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October 6, 2009
FDIC Update
I have written about the FDIC several times this summer because they have been fighting a 3-alarm blaze with just a few buckets of water.
This past week, to avoid having to beg money from Congress, the FDIC announced that they are demanding banks pony up 3 years worth of FDIC insurance fees, immediately.
Actually, this approach appeals to the libertarian in me. Having those who benefit from the FDIC insurance pay for it through these borrowings makes sense. More sense than going directly to the public trough which is a popular pastime these days.
This will certainly keep the fire hoses full for a while longer, but I can't help wondering what they will do next year when they have zip for revenue and the fire still smolders?
It is in character for government entities to try to buy time with various band-aids, hoping that economic growth down the road will make the problems easier to deal with, so this approach does not surprise me.
Right now banks are allowed to borrow at near zero interest and lend at much higher rates (have you seen what your credit card rates are lately?). And banks are allowed to lend the same dollars many times and multiply their profits. So, the longer low interest rates go on, the healthier banks will become.
Although it might not sound like good news at first, the number of banks on the FDIC's "problem list" has grown a lot in the last 2 years. But, the 416 "problem banks" represent just 5% of the nation's insured banks (source: Federal Deposit Insurance Corporation). What this means is that 95% of banks are not on the you-know-what list, and that is good news, indeed.
The Mother Road
Ernest Hemingway called it the Mother Road. Like a few people in my generation, Route 66 has always held a special fascination for me. I grew up just a few miles from the beginning of Route 66 in the center of Chicago, and I remember snippets of our travels on it during a family vacation to Phoenix in the 1950s.
This weekend my Route 66 bug took us to Kingman, AZ, with the obligatory stop at the Snow Cap in Seligman.
The Snow Cap is one of the original frozen custard stands from the 1950's, and one of the crazier places ever that you can have ice cream or burgers. The doors have handles and "pull" signs on both the right and left sides. Ask for a napkin and you will get a choice of "new or used" with a selection of each magically appearing from under the counter. And the gags go on from there.
The ice cream is good too.
If you are in Kingman, be sure to visit Hualapai Mountain Park. It is hard to believe you are in Arizona up in that forest. You can even watch elk graze from the window in the restaurant at Hualapai Mountain Resort. Hualapai is the name of the local Indians and means "people of the tall pines".
The ghost town of Oatman, a little west of Kingman on 66, is also a place full of characters, not the least of which is a herd of burros that roam the street mooching carrots which are sold in almost all of the stores.
And traffic regularly stops on Route 66 for the shootouts that happen in the middle of the road, so don't take historic Route 66 if you are in a hurry.
Our New Website is Up and Running
Our Technology Coordinator, Laurel Taylor has been sweating over a hot keyboard lately putting the finishing touches on our new website www.HepburnCapital.com. However, Laurel says that Yvette Romero was the real mover/shaker in this process.
New features include summaries of various strategies including performance reports that will be updated quarterly, along with brief strategy descriptions. You can drill down for details if you want to, but it is all neatly summarized on one page.
We also have a page with the benefits of active management vs. passive buy-and-hold investing lined out for comparison. Show it to your friends who might benefit from active management. Just click on the envelope icon on upper left corner of any page and email it to a friend.
You can also forward our performance numbers the same way if you want to show them off.
With Hepburn Capital having been featured in the national or local media more than 20 times in the past year or so, we have added a page on the web site called "In the News".
Our newsletters are also archived on the website so if you want a copy of something we published it should be there.
The web site is very much a work in progress, so if you have any suggestions or comments, we would be glad to get them.
What's Going On In Your Portfolio
We have created a streamlined format for performance reporting of our model portfolios* which are the patterns we follow when implementing trades in your accounts.
I plan to alternate the summaries of different strategies in upcoming newsletters to give you a feel for how we are doing. We will begin with Flexible Income*.
The HCM Flexible Income* portfolio had a good year last month. Yes, you read that correctly.
This strategy is designed to generate returns in the 6-7% range with very low volatility, but in September alone, the model was up 7.05% after deducting our maximum fee. Last month has made a good year even better.
For about two weeks, our Careful Growth* model has been hedged to protect against a market decline and although fully invested, has exposure equal to only 11% of the stock market's risk.
Our Flexible Income* model is currently fully invested in high yield bonds, and is more fully described below in our new summary format.
 Riddle of the Week
I run over fields and woods all day, and hide at night under a bed. My tongue hangs out waiting to be filled in the morning. What am I?
Answer
A Shoe
Account reviews
As you know, my style of doing business is decidedly different than typical brokers or financial planners that want to get you in their office frequently to do account reviews, which often turn into sales oriented fishing expeditions.
I assume if you have questions or concerns about the money you have entrusted to me, you will call me so I can help you work through them because that is what I am here for.
And an extension of that thought is that if you don't call, I assume you are happy. (If not, please let me know.)
I rarely make outgoing calls but let this newsletter keep you up to date on what I am thinking and doing on your behalf. The exceptions are times like last October when it seemed like the economic sky was falling and I made many, many calls in just a few days to assure clients that we were already out of the market and not experiencing the crash that was going on around us.
However, periodic reviews of your finances and how my work fits in, are appropriate, and they do let me know what you are thinking, which is more important than what I think anyway. After all, the customer is always right.
If you would like to schedule a review appointment to meet in person or go over things on the phone, please contact the office, anytime, at 778-4000. Any of my staff can schedule my time.
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