Investment Planning For 2010

Posted December 30, 2009 by admin. tags:Tags: , , ,
New Year Fireworks


photo by vogliovento

With the New Year upon us it is a good time to reflect on the lessons learned from this past year.  With the state of the economy at the beginning of 2009 would we ever have been able to anticipate or predict how the year would end?  Or can we possibly know what 2010 will bring?  Of course not.  One of the biggest lessons we can take away from 2009 is the importance of having and sticking to a long term investment plan.  Factors influencing the economy will inevitably vary from year to year but implementing a long term investment strategy will ensure we are not influenced by the fear and emotion of the moment and keep our end goals in sight.

Happy New Year from all of us at Paragon Wealth Management.

Should You Buy Gold?

Posted December 17, 2009 by admin. tags:Tags: , ,
GOLD!


photo by motoyen

Written by Nathan White, CFA

Several people have asked me about gold lately.

They are curious as to whether they should buy it or not. After all, it is hitting new highs. It seems like they all know someone who bought it around $300 an ounce.

I hear radio advertisements all the time that tell people to buy gold because of- the usual litany of fears (i.e., dollar crash, inflation, etc.) The last time I heard things like this was during the tech bubble when everyone wanted Internet gold.

What happened to gold investors last time people were buying for today’s reasons?

A recent article from Bloomberg.com by Nicholas Larkin and Millie Munshi provided some interesting insights. Those who bought near the peak in January 1980 on an inflation-adjusted basis are still 79 percent away from getting their money back. That is about a 44 percent return over 30 years. The average U.S. checking account rose about 92 percent over the same period with stocks and bonds doing much better.

Gold pays no interest, has virtually no industrial use, and  you must pay storage fees to hold it.

It is a purely speculative asset which ironically attracts some of the most traditionally conservative type of investors — go figure.

Do not get me wrong, I am not anti-gold, but at this point, the reward is not worth the risk.

It could keep going all the way to $2,000 an ounce for all I know making me look like a fool for writing this, but the contrarian in me does not like to buy high.

Gold is pricing in all of the fears for which people are buying it. At this point, you are just hoping some sucker will be willing to pay a higher price than you before the game ends.

I would be selling gold at this point, not buying.

What do you think? We want to hear your feedback.

Paragon Wealth Management
is a provider of managed portfolios for individuals and institutions.
Although the information included in this report has been obtained from
sources Paragon believes to be reliable, we do not guarantee its
accuracy.  All opinions and estimates included in this report
constitute the judgment as of the dates indicated and are subject to
change without notice.  This report is for informational purposes only
and is not intended as an offer or solicitation with respect to the
purchase or sale of any security.  Past performance is not a guarantee
of future results.

Letter to Obama– How to Create Jobs

Posted December 9, 2009 by admin. tags:Tags: , , ,
Obama


photo by mrsrichardson823

A couple days ago I heard President Obama say that he wanted input on how to create more jobs. Here is my input.

I’ve mentioned in previous posts that I do my best to look at things from a neutral perspective. I really don’t care who is in charge as long as they do not complicate my wealth management practice too much.

The Obama administration has made that difficult.

Dear Obama,

In my past 23 years of money management, politicians haven’t had much effect on our investment strategies. As a general rule, the less they do, the better the free market functions and that is usually positive for the stock market.

On the other hand, the more they do, the worse the free market functions, and that is usually negative for the market. The offset this time is that the stock markets were so extraordinarily undervalued that they really had nowhere to go but up.

Now that unemployment has skyrocketed, our politicians have decided that jobs are important.

Unfortunately, they did not decide that before they allocated $787 billion towards their “stimulus” program that we bought for them earlier this year.

Last week they held a job summit, also know as a “PR stunt”, to show how much they care about jobs. Then on Tuesday, five days later, they announced their plans to “save and create” more jobs. It’s amazing to me that you can go from the information gathering summit stage to the implementation stage in five days. Aside from that anomaly, let me explain.

Businesses create jobs. Politicians do not.

On a national level, some studies claim that it cost the government, which is code for the taxpayers (since the government does not actually have any money), $242,000 for each job they created with their stimulus bill. In Utah County, they claim it cost $147,000 for each job created by bill. Contrast that with business that spends nothing to create a job. In business a job is created when it adds value to and helps a company make more money. Any way you cut it, it is silly for government to spend billions of our money artificially creating temporary jobs.

So what can government do to help create jobs?

It is simple. First, create an environment where business can prosper. Second, let businesses keep more of the money they earn so they can use it to expand and hire additional employees.

The pot of money that businesses have to work with is limited in size. So when government takes the business owner’s money for extended unemployment coverage, which originally started at 16 weeks, and is now up to 99 weeks. Then you asses them with workman’s comp, social security and then another 40% cut of their income for state and federal taxes. It does not leave a lot to work with.

But, that is not enough. Then you propose punitive taxes on “the rich” ie. business owners (since they do not pay their fair share) followed by additional significant taxes on business for health care and cap and trade.

Since they do not have unlimited resources (like the government thinks they do) businesses cut back on hiring. Because they are afraid they are going to be taxed into oblivion and there is no real benefit for them to take risks (since they do not get to keep the money they earn) they stop expanding.

It really is simple. Get government out of the way of the free market. Reduce the ineffective and burdensome regulatory bureaucracy. Provide an infrastructure that allow businesses to prosper. Let businesses keep what they earn.

This is basic economics and a lot more effective than spending $242,000 to create a $45,000 temporary job. This is the way to see employment expand and create millions of jobs. Just like it did throughout the 80’s and 90’s.

Sincerely,

David Young
President of Paragon Wealth Management

What do you think? Feel free to leave comments.

Paragon Wealth Management
is a provider of managed portfolios for individuals and institutions.
Although the information included in this report has been obtained from
sources Paragon believes to be reliable, we do not guarantee its
accuracy.  All opinions and estimates included in this report
constitute the judgment as of the dates indicated and are subject to
change without notice.  This report is for informational purposes only
and is not intended as an offer or solicitation with respect to the
purchase or sale of any security.  Past performance is not a guarantee
of future results.

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