When  it comes to the multitude of professional services that we need (e.g. legal, health, financial,) we can choose to try to handle them ourselves or rely on a so-called professional.

A doctor friend of mine told me that "anyone who treats himself has a fool for a patient".  Generally speaking, I think that this is good advice.  I believe that you need to rely on "experts" to a certain extent, but how much do you really need to rely on them?

Professional Money

You have to understand that these "experts" that you rely on have a financial incentive and that the advice that they are giving you may be what's best for them but not necessarily for you.

You have a choice when it comes to investing.  You can either use a professional, or you can do it yourself.  Professionals who manage money for individuals call themselves many things nowadays.  They may call themselves stockbrokers, financial consultants, financial advisors, etc.

If you use a professional, you also have to choose which type of firm you want to do business with.  Do you want to do business with a "wire house" such as a Merrill Lynch, Smith Barney, or Morgan Stanley?  Or do you want to deal with a smaller or mid-size firm?

Generally speaking, if you do business with a wire house, the financial consultants who work there have more constraints put on them than they do at the smaller firms.  In other words, the financial consultants at wire houses are more limited in the products that they can sell you and how they have to treat you.

The financial consultants at wire houses generally receive a lower payout than the financial consultants at the smaller firms.  In other words, say that a financial consultant at a wire house generates $100,000 in commissions.  He may get a 35% payout, or 35% (0.35*$100,000) of that $100,000, or $35,000 (less taxes, of course.)

The financial consultant at a smaller firm may get a 50 - 60% payout on what they earn.  So why would anyone want to work at a wire house instead of a smaller firm?  There are many reasons.  The wire houses spend more money on research, support, and marketing.  Those expenditures benefit their consultants, so these firms pay their consultants less of a payout because their expenses are higher.

The wire houses have also become "jacks of all trade but masters of none".  Their  goals are to target high net worth individuals and get their mortgages, investments, bank accounts, and the kitchen sink under their roof.  These wire houses have become "one stop shops" .

Banks are doing the same thing now.  If you go into a bank, the personal banker who assists you always tries to push you to speak with the investment guy.  Banks and brokerage firms are competing with one another to take your money and put it into the most profitable product area for them:  INVESTMENTS.

Do not think that just because a firm is small that  it is bad or shady.  The wire houses like to scare you into thinking that so that they can keep their oligopoly.  There are good and bad firms that are big and small.  I can't tell you the amount of fines that have been levied against these wire houses over the years for bad behavior.  In other words, they have just as many bad apples among them as they do at the smaller firms.  They just have more money to spend on marketing to make you think that they are squeaky clean.

If you choose to use a professional to manage your money for you, you should do your due diligence either way.  You can go to the NASD (National Association of Securities Dealers) website to find out more about the firm or individual that you are thinking about doing business with.  Here is the link (http://pdpi.nasdr.com/PDPI/).

Amateur Money

If you choose the "do-it-yourself" method, you can  use a resource that supplies you with ideas and/or research such as the services that we offer here at Tycoon.  There are many pros and cons to this way of investing/trading.

First of all, you have to understand that investment newsletters like ours are prohibited from giving personal financial advice.  If you want that personalized service, you need to use a financial advisor.  In order to give you solid financial advice, one would have to ascertain many pieces of information about you such as your age, net-worth, risk-tolerance, income, just to name a few.

Once an advisor gathers this info, he could recommend a course of investment action for you to take that ideally should put you on the path to achieving your financial/retirement goals.  If you use an investment newsletter, we give recommendations to you during your subscription, but it is up to you to decide what to do with them.

You have to decide how many shares or contracts to buy, etc.  You have to decide how best to fit these recommendations into your overall portfolio.  The investment newsletter (us) can't tell you this because we are not in the business of giving personal financial advice. 

When it comes to investing, whether you use a professional or not, you need to know how much you are paying for whatever advice you receive, and you also need to ask yourself, "Is the advice worth what I am paying for it?"

You can simply hand off your assets to a professional if you have zero time or lack of desire to handle your own investments.  If you have the time and the desire to do it yourself, then you need to take the matter seriously.

You need to get more knowledgeable about financial products as well as the nomenclature of finance in general.  Once you understand what is going on, then you subscribe to a quality  investment newsletter, open up an account at a discount brokerage firm, and get started, hopefully making money.

The bottom line is that you can hand off your money to someone and put your faith in that person and firm or you can work a little harder and do it yourself; but before you make this decision, you need to ask yourself a few hard questions and answer them honestly.

1. What are my investment goals?

2. How much time do I have to focus on my investing?

3. How much money do I have to spend on investment advice?

4. How much money do I have to invest?


These are, of course, just some of the key questions.  Once you have answered them honestly, you need to decide whether you want to give it a try yourself or hand it off to a professional.  If you do it yourself, YOU ARE ULTIMATELY IN THE DRIVER'S SEAT.

My advice is that you should do it yourself only if you are willing to learn and commit the time to the process of becoming a better investor or trader.  Otherwise, hand off your money to an expert and move on.

I know some people who love to work on cars.  I am not one of them.  I would rather hand my car off to a mechanic and do other things with my time.  On the other hand, many people like to go to a doctor when they are ill and just be told what to do.  I, however, like to study and investigate health on my own.  Doing this has opened my eyes to the many mistakes that doctors and the healthcare system at large are making on a daily basis.

Know who you are before you start investing and/or trading because any mistakes that you make once you start can become costly.

Until the next time, folks, spend your hard earned money wisely.




Jason Jovine
Chief Investment Officer
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MARK YOUR ECONOMIC CALENDAR – What’s ahead for the week of February 26th.

Tuesday, February 27th, 2007
8:30                Durable Orders: Consensus -1.5%
Big Picture: Durable goods order growth has slowed (2% yoy) as business capital investment stalled over the second half of 2006 but ended with a strong December which may mark the awaited lift.  Flush corporate balance sheets, high capacity use and rising exports remain strong underlying factors as reduced demand tied to auto and housing add to the slowed capital investment.  The measure is volatile given the large costs of the goods included -- planes, capital goods and defense provisions.   But now business confidence plays a larger role in directing the pace of capital investment and the strength of the manufacturing sector.  A sustained downturn seems unlikely given the roaring pace in early 2006, the underlying fundamentals and expectations for continued moderate economic growth in 2007. 

10:00                Consumer Confidence: Consensus 110.0
Big Picture: The index reached a new 4 1/2 year high in January 2007.   Lower energy prices, long term yields and the tight labor market are now added to an improved growth outlook.  The index has been extremely volatile over the last year.  Mini 'cyclettes' (and large monthly volatility) are evident in the slowing upward trend.   Conference Board's survey is far larger and more business heavy than the household-heavy Michigan sentiment index.  The index is presumed to provide an early read on consumer spending which is far better previewed through interest rates and income growth.

10:00                Existing Home Sales: Consensus 6.24M
Big Picture: Higher mortgage rates and reduced demand have severely softened the housing market after the record high of June 2005 resales.  30-yr mortgage rates reached a 6.8% high in June and have fallen off considerably since, but the huge amount of unsold inventory reached a decade high in October and will continue to steer the yoy decline in prices.  The downward trend appears to be stabilizing after a severe correction which followed years of record growth.  Falling long term mortgage rates, lower prices and improving employment and income growth provide support and suggest a bottom in now forming.  December flat yoy prices contrast with declines since August.  Existing sales include condos/coops which make up about 1/8 of the total.

Wednesday, February 28th, 2007
8:30                GDP-Prel.: Consensus 2.3%
Big Picture: Economic growth rebounded in Q4 despite the stronger drag from housing.  The forward risk is that growth will outpace potential growth as the housing effect fades.   Lower energy prices aided Q4 growth by boosting consumer spending and slowing imports.  2006 growth was based on moderating consumer spending and the strong decline in housing as slowing business investment was bumpy.   2007 growth will be based on a more stable housing market as consumer and business provide the pace of growth.   Inventories are currently overbuilt but adjustments won't be severe.  Stimulative fiscal policy contrasts with restrictive monetary policy as economic growth has softened but remains self-sustained.  Inflation risk is weakening as the slowed economy helps quell the pressures.  Little slack in the economy and  remaining inflation risks are the Fed's concerns.

8:30                Chain Deflator-Prel.: Consensus 1.5%
Big Picture: Economic growth rebounded in Q4 despite the stronger drag from housing.  The forward risk is that growth will outpace potential growth as the housing effect fades.   Lower energy prices aided Q4 growth by boosting consumer spending and slowing imports.  2006 growth was based on moderating consumer spending and the strong decline in housing as slowing business investment was bumpy.   2007 growth will be based on a more stable housing market as consumer and business provide the pace of growth.   Inventories are currently overbuilt but adjustments won't be severe.  Stimulative fiscal policy contrasts with restrictive monetary policy as economic growth has softened but remains self-sustained.  Inflation risk is weakening as the slowed economy helps quell the pressures.  Little slack in the economy and  remaining inflation risks are the Fed's concerns.

09:45                Chicago PMI: Consensus 50.0
Big Picture: The index rose to an annual high in September and plunged to a contractionary level the start off 2007.  A volatile regional measure reflects the slowed auto sector, the effect from the downturn in housing and weaker capital investment in late 2006.  Briefing.com expects the manufacturing sector to rebound given the strong underlying fundamentals as autos and other regional factors could slow Chicago (and Detroit).   Inventories have been built up as sales slowed and should add to the slowing output.  The manufacturing sector moves in sharper cycles than the overall economy and the regional measures move in even shorter, more volatile patterns.  Business confidence fell off in Q3 but rebounded in Q4 suggesting business investment will follow along.  We expect the mid-expansion stall will be just that with stronger capital investment in early 2007.


10:00                New Home Sales: Consensus 1100K
Big Picture: New home sales fell a sharp -28% from the peak in July 2005 to the recent bottom in July 2006.  But by year end the level was 14% higher than the July low arguing that the worst is now past.  Gains over four of the last five months reflect a modest rebound given lower fixed term mortgage rates, lower prices and a buyers market.  Prices are lower than a year ago but prices will improve as unsold inventories are thinned.  Inventories reached a record 7.2 months (573K) in July and fell off to 5.9 months in December.  Strong speculative buying in some locations leave a stronger risk of larger price declines (in those specific locations) as the trend in national and regional prices will be modest compared to the size of the increase over the prior few years.  

Thursday, March 1st, 2007
8:30                Personal Income: Consensus 0.3%
Big Picture: Consumer spending rebounded in Q4 as the drop in energy prices left fuller pockets.  While we expect spending to run at a more moderate 3% pace it will be the key element of slowing in overall economic growth given its dominant weight (70%) in GDP.   Strong employment and improving income growth provide underlying support as wages and salaries are 6% higher yoy.   The Fed's favored core PCE price index has softened to 2.2% yoy -- not far from the 2% top of the Fed's comfort zone.

8:30                Personal Spending: Consensus 0.4%
Big Picture: Consumer spending rebounded in Q4 as the drop in energy prices left fuller pockets.  While we expect spending to run at a more moderate 3% pace it will be the key element of slowing in overall economic growth given its dominant weight (70%) in GDP.   Strong employment and improving income growth provide underlying support as wages and salaries are 6% higher yoy.   The Fed's favored core PCE price index has softened to 2.2% yoy -- not far from the 2% top of the Fed's comfort zone.

8:30                Initial Claims: Consensus NA
Big Picture: Initial claims broke above the remarkably tight range held in the 4-week average (306K-318K) over the holiday period as the new year brought an 11 month low in January and a spike to 359K in February.  Continued claims are slowly rising and stand 125K above the five year low reached in May.  The low levels reflect the thin available labor supply which make a qualified hire difficult to find and less likely to be let go.  A good read on the labor market as net hiring runs at a slow/moderate historical pace.

10:00                Construction Spending: Consensus -0.3%
Big Picture: Vastly different factors driving the 3 components of construction spending:  residential, business and public spending.  Business structural investment has surged over the last year and leads the components by a large margin in yoy growth.  Residential spending is plunging and stands -13% lower than a year ago.  Public spending is motoring along at 11% yoy.  Residential provides more than half the weight in the index and leaves the overall measure in decline at -1.4% yoy. 

10:00                ISM Index: Consensus 50.0
Big Picture: Stalled demand given slowed business investment and the resulting effects from the struggling auto and housing sectors left the ISM index below a neutral 50 in November and to a lower level in January.  Business investment has some supportive fundamentals -- cash loaded balance sheets and a high capacity utilization rates urging continued labor saving investment -- but weakened business confidence in Q3 stalled order growth.  Business confidence rose in Q4 with further gains expected in 2007 given the strengthening economy.  We expect manufacturing activity to grow with the lift in confidence and the resulting return of capital investment as sectoral difficulties in autos and housing lighten.

17:00                Auto Sales: Consensus 5.2M
Big Picture: Buying incentives have provided a bouncy path for vehicle sales over the last few years and drive the monthly pace of domestic sales.  High gasoline prices provide the advantage to fuel efficient imports and domestic autos but SUV sales have not shown a strong decline given the larger discounts awarded (and domestic preferences).  Reduced discounting softened the pace of 2006 sales to a 12.8 mln average pace from 13.4 mln in 2005.  With a 25% weight in retail sales, autos provide the monthly swing to consumer spending.

17:00                Truck Sales: Consensus 7.3M
Big Picture: Buying incentives have provided a bouncy path for vehicle sales over the last few years and drive the monthly pace of domestic sales.  High gasoline prices provide the advantage to fuel efficient imports and domestic autos but SUV sales have not shown a strong decline given the larger discounts awarded (and domestic preferences).  Reduced discounting softened the pace of 2006 sales to a 12.8 mln average pace from 13.4 mln in 2005.  With a 25% weight in retail sales, autos provide the monthly swing to consumer spending.

Friday, March 2nd, 2007
10:00                Mich Sentiment-Rev.: Consensus 94.5
Big Picture: The 14% gain over the last six months is largely tied to energy prices as the tight labor market and resilient economy continue to support the upward trend.  January reached the highest level since December 2004.  The expectations component has surged 23% since the August high in gasoline prices.  The University of Michigan survey is significantly smaller (500 phone calls) than the Conference Board's, includes a longer outlook (for expectations) as questions are focused on the household compared to the business heavy CB survey.  The index far better tracks the consumers' mood than spending habits better indicated through interest rates and  income growth.
(Source: www.Briefing.com)