Why Wait?

I was asked the other day, “what is the best advice you’d give someone with regards to investing?”  My first thought was to say something that sounded intelligent and would make a good impression.  After a second, I thought better of that and answered simply, “Start.”  They were taken aback and replied, “Start?  That’s it, just start?”

Yes:  start.

Let’s consider two scenarios:

Client 1 is 25 years old, just beginning his career.  Over the next ten years, he invests $5,000 each year.  If we assume an annual return of 7.5% (not unreasonable in a growth-based mutual fund), by age 35, Client 1 has $70,735 in his account.  At this point, he stops saving, but leaves his account alone to let it grow to age 65.

Client 2 is 45 years old and decides that if he wants to retire anytime soon, it’s time to start saving.  Over the next 20 years, he saves $10,000 each year.  Assuming the same 7.5% annual return, at age 65 his account value grows to $433,046.  Not bad!

Now, let us compare.

		Client 1	Client 2
Age started saving		25	45
Amount saved per year		$5,000	$10,000
Saving period		10 years	20 years
Total investment		$50,000	$200,000
Growth Rate		7.5%	7.5%
Account Value at age 65		$619,281	$433,046

Client 2 saved four times as much as Client 1, and for twice as long.  You’d think Client 2 would be the winner in this scenario, but the numbers don’t lie.

When is the time to start?

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).

All Quiet on the Facebook Front

Things have certainly calmed down since May 18^th when I spent almost two straight hours on the phone talking with folks about Facebook.  It was THE thing in the week leading up to its IPO and it seemed like everybody wanted a piece of the action.

At the time, our advice was to be “cautious, not euphoric,” because there is usually something that can be said for not following the crowd when it comes to investing.

By now, we know what happened.  To call Facebook’s IPO a “mess” would be an understatement.  After briefly passing $45 on the first day of trading, it took FB just two and a half weeks to fall 43% to $25.52.  All of a sudden, nobody wanted it.

Then a funny thing happened.  Facebook’s stock started to rise, reaching $33.43 at one point Friday, June 22, 2012, an increase of 31% since hitting bottom in early June.  As of mid-afternoon Friday, FB had risen just over 4% for the day alone.

Now, I am not saying that just because Facebook’s had a nice run that we should all start to “Like” it.  The point is, when you follow the crowd, it can be tough to make money.

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).

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).

Bargain Hunting

Last Tuesday, the S&P 500 closed below its 50-day moving average for the first time since December, 2011. A sign of trouble, this came after the markets have pulled back recently, due to factors such as European sovereign debt fears and a sluggish jobs report last week.  Wednesday saw a nice rebound, however, as the Dow Jones Industrial Average was up about 100 points and the S&P 500 about 12 points as of 3:00pm. Excellent earnings reports from Alcoa and a positive homebuilding report have helped fuel today’s rally. 

 What does this mean to the individual investor?  While stocks are still in positive territory for the year, and many are still near their historical highs, the recent pull-back means there are some bargains to be had. 

 Remember that nothing has changed in terms of the fundamental keys of successful investing…diversification, buy and hold good dividend-paying companies, buy low and sell high and dollar cost-averaging (among others).   This is a good opportunity to dollar cost-average into quality companies that are now a little more attractively priced.  This means putting a little money at a time into the market, thus lowering your average cost.  It also is a lower risk method of getting participation in a rocky market than dumping all of your money in at once.  Companies that I like include Bristol-Myers Squibb (BMY, $32.65.sh., 4.16% dividend), Coca Cola (KO, $72.21/sh., 2.835% dividend) and Intel (INTC, $27.89/sh., 3.01% div.). 

 The use of quality mutual funds is a great way to get exposure to a large basket of great companies like these with a small sum of money.  They are very conducive to setting up an automatic periodic dollar cost-averaging program.

 If you would like a complimentary review of your portfolio or to discuss comprehensive financial planning (retirement, insurance, retirement income, long term care, disability, survivor, estate and college planning) please contact me at (585) 340-2229.  Thank you.

Susie L. Light
Financial Advisor

(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)

U.S. Treasury and The Fed

I recently read an article that pointed out that in 2011 the Federal Reserve purchased 61% of U.S. Treasury bond issuance.  In the markets there is a lot of speculation about another round of quantitative easing (which is sometimes called QE3).  Such speculation has kept the equity markets afloat, rising and retreating on QE3’s prospects.  However, with such massive purchases it seems that the Fed never actually backed off their last quantitative easing scheme.  Meanwhile, non-Fed buyers of our bonds (foreign purchasers, banks, mutual funds, etc.) are buying at much lower levels than at any point since the “Great Recession”.  And that’s not because borrowing is down.

I wonder if the Fed is creating a bubble in government debt.  Or, assuming the bubble has been created, if the Fed may be trapped into buying all these bonds.  An affirmative answer to either one of those questions could make the 2008 crisis look like child’s play.

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).

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).

Related articles

• Did I Miss Something? (brightonsecurities.wordpress.com)

Cycles

Recently, my colleague Brennan published a post relating our current economic climate to that of the 1970’s.  This concept of a cyclical economy is something that has been studied in great detail for many years.  As Brennan posed, history never repeats itself exactly, but there are often many measurable similarities. I will refrain from discussing the statistics, historical and mathematical studies on cycles (believe me, there are thousands).

What I believe to be more important are the emotional effects on investors.  No matter how many economic crises we have, or periods of time where it is near almost impossible to lose money in the markets, we seldom consider anything but the present.  This is why it’s so important to have an evenhanded, unbiased plan for reaching your financial goals. When you’re down on your luck it seems as if things will never get better and when you’re flush you convince yourself that this will go on forever.  The same is true with investing, where mother market will always find a way to surprise you.

Sam DiNorma

 (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).