Yeske Buie Weekend Digest – Feb. 19, 2010

Yeske Buie Weekend Digest – Feb. 19, 2010

As another weekend approaches, we decided that it was time for another edition of Yeske Buie’s Weekend Digest. This week’s issue reports on a personal milestone, recent media coverage, and the significance of market milestones. Have a great weekend! The Yeske Buie Team.

Dr. Dave

Dave reached the end of a 13 year journey last week when he officially completed his doctorate in business. His dissertation, titled “Finding the Planning in Financial Planning: An Integrative Framework for Strategy Making by Financial Planners,” proposed and then empirically tested a new framework for thinking about how planners plan. The dissertation has already drawn interest from others in the academic world, with Zvi Bodie, a well-known economist at Boston University, proposing new research to further test some of the implications of Dave’s model.

Wall Street Journal

Dave was featured in the VOICES section of the Wall Street Journal’s online edition recently. He had the opportunity to talk about Yeske Buie’s science-based approach to financial planning and investments.

New Webinar Planned!

Yeske Buie, in conjunction with the Delta Group (Elissa and Dave’s study group) will be hosting a presentation by Liz Ann Sonders, the chief investment strategist at Charles Schwab & Co. The webinar will be held on April 6th at 4:00 PM Pacific Time, 7:00 PM Eastern Time. You’ll receive your official invitation in a few weeks.

Milestone Figures Grab Attention, but Their Impact is Hazy

This article has an interesting chart showing the first time the Dow crossed the 10,000 mark in 1999 and the most recent point, in October of last year. Two representative quotes are offered from those two time periods:

1999 “It is a testament to the market’s strength and the underlying strength of the economy.” – Robert Murphy, chief executive of Robb Peck McCooey

2009 “People don’t believe it, they don’t trust it, they are nervous, they are anxious.” – Andy Brooks, head of stock trading at T. Row Price.

It’s worth noting that 10,000 doesn’t have the same meaning in 1999 and 2009. First of all, on an inflation-adjusted basis, 10,000 represents a lower level today than it did ten years ago. Also, and even more significantly, the Dow was a lot more expensive in 1999 than it is now. As measured by the price-to-earnings ratio, in fact, the Dow was TWICE as expensive in 1999 as it is today. So, all other things being equal (and not even thinking about making a prediction here) there has to be more upside and less downside than the last time the Dow crossed this psychological threshold.

FINALLY, notwithstanding talk of a “lost decade,” the fact that the Dow was at 10,000 in 1999 and again in 2009 doesn’t mean you didn’t make any money over that time. Even if you held nothing but the Dow Industrials, you collected dividends over that entire period. And the theoretical average annual rate of return to the Yeske Buie 80/20 portfolio (80% stocks and 20% bonds) over that period was 5.90% (source: Morningstar Principia).