1 m ax b olka comprehensive business consulting building first-class financial advisors presented to...

1

MAX BOLKAComprehensive Business Consulting

Building First-Class Financial Advisors

Presented ToCoordinated Capital Securities

August 27th, 2010

“Coping With Bear Market Uncertainties: What To Tell Clients Now”

© 2010 Max Bolka - Reproduction In Any Form By Written Permission Only

Purpose Of Meeting

Answer Your QuestionsAddress Your Concerns

Communicate Our OpinionsProvide A Sense Of Direction

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Let Them Vent


What’s On Your Mind?

Where Will The Stock Market Go From Here?Major Obstacles To Investing

Is Inflation In Danger Of Making A Comeback?What Effect Will The War Have On The Market?

How Long Will The Recession Last?What To Do Now…Buy, Hold Or Sell?

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Let Them Vent


What’s On Your Mind?

How To Emotionally Survive Today’s TurmoilFour Factors To Know Before InvestingEffects Of Multi-Billion Dollar Stimulus

Will The Federal Reserve Raise Interest Rates?What Are Others Doing Right Now?

How Safe Is Your Money In The Bank?

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Let Them Vent


Show Empathy

“I Understand”“That Must Be Difficult For You”

“I Think Everyone Is In That Position”“I Certainly Hope It Doesn’t Come To That”

“Let’s Go Through And See What We Can Do To Improve Your Situation Regardless Of What The

Market Does In The Near Future”

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Let Them Vent


The State Of The World

The Fall Of CommunismElimination Of Nuclear War Threat

Unparalleled Technological RevolutionKnowledge Doubling At Record Pace

More Scientists Alive Today Than EverThe Biggest Bull Market In US History

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Introduction


TWO OBSTACLESTO INVESTING

Taxes & Inflation

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Introduction


TAXES

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Legally Reduce Or EliminateYour Income & Estate Tax Liability

Multi-Billion Dollar Gov’t Stimulus

Heirs And Charity Can Redistribute WealthMore Efficiently & Effectively

Introduction


INFLATION

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Inflation Vs. Deflation?

Computers & Satellite TV DishesPlanned Obsolescence vs.

Bread, Milk & Utilities

Introduction


#1) BUY LOW, SELL HIGH

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How Low Will The Market Go?

When Will This Bear Market End?

I Don’t Know!

10 Universal Principles Of Investment Success


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If You Didn’t Already Own This Company,Would You Buy It Today At Its Current Price?

BUY LOW, SELL HIGH

What If You’re From Mars, Had Never Heard of StocksHadn’t Lost Any Money, And Just Inherited $5 million…

What Do You Think Would Be A Good Thing To Do?





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How Do You Know It’s Not Going To Go LOWER?

I Don’t!

Buy It On Sale

BUY LOW, SELL HIGH




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How Do You Know It’s Not Going To Keep Going UP?

I Don’t!



Lock In Your Gains

BUY LOW, SELL HIGH

SUCCESSFUL INVESTORS

Overcome The Tendency Towards Fear & Greed

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“To Buy When Others Are Fearfully Selling And To Sell When Others Are Greedily Buying

Takes The Greatest Emotional Fortitude, But Pays The Greatest Rewards.”

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SIR JOHN TEMPLETON


“Buy When There’s Blood In The Street… Even If It’s Your Own”

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BARON VON ROTHSCHILD


#2) BUY QUALITY COMPANIES

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Sales Leader

Technological Leader

Strong Management Team - Track Record

Low Cost Producer

Well Capitalized - First Into New Markets

Well-known, Trusted Brand - High Profit Margin



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Keep Your Eye On The EscalatorNot The Yo-Yo

Look At Least Five Years Out

Ultimately Company Earnings Drive The Market

Invest / Don’t Speculate


#3) KEEP A LONG TERM PERSPECTIVE


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Serves As A Roadmap

Uncovers Inefficiencies = More “Gas”

Growth, Income, Taxes & Safety

Combine Investments To Accomplish Your Goals


#4) HAVE A PLAN


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What Are Your Goals?

Saving For Retirement (Growth)

Creating A Stream Of Income (Income)

Leaving A Legacy To Heirs & Charity (Taxes)


#4) HAVE A PLAN


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Too Much Company Stock, First JobFavorite Car, Favorite Sponsor

BUY LOW, SELL HIGH


#5) FOLLOW YOUR PLAN

Try To Eliminate Investing With Emotion Or On Sentiment


DOLLAR COST AVERAGINGAmt Invest Price / Share No. Shares

$12 $12.00 1$12 $6.00 2$12 $3.00 4$12 $4.00 3$12 $6.00 2$12 $12.00 1

===== ===== =====$72 $12.00 13

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Ave PPS = $7.16 Ave CPS = $5.54Value = $156


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1980 Invest $ 250,000Less Withdraw - $ 840,000

($15k +4%/yr COLA x 30 yrs)

2010 = $ 2,547,000

DOLLAR COST AVERAGING10 Universal Principles Of Investment Success


Assumes 12% Ave Annual RORTotal Withdrawals > $840,000

Includes Yr. 2000 & 2007 Loss > $1 million

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Distinguish Between Investor & Investment Performance

Your Own Personal ROR Versus

Average Rates Of Return


#5) FOLLOW YOUR PLAN


#6) PAY FOR GOOD ADVICE

Don’t Perform Brain Surgery On Yourself

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Keep In Top Financial Health



#7) THERE’S NO FREE LUNCH

Avoid Investing Solely On A “Hot Tip”

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Avoid Get Rich Quick Schemes(GRQS or “Jerks”)



#8) DON’T CONFUSE BRAINS WITHA BULL MARKET

Adhere To Universal Principles Of Investing

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Beware The Mass MediaThey Promote Fear & Greed



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If Your Money Is That Important To You,Hire A Professional To Help You Design A Plan

Give The Plan Enough Time & Money To Work


#9) DON’T PANIC


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Don’t Panic!

Markets Always Overreact

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#9) DON’T PANIC

Everything Goes In Cycles


#10) DIVERSIFY, DIVERSIFY, DIVERSIFY

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Diversify By:Country, Industry & Company

It’s The Unexpected Against Which You Are Trying To Protect



DEFINING A BEAR MARKET

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Bear Markets Have Occurred On Average Once Every Five Years

Average Duration Of Past TenBear Markets Since 1956 = 14 Months

Shortest Bear Market = 3 Months (1990)Longest Bear Market = 30 Months (2000-02)

Source: Vanguard Funds

An Historical Perspective


The Length Of 10 Bear Markets

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PeriodDuration (in Months) Percentage Drop

August 1956-October 1957 14 -21.6%

December 1961-June 1962 6 -28.0%

February 1966-October 1966 8 -22.2%

November 1968-May 1970 18 -36.1%

January 1973-October 1974 20 -48.2%

September 1976-March 1978 18 -19.4%

January 1981-August 1982 19 -25.8%

August 1987-December 1987 4 -33.5%

July 1990-October 1990 3 -19.9%

March 2000-October 2002 30 -49.1%



Source: Vanguard Funds

Plus The Latest Bear Market

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October 2007-March 2009= 18 Months

Dow Drops From 14,000 To 6,500= (-53.5%)

What Causes A Bear Market?

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Military Actions+ Political Events

+ Economic Activity+ Investor Sentiment= Prepare In Advance

Extraordinary Comeback &Long-Term Performance (S&P)

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10 Years 1975-1984: 14.8% ROR15 Years 1975-1994: 16.6% ROR25 Years 1975-2000: 16.1% ROR

Past Performance Is Not Indicative Of Future Results


HISTORY REPEATS ITSELF

30 Years 1975-2005: 13.2% ROR


Markets Rarely Move In A Straight Line

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Major Market Moves Tend To OccurOver Brief Periods Of Time


HISTORY REPEATS ITSELF


MARKET TIMING How Good Are YOU?

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Source: Standard & Poor’s Micropal. Based on returns of the S&P 500 Index over the 10-year period ended 12/31/07. Index is unmanaged and includes reinvested dividends; one cannot invest directly in an index. Past performance does not guarantee future results.

10-Year Period Ended December 31, 2007

Period of InvestmentS&P 500 Average

Annual Total Return

Fully Invested 5.91%

Missing the 10 best days 1.13%

Missing the 20 best days -2.55%



RECOVERY PERIODSAre Often “Front Loaded”

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Source: Schwab Center For Financial Research Past performance is no indication of future results. Results from recovery of S&P 500 three largest bear markets since 1950. (1/70-11/70, 11/73-3/75, 7/81-11/82)

Period of Investment

Ave Cumulative ReturnAfter Bear Market

1 Yr 2 Yrs 3 Yrs

Fully Invested 45% 63% 76%

Miss First Month of Recovery 32% 49% 61%

Miss Three Months of Recovery 19% 36% 44%

Miss Six Months of Recovery 12% 28% 36%

Asset AllocationModel portfolios: 1926-2006*

Asset Allocation Average Annual Return Years With a Loss Average Loss

100% bonds 5.5% 13 of 81 -3.1%20% stocks / 80% bonds 6.8% 11 of 81 -4.0%30% stocks / 70% bonds 7.4% 13 of 81 -4.7%40% stocks / 60% bonds 7.9% 15 of 81 -5.5%50% stocks / 50% bonds 8.5% 16 of 81 -6.8%60% stocks / 40% bonds 8.9% 20 of 81 -7.1%70% stocks / 30% bonds 9.4% 21 of 81 -8.5%80% stocks / 20% bonds 9.8% 22 of 81 -9.8%100% stocks 10.5% 24 of 81 -12.2%

*The performance data shown represents past performance, which is not a guarantee of future results.

Stocks: Standard & Poor’s 500 Index from 1926 to 1970, Dow Jones Wilshire 5000 Index from 1971 through April 22, 2005, MSCI US Broad Market Index thereafter.

Bonds: Standard & Poor’s High Grade Corporate Index from 1926 to 1968, Citigroup High Grade Index from 1969 to 1972, Lehman Long-Term AA Corporate Index from 1973 to 1975,

Lehman Aggregate Bond Index thereafter.

Source: The Vanguard Group

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THE 4 MOST DANGEROUS WORDS

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“This Time It’s Different!”

September 11th, 2001 Dow Goes From 11,500 to 7,500 = -35%

Sept 24th One Week Loss = -14.3%Largest Drop In 61 Years

October 10th., 2008 Dow Goes From 14,000 to 8,900 = -35%

Oct 10th One Week Loss = -18%Largest Drop In 75 Years

Source: http://www.djindexes.com/mdsidx/index.cfm?event=showavgDecades&decade=1990

Current Market Update

RECOVERY TIMES SHORTEN

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March 9th, 2009Dow Hits Five Year Low = Approx. 6500

(Start Of This Bull Market?)

Full Recovery = Less Than Two Years Sept 2001-May 2003

October 1st, 2002Dow Hits Five Year Low = Approx. 7300

(Start Of Last Bull Market)

Source: http://www.djindexes.com/mdsidx/index.cfm?event=showavgDecades&decade=1990



Bear Markets Since 1970

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Dow Jones Industrial Average1

Source: Ned Davis Research, as of 12/31/07. Figures based on the Dow Jones Industrial Average, comprising 30 large capitalization stocks. Indexes are unmanaged & include reinvested dividends; one cannot invest directly in an index. Past performance is no guarantee of future results.

Bear Market Decline Recovery Days

4/71–1/71 16.1% 209

1/73–2/74 45.1% 694

9/76–2/78 26.9% 525

9/78–4/80 16.4% 591

4/81–8/82 24.1% 472

11/83–/84 15.6% 238

8/87–0/87 36.1% 55

7/90–0/90 21.2% 87

7/98–8/98 19.3% 45

1/00–9/01 29.7% 616

03-10/02 31.5% 204

SOME THINGS ARE DIFFERENT

$ 750 U.S. Bailout Package (TARP)

Worldwide Government Consensus

Increased US Bank Deposit Insurance

Massive Liquidity Injections / Non Financial Bus

Worldwide Coordinated Rate Cuts

Worldwide (Semi) Nationalization Of Banks


© 2010 Max Bolka - Reproduction In Any Form By Written Permission Only 50

A CRISIS OF CONFIDENCE

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A Crisis Of Confidence A Crisis Of Consciousness

Fear vs. Faith

Companies Media Government



ACT YOUR AGE

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50 + Years Old

Low Prices = Good News

“Back The Truck Up”

Keep Contributing To 401k

Don’t Sell Low



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60 + Years Old

India = 1.2 Billion People 1/3 Land Mass

75% (800-900 Million)Live on Less Than $2.00/Day

Be Grateful, Make A Plan And Don’t Sell Low


ACT YOUR AGE


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70 + Years Old

Come See Me For Options

Don’t Lock In Your Losses

You Haven’t Lost A Dime! (Unless You Sell)


ACT YOUR AGE


WWBD?(What Would Warren Buffet Do)

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$5 Billion Goldman Sachs $3 Billion GE

BUY LOW, SELL HIGH

Personal Money / Heirs = Charity

80 Years Old / Aug 29, 1930



HOW SAFE ARE THE BANKS?

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FDIC Is A Self Funded Pool Of Reserves

Backed By Full Faith & Credit Of U.S. Government

“Extensive Internal Stress Testing…We Believe Reserves Will Be Sufficient”

Source: http://www.charlierose.com/shows/2008/10/17/1/a-conversation-with-sheila-bair-chairman-of-the-fdic)



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Inflation vs. Depression

Equities = Protection Against Inflation

$20 Bread vs. Bread Lines

Goal: Keeps Banks Open



HOW SAFE ARE THE BANKS?

THE RECESSION

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Financial & Economic Phenomenon Based Upon Self Fulfilling Prophesy

Scarcity Mentality & Fearful Emotions

Cash Is KingBut Only If You Use It

Fortunes Are Made In Recessions


BUY LOW, SELL HIGH


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Everything Is On Sale!

We Love Low Prices At Wal-Mart We Hate Low Prices On Wall Street


THE RECESSION

BUY LOW, SELL HIGH


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Upturns Have Historically Followed Downturns

“You Must Be Present To Win”

You Haven’t Lost A Dime! (Unless You Sell)

For Every Seller (The Herd) There’s A Buyer (Warren Buffet)


THE RECESSION


FEAR, GREED & REGRET

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Ride The Elevator All The Way DownBut Don’t Get Off

$3.5+ Trillion In Money Markets

Don’t Regret Missing The Start Of The Next Bull Market



NAME THAT STOCK

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NAME THAT STOCK

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SUMMARY

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- Wayne Gretzky

“I Skate To Where The Puck Is Going To Be, Not To Where It’s Been”

“You Miss 100% Of The Shots You Don’t Take”


SUMMARY

We Believe:

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History Repeats Itself

Don’t Lock In Your Losses

This Time It’s No Different


You Haven’t Lost A Dime (Unless You Sell)

Everything Goes In Cycles


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BUY LOW, SELL HIGH


SUMMARY

We Believe:

CONCLUSION

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FEAR vs. FAITH

Adam Smith:“If You Don’t Know Who You Are,

The Stock Market Is An Expensive Place To Find Out”


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FEAR vs. FAITH

What If This Time It IS Different?


Buy The 3-G’s:Guns, Generators & Gummy Bears

CONCLUSION

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FEAR vs. FAITH

Max Bolka:“Ours Is Not To Reason Why

Just Buy Low & Then Sell High”


CONCLUSION

WHAT TO DO NOW

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1. Make An Appointment

2. Map Out A Financial Plan

3. Evaluate Your Current Portfolio

4. Adjust Your Spending Plan

5. Review Tax Reduction Strategies6. Confirm Your Estate Plan


THANK YOU FOR ATTENDING

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For More Information On:All Aspects Of Practice Management,

Speaking, Writing & Coaching

MAX BOLKAComprehensive Business Consulting“Building First-Class Financial Advisors”

Nationwide: (800) 472-3288www.maxbolka.com


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max bolka reproduction

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