The economy... a crisis ... or an accident waiting to happen?
As I've said before ... this feels like a financial crisis ... in slow motion.

There's no rush on the Banks. There's been no panic. Our economy is not crumbling. We're not going into a depression as we did in the 30's. There's no need to put your money under your mattress. But ... it feels like we're about to have some sort of accident ... doesn't it?

Consider these facts:

• Bear Sterns failed... who'd of thunk it? The Government stepped in & took all their bad debt in trade for US Treasuries...
• Fannie Mae & Freddie Mac failed ... the Government stepped in to keep the wheels on.
• Lehman Brothers (in business for 158 years) is near failing. Treas Scty. Paulson says he is "adament" that no govt. $ be used in any deal .

So ...
If you had your choice would you...
A) Survive the accident, or
B) Would you avoid the accident all together?

There ARE ways to avoid the accident. Experts like Dan Fuss, Bill Gross & Mohammed El-Erian have experienced these "accidents" before ... and they have learned how to avoid them. Here are some of their ideas:

1. Focus on "Quality"
2. Utilize "Emerging Market" equity and debt
3. Look for "Absolute Return"
4. Consider "Hard Assets"

Integrated with typical asset allocation & diversification, these ideas can help you avoid the on-coming traffic.

Contact me if this makes sense to you.

When you have a complex problem, & it's an important topic ... who do you pick to help you solve it?

Most popular person? Most likable person? Most attractive person? Most articulate person? Most experienced person? Most knowledgable person?
If you're like most of us, you'd pick the most experienced, most knowledgable person to help.

In the world of investment portfolios those people would be the managers of the Harvard, Yale, and Princeton Endowments. Together, these 3 portfolios exceed $130 Billion ... (that's 130,000 million)!!! 3 portfolios worth 130,000 million dollars!! WITH THAT AMOUNT OF MONEY AT STAKE ... THE PORTFOLIO MANAGERS ARE EXPERIENCED & KNOWLEDGABLE.

Oh ... did I mention that their performance is outstanding??

So, when I have a complex portfolio management question... who should I look to?

Well guess what... portfolio management is getting more complex. (Emerging economies, devaluation of the US dollar, trade defecits, complicated monitary policy, inflation, energy costs, mortgage melt-downs, banks treading on thin ice, etc.)

We can learn a lot by studying the big endowments. At Harvard, Yale & Princeton, they know what they're doing.

When you follow a leader (who is experienced & knowledgable) you want to walk in their foot-prints.

Inflation ... it looks like it is here ... NOW.
Consumer Price Index #s (CPI) just came out for July & they show double the increase that was expected. DOUBLE! Inflation is now running at its highest rate in 17 years. (Can you even remember 1991?) HIGHEST IN 17 YEARS!

That's a problem. The CPI reflects the cost of goods. If we are paying more for the "stuff we gotta' have" (gasoline, food, clothing, etc...) we don't have money for the "stuff we want." If we can't afford the stuff we want (like eating out, going on vacation, going to the movies) the economy is bound to suffer. Can you say "recession?" I know you can.

And in a recession, chances are your investments could take a "hit" too. UGH!

So what can you do??

Here are some ideas to consider:

• Increase the Foreign (emerging) portion of your holdings.
• Look into TIPS (Treasury Inflation-Protected Securities).
• Don't give up on Real Estate... all real estate is not the same.
• Consider owning "hard asset" securities in your accounts.

If inflation is really here, fasten your seat belts ... it is bound to be a bumpy ride.

Dow Drops 239 points ... Financials to blame..

So yesterday it was Merrill Lynch. They announced a $5.7 billion write down as a result of mortgage loans ... following $41 billion earlier. Several weeks ago it was Fannie & Freddie. Prior to that it was Bear Sterns... and so on.

Henry Paulson (US Treas. Scty.) said yesterday... "I'd rather not be in the position of asking for these extraordinary efforts..." So our Treas. Scty. has to seek "extraordinary efforts" ?!?! Shoes keep dropping, & monetary policy-makers keeps reacting to keep the train on the track.

I am growing more & more uncomfortable with the amount of intercession from our monetary policy-makers. Why do they have to intercede? Why do we need the "extraordinary efforts"? Maybe what we have here is a financial crisis ... in slow motion.

TALKING HEADS DON'T THINK LONG RUN!
I heard a "talking head" on CNN say yesterday say this: "In 1998 the world was producing oil at 85% capacity ... today we are at 98% capacity." She then asked her guest "What do you think that means?"
WHAT DO YOU THINK IT MEANS???? We are near peak capacity & global demand is continuing to increase (see Brazil, Russia, India, China) ... IT MEANS PRICES WILL CONTINUE TO RISE OVER THE LONG RUN !!!(DUH). Think 10 years out...what will oil cost? What impact will its price have on the economy. I think we should take this into account TODAY as we plan our financial future. ...........Stay tuned for more specifics.

Would you get on a plane ... without a flight-plan?
I am a financial planner, and aviation analogies come easily to me so when somebody asked me to give my first 30 second commercial I naturally related financial planning to flight planning. That was 8 years ago ... & I still use that idea to help people remember what I do.

It's an effective analogy because when you are in flight:

• You want to know for sure where you're headed.


• You want the pilot to know how to avoid rough weather without taking you off course.


• You want to arrive at your destination on time.


• You want to get there as quickly as possible.


• You want a smooth landing.


• And most importantly, you want the pilot to do it all as safely as possible.

To me, every one of these statements is also true of financial planning.
So, as the "Financial Flight Planner" I find myself advising that people to "Keep the seat belts fastened tightly around you." The next several years are likely to be a bumpy ride.