Calm Before the Storm?

8 10 2012

Jonathan N. Castle, CFP®, ChFC®

The financial markets – both stocks and bonds – have been relatively calm for the last 4 months, nicely rewarding investors who avoided the urge to “Sell in May and Go Away,” and instead remained invested with a sound and prudent investment policy. Since the short but abrupt 10% correction that ended on June 2, the global stock markets have steadily advanced, packing on about 15% of value in the US markets and almost 18% in overseas trading. Our strategy of skewing portfolios heavily toward large stocks and high-yield bonds has generally paid off, allowing our investors to capture most of the market’s gains, commensurate with each individual’s risk tolerance.

However, based upon our own observations of financial news, as well as multiple discussions with clients, there is a nagging feeling of unease that persists in the financial markets. Nearly every client we meet with displays at least some level of concern about the economy and the financial markets going forward, despite having reaped solid returns from investments so far this year.

The financial markets are merely a reflection of the perceptions of hundreds of millions of investors, some of whom are highly sophisticated and understand the implication of governmental policies and economic data, and others who invest more by feel or intuition. Recently, there has been lukewarm (but not upsetting) economic news on the domestic front, a continuation of monetary easing by the Fed, and some positive developments in Europe that have led to a generally positive experience in the capital markets. Despite the calm, past experience has taught us that investors behave like lemmings and the stock market typically sets itself up to hurt the most people at any given time. I am reminded of Murphy’s Laws of Combat. There are several that presently come to mind:

• Murphy’s Law Number 26: The easy way is always mined.
• Murphy’s Law Number 38: If your attack is going really well, it’s an ambush.
• Murphy’s Law Number 32: In a crisis that forces people to choose among alternative courses of action, most people will choose the worst one possible (this one in particular may apply to Congress and the upcoming election)
• Murphy’s Law Number 44: After things have gone from bad to worse, the cycle will repeat itself.
• Murphy’s Law Number 145: Opportunity always knocks at the least opportune moment. (which takes courage to exploit…)

There are several very good reasons for unease – but it appears that there may also be a chance for opportunity to knock as well. Let’s take a look at the major issues that will be impactful on the economy and the financial markets over the next year or so.

Opportunities

Europe: The European Union seems to be finally getting its act together. The European Central Bank appears to be putting forth believable policies that may just keep the Union together and allow a “soft landing” for a number of the countries that are in deep fiscal trouble.

QE3 and Bernanke’s Printing Press:  The Fed’s announcement of QE3 is, in the short term, positive for the stock market and for the economy. Fortunately (for now) it does not appear that all of the ingredients for hyperinflation are present. QE3 does not cause the US to directly incur any more debt – but it does cause the Fed to print more money which can eventually lead to a weak dollar and inflation. Since other Central Banks are printing money as well, the Fed’s act of printing more money does not necessarily mean that the dollar will weaken against other currencies. So – for the short term, this is positive. For the long term – once the economy does truly begin to recover – this open-ended quantitative easing could be a catalyst for extreme inflation if fiscal tightening measures are implemented too slowly at some point in the future.

China:  It appears that China may have engineered a “soft landing.” If this is the case, it will have a positive impact upon our economy, as China is a significant trade partner with the US.

Dangers/Concerns

Fiscal Cliff:  The most dangerous upcoming challenge that we have to watch centers around the expiration of the Bush Era Tax Cuts. Originally scheduled to sunset in 2010, these tax cuts represent an aggregate economic impact of over $500 Billion dollars and are currently scheduled to expire at the end of 2012. If these tax cuts are allowed to expire abruptly, it would shock the economy and immediately push the US economy back into a harsh recession. It is likely that unemployment would rise quickly, every household in America would feel the impact, and the stock market would sharply pull back.

2012 Presidential Election:  Despite Romney’s good performance in the first debate, the markets currently still appear to be factoring an Obama victory. If Obama is reelected, then we believe that the markets will perhaps move sharply in one direction or another – but only for a very short period of time and for less than several percentage points, as amateur investors knee-jerk to the news. The impacts of governmental policy on industry sectors are some of the most widely studied economic subjects, and “bets” are placed months in advance. In fact, a number of studies have shown that the markets have a greater impact on presidential elections than presidential elections do on the markets. However – that being said, the consensus is that a Romney election will likely be better for the markets in the short term than would an Obama second term. Romney is a fiscal conservative, disagreeing with the Keynesian approach that the Obama administration is following. Historically, a Keynesian approach has not been particularly successful in creating economic prosperity, but has proven very effective at creating government debt and citizen’s dependency upon the government. Unfortunately, at some point, “production” must occur – which only occurs in the private sector and the free markets.

2012 Congressional Election:  It is likely that the Congressional and Senate elections will be more impactful to the economy than the Presidential election. If either side wins a mandate and can actually move forward with the responsible governance of the country, then we may see some of the more troublesome issues resolve themselves. It is our hope that Congress feels it has a mandate, and is empowered enough to move forward with “smoothing out” the expiration of the Bush Tax Cuts to the point where the US economy can avoid the upcoming fiscal cliff. If that is the case, then we may avoid recession and reap significant profits from the capital markets over the next several years.

So – in short – what do we see and what do we plan to do?

1. We are watchful. If we actually do hit the Fiscal Cliff, we will likely have time to react before everything goes to heck in a handbasket. In the event that the Bush Tax Cuts do expire, AND we begin to see the effects in the markets and on the economy, we will shift to Defensive Portfolios where appropriate. The Defensive Portfolios are designed to perform quite well under extreme market stress. However, if the stock market ends up providing a strong return, the Defensive Portfolio will miss out on most of it. Consequently, we do not want to shift to the Defensive Portfolio unless we feel that the odds of a serious market correction are high. Unfortunately, one cannot have it both ways. Safety and high returns rarely go together. Additionally, changing portfolio structure will have significant tax consequences on non-IRA type accounts.

2. In the event that we avoid the Fiscal Cliff, we expect several opportunities to arise if the situation in Europe continues to improve. Having reduced our exposure to international and emerging markets nearly 2 years ago, their impending recovery will likely present us with significant opportunity for profit. Currently the consensus from most analysts is that it is too early to buy into these markets – but perhaps soon.

3. High Yield Bonds and Large Growth Stocks continue to appear more attractive than usual. We intend to keep these in the portfolios in percentages well above what we would hold normally. So far, this has played out well for portfolio performance.

4. Interest rates: Rising interest rates are the least of our concerns right now. Yes, rising interest rates do cause the price of existing bonds to fall – but interest rates will only rise if the Fed does a complete 180 degree turn from its present policy of quantitative easing. Likely, we will have plenty of warning – and a very robust stock market – long before we need to adjust portfolios to protect against rising interest rates. Once that occurs, however, we will make the necessary adjustments to insulate portfolios against falling bond prices.

As always, we appreciate the faith that you have placed in us by allowing us to advise you during these most “interesting” times in our lives. It is our hope that our watchfulness and our attempts at distilling complex and often confusing information adds value to your overall financial situation.

Jon Castle

http://www.WealthGuards.com

This blog is for informational purposes only. This is neither an offer to purchase nor sell any securities. All investing involves the potential of loss – including invested principal. Indices quoted are general barometers of security price movement. You cannot invest directly in an index. All information is obtained from sources deemed reliable but not guaranteed. Past performance is not a guarantee of future performance. No tax or legal advice is given nor intended.

Investment advisory services provided by Paragon Wealth Strategies, LLC, a registered investment advisor.

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256 (904) 861-0093 www.WealthGuards.com

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements

Advertisements




The Market feels a bit… “Toppy.”

5 03 2012

Jonathan N. Castle, CFP®, ChFC®

Where does the time go?  It is already nearly the end of February and it seems like 2012 is speeding along faster than last year!  So far this year, the financial markets have been reasonably good to all of us, with the S&P 500 up about 8.5%, the Dow up 6.6%, and the NASDAQ up an eye-popping 13.9% as of this writing.

The Dow Jones Industrial Index has broken through the psychological barrier of 13,000 – the highest it has been since March of 2008 a few times now.  In fact, the markets have been remarkably – almost eerily – calm for the last 3 months, quietly marching upward, shrugging off the occasional bad news (such as the Greek bailout nearly unwinding last week and the ever increasing tension over oil in the mideast) with little more than an occasional flinch. 

As we have said for the past 8 months, we remain cautiously optimistic.  “Moderately Bullish” is a term that I have used in the past.  Based upon historical behavior of Secular Bear Markets, we expect that over the next 3 years or so, we will see substantial ups (and downs) in the markets with a slight overall uptrend.  

As it pertains to the current rally, we believe this leg of the rally is probably due for a drawback of some kind.  The next chart shows our reasoning for this.  When the market approaches a point where it had difficulty breaking through previously (such as the Dow’s 13,000 level), this is known as “resistance.”  Typically, as a market index approaches a resistance level, it generally will pause, draw back, and then, IF the level is to be broken, will punch through that level to achieve new highs.  Similar to a person drawing back before breaking through a door, the market will generally draw back before “breaking out” to a new level.  As we are at that resistance level now, a drawback would be a natural – even necessary – part of a normal market rally. 

Despite the recent market rally, we do not feel it is time to break out any party hats on a new sustained bull market just yet.  There are a number of reasons to remain cautious about the markets:

  • According to the Investment Company Institute – the total inflows (new money) going into equity (stock) mutual funds from February 1st through February 15th was a little over 4.6 Billion Dollars.  While this seems like a lot, compared to the inflows to bond funds, which netted 15.2 Billion – it was just a trickle.  Clearly, investors are not ready to assume lots of stock market risk just yet, and the recent rally did not have the market breadth that would indicate the start of a new bull market.
  • The price of oil is going up.  Part of the reason is that US refineries shut down every May to retool to EPA requirements, so oil nearly always rises during this part of the year.  However – increased tensions in the mideast are also driving oil prices higher.  Higher oil prices mean slower economic growth.  As businesses must pay more for energy, they spend less on payrolls and other things which drive growth.
  • Europe’s financial situation is still quite a mess.  While it seems that the European Union is working feverishly to keep from imploding – and they may well succeed – the fact is that Europe is already mired in what appears to be a deep recession.  This will have a global impact, slowing growth in emerging markets as well as within the United States.
  • Our National Debt is a significant problem – and only getting worse.
  • We are in an election year, so significant economic policy will likely not be passed until next year.  Given the uncertain outcome of the 2012 elections, it is anyone’s guess as to whether any new policies will be helpful or harmful.
  • The Bush tax cuts are set to expire this year.  This expectation is curbing business spending.
  • And the list goes on… given the recency of the 2008 market crash, investors are not yet hungry enough for returns to take additional risks and dive head first into the markets. 

However – there are numerous reasons to be bullish as well.  Institutional investors are slowly beginning to see the opportunity in stocks – and have publicly stated their plans to acquire more stocks in their portfolios over the next several years in preparation for a future bull market.  Some reasons to own stocks – and to expect the market will go up are: 

  • Stock valuations are more attractive than they have been in decades.  Based upon the price of stocks compared to company earnings, stocks are cheap.  In the past, investors who loaded up on stocks at current valuation levels were handsomely rewarded over the next 10 years.  Institutions know this – and their demand for stocks during this period may well keep the market afloat.
  • We are seeing a new “flurry” of IPO’s (Initial Public Offerings).  New companies – such as Facebook – offering publicly traded stock for the first time.  Historically, when there are a lot of IPO’s, the market does well.
  • We are seeing a significant increase in companies buying back their own stock.  Not only does this activity boost the stock market – but it is also an indication of what company insiders think of the future prospects of their companies.  Who would spend good money to buy their own company stock – unless they believed the company woud do well?
  • Corporations are hoarding more cash than ever.  While initially this might seem a bad sign – it is a an indicator of the huge potential that exists.  Eventually, this cash will be deployed.  When it is – there is enough of it to have an enormous impact upon virtually all parts of the economy.
  • Currently, the dividend yield on the Dow Jones is a very attractive 3.07%.  So, hypothetically if the market only goes up 5%, an investor who owned the Dow Jones would reap over 8% in total return.  It is only a matter of time before return-starved pension funds, institutions, and corporations currently investing in Treasuries earning less than 3% begin to move money to other assets to seek greater returns.  When this begins, the market has the potential to move up very quickly.

This balance between bullish and bearish factors is a normal part of the recovery process, but makes for a challenging investment environment. In summary, we remain cautiously bullish, with an expectation for occasional market corrections which may exceed 20% or more.  Likely, it will feel like taking three steps forward, only to take two steps back.  However, we feel that reasonable gains are available with the correct strategy.  The most successful investors that we have worked with have carefully chosen their risk tolerance, and then invested in portfolios scientifically designed around that risk tolerance – and remained focused on the long term.  

This blog post is not personal investment, financial, or tax advice.  Please consult your financial professional for personal, specific information.  Indexes mentioned are a general barometer of the stock or bond market they represent.  You cannot invest directly in an index.  Past performance is no guarantee of future results.   

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services offered by Paragon Wealth Strategies LLC, a registered investment adviser.  http://www.WealthGuards.com 






Should I Still Invest in a Crappy Economy?

20 09 2011

By Jon Castle, CFP®, ChFC®

It does not seem to matter who the potential investor is – whether they are already retired, are nearing retirement, or are a younger person with quite a bit of time until retirement… the question is often the same.  With interest rates being so low… with the markets unpredictible and volatile – what should I do?  The questions aren’t even really so straight forward as, “why should I invest my money now,” or “should I pay off debt first,” or even any of the other questions that, as a financial advisor for more than 15 years now, I’m used to getting.  The questions I am hearing now seem to have taken on the tone of confusion, despair, and a lack of direction, versus the questions I used to get such as “how should I invest,” or”what type of account – a Roth or a traditional IRA – should I have?”

Yesterday, when talking to a rather successful, nearly retired client on the telephone, she mentioned that she feels that she always has to take two steps backward for every three steps forward, and ideally, she would rather not see her account fluctuate at all once she retires next year.  “Isn’t there just something we can do with our money to earn a steady 6-8% or so with no risk?”  Unfortunately, the answer is NO.  While there might be many product salesmen out there who will try to convince you otherwise – the answer is still NO.   If there were -then all the institutions and large organizations in the world, who spend millions and millions of dollars trying to find or design such assets would have already found them.  A classic example of people and institutions trying to get outsized returns with no perceived risk is the recent mortgage debacle, and we saw how that turned out.

So – back to the original question – With the Economy on shaky footing (to say the least) and with the markets being… unusually volatile, to put it lightly – what should I do?

To answer this question, I had to turn to the history books, tenured academic research, and even some new research – but I think I found the answer.  Do EXACTLY what you have been told to do throughout the years.  Live below your means – save a portion of your income (assuming you are working and saving for retirement) and invest in a fully diversified portfolio designed specifically for your risk tolerance.  In fact – it is having the GUTS to invest during times like these that separate the winners from the… folks who wish they had as much money as the winners.

Last year, Dimensional Fund Advisors tapped into the database held at the Center for Research in Security Prices (CRSP) at the University of Chicago – the nexus of more Nobel-Prize winning research in economics than any other institution on the planet – to identify IF there was a direct correlation between a poor economy (as defined by low GDP) and poor investor returns.  In other words – SHOULD I STILL INVEST IN A CRAPPY ECONOMY?”

The Dimensional Study started by taking all of the world’s developed economies, examining their annual GDP growth from 1971 – 2008, and dividing them into two groups – High Growth, or Low Growth – for each year.  Clearly, much of what we hear on the news is about GDP growth – is our economy growing or not?  The higher the economic growth, the better – as this means reductions in unemployment, increases in personal wages, and, generally, a feeling of well-being, versus the cloud of general malaise that seems to have decended upon the world as of late.

Once the economies were divided into High Growth and Low Growth – the performance of their stock market indices was compared to their GDP Growth.  The question:  Does a poor economy (low GDP Growth) accurately predict poor investor returns?  The question was not – can an investor perform poorly during low-growth times (of course, we know that is possible) – but is there a clear and determinable correlation between a bad economy and a bad investor experience?

Oddly enough – the answer is NO.

                              AVG GDP                      AVG RETURN              Risk (Std Dev)

High Growth               0.92                             12.90%                          23.07

Low Growth               -4.02                            13.52%                          23.04

The data for Emerging Markets was similar, but quite honestly, the data for Emerging Markets only went back to 2001, and I felt this was just too short a time period to draw any reasonable conclusions.

When I first saw the data, I thought… well… this might be a sales pitch just to keep investors invested… we are still looking back only as far as 1971.  What about other periods of lousy growth?  And what about for the US in particular?  I wanted to check the data myself.  So, I delved into the CRSP database myself, using the French and Fama indices that go back as far as 1926, and to the Bureau of Economic Analysis (BEA.GOV) and compared hypothetical investor returns to the GDP growth (or lack thereof) during the 1970’s and during the Great Depression.

One particular period of interest to me was the years from 1972 to 1982.  Yes, this was after 1971, but I wanted to look at it further and in more depth from a portfolio manager perspective instead of just looking at the stock market.  How did it feel?  Remember the oil embargo?  Our defeat in Vietnam? The Cold War?  Carter’s “Misery Index?”  Double Digit Inflation?  During this period of time, the average GDP Growth was only 2.7% – well below the historical average of 3.4%.

The second period of interest was the period of the Great Depression.  Now the Great Depression itself lasted from 1929 to 1941 – but for this particular exercise, I wanted to look at the period starting about 2 and a half years AFTER the crash – starting with the summer of 1932 until the attack on Pearl Harbor, or December 1941 – the long, grinding years of the Depression.  During that period of time, our average GDP Growth was only 2.0% – the longest and weakest period of below-average growth on record for the United States.

My question was – how could today’s investors, using a properly designed, diversified portfolio,  have done during that time?  Were these two periods of time – arguably the worst periods (economically) in the past hundred years – a bad time to be invested?

Assume a relatively simple, domestic portfolio:  T-Bills (15%), 5-Year Treasuries (15%), US Large Stocks (11%), US Large Value, or underpriced, dividend paying stocks (21%), US Small Value Stocks (18%), US Small Stocks (10%), and Very Small, or Micro-Cap Stocks (10%).

Looking at the indices only (remember – there were VERY few mutual funds at the time of the Depression, and certainly no ETF’s,) we can get an idea of how an investor might have done.  The following numbers do NOT account for any fees, commissions, taxes, etc – but we can still draw conclusions.

From the period of 1932 – 1941, the above, simple, diversified portfolio (indices only) would have achieved an AVERAGE ANNUAL return of… wait for it… 19.29%!!  In fact one dollar invested as described above in the summer of 1932 would have grown to about $4.50 by December of 1941.  During the Great Depression!!

From the period of 1972 to 1982, the above, simple, diversified portfolio (indices only) would have achieve an AVERAGE ANNUAL return of… 14.82%!!  One dollar invested as described above in December of 1972 would have grown to about $3.49 by December of 1982.  During the Carter Years and the Misery Index!!

Were there periods of volatility, market corrections, and even stagnation in the investor’s portfolio?  Absolutely – in particular, a sharp market correction in 1936 would have scared out many undisciplined investors, and a particularly unpleasant 18 month bear market from 1973-1974 would have tested investor mettle.  But the facts remain – a fully diversified, properly balanced investor would have been able to achieve significant returns during those times.  In fact – there are a number of economic theories that suggest that investors who have the GUTS to invest (and remain invested) during these uncertain times are the ones who enjoy the GREATEST rewards.  These are the riskiest, most emotionally draining times to invest – as a result, the Capital Markets reward those investors more readily and more predictibly than the comparatively “timid” investors who only remain invested during the “good” times.

Today, the Fed and the International Monetary Fund (IMF) are projecting the US economy’s GDP growth to be about 2.7% for the next two years.  The media harps daily on the miserable shape of our economy, and politicians are using the economy as opportunities to further their agendas.  These are things that we must endure as a people, or change with our votes.

However – it is critical to SEPARATE our concerns about the economy – from our own INVESTMENT POLICY.  The two are NOT necessarily correlated.  A miserable economy – historically – does NOT mean miserable returns for an investor who is disciplined, creates a sound, diversified, low-cost investment STRATEGY with strict risk controls, and then implements it with courage and discipline.  In fact – it is EXACTLY these types of investors who have historically been the winners over the long term.

___________________________________________________________________________

This blog article does not constitute legal, tax, or personal financial advice.  Please consult your own financial professional for personal, specific information.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by Paragon Wealth Strategies, LLC., a registered investment advisor.





YABBUTS: “Yeah, but…”

27 10 2009

CastleInternetPhotoTiniest

By Jon Castle, CFP®, ChFC®

I got up this morning and turned on one of  the financial pornography channels as usual.  I won’t say which one it was, but, as a financial advisor and wealth manager, I usually begin my day with the financial news shows so I can have an idea of what is going on in the world of finance before I show up for work.

All I can say is… What Drama Queens!  I have never seen a bunch of highly intelligent, highly educated people whining and crying and “oh, the sky is falling” as I have today.  They had one guest host on there who had the unmitigated gall to suggest that our economy is slowly recovering, and that things were getting better – and that is why the stock market is up 60% since March and will continue to rise, with corrections and breaks over time, as is normal – and you would have thought that this person just committed some sort of blasphemy and should be burned at the stake!

YABBUTS.

“Yeah, but… the market dropped so much.” 

“Yeah, but… unemployment is down and how can the economy get better until unemployment is fixed?” 

“Yeah, but… the government stimulus packages are just about over and that put in a false bottom and now we will fall off the edge of the universe as we know it!” 

“Yeah, but the consumer remembers the recession and that will have an effect on what people buy going forward… ie, nothing, ever ever ever again”

“Yeah, but the dollar is weak and getting weaker.  No one really knows what that means… but is sounds scary so we better harp on it for a while… inspite of the fact it could totally reverse the trade gap and end outsourcing of jobs to other countries… we better monger up some fear cuz a weak dollar sounds… um… unpatriotic.   Doesn’t it?”

I have not heard so much Chicken Little since last October and honestly, it turned my stomach.   It reminds me of these fear-mongering authors who write a new financial gloom and doom book every 5 years or so, just to cash in on the conspiracy theorist market who will buy their books.

One would think that such learned gloomy economists would stop and realize that some economic indicators are “leading indicators” and some economic indicators are “lagging indicators.” 

Leading indicators (ie – indicators which PREDICT the direction of the economy) are things like stock markets, interest rates, bank portfolios, and corporate earnings predictions.  So, for example, if the stock market has reversed course and headed sharply up over a period of several months, along with very low interest rates, bank portfolios that are not overextended in loans, and companies currently reporting low earnings but predicting better earnings next quarter – those are forward-looking events and would tend to suggest better days are around the corner.  Oddly enough – that is just about ALL the economic data that is out there right now.

Lagging indicators, on the other hand – such as commodity and home prices, inventories, and unemployment – basically tell us where we HAVE BEEN – not where we are going.  So, if businesses have been laying people off, or home prices have fallen significantly, these indicators are primarily a symptom of economic conditions, not necessarily predictors of where we are going in the future.  Thus, they are known as lagging indicators, as they LAG the real economy.  They may get worse – but they do NOT PREDICT the direction of the economy – the leading indicators do.  Thus the term:  LEADING.

Again, I am amazed at how supposedly learned economists can think that unemployment somehow drives the stock market.  How can a lagging indicator possibly drive a forward-looking indicator?  People invest for the future, not the past.

Which brings us to the crux of the issue:  Lack of faith.  There is so much Chicken Littling and YABBUTTING… by these supposedly learned economists and professors, whom I’m convinced live their lives in tiny little rooms doing nothing but armchair-generaling and writing about other people’s actions, that they are missing the truly wondrous events literally unfolding before our eyes. 

Most economic growth is created when mankind, whereever he or she may be – creates something new out of necessity or invention, or adapts previously unused techniques or technology to increase productivity – or starts a new business or idea because they don’t have a job – and, in doing so, creates new jobs and opportunities for society as a whole.

What new and previously unthought of inventions will be released next year? 

Did you know that there is a company that is releasing a mind-controlled video game – before Christmas of this year?!  Whether or not it makes any money – can you imagine the applications of this type of technology? 

Did you know they are building spaceships to replace the “aging space shuttle fleet?”  I remember when the space shuttle was new!

Did you know that the world’s total knowledge base doubles an estimated every three years?  TOTAL!  Wow.  That boggles the mind.

Did you know that the major drug companies, according to Time Magazine, are spending $600,000 per day to support healthcare reform?  Someone, somewhere must think its pretty good for somebody’s business for it to go thru – and that will likely mean JOBS and economic growth.

Whether it will or not, who knows.  Not you.  Not me.  The free markets will decide.  Either way – humanity – and America – will survive.  Betting against humanity has been a bad bet for thousands of years now, and I’m not ready to start anytime soon.

And these perma-bear economists sit in their office… looking at yesterday’s data… yeah, but… yeah, but…  yeah, but…

Get a real job!  Better yet – start up a business and give someone else one!

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com





Senate Committee to examine 401k target-date funds

21 10 2009

Michelle New Pic

By Michelle Ash, CFP®, CDFA™

 

If you have an employer sponsored retirement plan, such as a 401(k) or a 403(b), you have likely seen “target-date” funds amongst your investment choices. These are funds which state a date, such as 2010 or 2020 as the “target date” for retirement.  The idea behind these funds is that they are appropriately balanced with an equity and fixed income mixture that is appropriate for someone that is that number of years away from retirement.  Over time, the funds automatically become more conservative as the individual draws closer to retirement. The idea is to put the risk tolerance and investment management with these funds on autopilot.

But the Senate Committee on Aging will begin examination this month of the fees, risks, and potential conflicts of interest associated with these funds.

A recent analysis by BrightScope of the investment options in nearly 13,000 plans found that the expenses charged by target-date funds are significantly higher than those charged by other funds on plan’s core investment menus.(1)  Because these funds are now the default investment option of most plans, meaning investors are placed into them automatically if they don’t select other investment choices, this may put some workers at a disadvantage. 

Target-date funds also have no benchmark for comparison. So, who’s to say what the appropriate blend for a target date 2010 fund would be? Consequently, returns from these funds have varied widely over recent years; sometimes causing investors who thought their money was invested relatively safely since they were close to retirement, to experience significant losses.

Our hope is that the Senate Committee’s examination will provide standards for these funds so that, like any other type of fund out there, an investor can ultimately determine for themselves if the fund is truly appropriate for their situation in terms of risk, cost, and personal best interest.

 

(1)  Source: “Companies take reins of workers’ 401k’s”, http://articles.moneycentral.msn.com, 10/21/09

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com





Is it Time to Market Time?

14 10 2009

Mike Carignan Internet

by Mike Carignan, CRPC

I was watching one of the many financial media/disinformation sources this morning and they were talking about the fact that the S&P 500 has had 6 days closing up. This is the most successive up days in the last 2 years. The follow-up question is one that we hear a lot…”Is it time to get back into the market?” Well, let’s think about the last year and where we are.

Last October the market “melted down”.   The media had a field day and was constantly bombarding us with the doom and gloom of the day.  It seemed every day there was some new revelation or calamity befalling the market that was going to cause the end of investing as we know it.  What followed was a mass exodus of money from equity and corporate bond investments into government debt and cash.  Many investors finally “had enough” in late February when the S&P 500 broke through 750 and lost another 70+ points…and they’ve been sitting on the sidelines since.

What have they missed?  Since the March low the S&P 500 has rocketed a whopping 400 points from 676 to 1076 as of 10/12/09. That’s a 59.2% increase.

This is a great illustration of why market timing is so dangerous. It gives us a rational for giving in to our worst fears, selling when everyone else is panicked and then waiting for the other shoe to drop while the market rebounds strongly.

The moral of the story…decide if you want to invest for the long term result or for the thrill of the gamble.

 

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com