Finding My Voice Again September 2010

8/3/2019 Finding My Voice Again September 2010

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Securities and financial planning offered through LPL Financial, a Registered Investment AdvisorMember FINRA/SIPC

STARCARE Associates

Many of you know I've been having a rough go of writing my newsletters for the last couple

of years. Advertising compliance wants to make sure you know the opinions expressed

are mine and are not necessarily shared by the sane, civilized world. They also don't want

me scaring you as that is a regulatory no-no. If you are reading this, compliance and I have

satisfied each other's concerns. Thank you, fine people at LPL.

Quarter III, 2010

Finding My Voice AgainBy C. Richard Hearn

CARE Chronicles

Thank you, financial faithful, for hanging with me during myblockage period. I feel like I have my voice back now and can

get back to the unique, warm, and fun newsletters we share.

Now that it's compliance-enhanced, it'll be even better. It reads

a little longer since I have a lot to make up for, so, let's roll.

1. You need to get the macro right,

2. Inflation versus deflation (Which ,When),

3. Markets can remain irrational longer than you can remain solvent,

4. All bubbles ultimately pop,

5. People will not walk around with a put very long,

6. Money is still made in crises,

7. Common sense is still common sense, just not common these days,

8. Denial rages more than the River,

9. A budget and a plan are still your tools and,10. You can do this!

In this next series of newsletters, let's talk briefly about each although several will overlap.

We'll see how far we get today before boredom challenges your curiosity and we'll pick up

from there in the next letter.

Much of my writing of late has been replaced by reading. My librarian daughter must be

proud. Most of the nine books I've read this summer are somehow related to finance,

economics, predictions of booms and busts, and how all of that impacts your investments.

From those readings, I have formed these conclusions (MY OPINIONS):


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The reason my voice is

sounding more passionate is

because I'm singing directly

from the heart.

Sammy Hagar

CARE ChroniclePage 2

You Need To Get The Macro Right!

If you don't see the big picture, what you

do with the small picture doesn't muchmatter. Where the economy is going and

why is the big picture. Individual security

selection is like rearranging deck chairs

on the Titanic if you don't know where the

icebergs are.

The MACRO view suggests that several

bubbles have already burst, including

dot.coms, real estate markets, stock

markets, credit markets, and consumer

spending. Some may continue going

down with real estate the most likely

victim. Two bubbles have yet to burst.

Those icebergs are the sovereign debt

crisis and the value of the US dollar.

The sovereign debt crisis will hit when

bond holders who buy US Treasuries

refuse to buy our bonds unless they canearn a more substantial yield (higher

rates.) When rates go up, bonds go down.

When rates go up, more of our tax

revenues are needed to fund that debt

and less is available for military, health

care, schools and roads. When rates go

high enough, all tax collections could be

needed just to service debt.

That's why the Federal Reserve is

working so hard to keep rates low, but

they may be running out of ways to do

that if real spending reform is not brought

to the party. In my humble view, the fed

did what it had to do in the credit crisis of

2008 and beyond.

It served as "the lender of last resort" to

keep the wheels from coming off the train.

credit both Paulson and Geitner

for executing in a scenario with zero good

options.

Despite the impassioned politics of the day

this isn't about Republican versus

Democrat, or Liberal versus Conservative.

It's about positive cash flow; if you have it,

you're cool; if you don't, at some point

you're in a world of hurt.

This is very much about 60 years of

spending money we didn't have for good

reasons and bad, and with the help of ever

industry or agency on the planet that could

make gazillions of bucks or hang on

to political power out of encouraging

leverage. Everyone to blame; no one to

blame. It doesn't matter.

Reality is reality and I believe it is en route

to a theatre near you. Word up. Reality is

traveling with his deleveraging friendsincluding his instant recalibrator and his

magical reset button. Evidently,

deleveraging isn't near as much fun as

leveraging or running amuck was, so realit

isn't getting a lot of positive tweets these

days.


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But, this isn't bad news for everyone. If

your debt load is low and your positive

cash flow is high, you may weather these

coming storms just fine. We will get

through this. We always do. However, in

my humble opinion, we don't get through it

until we have REAL deficit reduction and

REAL financial reform.

Meanwhile, let's keep working together to

find the bright spots in the scary times.

They are there. At the same time, let'skeep up our life jacket drills. Test yourself

with a few questions;

Are you OK if your investments return

less than 5% per year for the next

decade?

Are you OK if medical and educational

inflation average 5+ % per year for the

next decade?

Are you OK if you live to be 90?

What happens if one of you loses your

ob or becomes disabled?

What happens if your social security

is reduced by 20%?

What happens if a 15% spending

tax (VAT Tax) is applied to

everything but your groceries?

Maybe none of those questions will

apply, but they are worthy questions?

Denial of the question may not provide

an escape from the answer.

I am truly sorry to sound thesecautionary notes. I so hope they are

proved unnecessary. It's no fun when

your financial advisor isn't excited and

optimistic. I am excited and I am

optimistic about our investment models

and the opportunities we see today. I'm

excited about how most of you are

investing, not just your money, but

yourselves in learning more about your

investments. I'm excited that my firm

will provide you a complementary

budget and financial plan to help you

make sure you're OK.

As always, I am honored you permit us

to be the stewards of your dreams. We

and you have worked very hard to trust

one another. Please know how sacredthat is for us and we believe for you.

Time to put this puppy to bed. We'll

pick up here next time.


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130 Newport CenterDrive, Suite 136

Newport Beach, CA92660

T: (949) 756-CARE(2273)

F: (949) 851-CARE(2273)

THE S OURCE

FOR OB J E CTI V ECOM P RE HE NS I V E

FI NA NCI A L A DV I CE

The opinions voiced in this material are meant to provide general information only and are not intended to

provide specific investment advice. Please contact me prior to making any investment decisions.

P.S. Several newsletters and books

influenced this newsletter including:

John Mauldin, best-selling author andrecognized financial expert; he is alsoeditor of the free Thoughts From theFrontline that goes to over 1 millionreaders each week. For moreinformation on John or his FREEweekly economic letter go to:http://www.frontlinethoughts.com/learnmore

Carmen M Reinhart and Kenneth S

Rogoff, "This Time It's Different." Robert Frank, "Richistan." David Wiedemer PhD, Robert

Wiedemer, and Cindy Spitzer,"AFTERSHOCK."

I am appreciative of each of their insights.

Sincerely,

C. Richard HearnPresidentLPL Branch ManagerSTARCARE Associates, Inc.

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Finding My Voice Again September 2010