By Joe Smalley, Accredited Investment Fiduciary®

The elections must be closing in because the politicians are finally talking about the importance of the economy.  President Obama recently gave an impassioned speech urging Congress to pass his jobs bill.  Knowing that Washington is as divided as they’ve ever been, I will be surprised if he gets all that he is asking for.  But Congress (to the surprise of many), can read, and they know that people are frustrated and hurting, so they will likely go along with at least some of it.  What neither the President nor Congress seem to understand is that their bickering over the debt ceiling debate caused the economy to slam on the brakes while we all waited to see what our elected officials would do.  To the comfort of some and the consternation of others, the Federal Reserve stands by ready to “do whatever is necessary.”  Kind of reminds me of the old saying, “I’m from the government and I’m here to help you.”  Their latest strategy is to sell short-term assets and buy longer term assets.  This is supposed to force rates even lower in an effort to have investors holding onto cash seek higher returns elsewhere.  But make no mistake; they are doing this because the global economy has slowed down.

Of course, we tend to focus only as far as the end of our own noses.  While we watch the soap opera in Washington (or the political circus, as the President calls it), Rome is burning.  Not literally.  At least not yet.  But right now Europe is going through the very difficult task of unwinding bank debts that were given to sovereign countries that are having a hard time paying back their loans.  This may seem hard to understand and far away, but trust me when I tell you that it will impact your investments; it already has.  The German stock market has been down considerably in the past few weeks.  Germany is the rich uncle in Europe, and is bankrolling the other countries.  Understandably, they are getting a little tired of it.  So much so that a German banker who headed the European Central Bank recently resigned.  That started a rumor that Greece may default on their loans.  This is after they’ve been restructured – multiple times.  So what, right?  I never go to Berlin.  Well, Berlin’s problems are landing right here.  Our stock market has been hit hard.  In fact, we are testing the lows we put in back in August.  The challenge is that this problem in Europe is going to take a long time to fix.  It will be messy.  And it will likely get worse before it gets better.  And all this doesn’t even take into account that things in China might be slowing, as well.

So what should you do?  Four things.

Be nimble

As I’ve said over the past several months, markets go in cycles.  This is no exception.  However, I am changing my model asset allocations.  I am reducing exposure to stocks, I am increasing alternative investments that are not correlated to stocks, and I am adding gold as a hedge against uncertainty.  Everyone’s situation is unique and long term investors might be well suited to keep their current allocation.  Give me a call to review your investments to see if moving into one of the updated models might be a good idea for your situation.

Save more

Think you have enough saved?  Most people don’t.  It is not as hard as you think.  Time is your best friend as a saver.  Albert Einstein, who knew a thing or two about powerful forces, said “the most powerful force in the universe is compounded interest.”  Al was right, and it is not too late to get started.  And don’t get too caught up in the investment side of it.  Yes, earning 15% a year would be great – but it is not realistic.  Think about 2 & 20.  If you start with $100, and add $100 per week at a compounded annual rate of return of only 2%, you’ll have $127,779 in 20 years.  Don’t wait – start saving more now.

Spend less

The silver lining about this whole political debate is that as a society we are talking more about being fiscally responsible.  There is one sure way to get in financial trouble, and that is to spend more than you make.  That is true if you are a family of four or a country of 300 million.                        


Have a financial plan.  Figure out what you have, what you want, and what you need to do to accomplish that.  Life is moving fast. Make sure your plan is up to date.

We cannot control what happens in Washington, or what happens in Berlin, or what happens on Wall Street – but we can control where we invest, how much we save, how much we spend, and whether or not we have a plan. 

Like my grandma says, control what you can control, and don’t worry about what you can’t. 


All investments carry risk.  No strategy can guarantee a profit or protect against a loss.  All strategies should be used to help you accomplish your overall long term goals.  Past performance is no guarantee of future results. Not all equities offer a dividend and dividends are not guaranteed. Real estate investments are subject to a high degree of risk because of general economic or local market conditions; changes in supply or demand; competing properties in an area; changes in interest rates; and changes in tax, real estate, environmental, or zoning laws and regulations. REIT units/shares fluctuate in value and may be redeemed for more or less than the original amount invested. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income. International investing involves risks not inherent with domestic investments, such as currency fluctuations, differences in accounting methods; foreign taxation; economic, political or financial instability; lack of timely or reliable information; or unfavorable political or legal developments. Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity.  Investors must meet specific suitability standards and understand these investments are for a long-term investment horizon. Investors should note that diversification does not assure against market loss and that there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. 


Joseph D. Smalley is a financial advisor practicing at 2900 West Rd., Suite 222, East Lansing, MI 48823.  He offers securities and advisory services as a registered representative of Commonwealth Financial Network®, a member firm of FINRA/SIPC and a Registered Investment Advisor.  He can be reached at (517)487-4850 or at