Tidbits from the TD Ameritrade Conference

Cheryl and l recently attended the annual TD Ameritrade National Conference in San Diego.  I can truly say that it was one of the best conferences I have ever attended.  While I will be sharing more specific information with clients one on one at meetings, here are some of the highlights:

 

General Colin Powell---He has unwavering faith and confidence in our nation and our people.  He sees great wealth created in certain countries over the next several years, countries like China, India and some of the Latin America countries.  This is good for the entire world because stability in the government and the economy is needed to create wealth.  We should not fear these emerging countries but rather embrace them.  The US is still the best place in the world to invest wealth.  Their success is our success.

Jeremy Siegel is a professor at the prestigious Wharton School of Finance in Pennsylvania.  Professor Siegel is still very bullish on stocks for the long run.  He showed charts that illustrate the real return (after taxes and inflation) of stocks from 1802-2010 is 6.7%.  The past 20 years from 1990-2010 (which includes the horrific recession of 2007-2008) shows the exact real return of stocks is 6.7%.  Cash and bonds cannot deliver this kind of return so it is prudent and imperative that in order to create wealth, an investor must be willing to invest in stocks.  He thinks the US market of good quality companies is poised to deliver strong returns over the next few years.  Price earning ratios are below the long term average and corporate earning are strong so therefore the price earning ratios will be rising.  He also showed charts that made a compelling argument to be investing in stable emerging markets such as China, India and some Latin America countries. 

Craig Alexander is Senior Vice President and Chief Economist for TD Ameritrade.  He said the US economy is on the mend.  We still have a long way to go but it is encouraging that we are on the road to recovery.  There are three key factors that will determine our recovery.  1.  Housing –currently we have approx 9 months supply of houses on the market versus 2005 when the supply was only 4 months.  We have too much product and there is more coming with short sales and foreclosures.  The housing market still has another 5% to decline in value before we hit bottom.  2.  Unemployment remains high at over 9% but he was optimistic that jobs are coming.  Companies have squeezed expenses all they can and are now experiencing growth due to increased demand for products and more access to credit.  This will result in slow job creation.  3)  State and local governments are struggling with reduced revenues and high liabilities to service.  Some states are worse than others like New Jersey, California etc… 

Bottom line is that Mr. Alexander also confirmed what Professor Siegel stated, the next few years will be good for equities.  Bonds will suffer and interest on cash will remain low but stocks will reward the wise investor.  

TD Ameritrade Update

Important Information Regarding TD AMERITRADE's Financial Strength and Stability

We recognize that the current economic environment continues to be a source of concern for you and your clients. Many of you have questions about recent events, along with concerns about ongoing market volatility and what it means for both your investments and your clients'.
If you'd like to gain a better understanding of TD AMERITRADE's financial strength and stability in light of the industry-wide issues of subprime market risk and liquidity, please read below.

Does TD AMERITRADE have liquidity issues?

TD AMERITRADE's capital structure and liquidity are strong and stable. TD AMERITRADE has no exposure to the U.S. housing market and the associated complex financial structures that are at the root of the current liquidity crisis. The collateral backing our liquidity is in cash or U.S. securities, which are available and marked-to-market daily, and not housing-related securities.
The credit and liquidity issues currently impacting other firms have not impacted our liquidity structure, which we monitor daily.

In addition TD AMERITRADE does not take proprietary risk on its balance sheet. Our clear, transparent business model and commitment to conservative fiscal management have helped us avoid the recent troubles other firms have experienced from investment risks.

Does the recent buy out of Bear Stearns by JP Morgan affect TD AMERITRADE?

It does not affect the firm financially or otherwise. Our capital structure and liquidity are strong and stable.

Does TD AMERITRADE invest in or have exposure to risks in the subprime market?

TD AMERITRADE does not own securities in the subprime and Structured Investment Vehicles (SIV) markets.

In addition, we keep our own assets separated from our clients' assets. This means your investments and those of your clients with TD AMERITRADE are not exposed to any hypothetical risks associated with our firm's investments.

Please note, however, that every investment has risk and TD AMERITRADE can't offer an opinion as to whether the investments made in self-directed accounts are exposed to additional risk as a result of the current market climate.

Are the money market funds available through TD AMERITRADE safe?
If the available cash in your TD AMERITRADE account or your clients' accounts is invested into money market funds, the money is invested in either the TD Asset Management USA funds or The Reserve funds.

Both of these investment companies have provided statements regarding their respective funds' exposure to the subprime market, SIVs and asset-backed conduits that focus on the subprime asset class.

Please see the statement from TD Asset Management USA and/or see the statement from The Reserve.

If available cash in a TD AMERITRADE account is invested in a Money Market Deposit Account (MMDA) when it isn't currently invested in securities, that money is held at TD Bank USA and is FDIC insured. In addition, please note that TD Bank USA does not invest in the subprime and SIV markets.

Before investing in any mutual fund, be sure to carefully consider the security's investment objectives, risks, charges, and expenses. For a prospectus containing this and other important information, contact the investment company or TD AMERITRADE. Please read the prospectus carefully before investing.An investment in a money market fund is not insured by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

What protection does TD AMERITRADE provide to client accounts?
TD AMERITRADE is a member of the Securities Investor Protection Corporation. SIPC protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). An explanatory brochure is available on request, or at www.sipc.org. The SIPC phone number is (202) 371-8300.

In addition, TD AMERITRADE carries "excess SIPC" insurance through London insurers. Customers are protected up to an additional $149.5 million per customer (including $900,000 in cash) up to an aggregate of $250 million.