Wild Bill and the NYSE

Originally published September 15, 2003

The flap over the pay of New York Stock Exchange chief Richard Grasso is reminiscent of times past, when the NYSE was run by the “good old boys” of American high finance. They were in control until “Wild Bill” Douglas appeared on the scene as head of the SEC in 1936 and forced the Exchange to make stock trading a more democratic institution.

Grasso is Chairman and Chief Executive Officer of the Exchange. He is an employee of the corporation, tasked with overseeing the world’s largest open auction exchange of financial securities. His recently announced one-time payment of $140 million of deferred compensation has raised a number of eyebrows.

According to an article in the Sept. 12 Wall Street Journal, the Exchange hired executive compensation consultants in 1994-95 to review its executive’s compensation. Since the Exchange is a not-for-profit entity, it cannot reward exemplary performance with stock or stock options. Therefore, the Exchange set performance targets for its executives and rewarded them with deferred compensation and bonuses, retirement supplement plans and other target bonuses.

Nobody is questioning the job done by Mr. Grasso. By all reports, he has done an outstanding job of running the NYSE. However, brokers who pay a fee to operate on the Exchange were surprised to learn that while their income has been declining with the falling stock market and the fees they pay the Exchange for the right to do business have risen, Mr. Grasso’s income has shot up.

Prior to Douglas, the President of the NYSE was a member of the Exchange. Perhaps the most famous NYSE President was Richard Whitney, who during Black Thursday in 1929 calmly walked down to the floor of the Exchange and began purchasing blue chip stocks (spending over $20 million in the process) in a single-handed attempt to stop the panic crash. Whitney was later convicted of stealing from the Exchange and ultimately went to jail for his troubles. But Whitney’s affair was not the only problem the NYSE was facing in the mid-1930s.

William O. Douglas arrived on the scene as the third commissioner of the newly formed Securities and Exchange Commission. Appointed by President Roosevelt, Douglas was nicknamed “Mr. Trouble” by the New York press. He was not a friend of the big business/money interests that dominated American finance in that era.

Douglas was ruthless in his drive to reform this venerable institution of American capitalism. During his tenure at the NYSE and later as a Supreme Court Justice, Douglas was criticized by conservatives for his extremely liberal views. Author Bruce Murphy, in his biography Wild Bill, the Legend and Life of William O. Douglas, points out that Douglas was concerned with the preservation of capitalism and the Exchange, and he believed the best way to accomplish this was to ensure that the Exchange remained “above suspicion.”

Whitney’s disgrace gave Douglas the opening he needed to use the SEC to reform the NYSE. The Exchange soon had a new constitution aimed at furthering its public responsibilities, not just its members’ interests. The president became a paid employee, not a member of the Exchange. Brokers were forbidden to have margin accounts for themselves if they did business with the public. From that point forward, the SEC, not the NYSE, would set margin requirements, a powerful tool for dampening speculation and preventing another bubble like the one in 1929.

The Exchange has operated relatively unchanged since the days of Douglas. The Grasso situation is once again calling public attention to the affairs of this private institution. Perhaps it is time, as some floor brokers would attest, for another “Wild Bill” to ride onto the scene.

William O. Douglas

by Bruce Fenton

William O. Douglas’ father died when William was 6, and from that point on he worked to help support his mother. At twelve he was stricken with polio and told he would never walk again—something his indomitable spirit would not allow him to accept, for soon he was hiking in the mountains near his home.

At 18 he went off to college, living four years in a tent while he both worked full-time and went to school, graduating with honors. Penniless, he worked as a shepherd. He took a herd of sheep to Chicago, where he hopped freight and rode the rails into New York with 6 cents in his pocket to enroll at the Columbia Law School. But first, he had to get a job to pay for school and support his mother.

When law school was completed, Douglas attracted the attention of President Franklin D. Roosevelt, and was appointed to the newly formed Securities and Exchange Commission (SEC), and by 1937 became chairman. In 1939, Douglas was nominated to the U.S. Supreme Court by Roosevelt where he will be forever remembered for his liberal opinions on freedom.

Today, we all live with another of his legacies as a result of his role with the SEC. The SEC was organized to administer three Acts: the 1933 Act, which regulated the offer and sale of securities; the 1934 Act, which regulated stock exchanges and various practices of brokers; and the 1935 Act, which called for the dissolution of public utility holding companies. Later, the 1934 Act was amended to allow—under general supervision of the commission—the self-government of brokers and dealers in the over-the-counter market. The self-governing organizations became known as the NASD and the OTC market became the NASDAQ.

At the time, Douglas was concerned with the fact that less than one percent of the total number of stockholders held fifty percent of all securities listed on stock exchanges. He made it his mission to see that the large percentages of stockholders on the small side were protected. In his book, Go East Young Man, he describes the situation as reminding him of the “golden-mantled ground squirrel in the Cascades who is the anchor man in the food chain. He is to predators what hamburger is to man. His enemies are many… in the capitalistic system the unsophisticated small stockholder is the ground squirrel… hamburger for predators!”

As a jurist, Douglas could be counted on to protect the rights of the small and the weak. His was the opinion that “man’s age-long effort has been to be free. And we can keep that freedom only if we are self-reliant enough to be free. We cannot become self-reliant if our dominant desire is to be safe and secure; under that influence we could never face and overcome the adversities of this competitive age.”

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

Stock Market Performance

by Bruce Fenton

In case you may have failed to notice, as of March 30, the Dow has remained above 11,000 for the past 15 days, 31 days in all for the first quarter, according to WSJ numbers. We have not been treated to numbers like this since 2000 when the DJIA hit an all time high of 11,722 on Jan 14, 2000.

Despite wars, pestilences of all types, kidnappings, bombings, rising interest rates and oil prices, steadily declining numbers for the current President’s approval ratings … you name it … this economy keeps chugging.

If you find this confusing, take a look at the numbers underlying the economy. Corporate profits jumped 21.3% in 2005 to $1.35 trillion … representing the largest share of national income in 40 years, 11.6%. To stock market investors, rising profits are like rising rents for real estate investors … a nice feeling.

The Bureau of Economic Analysis (BEA) released its final report on Gross Domestic Product for the fourth quarter 2005. Real gross domestic product, calculated as the output of goods and services produced by labor and property located in the United States, increased at an annual rate of 1.7 percent in the fourth quarter 2005. In the third quarter, real GDP increased 4.1 percent annualized.

Gross domestic product is the universally accepted measure of the economic activity of the nation. It is the sum of final output measured by the equation C+I+G +(X-M) = GDP where C is consumer spending, I is private or business investment, G is government spending and X-M is the net of exports minus imports.

As the economy goes through different cycles, the changes in the components become important indicators to market watchers. For example, the I component, or business investment, contributed to the 2001 recession by decreasing -7.9% in 2001, and further shrinking by -2.6% in 2002. Yet, the economy remained afloat thanks to the consumer, whose spending increases, year over year, were +2.5% and +2.7% for the same years.

While year over year changes in consumer spending are +2.9% 2003, +3.9% 2004, and +3.5% for 2005, the real muscle for the economy is coming from the change from negative growth in business investment in 2001 and 2002, to strongly positive figure in 2004 and 2005, where year over year changes were +11.9% and +6.1% respectively.
Those worried that the government is spending the economy into a deep hole might find some comfort in the fact that the growth in government spending is decreasing from +2.8% 2003 to +1.8% in 2005.

The above figures came from the BEA’s web site, www.bea.gov.

GDP as an indicator has evolved since the 1930s. Simon Kuznets, an economist hired by the U.S. Department of Commerce in the 1930s, led the creation of a national accounting system. Up to that time, policy makers had little idea how the economy was performing, and worse, had no way of predicting with any accuracy, the impact of fiscal and monetary policy changes on the nation’s economy.

Today we take for granted the operations of the Federal Reserve Board as it attempts to control the nation’s money supply, and indirectly, inflation. With libraries of data at their fingertips, these watchdogs of our money can make relatively informed decisions as opposed to their predecessors in 1928 and 1929 that are widely criticized for their actions which many felt contributed to the crash of the stock market. Little mention is given, however, to the difficulty these Fed governors had who were “flying blind”, without any reliable data to guide their decisions and measure results.

Markets will continue to react to changes in GDP. Strong positive growth is good for the stock market, and generally a negative for bonds, as increased economic activity tends to push up prices and interest rates. The opposite is true as the rates of change decline.

Bruce Fenton is a financial consultant, a writer, and the president and founder of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

Impact of India

by Bruce Fenton

“When people have hope, you have a middle class.” This quote from the cofounder of Yahoo, Jerry Yang, to a senior Chinese Government official was reported by Thomas Friedman in his book, The World is Flat. Well, look out world—there is a huge middle class movement taking place in the world’s second most populated country, India.

It’s hard to imagine, but America’s key strategic partnership in the 21st century could end up being this nation of over a billion people, approximately one third of whom are Muslim.

Friedman notes that the existence of large, stable, middle classes around the world is crucial to geopolitical stability. It makes sense … middle classes with hope for the future are less likely to blow themselves up for some radical cause, are more productive, and more likely to eventually save for a life after work.

In a recent column on Yahoo, Charles Wheelan, Ph.D., wrote “What’s good for India is good for us.” He makes his case based upon four reasons that we should hope that the next decade in India is at least as good as the past ten years have been.

First, he notes that if we are going to promote democracy as a worldwide way of life, what better nation to carry that torch than India. With over a billion people, 22 official languages, and enough ethnicities to make everyone a minority, if democracy can work there it can work anywhere.

Despite structural problems within India’s governmental system, Indians still vote in higher numbers than Americans, they enjoy a reasonable amount of stability, a rule of law and a respect for individual rights.

Second, an economy growing at over 6% a year for the past ten years has lifted more than 100 million people out of dire poverty. Despite those numbers, India is still home to about one third of the world’s poor. There is still so much to do, but the possibilities for continued growth and progress are huge.

Third, while many of us think of India as the land of outsourcing and “24/7” call centers, their growth helps our economy. Their growing middle class drink our sodas, buy our computers and software, and I’ll bet most of their kids want, or own, an iPod®. As Wheelan so aptly states, “It doesn’t matter what business you’re in, having 300 new middle class consumers in India is good for you.”

The author notes that Indian firms will design and sell products that make our lives better. Thanks to the dot.com bust, many of the highly skilled Indian engineers working in Silicon Valley on temporary visas went home and put their brainpower to work. Today they collaborate with their former U.S. employers as well as produce their own innovative solutions to a host of technological problems.

This in turn leads to the simple fact that competition from Indian firms, and outsourcing by American companies, lowers the cost and improves quality of many of the goods and services we buy. What we save as a result works the same as a tax cut for American consumers and companies.

Finally, Wheelan makes the point that despite the fact that China’s economy is growing faster than India’s, India is not China. The latter, despite its movement toward capitalism, is still an autocratic, totalitarian state … which in turns leads to unpredictability in its geopolitical relations.

Our relationship with India is not problem-free. India will be a prodigious consumer of energy …and that will drive up our energy bill. We need to find work for Americans outsourced by Indian firms. These are not easy problems to fix, but make no mistake, India is a force to be reckoned with and one we want to have on our side.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

2006 New Years

by Wendell Cayton

What’s not to like about this economy … especially looking forward to next year? Considering hurricanes, soaring energy prices, higher interest rates, and a war that won’t go away, the overall performance is a testament to the willingness of both consumers and business to spend and invest. According to Moody’s Economy.com®, the economy should enjoy a real GDP growth of over 3.5% this year. By their figuring, this will translate into the creation of over 2 million jobs and a 5% unemployment rate. They note that this in not on par with the 3 million jobs created annually during the latter part of the 1990s; labor-force growth has slowed, indicative of an increasing rate of retirement from the workforce.

As a nation, we are growing stronger balance sheets, both on the business and the household
sectors. Corporate profitability is up. And helped by historically low interest rates, corporations have strengthened their balance sheets and have plenty of cash on hand.

Household net worth is growing even more quickly and will soon hit an all-time high, six years
after the previous peak. Naysayers who continue to point to increasing consumer debt as the engine fueling consumer spending are neglecting to factor in increasing household incomes, increased retirement plan account values, and higher real estate equity.

Fears of higher inflation caused by higher interest rates and increasing fuel costs are perhaps
overblown, as core consumer price inflation is only 2% and the federal funds rate target and fixed mortgage rates hover around 4.25% and 6% respectively—both low by historical standards.

Looking forward to 2006, we see more promising signs of continued economic growth, with some bumps to be avoided.

The domestic auto and airline sectors can be described as anemic at best. Bankruptcy plagues both industries, leaving investors scratching their heads, wondering if they will ever return to profitability. Personally, I believe airlines will be increasingly impacted by the proliferation of broadband Internet and the spread of inexpensive video conferencing capability.

Speaking of inexpensive video conferencing, if you haven’t been in an Apple® store recently, treat yourself to a demonstration of their capabilities. With a setup in Grandmother’s home and one in your house, you can have everything you need to stay in touch (except for the cinnamon rolls and hugs) without the hassles and expense of air travel.

The combination of increasing interest rates and higher energy prices could also put a damper on the 2006 party. A disruption in supplies, or a colder than average winter, could drive oil and gas prices to much higher levels, which in turn puts pressure on economic growth. Lest we forget, higher interest rates in the home mortgage market could continue to drive down housing affordability and cool off the hot housing market.

Aside from the “bumps,” on the plus side we have increased business productivity, as growth in labor compensation has not kept pace. Moody’s points out that businesses are generating more than enough cash to cover their projected investment needs.

With cash to spend, it is a good bet we will see increased business investment spending, which should result in expanded payrolls and more jobs, which means stronger consumer spending.

2005 New Year's Resolutions for Investors

by Wendell Cayton

Since this is the time for New Year’s Resolutions, I considered a few for the investment-minded. Calling them resolutions, goals, or objectives makes little difference - following them will make a difference!

1. Save first and spend what’s left
   The road to riches is paved by discipline to live within one’s income. Those who learn to pay themselves first by saving before they spend will have capital to invest. It is this creation of capital that will buy economic freedom.
   
   Unfortunately, U.S. savings rates are at an all-time low. Economists believe that this is somewhat the result of generous stock market returns creating a sense of wealth that is muting the incentive to save. Keep in mind that the stock market is where savings should be invested, not where savings are created. A disciplined approach to “saving first and spending what’s left” will give you the capital to benefit from the stock market.
   
2. Maintain a diversified portfolio approach to investing
   Having all of one’s eggs in one basket, so to speak, is a high-risk strategy that can cause sleepless nights. With a rapidly rising stock market the temptation is to buy the hot stock(s) or own the hot mutual fund. Think back to September when the same stocks or funds plunged. Wouldn’t it have been nice to have owned some stodgy, government bonds that shot up in price at that time? Those who did were in a position to sell the bonds and buy the stocks that went on sale at a 40% or greater discount!
   
3. Buy low and sell high
   Makes all the sense in the world, but it is very difficult to execute. Nevertheless, look for good companies that you would want to own whose price has been pushed down by bad news about its industry and whose fundamental business is solid. Buy at a discount. The time to sell is when you reach a point where you would not buy the stock for that price. . . too expensive. Sell if you have a better idea where to put the money.
   
4. Think long-term when investing
   Buy good companies that you would be proud to own years from now. Market timing is terribly tricky and even the pros do not do it well. Buying and holding quality stocks or the mutual funds that invest in high quality stocks will help you ride out market swings like those last fall with confidence.
   
   Recall the September headlines in the financial press? The financial world as we then knew it was teetering on the brink of extinction. . . a crash equal to ’29 was imminent. Those who suddenly became short-term investors, and who listened to the pundits, sold and missed the moves up that took the stock market back to new highs in November. Keep your long-term perspective, regardless of short-term market volatility.
   
5. Avoid the “Urban Myth” stocks
   These are the stocks you hear about from your neighbors at the local coffee shop. They know somebody who knows somebody else whose son works for the company that is about to bring out the product/service that will end all of mankind’s woes. . . and the stock is selling for $.50 a share! How can you go wrong? Simple, buy into the myth. See resolutions #3 and #4.

Have a Happy New Year and may this one be the best of the century!

Witch of Wall Street

by Bruce Fenton

Contrary to the widely held belief, Meg Whitman, CEO of eBay, is not the first “World’s Richest Lady to Make It on Her Own.” Arguably, that title may rest with one Hetty Green.

Had there been a Forbes Four Hundred list when she died in 1916, she surely would have been among the top twenty. According to some historians, she remains to this day one of the forty richest Americans ever.

Hetty made her money the old fashioned way . . . never spent a penny she didn’t have to, and invested wisely in businesses she understood.

Her family came from Mayflower stock. In the early 19th century, they built a fortune in the New England whaling industry. She inherited a piece of the family fortune, including some from her father who learned early in life that the easier money could be made on Wall Street. It was from him that she inherited a love and a nose for trading properties and stocks.

Even though her inheritance provided a handsome annual income, it wasn’t enough for Hetty. Never, it seems, would she have enough. Stories of her miserly, penurious ways abound. This was a lady obsessed with money itself—not the power of money, not what it would buy, but simply bigger piles of money.

No matter how minor the sum, she would part with none of her money without a huge emotional sacrifice. A story is told that she spent most of a night tearing apart a carriage to find a two-cent stamp that had fluttered from an envelope. During the time she spent looking for that stamp, Hetty’s vast fortune earned enough in interest to equal an average family’s annual income.

As good as she was at not spending money; she was equally adept at making it.

In their book The Witch of Wall Street, Hetty Green, authors Boyden Sparkes and Samuel Taylor Moore quote her views on investing: “I don’t believe in stocks. I never buy industrials. Railroads and real estate are the things I like. Before deciding on an investment, I seek out every kind of information about it. There is no great secret in fortune making. All you have to do is buy cheap and sell dear, act with thrift and shrewdness and be persistent.”

In 1885 Hetty just barely survived the failure of the investment bank of Cisco and Son, holders of her vast sums of currency, stocks, bonds, real estate deeds, and certificates of deposit (CD). She quickly moved her money to Chemical Bank in New York. They were kind enough to offer her an office to work from, but Hetty wouldn’t risk being called a New Yorker and being made subject to New York taxes. So the world’s richest woman, when visiting her money, would work at whatever desk or counter was available. If none were available she would sit on the floor, clipping coupons. She would even bring her own lunch, which she heated on the radiators.

She was a familiar sight on Wall Street in her later years, dressed in drab utilitarian clothes, trudging from bank to bank, brokerage to brokerage, conducting her business. She refused to pay for a cab . . . “Couldn’t afford one,” she would complain.

She spent her last days moving through a succession of rooming houses and cheap hotels, all to avoid paying New York taxes. Fortunately, she died before the income tax became a staple of American economic life!

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

2004 New Year

by Wendell Cayton

Let’s make 2004 the year it all comes together!

We believe that no other system or collection comes close to The Macaulay Group’s Comprehensive Wealth Management System.

To fully understand THE SYSTEM, you must understand its six strategies. Together, these strategies and their tactical implementation make up The Macaulay Group’s system. Five of the strategies are operational; the sixth is a “Master Strategy” that governs the implementation of the other five.

The result is a Comprehensive Wealth Management system that, we believe, will best allow the achievement of your financial goals. To the extent that you are achieving your goals and raising the bar to even higher standards, you are doing these things—your choice is simply whether you want to develop them yourself or buy them.

1. Computerize your business. That’s right, I said business. It’s important that you under­stand that we view each client household as a business. You are obviously the president; we want to be your CFO. Business owners would not dream of running their operations without a monthly balance sheet, cash flow statement, statement of changes in financial position, and a tight grasp on where they stand at any given time with inventory, credit lines, payables and receivables.
   
   It has always amazed me that when we sit down with our clients’ personal affairs, they make decisions with a collection of unconsolidated monthly statements. Furthermore, they have no idea of the net after-tax, after-fee return on investment. They have outdated wills, trusts, and insurance policies, and they have not run multiple scenarios with state-of-the-art professional planning software. My group invests a lot of money to make all of these resources available to all of our clients as part of the added value we bring to the table.
   
2. Build a Team. By definition, Comprehensive Wealth Management must be very different for any two people. Depending on your situation, you may have a need for experts in financial planning, estate planning, business valuations, liquidity options and strategies for owners of closely held business or large real estate holdings, insurance and long-term care planning, charitable giving, taxes, legal matters, borrowing money, selling a business, ESOPs, option grants or investment management. While we are certainly not experts in all of these areas, we do work with individuals who are. When you hire The Macaulay Group, you immediately have access to the whole first string.
   
3. Protect and preserve your existing wealth. Our clients are already wealthy—they have made their money building a business or practicing medicine or law or playing baseball or climbing up the executive ranks of a successful public company and saving their money. The last thing they want is someone new coming in trying to be a hero. We focus on getting our clients competitive returns while helping them to avoid landmines:
   
   a. We are ruthless in keeping fees down.
   b. We hold managers accountable for performance and buy/sell decisions.
   c. We pride ourselves on finding and cutting out unnecessary fat.
   d. We bring modern investment techniques to the table to help protect the downside.
   e. We do a complete insurance needs analysis (life, disability, and liability).
   
4. Planned Giving and Estate Planning. Bottom line . . . what is the most tax-efficient way to get your assets from you to wherever you want them to go? There are two separate and distinct facets of this equation (while you are alive and after you’re gone), yet they need to be coordinated—not only with each other, but also with your entire Wealth Management plan. We have done an unusually high level of work with clients who have a large percentage of their net worth in a closely held business or practice, clients with large IRAs or qualified plans, and clients with quite a few stock option grants.
   
5. An Organized Set of Checks and Balances. If you buy a Mercedes but don’t perform scheduled maintenance, you will have problems. If you are in a situation where you have built a substantial net worth and are faced with some of the issues I have mentioned in this letter, you cannot simply review things “once in a while.” There should be a yearly, monthly, weekly, and daily service checklist.
   
6. Master Strategy. This is the strategy we employ to implement the preceding five operational strategies. It includes a “Launch Strategy” designed to get your custom-designed system off the ground with minimal disruption to your current financial life. We then proceed to build on your customized system in a very structured manner, focusing on one operational strategy at a time and working to create a stable, productive environment.
   

2003 New Year’s Resolutions

by Wendell Cayton

As the New Year rolls around, we once again face the celebrations, both festive and serious, that mark the end of an old year and the beginning of a new one. For investors, the old one wasn’t so bad, but as a culture driven by change and opportunity, we still look forward to a better New Year.

New Year’s Resolutions symbolize our desire to make a fresh start. This custom goes back many centuries, and it has become a ritualized way of reviewing the past year and looking toward the future. It’s appealing because it gives us the opportunity to imagine changes we’d like to make.

Our calendar starts the New Year in the month Julius Caesar named after Janus, the god of gates, doors and beginnings. Janus had two faces—one looking forward, the other backward.

The Indians of the North American forests and plains celebrated the New Year by burning their old food stores from the year before and allowing the fires to go out, after which they were rekindled to symbolize a new beginning.

Cleaning has been a recurring symbolic idea. In ancient England, chimneys were swept so that good luck could more easily descend and stay. Germans still hold that one should live the first day of the year the way every remaining day should be lived; among other things, the hausfrau spends extra time making her home spotless. Housecleaning is also traditional in Japan, China and Africa.

Eating pork on the first day of the year became a tradition in nearly every country because pigs root in a forward direction, symbolic of a fat, plentiful future. The custom of making noise with horns, bells and other devices goes back to the ancient practice of using noise to drive evil spirits away.

Looking forward, perhaps I can share a few resolution thoughts with you.

Instead of rushing out to buy a membership to the local gym, go to www.RealAge.com. Take their age test, giving answers that reflect how you live now. The results will compare your biological age to your chronological age.

At the end, there is an Age Reduction Planner you can use to see yourself as you would like to become . . . ten pounds lighter, adding more exercise, etc. The object of this “game” is to reduce your biological age by improving your lifestyle. The new results should decrease your biological age—and if they do, then those changes you hypothetically made become your guideline for developing a new lifestyle resolution.

On the financial side, an easy resolution to make that is fun to keep is to develop the habit of saving a little money each week for a slush fund, whose purpose may be nothing more than paying for a special night out at the end of the year. This can be done with as little effort as keeping a jar in your bedroom and depositing all your pocket change into it each night. You’ll be amazed at how fast the jar fills, and you may also find that it stimulates you to get really serious about saving and increasing the amount you put away in your retirement account.

Finally, be kind to the bears. They’ve had three years in the sun, forcing bulls to run off and cower in their sheds. They have only been able to make this claim twice in the past twenty years—and now they have retreated to their lairs. As in nature, everything moves in cycles, and the bears will return. This is not a time to gloat; rather, it is a time to be thankful they didn’t eat us all.

May you enjoy a Happy New Year and good investing!

2002 New Year’s Resolutions

by Wendell Cayton

New Year’s Resolutions . . . we make ’em and break ’em. We humans are as alike as we are different. Here’s one resolution we all have made, at least once in our lives, which we shouldn’t break.

No, I’m not talking about the resolve to never purchase another “can’t miss” IPO stock. It’s a foregone conclusion that the next time our neighbor turns a $2,000 investment into $20,000 in a matter of weeks, that itch will be back.

I’m talking about the resolution that most of us make to get our bodies back into shape. Over the years, as my clients have aged . . . and I have aged . . . I have become increasingly aware of the fact that a successful retirement is really about quality of life. That has more to do with how we take care of ourselves physically than how much money we have piled up.

Last week, I found a most intriguing website devoted to aging and health: www.realage.com

The site directs you to take the RealAge Test. The test consists of numerous questions regarding lifestyle . . . what you eat, your physical condition, how much you exercise, your family health history, your health history and so on. The test is designed to measure your real age as opposed to your chronological age. If people take very good care of themselves, their real ages are equivalent to those of younger people. If they abuse themselves, their real ages are likely to be that of older people. The site also provides a number of suggestions on how to make yourself younger.

I took the test as I live now and then retook it as if I kept all my resolutions to get in shape, eat breakfast and green vegetables, drive a little slower and always wear my seatbelt. I materially added years to my life!

I challenge you to do the same. Take the test both ways—first honestly as you live today, and then again as you would like to live. While you’re at it, hit the nearest bookstore for a delightful and provocative book on aging: Breaking the Rules of Aging by David Lipschitz, MD, PhD.

As a geriatric medicine specialist, Lipschitz became increasingly aware of how poorly doctors treated patients over 50. Their immediate medical conditions were treated, but the doctors seemed to be interested only in those immediate problems and not the future lives of the patients. Lipschitz’s book deals with the future and how one can learn to live with aging and still enjoy life. He notes that an average 70-year-old is likely to live another 16 years, but a really healthy person of the same age could easily live to 100.

He also explores a number of myths about aging, like “a little weight as we age helps,” “heart tests and treatments will save your life,” and my favorite myth, “walking is the perfect exercise for older adults.” Dr Lipschitz says strolling doesn’t cut it—we need to pump iron, put a little physical stress on our bodies. That matters . . . regardless of how old we are!

I challenge you to take the RealAge Test. Then read Dr. Lipschitz’s book. Doing so should put a little resolve into that resolution.

Have a happy and prosperous New Year!