Patrick Bourbon
Best of BFM
We've carefully assembled practical tips you can use to help you make better, more informed decisions.

Did you know that your vision can literally "trick" you? Did you know that human attention is limited and that we can't analyze all the information we receive?
Financial Tips
Learn More


We can point to some general practices that can help investors improve their investment decision making:

- Thinking more analytically when making important financial decisions.
- Being pro-active, curious and non-assumptive at all times and spending time to evaluate investments, possible risks and benefits.

- Continuously striving towards improving self-control and avoiding hastiness.

- Avoiding making any important investment decision while being in a passive state of mind.

- Creating a balance between being patient and being dynamic about investment choices.


We have also attached a summary: BFM_Newsletter_08_2011.pdf.



What just happened to the credit rating of the US?

Standard & Poor’s (S&P) lowered its long-term debt rating by one notch, from AAA to AA+, but left the short-term rating at A-1+. S&P left the sovereign debt rating on negative outlook. The move was expected. S&P had revised its outlook on the US to negative from stable back in April 2011. In July, it placed the rating on CreditWatch negative, indicating a near-term rating change was possible. The downgrade reflects the default risk associated with the US. The difference between a triple-A or double-A rated credit in terms of default is almost imperceptible.

Thru Monday, August 8, the equity markets had fallen 15% in the past two weeks, were down 12% for 2011 and were flat for the past 12 months. To put this in perspective, the markets decreased about 80% during the Great Depression, around 40% in 2001-2002, in 2008, and were down around 20% in one day in October 1987 or in two days at the beginning of the Great Depression in October 1929.

We take a long-term, academic and disciplined approach to investing and we try not to react emotionally to market swings, unlike many individual investors who tend to sell equities and lock in losses during down-turns.

The portfolios we recommend are well-diversified. For example, we recommend to invest in emerging markets funds which have been up 14% for the last 10 years on an annualized basis (vs. 1% for the S&P 500).

Although we closely monitor the markets, we are not market timers and market movements do not affect our strategic asset allocation.

Twice since 2000, the markets have experienced large movements (40+% decrease). These down-turns create significant opportunities to rebalance portfolios and buy equities at low cost.


On the positive side:

Corporate margins and balance sheets are in good shape.

Equities are not generally expensive compared to historic norms or compared to bonds.

The unemployment rate is slowly decreasing and is now at 9.1% vs. 9.8% in November 2010.

In the last 25 years there have been 11 country downgrades from AAA. In 10 such unhappy occurrences, the local 10-year government bond yield was lower one year after the credit action. The stock market results were somewhat more mixed but were generally positive – on average, the local index of the country downgraded was up nearly 17% a year later.


On the negative side:

Large Debt in US, EU and Japan.

The odds of a recession are increasing.

Leading indicators are no longer improving.

Growing concerns over higher tax rates, fiscal consolidation, and a potential default in Italy.

Real estate prices are not improving.

The unemployment rate is still high.



We have discovered that the most valuable things we do for our clients is the selection of mutual funds, the construction of portfolios, and making sure they have enough asset as long as they live by focusing on asset allocation and diversification. If you have any ideas on how we might connect with people who could benefit our help, your advice would be a great help.





We would welcome the opportunity to know you better, introduce ourselves, share with you the work we do for our clients, and position ourselves as a useful resource for you. A consultation would be a wise first step toward achieving your vision.


Getting to know you, your needs and motivations, is as important as you evaluating our capabilities to help you meet your financial goals. We do not charge a fee for our initial consultation during which we review your portfolio, and discuss your goals and objectives.

“ Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
— John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936
Follow on Twitter    Follow on LinkedIn  

Thanks to the 500+ of you who have read the Best of BFM Newsletter (click here), which summarizes the newsletters you enjoyed in 2010-2011. By now, you should have uncovered that financial decisions are not only driven by rationality but they are also influenced by emotions. You also found out that your vision can literally "trick" you whenever it can (click here)!

Has BFM Helped You Yet? Click Here for Your Personal Guide to Financial Peace of Mind

Copyright © 2013 Bourbon Financial Management, LLC.  
All Rights Reserved.

Bourbon Financial Management, LLC
616 W. Fulton St. Suite 411
Chicago, IL 60661
(+1) 312 909 6539 -
Visit Our Website
 unsubscribe from this list | update subscription preferences 

This Newsletter is not advice.  Pursuant to the rules of professional conduct set forth in Circular 230, nothing contained in this communication was intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose. This newsletter may be an advertisement pursuant to federal law. 
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, and fitness for a particular purpose.