Times like these make people resourceful, for example, coupon use declined for many years before making a comeback last year. This year will surely see a rise in their use as food gets more expensive and people have less money to spend on it.
But there's one aspect of the financial crisis that I find even more interesting than finding ways to save money, and that is the effect all of this has on kids. Most children, many teenagers and even many young adults have never lived through a national economic downturn. Many have lived through an incredible bull market, years of consumer excess and easy credit. For them, this crisis is a rude awakening.
Earlier this week, The New York Times had a story about how teenagers are coping with the economic downturn. While some are extremely concerned about the situation and are trying to help their families come up with solutions to save money, many seemed offended that they could no longer have as many new clothes, gadgets or restaurant meals as they had previously enjoyed.
Many people in their early 20s or under are too young (or not even born yet) to remember any economic problems from the last couple of decades. They've grown up in the recent boom times and are having difficultly adjusting to a more frugal way of life. Meanwhile, the pressure on teenagers to have name-brand clothes and shoes, an iPod, cell phone and video game system has probably never been greater. This has been fed, in part at least, because of the booming economic times in which this generation was raised.
While many of the teenagers in the article had a hard time coping with the new limitations on spending, others were eager to help their families and figure out ways to live more frugally. Most of the teens who were allowed to be a part of the family discussions about finances felt better about the situation because they were kept in the know. In an attempt to do that, one of the families in the article showed their kids the monthly bills and the teenagers were shocked. One even thought the monthly mortgage payment was an annual fee, demonstrating the lack of knowledge most teens have about bills, check writing and life after parents stop the gravy train.
A major concern brought about by the crisis is the ability to get loans for college. With the tight credit markets, it's becoming more difficult to access funds that many need to attend college. Evidence of this and the economic downturn can be seen in the Massachusetts state university system where enrollment is up 4% over last fall. Paying for college, especially expensive private schools, was already a stretch for many families and now it's bound to be an even bigger burden.
So while kids may have to take pay cuts on their allowances or pick only one new outfit for school instead of several, this is a great time to instill values of saving in children and teenagers. When times are good and the economy isn't a worry, people often don't take the time to teach kids about saving for a rainy day. One good thing that may come out of the current debacle is that kids today might be more prepared to deal with tomorrow because of the conversations parents are having with them about saving, not overextending credit and living within their means.
Taking some time to teach kids about finances will really pay off in the long run. This is especially important for the generation of young adults and children who have grown up in the boom times and never felt the pinch of a troubled economy. It's a hard lesson to learn, but a vital one.
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Invest Like the Oracle of Omaha
In an editorial in today's New York Times, Warren Buffett, laid out his plan to capitalize on the recent stock market crash. His mantra: "Be fearful when others are greedy, and be greedy when others are fearful." It's clear that right now, fear has reached a fever pitch. Buffett, one of the world's most famous investors, isn't predicting the short-term moves of the market, but he's betting that in the long-term, the market will rebound and move significantly higher.
Buffett went on to say, "Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."
Cabot Benjamin Graham Value Letter follows the system laid out by the father of value investing, who taught the system directly to Buffet when he was Graham's student at Columbia University. Click the link below to start investing like the Oracle of Omaha.
Lately I've gotten the same question over and over and I'm guessing more readers are wondering about it as well so I'm going to share it and the answer with you here. Remember to send us any questions, comments or suggestions via email or on our blog, The Iconoclast Investor.
Question: What are the track records for your publications?
Answer: I've responded below by individual newsletter. You'll note that some of our newsletters offer specific portfolio and advice and other don't, and in the case of those that don't, performance depends on how subscribers act on the advice.
- Cabot Market Letter, ranked fifth for 2007 among all newsletters tracked by Hulbert Financial Digest, provides specific portfolio allocation advice. Since the start of 2007, Cabot Market Letter has gained 22% while the Nasdaq has dropped 28% and the S&P 500 has plummeted 31%. During the five years ended September 5, the portfolio is up 4.4% annually, while the S&P 500 and Nasdaq are down 2.9%. Over the past three years, Cabot Market Letter is up 5.9%, while the S&P 500 and Nasdaq are both down 7.2%.
- Cabot Benjamin Graham Value Letter provides two portfolios to its readers, the Classic Benjamin Graham Value Model and the Wise Owl Model. Since its inception in 2002, the Classic Model delivered a 16.3% compound annual return, while the Dow brought just 3.9%. And its Wise Owl Model, running since 1995, delivered 15.2% while the S&P 500 returned 5.5%.
- Hulbert Financial Digest ranked Cabot China & Emerging Markets Report the top performer of all its newsletters in both 2006 and 2007 with returns of 78.6% and 74.1% respectively. For the 12 months ended August 31, Cabot China & Emerging Markets Report retained Hulbert's top spot, with a return of 25.3%.
- Cabot Top Ten Report presents 10 top performing stocks every week and performance depends on how subscribers act on the advice. However, since January 2007, its weekly stock recommendations have outperformed the Nasdaq by more than 40%.
- Cabot Stock of the Month Report recommends one stock each month from other Cabot publications, so it contains value stocks, growth stocks, Green stocks, emerging markets stocks and momentum stocks, depending on what appears to be the most promising stock for the current market conditions. As of its September issue, it had seven stocks recommended at buy or hold, and the performance of these stocks ranged from a low of -22% for a value stock recommendation and +397% for a growth stock recommendation. But we remind you that this value stock is still a fine investment, as they take more time to mature than growth stocks.
- Cabot Green Investor was launched in January of this year. It has been a tough eight months for Green investments after seeing a strong rally in 2007. Year to date, the major Green funds are seeing awful results: the Guinness Atkinson Alternative Energy mutual fund is down 24%, return for the Wilderhill Clean Energy ETF is down 29%, the Market Vectors Alternative Energy ETF is down 12% and the Green Century Equity Fund is down 13%. By comparison, for the year, Cabot Green Investor is down 2% as of September 2, largely on the basis of current holdings that we're still bullish on.
- Cabot Small Cap Confidential's focus is on finding undervalued and little-known small-cap companies that are poised to break out in a big way. Since its launch in October 2007, Cabot Small-Cap Confidential has recommended one stock each month as a long-term investment. Subscribers choose the stocks that make sense for their specific portfolio, and so performance depends on how subscribers act on the advice. Currently, the performance of the individual stocks recommended in the newsletter over the past 11 months ranges from -57% to +62%. But as with value stocks, we remind subscribers that it takes more time for small-cap stocks to mature.
For more information about our publications, please explore our Web site.
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Golden Opportunities in the Financial Crisis
It's October 2008 and the markets appear like the leaves on an autumn tree ... falling.
Yet here at Cabot, thanks to good stock selection in 2007, and good market timing in 2008, Cabot Market Letter has actually been able to hold onto a 22% total gain since the start of last year, versus a loss of more than 28% for the S&P 500. Editor Michael Cintolo has used a growth stock selection system and market timing indicators honed for 38 years to keep investors out of the market during bad times and in the best stocks during good times.
His steady advice has helped subscribers retain much of their 2007 gains, even with the current bear market and economic turmoil. Cabot Market Letter's proven system has found leaders even in this tumultuous market, like the #1 oil stock, Continental Resources (CLR), recommended in April of this year, just before it doubled within three months.
Click the link below to get on board with a proven system that will keep you on the right side of the market and in the best stocks.
In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, we have links below to each issue.
Cabot Wealth Advisory 10/13/08 - Invest Like Columbus
On Monday, Timothy Lutts wrote a tribute to Columbus Day and reminded us of all the ways the explorer has influenced us, perhaps most importantly with his enterprising spirit and courage to venture into the unknown. Tim also wrote about why it's important to keep looking ahead in the market and a company that could be a leader in the future. Featured stock: Amedisys (AMED).
Cabot Wealth Advisory 10/16/08 - What to Expect Now
On Thursday, Michael Cintolo wrote about attending the Contrary Opinion Forum in Vermont and his optimism for the long-term future of the market. Mike detailed his expectations for what will happen after last week's market crash based on past bear markets. Mike also wrote about a stock on his watch list that had a recent positive reaction after its earnings report. Featured Stock: Global Payments (GPN).
Until Next Time,
Editor of Cabot Wealth Advisory
Editor's Note: When the market is crazy, like it's been lately, I like to read as much information as I can. But there are only so many hours in the hours in the day. I've found the best way to maximize the information I can take in is to read a thorough compilation, such as Dick Davis Digest. It's been bringing subscribers the best advice from the best minds on Wall Street for 27 years and it can help you get back on track after last week's market crash. Click the link below to learn more.