Fagan Associates Columns

Quite often callers to our office or to our radio show on 810 WGY ask us the “rule of thumb” question that goes something like this.  “I’m XX years old, what percentage of my retirement money should I have in the stock market?”  Believe it or not there is no simple answer as there are many variables that influence our response.

One of those variables would include the length of time prior to when you will need to draw from your investments.  If you are 60 and planning on working until 62, all things being equal, you would have less a percentage of your assets invested in equities versus that same individual who planned on working until 65.  This assumes that this investor would need to draw upon their investments upon retirement.

A second variable would include your other sources of income.  If upon retirement, you will be receiving a Defined Benefit pension plan, one that guarantees a stated amount of monthly income for the remainder of your life and perhaps the life of your spouse and that income along with Social Security will be enough to maintain your standard of living, this investor should then commit a larger percentage of his/her assets into the stock market as compared to one without guaranteed income.

A third variable would be to identify other less risky options.  If only interest rates on Certificates of Deposit were 5.00% like they were three or four years ago or if only bonds were paying 5.00% like they were a few years ago then perhaps an investor, in order to maintain his standard of living, could take less risk.  However, interest rates are not 5.00%.  They are much closer to 0.00% so many individuals are going to have to consider shouldering some risk in order to reach their objectives.  That said, should interest rates begin to rebound a bit, take this risk off the table.  The economy evolves.  Your portfolio should revolve with it.

Do you own your own home?  This is a potential source of retirement income should you exercise a reverse mortgage.  Will you potentially receiving an inheritance?  This could provide a hedge for inflation down the road or provide supplemental monthly income.

Finally, what is your standard of living?  Also, how flexible is this standard of living.  Generally speaking, the more the cost of maintaining your standard of living can be covered by guaranteed sources of income, the larger percentage of your investment balance should be in equities.

These variables should not be considered independently, but in conjunction with each other.  They are also not meant to be a complete list, but provide food for thought and a starting point when considering your asset allocation.  Keep in mind that the goal of every investor is to maximize their return with as little risk as possible.  Unfortunately, given the current level of interest rates, investors must assume some risk.

THE BOTTOM LINE – Leaving long-term investment money in cash at zero percent also carries risk.  Investors today are caught between a rock and hard place.  If you investment in equities there is the potential for losses.  If you leave money in the bank, it will not grow.  The answer lies in an investor taking calculated risk according to his objectives and considering the variables above.

Stock markets around the globe sold off over the past few days, in part due to the cautious statement issued by the Open Market Committee of the Federal Reserve after their regularly scheduled meeting on Monetary Policy this past Wednesday.

Most notably, the Fed replaced the statement that “downside risks to the economic outlook have increased” released after their August 9^th meeting with “there are significant downside risks to the economic outlook.”  Believe it or not, just with the addition of the word “significant,” market observers shuttered.  What follows are some additional observations by the Federal Reserve.

“Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow.  Recent indicators point to continuing weakness in overall labor market conditions.”

“Investment in nonresidential structures is still weak, and the housing sector remains depressed.  However, business investment in equipment and software continues to expand.”

“The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually.”

“The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further.  (The dual mandate of the Fed is to “foster maximum employment and price stability.”)

To all of the above we respond, “tell us something we don’t know.”  Here’s what we think.

There’s about an even chance that the U.S. economy will enter into a recession within the next three quarters as a recession is defined as two consecutive quarters of negative growth in Gross Domestic Product.  However, that recession will be both short and shallow.

The stock market has in great part discounted the possibility that there will a short and shallow recession.  Perhaps there is another five to ten percent of downside risk if a recession proves shallow.  That said, it has not discounted another deep and long one.  This bears watching.

Over the intermediate (one to three years) to long-term, with the ten-year U.S. Treasury Note at 1.70%, dividend paying stocks are very attractive.  There are dozens of stocks, including McDonald’s, Proctor & Gamble, Intel, Bristol Myers and Abbott Labs that pay dividends far above this Treasury note.  Yes, you are assuming more risk.  However, there is also risk in locking ten-year money up at 1.70%.

This is not an easy environment to invest in if you don’t know what you’re doing.  We often say “just because you can afford to buy the plane doesn’t mean you can pilot it.”  Some can invest money on their own.  Others need help.  It’s an expensive lesson if you think you’re the former and it turns out you were the latter.

This political wrangling in Washington between the Republicans and Democrats is a mess and it is hurting consumer confidence.  Like it or not, what hurts Main Street hurts Wall Street and what hurts Wall Street hurts Main Street.  Both are hurting right now and the longer this finger pointing, campaigning and stalemate continues, the more there will be repercussions on both streets.  It will be very detrimental if this drags out until the 2012 Presidential Election.  We fear it may.  We hope it doesn’t.

First and foremost, let us state that investors are scared to death that “it’s different this time.”  Perhaps it is.  However, in believing that the United States has truly entered an eternal period of no or slow growth and a flat stock market, you are also taking risk that it is NOT different.  For example, by leaving long-term investment money at zero to two percent you are assuming opportunity risk, the risk that you will not have accumulated enough assets to meet your objectives.

Second, let us state that opportunity comes with risk.  Think back to 1999 when the economy and stock market were humming along just beautifully.  Unemployment was near 4%, Americans were building and buying houses like crazy and the stock market was at all-time highs.  Ask yourself this question, would you have been more or less apt to invest money in stocks at that point?  The answer is simple, more, much more.  The reason is clear.  Studies have shown that individuals and investors believe that the period of time that they are in will last forever, be they good or bad times.  In part, this is why after eleven years of zero returns on stock market indices, investors are shying away from what we believe will help them achieve their goals over the next eleven years – dividend paying stocks.

For this column we have put together a list of potential investment alternatives to your low-paying Certificate of Deposit, Annuity or U.S. Treasury Note.  However, keep in mind, this is for long-term investors only who wish to assume some risk.  Also, keep in mind that the ten-year U.S. Treasury note is yielding approximately 2.00% per year.

One logical alternative to a U.S. Treasury note yielding 2.00% is a basket of dividend paying stocks.  For example, Procter & Gamble (3.40%), Johnson & Johnson (3.60%), Altria Group (6.20%), Abbott Labs (3.80%), Pepsi (3.30%) and McDonald’s (2.80%) all yield much more than the ten year Treasury.  In addition, they have all INCREASED their dividends at least on an annual basis for more than twenty-five consecutive years.  Therefore, as an investor in any of these companies you are starting off receiving much income than a U.S. Treasury AND you have a good opportunity for increasing income every year.

Another logical alternative for mid- to long-term investors is a basket of dividend paying stocks that have increased their dividends every year for at least twenty-five years.  This can be found in the SPDR S&P Dividend ETF (symbol SDY) whose objective is to invest at least “80% of its assets in the fifty highest dividend yielding constituents of the stocks of the S&P Composite 1500 index that have increased dividends every year for at least 25 consecutive years.”

THE BOTTOM LINE – It is not during periods of economic prosperity that bull markets begin.  It is usually during periods of uncertainty.  A good way to mitigate this uncertainty and the risk that comes with it is as described above, by buying securities that provide income at or above the level of other, more guaranteed alternatives.  Certainly this adds risk to your metrics.  However, given the fact that interest rates are at multi-decade lows and provide little bang for the buck, it might be worth a look.

FOOD FOR THOUGHT – According to a lead anchor on business channel, CNBC “why would we ever lead with the house is not burning.”  Thus implying that bad news gets the viewers and viewers get the ratings.  Are we too into this reality TV, perhaps to our own detriment?  Perhaps we are getting too much information without the knowledge necessary to use the information to our benefit.

The huge news regarding the stepping down of Apple CEO Steve Jobs and thus handing over the reins to current COO Tim Cook had dominated the business airwaves for about twelve hours Wednesday night until it was announced that Berkshire Hathaway CEO and legendary investor Warren Buffett was investing $5 billion in Bank of America.  What does this all mean?

Regarding Jobs and Apple, short- and mid-term this should mean nothing to a company that has its product cycles well mapped out for approximately the next three years.  However, over the long term it remains to be seen if the innovative Apple bench is deep enough to offset the loss of the visionary, Jobs.  Despite not having Steve Jobs at the helm, at eleven times 2012 earnings, more than $73 per share in cash and no debt, along with an excellent management team, now with a chip on their shoulders and something to prove, we believe that a pullback in Apple should not be sold.  We believe that the loss of Jobs is akin to the loss of Walt Disney.  Both have created an environment that nurtures product creation and to a great extent institutionalized these qualities.  This will be tested over the next several years.

Regarding Buffett and Bank of America.  Warren Buffett will invest $5 billion in perpetual preferred stock of the beleaguered banking giant which will also provide t warrant to buy 700 million shares of common stock at $7.14 each.  Has the Greenspan Put been replaced by the Buffett Put?  This caused Bank of America to initially surge more than twenty percent early Thursday before settling nearly ten percent higher by the close.  The entire banking sector also rallied on the belief that “the bottom must be in” if Buffett was investing.  We say, not so fast.  Sentiment is still very negative regarding the financial sector and it will take more time before the housing market sorts itself out.  This should keep any bull markets that begin in the financial sector in check.  We have not taken a stake in Bank of America and at this time, we continue to prefer JP Morgan Chase, First Niagara and FNB Corp.

Last, but not least, there has been much talk lately regarding the likelihood that the economy over the next year will be similar to 2008, when credit markets shut down and the economy sank.  Although we do firmly believe that the economy is slowing and perhaps at a stall speed, we do not believe that we are setting ourselves up for another economic freefall like the one we went through during2008.  We have always been of the belief that this economic recovery will be modest, at best, filled with fits and starts.  We have not changed this outlook.  At this point in time we are looking for this recent economic slowdown is temporary and that the economy will reaccelerate over the next two to three quarters to approximately three percent GDP growth, not great, but not another recession either.

THE BOTTOM LINE – We do not believe that we are in for a robust economy or for a robust stock market.  However, valuations are reasonable for stocks, but most likely overvalued for bonds.  With this in mind, there will most likely be a slow migration out of fixed income and into highly liquid, dividend paying U.S. stocks over the next year or two.  We think that this would be a smart move if you have a three to five year time horizon and can stomach some risk.

Just as it pays to establish an escape route from your home in case of a fire, it pays to establish a disciplined plan of action pertaining to your investments, all the while keeping in mind that panic is not a strategy.  It is with this in mind that we thought it was timely to provide a ten step program that might help you navigate these turbulent investment waters.

Step number one.  Assess your current financial situation.  Items to include your income, perceived job security, details of your pension plan, projected Social Security benefits, insurances (life, health, disability, property and casualty), real estate values, mortgage information and other debt.

Step number two.  Get an historical perspective on this period in history.  Is it really different this time or are in a phase in our history that will pass?  Keep in mind that the stock market generally moves up over a twelve to twenty year period with mini bulls and bears contained within and then moves sideways over the next period with mini bulls and bears in between.  We believe that until further notice, we are obviously in a sideways moving period and have been so since early 2000.

Step number three.  Given the above, begin to determine your appropriate asset allocation.  Some rules of thumb include the older you are, the more fixed income (bonds) you should include in your portfolio.  The more guaranteed your pension plan, the closer you are to realizing the benefits of that plan, and to what extent that pension plan along with Social Security will meet your income needs during retirement, the more equities (stocks) one should include in their portfolio.  The more prone you are to making emotional investment decisions, the more you should include fixed income investments.  Keep in mind that the opposites of the above also hold true and that we are speaking in generalizations only.

Step number four.  Sell the peripheral holdings.  Get out of investments you don’t understand or investments that contain volatility that exceeds your temperament.  These may include but are not limited to emerging market funds, aggressive growth funds, non-investment grade (junk) bonds, and small cap stocks.  Sell so that you can sleep at night.

Step number five.  Hold some cash.  Depending upon your situation, we believe that anywhere from zero to twenty-five percent of your account is appropriate.  Too little and you may sell in panic.  Too much and you are not moving toward your long-term goals.

Step number six.  Buy some dividend paying stocks.  Do you realize that the ten-year U.S. Treasury Note yields only 2.10% and that Proctor and Gamble stock yields over 3.40%?  Moreover, interest rates are at or near a fifty year low and P&G has not only paid, but increased its dividend every year for the past fifty-three years.  With this in mind and assuming that P&G does NOT increase or decrease their dividend over the next ten years, should the stock decline thirty percent over this time frame you will still make a little money.  A pool of these stocks sounds like a better alternative for long-term investors than money sitting at zero percent in your bank account.

Step number seven.  Recognize that too many investors have their fingers on the sell trigger and too many investors have guns in the form of their computers.  Try to determine if perhaps you are one of those individuals that does not have the temperament or time to invest on your own.  There is an old adage that says, “just because you can afford the ticket doesn’t mean you can fly the plane.”  Simply put, yes, it is your money, but perhaps your time, talent and temperament are better spent elsewhere.

Step number eight.  Be disciplined.  Don’t chase the stock market on up days thinking that you have missed the boat.  There will be many more boats to come around.  The volatility will continue.  Be patient and let the stock market come to you.  What a novel idea, buying on the down days.

Step number nine.  Gain some perspective.  We’re both around fifty.  If statistics hold true, that means we have only about thirty more Summers to enjoy.  All that you can do is do your best and work toward reaching your goals.  It is kind of like dieting and exercising, it is your best shot, but doesn’t promise anything.

Step number ten.  Become and investor, not a day trader.  The media wants you to act, act, act, by always yelling fire in a crowded room.  Think of the preceding nine steps to gain perspective.  Buy low, sell high. Sounds easy but is rarely accomplished by the retail crowd because they are often scared out of their investments at the wrong time.  If history is any guide whatsoever, this is truly what will prevent you from reaching your goals.

As with any painful experience, investors are fearful of a repeat of 2008 when the major United States stock market indices plunged more than fifty percent.  However, despite the similarities and volatility and root causes of the recent correction, at this time we do not believe that we are setting the stage for another bear market.  That said, we remain concerned over the current stalling of the modest economic recovery, but believe that we will gradually regain some forward momentum putting at least a floor under stock prices within ten percent of current levels and perhaps a even bid higher.

First and foremost, it is rarely the devil that you know that gets you into trouble, but rather the devil that you don’t.  Simply put, as we justifiably fret over the global economic issues affecting our economy, political, business and economic leaders are trying to find a solution.  From an historical perspective, it is therefore unlikely that we will have a repeat of a meltdown of the financial system as we did in 2008.

The U.S. financial system and economy is on much sounder footing now than in 2008.  Both banks and consumers have taken advantage of the passage of time and low interest rates to substantially repair their balance sheets by deleveraging and raising capital, where appropriate.  In addition, U.S. corporations are in their strongest financial position in decades.

The housing market is right-sizing.  The bubble in housing that was fueled by the securitization of mortgages, low hurdles to qualify, a lack of governmental oversight and poor decisions on all fronts that resulted in home ownership spiking to an unsustainable record high of 69.2% of population in 2004 has eased to 65.9% during the second quarter and is most likely on its way back down to at least 63.0%, the multi-decade prior norm.  Although this could be construed as a negative, we don’t think so as the economy has been able to absorb this headwind from a moribund construction sector without again tanking.  Furthermore, even if there were another leg down in the housing sector, due to the first downturn, it would negatively impact the economy much less.

Although the official Unemployment Rate stands just over nine percent all the while recognizing that real unemployment is in the mid-teens, we believe that the bleeding has at least stopped and that if weekly data that relates to Initial Claims for Unemployment Benefits continues at the current level of approximately 400,000 the nation’s unemployment situation should not deteriorate.

Central bankers around the world realize that the global economy is slowing and that some may have to at least cease hiking interest rates, notably within the countries of China and India.  Historically, when central bankers cease hiking rates, economic activity picks up.  One can also expect increased economic activity as the Japanese economy regains its footing after their earthquake/tsunami and if the political instability in the Middle East remains relatively low.

Interest rates in the United States are at multi-decade lows.  We realize that this is a function of the slow economy.  However, regardless of the reasoning, low interest rates are beneficial to economic growth.  These low rates will help once business and consumer demand increases.

Finally, despite the debacle surrounding the debt-ceiling during the month of July, we agree with Winston Churchill who accurately observed that “you can always count on Americans to do the right thing – after they’ve tried everything else.”  We hope that we can include our elected officials in this lot who royally fouled up the debt debate and now must work hard to get it right and regain the trust of their electorate.  Otherwise, gold by its recent spike higher will continue to send congress a message to get its house in order, including entitlement programs such as Medicare, Medicaid and Social Security.

THE BOTTOM LINE – We realize that headwinds will remain.  We are not saying that the economy is doing well.  We realize and have noted over and over again that economic growth for the foreseeable future will be modest, at best.  However, given the downturn in the stock market over the past few weeks, it pays to look at the risks to the economy and therefore to investors.

After a day on Wall Street that many would like to forget and with the realization that stocks can go lower from here, we believe that the worst a past and that STOCKS ARE REASONABLY VALUED and more than one halfway through this correction.  Fundamentals are sound.  Valuations are reasonable.  Stocks are held by strong hands rather than weak ones.  America has begun to deal with its financial issues.  Cash positions that institutions, individuals and corporations are holdings are enormous.

Over the past month we have raised some cash, moved to more conservative positions and purchased the Permanent Portfolio (PRPFX), a mutual fund dominated by gold holdings.  However, now is the time to put together a shopping list and then begin to nibble.  Don’t go all in.  A “buy me” bell is not going off. Look for companies with strong secular growth stories (MCD, AAPL, COP, LVS, NKE, GOOG, MA, V) and then buy on weakness.

Bottom line, think long term and remember that unlike, 2000 and 2008, stocks are fairly valued and offer opportunity over the next 3 years.  Over the next 3 days, who knows.  Stocks could head lower, but like noted above, now is the time to look for opportunities and not for cover.

Let us give you our take on this debt crisis.  You can’t eat chicken wings every day of your life and then when the doctor tells you that you need to take some medicine to lower your cholesterol, you decline and say that you are just going to stop eating chicken wings.

How does the above relate to the debt crisis?  Americans, all of us, have overspent (chicken wings) and built up more than $14 trillion in public debt.  In our opinion, the solution is for the government to increase revenue through a combination of increasing taxes, broadening the tax base and practicing fiscal restraint by a reduction in spending.  This is the correct approach.  We can’t just cut spending (stop eating chicken wings) without raising the debt ceiling (medicine).  If we do we risk defaulting on our debt, the equivalent of a financial stroke.

Nobody knows how the impact of a default on our debt will be felt on either Wall Street or Main Street.  However, the risk is worth more than the reward.  Market pundits and economists have forecasted anything from a muted response from a default to another severe recession.  We believe that the already slowing economy will slow even further, quite likely coming to a halt, one that will be temporary and short-lived assuming that the political wrangling over this subject is also short-lived.  Politicians have the uncanny ability to do the wrong thing at the wrong time.  However, once they realize that their reelections are in jeopardy, they will do the right thing as outlined above.

Despite the fact that the United States has never defaulted on its debt and as such we would be in uncharted territory, we believe that some of the following might occur.  Almost certain would be a downgrade of America’s AAA credit rating to AA by Standard & Poor’s which could very well lead to hiring borrowing costs for both public and private entities.  In addition, investors in U.S. Treasuries may become reluctant to continue to invest or require higher interest payments for the additional risk.  Continued uncertainty over the debt issue would also cause businesses to remain cautious therefore slowing an already slowing economy.  This will also filter down to individuals.  Finally, the value of the U.S. dollar, the world’s reserve currency, will also be called into question.  That will ultimately be inflationary, once again eroding America’s standing as the global economic power.

THE BOTTOM LINE – Fiscal responsibility is of utmost importance to the long-term financial health of the United States.  However, this is a process and cannot occur overnight.  It therefore becomes imperative that Congress approve a raising of the debt ceiling as it begins to reign in spending.

Think of a world in which everybody had loaded guns and were always poised, ready to pull the trigger.  What a scary place that would be.  However, in this day and age the vast majority of investors do have guns (their computers) and have their fingers on the triggers (the computer keys).  Our advice, relax take your fingers off the keys and move away from the computer.

Just like we shouldn’t fix our car or electrically wire our home, perhaps you shouldn’t have the constant access and therefore temptation to trade your investment portfolio.

In an era of fast, faster, fastest it just might pay to slow things down when it comes to investing. The financial media encourages investors to watch, to act quickly, to respond instantaneously to the latest breaking news.  Theirs is a job to produce ratings and not necessarily to provide solid information upon which most investors can take action.  Fast, faster, fastest can often lead to foolish, more foolish, most foolish.

Recently, Pandora came public and the stock shot higher.  Investors were forced to decide quickly on the day of the initial public offering – “should I or shouldn’t I”?  The stock topped out at $26 only to then be cut in half and still remains more than twenty-five percent below that high.  We received calls seeking counsel on whether or not to buy the shares.  Our advice was to wait and figure out how such an investment made sense over the long haul.  There was not and still is not enough data to support the stock at these levels.

That said, we recognize that it doesn’t always pay to wait.  It doesn’t always pay to dither. We have found that in decisions of money and in life changing decisions that it does pay to act decisively but with thought.  Establish a disciplined plan of action, steps to take to determine what and when to buy and sell and follow those in as most an unemotional manner as possible.  Invest with your head and not your stomach.

Too often we are put in the position of deciding NOW about life changing situations.  Our advice, “slow it down.”  Don’t shut it down, slow it down and make decisions after the pressure and emotion has subsided.

THE BOTTOM LINE – There are no balls or strikes in investing.  Certainly, if you establish a disciplined approach to investing you will miss some opportunities.  An investor knows that for every opportunity that passes there is another waiting in the wings.  You can wait for that fat pitch to hit without worrying about striking out.

The stock market has sold off approximately seven percent over the past eight weeks as investors have recently chosen to view the economic glass as half empty rather than half full.  With this in mind, as part of a two part series, last week we addressed five negatives that were weighing on the stock market, including the weak housing market, high unemployment rate, austerity measures proposed at all levels of the public sector, the paradox of thrift and a heating up of the political rhetoric.  This week, we’ll address some of the positives that should ultimately take hold and send stocks higher or at least provide a floor within a few percentage points of current levels.

The first positive is that given current valuations stocks have most likely already factored in the weak housing and labor markets and that only a further, marked weakening, will send stocks lower.  If history is any guide, the housing bubble which was pricked during the latter part of 2007 and into 2008 will at some point recover a small portion of their losses and then flat-line for awhile.  In other words, the bloom is off the housing market rose.  However, absent a further decline, most homeowners are not assuming any appreciation in the value and most investors are not assuming that the housing market will participate in an economic recovery.  Any upside in the housing market will be welcomed by homeowners and investors alike.

The second positive is that interest rates on deposits remain at or near zero percent.  Individuals either saving for the education of their children, their retirement or receiving retirement income are not able to achieve their objectives with money earning zero.  They will look for alternatives which will include stocks as well as bonds.  And why not, many individual stocks pay dividends far in excess of three percent as do mutual funds.  Many individuals will shoulder some risk to principal for an opportunity to pick up a return better than nothing, which is what money in the bank is paying.

The economy continues to move forward, albeit at a sluggish pace.  Given all of our economic woes noted above as well as others, it is no surprise that many believe our country remains in a recession.  The fact of the matter is that we are moving forward, it is just not at a blistering pace.  And for every month that passes, our economy continues to heal – individuals repair their balance sheets, corporations earn money and the public sector right-sizes.  Ultimately, this will lead to a more robust recovery assuming that there are no external shocks to the economy.  (We realize this is a big assumption.)

The United States is a smaller contributor to global economic growth.  This may sound like a negative, but it is not.  The global economic pie is getting bigger and despite the fact that our percentage of this pie is shrinking, the absolute value of that pie continues to rise.  The vast majority of S&P 500 companies derive more than half of their revenue and net income from outside the United States.  This bodes well for corporate earnings which should eventually help lower our unemployment rate.

The final potential positive influence on stock prices is the high degree of skepticism and cynicism on both Main Street and Wall Street.  The stock market has gone nowhere for the past twelve years and investors are beginning to wonder if it will ever rise again.  What they don’t know is that this market action is very similar to past cycles where stocks appreciate over a longer period of time which is then followed by a digestion of those gains over a similar period of time only to then be followed by another long period of appreciation.  We believe at some point in time increasing corporate profits and improving fundamentals will ultimately push stocks higher.  When this occurs is anybody’s guess.  However, we do know that the time will come when stocks have their day.

THE BOTTOM LINE – Remain patient.  Invest according to your objectives and recognize that despite all of the negativity in the media surrounding the stock market, there is a lot of value out there, value which we believe will be unlocked over the next two to five years.  We conclude that stocks remain the nicest house in a bad neighborhood and at this time the most efficient choice in helping you reach your financial objectives, when compared to bonds, cash and real estate.