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Where's the best place to put your money now?

Jim and Dan talk about investing and recession: Last week Dan Wiener and Jim Lowell were invited to appear on CNBC. Dan appeared on Aug 22nd, and Jim appeared on Aug 23rd. You can watch Jim first, and then Dan in the 2 video clips below.

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Surprise Management Change at Fidelity

In a surprise and surprising announcement, Ellyn McColgan announced she is leaving Fidelity to pursue new opportunities. Ellyn had been viewed as a likely heir apparent when Ned Johnson steps down from his current role (sometime in the next several years). But, it appears that Ellyn didn’t want to wait out the succession and instead devised her own transitional plans. While the impact of her decision to leave won’t affect shareholders in any way, I do view her departure as a blow to Fidelity’s senior management lineup. Moreover, I view her role as one which will likely be filled temporarily by Rodger Lawson, the returning President of FMR Co, as one which could be filled from outside the current management ranks, much the way Fidelity’s new institutional company has been filling its human capital orders. I’m sorry to see Ellyn go; she was a true leader and an exemplary senior officer.

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Fidelity makes a smart move

It has been several months since we updated the Fido Files blog. In fact, the last time was to report the departure of Bob Reynolds. Now we are reporting on his replacement. As announced today by Fidelity, Rodger Lawson, a longtime Prudential Financial executive, will be taking over as president of FMR Corp., the holding company for Fidelity’s businesses. You can click here to read the official press release.  Rodger Lawson’s return as President of FMR (Fidelity’s mutual fund company), is excellent news with precedents that bode well for Fidelity’s funds. Rodger’s experience both as a former President of FMR co, and more recently running a similar and competitive business, will yield invaluable insights to Fidelity’s mutual fund company. And while that news is, in and of itself, good news for Fidelity, the better news is that for Fidelity Investor members, we can expect a greater emphasis on marketing to Fidelity’s past core message: their mutual funds. Lately, Fidelity has been heavily marketing their platform as an excellent place to do business; and they’re right. It is. But they’ve been doing a less stellar job marketing their own mutual funds which has created the impression that they’re not worth marketing – wrong! I expect the return of Rodger to be the first shoe of Magellan’s re-opening to drop at a time in the near future as a way to say that Fidelity is not only back, but leading the pack. This isn’t just rhetorically feel-good news for investors like us, the more money that flows into the funds, the lower the overall expense ratio will be – and the more fully invested the funds will remain. This new appointment will likely not quell the debate over possible successors for Ned Johnson, however. Click here for yesterday’s Boston Globe Article on the subject.

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Changes at the Top

Fidelity announced on April 19, 2007 that Bob Reynolds, its COO and second-in-command, is retiring and Ned Johnson is assuming a more proactive role while Abigail Johnson (Ned’s daughter and heir apparent) will be joined by rising star Ellyn McColgan as the trinity that will lead Fidelity forward. For reasons that I will detail below, I think that this is welcome news for shareholders and employees alike. First, I want to say goodbye to Bob Reynolds; a key figure at Fidelity for as long as I’ve been tracking the company and a significant contributor to not just Fidelity’s retirement plan business but the retirement planning business as a whole. Bob’s success in that role, while invisible to most, means that he’s got a thumbprint on nearly everyone’s 401(k) plan. And while his more than 20 years of hard labor in the mines at Fidelity have earned him a retirement kitty that most would envy and only a handful could best, I think he deserves the fruits of his labors as much as he deserves to learn how to rest. That said, Fidelity’s announcement about significant changes at the top of their management pyramid have been a while in coming. I view it as a necessary reshuffling at the top based on several missteps in their various businesses as well as come confusion about the message and mission of its core fund business. Nearly two years ago, Fidelity launched Pyramis Global Advisor, its bid for an institutional money management firm, and to this day it’s hard to know who is running that show, let alone what its products are; that’s like opening the barn door only to remember that you forgot to put horses in the stalls in the first place. Over the past several years, Fidelity has seen several heads of FMR Co., the mutual fund firm we know inside and out, come and go – a sign to me that management was treading lightly trying to figure out what the top brass wanted them to do rather than stepping boldly based on where they knew the business had to go. With the ascension of Ellyn McColgan, the days of whine and poseurs are over. She’s a no-nonsense, driven, leader who has earned her stripes the best way: she has consistently executed well on every role she’s been assigned to and has earned the respect of her mentors, seniors, peers, and rank and file who know her to demand excellence based on her example and not some text book theory of how to succeed in business. Moreover, to meet her is to know that this is not someone who is simply interested in running a big business well; she is passionate, deeply passionate, about Fidelity and seeing Fidelity not simply maintain but increase its leadership role as the flagship financial services firm for shareholders like you and me. This passion has been evident from her start at Fidelity, and has only increased; a fact that is never lost on anyone who has dealt with her, worked for her, or simply listened to her. Ellyn’s role, which I view (rightly or wrongly) as complementary (not secondary) to Abigail’s, means that we have a dynamic partnership at the top at the time when Fidelity needs it most – not just based on recent indirection and indecision, but also with due regard for securing a better future for itself and us. Enabling Ellyn and Abby to work in tandem while Ned is still calling the overall course, means that he can see if this is the best leadership team to lead Fidelity into the future, a future that must proceed without him at some point in time. I will be watching them as closely as he will, but I suspect neither of us will be disappointed. Don’t mistake my words for flowery or faint praise. When missteps are made, you know I point them out. But this time around, I think Fidelity is taking a clear and distinct step in the right direction. *** You can read more about this change in this morning’s Boston Globe. I spent nearly all yesterday afternoon being grilled by their business reporters. Click here for the 2nd Globe article. Click here for the Boston Herald’s take. The Wall Street Journal also has a nice article. (You do need to be a subscriber to read the full article.)

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Fidelity Retirement Survey for Married Couples

Fidelity announced today that there is yet another topic that married couples can disagree on. It’s not parenting styles, what movie to watch on Friday night, or whether or not to buy a pool table. It’s retirement finance. In a survey conducted by Fidelity, drawing on a pool of 500 couples born between the years of 1937 and 1964, it was found that most couples agree on the type of investment product they use in their retirement plan (i.e. Fidelity vs. Vanguard or another investment company, or stocks vs. mutual funds). And that’s about it. The range of disagreement was much wider. Here’s a short list: Age of retirement; is one or both spouses going to continue to work; at what age will your spouse begin to draw on a pension; how much of a financial cushion should be worked into the equation to hedge against health problems; etc. While this is instructive from a retirement stand point, and amusing from a married stand point, what this survey says to me, however, is that it’s not so much that married couples don’t agree on retirement issues, it’s that they probably haven’t even talked about the details enough to even know if they agree or not. Yes, it’s painful; but you gotta do it. You just finished dealing with taxes. Why not talk about it now while finances are fresh in your mind? It can count as your date night. Click here for the full text of the survey.

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How much money do you need to save for retirement? The 2007 Retirement Confidence Survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates reported yesterday that nearly half of workers surveyed have only $25,000 – or less – saved up for retirement. (You can find the survey results at www.ebri.org, or click here. CNNfn also has an article on the survey. Click here for that article.) The survey also found that workers have been slow to adapt to changes in the retirement system, many are ignorant as to Social Security basics, and that more than 10% of workers wouldn’t follow financial advice if it was given them. 66% of workers surveyed would follow only some financial advice. But much money do you need to save for retirement? Where do you find the figure that you can plug into your monthly budget and then divide by the number of years left to retirement? Unfortunately, because everyone is different, especially when figuring in such factors as health and personal spending habits, it is difficult to say definitively “Person X must save Y dollars in order to retire in year Z.” The figure that Fidelity suggests is 80%. For a secure retirement a person should save enough to replace 80% of their pre-retirement income. The average working family has saved only 58%. A survey done by Fidelity in March 2007 found that “working Americans have a median of $22,500 in total household retirement savings and anticipate receiving $29,500 in annual Social Security payments. In addition, 51 percent of households expect to receive a pension and anticipate median benefits of $18,000 annually. Baby boomers had the highest level of readiness, with an income replacement level of 62 percent, up 2 points over 2006, and a median of $45,000 in total household retirement savings.” (Click here for the March 13 Boston Globe article about the survey.) For more information on how to prepare for retirement, you can go to Fidelity’s website and click on Retirement and Guidance. The website choosetosave.org also has information about how much to save for retirement, as well as interactive calculators to give you a ballpark figure.

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March 6, 2007 NBR Interview

You can read the transcript from the Nightly Business Report from March 6th at http://www.pbs.org/nbr/site/onair/transcripts/070306c/. You can also watch the video file, but that will only be available until about 9PM today when it will be replaced by the March 7th broadcast file. That link is http://www.pbs.org/nbr/info/video.html. Read (or watch) what Jim and Dan Wiener had to say about recent market volatility, ETFs, and their favorite Fidelity and Vanguard funds and post a comment below. Small note: The person who made this transcript clearly doesn’t know much about ETF’s. The ONEQ has been transcribed as the “one, two.” Or perhaps Jim needs to work on his annunciation. Summary of Jim’s Favorite Fidelity Funds Low Priced Stock (Value Fund as a substitute) International Small Cap Opportunity (for overseas) Consumer Staples (as a purely defensive play) Dividend Growth (as a great core large cap fund) Summary of Dan’s Vanguard Picks Selected Value Global Equity Health Care Capital Opportunity

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Dow drops 3.29%

To post a comment, scroll down to the end of the post and click on "comments." This will take you to a comments screen. Today all our major market indices lost more than 3% on the day – the worst intraday loss for the Dow, the S&P 500 and the NASDAQ since March 24th, 2003. All 30 Dow stocks lost ground today. All but 4 stocks in the S&P 500 lost ground. The NASDAQ didn’t crash, but it sure came unplugged from its year-to-date gains. It was ugly. All the indices regained measurable lost ground in the final hour of trading (the Dow regained nearly 200 points having shed 545 points, a 4.3% loss, at its nadir). But that’s just a silver lining, and I don’t expect it to insulate us from further sell-offs in the near-term. In fact, I think that today’s sell off that was triggered by a sell off in the Asian and European markets earlier in the day is likely to continue back across the global markets tonight, setting the stage for a vicious circle that could poison tomorrow’s well and will no doubt make for exceptionally volatile days ahead. That said, there are no trades recommended for any of our portfolios. Here’s why. Our Portfolios Are Designed With Bad Weather in Mind Our portfolios remain well diversified and well founded upon our proven risk-adjusted investment discipline which has weathered much bigger storms than today’s gale. Our proprietary manager ranking system which rewards managers equally as much for losing less in downdrafts as it does for gaining more on the upswings is at the core of our portfolio construction. Our defensive maneuvering in January will look a bit smarter after today, but it hasn’t hindered us from gaining measurably better ground relative to the markets at home and abroad year-to-date, last year, over the past 3-, 5- and 10-years. Simply put, Fidelity Investor’s portfolios are designed with bad weather always in mind. Sell Off Not Welcome, But No Surprise Hopefully, last week’s Hotline paved the emotional way for what happened today, making the sudden sell off a bit less unnerving, albeit not more welcome. I said, “The markets have been buoyed by a continuation of five mega-trends; reasonably good earnings, moderately declining oil prices, mergers and acquisition news, the Fed’s soft landing, and a general status quo on all geopolitical fronts. If any one of these trends hits a bump in the road, look for the markets to get a flat and have to pull off to the sidelines fairly quickly; here, there, anywhere, a sell off of 10% inside of a month or two’s time frame wouldn’t surprise me a bit. And even if all the above trends remain in place, I wouldn’t be surprised to see the markets give up some measurable ground; we’re now on the second longest winning streak for the Dow in its history, and all other major market indices are at recent or historical highs (even the S&P 500 is at a 6 ½ year high), meaning they’re prone to a pullback.” Today, the markets at home and abroad got that flat tire and then some. Why a Pullback Is Not a Setback … Yet Over the last several months we’ve been talking about the positive trends supporting current price levels in the markets at home and abroad, from reasonably good earnings, a Goldilocks economy, domestic and global economic growth, and jobs chief among them. We’ve also been highlighting the troubling near-term signs, from escalating oil prices, to geopolitical impingements, to the ongoing correction in the housing market. But the one area I’ve most focused on most has been the fairy tale rally’s promise of a happy ending. The fact is that even including today’s sell off we’re still on the second longest winning streak for the Dow without a 10% correction in its history; the longest winning streak was snapped on October 19, 1987, dubbed Black Monday because the market lost over 22% on the day. As I said last week, “Since all our major market indices are at recent or historical highs, they’re prone to a pullback”. Today, given the current economic underpinnings for sustained slow growth here at home and for manageable growth abroad, it’s unlikely that this is a anything more than a healthy pullback along the way to higher highs by year-end. It may be very tough sledding between now and then – but together, we’ll make it through any tough times safe and sound. What Triggered Today’s Pullback? Economic News: the markets being ahead of themselves for one. For another, the Durable Goods report (a report which reflect sales of big ticket items meant to last 3 or more years – such as cars, refrigerators, and technology). The Durable Goods Orders were down more than twice as much as consensus estimates; even if you back out a steep decline in Aircraft orders (which were down 60% compared to the prior month) making it basically a seasonal blip, ex-transportation durable goods fell slightly more than 3%. The key number inside the report from my perspective is the one that relates to business spending which was down 6%. That is a troubling sign since business spending is the safety net beneath consumer spending. If both slow or decline then recession looms larger than currently is thought or priced into the stock and bond markets. (An exhibit of this: the Fed funds’ futures chances of an interest rate cut doubled from 20% to 40% on the durable goods news.) China Shanghaied Our Markets: I have been mentioning for over a year that I expect China’s breathless growth pace to have to slow. When it does, I’d look for most markets to stumble and energy to free fall. Today, we saw the Shanghai index experience its largest single day drop in a decade (losing nearly 9%), but that sudden sell off was set against the backdrop of the prior 6 trading days which saw that index soaring […]

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