Needless to say, it has been an eventful end of August on the East Coast, with an earthquake, hurricane and tornado warnings. Hurricane Irene came and went and left Cape May County pretty much intact, minus a few cubic yards of beach sand and some toppled trees. I know there was quite a bit of grumbling about the mandatory evacuation being overkill, and I thought that myself at first, but had the eye of the storm been out to sea a bit more or gone up the Delaware Bay, I think I would have been chest high or worse in water in my living room. Had people stayed, and the worst case scenario happened, there might have been some serious injury, especially in the ranks of the tourists who swell our population exponentially at this time of year. You just have to look north and west for evidence.
Having worked in a school system for a major portion of my life, I equate the purpose and intent of the evacuation with a fire drill. This was the opportunity for the governor and emergency management officials to err on the side of caution and see if the evacuation plans for removing approximately one million people from Cape May County would work. I have to say it did work quite well, even though I know quite a few of the locals, myself included, did remain and the Bull and Bear Tavern was quite packed Friday night. It helped to know I live on just about the highest ground in the county and the area shelter was literally right around the corner!
Speaking of bulls and bears, the month of August, traditionally a time for vacation, has been full of activity and debate. A 17.9% drop in the S&P 500 took us well beyond a correction and very close to bear market territory. However, there has been a rebound off the low of 1,119.46 to 1,210.08 as we prepare for the Labor Day weekend. The aforementioned natural calamities also added to the show. Of course, the politicians exhibited their expertise by taking the debt ceiling debate down to the wire and generating a debt downgrade. Now the Fed, which just ended its meeting in Jackson Hole, announced it effectively can't do much more with monetary policy and that fiscal policy is the solution to our ills. That leaves things to the "Super Committee" born out of the debt ceiling debate. It looks to be an interesting September.
Tuesday, August 30, 2011
Wednesday, August 10, 2011
AFTER THE DOWNGRADE
Unimpressed with U.S. deficit reduction plans, S&P delivers on its warning.
Presented by John H. Kaighn
Unprecedented and unsettling. Standard & Poor’s issued a historic downgrade of U.S. debt on August 5, sensibly waiting until the market week had concluded to send a shock wave toward global investors. It reduced America’s long-term debt rating – which had been AAA since 1941 – to AA+(1)
S&P felt Congress did too little too late. The credit rating agency had threatened to lower the boom if Congress passed any deficit reduction plan smaller than $4 trillion in scope. The Budget Control Act of 2011 “falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” an S&P statement noted. It also retained its “negative” credit outlook on the U.S. (2)
S&P is also skeptical that the federal government can collect more money from taxpayers. Its analysts do not think the Bush-era tax cuts will sunset at the end of 2012 “because the majority of Republicans in Congress continue to resist any measure that would raise revenues.” (2)
On August 5, S&P sovereign ratings committee chair John Chambers told Fox News that the new AA+ rating could be cut to AA within 6-24 months if the U.S. doesn’t arrange to slash $4 trillion from its deficit in the next decade. The implication: Congress better agree on more cuts by February. (3)
China’s comments. The world’s largest holder of U.S. debt issued a withering critique of Congress through Xinhua, its official news agency. The state commentary stressed that the U.S. has a “debt addiction” only curable via major cuts to defense spending and entitlement programs. It also said that the option of a “new, stable and secured global reserve currency” should be explored. (4)
The Treasury’s claim. Friday evening, the Treasury argued that S&P’s analysis contained an accounting error that unnecessarily added $2 trillion to its projection of U.S. debt. S&P admitted the error but stuck with the downgrade. (1)
So what happens now? The early August global response aside, analysts are divided as to what the short-term impact might be for the American economy. Could it cripple the recovery, or just prove inconvenient to it?
Demand was big for Treasury notes even before the threatened downgrade and Treasuries still symbolize comparative safety to institutional investors, so an August selloff might be short-lived. If this turns out to be the case, the effect on interest rates might be less significant than feared.
In the opinion of JP Morgan Chase analysts, Treasury yields could increase by 60-70 basis points as a result of the downgrade, translating to $100 billion in added annual borrowing costs for America. Citing Federal Reserve research, these analysts think that an increase of 50 basis points in Treasury yields (0.5%) could take a 0.4% bite out of U.S. GDP. (2)
Could the Fed launch QE3*? The possibility exists, particularly if foreign investors ditch dollar assets. The Fed’s Open Market Committee will make an announcement on August 9, and few analysts expect another wave of bond buying – but it is an option.
When might the U.S. recapture its AAA rating? It might take years for that to happen. S&P has cited political gridlock on Capitol Hill as a major reason for the downgrade, and it doesn’t see that going away in upcoming months. On top of that, the U.S. economy expanded just 1.3% in the first half of 2011 - about half the pace needed to dispel the lingering effects of recession. (5)
Are mortgage rates going to go north? Maybe; maybe not. Rates on conventional mortgages have a direct relationship with 10-year Treasury yields. Recently, those yields have dramatically fallen, and demand for longer-term Treasury notes has been palpable. Interest rates on auto loans might see a spike, as those rates are pegged to 2-year notes and factors like the LIBOR rate. The hardest hit might come from credit card issuers. Credit card interest rates reflect the prime rate. Credit.com credit card advisor Beverly Blair Harzog told CNNMoney that she believed credit card firms could possibly jack up rates 1-5% as a result of jitters over the downgrade. (6)
Wall Street might sail through this. Does that sound far-fetched? Look at some historical examples. S&P downgraded Canada’s AAA credit rating in the spring of 1993, yet Canadian stocks gained 15% in 1994 and our northern neighbor had its AAA rating back by 1997. Moody’s Investors Service downgraded Japan in November 1998 and its stock market advanced more than 25% in the next 12 months. Italy, Canada, Ireland, Japan, Belgium and Spain have all suffered S&P downgrades from AAA, and most of these cuts had little sustained impact on government bond yields. (6,7)
What’s your outlook? You might be considering some major moves in the wake of the S&P decision. Remember that impulsive decisions are often regretted down the line. Confer with the financial professional you trust to determine what you may (and may not) want to do.
John H. Kaighn may be reached at (609) 827-0194 or kaighn@jerseybenefits.com.
Jersey Benefits Group, Inc.
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.
* Quantitative Easing [round] 3
LD41171-08/11
Citations.
1 - nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html [8/5/11]2 - bloomberg.com/news/2011-08-06/u-s-credit-rating-cut-by-s-p-for-first-time-on-deficit-reduction-accord.html [8/5/11]
3 - foxbusiness.com/markets/2011/08/06/sp-us-faces-further-downgrade-beyond-double/ [8/6/11]
4 - nytimes.com/reuters/2011/08/06/world/asia/news-us-china-sp.htm [8/6/11]
5 - huffingtonpost.com/2011/07/29/gdp-us-q2-second-quarter-expectations_n_913032.html [7/29/11]
6 - money.cnn.com/2011/08/06/pf/sp_rating_money.moneymag/ [8/6/11]
7 - marketwatch.com/story/china-rips-us-on-debt-rating-downgrade-2011-08-06 [8/6/11]
8 - montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29 [8/6/11]
Presented by John H. Kaighn
Unprecedented and unsettling. Standard & Poor’s issued a historic downgrade of U.S. debt on August 5, sensibly waiting until the market week had concluded to send a shock wave toward global investors. It reduced America’s long-term debt rating – which had been AAA since 1941 – to AA+(1)
S&P felt Congress did too little too late. The credit rating agency had threatened to lower the boom if Congress passed any deficit reduction plan smaller than $4 trillion in scope. The Budget Control Act of 2011 “falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” an S&P statement noted. It also retained its “negative” credit outlook on the U.S. (2)
S&P is also skeptical that the federal government can collect more money from taxpayers. Its analysts do not think the Bush-era tax cuts will sunset at the end of 2012 “because the majority of Republicans in Congress continue to resist any measure that would raise revenues.” (2)
On August 5, S&P sovereign ratings committee chair John Chambers told Fox News that the new AA+ rating could be cut to AA within 6-24 months if the U.S. doesn’t arrange to slash $4 trillion from its deficit in the next decade. The implication: Congress better agree on more cuts by February. (3)
China’s comments. The world’s largest holder of U.S. debt issued a withering critique of Congress through Xinhua, its official news agency. The state commentary stressed that the U.S. has a “debt addiction” only curable via major cuts to defense spending and entitlement programs. It also said that the option of a “new, stable and secured global reserve currency” should be explored. (4)
The Treasury’s claim. Friday evening, the Treasury argued that S&P’s analysis contained an accounting error that unnecessarily added $2 trillion to its projection of U.S. debt. S&P admitted the error but stuck with the downgrade. (1)
So what happens now? The early August global response aside, analysts are divided as to what the short-term impact might be for the American economy. Could it cripple the recovery, or just prove inconvenient to it?
Demand was big for Treasury notes even before the threatened downgrade and Treasuries still symbolize comparative safety to institutional investors, so an August selloff might be short-lived. If this turns out to be the case, the effect on interest rates might be less significant than feared.
In the opinion of JP Morgan Chase analysts, Treasury yields could increase by 60-70 basis points as a result of the downgrade, translating to $100 billion in added annual borrowing costs for America. Citing Federal Reserve research, these analysts think that an increase of 50 basis points in Treasury yields (0.5%) could take a 0.4% bite out of U.S. GDP. (2)
Could the Fed launch QE3*? The possibility exists, particularly if foreign investors ditch dollar assets. The Fed’s Open Market Committee will make an announcement on August 9, and few analysts expect another wave of bond buying – but it is an option.
When might the U.S. recapture its AAA rating? It might take years for that to happen. S&P has cited political gridlock on Capitol Hill as a major reason for the downgrade, and it doesn’t see that going away in upcoming months. On top of that, the U.S. economy expanded just 1.3% in the first half of 2011 - about half the pace needed to dispel the lingering effects of recession. (5)
Are mortgage rates going to go north? Maybe; maybe not. Rates on conventional mortgages have a direct relationship with 10-year Treasury yields. Recently, those yields have dramatically fallen, and demand for longer-term Treasury notes has been palpable. Interest rates on auto loans might see a spike, as those rates are pegged to 2-year notes and factors like the LIBOR rate. The hardest hit might come from credit card issuers. Credit card interest rates reflect the prime rate. Credit.com credit card advisor Beverly Blair Harzog told CNNMoney that she believed credit card firms could possibly jack up rates 1-5% as a result of jitters over the downgrade. (6)
Wall Street might sail through this. Does that sound far-fetched? Look at some historical examples. S&P downgraded Canada’s AAA credit rating in the spring of 1993, yet Canadian stocks gained 15% in 1994 and our northern neighbor had its AAA rating back by 1997. Moody’s Investors Service downgraded Japan in November 1998 and its stock market advanced more than 25% in the next 12 months. Italy, Canada, Ireland, Japan, Belgium and Spain have all suffered S&P downgrades from AAA, and most of these cuts had little sustained impact on government bond yields. (6,7)
What’s your outlook? You might be considering some major moves in the wake of the S&P decision. Remember that impulsive decisions are often regretted down the line. Confer with the financial professional you trust to determine what you may (and may not) want to do.
John H. Kaighn may be reached at (609) 827-0194 or kaighn@jerseybenefits.com.
Jersey Benefits Group, Inc.
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.
* Quantitative Easing [round] 3
LD41171-08/11
Citations.
1 - nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html [8/5/11]2 - bloomberg.com/news/2011-08-06/u-s-credit-rating-cut-by-s-p-for-first-time-on-deficit-reduction-accord.html [8/5/11]
3 - foxbusiness.com/markets/2011/08/06/sp-us-faces-further-downgrade-beyond-double/ [8/6/11]
4 - nytimes.com/reuters/2011/08/06/world/asia/news-us-china-sp.htm [8/6/11]
5 - huffingtonpost.com/2011/07/29/gdp-us-q2-second-quarter-expectations_n_913032.html [7/29/11]
6 - money.cnn.com/2011/08/06/pf/sp_rating_money.moneymag/ [8/6/11]
7 - marketwatch.com/story/china-rips-us-on-debt-rating-downgrade-2011-08-06 [8/6/11]
8 - montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29 [8/6/11]
Thursday, July 7, 2011
JERSEY BENEFITS ADVISORS INVESTOR NEWSLETTER SUMMER 2011
MARKET WATCH
We have just completed halftime in America, to borrow a sports analogy, as the residents of this fair land took a much needed respite, to reflect on their revered and fragile independence. Judging from the traffic here at the Jersey Shore, at least a few souls didn’t seem to mind parting with the $3.49 per gallon it took to reach the sizzling sand and take a dip in the unseasonably warm 4th of July ocean. Then, it was back to work, for the 9 out of 10 who officially had a job, as the second half of the year began, hopefully without some of the shocks we experienced in the first half, but realizing it could very well be more of the same.
Actually, the first half ended very much like the first quarter as the news generally was focused on the same regions of the world. The US economy seemed to be on the verge of a boom, only to get mired down in international events which captured the media’s attention as the market rebounded from a 7% decline, just days before the quarter’s close, to make a fantastic comeback and post quite respectable results. The Middle East and North African uprisings raged on but were stalemated, European debt problems seemed to flare up and cool off every other week, with constant threats of a Greek default. Japan has put on its game face and set out to rebuild a tsunami battered economy, while so many seem just so enamored with “everything China”. It reminds me of the 70’s mindset towards the Soviet model. For those of you who weren’t around then or don’t remember the history, suffice it to say, there is no Soviet Union now!
One major bright spot during the second quarter was the Navy Seals’ killing of bin Laden. Unfortunately, the initial euphoria was met with the stark realization his al Qaeda buddies might want revenge. While things have been quiet, the destabilizing unease due to the threat of terrorism dampens our collective consciousness. Still, it does bring us one step closer to closing a chapter which has been consuming a large part of our treasure and dividing us as a people.
The major indices were all up for the year at the halfway point, thanks to the surge during the last four trading days in June. The Dow Jones Industrial Average* closed at 12,414.34 which is a 7.2% return for the year, so far. The S&P 500*, a measure of the broader market, closed at 1,320.64 which was 5 points lower than its close for the first quarter, but still a 5% return thus far for 2011. Finally, the NASDAQ*, the bell weather of technology, finished the first half at 2,781.07, 8 points lower than the first quarter, but still a 4.5% return for the year. Considering the headwinds the market faced during the first half of the year, and after two nearly 7% corrections, a positive return was a lot like a small lead at halftime; it felt good, but you don’t want to get complacent, because the game could take many twists and turns before time expires.
Speaking of twists and turns, all of the fuss about the debt limit needs a bit of clarification, as the August deadline looms. Look for a last minute compromise that raises some taxes and makes some budget cuts, possibly even to Medicare and Social Security. To play chicken with the debt ceiling, which in effect is gambling with the credibility of the government to make its interest payments, would be as devastating to the markets as when Congress failed to initially approve the TARP legislation. It would be nice for politicians to stop all of the rhetoric and talk plainly about the need to live within a budget like you & I must do.
HAPPY 4TH OF JULY From the Jersey Shore!
PRIVACY POLICY & NEW ADDITION TO OUR WEBSITE
PRIVACY POLICY
At Jersey Benefits Advisors and Jersey Benefits Group, Inc. protecting your privacy is very important to us. We want you to understand what information we collect and how we use it. We collect and use information from you on applications and other forms as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.
We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf.
We restrict access to your nonpublic personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you.
We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times.
ONLINE LIFE INSURANCE
We have partnered with ORG, Inc. to develop and market an online life insurance quotation system that allows individuals to enter their information and receive competitive quotes from major insurance carriers online. In most cases the application can also be completed online. There is also a direct toll free line to speak to a customer service representative, as well as an email link to ask questions or receive assistance with the quotation or application process. The quotes can be obtained from our website.
This system eliminates speaking to numerous agents who call with quotes, which is the model used by many websites that market insurance quotes. For people who wish to complete the process totally on their own, and like to evaluate numerous quotes independently before applying for insurance, this site should satisfy their needs. Quotes are free and no money is exchanged until the individual is approved for the policy quoted.
Of course, anyone who is interested in talking to an insurance advisor, who will meet with the client in the traditional face to face manner, simply needs to contact the company either by telephone or email to set up an appointment. Through the ORG network, we can assist individuals outside the state of NJ to locate insurance professionals who can meet with them face to face. The toll free number to call, outside NJ, is (855) 802-4123. Within the state of NJ, clients can contact me directly.
INVESTOR PSYCHOLOGY: BUY LOW, METHODICALLY & DISCIPLINED
Investor psychology has been a topic receiving much attention recently, as many of the tried and true philosophies of investing have been questioned. With all of the talk of a lost decade of returns, the focus has been on how to beat the market consistently, utilizing everything from alternative investments to holding physical commodities. As we’ve discussed time and time again, market timing and excessive trading can be very detrimental to a portfolio. As James Stewart stated in the July issue of Smart Money, “If market peaks tend to be unremarkable, market lows tend to arrive when times seem apocalyptic”. That’s why I continue to believe buying quality funds in as many sectors of the economy as you can, and dollar cost averaging into them constantly, is still the best overall strategy.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment.
REFERRALS ARE ALWAYS WELCOME
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc.
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
Advisors.
LD 41031-07/11
We have just completed halftime in America, to borrow a sports analogy, as the residents of this fair land took a much needed respite, to reflect on their revered and fragile independence. Judging from the traffic here at the Jersey Shore, at least a few souls didn’t seem to mind parting with the $3.49 per gallon it took to reach the sizzling sand and take a dip in the unseasonably warm 4th of July ocean. Then, it was back to work, for the 9 out of 10 who officially had a job, as the second half of the year began, hopefully without some of the shocks we experienced in the first half, but realizing it could very well be more of the same.
Actually, the first half ended very much like the first quarter as the news generally was focused on the same regions of the world. The US economy seemed to be on the verge of a boom, only to get mired down in international events which captured the media’s attention as the market rebounded from a 7% decline, just days before the quarter’s close, to make a fantastic comeback and post quite respectable results. The Middle East and North African uprisings raged on but were stalemated, European debt problems seemed to flare up and cool off every other week, with constant threats of a Greek default. Japan has put on its game face and set out to rebuild a tsunami battered economy, while so many seem just so enamored with “everything China”. It reminds me of the 70’s mindset towards the Soviet model. For those of you who weren’t around then or don’t remember the history, suffice it to say, there is no Soviet Union now!
One major bright spot during the second quarter was the Navy Seals’ killing of bin Laden. Unfortunately, the initial euphoria was met with the stark realization his al Qaeda buddies might want revenge. While things have been quiet, the destabilizing unease due to the threat of terrorism dampens our collective consciousness. Still, it does bring us one step closer to closing a chapter which has been consuming a large part of our treasure and dividing us as a people.
The major indices were all up for the year at the halfway point, thanks to the surge during the last four trading days in June. The Dow Jones Industrial Average* closed at 12,414.34 which is a 7.2% return for the year, so far. The S&P 500*, a measure of the broader market, closed at 1,320.64 which was 5 points lower than its close for the first quarter, but still a 5% return thus far for 2011. Finally, the NASDAQ*, the bell weather of technology, finished the first half at 2,781.07, 8 points lower than the first quarter, but still a 4.5% return for the year. Considering the headwinds the market faced during the first half of the year, and after two nearly 7% corrections, a positive return was a lot like a small lead at halftime; it felt good, but you don’t want to get complacent, because the game could take many twists and turns before time expires.
Speaking of twists and turns, all of the fuss about the debt limit needs a bit of clarification, as the August deadline looms. Look for a last minute compromise that raises some taxes and makes some budget cuts, possibly even to Medicare and Social Security. To play chicken with the debt ceiling, which in effect is gambling with the credibility of the government to make its interest payments, would be as devastating to the markets as when Congress failed to initially approve the TARP legislation. It would be nice for politicians to stop all of the rhetoric and talk plainly about the need to live within a budget like you & I must do.
HAPPY 4TH OF JULY From the Jersey Shore!
PRIVACY POLICY & NEW ADDITION TO OUR WEBSITE
PRIVACY POLICY
At Jersey Benefits Advisors and Jersey Benefits Group, Inc. protecting your privacy is very important to us. We want you to understand what information we collect and how we use it. We collect and use information from you on applications and other forms as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.
We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf.
We restrict access to your nonpublic personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you.
We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times.
ONLINE LIFE INSURANCE
We have partnered with ORG, Inc. to develop and market an online life insurance quotation system that allows individuals to enter their information and receive competitive quotes from major insurance carriers online. In most cases the application can also be completed online. There is also a direct toll free line to speak to a customer service representative, as well as an email link to ask questions or receive assistance with the quotation or application process. The quotes can be obtained from our website.
This system eliminates speaking to numerous agents who call with quotes, which is the model used by many websites that market insurance quotes. For people who wish to complete the process totally on their own, and like to evaluate numerous quotes independently before applying for insurance, this site should satisfy their needs. Quotes are free and no money is exchanged until the individual is approved for the policy quoted.
Of course, anyone who is interested in talking to an insurance advisor, who will meet with the client in the traditional face to face manner, simply needs to contact the company either by telephone or email to set up an appointment. Through the ORG network, we can assist individuals outside the state of NJ to locate insurance professionals who can meet with them face to face. The toll free number to call, outside NJ, is (855) 802-4123. Within the state of NJ, clients can contact me directly.
INVESTOR PSYCHOLOGY: BUY LOW, METHODICALLY & DISCIPLINED
Investor psychology has been a topic receiving much attention recently, as many of the tried and true philosophies of investing have been questioned. With all of the talk of a lost decade of returns, the focus has been on how to beat the market consistently, utilizing everything from alternative investments to holding physical commodities. As we’ve discussed time and time again, market timing and excessive trading can be very detrimental to a portfolio. As James Stewart stated in the July issue of Smart Money, “If market peaks tend to be unremarkable, market lows tend to arrive when times seem apocalyptic”. That’s why I continue to believe buying quality funds in as many sectors of the economy as you can, and dollar cost averaging into them constantly, is still the best overall strategy.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment.
REFERRALS ARE ALWAYS WELCOME
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc.
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
Advisors.
LD 41031-07/11
Wednesday, June 15, 2011
Choosing Investments
Like every investor, you want to choose investments that will provide the growth and income you need to meet your financial goals. To do that, it's important to understand what your investment choices are and how different types of investments put your money to work. Risks and potential returns vary greatly from investment to investment. Stocks offer you the potential for growth, but they can be volatile. Bonds generally provide income and lower volatility, but also lower potential for growth. Treasury bills, CDs and money market funds are insured, but may not keep up with inflation.
Think About Your Risk Tolerance and Needs
As a general rule, the younger you are and the more time you have to reach a financial goal, the more investment risk you can afford to take. That means, for example, when you're in your twenties and just starting your career, you may be able to take a more aggressive approach to investing for long-term goals. Aggressive investing means choosing investments that have the potential to provide greater return over an extended period. But these investments also expose you to more risk in the short term because their prices are volatile, which means they might move up and down rather quickly within a short period.
On the other hand, when you're in your late 50s or 60s, you'll probably want to be more cautious about taking on investment risk, since your portfolio may not have a chance to recover from a market downturn before you need to start drawing on your retirement assets. When you retire, your goal is not only providing continued growth while taking limited investment risk but also ensuring that you have a stream of income that can cover a portion of your living expenses.
But these are just guidelines. No single approach to choosing investments will work for everyone or will be right for every situation. Even when you're young, there may be circumstances that make it unwise to take a lot of investment risk—if, for example, you're still in school or have significant debt. Or you may simply be uncomfortable with that approach. Similarly, there may be situations when it makes sense to take more risk in your portfolio later in your working life. So you'll want to tailor your strategy to your own unique needs and circumstances.
What to Look for in All Investments
What does make sense for all investors is concentrating on investments that, however different they are from each other, share these important characteristics:
* The investments are easy to evaluate because there's lots of information about them. Regulators require that certain information be disclosed to investors through documents such as mutual fund prospectuses, corporate filings for stock issued by public companies that trade on the major stock markets and prospectuses or offering statements for bonds. In addition, you can find a wealth of real-time and historical market data for stocks, bonds, mutual funds and other securities on FINRA's Market Data page.
* The investments are easy to buy and sell, either through a brokerage account or in some cases directly from the issuer. Thinly traded stocks or securities that aren't listed on a major exchange are rarely a good idea for most investors.
* The sales charges for buying and selling the investments are clearly explained, as are any fees for selling within a certain time frame. FINRA's Fund Analyzer can help you compare up to three different mutual funds, classes of a single fund or exchange-traded funds.
The investments are registered with the SEC or your state's securities regulator, and the salespeople who sell them are licensed by FINRA. Use the SEC's EDGAR Database to check whether the investments are registered, and use FINRA BrokerCheck to confirm that a broker is licensed to sell securities.
* You understand the risks of the investment and how it works.
This article is an excerpt from the Smart Investing section of the Financial Industry Regulatory Authority's Website. To read more articles on investing go to FINRA
Think About Your Risk Tolerance and Needs
As a general rule, the younger you are and the more time you have to reach a financial goal, the more investment risk you can afford to take. That means, for example, when you're in your twenties and just starting your career, you may be able to take a more aggressive approach to investing for long-term goals. Aggressive investing means choosing investments that have the potential to provide greater return over an extended period. But these investments also expose you to more risk in the short term because their prices are volatile, which means they might move up and down rather quickly within a short period.
On the other hand, when you're in your late 50s or 60s, you'll probably want to be more cautious about taking on investment risk, since your portfolio may not have a chance to recover from a market downturn before you need to start drawing on your retirement assets. When you retire, your goal is not only providing continued growth while taking limited investment risk but also ensuring that you have a stream of income that can cover a portion of your living expenses.
But these are just guidelines. No single approach to choosing investments will work for everyone or will be right for every situation. Even when you're young, there may be circumstances that make it unwise to take a lot of investment risk—if, for example, you're still in school or have significant debt. Or you may simply be uncomfortable with that approach. Similarly, there may be situations when it makes sense to take more risk in your portfolio later in your working life. So you'll want to tailor your strategy to your own unique needs and circumstances.
What to Look for in All Investments
What does make sense for all investors is concentrating on investments that, however different they are from each other, share these important characteristics:
* The investments are easy to evaluate because there's lots of information about them. Regulators require that certain information be disclosed to investors through documents such as mutual fund prospectuses, corporate filings for stock issued by public companies that trade on the major stock markets and prospectuses or offering statements for bonds. In addition, you can find a wealth of real-time and historical market data for stocks, bonds, mutual funds and other securities on FINRA's Market Data page.
* The investments are easy to buy and sell, either through a brokerage account or in some cases directly from the issuer. Thinly traded stocks or securities that aren't listed on a major exchange are rarely a good idea for most investors.
* The sales charges for buying and selling the investments are clearly explained, as are any fees for selling within a certain time frame. FINRA's Fund Analyzer can help you compare up to three different mutual funds, classes of a single fund or exchange-traded funds.
The investments are registered with the SEC or your state's securities regulator, and the salespeople who sell them are licensed by FINRA. Use the SEC's EDGAR Database to check whether the investments are registered, and use FINRA BrokerCheck to confirm that a broker is licensed to sell securities.
* You understand the risks of the investment and how it works.
This article is an excerpt from the Smart Investing section of the Financial Industry Regulatory Authority's Website. To read more articles on investing go to FINRA
Tuesday, May 31, 2011
Improve Your Business Through Networking
As an entrepreneur you'll come in contact with numerous other business people as you conduct your day to day operations. They could be lawyers, suppliers, customers or other business services providers. These individuals are important to your business in many ways. If they bought your product or service or if you hired them, you can also gain their business knowledge, experience, ideas, and advice if you stay connected to them. This is what networking is all about. Networking is when two or more different businesses stay in contact on a regular basis to help build and improve each others business.
Some of the benefits which can be gained by talking to other business people are:
• Knowledge or information that you didn't have before
• Advice on how to solve a current business problem
• Leads to a new business project or opportunity
• Joint ventures and cross promotion deals
• Learning important skills that you didn't have before
• Constructive criticism that improves your business
• Brainstorming that sparks a profitable business idea
• Encouragement and motivation for your projects
There are several ways to network with other business people. You could participate in business expositions and trade shows. You might visit business clubs and associations or take part in on-line business related forums, e-mail discussion groups or social networks. By using your creativity, you could come up with even more ideas.
If you have the time, you could start your own networking group. You could hold meetings at a local seminar room, hotel, or at your own business facility. If you want to hold meetings on-line you can use a private chat room. You should publish a print or e-mail newsletter to keep members informed of meeting dates and times, or other pertinent information about your business.
It is helpful to keep all of your business associates' contact information in one place. Make sure it is organized by business type or profession for easy searching, so when you need some advice on a new marketing campaign you can call your marketing expert. Be sure to follow up and stay in contact by phone or email on a regular basis.
Another fantastic way to network with other businesses is to operate a joint venture. This is when two or more businesses join together to work on a project for a set period of time. Participating in joint ventures with other businesses can increase your chances of beating your competition, increase your sales and increase your profits quickly. Other advantages of a joint venture are:
• money can be saved when businesses share operating costs
• referrals can come from other businesses
• valuable time can be saved when businesses share the workload
• new products and services can be offered to your customers
• new business associates can be gained
• money can be saved by sharing advertising and marketing costs
• advice and information can be obtained from other businesses
You can find joint venture opportunities with businesses online or
offline. I try to find businesses that have the same target audience, but are not in direct competition with my business. Here are a few ways to find joint ventures online:
• subscribe and participate in e-mail discussion groups, online forums and newsgroups that deal with your target audience
• subscribe to e-zines that deal with your targeted audience
• note on your Web site or e-zine that you are interested in doing joint ventures, such as exchanging articles utilizing an article directory.
• search in your favorite web directories and search engines to find businesses for joint ventures online
Once you find a business simply e-mail them your proposal.
Explain to the business owner the benefits of the joint venture.
Discuss why it would be a win/win situation for both of your businesses. Provide feedback regarding their business, Web site, products and services. Using the methods above will enhance your chances of constructing a profitable joint venture.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Best Selling Electronics from Amazon
Some of the benefits which can be gained by talking to other business people are:
• Knowledge or information that you didn't have before
• Advice on how to solve a current business problem
• Leads to a new business project or opportunity
• Joint ventures and cross promotion deals
• Learning important skills that you didn't have before
• Constructive criticism that improves your business
• Brainstorming that sparks a profitable business idea
• Encouragement and motivation for your projects
There are several ways to network with other business people. You could participate in business expositions and trade shows. You might visit business clubs and associations or take part in on-line business related forums, e-mail discussion groups or social networks. By using your creativity, you could come up with even more ideas.
If you have the time, you could start your own networking group. You could hold meetings at a local seminar room, hotel, or at your own business facility. If you want to hold meetings on-line you can use a private chat room. You should publish a print or e-mail newsletter to keep members informed of meeting dates and times, or other pertinent information about your business.
It is helpful to keep all of your business associates' contact information in one place. Make sure it is organized by business type or profession for easy searching, so when you need some advice on a new marketing campaign you can call your marketing expert. Be sure to follow up and stay in contact by phone or email on a regular basis.
Another fantastic way to network with other businesses is to operate a joint venture. This is when two or more businesses join together to work on a project for a set period of time. Participating in joint ventures with other businesses can increase your chances of beating your competition, increase your sales and increase your profits quickly. Other advantages of a joint venture are:
• money can be saved when businesses share operating costs
• referrals can come from other businesses
• valuable time can be saved when businesses share the workload
• new products and services can be offered to your customers
• new business associates can be gained
• money can be saved by sharing advertising and marketing costs
• advice and information can be obtained from other businesses
You can find joint venture opportunities with businesses online or
offline. I try to find businesses that have the same target audience, but are not in direct competition with my business. Here are a few ways to find joint ventures online:
• subscribe and participate in e-mail discussion groups, online forums and newsgroups that deal with your target audience
• subscribe to e-zines that deal with your targeted audience
• note on your Web site or e-zine that you are interested in doing joint ventures, such as exchanging articles utilizing an article directory.
• search in your favorite web directories and search engines to find businesses for joint ventures online
Once you find a business simply e-mail them your proposal.
Explain to the business owner the benefits of the joint venture.
Discuss why it would be a win/win situation for both of your businesses. Provide feedback regarding their business, Web site, products and services. Using the methods above will enhance your chances of constructing a profitable joint venture.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Best Selling Electronics from Amazon
Thursday, April 7, 2011
JERSEY BENEFITS ADVISORS INVESTOR'S NEWSLETTER SPRING 2011
MARKET WATCH
As 2011 dawned, concerns about unemployment, economic growth, fiscal responsibility and inflation were topics being discussed when attempting to ascertain prospects for the continuation of our economic recovery. Spending initiatives in several states sparked controversy and healthy debate about programs, as well as the taxes that pay for them, to the point where even the Federal government managed to cut $6 billion from the current fiscal budget, and delay a shutdown of nonessential government offices. Meanwhile, the Dow Jones Industrial Average was on the way to its second largest first quarter gain in its history.
While the issues discussed above certainly are meaningful topics and impact our economy and the markets, the major factors affecting the global economy came out of the blue and weren’t on anyone’s radar. Those issues were summed up by Alan Abelson in Barron’s as he wrote, “The first three months encompassed just about everything shy of Armageddon. A fiery contagion of revolution and civil war in the Middle East and North Africa that toppled governments and sent dictators scurrying; a horrendous earthquake, nuclear meltdown and tsunami in Japan; chronic financial woes that beset and threatened to dismember the European Union, exploding oil and food prices - gad, we get the heebie-jeebies just reciting the lugubrious litany”.
The heebie-jeebies aside, it has been a remarkable quarter insofar as international events and the markets are concerned. Whether this revolutionary fervor will result in populations of Middle Eastern countries choosing less authoritarian Western style regimes, or succumbing to Hamas and Hezbollah remains to be seen. Securing the flow of oil from the area, as witnessed by the military incursion in Libya, forces us all to recognize the realities we face for our dependence on energy from this region. Whether you believe in “drill baby drill” or “green energy”, it is time for us to develop a comprehensive energy policy that utilizes all of the options available for our energy needs. Meanwhile, be prepared to pay more at the pump.
As I stated earlier, the DJIA* had a great first quarter climbing 6.4% and closing at 12,319.73 while the S&P 500* finished at 1,325.83 for a 5.4% increase. The NASDAQ* added 128.2 points and ended the quarter at 2,781.07 for a 4.8% gain. So much for the “New Normal” we discussed in the last issue.
These first quarter gains were achieved, despite a brief pullback in the various indices after the earthquake in Japan. The indices gave up all of their gains by mid March, only to absorb the shock and rebound to current levels. Where things go from here depends largely on earnings, employment, inflation, fiscal policy, monetary policy, international political events and of course, Mother Nature. The recent pullback in March does not even qualify as a correction (a 10% drop in an index), so with all of the issues facing us, one can never rule out a correction in the market coming at any time. The last correction was in July. As I have said many times before, corrections are healthy and present opportunities for deploying more capital. Of course, they are never pleasant.
As the second quarter unfolds, I expect to see oil prices settle down, inflation to remain benign and the Fed to begin discussing higher interest rates. The stock market is still 15% below the peak set in 2007, so a slow, steady ascent from here toward the 2007 highs would be welcome.
ONLINE ACCESS TO YOUR ACCOUNTS
For those of you who wish to access your account information online, the process is much easier than at any time in the past. Even if you have Pershing accounts, annuities or mutual funds with various companies, you can now access everything in one location from our website. Here is the link: Jersey Benefits Group, Inc.. Once you get to the Jersey Benefits website, you can access the link for your account under Securities Products or Investment Advisory. Under either heading go to the first choice, and look for the link for Pershing accounts only or Consolidated Statements. For Pershing only accounts, you need to contact me by phone or email for a password. There is a form to sign. For Clients with Consolidated Statements, you need to call or email to obtain a temporary password.
THE ECONOMIC AND POLITICAL OUTLOOK & MORE
Once again, earnings season is upon us, and the quarterly results of companies will compete with economic news, international events and commodity prices for investors’ attention. Continued improvement in earnings, and a positive outlook for guidance issued by US companies, could further improve the employment picture. Progress in the area of job creation is slowly being achieved.
The Labor Department reported jobless claims in the week ended March 26 fell to 388,000 and the unemployment rate fell to 8.8%, which indicates modest improvement for the labor market. Further evidence of improvement on the labor front came with the March payroll report, released by the Bureau of Labor and Statistics, indicating an addition of 216,000 jobs. The household survey, which is another measure of job growth, reported 291,000 additional jobs added in March . While these numbers leave us 7.25 million jobs down from the total number reported before the recession, any progress is welcomed.
As the government faces another possible shutdown as early as Friday, April 8th, Congress continues to bicker over whether to trim $55 billion more from the current budget. While it would be a small step in the right direction, it remains to be seen if a compromise can be reached. I certainly don’t mean to minimize the impact of $55 billion on the budget, but the reality is when you look at a budget of $3.7 trillion, about 1/3 of which is borrowed, one realizes something has to be done. Either $1.5 trillion needs to be cut, or taxes need to be increased to pay for the spending deemed important to the populace. The alternative is crushing debt on our children, which I don’t think is sustainable.
The price of gold has been flat for the quarter, but not without some volatility. In February the price swooned 7% but has since recovered its losses. Gold, silver and other commodities are positions which should be part of an investment strategy. Owning the physical commodities themselves is cumbersome and expensive, so my recommendation is to gain exposure through commodities funds, ETF’s or stocks of companies that mine or handle commodities. Obviously, we never want to put all of our money into one asset class, because concentrating risk is usually a recipe for disaster.
My philosophy is and always has been to diversify across as many sectors of the economy as you can afford, and dollar cost average into your portfolio often. While this strategy can’t guarantee against losses in the short term, as most of us have experienced over the last three years, patience and discipline do produce rewards. Thanks again for your continued confidence in me, and know that I truly appreciate your business. Feel free to call or email with questions.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. SAVING A PORTION OF OUR PAY EACH MONTH IS VERY IMPORTANT. COMPANY SPONSORED PENSION PLANS ARE ONE METHOD TO SAVE AND SHOULD BE USED FOR RETIREMENT. OTHER SYSTEMATIC INVESTMENT ACCOUNTS, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES CAN ALSO BE OPENED, AND DEBITED DIRECTLY FROM YOUR CHECKING OR SAVINGS ACCOUNT. FOR MORE INFORMATION, JUST CALL TO SET UP AN APPOINTMENT. REFERRALS ARE ALWAYS WELCOME.
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
Advisors.
LD 40098—04/11
As 2011 dawned, concerns about unemployment, economic growth, fiscal responsibility and inflation were topics being discussed when attempting to ascertain prospects for the continuation of our economic recovery. Spending initiatives in several states sparked controversy and healthy debate about programs, as well as the taxes that pay for them, to the point where even the Federal government managed to cut $6 billion from the current fiscal budget, and delay a shutdown of nonessential government offices. Meanwhile, the Dow Jones Industrial Average was on the way to its second largest first quarter gain in its history.
While the issues discussed above certainly are meaningful topics and impact our economy and the markets, the major factors affecting the global economy came out of the blue and weren’t on anyone’s radar. Those issues were summed up by Alan Abelson in Barron’s as he wrote, “The first three months encompassed just about everything shy of Armageddon. A fiery contagion of revolution and civil war in the Middle East and North Africa that toppled governments and sent dictators scurrying; a horrendous earthquake, nuclear meltdown and tsunami in Japan; chronic financial woes that beset and threatened to dismember the European Union, exploding oil and food prices - gad, we get the heebie-jeebies just reciting the lugubrious litany”.
The heebie-jeebies aside, it has been a remarkable quarter insofar as international events and the markets are concerned. Whether this revolutionary fervor will result in populations of Middle Eastern countries choosing less authoritarian Western style regimes, or succumbing to Hamas and Hezbollah remains to be seen. Securing the flow of oil from the area, as witnessed by the military incursion in Libya, forces us all to recognize the realities we face for our dependence on energy from this region. Whether you believe in “drill baby drill” or “green energy”, it is time for us to develop a comprehensive energy policy that utilizes all of the options available for our energy needs. Meanwhile, be prepared to pay more at the pump.
As I stated earlier, the DJIA* had a great first quarter climbing 6.4% and closing at 12,319.73 while the S&P 500* finished at 1,325.83 for a 5.4% increase. The NASDAQ* added 128.2 points and ended the quarter at 2,781.07 for a 4.8% gain. So much for the “New Normal” we discussed in the last issue.
These first quarter gains were achieved, despite a brief pullback in the various indices after the earthquake in Japan. The indices gave up all of their gains by mid March, only to absorb the shock and rebound to current levels. Where things go from here depends largely on earnings, employment, inflation, fiscal policy, monetary policy, international political events and of course, Mother Nature. The recent pullback in March does not even qualify as a correction (a 10% drop in an index), so with all of the issues facing us, one can never rule out a correction in the market coming at any time. The last correction was in July. As I have said many times before, corrections are healthy and present opportunities for deploying more capital. Of course, they are never pleasant.
As the second quarter unfolds, I expect to see oil prices settle down, inflation to remain benign and the Fed to begin discussing higher interest rates. The stock market is still 15% below the peak set in 2007, so a slow, steady ascent from here toward the 2007 highs would be welcome.
ONLINE ACCESS TO YOUR ACCOUNTS
For those of you who wish to access your account information online, the process is much easier than at any time in the past. Even if you have Pershing accounts, annuities or mutual funds with various companies, you can now access everything in one location from our website. Here is the link: Jersey Benefits Group, Inc.. Once you get to the Jersey Benefits website, you can access the link for your account under Securities Products or Investment Advisory. Under either heading go to the first choice, and look for the link for Pershing accounts only or Consolidated Statements. For Pershing only accounts, you need to contact me by phone or email for a password. There is a form to sign. For Clients with Consolidated Statements, you need to call or email to obtain a temporary password.
THE ECONOMIC AND POLITICAL OUTLOOK & MORE
Once again, earnings season is upon us, and the quarterly results of companies will compete with economic news, international events and commodity prices for investors’ attention. Continued improvement in earnings, and a positive outlook for guidance issued by US companies, could further improve the employment picture. Progress in the area of job creation is slowly being achieved.
The Labor Department reported jobless claims in the week ended March 26 fell to 388,000 and the unemployment rate fell to 8.8%, which indicates modest improvement for the labor market. Further evidence of improvement on the labor front came with the March payroll report, released by the Bureau of Labor and Statistics, indicating an addition of 216,000 jobs. The household survey, which is another measure of job growth, reported 291,000 additional jobs added in March . While these numbers leave us 7.25 million jobs down from the total number reported before the recession, any progress is welcomed.
As the government faces another possible shutdown as early as Friday, April 8th, Congress continues to bicker over whether to trim $55 billion more from the current budget. While it would be a small step in the right direction, it remains to be seen if a compromise can be reached. I certainly don’t mean to minimize the impact of $55 billion on the budget, but the reality is when you look at a budget of $3.7 trillion, about 1/3 of which is borrowed, one realizes something has to be done. Either $1.5 trillion needs to be cut, or taxes need to be increased to pay for the spending deemed important to the populace. The alternative is crushing debt on our children, which I don’t think is sustainable.
The price of gold has been flat for the quarter, but not without some volatility. In February the price swooned 7% but has since recovered its losses. Gold, silver and other commodities are positions which should be part of an investment strategy. Owning the physical commodities themselves is cumbersome and expensive, so my recommendation is to gain exposure through commodities funds, ETF’s or stocks of companies that mine or handle commodities. Obviously, we never want to put all of our money into one asset class, because concentrating risk is usually a recipe for disaster.
My philosophy is and always has been to diversify across as many sectors of the economy as you can afford, and dollar cost average into your portfolio often. While this strategy can’t guarantee against losses in the short term, as most of us have experienced over the last three years, patience and discipline do produce rewards. Thanks again for your continued confidence in me, and know that I truly appreciate your business. Feel free to call or email with questions.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. SAVING A PORTION OF OUR PAY EACH MONTH IS VERY IMPORTANT. COMPANY SPONSORED PENSION PLANS ARE ONE METHOD TO SAVE AND SHOULD BE USED FOR RETIREMENT. OTHER SYSTEMATIC INVESTMENT ACCOUNTS, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES CAN ALSO BE OPENED, AND DEBITED DIRECTLY FROM YOUR CHECKING OR SAVINGS ACCOUNT. FOR MORE INFORMATION, JUST CALL TO SET UP AN APPOINTMENT. REFERRALS ARE ALWAYS WELCOME.
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
Advisors.
LD 40098—04/11
Tuesday, April 5, 2011
Variable Annuity Vindication
Many of my clients have invested in the Transamerica and MetLife Variable Annuities over the years, so I wanted to refer you to an article in the Wall Street Journal about variable annuities and the Guaranteed Minimum Income Benefit. This rider protects the assets so your account will continue to grow in a down market. The following article by Leslie Scism sums up perfectly the reasons why the variable annuity should be a part of most investment portfolios, and vindicates many advisors who realized there was really no other comparable protection against downside risk.
Long Derided, This Investment Now Looks Wise
by Leslie Scism
One of the best investments of the past decade was one of the most derided: the variable annuity. But investors who want in on the action now are in for a shock, as the juiciest deals have disappeared from the market.
Variable annuities, a tax-advantaged investment account that holds a type of mutual fund, are sold by insurers, and most offer some form of investment guarantee for an additional fee. For years, they were attacked for being too expensive. Why pay for a guarantee to protect against a stock-market decline, the argument went, when stocks continued their inexorable march upward?
Then stocks plunged, and variable-annuity guarantees no longer looked expensive. In fact, insurers, in a move to build market share, had underpriced many of them. Suppose an investor owned a variable annuity that tanked in value last year. No matter. Under the most-generous contracts, insurers pledged to pay customers lifetime retirement income based on past market gains in their underlying funds, plus minimum annual increases in years the market is sluggish or down.
Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in value last year, when the Standard & Poor’s 500-stock index dropped nearly 39%.
“When I watch friends bemoaning the market, I feel guilty saying anything, actually,” says Amy White, a 67-year-old retired accountant in Dallas. She and her late husband invested hundreds of thousands of dollars in variable annuities early this decade, and their funds rose as the market neared its 2007 peak. While they fell last year, the guaranteed amount—on which Ms. White’s retirement-income checks will be based—is still more than double the invested amount.
Click here to read the rest of the article
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Long Derided, This Investment Now Looks Wise
by Leslie Scism
One of the best investments of the past decade was one of the most derided: the variable annuity. But investors who want in on the action now are in for a shock, as the juiciest deals have disappeared from the market.
Variable annuities, a tax-advantaged investment account that holds a type of mutual fund, are sold by insurers, and most offer some form of investment guarantee for an additional fee. For years, they were attacked for being too expensive. Why pay for a guarantee to protect against a stock-market decline, the argument went, when stocks continued their inexorable march upward?
Then stocks plunged, and variable-annuity guarantees no longer looked expensive. In fact, insurers, in a move to build market share, had underpriced many of them. Suppose an investor owned a variable annuity that tanked in value last year. No matter. Under the most-generous contracts, insurers pledged to pay customers lifetime retirement income based on past market gains in their underlying funds, plus minimum annual increases in years the market is sluggish or down.
Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in value last year, when the Standard & Poor’s 500-stock index dropped nearly 39%.
“When I watch friends bemoaning the market, I feel guilty saying anything, actually,” says Amy White, a 67-year-old retired accountant in Dallas. She and her late husband invested hundreds of thousands of dollars in variable annuities early this decade, and their funds rose as the market neared its 2007 peak. While they fell last year, the guaranteed amount—on which Ms. White’s retirement-income checks will be based—is still more than double the invested amount.
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John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Monday, March 28, 2011
Jersey Benefits Advisors Form ADV Part 2A
Part 2A of Form ADV: Firm Brochure
Item 1 Cover Page
Physical Address: 34 Doe Dr.
Woodbine, NJ 08270
Mailing Address: PO Box 1406
Ocean City, NJ 08226
Telephone: (609) 827-0194
Fax: (609) 861-9257
Email: kaighn@jerseybenefits.com
Website: Jersey Benefits Advisors
John H. Kaighn is the only Investment Advisory Representative of the firm, and he provides investment supervisory services, manages client accounts and furnishes investment advice through consultation with clients. Mr. Kaighn has been a registered IAR in the state of New Jersey with Jersey Benefits Advisors since 1996. His date of birth is 9/11/1952.
John H. Kaighn has a BA and an MA from Rowan University aka Glassboro State College, has FINRA licenses series 7,26 & 63 and has been a registered representative since 1993. Mr. Kaighn currently holds securities licenses in the states of CO, DE, FL, MD, NC, NJ, NY & PA and offers securities through Transamerica Financial Advisors, Inc.
John H. Kaighn has a life, health and variable life insurance license in the state of New Jersey. Mr. Kaighn is licensed with numerous insurance carriers and Jersey Benefits Group, Inc. is a licensed insurance agency in the state of New Jersey. Jersey Benefits Group, Inc. also offers Pension Consultation and TPA Services.
Item 5 Fees and Compensation
Compensation for advisory services is primarily derived from the following sources:
1. Front End Sales Commissions
2. Contingent Deferred Sales Charges
3. Percentage of Assets Under Management.
Front End Sales Commissions are generated at the point of sale and are commonly called A shares. These commissions vary by fund company. A shares usually have a 12b1 fee of .25% ($00.25 per $100.00 of assets under management) which is compensation for ongoing service and advice to clients who utilize A shares. This portion of compensation from A shares is considered a Percentage of Assets Under Management. Commissions for sales of stocks, bonds and ETF's are generated at the purchase and sale of these securities, and for clients holding mutual funds with 12b1 fees, there is no additional asset under management charge for holding stocks, bonds or ETF's.
Contingent Deferred Sales Charges are generated when a client sells an investment prior to the holding period, which can be from 9 years on some annuity products, to 6 years on B shares of mutual funds, or 1 year on C shares of mutual funds. The CDSC usually declines each year during the surrender period. This compensation method is only recommended for clients whose investment time horizon matches the surrender time line of the share class. The idea is to AVOID paying the CDSC. The 12b1 fee for products with a CDSC is usually 1.00% during the surrender period and declines to .25% when the surrender period has ended, in most cases. The 12b1 fee for C shares remains 1.00% ($1.00 per $100.00 of assets under management).
Percentage of Assets Under Management This type of compensation is usually generated through service fees associated with mutual funds, which are commonly known as 12b1 fees and provide compensation for ongoing advice and service. If a client prefers to purchase mutual funds which don't have a 12b1 fee, then a fee will be charged on total assets under management, which is 1.00%. Hourly charges may also be assessed in certain situations. Hourly charges and additional asset based fees are not charged if a client utilizes funds which have a 12b1 fee.
Item 6 Performance-Based Fees and Side-By-Side Management
Clients are not charged performance based fees.
Item 7 Types of Clients
Item 9 Disciplinary Information
Jersey Benefits Advisors has never had any disciplinary actions initiated against it.
Item 10 Other Financial Industry Activities and Affiliations
Jersey Benefits Advisors has arrangements with various other entities which are material to its advisory business or clients. John H. Kaighn is a Registered Representative with Transamerica Financial Advisors, Inc., which is a registered broker/dealer. Jersey Benefits Advisors also has arrangements with Jersey Benefits Group, Inc., a licensed insurance agency and third party administrator to assist meeting client needs for insurance and pension services. Jersey Benefits Advisors sells products and services, other than strictly advice to its clients.
Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
Jersey Benefits Advisors maintains a Code of Ethics and practices under the fiduciary standard of care. In order to help a client establish a position in a fund with a high minimum purchase price, a principal purchase may be used on occasion. Jersey Benefits Advisors also acts as a broker and effects securities transactions for compensation for clients.
Clients have the choice of maintaining a fee or commission based relationship. Transamerica Financial Advisors, Inc. is the broker/dealer recommended to clients and they review all transactions. Pershing Brokerage Accounts are also recommended to many clients. Other brokers may be used if the client's needs dictate.
Item 12 Brokerage Practices
Jersey Benefits Advisors utilizes brokerage practices to assist clients in choosing the most cost effective product to meet their investment, insurance and other financial needs. Securities transactions are provided through Transamerica Financial Advisors, Inc. and insurance brokerage services are provided through Jersey Benefits Group, Inc.
Item 13 Review of Accounts
All client accounts are constantly reviewed, no less than quarterly, by John H. Kaighn. Clients with multiple accounts receive consolidated semiannual statements, prepared by the advisor. All clients receive monthly or quarterly statements directly from the B/D, investment company or insurance company with custody of the client's assets. Online access for clients is available through the company website, which is Jersey Benefits Advisors.
Item 14 Client Referrals and Other Compensation
Jersey Benefits Advisors always accepts referrals, but does not directly or indirectly compensate any person for client referrals.
Item 15 Custody
Jersey Benefits Advisors does not maintain custody of client assets. Client accounts are held in the individual's name at Pershing, banks, insurance companies or investment companies. No client funds are commingled with the assets of Jersey Benefits Advisors.
Item 16 Investment Discretion
Jersey Benefits Advisors does not have the authority to determine, without client consent, the securities to be bought or sold, the amount of securities to be bought or sold, the broker or dealer to be used or the commission rates paid. An opt out rebalancing program exists, and to date no client has opted out. Clients certainly have the right to opt out of rebalancing programs, if they so desire.
Item 17 Voting Client Securities
All clients vote their own securities.
Item 1 Cover Page
J/M Kaighn, Inc.
t/a
Jersey Benefits Advisors
CRD: 125129
Date: 12/31/2010
Physical Address: 34 Doe Dr.
Woodbine, NJ 08270
Mailing Address: PO Box 1406
Ocean City, NJ 08226
Telephone: (609) 827-0194
Fax: (609) 861-9257
Email: kaighn@jerseybenefits.com
Website: Jersey Benefits Advisors
This brochure provides information about the qualifications and business practices of Jersey Benefits Advisors. If you have any questions about the contents of this brochure, please contact us at (609) 827-0194 or kaighn@jerseybenefits.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Additional information about Jersey Benefits Advisors also is available on the SEC's website at www.adviserinfo.sec.gov.
Item 2 Material Changes
None
Item 3 Table of Contents
Item Number Item Page
4 Advisory Business, Licenses & Education ............................................ 1
5 Fees & Compensation ....................................................................... 2
6 Performance Based Fees ..................................................................... 3
7 Types of Clients ................................................................................ 4
8 Methods of Analysis, Investment Strategies and Risk of Loss..................... 5
9 Disciplinary Information ..................................................................... 6
10 Other Financial Industry Activities and Affiliations .................................. 7
11 Code of Ethics, Participation or Interest in Client
Transactions and Personal Trading........................................................ 8
12 Brokerage Practices ............................................................................ 9
13 Review of Accounts .......................................................................... 10
14 Client Referrals and Other Compensation............................................... 11
15 Custody .......................................................................................... 12
16 Discretion ....................................................................................... 13
17 Voting Client Securities .................................................................... 14
Item 4 Advisory Business
J/M Kaighn, Inc. t/a Jersey Benefits Advisors is a Registered Investment Advisor in the state of New Jersey. The firm's CRD Number is 129125. Jersey Benefits Advisors provides investment and insurance advice to clients, and publishes a quarterly newsletter.
Item 2 Material Changes
None
Item 3 Table of Contents
Item Number Item Page
4 Advisory Business, Licenses & Education ............................................ 1
5 Fees & Compensation ....................................................................... 2
6 Performance Based Fees ..................................................................... 3
7 Types of Clients ................................................................................ 4
8 Methods of Analysis, Investment Strategies and Risk of Loss..................... 5
9 Disciplinary Information ..................................................................... 6
10 Other Financial Industry Activities and Affiliations .................................. 7
11 Code of Ethics, Participation or Interest in Client
Transactions and Personal Trading........................................................ 8
12 Brokerage Practices ............................................................................ 9
13 Review of Accounts .......................................................................... 10
14 Client Referrals and Other Compensation............................................... 11
15 Custody .......................................................................................... 12
16 Discretion ....................................................................................... 13
17 Voting Client Securities .................................................................... 14
Item 4 Advisory Business
J/M Kaighn, Inc. t/a Jersey Benefits Advisors is a Registered Investment Advisor in the state of New Jersey. The firm's CRD Number is 129125. Jersey Benefits Advisors provides investment and insurance advice to clients, and publishes a quarterly newsletter.
John H. Kaighn is the only Investment Advisory Representative of the firm, and he provides investment supervisory services, manages client accounts and furnishes investment advice through consultation with clients. Mr. Kaighn has been a registered IAR in the state of New Jersey with Jersey Benefits Advisors since 1996. His date of birth is 9/11/1952.
John H. Kaighn has a BA and an MA from Rowan University aka Glassboro State College, has FINRA licenses series 7,26 & 63 and has been a registered representative since 1993. Mr. Kaighn currently holds securities licenses in the states of CO, DE, FL, MD, NC, NJ, NY & PA and offers securities through Transamerica Financial Advisors, Inc.
John H. Kaighn has a life, health and variable life insurance license in the state of New Jersey. Mr. Kaighn is licensed with numerous insurance carriers and Jersey Benefits Group, Inc. is a licensed insurance agency in the state of New Jersey. Jersey Benefits Group, Inc. also offers Pension Consultation and TPA Services.
Item 5 Fees and Compensation
Compensation for advisory services is primarily derived from the following sources:
1. Front End Sales Commissions
2. Contingent Deferred Sales Charges
3. Percentage of Assets Under Management.
Front End Sales Commissions are generated at the point of sale and are commonly called A shares. These commissions vary by fund company. A shares usually have a 12b1 fee of .25% ($00.25 per $100.00 of assets under management) which is compensation for ongoing service and advice to clients who utilize A shares. This portion of compensation from A shares is considered a Percentage of Assets Under Management. Commissions for sales of stocks, bonds and ETF's are generated at the purchase and sale of these securities, and for clients holding mutual funds with 12b1 fees, there is no additional asset under management charge for holding stocks, bonds or ETF's.
Contingent Deferred Sales Charges are generated when a client sells an investment prior to the holding period, which can be from 9 years on some annuity products, to 6 years on B shares of mutual funds, or 1 year on C shares of mutual funds. The CDSC usually declines each year during the surrender period. This compensation method is only recommended for clients whose investment time horizon matches the surrender time line of the share class. The idea is to AVOID paying the CDSC. The 12b1 fee for products with a CDSC is usually 1.00% during the surrender period and declines to .25% when the surrender period has ended, in most cases. The 12b1 fee for C shares remains 1.00% ($1.00 per $100.00 of assets under management).
Percentage of Assets Under Management This type of compensation is usually generated through service fees associated with mutual funds, which are commonly known as 12b1 fees and provide compensation for ongoing advice and service. If a client prefers to purchase mutual funds which don't have a 12b1 fee, then a fee will be charged on total assets under management, which is 1.00%. Hourly charges may also be assessed in certain situations. Hourly charges and additional asset based fees are not charged if a client utilizes funds which have a 12b1 fee.
Item 6 Performance-Based Fees and Side-By-Side Management
Clients are not charged performance based fees.
Item 7 Types of Clients
Jersey Benefits Advisors generally provides investment advice to individuals, pension and profit sharing plans, trusts, estates, charitable organizations, corporations and other business entities. Most clients are generally invested in several, if not all of the the following types of securities:
1. Equity Securities (common stock of large, medium and small corporations)
2. Corporate Debt Securities (bonds)
3. Certificates of Deposit
4. Investment Company Securities (mutual funds, variable annuities, variable life insurance and ETF's)
5. Municipal Securities
6. United States Government Securities
Item 8 Methods of Analysis, Investment Strategies and Risk of Loss
Jersey Benefits Advisors utilizes Charting, Fundamental Analysis, Techmical and Cyclical Analysis to assess securities. The main sources of information for investment analysis are:
1. financial newspapers and magazines
2. research materials prepared by others
3. corporate rating services
4. annual reports, prospectuses and filings with the Securities and Exchange Commission
5. company press releases
6. inspection of corporate activities.
Investment strategies primarily consist of long term purchases of diversified assets which are rebalanced periodically. As with any investment past performance is no guarantee future results, and there is always a risk of loss.
1. Equity Securities (common stock of large, medium and small corporations)
2. Corporate Debt Securities (bonds)
3. Certificates of Deposit
4. Investment Company Securities (mutual funds, variable annuities, variable life insurance and ETF's)
5. Municipal Securities
6. United States Government Securities
Item 8 Methods of Analysis, Investment Strategies and Risk of Loss
Jersey Benefits Advisors utilizes Charting, Fundamental Analysis, Techmical and Cyclical Analysis to assess securities. The main sources of information for investment analysis are:
1. financial newspapers and magazines
2. research materials prepared by others
3. corporate rating services
4. annual reports, prospectuses and filings with the Securities and Exchange Commission
5. company press releases
6. inspection of corporate activities.
Investment strategies primarily consist of long term purchases of diversified assets which are rebalanced periodically. As with any investment past performance is no guarantee future results, and there is always a risk of loss.
Item 9 Disciplinary Information
Jersey Benefits Advisors has never had any disciplinary actions initiated against it.
Item 10 Other Financial Industry Activities and Affiliations
Jersey Benefits Advisors has arrangements with various other entities which are material to its advisory business or clients. John H. Kaighn is a Registered Representative with Transamerica Financial Advisors, Inc., which is a registered broker/dealer. Jersey Benefits Advisors also has arrangements with Jersey Benefits Group, Inc., a licensed insurance agency and third party administrator to assist meeting client needs for insurance and pension services. Jersey Benefits Advisors sells products and services, other than strictly advice to its clients.
Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
Jersey Benefits Advisors maintains a Code of Ethics and practices under the fiduciary standard of care. In order to help a client establish a position in a fund with a high minimum purchase price, a principal purchase may be used on occasion. Jersey Benefits Advisors also acts as a broker and effects securities transactions for compensation for clients.
Clients have the choice of maintaining a fee or commission based relationship. Transamerica Financial Advisors, Inc. is the broker/dealer recommended to clients and they review all transactions. Pershing Brokerage Accounts are also recommended to many clients. Other brokers may be used if the client's needs dictate.
Item 12 Brokerage Practices
Jersey Benefits Advisors utilizes brokerage practices to assist clients in choosing the most cost effective product to meet their investment, insurance and other financial needs. Securities transactions are provided through Transamerica Financial Advisors, Inc. and insurance brokerage services are provided through Jersey Benefits Group, Inc.
Item 13 Review of Accounts
All client accounts are constantly reviewed, no less than quarterly, by John H. Kaighn. Clients with multiple accounts receive consolidated semiannual statements, prepared by the advisor. All clients receive monthly or quarterly statements directly from the B/D, investment company or insurance company with custody of the client's assets. Online access for clients is available through the company website, which is Jersey Benefits Advisors.
Item 14 Client Referrals and Other Compensation
Jersey Benefits Advisors always accepts referrals, but does not directly or indirectly compensate any person for client referrals.
Item 15 Custody
Jersey Benefits Advisors does not maintain custody of client assets. Client accounts are held in the individual's name at Pershing, banks, insurance companies or investment companies. No client funds are commingled with the assets of Jersey Benefits Advisors.
Item 16 Investment Discretion
Jersey Benefits Advisors does not have the authority to determine, without client consent, the securities to be bought or sold, the amount of securities to be bought or sold, the broker or dealer to be used or the commission rates paid. An opt out rebalancing program exists, and to date no client has opted out. Clients certainly have the right to opt out of rebalancing programs, if they so desire.
Item 17 Voting Client Securities
All clients vote their own securities.
Thursday, February 10, 2011
Technology, Unemployment, and Our Children’s Future
Once in a while I like to add an article from a guest writer. The ensuing article is one written by Hunter Richards, who really did his homework on this discussion of the impact of technology on productivity, employment and education. If you'd like to leave him a comment, you can go to: The Software Advice Blog.
Got a teen playing Wii instead of doing homework? You might want to share this post.
Despite the tremendous benefits of information technology (IT), it comes at a human cost – the displacement of less-skilled employees. As software and systems automate an increasingly large portion of business processes, the displacement is affecting a wider set of workers. So despite an improving economy, 9.5% unemployment might last longer than many think.
Here we walk through a fairly simple story of man versus machine. It’s not a new story, but we went to the effort of pulling together and visualizing the relevant data.
Our conclusion? Drop the Wii-mote and hit the books.
IT spending has risen dramatically over the last 40 years…
IT spending has steadily risen since 1970. Trendlines and new opportunities like cloud computing suggest that the current dip in spending is only temporary.
…making us more productive…
Technology has made labor more productive. There’s a long-term upward trend in labor output rates, and it isn’t slowing down.
…which has led to rapid growth in corporate profits.
The resulting productivity has been great for business – greater productivity means higher profits. But these profits don’t benefit everyone. They accrue to the executives and shareholders.
IT is slowly replacing many functions. There’s an ever-widening divide in the labor market between skilled occupations and what one might call “low-level jobs” – simple clerical roles, plant-floor workers, and low-level support roles.
While national unemployment rates have ebbed and flowed…
This polarization between highly-skilled and less-skilled workers is part of what’s eroding the middle class, pushing more and more people into the low income bracket.
…and wealth has shifted toward the highest earners.
The less-educated workers who manage to keep their jobs are falling further and further behind in the national income distribution as the relative value of their services declines.
Alas, high-tech industries are growing…
So how can you avoid being replaced by a machine? You’ll need to be one of the people who work in an advanced field that still requires highly-skilled human capital. Take the IT field, for example. The Tech Pulse Index tracks the growth of national economic activity in technology by combining data on employment, investment, production, shipments, and consumption. The Tech Pulse Index has risen sharply (with the exception of the dot-com bust around the year 2000), reflecting continued demand for high-tech workers. The same is true in other engineering disciplines, healthcare and finance.
…but an advanced education is required.
Are we educating people enough to slow the widening of labor market gaps? The graph above shows the percentage of all 18- to 24-year-olds enrolled in degree-granting institutions since 1970. There’s an upward trend, but is it growing fast enough?
IT is good for society in the long term, but it’s a double-edged sword when considered together with labor market trends. Sure, the current economic despair owes its severity to many different issues – offshoring of jobs, the real estate collapse, and the national debt are just a few – but education and income disparities are long-term problems that demand attention. We must align education growth with productivity growth to close the gaps.
Will this deus ex machina lead to an age of renewed human potential, or will it harm the well-being of the majority?
This is a guest post by Hunter Richards, a blogger who covers web-based accounting software and other technology trends.
Got a teen playing Wii instead of doing homework? You might want to share this post.
Despite the tremendous benefits of information technology (IT), it comes at a human cost – the displacement of less-skilled employees. As software and systems automate an increasingly large portion of business processes, the displacement is affecting a wider set of workers. So despite an improving economy, 9.5% unemployment might last longer than many think.
Here we walk through a fairly simple story of man versus machine. It’s not a new story, but we went to the effort of pulling together and visualizing the relevant data.
Our conclusion? Drop the Wii-mote and hit the books.
IT spending has risen dramatically over the last 40 years…
…making us more productive…
…which has led to rapid growth in corporate profits.
IT is slowly replacing many functions. There’s an ever-widening divide in the labor market between skilled occupations and what one might call “low-level jobs” – simple clerical roles, plant-floor workers, and low-level support roles.
While national unemployment rates have ebbed and flowed…
…the uneducated are consistently left behind…
This polarization between highly-skilled and less-skilled workers is part of what’s eroding the middle class, pushing more and more people into the low income bracket.
…and wealth has shifted toward the highest earners.
Alas, high-tech industries are growing…
…but an advanced education is required.
IT is good for society in the long term, but it’s a double-edged sword when considered together with labor market trends. Sure, the current economic despair owes its severity to many different issues – offshoring of jobs, the real estate collapse, and the national debt are just a few – but education and income disparities are long-term problems that demand attention. We must align education growth with productivity growth to close the gaps.
Will this deus ex machina lead to an age of renewed human potential, or will it harm the well-being of the majority?
Thursday, January 20, 2011
Jersey Benefits Advisors Investors Newsletter Winter 2011
MARKET WATCH
By the time you read this newsletter, 2010 will be cast upon the dustbin of history, Auburn will be the national football champion, and President Obama will be dealing with a very different Congress. As I mentioned in the fall newsletter, the consensus was the House would go to the Republicans and the Senate would remain in Democratic hands. This scenario played out exactly as anticipated, and you might think a couple of years of center to right policy could be expected.
Well, if the only bipartisan effort of 2010 completed by the lame duck Congress is any indication of the future, it looks like long term fiscal stability is still the last issue of importance in Washington. In this compromise, according to Thomas Donlan in a Barron’s editorial, “President Obama and soon-to-be House Speaker Boehner agreed to settle their policy differences by giving each other what he most wanted. The President received a temporary extension of long term unemployment benefits and a temporary cut in the Social Security payroll tax; Boehner received extension of all the tax cuts enacted temporarily back in 2001-03 and an assortment of temporary tax credits for business. Economists familiar with American political behavior note that neither side gave up any cherished spending or tax breaks; both sides compromised at the expense of long term fiscal stability.” The University of Maryland’s Peter Morici bluntly stated, “Instead of each side getting half of what it wanted, Washington feasted and everyone got everything they wanted and more”. Welcome to 2011!
Despite a difficult economic environment coined “The New Normal”, the markets enjoyed a very good year. Upon further study I learned the “New Normal”, which I suppose replaced the “New Paradigm”, isn’t such a novel concept the way it was used by Pimco Bond guru, Bill Gross, to describe what he saw as a period of extended slower growth, smaller asset returns and narrower profit margins than in decades past. The “New Paradigm”, for those of you who may have missed it, or forgot about it, was a term coined back in the days of the dotcom mania. The idea was profits were no longer as important as the business concept itself. We all know where that brainstorm led us.
Nothing has been normal about the markets the last three years, and 2010 was no exception. The Dow Jones Industrial Average* ended the year at 11,577.51 which is an 11% gain. The S&P 500* closed at 1,257.64 for a 12.8% increase, while the NASDAQ* finished the year at 2,652.87 for a 16.9% gain. Since the average annual gain for the S&P 500* between 1926 and 2009 was 9.8%, one could say this was better than a normal year for the index, and much better than was anticipated just two years ago.
So, Happy New Year to you and remember, the markets can be gut-wrenching at times, but with a diversified and unemotional approach they can also be very profitable. Thanks for your continued confidence in me.
By the time you read this newsletter, 2010 will be cast upon the dustbin of history, Auburn will be the national football champion, and President Obama will be dealing with a very different Congress. As I mentioned in the fall newsletter, the consensus was the House would go to the Republicans and the Senate would remain in Democratic hands. This scenario played out exactly as anticipated, and you might think a couple of years of center to right policy could be expected.
Well, if the only bipartisan effort of 2010 completed by the lame duck Congress is any indication of the future, it looks like long term fiscal stability is still the last issue of importance in Washington. In this compromise, according to Thomas Donlan in a Barron’s editorial, “President Obama and soon-to-be House Speaker Boehner agreed to settle their policy differences by giving each other what he most wanted. The President received a temporary extension of long term unemployment benefits and a temporary cut in the Social Security payroll tax; Boehner received extension of all the tax cuts enacted temporarily back in 2001-03 and an assortment of temporary tax credits for business. Economists familiar with American political behavior note that neither side gave up any cherished spending or tax breaks; both sides compromised at the expense of long term fiscal stability.” The University of Maryland’s Peter Morici bluntly stated, “Instead of each side getting half of what it wanted, Washington feasted and everyone got everything they wanted and more”. Welcome to 2011!
Despite a difficult economic environment coined “The New Normal”, the markets enjoyed a very good year. Upon further study I learned the “New Normal”, which I suppose replaced the “New Paradigm”, isn’t such a novel concept the way it was used by Pimco Bond guru, Bill Gross, to describe what he saw as a period of extended slower growth, smaller asset returns and narrower profit margins than in decades past. The “New Paradigm”, for those of you who may have missed it, or forgot about it, was a term coined back in the days of the dotcom mania. The idea was profits were no longer as important as the business concept itself. We all know where that brainstorm led us.
As it turns out, the term “New Normal” may be as old as hard times itself. Consider this quote from Business Week: “In 1939, a decade into the worst economic slump in American history, New York City Mayor Fiorello La Guardia remarked: ‘We must realize this is not a temporary depression, but a New Normal and adjust ourselves accordingly.’ That year, New York’s Central Park was filled with people living in tents and the world’s tallest tower had so many vacancies that it was nicknamed the ‘Empty State Building’. Normals seem permanent. They never are.”
Nothing has been normal about the markets the last three years, and 2010 was no exception. The Dow Jones Industrial Average* ended the year at 11,577.51 which is an 11% gain. The S&P 500* closed at 1,257.64 for a 12.8% increase, while the NASDAQ* finished the year at 2,652.87 for a 16.9% gain. Since the average annual gain for the S&P 500* between 1926 and 2009 was 9.8%, one could say this was better than a normal year for the index, and much better than was anticipated just two years ago.
So, Happy New Year to you and remember, the markets can be gut-wrenching at times, but with a diversified and unemotional approach they can also be very profitable. Thanks for your continued confidence in me.
 |
| Gold closed at $1,420.55 per oz. for 2010. That’s a 26.7% increase for the year. The graph above shows the history of gold from 1971 to the present. Caveat emptor???? THE CHASM BETWEEN FEELINGS AND FACTS A recent Bloomberg poll conducted in October 2010 found that 2 out of 3 likely voters in the November midterm election said that taxes had gone up, the economy had shrunk and the billions of dollars lent to banks as part of the Troubled Asset Relief Program (TARP) would never be recovered. The most significant finding about the poll is the dichotomy between belief and reality. The facts are that since 2009, Congress and the Obama Administration have cut taxes by $240 billion and growth has continued uninterrupted in the US and most major economies since the recession ended in June 2009. Furthermore, the Treasury expects a $16 billion profit on the money lent to the banks during the TARP rescue. They must have polled people who don’t read this newsletter! THE POLITICAL AND ECONOMIC OUTLOOK & MORE As I mentioned in the Market Watch segment, there is a new Congress in Washington. With the House and Senate controlled by different parties, gridlock is a possibility, which a cynic might say could cause Congress to do nothing, and that would be a good thing. I have to admit I’ve uttered those exact words, especially when I get frustrated with the direction of government. After the deal on taxes and unemployment it does seem like the cynic’s scenario might be preferable. However, being the optimist I am, I think this just might be a time when some productive action could be in the wind in regard to entitlement programs, taxes and budget deficits. It also helps to add some perspective to the problems we currently face as a country. To do that, let’s look at another Bloomberg poll conducted in September 2010 which revealed that, “77% of global investors expected the European monetary union would crumble and at least one struggling government would default, all despite a $1 trillion euro zone backstop. Greece and Ireland may have stared into the white light of fiscal death, but they were yanked back to earth by their neighbors, wounded but without default”. Many people are concerned about the fiscal condition of some of the states in our own union. I had the chance to hear St. Louis Federal Reserve President James Bullard address the financial health of our own states against the backdrop of the conditions in Europe. His response was enlightening as he remarked,” There is no imminent crisis with any US state as in Europe where Greece and Ireland were borrowing 100% of GDP. US state’s borrowing is more like 10% of GDP. In the US it is more about making policy decisions like lower spending, higher taxes or both”. With spending and deficits at the state and federal levels in the crosshairs of many in Congress, and the Obama Administration at least feigning a move to the center, perhaps there may actually be some headway made toward fiscal sanity. Well, one could hope! As we enter 2011, it helps to be aware of the problems we face as a nation. There are many people concerned about the unprecedented monetary interventions, and the staggering debt load of the government. The extraordinarily low interest rates we have now will need to be increased, but the economy, while improving, is not growing at a level that can even begin to bring the unemployment rate back down to acceptable levels. While energy and food prices are rising, the impetus for major inflation, wage growth, has no traction. So I think for now, interest rates will stay low and inflation will remain tame. The Fed will have to monitor this closely and act decisively if growth accelerates. * THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. SAVING A PORTION OF OUR PAY EACH MONTH IS VERY IMPORTANT. COMPANY SPONSORED PENSION PLANS ARE ONE METHOD TO SAVE AND SHOULD BE USED FOR RETIREMENT. OTHER SYSTEMATIC INVESTMENT ACCOUNTS, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES CAN ALSO BE OPENED, AND DEBITED DIRECTLY FROM YOUR CHECKING OR SAVINGS ACCOUNT. FOR MORE INFORMATION, JUST CALL TO SET UP AN APPOINTMENT. REFERRALS ARE ALWAYS WELCOME. COMPANY INFORMATION Investment Advisory Services offered through: Jersey Benefits Advisors P.O. Box 1406 Ocean City, N.J. 08226 Phone: 609 827 0194 Fax: 609 861 9257 Email: kaighn@jerseybenefits.com Securities offered through: Transamerica Financial Advisors, Inc. A registered Broker/Dealer 570 Carillon Parkway St. Petersburg, FL 33758-9053 800-245-8250 Member FINRA & SIPC Transamerica Financial Advisors, Inc. is not affiliated with Jersey Benefits Advisors. Third Party Administration and Insurance Services offered through: Jersey Benefits Group, Inc P.O. Box 1406 Ocean City, N.J. 08226 Phone: 609 827 0194 Fax: 609 861 9257 Email: kaighn@jerseybenefits.com Email: Billcola@yahoo.com All opinions expressed in this newsletter are solely those of John Kaighn and Jersey Benefits Advisors. LD39315-01/11 |
Tuesday, December 21, 2010
As the holidays rapidly approach, I would like to take a few moments to wish you a happy and joyous Christmas and Hanukah, as well as a healthy and prosperous New Year. I also wanted to remind you I am always here to assist you with any questions or concerns you might have about your investments or insurance needs. Please feel free to contact me by phone or email any time you’d like to discuss your investments or schedule an appointment.
The economy seems to have averted the dreaded double dip recession and is definitely moving in the right direction. At this juncture, it is difficult to tell exactly where we are in the new business cycle, but my guess is we are still in the recovery phase, as GDP has not surpassed the level achieved before the recession in real dollars. Yet, when you look at profit margins, productivity and the Institute for Supply Management index, it seems as though we might be in mid cycle. Of course, if you focus on the unemployment rate, consumer confidence and capacity utilization you might think we were still in recession. I guess it is safe to say that when you have one of the worst recessions in memory, the recovery will be at least as unpredictable.
According to PNC Wealth Management, the cost of buying all of the gifts in the holiday classic song “The 12 Days of Christmas” surged 9.2% from last year. The total cost for all of the items in the list has jumped $2000.00 to $23,439.38. While the cost of five golden rings rose by 30%, they seemed a bargain compared to the cost of three French hens, which increased by 233%.
Remember, if you plan to add to a Coverdell Education Savings account for 2010, the transaction must be completed by December 31st.. The maximum annual contribution is still $2,000.00 per year. Contributions to 529 College Savings Plans are considered gifts under the federal gift tax regulations and hence any contributions in excess of $13,000 ($65,000 if filing single over five years) or $26,000 ($130,000 if filing married jointly over a five-year period) per donor count against the one-time gift/estate tax exemption. The five-year period is known as the five-year carry-forward option: Once the single donor puts in $65,000 or the married jointly donor puts in $130,000, they are not able to make another contribution (gift) to that individual (without using part of their lifetime gifting exclusion) for five years.
If you’d like a second opinion on your investment or insurance objectives, or would like to develop a plan in the future, please don’t hesitate to contact me.
Happy Holidays
John H. Kaighn
Jersey Benefits Advisors
The economy seems to have averted the dreaded double dip recession and is definitely moving in the right direction. At this juncture, it is difficult to tell exactly where we are in the new business cycle, but my guess is we are still in the recovery phase, as GDP has not surpassed the level achieved before the recession in real dollars. Yet, when you look at profit margins, productivity and the Institute for Supply Management index, it seems as though we might be in mid cycle. Of course, if you focus on the unemployment rate, consumer confidence and capacity utilization you might think we were still in recession. I guess it is safe to say that when you have one of the worst recessions in memory, the recovery will be at least as unpredictable.
According to PNC Wealth Management, the cost of buying all of the gifts in the holiday classic song “The 12 Days of Christmas” surged 9.2% from last year. The total cost for all of the items in the list has jumped $2000.00 to $23,439.38. While the cost of five golden rings rose by 30%, they seemed a bargain compared to the cost of three French hens, which increased by 233%.
Remember, if you plan to add to a Coverdell Education Savings account for 2010, the transaction must be completed by December 31st.. The maximum annual contribution is still $2,000.00 per year. Contributions to 529 College Savings Plans are considered gifts under the federal gift tax regulations and hence any contributions in excess of $13,000 ($65,000 if filing single over five years) or $26,000 ($130,000 if filing married jointly over a five-year period) per donor count against the one-time gift/estate tax exemption. The five-year period is known as the five-year carry-forward option: Once the single donor puts in $65,000 or the married jointly donor puts in $130,000, they are not able to make another contribution (gift) to that individual (without using part of their lifetime gifting exclusion) for five years.
If you’d like a second opinion on your investment or insurance objectives, or would like to develop a plan in the future, please don’t hesitate to contact me.
Happy Holidays
John H. Kaighn
Jersey Benefits Advisors
Monday, November 15, 2010
Staying the course
On January 15, 2009, 90 seconds after lifting off from LaGuardia Airport, the now famous US Airways flight 1549 lost all engine power upon striking a flock of geese 3,200 feet above New York City. Three-and-a-half minutes later, the crippled Airbus A320 touched down in the Hudson River, and what could have been a major loss of life became a textbook lesson in crisis management.
Listening to the cockpit communications, it's quickly apparent that "The Miracle on the Hudson" was made possible by the skill, poise and careful coordination of Captain Chesley Sullenberger and First Officer Jeff Skiles. Yet the transcript also reveals the importance of a tool that for decades has helped pilots manage both the routine and unexpected during flight. That tool is the checklist.
Indeed, in the moments just before the bird-strike, Sullenberger is heard saying, "After takeoff checklist complete." Upon losing power, the first directive he gives Skiles is "Get the QRH." The QRH or Quick Reference Handbook, is a manual consisting largely of checklists to be utilized in troubleshooting various problems such as loss of cabin pressure or engine power. After the order is given, Skiles and Sullenberger can be heard working through a series of steps designed to save the flight.
As they attempted to address an emotionally fraught, seemingly impossible situation, the two pilots had a simple resource they could turn to for help. Beyond the aviation world, checklists are used to manage a host of complex processes: from constructing skyscrapers to administering critical care in hospitals.
Of course, the decisions investors make when markets become volatile don't have life or death consequences, but they can prove vital to ong-term financial wellbeing. And given what we know about
how market volatility can transform a calm, cool and collected investor into an emotional, panicked and scattered one,having a checklist to consult during the next period of instability might mean the difference between reaching your goals and falling short of them. The next time volatility strikes, consider these six steps:
1. Take your emotional temperature.
Even with the recent market tumult still visible in the rearview mirror, it may be difficult to recall just how unsettled investors felt in 2008 and early 2009. Yet it's all but assured that a future downturn will find us back in the same emotional boat. We shouldn't be surprised that when markets decline our moods tend to do the same, as losses can make us feel as if our financial objectives are imperiled. Yet even if we acknowledge that declines are a reality, we are still susceptible to letting the emotions that accompany those downturns drive decisions at odds with key investing goals. One way to help keep them at bay is to gain a deeper understanding of where they originate.
Consider, for example, the strong compulsion to sell when markets become erratic. At heart this urge is essentially a flight response, We seek to eliminate a source of anxiety - in this case, the possibility of monetary loss - by disengaging from it. On a practical level, that generally means converting assets into cash, which limits the possibility of loss.
Psychological studies and research in behavioral finance confirm that this aversion to loss is actually part of our neurological programming, hard-wired into us from a time when survival depended on hunting and foraging - and holding on to the fruit of those efforts meant the difference between life and death.
Viewed in that light, it's no surprise that the visceral urge to limit losses overtakes the rational part of our brain that may be telling us that selling assets into the teeth of a down market locks in losses and reduces considerably the potential to benefit from a market recovery.
Aversion to loss is but one of many tendencies that surface during volatile periods. Others include the impulse to move with the herd - a phenomenon exemplified by the late 1990s rush into tech stocks - as well as our penchant to heavily weigh the importance of recent events rather than considering them against the backdrop of market history.
According to behavioral economist Dan Ariely in his book, Predictably Irrational, it's important to understand the surprising power that emotions can exert over our choices. "Although there is nothing much we can do to get our Dr. Jekyll to fully appreciate the strength of our Mr. Hyde, perhaps just being aware that we are prone to making the wrong decisions when gripped by intense emotion may help us."
2. Turn down the volume.
When the market is rising like a rocket or sinking like a stone, the popular press seldom provides analysis that's useful to long-term investors. Instead the headlines tend to play up whatever information or trend has grabbed the momentary attention of traders and pundits. In an age of nonstop connectivity, tuning out financial news can be tough, but fixating on daily or even weekly market returns can spur us to actions that might ultimately impede our long- term success.
It's interesting to consider that the temptation to monitor stock and bond investments on a daily or even hourly basis stems mostly from the fact that there is always new data available, as trading creates regular re-pricing. To remain focused on long-term goals, it may be helpful to take the same approach with your investment portfolio that you do with assets that don't get re-priced with similar frequency. For example, short-term fluctuations in the value of your home or car don't prompt you to immediately put them up for sale.
Another strategy for curbing the emotional impact of market volatility is to review the value of your investments only at regularly scheduled times. Many investors elect to do so quarterly upon receiving account or brokerage statements. This diminishes the likelihood that they will feel it necessary to make constant changes in response to day-to-day market swings.
3. Find the broader context.
Ask the average investor how many 20% market declines they'd expect to experience over a 25-year period and chances are the answer will fall short of the number suggested by history. The figure, based on the unmanaged Dow Jones Industrial Average dating back to 1900, is about seven. That's right, roughly once every three-and-a-half years (assuming 50% recovery of lost value between declines), the Dow has lost at least one-fifth its value.
Yet each time such a downturn occurs, it understandably upsets investors. Moreover, the sharper drops often elicit claims that this time the selloff is different or worse than those that have come before. As previously noted, maintaining perspective while watching an account balance shrink is not easy. but remembering that downturns are a fairly normal occurrence can help place short-term market events in a broader historical context.
Having that historical perspective can strengthen your resolve to stay invested, which can be a key to long-term success. After all, pulling out of the market at a high point and buying back in at the boltom is almost impossible to do once, let alone more than a half dozen times during your life as an investor.
4. Recognize the potential harm of sudden movements.
A recent survey by financial research firm Dalbar determined that over the 20 yearsended December 31, 2009, the average stock investor's return trailed that of the broader market by nearly 5% per year. Put another way, if the market gained 10% annually, the average investor's portfolio realized only a 5% gain.
Much of this differential stems from investors who, for the reasons discussed previously, sold at the boltom of the market and, if they bought back in, did so once the market had already begun to recover. Market turnarounds often happen suddenly and unpredictably; being on the sidelines when a reversal occurs can rob investors of significant return.
In fact, a hypothetical investor in the unrnanaged Standard & Poor's 500 Composite Index who wasn't invested on the index's five best days during the lO-year period ended December 31, 2009, would have realized an annual return nearly 4% lower than someone who remained invested the entire time. Of course, past results are not predictive of results in future periods.
5. Think like a contrarian.
Warren Buffett once offered the following bit of investing advice: "When others are greedy, be fearful; when others are fearful, be greedy." A more delicate rephrasing might be: Amid adversity, there is often opportunity. Volatility of the kind that marked 2008 and early 2009 often punishes good and bad investments alike, as some investors succumb to the stress and opt out of the market entirely.
Though coetinuing to invest when markets are declining can be difficult, if you believe that stock and bond funds are a good way of meeting long-term financial objectives - which has been the case historically - then making purchases during a downturn is often like buying investments at prices below their longterm average. That's because as markets become less emotionally driven, stocks and bonds generally return to something closer to their long-term average, and investors who "bought on the dip" can benefit. While regular investing doesn't ensure you'll make money, staying the course through thick and thin can help increase your share balance, which can increase your portfolio's ability to provide income.
6. Check in with your financial adviser.
No one would set out on a Himalayan trek without enlisting a guide who knew how to navigate the most perilous stretches. So it goes with investing.
Your financial adviser can be a steadying presence when market conditions get tough. Whether reviewing your investment plan, providing perspective on what's happening in the market or placing current conditions in a larger context, your adviser is an important ally and sounding board. Maintaining open lines of communication can prevent you from taking steps that could undermine your long-term goals.
Indeed, you might think of an adviser as a kind of co-pilot. Much like Sullenberger and Skiles, you can manage the crisis more effectively together - by systematically working through your checklist with the goal of achieving a belter outcome.
The preceding article appeared in the Investor Magazine provided to shareholders of American Funds, a mutual fund company whose various funds are used by Jersey Benefits Advisors and John Kaighn to assist clients in meeting their investment objectives.
Listening to the cockpit communications, it's quickly apparent that "The Miracle on the Hudson" was made possible by the skill, poise and careful coordination of Captain Chesley Sullenberger and First Officer Jeff Skiles. Yet the transcript also reveals the importance of a tool that for decades has helped pilots manage both the routine and unexpected during flight. That tool is the checklist.
Indeed, in the moments just before the bird-strike, Sullenberger is heard saying, "After takeoff checklist complete." Upon losing power, the first directive he gives Skiles is "Get the QRH." The QRH or Quick Reference Handbook, is a manual consisting largely of checklists to be utilized in troubleshooting various problems such as loss of cabin pressure or engine power. After the order is given, Skiles and Sullenberger can be heard working through a series of steps designed to save the flight.
As they attempted to address an emotionally fraught, seemingly impossible situation, the two pilots had a simple resource they could turn to for help. Beyond the aviation world, checklists are used to manage a host of complex processes: from constructing skyscrapers to administering critical care in hospitals.
Of course, the decisions investors make when markets become volatile don't have life or death consequences, but they can prove vital to ong-term financial wellbeing. And given what we know about
how market volatility can transform a calm, cool and collected investor into an emotional, panicked and scattered one,having a checklist to consult during the next period of instability might mean the difference between reaching your goals and falling short of them. The next time volatility strikes, consider these six steps:
1. Take your emotional temperature.
Even with the recent market tumult still visible in the rearview mirror, it may be difficult to recall just how unsettled investors felt in 2008 and early 2009. Yet it's all but assured that a future downturn will find us back in the same emotional boat. We shouldn't be surprised that when markets decline our moods tend to do the same, as losses can make us feel as if our financial objectives are imperiled. Yet even if we acknowledge that declines are a reality, we are still susceptible to letting the emotions that accompany those downturns drive decisions at odds with key investing goals. One way to help keep them at bay is to gain a deeper understanding of where they originate.
Consider, for example, the strong compulsion to sell when markets become erratic. At heart this urge is essentially a flight response, We seek to eliminate a source of anxiety - in this case, the possibility of monetary loss - by disengaging from it. On a practical level, that generally means converting assets into cash, which limits the possibility of loss.
Psychological studies and research in behavioral finance confirm that this aversion to loss is actually part of our neurological programming, hard-wired into us from a time when survival depended on hunting and foraging - and holding on to the fruit of those efforts meant the difference between life and death.
Viewed in that light, it's no surprise that the visceral urge to limit losses overtakes the rational part of our brain that may be telling us that selling assets into the teeth of a down market locks in losses and reduces considerably the potential to benefit from a market recovery.
Aversion to loss is but one of many tendencies that surface during volatile periods. Others include the impulse to move with the herd - a phenomenon exemplified by the late 1990s rush into tech stocks - as well as our penchant to heavily weigh the importance of recent events rather than considering them against the backdrop of market history.
According to behavioral economist Dan Ariely in his book, Predictably Irrational, it's important to understand the surprising power that emotions can exert over our choices. "Although there is nothing much we can do to get our Dr. Jekyll to fully appreciate the strength of our Mr. Hyde, perhaps just being aware that we are prone to making the wrong decisions when gripped by intense emotion may help us."
2. Turn down the volume.
When the market is rising like a rocket or sinking like a stone, the popular press seldom provides analysis that's useful to long-term investors. Instead the headlines tend to play up whatever information or trend has grabbed the momentary attention of traders and pundits. In an age of nonstop connectivity, tuning out financial news can be tough, but fixating on daily or even weekly market returns can spur us to actions that might ultimately impede our long- term success.
It's interesting to consider that the temptation to monitor stock and bond investments on a daily or even hourly basis stems mostly from the fact that there is always new data available, as trading creates regular re-pricing. To remain focused on long-term goals, it may be helpful to take the same approach with your investment portfolio that you do with assets that don't get re-priced with similar frequency. For example, short-term fluctuations in the value of your home or car don't prompt you to immediately put them up for sale.
Another strategy for curbing the emotional impact of market volatility is to review the value of your investments only at regularly scheduled times. Many investors elect to do so quarterly upon receiving account or brokerage statements. This diminishes the likelihood that they will feel it necessary to make constant changes in response to day-to-day market swings.
3. Find the broader context.
Ask the average investor how many 20% market declines they'd expect to experience over a 25-year period and chances are the answer will fall short of the number suggested by history. The figure, based on the unmanaged Dow Jones Industrial Average dating back to 1900, is about seven. That's right, roughly once every three-and-a-half years (assuming 50% recovery of lost value between declines), the Dow has lost at least one-fifth its value.
Yet each time such a downturn occurs, it understandably upsets investors. Moreover, the sharper drops often elicit claims that this time the selloff is different or worse than those that have come before. As previously noted, maintaining perspective while watching an account balance shrink is not easy. but remembering that downturns are a fairly normal occurrence can help place short-term market events in a broader historical context.
Having that historical perspective can strengthen your resolve to stay invested, which can be a key to long-term success. After all, pulling out of the market at a high point and buying back in at the boltom is almost impossible to do once, let alone more than a half dozen times during your life as an investor.
4. Recognize the potential harm of sudden movements.
A recent survey by financial research firm Dalbar determined that over the 20 yearsended December 31, 2009, the average stock investor's return trailed that of the broader market by nearly 5% per year. Put another way, if the market gained 10% annually, the average investor's portfolio realized only a 5% gain.
Much of this differential stems from investors who, for the reasons discussed previously, sold at the boltom of the market and, if they bought back in, did so once the market had already begun to recover. Market turnarounds often happen suddenly and unpredictably; being on the sidelines when a reversal occurs can rob investors of significant return.
In fact, a hypothetical investor in the unrnanaged Standard & Poor's 500 Composite Index who wasn't invested on the index's five best days during the lO-year period ended December 31, 2009, would have realized an annual return nearly 4% lower than someone who remained invested the entire time. Of course, past results are not predictive of results in future periods.
5. Think like a contrarian.
Warren Buffett once offered the following bit of investing advice: "When others are greedy, be fearful; when others are fearful, be greedy." A more delicate rephrasing might be: Amid adversity, there is often opportunity. Volatility of the kind that marked 2008 and early 2009 often punishes good and bad investments alike, as some investors succumb to the stress and opt out of the market entirely.
Though coetinuing to invest when markets are declining can be difficult, if you believe that stock and bond funds are a good way of meeting long-term financial objectives - which has been the case historically - then making purchases during a downturn is often like buying investments at prices below their longterm average. That's because as markets become less emotionally driven, stocks and bonds generally return to something closer to their long-term average, and investors who "bought on the dip" can benefit. While regular investing doesn't ensure you'll make money, staying the course through thick and thin can help increase your share balance, which can increase your portfolio's ability to provide income.
6. Check in with your financial adviser.
No one would set out on a Himalayan trek without enlisting a guide who knew how to navigate the most perilous stretches. So it goes with investing.
Your financial adviser can be a steadying presence when market conditions get tough. Whether reviewing your investment plan, providing perspective on what's happening in the market or placing current conditions in a larger context, your adviser is an important ally and sounding board. Maintaining open lines of communication can prevent you from taking steps that could undermine your long-term goals.
Indeed, you might think of an adviser as a kind of co-pilot. Much like Sullenberger and Skiles, you can manage the crisis more effectively together - by systematically working through your checklist with the goal of achieving a belter outcome.
The preceding article appeared in the Investor Magazine provided to shareholders of American Funds, a mutual fund company whose various funds are used by Jersey Benefits Advisors and John Kaighn to assist clients in meeting their investment objectives.
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