What investors are hoping to find under their trees

December 23, 2011

Despite another trying year, investors have been good little boys and girls. We faithfully made contributions to our retirement accounts but have little to show for the effort. We maxed out our tax-deferred IRAs and 401(k)s and managed to keep our costs down. We even reduced our tendency to overtrade.

It mostly has been for naught. It doesn’t seem like any of our holiday wishes have been granted over the past decade.

All we want for Christmas is to get back to break-even.

Rather than mailing you directly and hoping for the best, this year I decided to publish my holiday list in this newspaper. (In Washington, this is called a “well-placed leak.”)

Here is the short list of what investors are hoping to find under their trees:

1 A consistent trend: Investors need some Dramamine after this year’s wild swings. The second half of the year alone had more than a dozen swings between 5 percent and 20 percent. Despite all that, the market is unchanged year to date. It is the equivalent of a lump of coal in investors’ stockings.

2 Yield, please: Those who live off of their investment portfolios are having a tough time. The 10-year Treasury is yielding less than 2 percent. Social Security recipients have seen almost nothing in terms of cost-of-living adjustments.

Santa, won’t you please speak to Fed chief Ben Bernanke about normalizing the interest rate policy? We don’t ask for much, just risk-free, tax-free, real annual yields of 4 to 6 percent.

3 More civil suits against corporate execs: We got an early Christmas present when the Securities and Exchange Commission filed suit against the chief executives (and other top officers) at Fannie Mae and Freddie Mac. These execs made “misleading and false disclosures” to investors about subprime exposure, according to the SEC.

There must be many more execs at various firms — AIG, Citigroup, Lehman Brothers, Bear Stearns, Merrill Lynch, Indy Mac, Bank of America, Countrywide and even Goldman Sachs — who similarly misled investors. Securing convictions and huge fines against those who misrepresented their financial condition to the public would go a long way toward restoring investor confidence.

4 Good advice: Why is reasonably priced, intelligent personal financial advice so difficult to come by? What most investors really need is someone they can respect and trust to help them plan for the future. We don’t ask for much, just a person who will help us make money in good markets and prevent us from losing any in bad ones.

5 A bottom in housing: The ongoing residential real estate debacle continued this year, with prices falling another 3.9 percent year-over-year last quarter. If housing prices do not stabilize, then the banks are still at risk, festooned as they are with bad mortgages. Without stable, financially secure banks, we cannot see any sort of sustainable market move. Hence, a bottom in housing prices would be a real treat.

6 Criminal indictments of robo-signers: Speaking of banks, they seem to have some employees who have violated the laws regarding perjury, foreclosure and litigation. Some of our state attorneys general have been very good this year at investigating them. The New York, Delaware, California and Nevada chief prosecutors deserve a little something extra in their stockings for so diligently pursuing these criminals. (A lump of coal, perhaps, for the rest?)

7 Please fix Europe: Our largest trading partners in Europe are a mess. Their banks are filled with a different sort of subprime junk — the sovereign debt of overleveraged nations. Anything you can do to help them out of their jam would be appreciated.

8 No more volatility: The roller coaster ride in the markets these past few years has given us motion sickness. How about a nice calm market for next year, even if the gains are in the single digits? That would suit us just fine.

9 Accelerate loss deductibility: Investors have lost thousands of dollars in the past three crashes (tech, housing and stocks). The maximum set off against profits is a mere $3,000 a year (married joint filers). At that pace, there are lots of investors whose losses will outlive them. Indeed, plenty of middle-class families still have losses from the dot-com crash alone that run into six figures. If Congress were to raise this to $10,000 or $20,000 a year, it would not cost that much but would be a huge benefit.

10 End of the bear market: It has been 12 years since the stock market peaked in March 2000. For all the ups and downs we’ve experienced, the major indices are essentially unchanged since 1999. Santa, won’t you please end this bear market sooner rather than later? I know the last bear market lasted 16 years, until 1982, but I am not sure we can last six more years!

That’s my investor’s holiday list, Santa. Hope you can accommodate me.

— Barry

* * *

Dear Barry,

Thank you for your list. It is not every day that Santa gets a request for “more yield” or “criminal indictments,” so it definitely caught my eye.

I have taken the liberty of forwarding parts of your list to different folks in the Capital — the SEC, Congress, Federal Reserve and White House. They can do more with your request than I can.

About your other list — the one with that Aston Martin (British racing green) on it? Forget about it; you haven’t been THAT good this year.

Ho ho ho,
— Santa

Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture.

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