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06/14/2010

The Bank Called You

JUNE 2010 INSIGHT

…from the desk of Brian Carden, Financial Advisor

        OK, it’s finally summer…locally the weather is warm, flood damage is slowly being repaired, and Nashville is slowly coming back to normal. In spite of all of the economic negativity being spouted on the daily airwaves, Internet, & alleged “financial gurus”, some Nashvillians are doing very well for themselves. In last month’s rant “Who Says” I challenged several of the financial myths that are continually being floated around by the above mentioned sources of information. This month, let’s look to measure some of the financial products where people are placing their money, circa 2010.

         I’ll set the stage. You’ve probably heard that the 2000’s have been called “The Lost Decade”. From an equities based perspective, it’s true. But let’s look at a couple of other current issues.

  1. The Russell 3000, the broadest index of US based stocks, had an average annual return for the last 10 years of -.2%. All that risk for virtually zero return. (Ned Davis Research)
  2. Money markets and CD’s are at unattractive lows. Bank savings accounts are at 0.1%.
  3. 80% of all mutual fund inflows for 2009 and 2010 are going into bond funds. (Strategic Insight, 2010) First consumers are chasing returns…now they’re running from them!
  4. The US Government has issued bonds (or I.O.U’s) in excess of $42 trillion and most of them are being bought by our friends in the “BRIC countries “ (Brazil, Russia, India, & China). If they quit buying…we will have to incent them by raising interest rates to make them more appealing. If that happens, the resulting correction of the entire bond fund market could go crashing down just like equity funds did in 2008.

        So just exactly where are you investing your dollars? It’s a conundrum, isn’t it? What if you could use a series of financial strategies and financial tools to create “The Bank Called You”? If you could do that, what would it look like? First of all, you would have to build the actual structure, and then put deposits into it systematically to make it grow. You would want it to have a reasonable rate of return, say 4%...and if it could be a guaranteed rate that would be even more attractive. Of course, there would be some annual expenses to running your bank as well.

        Would you like to grow your deposits in a tax-favorable environment, and maybe even take dollars from your bank in the same way either through withdrawals or loans? This way you could create some effective exit strategies that many of your other investment alternatives might not have. To make it as safe as possible, you would need protection in place against creditors, predators, and life events such as illness, accident or death.

        We’re just strategizing here…but if you’ve been a loyal reader for the last six years, you hopefully know two things. First, everything you read has been approved by a compliance officer for accuracy and correctness. Secondly, I’m not going to put anything in print I can’t back up. I’ve generally finished these pieces with a call to action…either in a response via e-mail, or to take me up on that Starbucks Latte that’s been available to you this entire time. “The Bank Called You”…has a nice ring to it, doesn’t it?

Sincerely,
Brian
Brian_Carden@PeachtreePlanning.com
www.briancarden.com
www.thebankcalledyou.com

Posted by Brian Carden at 12:57:00 PM in Financial

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