Wednesday, October 15, 2008

Personal and Business Advice in Turbulent Times

Last night I attended a Town Hall Meeting at Kennesaw State University. I heard some great advice I felt I should pass on.

The Economic Summit Town Hall Meeting, held Tuesday evening at the KSU Center, allowed individuals and business owners to voice their economic concerns and get responses from experts. Sponsored by the Kennesaw State division of the Small Business Development Center and KSU’s Econometric Center, the panelists included Joseph Brannen, President of the Georgia Bankers Association; Tony Britton, Senior Vice President of Wachovia; Dr. Gene Henssler, President of G.W. Henssler & Associates and host of the popular radio program, Money Talks; and Dr. Donald Sabbarese, Director of KSU’s Econometric Center.

After opening remarks by Dr. Lendley Black, Provost & Vice President for Academic Affairs, Lydia C. Jones of the SBDC introduced the discussion format and established an informal, accessible atmosphere to discuss potentially volatile and emotional issues. “Please, no political comments!” Jones warned.

Although we hear abundant reports and advice on the economy, the unique value of this meeting was the opportunity to ask specific questions and to get answers that applied specifically to our region.

The bad news is that building and manufacturing are suffering. One in six homeowners are “under water,” owing more than their homes could sell for. Although exports have been the good news in recent years, now other countries are hurting, which will of course negatively impact overseas sales. But then, we’ve heard all the bad news over and over.

What about the good news?
  • Ninety six percent of our banks are well-funded. Two thirds are profitable.
  • The government has acted to restore confidence in the markets. The FDIC now guarantees our bank holdings for up to $250,000. (The time when the government failed to act was 1929, allowing the Great Depression to take hold.)
  • Five hundred people per day are moving to Georgia.
  • Atlanta is well-diversified, has no geographical boundaries, has a world-class airport and is business-friendly. No wonder it’s growing at two times the rate of the country. Atlanta real estate hasn’t “burst.” It’s only down 6.9%, one of the lowest declines in the country. (Compare this to Miami, where house values are off 44%.
Specific answers to people’s concerns:
  1. Should I get out of stocks? “This is the dumbest time ever to get out of the stock market,” advised Hennsler. When stocks are cheap, this is the ideal time to buy, not sell.

  2. What about unemployment? Sure, unemployment is creeping up. But in recent years it’s been at an unprecedented 5%. Manufacturing is hurting, so move into growth areas like education and health.

  3. Are banks doomed to failure? No. They’re simply changing  getting back to basics  like coaches concentrating on blocking and tackling. We had gotten away from that. People with good jobs and good credit can still get loans for houses and businesses. People with bad credit and shaky jobs and no collateral won’t be able to get loans. That’s the way it’s supposed to be. We had gotten away from that. Build relationships with bankers. Give them a detailed business plan. So much of business is about relationships. Pursue them.

  4. How can the government give away all that money? Won’t we have to pay for it? Henssler believes that the government could actually make money on these bailouts. Companies will have to pay on the loans and the government will own assets that they’ll be able to sell, hopefully at a profit, in more stable times.
In the end, Lydia Jones asked the panelists to each share pitfalls we should avoid. They responded:

1. Don’t get rid of your key people.
2. Be informed, but don’t take drastic measures.
3. Keep your optimism.
4. Don’t overreact. Keep the lines of communication open.
5. Don’t cut back on marketing. Sell, sell, sell!

Thursday, October 2, 2008

Wise Investing Advice for Turbulent Times

These are scary times. I heard last Friday that my bank had shut its doors. Fortunately, another company had bought them out, so that I can still write checks, visit the ATM and receive automatic deposits from my companies. What if they'd not been bought out? How could I access my funds?

These are just a few of the questions people are asking these days. David Hultstrom is a financial adviser I respect. He gave me permission to reprint his recent newsletter below.

Financial Foundations October 2008 Newsletter, by David Hultstrom.

There seem to be a lot of questions out there about what is going on currently, so this month's newsletter will touch on a number of items and provide links to useful resources.

1) If you need a counterbalance to all the blaring headlines and breathless reporting about the current state of the financial markets, I highly recommend listening to the presentation at

2) As you undoubtedly know, bank deposits are covered by FDIC insurance. If you would like specific information about how the coverage works, see

3) Investment accounts are covered by SIPC insurance and information about that and other issues related to the failure of investment firms can be found at

4) There are a number of services that rate the safety of banks (see, unfortunately most of them cost more than it is worth for a consumer who simply wants to know how their bank is doing. However, does have a free search to see how your bank is rated at

5) The New York Times had a good interactive graphic that gave a sense of the size of the problems, see and move your mouse over the listings. Note the data is a few weeks old now, which seems like an eternity in these fast-moving times. Also, this graphic gives a sense of the size of the Lehman bankruptcy

6) Based on monthly data since World War II, there have been 6 severe stock market downturns (declines over 20% in nominal terms). In these, the average decline has been about 1/3, and they have lasted an average of slightly over 3 years (in other words, the time from a peak through a 20% or more decline then on to a new high). In the worst of these (1973-74 and 2000-02), the market declines have been on the order of 45% and lasted 4-6 years until portfolios were back to their previous values. Currently, the U.S. stock market is down approximately 20% from its high almost a year ago. There is no way to know if it will go higher or lower from here. This is subtle but important. If there was a consensus that the market was going down further it would already be down to reflect that consensus. Conversely, if there was a consensus view that the market was headed higher, it would already be higher to reflect that expectation. There are only two ways to "win": 1) be smarter than the collective wisdom of everyone participating in the market, or 2) ignore short term fluctuations and remain with your target investment portfolio knowing that in the long run, you will be better off than the vast majority of folks who tried to time the market getting in and out. In this, as with many things, slow and steady wins the race. Occasionally, the market seems to get irrational and I think you may be able to profit from being less subject to the current hysteria (either positive or negative), this does not appear to me to be one of those times. I think the possible outcomes are much more uncertain than normal from this point and there is a significant chance of further deterioration and also a significant chance that the market could recover from this point. I don't know, and I know that I don't know (which might possibly make me smarter than the TV talking heads though less entertaining - I leave that for you to decide). Uncertainty and risk is why none of our clients have a 100% stock portfolio and none of our clients have 100% of the stocks they do own located solely in the U.S.

My tentative plan is to write next month about lessons that can be learned from both the technology bubble in the late 90's and the lending bubble we are still recovering from. Until then, if you need anything - even just to talk about what is going on - please feel free to contact us.
Note: Our clients are located around the country (and world), if you know someone we may be able to help, we would be happy to do so. While Financial Foundations is intended primarily for our clients, we are happy to expand our readership so feel free to pass this along. If you have received this from someone else in that manner and would prefer to get it directly from us each month, please let us know. Similarly, if for some reason you no longer wish to receive this (as unimaginable as that seems) simply let us know that as well.


David E. Hultstrom
Financial Architects, LLC
Financial Planning & Wealth Management
Address: 107 Weatherstone Drive, Suite 510
Woodstock, GA 30188
Phone: 770-517-8160
Fax: 770-517-8159
Toll Free: 888-Fin-Arch (888-346-2724)
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