Oh great, here we go again
July 30, 2012
by Brian Wolf

I just read the following story from Associated Press – 21 people at an event hosted by motivational speaker Tony Robbins suffered burns while walking across hot coals, and three of the injured were treated at hospitals. The injuries took place recently during the first day of a four-day event at the San Jose Convention Center, hosted by Robbins, called “Unleash the Power Within.”

Most of those hurt had second and third degree burns, said San Jose Fire Department Capt. Reggie Williams. Walking across hot coals heated to between 1,200 to 2,000 degrees provides attendees an opportunity to “understand that there is absolutely nothing you can’t overcome,” according to the motivational speaker’s website.

OK Tony, I have a news flash for you. I guarantee you my “Power Within” can’t overcome 2,000 degree hot coals. I’m sorry, but I got burned this past weekend and it was only about 95 degrees outside.

It’s important to note that I don’t blame Tony Robbins for his lack of insight into common sense. He probably really believes that no one would get burned if they just “wanted” to overcome the burning hot coals.

My issues are with the hundreds of others that actually followed this advice! Thank God Tony Robbins isn’t an investment advisor representative. My fear is that he might suggest that people could just “will” their portfolios into great stock market gains.

As ridiculous as that notion is, I’ve also witnessed thousands of people in my career who decided to ignore warning signs and continue to invest in high risk products in troubled times. I really do wish I had a dollar for everytime someone told me that their advisor told them that their portfolio was low risk, when MorningStar reports showed a very different analysis.

Just last week, PIMCO’s superstar money manager, Bill Gross, came out saying that we are getting close to going into a recession again here in the US (Gross Says U.S. Nearing Recession as Goldman Sachs Cuts Forecast by Shamin Adam - Bloomberg – 7-16-12).

What I find most interesting about this is that based on the feedback I hear from our clients, we are already there!

Gross is not the only one talking about this topic. CNBC is reporting that last week US retail sales showed the world’s biggest economy is slowing very quickly, leading one economist to claim America has gone from “first half hero to second quarter zero” (US Economy Goes From ‘Hero to Zero’ by Patrick Allen - CNBC EMEA Head of News - 7-17-12). In fact, CNBC goes on, “the 0.5 percent fall for June was far worse than expected, and the third monthly drop, the longest run of falling sales since 2008, when the Lehman crisis helped lead America into a recession.”

So, here we are with our economy experiencing the “longest run of falling sales since 2008.” Anytime you reference 2008 in a statistic, you know that things aren’t going so well. So, how are you supposed to protect yourself from the market drop that may very well be coming?

If you are still working, you might want to utilize the old Rule of 100. That rule simply tells you that your age should reflect the percentage of your portfolio that is allocated toward lower-risk types of accounts like bond funds or annuities, and the balance could then be in higher, more risk-based funds.

If, on the other hand, you are either retired or within a couple years of retirement, you might want to be utilizing the advice given by the Putnam Institute (Optimal Asset Allocation in Retirement: A Downside Risk Perspective by W. Van Harlow PhD., CFA – Director of Research June 2011).

Putnam’s research tells us that retirees (and those within a couple years of) should have no more than 25 percent of their money allocated to the stock market. The vast majority should be in safer positions.

Check your own portfolios – are you well positioned to mitigate as much risk as possible in a potential upcoming market “correction”? If not, it’s definitely time to make some adjustments!

Of course, if you’re the type of person who can walk on hot coals and not get burned; then please disregard this column as I’m sure you’ll be able to “Unleash The Power Within” and figure out how to not lose any money all by yourself.

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