Why Choose Channer Investment Management?

WHY CHOOSE
CHANNER INVESTMENT
MANAGEMENT?

SIX IMPORTANT REASONS –

  • True Custom Management. Our clients’ accounts are held and managed separately, and in specific consideration of each client’s preferences, tax circumstances, risk tolerances and other individual variables. No two accounts are the same at Channer, because no two clients are the same. By comparison, many investment managers handle all of their accounts approximately the same. In many cases, each account is little more than a slice of what otherwise might be a “one-size fits-all” investment.
  • Stock and bond expertise. The third generation Channer organization is unusually well developed in both areas. The first two generations of Channers specialized on the bond side. The third (present), mentored under the previous, then established new mentors who became three of the greatest stock investors of all time: John Templeton, Peter Lynch & Warren Buffett. At Channer, it is about stocks and bonds, not one or the other. This is a distinguishing difference because most people in the investment business started on either the bond side or the stock side, and then continued to develop that specialty.
  • Twin responsibilities. All investment managers accept responsibility for the management of their clients’ accounts. At Channer we do not believe that is enough. We know that investor behavior, (the tendency to make course changes based of emotion or media influence), is a major hazard for all investors. We therefore accept a second responsibility, which is to help develop the “investment temperament” of each of our clients By contrast many modern investment managers wish to avoid direct contact with clients. We believe that view to be common, cost efficient, but mistaken.
  • Client involvement. Investment managers generally have your written consent to manage your account with discretion. This means they can make decisions without client approval or involvement. The Investment professionals at Channer often do the same, but they also recognize that it is not an all-or-none proposition and that some investors want to be involved in the decision making process. Some investors learn and understand the investment process better by doing so. Accordingly, as unusual as it is, at Channer we encourage investor involvement. We want to build and grow personal relationships with each of our clients. Our clients are not commodities; they are people, and we treat them as intelligent individuals.
  • Pricing alternatives. The financial professionals at Channer offer both commissionable brokerage accounts and fee based management accounts (through LPL Financial). However, it is one or the other, never both in the same account. Our fees are negotiable, depending on the needs, circumstances and investment assets of the client. Most other investment managers are also fee based, but some also charge commissions for each transaction. In addition, some share their fees with referring brokers, which can leads to higher client costs.
  • Buy-side research. “Buy-side” research is created for professional investment managers because they are buyers of securities for the benefit of their clients. By comparison, “Sell-side” research is the product of analysts who publish their reports on behalf of a “sales force”. Sell-side research has been historically fraught with conflicts of interest, and poor results. At Channer, we utilize buy-side research; we find sell-side research to be suspect by nature.

“The decade of the nineties produced a large number of mistaken investors. The markets were so kind and forgiving that many investors, especially those led by the less experienced, lost their perspective. By comparison, the period of financial collapse that began in 2008, produced extraordinary challenges for all investors.

Yet, in both easy periods and the exhaustive periods that follow, investing is difficult and requires adherence to fundamentals. At Channer, we pursue excellence in the conviction that profits will eventually follow. We believe the investment community would be well served should that view be adopted for the decades ahead.”

Bernard Madoff “Ponzi Scheme”

Q: How could the Bernard Madoff “Ponzi Scheme” have happened in this day and age?

A: There are some golden rules, when it comes to investing money. Here are a few that relate:

If you don’t understand it, don’t invest in it.

  • Never let greed get in the way of common sense.
  • Trust, but be and stay informed (verify).
  • Never write your check directly to the financial advisor.

It is quite possible that many of Mr. Madoff’s clients failed themselves on all four of these protective fundamental rules, but as you can see, there is no doubt about the fourth.

Because at least some checks were made out to Mr. Madoff personally, how could investors have understood what they were investing in? Based on news reports, it appears it was the promise of steady and high returns that were “too good to be true”. Staying informed would have also been very helpful, but how does one stay informed on investments that were not properly understood in the first place?

While Mr. Madoff has admitted publicly that his chosen behaviors will likely cause innocent investors to lose billions of dollars, if someone chooses to break the four rules that we have highlighted above, they are also choosing to take risks beyond their ability to calculate. This makes them vulnerable to the schemes of others.

All of this is clearly a circumstance of wrongdoing. But it would not have been possible if so many investors were not in search of a “free lunch”. Very sad, but true. And most astonishing of all is the number of institutional (professional) investors who also drank from Mr. Madoff’s cup.

Madoff


© 2008, CHANNER INVESTMENT MANAGEMENT, INC.

SECURITIES AND FEE-BASED ACCOUNTS OFFERED THROUGH LPL FINANCIAL

MEMBER FINRA/SIPC A REGISTERED INVESTMENT ADVISOR

www.channerinvestment.com 1-800-635-0157 A Channer University Publication™

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Past performance

is no guarantee of future results. The market for all securities is subject to fluctuation such that upon sale an investor may lose principal.

A CIM Special Report: 2010

Where are the Jobs?

Why has the market advanced recently?

Did we have a “lost decade”?

If so, what is ahead?

[As carefully discussed on The Conservative Investor’s Radio Program.]


Where are the Jobs?

The media likes to highlight the “jobless recovery” headline. It sells. It also confuses people, so, lets attempt to correct that now. As the economy continues to recover, more jobs will be added, but it will take time. The job market is what we call a ‘trailing indicator’. This means than improvements typically take place after the economy makes improvements. Unfortunately, it does not encourage those who are looking for early recovery evidence.

It often takes a recession for many businesses to realize they were employing workers they did not actually need. At the same time, when the economy was humming, those same employers didn’t want to rock the boat – or pare their workforce to a leaner condition. Yet, when the economy stumbled badly, they were forced to let as many employees go as they could spare. That was a painful process. It is always difficult to discharge employees, and it is expensive. As a result, employers are not eager to re-hire and run the risk of repeating their recent history. And given the depth of our last recession, this time around there will be unusual reluctance to rehire. This is neither the news nor a reality that anyone wants. It is a very adverse condition that will be especially slow to correct itself.

The happy news is American businesses are making huge productivity gains. They have found they could get the job done with smaller payrolls, and given the burden of payroll taxes today, doing so will reduce costs and improve profits considerably. But sadly, that reality is on the back of many who are unemployed. This brings us to our next topic:

Why has the market advanced recently?

The stock market, unlike the job market, is a ‘leading indicator’. It essentially takes the temperature of investors. In addition, if investor’s decide that stocks have become inexpensive, and that productivity gains will lead to improving earnings, they historically take action in anticipation of those expectations. And that is precisely what has been happening. Yet inspite of the large advances that have taken place since the recession low, the market is still much lower than it was when the decline began. The DJIA (Dow Jones Industrial Average; “The Dow”) was about 14,000 when the mega-banks, Wall Street, mortgage lenders and other nefarious characters began revealing their bad character. They were the causes of the big turndown. So it was much more of a cause-and-effect condition, than a typical ‘top of the cycle’ downturn. A liquidity crisis developed quickly and less experienced investors used their fear to divest. Stocks moved from weak hands to stronger and more experienced hands.

But all of that is history now, and the market is not only moving back to higher and more appropriate levels, but it is “telling”. It is telling the average person that the economy and the liquidity crisis has been attended to, and things are getting better. Not forever, but for as far as the optimists can see, at present.

Did we have a “lost decade”? If so, what is ahead?

Future Past Present
Again, we would say this ‘lost decade’ talk is good for selling what the media sells. But it is not helpful, even though the S&P 500 is roughly at the same level as it was about 10 years ago. A recent quote from Bill Miller, the legendary investor, may help to re-establish perspective:

“…There have been fourteen 10-year periods where stock returns have been negative, including this [last] one. In every one of the previous 13, the subsequent 10-year returns have exceeded 10%, about 50% more than average, and more than double the return of government bonds. So every time stocks have performed poorly for 10 years, they have performed better than average for the next 10 years, and they have beaten bonds every time by an average of 2 to 1.”

Thank you Bill Miller. We would make two more points: First, as soon as you change the starting and ending date of any ten-year period, you produce different results. If you just go back a few years, that trailing ten-year period looks entirely different. That will likely be the case a few years from now, but we can’t make those calculation until we get there. Second, why did the complainers of the last decade fail to mention the decade that preceded this last one? That was a rather incredible decade. In its beginning, in 1990, we saw many positive factors coming together and went public with our view that there was a high probability that the Dow could hit 10,000 by 2000. We were wrong. It actually got there in 1999. However, it was at about 2800 when we made our expectations known. And therefore, the preceding decade had an almost four-for-one advance! While that was hardly a normal or typical decade, we strong submit that the last decade was not normal either. Bill Miller’s good comments above help make that point, and they are a great reminder that things don’t get weak and then stay there forever. Rather, sometimes they move along in a somewhat steady manner, and sometimes they move along in an alternating fashion of too much followed by too little. This serves to confuse us, yes. And unfortunately, it does not serve to provide us with perspective or understanding. This report is our attempt to help investors to see the difference.

Concluding comments:

To say 2009 was memorable is an understatement.

To future historians and economists it will be the year to which all forthcoming bear and bull markets will be compared. For investors, recovery was the word for 2009. In fact, the volume for Google searches and news references for the word “recovery” soared over the course of 2009, especially relative to the word of 2008: “recession”. 2009 began in the midst of a bear market plunge that was the worst since 1932 and the free-fall suddenly rebounded into a “V”-shaped rally of 65% from March 9 through mid-December, the most powerful nine-month rally in the S&P 500 since 1933.

For 2010, ‘sustainability’ may be the word —

not merely because climate change [may] be on Washington’s agenda, but primarily as it pertains to continuing the economic and market recovery witnessed in 2009. In brief, we believe, the recovery is likely to be sustained with economic growth in the 3-4% range in 2010. *

*Courtesy of LPL Financial Research – 600521