, isolation, and… what happened in the ’30s  (Depression).”

Hugh Carnegy and George Parker. “IMF Chief Warns over 1930s-Style Threats,” Financial Times, December 16, 2011.

  • “It is hard to avoid the conclusion that stock prices are levitating at over-inflated values, thanks to the herd-like behavior and collective fear of investment institutions.”

Financial Times, December 30, 2011.

  • “An escalation of the crisis would spare no one. Developed and developing country growth rates could fall by as much or more than in 2008-09.”

Quotation attributed to Andrew Burns, head of macroeconomics, World Bank. Chris Giles. “World Bank Warns on the Risk of Global Economic Meltdown,” Financial Times, January 18, 2012.

  • “This may be the unhappiest bull market ever. We love to hate it, but that may be just egging it on.”

Tom Petruno. “The Unhappiest Bull Market Ever,” Los Angeles Times, February 12, 2012.

  • “US companies are more uncertain about the future than at any point since the financial crisis, with just one in five of the biggest corporations making any predictions as they published quarterly results.”

Ajay Makan. “Doubt Haunts US Company Results,” Financial Times, February 21, 2012


  • “For nearly a decade, it turns out, the most accurate forecasts have come from the fringe. So it’s upsetting to learn that many of these Cassandras now believe, for different reasons, that we are on the brink of another catastrophe that may be far worse.”

Adam Davidson. “Sorry to Break It to You,” New York Times, February 5, 2012.

  • “It remains clear that this almost uninterrupted equity market  lacks substance and conviction. The rally’s volume has been very weak, and  institutional operators have been absent from the market. There has been very little participation from the retail investor, based on data from  Lipper, a provider of information and ratings on mutual funds. Corporate insiders have been big sellers of stock, exceeding $6 billion last month (with the ratio of selling to buying hitting the astronomical 13-to-1 mark).”

David Rosenberg, chief economist and strategist, Gluskin Sheff. “The World is Not Fixed and This Equity Rally Lacks Conviction,” Financial Times, March 15, 2012.

  • “No one sees a growth rate fast enough for the American economy to return to full employment any time soon.”

Joseph Stiglitz, Nobel laureate 2001. “The American Labour Market Remains a Shambles,” Financial Times, March 13, 2012.

  • “We think that most of the US market is just not worth investing in… And it’s our belief that profitability will have to come down and the market isn’t priced for it.”

Quotation attributed to Ben Inker, head of asset-allocation group, Grantham, Mayo, Van Otterloo. Jonathan Cheng. “Two Pros Weigh In on US Stocks,” Wall Street Journal, April 2, 2012.

  • “It’s simple arithmetic and it leads to a simple yet alarming conclusion that unless current law is amended before year-end, the stock market has to fall by at least 30%.”

Donald J. Luskin. “The 2013 Fiscal Cliff Could Crush Stocks,” Wall Street Journal, May 4, 2012.

  • “Stocks have not been so far out of favor for half a century  Many declare the ‘cult of the equity’ dead.”

John Authers and Kate Burgess. “Out of Stock,” Financial Times, May 24, 2012.

  • “The US economy is continuing to lose momentum just as global events that could derail the recovery gather steam… The downshift couldn’t come at a worse time. Experts warn that a breakup of the euro zone could spark the worst credit freeze since the collapse of Lehman Brothers in 2008.”

Ben Casselmann and Phil Izzo. “Recovery Slows as Global Risks Rise,” Wall Street Journal, June 16, 2012.

  • “‘Dr. Doom’, Nouriel Roubini, says the ‘perfect storm’ scenario he forecast for the global economy earlier this year is unfolding right now as growth slows in the US, Europe, as well as China.”

Ansuya Harjani. “Roubini: My ‘Perfect Storm’ Is Unfolding Now,” CNBC, July 9, 2012.

  • “Bill Gross, co-founder and co-chief investment officer of Pacific Investment Management Co., says stock investors should rethink the age-old investing mantra of buying and holding stocks for the long run… Stocks, he says, operate much like a Ponzi scheme, showing returns that have no real bearing on reality.”

Steven Russolillo and Kirsten Grind. “Bill Gross: Stocks Are Dead and Operate Like a Ponzi Scheme,” Wall Street Journal, August 1, 2012.

A Funny Thing Happened On the Way to Economic Armageddon

by Scott Coyler, CEO Advisor Asset Management

Reprinted with the permission of Advisors Asset Management


by John Berzellini

In his most recent blog article, “A Funny Thing Happened On the Way to Economic Armageddon” Scott Colyer, CEO Advisor Asset Management; reminds us of three absolute truths; Death,Taxes and Don’t Fight the Fed.

We may not be able to do anything about death and taxes, but let’s make sure our portfolio manager isn’t picking fights we can’t win!

A Funny Thing Happened On The Way To Economic Armageddon…

by Scott Colyer On October 03, 2012 | Categories: Featured, Market Commentary, U.S. Economy

After the recent announcement by the U.S. Federal Reserve (Fed) that they would begin to engage in what has been deemed “QE3,” there has been a lot of skepticism that such a plan could actually work. The Fed is attempting to carry out their dual mandate of price stability and full employment by engaging in a new round of asset purchasing targeted at the mortgage market. Public support of Bernanke seems to be waning as even some sitting Fed governors are publicly dissing the plan. Congressional support of the Fed is also being tested by those worried that the Fed is monetizing U.S. Treasury debt to a degree that will debase the U.S. dollar leading to inflation.

Many pundits are making media appearances denouncing the potential healing power of Quantitative Easing. The latest version follows three bond buying binges by the Fed (QE 1, QE2, Twist) where the Fed has given its unending promise to buy agency mortgage-backed securities monthly until they see the recovery in full swing. Furthermore, they have extended their zero-interest rate guidance until at least 2015 and promised to continue the stimulus until things get much better. We note that potentially the most important part of the Fed’s new moves is the commitment to keep policy “kitchen-sinked” well into the next recovery cycle. Yes, we believe we are now in uncharted territory.

We have not seen this type of “Mighty Banker” mentality since the days of Paul Volcker in the 1980s. You may remember that Volcker’s challenge was to break the back of inflation, which he did by raising the Fed funds rate to 20%. Do you think that rattled a few cages in Congress? Absolutely! Farmers, who were suffering because of high equipment costs and low grain prices, were rolling their tractors to Washington D.C. in protest. Mr. Volcker was looked at by many as a lunatic bent on ruining the United States by imposing usurious interest rates on a very sick U.S. economy. He was appointed Fed Chairman by Jimmy Carter in 1979 and spent the first three years systematically tightening monetary policy well beyond any measures that had ever been used before. He was re-appointed by Ronald Regan who was elected as President in 1980 and began to install a number of fiscal repairs designed to restore growth to the U.S. economy.

It was not until 1982, when the interest rate peaked on the 10-year Treasury note at 15%, that things began to look better. Unemployment peaked over 11% and the equity and bond markets began one of the longest bull markets in history. Volcker was pictured as a villain on Time Magazine’s March 1982 cover. Faith in the Fed was at an all-time low, yet the Fed was feeding the economy just the medicine that was needed to cure the patient. When it was darkest and popular to hate the Fed, history shows us we should have embraced their resolve.

In many ways, Ben Bernanke is fighting the same fight that Volcker did, except in reverse. Instead of fighting inflation, he is fighting deflation. Bernanke is using his lifetime of studying economic theory, with a focus on the Great Depression, to maneuver the tough conditions we now face. Like Volcker, he has been forced “off the reservation” to places we have not been before in modern days. Also, like Volcker, his medicine just might work. Nobody is saying it; nobody is supporting it; as most pundits are lining themselves up on the “I told you so” side of the street.

We are truly in a time of great anxiety. There has never been a time in modern history when global monetary policy has been this easy. From Washington D.C. to London and from Tokyo to Shanghai, monetary policy is incredibly stimulative. What happens if this actually works? Monetary policy is an incredibly powerful force and can produce some powerful results. With the Fed promising as much easing as is needed to obtain the desired result, should investors buy-in or run for the hills?

The empirical evidence does not favor those who “fight the Fed.” I was always taught that there are three absolute truths that one should accept without reservation. Those are: death, taxes and “don’t fight the Fed!” Because we are in unchartered territory, many people have found themselves doing just that. The Fed is trying to lower interest rates to provide additional cash to people and companies who refinance debt. They are trying to restore confidence by elevating stock and housing prices. A confident consumer is a spending consumer. A growing economy spreads jobs and profits to all of its participants.

Yet, even with the entire stimulus, cash is being drained from equity markets and jammed into U.S. Treasuries, banks and bond funds at a time where returns offered in those areas are at all-time lows. What gives? Could the Fed have it wrong? In our opinion, highly unlikely! Let’s look at what is happening not just here in the United States but globally as well. Equity prices are almost back to levels we saw in 2007. The valuation of equities is very attractive even at today’s levels. Housing prices have bounced as low home prices and record-low mortgage rates have caused the housing affordability index to hit record highs. Could the masses be wrong? Could record cash hoards and bond fund inflows be the wrong move? Most likely it is. History has shown us that when the masses all get parked on one side of a market, the likely winners will be those on the opposite side. If that logic holds here, those cash hoards and bond fund groupies will actually provide the cannon fodder for a prolonged equity market and commodity market run.

Remember, the Fed is producing currency and injecting it into the economy by way of asset purchases. That cash has been initially hoarded but will likely be re-deployed to other asset classes as returns are needed on that capital and returns in non-risk assets are non-existent. As fear dissipates, the velocity of the movement of capital will likely accelerate. Yes, the risk of a melt-up increases. The Fed has the tools and the resolve and they have shown they are not afraid to use it. They have told you what they want and they will keep printing until they get it.

We believe the key here is to get in front of the Fed. For bond fund managers, it might be trying to own what the Fed will be buying. For the normal investor who understands the Fed is trying to create growth, employment and, yes, inflation, they may favor assets where the income streams will likely increase with the rate of inflation. For a demographic generation that is starved for income, we suggest buying income-producing assets that others, in search of income, will come to want and need. They will pay-up for them as their alternatives are disappearing and the Fed has dashed hopes of higher rates any time soon.

We think the same strategy should be deployed to global markets as well. As of the writing of this article, people who fought the European Central Bank (ECB) are suffering as well. All Euro-country equity markets are now positive for the year, except Portugal. Yes, even Greece is up double digits for the year. Ireland seems solidly on its way to recovery. Yes, we hear the “Chicken Littles” tweeting a daily prophecy of death to Europe’s economy and its bonds and equities. Yet, it seems the louder they squawk, the higher the markets move. Another case of don’t fight the ECB (Fed)? We think so.

China is just beginning a huge monetary-easing program. Latin American countries are looking to weaken their currency values that have risen against the dollar. Their competitiveness is being challenged by the Fed’s actions. Japan just upped its asset purchase by 10 trillion yen. The race is on. Should an investor bet against a global easing? That’s hardly a wise course to pursue, in our opinion.

We conclude that fighting the Fed is not a wise move now, just like at any time in the past. Even though Chairman Bernanke is going places where the Fed has not gone before, the outcome is likely to be what they are shooting for. If they don’t get it, they will keep trying. Sooner or later they will achieve their intended target. We believe the risk is in resisting the Fed and staying parked in places that might suffer during a re-emergence of growth and at least some inflation. Finally, if you believe that there are significant opportunities on a more global basis, the same advice applies. Yes, “don’t fight the Fed” is still the rule.

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at For additional commentary or financial resources, please visit