What About Gold?

Posted March 31, 2011 by admin. tags:Tags: , , ,
Gold Coins

photo by motoyen

Written by Dave Young, President of Paragon

We are regularly asked our opinion on whether or not investors should buy gold. We’ve written about it in the past, but I wanted to give you an update of where we stand now.

Gold is being promoted on a host of television shows. There are a nonstop barrage of advertising promoting it.

Usually buying gold through the brokers that are pitching it on TV is the most expensive way to buy it. If I wanted to buy gold, I wouldn’t buy it through those costly pitchmen.

For the record, at Paragon we are not buying gold right now. That doesn’t mean we are anti-gold, it just means we don’t want to buy it right now. Over the years we have bought and sold gold many times when the valuations made sense.

Our reluctance to buy gold doesn’t mean it won’t keep going up from these already stretched levels. Once a trend establishes itself, it can keep running as long as people keep buying.

An upward trend is not a reflection of value, it simply means there are more buyers than sellers. Right now there seems to be no shortage of buyers.

We aren’t buying gold right now because we cannot justify that it is worth what it is selling for. It’s valuations are severely stretched.

Fear is driving gold purchases.

There is uncertainty in the Middle East, issues with Libya, European debt issues, endless U.S. Government spending and the all encompassing fear of inflation.

At Paragon, we make money by buying early in trends and selling when the trends start to roll over. Most trends in the market last between six and 24 months. While we don’t know how much further gold will run before it rolls over, we do know that it is not early in its trend. We also know that it is anything but cheap.

The only way I would buy gold right now would be for a short-term trading play. However, if I really wanted to make a short-term trading play on metals, I would buy silver instead of gold. It tends to follow the same trends as gold, but move a little harder up and down. Bottom line, I would not take a long-term position in gold at these levels.

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.

Sell Treasury Bonds Now?

Posted March 24, 2011 by admin. tags:Tags: , ,
Walking down Wall Street

photo by andos

Written by Dave Young, President of Paragon Wealth Management

The big news in the financial world last week was that Bill Gross, the largest bond manager in the world, started selling his treasury bond positions. That caused concerns for many bond investors.

Why would the king of bonds be selling bonds?

Maybe because they currently provide very little if any upside potential and a lot of downside potential. If you are going to get next to nothing to own them, but be exposed to significant downside risk; they don’t make a lot of sense.

Our intermediate and long-term bond models have been on sell signal for several months. Unfortunatly, if you are just selling bonds now, you have likely already experienced losses from your bonds over the past few months.

If you don’t want to own intermediate and long-term bonds… then where can you go for safety?

Our conservative portfolio, Managed Income, is designed first to provide protection and second to generate returns. This portfolio uses several models which indicate which conservative asset classes are on a “buy” signal and which are on a “sell” signal.

Currently, our Managed Income models show the following asset classes still on a “buy” recommendation. We are still holding positions in short-term bonds, high yield bonds (barely on a buy signal), convertible stocks, preferred stocks, real estate and some alternative funds. We will continue to hold those positions in our Managed Income portfolio until each of their individual models moves from the “buy” signal to a “sell” signal.

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.

Stay in or Get out the Market?

Posted March 17, 2011 by admin. tags:Tags: , , ,
New York Stock Exchange Building


Photo by Wagner T. Cassimiro “Aranha”

Written by Nathan White, Paragon’s Chief Investment Officer

Is the recent market turmoil a buying opportunity or a signal to get out?

Assessing the actual economic impact of crisis events such as the catastrophe in Japan and the turmoil in the Mideast is not an easy task. The usual market reaction to uncertainty is increased volatility and a tendency by many to sell first and ask questions later. This indiscriminate selling is usually the time to buy, but the hard part is determining if the selling will continue.

I tend to generally view the recent market weakness as an opportunity to increase equity exposure. Over the last few months as the market kept rallying and more people got bullish we increased our cash position as a precautionary move. 

Until the recent weakness, the market had not experienced a five percent correction for about 135 days and a 10 percent correction for 200 days. Since 1928 the average number of days without a five percent correction has been around 50 days and 160 days for a 10 percent correction (source:  Ned Davis Research).

According to these statistics, the market was overdue for a five to 10 percent correction, and hence we decided to hold a bit more cash.

However, averages are just averages and the market will do whatever it wants and so there is no telling how long any particular correction will last. The majority of our indicators stil show the bull market is intact, but from here on out the gains could become harder to come by thereby requiring more “opportunistic” trading strategies.

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.

Money Management and Baseball

Posted March 10, 2011 by admin. tags:Tags: , , , ,
Money and 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. 

Asset management is similar to baseball because they both take patience and a sound long-term strategy to be successful.

At Paragon Wealth Management we have asset management services for our clients who have $200K to $1M to invest, and wealth management services for investors who have over $1M to invest. When investors see the returns our growth portfolio, Top Flight, has generated over the past 13 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 421.46 percent versus 72.19 percent for the S&P 500 from January 1998 through February 2011. (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 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 four of the past 13 years, which is about 31 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 underperform. 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 six times more than the broad market as measured by the S&P 500 over the past 13 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.

 

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