Monthly Archives: April 2012


The most frequent question I am asked is “What should I be doing now in my 401(k) account at work? What about my brokerage account?” The answer to that question lies where it always has- the facts that we know to be true.

A good way to go broke is to rely on someone who claims they have a crystal ball.  Former Assistant to the US Treasury Secretary Edgar Fiedler once said “…Those who live by the crystal ball soon learn to eat ground glass.” Truer words were never spoken. That is why at Volk and Associates we try our best never to make predictions or assumptions.  And that may be what sets us apart from virtually every other advisor or broker in the industry. We believe in the irrefutable Law of Supply and Demand and the guiding hand of relative strength.  It has served us well, as our investment models indicate over the last 11 years.

The beauty of our relative strength approach is two-fold: First, its simplicity and second, it’s adaptability not just to market conditions but also to being systematic. While no approach to investing can claim complete impartiality, being systematic breeds three things for us that are to our advantage: A.)  It keeps our perspective in the present;  B.) It eliminates as much emotion as possible; and C.) It prevents our winners from being sold too early and keeps us from hanging on to losers. It’s ok to be wrong about a stock or fund investment. it’s NOT ok to stay wrong.

As many of you know, we call our approach to investing “Fact-Based Investing”. The reasons for this are simple:

  1. There is so much dis-information coming out of the fire hose of information we call the Internet, combined with directives from the financial media and advisory communities, it is difficult to filter that down into something we can actually take a drink from..
  2. Even if you do get the information flow down to a trickle, who is to say who is truthful and who is lying? I’m sure investors in Enron, WorldCom, Global Crossing, etc.,…all thought they and the analysts that followed those companies thought they could trust the information coming from them.
  3. If the information can be trusted, what makes us think the analysts and money managers selected are any smarter than the other thousands of the same sort of analysts utilizing the same education and methods? Do we believe he’s just a better interrogator of the CFO’s of the potential companies to invest in?
  4. Whatever manager selected, he must make the right market call on the stock.
  5. Even if the manager IS right, now he has to have the market agree with him, otherwise there will be no demand to push the price higher.

Another favorite quote from Edgar Fiedler:  “The herd instinct among forecasters makes sheep look like independent thinkers.”

So, back to the question at hand: “What should I be doing now in my 401(k) account at work or in my brokerage accounts?”

Here are the facts you should consider and steps you should be taking NOW:

  1. The market started this latest cyclical bull run back in the beginning of October.
  2. With last week’s market action, this cyclical bull market may be coming to an end, or it might not be. We’re not going to predict. We will only go on what happens for fact.
  3. Go back to your 401(k) statement and your brokerage account statements from the end of September and mark down the prices of all your investments at the time.
  4. Now pull up their current prices and figure the percentage returns since that time.
  5. Do the same for the S&P 500, or better, to the Russell 3000 Index, which is actually a better representation of the overall market.
  6. Compare each of your investments’ returns to the benchmark index’s return.
  7. Whichever under performed the benchmark index you selected will most likely be the biggest under performers in the coming cyclical bear market, but most likely in a big way. There was some factor that was making them under perform in a bull market. Most likely that hasn’t been resolved.

Or, another alternative:

Let Volk and Associates handle managing your 401(k) for you, either within your 401(k) menu plan of choices or inside a self-directed 401(k) account or rollover. We currently follow and make recommendations on dozens of large and small company 401(k) plans’ choices on a weekly basis.

Do you really have time to be consistently doing the research necessary, on a continual basis, to manage your largest asset? Would it not be a better use of your time to turn this management over to a professional advisory firm with the track records our models have shown?

-Eric Volk

Next Time:Â An illustration of how Volk and Associates can pay for its services. Â -or- Why it makes sense use our services.


From time to time I find it helpful to refresh my memory of significant events of the intermediate past that may have seemed innocuous at the time due their ‘nearness’, but upon further review with the benefit of hindsight, give them a bit better perspective.  Today’s subject is an announcement by the Social Security administration’s Chief Actuary Stephen C. Goss, which was detailed in an article in the Los Angeles Times:

Goss reported a major surge (25% instead of the 15% his office had been predicting) in early retirement claims despite the fact that benefits will be reduced by as much as 25% if they retire at age 62 instead of 66.

The ramifications are far reaching for these people at any time, but particularly at that point: Â The interest rates were ratcheted down at the precise point that much of their annuity payments and other factors in their retirement were being determined, permanently. Â The correct solutions keep getting put off by Americans: save more, invest wisely, work longer. Â Since then, you’d think that this trend may have reversed itself. Â However, it has actually kept that pace up.

-Eric Volk