Europe Watch Continues

Posted September 29, 2011 by admin. tags:Tags: , ,
Greece

photo by Bigredtomato

Written by Nathan White, Chief Investment Officer, Paragon Wealth Management

The European situation continues to be the dominant force moving the markets.

This week the market continues in its volatile ways with intraday moves of one percent or more now seeming to be common. I don’t think the market has ever seen such large seesaw action in percentage terms in such a short period of time. Markets rallied in the early part of the week on the prospect that the Europeans would begin moving on a much larger solution to contain the crisis. Words are one thing, and action is another. At this juncture let’s hope that they don’t need a few five percent drops to provoke them to action.

This week is also quarter end, and there is talk that pension funds, which have been underweight equities, need to increase their allocation to equities for quarter end to meet their mandates. 

Economic data continues to come in mixed, but is still showing growth for the most part. Quarterly earnings announcements start in October, and the focus will be on company guidance going forward. The negative seasonality tendencies of the market often wear off in early October and this pattern could come to fruition this year if the European crisis culminates. The question is whether the markets will be about where they are now or 10 to 20 percent lower before this occurs.

Disclaimer
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.

 

Extreme Volatility

Posted September 23, 2011 by admin. tags:Tags: ,
Bear eating fish

Written by Dave Young, President of Paragon Wealth Management

Ever since the market initially sold off the third week of July the volatility has been extreme. We saw the Dow go from 12,800 to 10,600 as our politicians presided over a debt ceiling circus which was  followed by a first time ever downgrade of U.S. Treasuries. Worries over the financial situation in Europe stoked the fear even more.

Ever since then the market action has reminded me of what I saw after the 1987 stock market crash. After that initial crash the market moved violently up and down for several month as traders actively moved between fear and greed. It was kind of like aftershocks following a major earthquake.

This time, after the initial sell off we’ve seen a ridiculous amount of volatility. Talk about lemmings running back and forth between extreme bullishness and extreme bearishness, the volatility has been unreal. It’s been a long time since I’ve seen so many extreme back and forth market swings in such a short amount of time.

For example, after the July sell off, the Dow moved back up a thousand points on good news, then went down 800 points on bad news. Then it moved back up another 1000 points… and back down 900 points… then back up 500 hundred points followed by another down 600 points. Then most recently it went back up 800 points which was followed by another 900 points down, which put us at a close of 10,733. We’ve moved an unbelievable  total of 8700 Dow points in two months.

There isn’t much that you can do when things get this volatile. We continue to be about 80% invested and are waiting for a trend to eventually establish itself. Since the first of August there has been no clear trend, just extreme back and forth moves.

The market may break and move lower which would give us a downward trend that we could adjust to. On the other hand, many of our indicators show that with stock valuations so low and volatility so high there is a good probability that we may see the market bottom in the near future. If that script plays out then we feel that there is decent chance for a significant rally between now and year end. Time will tell. As always, feel free to call or email us if you have any questions or concerns about your accounts.

Disclaimer
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.

Are We Headed For Another Recession?

Posted September 16, 2011 by admin. tags:Tags: , ,
Chalkboard


Written by Nathan White, Paragon’s Chief Investment Officer

The economic data is still presenting a mixed bag on whether a recession is coming or is already here.

For example, industrial production and manufacturing increased in August contrary to the ISM data that slipped negative for the first time since May 2009. Industrial production is up 3.3 percent on a year over year comparison which indicates moderate economic growth. Overall, the economic leading indicators are still pointing up (anemically so, however) and a recession has never started when they have been advancing.

Much of the slowdown is being affected by the political headlines that are driving markets. 

This uncertainty naturally creates a sort of self-fulfilling prophecy as business and consumers hold back. The bad news is that the economy is not growing at a rate that can significantly reduce unemployment or raise standards of living. The good news is that the economy is sort of bouncing along the bottom, and it is hard to get significantly worse. It is running more or less at what I call its replacement rate (e.g., people buy a car when the old one dies as opposed to upgrading because they’re doing well) and until the debt overhang is worked off, the economy will have a hard time taking off.   

Disclaimer
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.
  

Mr. President, pull a “Clinton” please.

Posted September 8, 2011 by admin. tags:Tags: , ,
President Bill Clinton


photo by *Cindy*

Written by Nathan White, Paragon’s Chief Investment Officer

The President is going on another of his “grand” stages tonight with his jobs speech before Congress. I keep hoping, praying, and wishing that the President will finally pull a “Clinton” and present some real structural solutions to help the economy. Anything less will be very disappointing and now that most of the points seemed to have come out ahead of tonight it seems like we are just going to get more of the same stimulus that we’ve already got. More style than substance. The economy and markets are so starved for certainty at this point.

Clinton got it. He moved to the center and co-opted Republicans ideas and then got the credit (and deservedly so) as the economy soared. Our current President seems to have no inclination to do the same – yet. Self-preservation is a powerful motivation and the President’s time is pretty much up. One of the problems is that the President doesn’t have the same quality of advisors (including those from the private sector) that Clinton had.

I believe the answer to the President’s problems is right before him and all he has to do is reach out and grab it and the economy will take off – move to the center!

Here’s some of my views on what could or should be proposed and the probabilities of being proposed:

High Probability (Low Impact):

  • High Payroll tax cut extension (yawn)
  • Temporary tax credits for hiring (again, enough with temporary!)
  • Infrastructure bank/spending (OK)

Low Probability (High Impact)

  • Removal of the repatriation tax on foreign corporate earnings – an absolute no brainer that continues to mystify me why it isn’t done.
  • Dramatic approach addressing the housing situation
  • Structural tax reform

 

Disclaimer
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.

Highs and Lows

Posted September 1, 2011 by admin. tags:
News Headline: No End To Wall Street Pain

Written by Dave Young, President of Paragon Wealth Management

After spending most of the year in a back-and-forth uneventful trend, the world markets abruptly changed course. A severe lack of fiscal leadership from Washington coupled with a sovereign debt mess in Europe cause the global markets to sell off hard.

This recent volatility has been the most extreme we have experienced since the 2008 meltdown. I don’t remember a time when there were so many huge, back-to-back, up-and-down market moves in a row. One a regular basis, the Dow Industrial has been losing or gaining 400, 500, and 600 points at a time.

This type of volatility can make the most seasoned investor a little queasy. The volatility, accompanied by the endless negative news – real and imagined – is enough to make investors question if there is anywhere safe to put their money.

Studies have shown most investors consistently under perform the market indexes. The reason they under perform is because they sell out of their investments when they get scared and then go back into them once they feel safe. Investing based on feelings is a recipe for buying high and selling low.

So what should an investor do in these difficult times? How do you avoid selling low and buying high? Here are three basic rules I recommend:

Rule #1 – Never sell out during panic.

Wait for sanity to return before you make any changes to your portfolio. When the markets are moving 500 to 600 points a day, it represents extreme panic. The stock market is essentially a high-tech auction. If you try to sell at the same time as everyone else, there are very few buyers. Those  few buyers can essentially name the price they are willing to pay you. That price will be well under fair value.

Rule #2 – Establish your risk tolerance before you invest.

You need to define in advance how much risk you are comfortable with. Investors often ignore this step.  Then, when the markets become volatile, they become painfully aware their risk tolerance is not set properly. Making the effort to set your risk tolerance initially – and reassessing it annually – is critical to your long-term success.

Rule #3 – Keep your focus on the long-term.

Mistakes are often made when investors make emotional decisions based on short-term market action. Unfortunately, decision based on short-term market movements can have long-term negative consequences. Your investment strategy should be based on your long-term goals and objectives. While your plan should be reviewed and adjusted annually, it should not be drastically changed, especially when markets are volatile. Define your long-term investment plan when markets are stable.

What can investors expect going into the end of the year?

Usually markets will do whatever the majority doesn’t expect, and right now most investors are scared and expecting the worst. We don’t expect another recession soon based on the current economic numbers we track. That may change though if Europe  doesn’t deal with its debt problems or U.S. consumers scare themselves silly and pull back on consumer spending. Unfortunately, recessions can be self-induced.

On a positive note, historically, the third year of every president’s term since 1939 has been positive for the markets – even during Jimmy Carter’s presidency. In addition, surprisingly, the S&P 500 has produced a positive return for the final four months of the year during seven of the last eight years.

Disclaimer
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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