Another Look at Hedge Funds

BY DALE SCHWARTZENHAUER

I am responding to the twin articles, “Freedom From Market Swings” and “The Hedge Fund Mystique” ( JofA, May02, page 55).

Although CPA practitioners may have some high-net-worth clients like those described in the articles, most of us work with clients with far more average investor profiles. Since these clients don’t fit the eligibility requirements for many “alternative investments,” what options are they left with? I encounter many individuals who were hammered in the market in the past two years but don’t have a clue what their response should be. Many still cling to the buy-and-hold approach that was widely hailed by Wall Street as the only successful way to invest.

For those without much market savvy, my recommendation to clients is that cash is king and debt loads will be a death trap. For those with a slightly more aggressive stance, I suggest balancing that position with bear-market mutual funds.

As for timing models—and they do work—there is a time to be in the market and a time to be out—all the way out. I could see the handwriting on the wall two years ago when my co-workers were “swinging from the chandeliers” and proclaiming how wealthy their heirs would be from a few stock positions. Unfortunately, my proclamations that the bull market would end fell on deaf ears. I wonder what the accepted strategy will be at the bottom of the bear market.

Dale Schwartzenhauer, CPA
Jim Johnson & Co.
Walla Walla, Washington

Letters to the Editor

The JofA encourages readers to write letters on important professional issues in addition to comments on published articles. Because space is limited, letters submitted for publication should be no longer than 500 words. Please include telephone and fax numbers.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.