(And, am I the only one feeling that there was way too much excitement last week?  The Giants won the World Series, the election, the fall back to Standard Time, and then I had my client appreciation event all day yesterday.  That’s a lot of life in one week.)

And so now what?

This might be one of the most interesting lame-duck sessions we’ve ever seen in Congress.  The two big ones I have my eye on are whether the Bush tax cuts will be extended and whether Congress is going to do something about the estate tax for 2011 and beyond.  Many of us stand to be impacted dramatically by those decisions. I can’t remember the last time I saw so many of my CPA and estate planning lawyers paying so much attention to Congress.  Decisions made at the last hour of this year might allow for little planning and maneuvering before year-end, so it seems much planning is being done in anticipation of one move or another.  Make sure you are in touch with these professionals in your life, especially if you are self-employed, have a family income in excess of $200K, are 70-and-a-half or older, or have a net worth in excess of $750K.

Managing the Cycle of Emotion

My real point in this post is to remind people about the cycle of emotion.  There’s an explanation for why the equities market return 7-8% historically over a 30-year period, and why the average do-it-yourself investor makes 2% at best.  It’s called buying and selling on the cycle of emotion.  Instead of buying low and selling high, most investors do the opposite.  A neighbor mentions an investment, and the potential investor does nothing until the price has increase and his or her confidence has increased.  By the time they have the guts to invest, the price is even higher.  Invariably, the investment rises and then loses value and the investor sells at a loss in a moment of panic or despair.  The discouraged investor swears s/he will never do that again.  Until, of course, the neighbor mentions the next big thing.

You can manage the cycle of emotion through systematic implementation of a financial plan that is in alignment with your investment goals, philosophies, and risk tolerance.  The trick is to stick to it and to make thoughtful adjustments as the markets make their adjustments.

My favorite comment I’ve heard lately is that the “flight to gold at these prices is a flight to Armageddon.” Still makes me laugh.  Let’s face it, if you’re wanting to buy gold because you’re concerned about the global geopolitical system and currencies collapsing, you might be better off with land.  At least then you might get food and water because you can’t eat gold.  I’m not convinced that market fundamentals justify gold’s price.  Fear seems to have a bigger influence in that market.  Gold is not a good inflation hedge, and it’s in danger of losing value very quickly when the economy recovers.  Don’t get caught in the frenzy.  Fear is not the best place from which to make decisions.  Look at your financial plan.  Follow it.

The irony of the timing

Look, I’m not saying this is all bad, ridiculous, time-wasting, and frivolous.  There are some states that weren’t licensing mortgage professionals at all.  Buying a home and getting a mortgage are usually the two biggest financial transactions that anyone will make in a lifetime.  The people who are involved in those transactions ought to have some sort of licensing and compliance control.  If we choose as a society to regulate my hairdresser, then we probably ought to regulate people who care for people’s financial health.

Be aware:  Securities and Exchange Commission did this, too, many many years ago.  Decades later, the SEC failed for years to stop the biggest Ponzi scheme known to this country and its licensee.  I’m not sure when ethics became defined as knowing which regulatory agency would fine you or put you in jail if you ripped off your client, but that’s what I studied.  I’m not sure why it’s important for me to know that the Truth-in-Lending-Act is also known as Regulation Z or that the Real Estate Settlement and Procedures Act is also known as Regulation X.  I do know that the exams that the SEC requires are not dissimilar in the rote memorization that is required to pass the exams that allow financial professionals to manage money.  While the intentions may be good here, I’m not convinced it will have the effect it intends to have.  Bad people find ways to do bad things and seemingly do it best when someone is supposedly watching.

So, feel safer, I guess.  The bar to entry to this profession has been raised for sure.  You’ll be pleased to know that’s true even for me.  I have had to register with a national registration system, I’ve had to take a national test, I’ve had to take a state test, I’ve had my fingerprints taken (again), I’ve allowed someone to pull my credit report, and I will disclose my net worth.  Nevermind that I’ve passed the Bar Exam, the Certified Financial Planner exam, two industry certifications exams, a state exam to get my salesperson’s and then my broker’s license, and maintained my state required 45 units of continuing education credit to maintain my licensing.  I supposed DNA testing and electroshock therapy are next.

The silver lining (because I will always find one):  It’s been good for the economy.  I’ve spent over $1100 getting this done, which I hadn’t planned on spending this year.  The facilitator at the testing site said that he had been closed three days a week for the last six weeks and things were picking up again.  He was pleased to see all us mortgage people showing up to get tested.  So it goes.

Okay, I’m done. Rant over.