Potential Energy

Posted February 20, 2013 by admin. tags:
Potential Energy


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

Bloomberg reported today that the biggest U.S. banks are lending the smallest portion of their deposits in five years.  The banks have been flooded with cash since the financial crisis of 2008 as people have sought to conserve cash and not borrow.  Due to tighter lending standards, less credit worthy borrowers, increased regulation and capital requirements loans have not been exactly flying out the door.  This doesn’t mean banks haven’t been lending but more that they are a lot more cautious and that demand isn’t what it once was.

The economy, while growing, hasn’t felt strong enough for robust lending to reignite…yet.  Could this change?  The economic
numbers, while not great, have been getting better and banks have significantly cleaned up their balance sheets and raised capital.  The potential is there.  While lending will probably not return to the levels of the past (at least for a while), it wouldn’t take much releasing of the spigots to keep the economy moving along and get better.  It’s like a virtuous cycle where once confidence and conditions improve it creates a sort of self-reinforcing momentum.

Dare I say we could be entering a sort of boom or “normal” period?  I know that sounds like heresy to so many and contrary to the gloom scenarios that having ruled the day since 2008 but I agree with James Paulsen of Wells Capital Management who says that the economy is now “gearing”.

As I have talked about before, the fly in the ointment is the Fed.  As the economy strengthens it will have to reverse its easy money policy and shrink its tremendous balance sheet and these actions act as a drag on the economy.  This is one of the reasons why I never liked so much QE and have always said that the Fed’s big test comes when they have to start reversing policy and whether they will have the guts to do it.  For now the Fed is in no hurry to reverse course and with their stated target of 6.5% unemployment they could be very slow in the process of reversing course when that time comes.

Politically it will be difficult.  That means we could enter a period where, with the aid of increased lending, the economy picks up for some years before the Fed finally takes away the punch bowl.  That means that stocks and the economy could do well for a while before inflation forces action.

 

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.

What To Ask When Hiring a Financial Adviser

Posted February 14, 2013 by admin. tags:
Hire a financial advisor

Written by Dave Young, President & Founder of Paragon Wealth Management

For some
reason, it has always been easier to lose money than it is to make it and keep
it.

Managing
your own investments can be done successfully, but it is not easy. First, it
requires a time commitment to research and track your investments. Second, it
requires discipline to stick with your strategy through challenging times.
Third, and most difficult, it requires you to remove emotion from your
investment process.

Studies
have shown that most investors would be better off with the help of a financial
adviser. Unfortunately, finding the “right” adviser is difficult. Most
investors hire someone they “trust”. However, “trust” is very intangible and
difficult to quantify. Also, the size of the firm or familiarity of the brand
name does not indicate the quality of the advice provided.

To make
sure you don’t get stuck with a salesperson when you are really looking for an
adviser, make sure you ask these four questions:

  • Fiduciary?
    Fiduciary advisers have a legal obligation to put your
    interests ahead of their own.  A minority
    of all financial advisers actually meet the fiduciary requirement.
  • Experience?
    How many years have they been managing money? Ideally, your
    adviser has experience investing in both good markets and bad markets. In the
    final analysis, you are paying an adviser for their experience.
  • Track
    record?
    Legitimate
    advisers will be able to show you a clear report of what they’ve done for their
    clients over the years. Any adviser who refuses to show you their past performance
    should be crossed off your list.
  • Conflict
    of interest?
    By
    working only with advisers who are paid through management fees and not
    commissions you can make sure their interests are aligned with yours.You
    should never own a product with a surrender charge.
As I mentioned, it has always been easier to lose
money than it is to make money. Implementing these tips will help you find a
great adviser.
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.

Blog Role

Meta