For the past several weeks, I’ve resisted the temptation to comment about “the debt ceiling”.

Why?

The debt ceiling debate is certainly important to the long term future of our country, but from an investor’s standpoint, it’s just noise. Everything you hear about it is already reflected in securities prices, so it doesn’t help to chase investments that promise to defend against it, whatever “it” is. I figure physicians have enough noise in your life already, so I spend my time trying to help families focus on the “signal”, or the issue that matters.

So here’s the signal for investors: diversification matters. And in particular, diversification beyond the confines of the United States–whether we’re talking stocks or bonds–matters. Many of my clients own foreign investments, and that’s proven to be helpful in staying on track as we muddle through the bad noise du jour.

And since you’re hearing a ton of bad news these days, I thought I would share some good news to balance things out. The following story is reprinted with permission. Enjoy.

-W. Ben Utley, CFP®

Seven Headlines to Beat the Gloom

by Jim Parker, Vice President of Dimensional Fund Advisors

[Ben's Note: This material may refer to resident trusts offered by DFA Australia Limited. These resident trusts are only available in Australia. Nothing in this material is an offer or solicitation to invest in these resident trusts or any other financial products or securities. All figures in this material are in Australian dollars unless otherwise stated. I had to look outside the US to find good news, and this came from an Australian source.]

Debt crises, sovereign risks, double dips and banking strains: Page One headlines can make for depressing reading these days. But being a smart news consumer—and smart investor—means keeping an eye on the lesser headlines. Here are seven you may not have seen:

• Robust Growth in Germany Pushes Prices—Analysts see a strong chance that German inflation will head towards 3 per cent by the end of the year against a backdrop of robust growth in Europe’s biggest economy. (Reuters, July, 27, 2011)
• Brazil Domestic Demand Still Strong—The Economist Intelligence Unit says economic growth in Brazil surprisingly picked up speed in the first quarter, challenging the government’s efforts to cool the expansion. (EIU, July 6, 2011)
• Japan Retail Sales Top Estimates—Japan’s retail sales rose 1.1 per cent in June, exceeding all economists’ forecasts and adding to signs the economy is bouncing back from an initial post-disaster plunge. (Bloomberg, July 28, 2011)
• No Fear in China—Traders betting on gains in China’s biggest companies are pushing options prices to the most bullish level in two years. The Chinese economy is projected to grow by 9.4 per cent in 2011. (Bloomberg, July 28, 2011)
• Southeast Asia Booms—Southeast Asian markets are the world’s top performers in 2011 thanks to strong economic and corporate fundamentals. Thailand’s index hit a 15-year high in July and Indonesia’s a record high. (Reuters, July 22, 2011)
• Australian Boom Keeps Rate Rise on the Agenda—The Australian dollar hit its highest level in 30 years in late July as traders looked to the prospect of another rise in interest rates on the back of a resource investment boom. (WSJ, July 27, 2011)
• New Zealand Bounces Back—The New Zealand economy has grown more strongly than expected after the Christchurch earthquake, helped by improving terms of trade. The Reserve Bank signals it may raise interest rates soon. (Bloomberg, July 28, 2011)

Standing back from all this, the picture that emerges of the world outside North America and southern Europe is of robust economic conditions. If anything, policymakers in many parts of the world, particularly in Asia, are seeking to pull back demand, rather than stoke it.

Australia, for instance, is enjoying its best terms of trade in more than 50 years. An unprecedented investment boom in mining is injecting extraordinary wealth into the economy and has helped to push the Australian dollar to levels not seen since it was floated in the early 1980s.

Likewise, China, India and much of South-East Asia are seeing strong investment flows and worrying more about over-heating than anything.

This is not to say that all is right with the world. The aftermath of the global financial crisis has created severe problems, particularly in terms of public sector debt and deficits. But we know that that news is in the price. Meanwhile, economic activity in much of the world is thriving.

For equity investors, that means opportunities for wealth building are increasing, not decreasing. Moreover, the global economy is becoming multi-polar, rather than overly dependent on the US, which means the potential benefits from broad diversification are even greater.

That’s why focusing too much on the day-to-day headlines with the US debt ceiling or European sovereign issues risks missing many of the good stories out there.

Sometimes, the best advice is to read the newspaper from the inside out.

Every morning I wake up to the news on NPR, since that’s how I’ve programmed my alarm clock. It’s a rude awakening indeed, and more alarming than the “blat blat blat” sound of my other less alarming option.

Next, I watch the 24/7 bad news channel on television as I eat breakfast. And before a serious case of indigestion has the chance to set in, I reach my office to plow through somewhere between 60 and 360 headlines from around the markets and around the world via Google Reader. And you guessed it… more bad news.

This gloom and doom bad news isn’t designed to make you feel good. But good investing isn’t about “feelings.” It’s about thinking, and acting (or not acting) appropriately.

The thing I’ve been thinking lately is that there’s a great deal of news that’s NOT being reported clearly, and that’s what I’ve decided to call the “anti-news”. So here’s the news I hear, and the anti-news I perceive to be true as well.

The Economy

• The News: We’re in a recession, and it’s going to be the great depression all over again.
• The Anti-News: We’ve been in a recession for at least a year now by my reckoning, and other than the fallout in the stock market, it looks nothing like the Great Depression. Back then, unemployment hit 25% (1933) and gross domestic product, the broadest measure of economic activity, plunged 13% (1932). This compares favorably with the 0.2% decline in GDP the Fed is forecasting for 2009.

  During the Great Depression the money supply shrank by one-third from 1929-33, and the Fed didn’t protect the banking system.  Today Ben Bernanke and international monetary institutions are doing everything they can to support the banks, short of controlling them outright.

Unemployment

• The News: In October, the unemployment rate rose from 6.1 to 6.5 percent.
• The Anti-News: In October, the EMployment rate fell by a mere 0.4% from 93.9% to 93.5%.

  That means that now 65 people are out of work for every 935 people who still have a job. Let me repeat that: the vast majority of people still have a job. And most people will still need to buy groceries, make mortgage payments, visit the doctor’s office, and do all those other things that are part of the economy. And we still have an economy.

  If you’ve followed the “news” that the big three automakers are on the ropes, we’re being led to believe that car making will come to an end, and every employee in the industry will be without work, indefinitely. Undoubtedly some families will suffer greatly but others will re-train and re-join the workforce.

  The news is not telling us that some industries are short of skilled labor, like the nursing field. Right now we have a chronic shortage of skilled nursing care (largely due to a bottleneck in the educational system). I’ve read stories (dating back to two years ago) where people downsized by the auto manufacturers have begun to be retrained to enter the nursing field. I wonder how far $25 billion would go in re-training these workers?

Stock Prices

• The News: The market is down 50% at 7,500, the lowest it’s been in five years. People are selling like crazy.
• The Anti-News: “The market” is not down 50%, just the stock market. The bond market is actually up 2% in the twelve months ended yesterday, and many investors (my clients included) hold some portion of their portfolio in bonds. With the Dow at 7,500, it’s actually up more than four-fold compared to where it closed on October 19, 1987 near the bottom of the “crash” (at 1,738), and UP 182-fold compared to where it closed at the depths of the Great Depression (at 41).

  Stocks are cheap by several measures, including their absolute prices. How cheap are they? Well, they’re “half off,” which means that every dollar you invest today buys you twice as much as it would have just a year ago. And people are buying stocks. in fact, they’re buying exactly the same number of shares as are being sold (since every share that is sold *by* someone must be sold *to* someone else).

  Stocks are also cheap when you look at them from the standpoint of the passive income they generate, or the “dividend yield”. As of yesterday, the yield on the Vanguard S&P 500 Fund stood at 2.76%. If the index stopped going down today, and *never* went back up again, a person might double their money in 25 years based on the dividend payment alone. Now I know that 25 years is a long time to wait for a chunk of your retirement money to regain its value (and I doubt it will take nearly that long), but just imagine what the future looks like for all those people who sold their stocks yesterday to buy “safe” Treasury bonds yielding a mere 0.5%… In speaking with one client recently, I layed out this dividend math and she said, “well you’d get eaten alive by inflation.” But would you really?

Inflation

• The News: The consumer price index declined 1% this month.
• The Anti-News: Say what? You mean prices actually went DOWN? Yes, that’s the case. Just three months ago fuel prices threatened a 70′s style bout of “stagflation” and now we have actually experienced a touch of deflation. That means some things are actually getting cheaper. One of which is oil.

Oil Prices

• The News: Oil prices are about $50-60 per barrel.
• The Anti-News: We’re actually burning less oil now than back when prices were at $147/barrel, and we’re driving fewer miles. This actually helps the environment while it gives our country time to figure out a solution to the energy crisis (hard to call something a crisis that we’ve known about since Carter was in office), and it reduces the power and influence of oil-producing nations that “don’t like us very much” including Russia and the Middle East. And you can still pick up a gas guzzling Honda Pilot or Ford Explorer on the cheap.

Home Prices

• The News: Home prices are down, and going lower (since when did “news” include prognostication?).
• The Anti-News: Unless you plan to move to a nursing home in the very near term, this is nothing to fear. You have to live somewhere, and if you had to move today, you might lose value relative to the peak price of your home. But you’d also be back in the market for a house and you’d have a wide selection to choose from at low prices.Some clients I’ve spoken with recently are taking advantage of this phenomenon to buy land at low prices (since the speculators are unloading it) and build new homes using materials that are being sold at low prices. They plan to actually employ some out of work contractors, whose hourly rates have dropped precipitously.

Prognostications

• The News: We should have seen this coming. Joe Blow from Smarty Pants & Co. (a prestigious Wall Street forecasting firm) said, in 2006, that all hell would break loose and that things would go badly.
• The Anti-News: Anyone with a modicum of investment wisdom CAN see recessions on the horizon because we ALWAYS have had recessions and we always will. Recessions are a natural part of the economic cycle and nothing to fear. However, predicting the timing, depth and breadth of a recession is fool’s work.

  The pundits who are now saying, “I saw it all along” are the kind of people who always see bad news on the horizon because they see the future as glass-half-empty. They sit on the sidelines hoarding cash – or gold – hoping for “The Big One” to come along, seeing every downturn in the economy as the beginning of the end. We know that even a broken watch tells time accurately twice a day, and the Doom and Gloomers merely got it right for a change. Too bad they’re missing the buying opportunity of a lifetime.

At the end of the day, after you turn off the news, the only thing that matters is what you did with your investments based on what you heard in the news. And the thing to do right now is make sure you’re fully diversified, that the investments you hold now are right for you, and that you have someone to help you follow the anti-news and remember why you’re investing in the first place.

Today’s Wall Street Journal reports that President Bush signed into law the Emergency Economic Stabilization Act of 2008, which you may know as “the bailout bill”.

What does it mean for physician families? Here’s our summary of the relevant points in the 425 page document.

The Losses In Your 401(k) Probably Won’t End Today

If you were thinking the bailout bill might make your stocks and mutual funds finally bottom out, think again. The Secretary of the Treasury has until November 17 to establish rules that govern details of the bailout, including how securities will be purchased, what price will be paid, who will manage the assets, and what troubled assets to actually buy. In this economic environment, 45 days is an eternity, and all hell might still break loose between now and then. And even after the program spends the first dime on the first bad mortgage, we won’t know for sure what the government has actually done for probably 3 months or more since their first report is due 60 days after the program begins to function.

But You Probably Won’t Be “Wiped Out” Either

I believe the legislation will have the desired effect: keeping the country’s financial system from collapsing. If we avoid a real, honest-to-goodness depression, then physician families will be facing a recession, which we as a nation face about every 5-10 years as a natural part of the economic cycle. If you’ve done your financial homework and observed the best practices of personal finance, you may be a bit uncomfortable but you’ll survive. Healthcare is one of those must-have services and even recession won’t change that.

This legislation does more than make it possible for the Treasury to buy up troubled mortgages. The Treasury also gains the ability to modify loans it has purchased by reducing interest rates or reducing the balance due. This may make it easier for homeowners to stay in their homes, stabilizing the inventory of homes on the market. We believe this might put a floor under home prices, which benefits everyone.

Your Bank is Now Safer, But Not For Long

Section 136 of the Act increases the FDIC coverage limit on bank deposits from $100,000 to $250,000. Physicians who use bank checking and savings accounts to hold cash they need for 6-figure tax bills and other large expenses will now find it much easier to protect their savings. This limit also applies to federally-chartered credit unions under the NCUA.  This provision expires December 31, 2009 unless Congress chooses to extend it.

By the way, a family of four can effectively gain FDIC/NCUA coverage for a total of $1.5 million now at any covered bank or credit union by arranging their accounts carefully.

$7,000,000,000: Smaller Than It Looks, And Bigger Too

The bailout’s price tag to taxpayers has been touted as $700 billion but it may never cost that much since the act allows the Treasury to purchase only (“only”) $250 billion worth of bad assets to begin with. Only with a request from the President can the Treasury spend another $100 billion. To take the total exposure for taxpayers up to $700 billion, Congress would need to OK an additional/final $350 billion.

When the Treasury buys up these securities, they may bring some price stability to these and similar securities, causing investors beyond the Treasury to see value and begin buying. If this action re-ignites the market for these securities (which are not all worthless), it may not be necessary to tap the whole $700 billion. Interest and capital appreciation on these securities would also serve to decrease the total outlay.

To get the bill through Congress, lawmakers added “sweeteners” including an extension of Alternative Minimum Tax relief that may benefit some physician families (saving affected families $3,700 for the 2008 tax year). This may sound good but there are a number of provisions in the bill which will not benefit physicians directly, and the Congressional Budget Office estimates these extras could increase the federal deficit by $107 billion over the next nine years. We expect that physicians will bear an increasingly larger tax bill to pay for it all.

Your Tax Bill Is Headed Upward

As almost every taxpaying doctor must already know, the Act raises the ceiling on the federal debt to $11.3 trillion (wow!). But what physician families may not know is that Section 122 of the Act increases the limit without regard to the success or failure of the bailout effort.

Upshot? Even if the bailout is a resounding success, Congress still has the authority to run up $700 billion more in debt, and that debt might not have a thing to do with the bailout. Think of it as an increase in the limit on Uncle Sam’s credit card where physicians are the ones paying the bill.

A Bill For Mental Health

If thoughts of the Second Great Depression and financial meltdown are making you crazy, the new bailout bill may have something for your mental health… really. In addition to the rescue package, the new law includes long-sought language requiring insurers to offer coverage for most mental illnesses at comparable rates to physical illnesses.

The Paul Wellstone Mental Health and Addiction Equity Act of 2008 requires group health plans to apply the same health insurance benefits to mental health or substance-related disorders as they apply for medical and surgical benefits, including limits on deductibles, co-payments, and out-of-pocket expenses. If you have a psychiatric practice, this could be very good news for you. And if a member of your family is dealing with substance abuse issues, this will bring much-needed financial relief. It might also be expected to raise the cost of health insurance for everyone.

With oil closing yesterday at an all time high of $137 per barrel, and gas prices over $4.00 at the pump, you might have asked yourself, “Shouldn’t I be investing in oil companies?”

The short answer is: Yes.

Everybody needs oil, there’s nothing else like it, they’re not making it any more (or at least Mother Nature isn’t), and there’s barely enough of it to go around. More to the point, your friends and colleagues are probably talking about it, while the guys on TV seem to think it’s a great idea.

And I agree. Investing in oil companies is a good idea.

But you may have also asked yourself the question, “Shouldn’t I take some of my extra money and just invest it in some oil, a hand full of oil stocks, or an oil-focused mutual fund?”

Let me assure you the answer to that question is… No.

In the 90’s, everybody thought technology was a great investment. After all, there was nothing else like it, everybody needed it, and people couldn’t get enough of it. Same story with real estate: everybody’s gotta have a place to live, and with land, there’s a shrinking supply they’re not making any more of it.

Of course, we saw what happened with both of these sectors of the economy. Boom. Bust.

In fact, the boom-bust cycle is an intrinsic part of most sectors of the economy, and that’s why it’s important to approach all sectors in a diversified manner.

When I recently surveyed the average account that is under our direct management (meaning an account that is held at a brokerage firm where we have both the power and the freedom to choose any security we need), we found that energy companies made up a total of 9% of the overall exposure to stocks, and more than 50% of the bonds in an average account were issued by companies or governments located in major oil producing countries.

So what’s the bottom line? If you’re probably already investing in oil (as well as natural gas, coal, and greener forms of energy production) so there’s no need to drill deeper in this sector. It’s already a meaningful yet reasonable part of your overall investment strategy.

Given the speculative fervor about oil, it might be the wiser choice to merely stay the course.