Clark At Large

In response to my April 13 blog titled “Ode to Pollyanna,” DT Palmero makes a compelling analysis of why clients’ houses are similar to their investment portfolios, as long they view their portfolios as “an illiquid asset that provides current income in the form of dividends, capital gains, and interest.” If clients can be convinced to see their portfolios that way—as money they can’t have access to except for its “income” even if they lose their jobs, a child gets sick, they get divorced, etc.—then, sure I get the analogy.

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I recently received an e-mail from an advisor who took issue with part of my April column for Investment Advisor, “Timing Is Everything”  (http://www.investmentadvisor.com/Issues/2009/April/Pages/Timing-Is-Everything.aspx).  He wrote: “You stated that with ‘Pres. Obama, Pelosi, and Reid in charge, that we’re possibly headed for a Carter economic environment’… You appear to place the blame on the current officeholders which completely ignores what precipitated the current problems.”

This reader raises an interesting point that I believe has a message for all of us in our politically charged society.  He’s right, of course: I did consciously avoid an analysis of the causes of the current crisis for two reasons.

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One of the benefits of getting older is that you start to get some historical perspective. When I started covering financial services in 1984, the economic environment was vastly different from the one we’ve come to consider normal: during the preceding 20 years, the top tax rate hit 90%, inflation reached double digits, interest rates peaked in the high teens, and the stock market, which hit a record DJIA of 995 in 1966, finally broke 1000 in 1973, then didn’t reach that high again until April 1981.

Now consider the “golden age” we’ve enjoyed during the past 20 years: inflation has been almost non-existent, interest rates hovered in the low single digits, taxes were low, and the stock market boomed, reaching 14,164 on October 9, 2007.

This environment has been perfect for independent advisors.

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