Perspective from the Checkout Line

As I stood in line this past Sunday at Wegmans, amidst the usual sea of candy bars, energy shots, and chewing gum, I was faced with a dilemma.  As I stared down my favorite pack of gum, I couldn’t decide whether to buy or leave it alone.  Luckily, my phone’s calculator helped my answer the question as I waited for those in front of me to cash out.  Allow me to explain.

Our good friends at the IRS recently raised the contribution limit for 401(k) retirement plans by an additional $500 starting in 2013.  This means the amount you are now able to save for retirement during this coming year is $17,500.  Those over the age of 50 have an even sweeter deal, as the “catch-up” contribution of $5,500 that you’re allowed brings your maximum contribution to $23,000.

Now, I am not naïve enough to think that money grows on trees and we‘re all contributing the maximum amount right now and can easily add another $500 to that total.  In fact, according to this CBS article, just 5% of participants nationwide are making the maximum contributions to their retirement accounts.  That is understandable when you look at the cost of daycare, college tuition, and a single gallon of gasoline.

But consider this.  Over the course of a year, $500 breaks down to approximately $1.40 each day.  If you take that $500 and put it towards your retirement in each of the next 20 years, assuming a 5% yearly return, the extra $10,000 that you’ve contributed will be worth nearly $17,000.

Now I can answer the question – do I really need the gum?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

The Crash That Was

Over the better part of 30 years I have seen plenty of ups and downs in the financial markets, but nothing compares to the bedlam – the pure panic – that gripped Wall Street and much of the rest of America twenty five years ago today.  It was October 19, 1987, and when the New York Stock Exchange opened that morning, we were off to a weak start that got weaker all day, as investors saw stocks slump 508 points, a 23% drop.  Wags immediately started calling it Black Monday.  To this day we have never seen a bigger one-day decline, and I am hopeful not to have that record broken.

There was no internet, of course, no financial channels on cable, but TV and radio stations broke into regular programming to alert people to the meltdown.  The computer systems that the exchanges used had difficulty handling the volume of transactions, and some major brokerages teetered on the edge of insolvency.  At the office where I worked, most of us stayed until after 9 pm, taking calls from clients.  Then we dragged ourselves – hoarse, tired, and stunned – out to some downtown bar that was not surprisingly filled with colleagues from other firms.  We all hoped our employers would reopen the next morning – it was far from certain that they would.

In the end, some firms were mortally wounded by the crash and had to merge.  Mine, EF Hutton, was one.  But the economy wasn’t tipped into depression as some suggested would happen, and markets gradually recovered.  No crashes, no bear markets, are ever the same as previous ones.  Trying to predict the size and duration of the next one is like generals who always seem to be preparing to fight the last war.  The investors who came out of Black Monday in the best shape were those who selected high quality investments, stayed informed, and held their investments if nothing in their reason for investing had changed.  That has remained a sound basis for investment decisions and will serve well in the next crash – whenever that might be.

GTC

 

 

 

 

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Ground Rule #2: Percents, Not Dollars!

We have covered the first question for plan participants: How much?  How much should you contribute, how much will keep you comfortable in retirement, how much can you afford today?   If you decide what you can afford and that’s your contribution, it’s a perfectly reasonable approach (but don’t forget this rule when deciding).  But once you have decided that a contribution of $5 or $50 or $500 per paycheck is the right amount, you have an important step to take.

Convert that dollar amount to a percentage.  If your gross pay in an average period is, say, $1000, then a contribution of $50 should be noted as 5%.  There is on the surface no difference, but what about when you get a raise or bonus? What if you work overtime? Your pay rises but your contribution does not, unless you use a percentage. The flip side is also true: if you earn less in a period, a percentage-based contribution will be smaller, so your net pay will not be reduced out of proportion.  But there is also a life issue that might not seem obvious.  You have a life to live, a job, family obligations; stuff to do.  Let’s face it: once you get your 401(k) or 403(b) set up, making changes will just not land very high up on your “to do” list.  Sometimes years can slip by before you get around to a review (that can be good).  But if your income grows and your contribution does not, you’ll fall behind in seeing your account grow to where you need it to be.  So set up your contribution as a percentage and you can get back to enjoying life.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

FACEBOOK

Well there certainly seems to be an awful lot of chatter about the pending IPO (initial public offering) of Facebook’s stock.  First and foremost please know that as of the writing of this post the IPO has not even occurred.  The IPO is scheduled for the week of May 14^th.

 Currently the offering price talk is $28- $35 per share.  It has been reported to be “over-subscribed” which simply means there are plenty of folks, institutions and individuals,  who would love to buy the stock at the offering price.  Trust me everyone who wants to buy it at the offering price will not get it.  I suspect that if you are one of the lucky folks to get it at the offering price you stand a better than average chance of turning a profit.  For everyone else here is my advice:

 Just wait and see how this company and its stock do after it starts trading for a few days or weeks.  Based on its current earnings estimates the offering price is about 99 times its earnings.  Which in financial jargon means it has a P/E ratio (price to earnings) of 99x.  Historically not cheap.  Apparently from the analysis that I have read Facebook’s profit growth is slowing not accelerating, not good for a company with a 99x multiple.  I am not bashing Facebook here, many companies have shown the ability to adapt their business model and Facebook may well be able to do just that. 

 My approach here is to remain cautiously optimistic and if the stock presents an agreeable entry point then perhaps an investment can be made, but it strikes me that at this offering price you are not getting a great bargain and if the stock does rise after the offering it’s even less of a bargain.  I just do not see the need to rush in and buy anything, ever, Facebook included.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Ground Rule #10: Start

Today I’ll start the countdown of my Ten Ground Rules for 401(k)/403(b) Success. These are common sense guidelines I have refined from nearly three decades of talking with clients and observing their results within employer-sponsored retirement plans.

The first rule seems so simple and obvious as to be unnecessary: Start.  Get started. Enroll in whatever plan your employer makes available.  It’s surprising how many people delay their participation in retirement plans. There are always reasons: you’re new on the job and not familiar with the plan, or you feel you can’t afford to, or you mean to get involved but just hadn’t gotten around to it.  Would you fail to sign up for your employer’s health insurance benefit? Would you not take any vacation because you hadn’t gotten around to understanding the time-off rules? Of course not.  Building your personal net worth is just as important, it’s just not as immediate.  So focus on your employer’s plan, ask for guidance if you need it, and enroll.

Some people get frustrated by articles stuffed with numbers showing how much money you need to save to retire.  That frustration can cause them to avoid participating altogether and make the goal even harder to reach.  Don’t worry about goals, not yet.  Just get in your plan and start contributing. Without a start, the rest of my rules won’t do you any good.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

When Kodak Listens

You can’t live in Rochester without knowing Kodak employees and retirees, and those of us who have never worked there draw a lot of our picture of what happens inside the Big Yellow Box from what we hear from family and friends.  But an image of Kodak created by secondhand accounts is a little like a portrait painted by listening to someone describe the subject instead of seeing it for yourself.  After all, like the blind men and the elephant, most Kodak employees see a small piece of the operation, and we’re getting a small story from them.

But over the last year as Kodak slid toward, then into, bankruptcy, I have heard a consistent story from a variety of smart, skilled people from different parts of Kodak’s operation: the story of the consumer inkjet business.  In February 2007, I traveled to Manhattan to attend Kodak’s investor briefing and the rollout of the new inkjet printers.  The appealing pitch: high-quality ink at very low cost, designed to broaden the market by letting consumers print as much as they wanted without worrying about cost. Attendees received sample photos and they looked great.

The only problem is that 5 years later, the consumer inkjet business is still not yet profitable, and much of Kodak’s Consumer Digital Group (CDG) is being dismantled. This is where the listening part comes in.  I can’t reasonably paint that picture from a story I hear from one or two people. But over many months I’ve pieced together an image from different parts of the company. Like the Kodak market researcher who reported that their group told management that the inkjet business had a major entrenched competitor (Hewlett-Packard), thin profit margins, and a shrinking market (people just don’t print many photos).  Like the two senior researchers in Corporate Research & Engineering who report that their group told management that the inexpensive ink was ruining the printer heads and needed more work before going to market. Like the members of the finance staff who report that Kodak has been losing money on each printer sold, with no change in sight.  In each case, current and former employees say, warnings were ignored by senior management and the printers were rushed to market. Result: overwhelming number of defective printers (one source says 100% in the first months), loss of retailer support, and a business that 5 years later loses $50 on each printer Kodak sells.

Kodak didn’t listen to its own employees: skilled, dedicated, hardworking people. So who is Kodak listening to now? Bankruptcy consultants and lawyers, at a cost of tens of millions of dollars and counting.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Speaking Volumes

Trading ‘volume’ is defined as the number of shares bought or sold during a given time period.  Technical analysts believe it is a powerful tool for confirming trends in prices, or rather shifts in the market’s supply and demand.  If a price trend has a lot of volume then the trend is supported and an investor can have more confidence in the trend.  If a price trend has little volume then the trend is not supported and an investor should be skeptical. 

One of the lead articles on CNBC.com recently was about trading volume in stocks.  It asks a rather poignant question:  “How can stocks be in their fourth year of a bull market and trading activity be so low?”  It is a question that ought to make investors nervous.  The low volume of this bull market has left many wondering who’s buying and if there is any conviction in the rally.  Furthermore, today’s market is characterized by heavy “program trading” that is done in micro-seconds by computers.  These programmed trades are not actual positions based on future expectations.  Rather they are just trying to take advantage of ultra-short term prices disparities.  This is important because oftentimes volumes are what separates bull market rallies from bear market rallies.  The bottom line for the bull market is that this emperor has no clothes.

Brennan R. Redmond, CFA
Vice President
Brighton Securities

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities)

Gift of Time

Have you ever thought about time as an investment?  Recently I came across an article where the author wrote about the best financial advice he had ever received: “invest your time, don’t spend it.”

This led me to a similar article which also discussed the idea of spending vs. investing time.

In the end, both articles provide examples of activities where we “spend time” and examples where we “invest our time.”  I often say “it’s not how much you make, it’s how much you save” that will determine how successful you’ll be in accumulating wealth, and the same could be true for time.  Replace the word Money with the word Time and see how interchangeable they are!

This got me thinking about how many of my clients rely on me to oversee their investments because they don’t have the time; or prefer investing their time with their family, their faith, or friends.  Think of someone that you think is “very successful.”  Ask them what they do with their time and see if they’re “spending” it or “investing” it.

Call or stop by our office anytime, to meet with me personally, and give yourself the “gift of time.”

 

Joe Boyd
Financial Advisor
Brighton Securities

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities)

Crowd Funding vs. Fat Cats

We regularly get questions from people wanting to invest in “hot” new companies. Lately all the media buzz about a looming public offering of shares from Facebook has more people than ever wondering how they can get in on the action.

The answer usually is: they can’t.

Think about it: people are interested because they expect that an investment in something like Facebook could make them some quick cash, maybe a lot of it, and there’s a good chance they could be right.  So ask yourself this – would the big Wall Street underwriters who bring such firms to market really let the average investor make some easy money, or would they share the bounty with their favored fat cats? Remember who we’re talking about. These are many of the same firms who brought us the financial crisis, took huge bailouts, then paid millions in bonuses to retain their “best” people. They don’t exist for the average investor.

That’s where “crowd funding” comes in. The theory is that small startups can go to the public – the average investor – and get investment capital to start and grow businesses.  NPR’s Morning Edition did a story about crowd funding this week.  Sounds like a fine idea, but lurking behind it s the ever-present specter of securities fraud. Stock scammers are not new, and a hallmark of their crooked trade is to prey on the unwary, often in modest amounts. It’s not hard to imagine a website touting plausible-sounding “up-and-coming” companies and encouraging the unwary to make a small investment.  Plenty of people might “invest” $5, $100, $1000 hoping for a long-shot win. After all, people throw away money on lottery tickets every day. Experience suggests that such sites would pop up, collect money, and disappear, leaving investors with nothing and regulators hunting a thin trail.

Crowd funding sounds like a good idea, but without adequate safeguards for the investing public, it won’t be a path to Fat Cat status.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Magic Numbers?

What happened to the “news” story that was Dow 13,000?  Over the last few weeks as US stock markets rose and the Dow Jones Industrial Average flirted with 13,000 stories filled the financial media.  Their content was a typically breathless “will it or won’t it” close above that magical mark. Experts opined on the “psychological importance” of this and other market measures.

And then what? US financial markets have been up for 7 straight trading days, the Dow is solidly over 13,000 (13,200 as I write this) and it’s not a topic anymore. Why not? My view: it was never a legitimate topic in the first place.

I started in the investment business when the Dow was at 1,000 and can remember when some people predicted that the Dow would reach 5,000, or 7,000, or even 10,000 – some day.  I also remember the “experts” who denounced those predictions as crazy, impossible fantasies.  Marks don’t move based on the level of some arbitrary index. Markets move, in the long run, based on dollars and cents: sales, earnings, dividends. The rest is noise. I’m bullish on the US economy, and I’m bullish on our stock market. Ignore the noise; enjoy the ride.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

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