News Columns & Blogs

Pay attention to the man behind the curtain

Fans of The Wizard of Oz will recall the line “Pay no attention to the man behind the curtain.” That’s pretty much what the powers to be in Washington are asking us to do. In my opinion, regardless of some of the rhetoric being fed to us by Congress, we are going to be in for some very rough times during the next few years.

The nationalization of the banks as these banks swallow up the big brokerage houses will have a definite impact on the culture of the financial industry. This was tried during the Herbert Hoover administration. For those who don’t recall, his administration led us into what is now known as The Great Depression. There was market manipulation going on too which didn’t help but mixing partial ownership by the government in private businesses historically hasn’t worked well.

However, before you start stuffing cash under your mattress or burying it in the back yard, there are ways that you can make money during the current economic calamity.

First, you will have to think outside of the box. Common sense, wisdom and education will become critical attributes to surviving financially. All three major stock indexes fell 30 percent to 40 percent in 2008. So far in 2009, they are not setting the world on fire.

Many have retreated to cash. I have nothing against cash, but it does not make you money. Take for an example a CD paying 3 percent. After a year when you pay taxes on the interest and factor in the effect of inflation, you actually have less than what you started with. That’s why I call CDs certificates of depreciation.

Many folks have bought into the mantra of “staying invested” and/or “think of the long term.” Basically I agree with both statements. But, here is where common sense, wisdom and some research come into play. Staying invested in your current investment is not necessarily what that term was meant to convey. You should stay invested, but perhaps you need to change the investment. Why would you want to stay with a stock or a mutual fund that lost 40 percent last year?

Perhaps you should investigate alternative investments that do not correlate with the markets and usually are not affected by the current volatility of the markets. Most of these investments do carry higher suitability standards and are a little harder to understand than a mutual fund, but are capable of providing favorable returns even in this volatile market. Some deal with equipment leasing, some deal with commercial real estate investment trusts and some deal with private equity to name a few.

You may have read or heard advertisements from some advisers, bragging that they can offer you investments that could provide double-digit growth in a good market and will not lose you money in a down market. These investments do exist. They are called equity index annuities. What the advisers are not saying is you may be locked in with up to 20 years with high surrender charges and the upside is limited.

As I stated in my last column, now is the time to have your portfolio reviewed. Now is truly a time to get a second opinion. Ask your current adviser about the limitations she or he has on product availability. If all they can provide is stocks, bonds, mutual funds and/or insurance products, now is the time to explore other options. The old methods of investing may not be sufficient to survive all the changes that are going on in the economy and the financial markets. Now is truly the time to pay attention to that man behind the curtain unless all you want to end up with is a watch for a heart, a diploma for brains and a medal for courage.

Tom Kubik, president of Kubik Financial Services, LLC, in Bradenton, can be reached at 795-5884 or e-mail at