Unintended Consequences…

Posted June 24, 2010 by admin. tags:Tags: , , , ,
American Neighborhood



photo by NNECAPA

Written by Nathan White, Paragon’s Chief Investment Officer

The markets reacted negatively to the release of the new single-family homes sales number that was released yesterday morning.

A pullback was widely expected as the federal housing stimulus program ended in April and the ending of the program caused the March and April numbers to be pretty solid. In fact, the April number of +15 percent was very strong.

The markets always move on expectations, and when the May number was released showing a 32.7 percent decline it was so far below the already lowered expectations that the markets sold off. The May decline was the lowest ever on record!

So the end result of this benevolent well-meaning government program did nothing more than pull demand forward into the months preceding the end of the program.

Once the program ended, sales fell off a cliff. It will probably now take a couple of months or so for this statistic to return to its “natural” state and produce more reliable numbers.

So as the result of government action we get nothing more than a bunch of statistics with this number that cannot be trusted. A short-term consequence of the program was to cause a lot of uncertainty in the markets today and cause many to wonder if this will contribute to a double dip in the housing market and the economy.

In the end, we don’t think that this will result in the double-dip unfolding as this housing statistic is notoriously volatile month to month and new home inventories have been shrinking (we are neutral on the housing market right now) but in the short-term it has done nothing more than cause a lot of uncertainty.

I believe it would have been better not to have had this distorted economic activity in the first place.

At a time when headlines are causing a lot of angst about the future economic state, it doesn’t help to have another negative unintended consequence of well-meaning government policy adding fuel to the fire!

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.

If it sounds too good to be true…

Posted June 18, 2010 by admin. tags:Tags: , , ,
Amazing Ocean Sunset


photo by Mundilfari

Written by Nathan White, CFA

I’ve had a few people lately inquiring whether certain annuity investment products that have been presented to them are a good deal or not. In light of the recent market volatility this product seems appealing. The conversation usually starts with a statement like this “I’ve had someone tell me that they can get a guaranteed fixed return or most of the gains if the market moves up.” This seems like a no brainer – all upside and no downside!  Who wouldn’t want such a deal? When evaluating products like these keep in mind the old saying “if it sounds too good to be true then it probably is.”

Because equity-indexed annuities (EIA) may seem so appealing, many fall victim to the sales tactic and then later feel significant buyers remorse when they experience the reality of these products. These annuities use complex formulas to determine what your gain is – if the market goes up, you actually end up getting significantly less than what it looks like on paper. In the end, no matter how much the market improves, all you may end up getting on average is a little more than what your minimum guaranteed return is. To make matters worse your money is locked up for years and the only way to get it out is to pay a hefty fee.  You basically get locked into a low returning investment. If a low return is all you need then maybe it is something worth considering, but you could probably buy a bond with a similar return and still have access to your investment should you choose.

Remember, beware of the investment advice from anyone selling you a product and get an objective opinion from an advisor with a fiduciary standard.

Click on the link below for more information on the pitfalls of EIAs.

http://www.guardingyourwealth.com/annuities/Equity-Indexed-Annuities.htm

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.

 

Investing is like a baseball game

Posted June 11, 2010 by admin. tags:Tags: , , , ,
Baseball



photo by laffy4k

Written by Dave Young, President of Paragon Wealth Management

Imagine yourself as a baseball player.

First, your team gets a base hit, next you get a double. Then, another base
hit. This is followed by a triple, and then you strike out. Then, you strike out twice in a row! Just about the time you are ready to abandon your team, they hit two home runs.

The moral of the story is you never know how the game is going to turn out unless you stay for the whole game. 

When investors see the returns our growth portfolio, Top
Flight, has generated over the past 12 years, they get excited about
them
.

Then, when the market goes through a downturn, and Top Flight goes
through a mild downturn, they start questioning their investment
strategies.

Paragon’s Top
Flight Portfolio
has generated a total return of 351.1 percent
versus 39.2 percent for the S&P 500 from January 1998 through May
2010. (see www.paragonwealth.com for full
track record and disclosures.)

It is important to understand the
ups and downs that investors went through in order to capture those
extraordinary returns investors have seen since Top Flight’s inception in 1998.

Its also important to understand that investors who did not
keep a long-term perspective and bailed out of their portfolios along
the way, never saw those returns.

It is only those investors who had the discipline to keep a
long-term
perspective who got the long-term returns.

For
example, in three of the past 12 years, which is 25 percent of the time,
Top Flight underperformed the S&P 500. In two of those years, Top
Flight declined and investors lost money.

The investors who focused on the short-term during those times, bailed
out of their portfolios. They were shaken out of their long-term investment strategy and ultimately hurt themselves by
selling out of their portfolio.

In an ideal world Top Flight would always outperform and would
travel a straight line of positive returns year after year. 

Unfortunately, we do not live in a perfect world. Reality is more
like two steps forward and then one step back over and over.

With Top
Flight
we never know in advance when we are going to under perform
the market or when we are going to “hit a home run.” Although there are no guarantees, we do believe that if
we keep stepping up to the plate and executing our investment strategy
that we are going to outperform more than we under perform. Over time we
believe that disciplined execution of our investment strategy will
deliver outsize results.

However, that means we have to
keep stepping up to the plate, and we have to consistently follow our
investment strategy.

That is how Top Flight has generated returns almost nine times more than the broad market as measured by the S&P 500 over the past 12 years.

If investors want those long-term returns, then they must “stay for the whole game”. 

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.

Summer Rally?

Posted June 3, 2010 by admin. tags:Tags: , , ,
Spring Toolips

photo by Steve aka Crispin Swan

Written by Nathan White, CFA

The markets often take a breather during the summer as people focus on other things besides economics.

June and July are often lackluster months.

After the recent correction the “sell in May and go away” idea seems to have been right on the mark; or does it? The “sell in May and go away” tactic has gained widespread acceptance because it generally worked from 1950 to about 2003 according to a recent article by Louis Navellier (http://www.thestreet.com/story/10752020/1/sell-in-may-and-go-away-no-way.html).

Perhaps we should have said “sell before May” this time around. In fact, selling during May this year might end up being exactly the wrong thing to do.

The recent causes for the market turmoil (i.e., flash crash, European debts woes, Gulf oil disaster, new Israeli-Palestinian tension) have been masking increasingly good economic reports that show the economy continuing to recover.

I always believe that the market loves to continually disappoint as many as it can.

Now that the recent turmoil has caused investor sentiment to reach extreme pessimistic levels, and with a general belief that the summer is a bad time for the markets, perhaps the market will do the opposite of what is generally expected, and have a nice rally.

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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