Category Archives: Financial Fears

Looking Past Scary Financial News Headlines

Posted October 15, 2014 by admin. tags:Tags: , , , , ,
Looking past the scary figures

I encourage you to learn more about investing and planning. It will pay dividends in many ways, and we are here to assist you as you take steps to educate yourself.

But I caution you about spending too much time in front of the financial news channels dotting the cable landscape or the many Internet sites that are just a mouse click away.

It’s not that they don’t report hard news. They do. But there are times when markets get volatile and the “shrillness meter” hits alarming levels.

Just a couple of months ago, when the Dow fell over 300 points in one day, I went onto the MarketWatch website and found a section highlighting the most popular stories.

1. “Warning: the Plunge in Stocks Is Just Beginning.” Well, stocks quickly recovered and claimed new highs.

2. “S&P 500 Suffers Largest Weekly Loss in 2 Years.” True, but we emphasize the longer term and continually stress that your plan should take into account setbacks in the market. Be very careful of allowing weekly volatility sidetrack a multiyear plan.

3. “Three Market Warning Signs that Predict a 20% Tumble.” See my comment on article number one, above.

The top three stories were playing on the fears of investors. Simply put, bad news sells. But it can be confusing if the noise isn’t filtered.

It’s been over 570 days since we’ve had a 10% drop in the S&P 500 Index, or a decline that would officially be called a “correction.” Going back to mid-1940s, the median time period between corrections has been 121 trading days, and the average has been 273 trading days.

Markets never move up in a straight line and we are due for a 10% pullback, which, coupled with the expanding economy, would be healthy. No one can accurately predict when that might occur but it will happen. The portfolios we recommend have a long-term time horizon and are designed to help you achieve your personal financial goals.

Stay focused on your goals and make adjustments that take into account changes in your personal circumstances. Ignore fear-mongering that can be deafening during market volatility.

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

 

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.

It

Backed against the wall….

Posted September 26, 2014 by admin. tags:Tags: , , ,
The chains

Hands chained up

We, along with many others, have been cautious about the bond market for some time.  As the sun sets on QE the angst over when the Fed will start to raise rates and by how much is rising.  Markets always like to price things in ahead of time and right now it seems the equity market’s recent nervousness could be due in some part to this interest rate uncertainty.   The bond market however has not moved much yet.  Many, including us, thought that the bonds would have a difficult year as they start to price in the rate increases.  Instead, bonds have (so far) have had a good year surprising many.  Alas, the inevitable is coming though and the window for bond gains is closing as we creep toward June of next year which is the most accepted time that the rate increases will begin.  Any equity market weakness will give bonds more time to put off the reckoning.

Any rally in bonds should be sold as their time is getting short.  I think you’re seeing the cracks appear in the high yield market right now.  Historically, high yield is more correlated with the equity market and not that sensitive to interest rate risk but at these low rates it now contains interest rate risk as well.  With yields still below six percent the reward is just not worth the risk for holding junk bonds.

Although we don’t find bonds attractive it doesn’t mean that a bloodbath is coming.  It will probably be more like death by a thousand cuts.  The Fed will be very slow and steady in raising rates as to minimize market disruption.  After all, they do hold about $4.5 trillion of bonds!  The first one to two percent moves from the bottom will be the most painful but in a gradual manner as mentioned.  A year from now interest rate could be a half to one percent higher.  Take a look at the duration of your bond holdings and compare it to your yield – you’ll be hard pressed to find anything that would come out positive…

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

 

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.

Should I Invest Now?

Posted August 19, 2014 by admin. tags:Tags: , , , ,
Financial advisor talking with clients

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

We are regularly asked this question. Investors don’t know what to do. They are concerned. Many seem to always be in the wrong place at the wrong time. They missed out on the gains of the past five years and are now concerned they may be investing at the top of the market.

It seems like the risk pendulum swings from one extreme to another. In the 1990’s investors did not take enough risk and missed out on amazing returns. By 2000 and 2008 investors finally began to believe that markets only go up. They became aggressive just in time to be devastated by 50% losses and years of bad returns. By 2009, many investors had thrown in the towel. Those investors then missed out on the big gains of the past five years.

In order to build wealth you must invest for the long term. Stocks and real estate are the two most reliable investments for most investors to build wealth over time. Over the long term they appreciate in value much more than bonds or bank savings options.

In the short term stocks and real estate fluctuate in value and scare many investors away. Putting money into stocks or real estate for less than five years does not usually work out.

I believe there are four principles that must be followed to build significant wealth over time. Sound investing is not a single decision. It is a process.

1st – You must invest using an investment strategy that has been proven to work over time.

2nd – Your strategy should provide you with exposure to the stock and real estate markets.

3rd – Your risk tolerance (investment comfort level) should be set properly so that you are not forced out of your investments at the wrong time.

4th – You must invest for the long term thereby giving yourself the ability benefit from the ups and downs of market cycles.

Please call us if you have any questions or would like to make any changes to 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.

End of the World?

Posted October 3, 2013 by admin. tags:Tags: , , , , , ,
Flying American Flag

It is no wonder that investors are concerned about the government shutdown.  Here is an excerpt from today’s press release from the U.S. Treasury Department.  Keep in mind the Treasury is supposed to report the facts and not play partisan political games.

In a Press Release posted on the U.S. Treasury website today they stated:

WASHINGTON – The U.S. Department of the Treasury released a report today on the potential macroeconomic effects of debt ceiling brinksmanship.  The report states that a default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse…..  This introduction was followed by two pages of extreme doom and gloom.

Really?  The word catastrophic was used twice in the press release.  “Could” was used repeatedly.  I have never seen anything this like this from the Treasury Office.  They usually deal
with facts and do not issue press releases based on what might happen if a worst case scenario unfolds.

The market was actually up the first day the shutdown went into effect.  Today, Day 3, it is surprising that the stock market did not drop harder with this type of hyperbole.

Economists are mixed on the outcome of the debt ceiling talks.  Because it is politics no one really knows how this will play out. We have watched our politicians play these games regularly over the last few years. Every time they create a lot of uncertainty and fear but in the end it all seems to work out. It reminds me of the story of “The Little Boy who Cried Wolf.”

In the real world, the markets have been doing well generally.  We are concerned that we have not seen a significant correction for some time. Also, we don’t like that investor sentiment is as positive as it is.  In a perfect world we would see a mild pull back followed by a rally into the end of the year. 

If we could see into the future that would be ideal.  In the mean time we will follow our models and systems and manage your portfolios accordingly.

Written by Dave Young, President and Founder of Paragon Wealth Management.

 

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.

I Heard the Stock Market is Going to Crash!

Posted March 22, 2013 by admin. tags:
Where is the market going

Will the Market go up or down

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

Last week I received a call from a very concerned client.  He was talking to a friend who told him that the stock market was about to crash.  He had heard it from an expert on television and wanted to know if I had heard that the crash was coming!  Also, he wondered, “What he should do with his account?”

I explained that no one knows with absolute certainty where the market is going next.  The stock market is essentially a giant auction. Everyone has an opinion on whether or not the values are fair.  Some think they are too low, some too high and some just right.

Just because the market is hitting all time highs that doesn’t mean that it has to go down. Regardless of where it is at in the cycle, it will do one of three things.  It might go up more, may move
sideways or could go down.  The only thing that is guaranteed is that one of those three options will occur.

At Paragon, we go to great lengths to position our portfolios in front of the path that our analysis shows the market is most likely to go.  We are right more often than we are wrong, however, unfortunately we are not always right.

So how do you invest and keep your sanity?  You control the variables that you can control and you don’t worry about the others.
One variable you can control is whether or not your risk tolerance is
set properly.  We also call this your “investment comfort level”.  If
you are invested according to your appropriate investment comfort level then you significantly increase your potential for long term success.

If you haven’t checked your Investment Comfort Level lately
then I would suggest you take the Risk Tolerance Survey on our website.  Click here to take the Risk Tolerance Survey.  After you take the risk tolerance survey – then verify that your investments match your personal investment comfort level.

This is one of the most useful exercises you can do in order
to make sure you are invested the way you should be.  Call or email us if you have any question whether you are invested appropriately.

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.

 

Fiscal Cliff…

Posted December 14, 2012 by admin. tags:
The Fiscal Cliff

Written by Dave Young, President of Paragon Wealth Management

So here we are again.  
Another saga of politicians making promises, trading accusations and
accomplishing nothing of substance.  It's
been said that the definition of insanity is doing the same thing over and over
and expecting a different result.  So
what does that say about our "leaders" in Washington?

It's obvious we have a 16 Trillion and growing problem.   One
side believes that the solution is to keep increasing taxes…as long as we
only do it to the "rich".  The
other side believes that the only solution is to cut government spending.

This impasse brings us to what the media loves to call the
"Fiscal Cliff".

What makes the Fiscal Cliff such a great title is that it
sounds really scary.  Fear increases
attention.  Increased attention
translates into more viewership.  More
viewership translates into more revenue for the media outlets.  As a result, the media loves scary things,
real or imagined.

In reality, if our politicians cannot agree on a solution
then that will create a problem.  That
problem will be more of a fiscal slide over time rather than the fiscal cliff
that has been portrayed.  If the slide
occurs it will likely take months to play out before it has any direct effect
on our economy.

If it did play out over six months or more then the revenue
that would be sucked out of the economy could potentially push us into another
recession.  If that recession played out
then that would be bad for all investments.

Even though it would take months to play out from a
practical standpoint, potential selling could be immediate and more severe if
investors act emotionally and start selling just because they are scared. 

In the previous politically induced potential calamities,
ie. the European Crisis, the Debt Ceiling Crisis, and the U.S. Treasury Debt
Downgrade Crisis… politicians reacted by effectively doing nothing and
kicking the can down the road.  In the
end, they did what they always do and went back to spending more of other
people's money.  

There is a decent chance that they will do nothing.  Not because it is the right thing to do…but
because it is politically advantageous. 
If they do "something" it will likely not help the core debt
problem.  However, just going through the
actions of doing something would likely have a positive effect on the markets.

In my opinion, I believe that if the market does sell off
because of what the politicians do, I don't think that it would be long
lived.  In other words I would expect the
losses to be reversed over the following months just like the previous
political meltdowns.  On the other hand,
if they come to some agreement that is viewed positively by investors then
there is a decent chance we could see some upward market movement.  In short, I think that there is more downside
for investors by being out of the market right now than there is to stay
invested.  Keep in mind, unfortunately, I
can't see into the future, and markets are free to do whatever they want.

In the end, the most important thing to do is make sure that
your risk tolerance is set at a level that you can live with.  Make sure you are comfortable with your mix of
conservative versus growth oriented investments.   If
your risk tolerance is set properly, then you should not be stressed regardless
of how things play out.  As always,
please contact us if you have any questions or concerns.

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. 

Investing Under Obama- Part II

Posted November 15, 2012 by admin. tags:
Rolling hills

Written by Dave Young, President of Paragon Wealth Management

After a
seemingly endless campaign, we now know who will be in charge for the next four
years. I believe that keeping the money you earn and investing it successfully will
be more difficult than ever.

In the 26
years that I have managed money I have never seen government affect the free
market in the negative way that it does now.
Unfortunately, every investment decision we make is affected by politics,
government policies and regulations.

Going
forward, what does this mean for investors?

The first
problem is the uncontrolled spending in Washington that shows no signs of
slowing.  Obama ran up the national debt
from 9.6 Trillion to over 16 Trillion dollars, a 66% increase, in just four
years.  His rate of spending is incomprehensible
and dangerous.

To put this
in context, $16,000,000,000,000, with one dollar bills stacked flat would go
out of the stratosphere, around the moon and back, twice.  That is almost a million miles of bills. Put
another way, to pay back just the 6.4 Trillion dollars that Obama spent during
the past four years, at a dollar a second, would take over 202,000 years.

The second
concern is that interest rates are temporarily forced to all time lows.  Low rates have kept the interest on the debt
manageable.  If rates increase only one
percent then the interest cost on $16 Trillion will increase by $160 Billion
per year.  If rates go up two percent
then the increased cost is $320 Billion.
A three percent increase would be $480 Billion, and so on.  When rates go up our debt will become more
unsustainable than it is now.

From an
investment perspective, these are troublesome and potentially hazardous
problems. Maybe this is why several polls show 80%+ of financial advisors were
not in favor of Obama.

Problem
#3:  Obama seems to believe that the only
way to balance the budget is to tax the “rich” more.  Never mind that the top 5% of taxpayers  already pay 60% of the income taxes.     He demonizes “millionaires and billionaires”
but in reality there is a target on the back of anyone who makes over
$250,000.  This continues to be his
focus, even though taxing job creators (the rich) more will only bring in about
FIVE PERCENT of the revenue needed
to balance the budget over the next decade.

So what is an investor to do?

First,
investors must be aware and take advantage of every legal method available to
reduce their taxes.  In order to fund their
out of control spending, the government will be raising taxes any way they can.
In order to make forward progress you
need to avoid unnecessary taxes, so that you can keep and grow your money.

Second, you
must be aware of our nation’s fiscal mess and monitor it going forward. If
spending continues at the current rate, then we may arrive at a tipping point
sometime in the future.  If we cross that
tipping point the government will have to take action to deal with the debt.

At Paragon,
we are watching for signs of inflation, hyper-inflation or currency
devaluation.  Traditional buy and hold, diversified
investing will not work in this scenario.  Also, conservative areas such as bank CD’s and
bonds provides no protection from the ravages of inflation.

You or your
advisor must be aware of what is going on so that you can monitor and adjust
your investments accordingly.  If the
inflation scenario plays out then investors need to reallocate their
investments into areas that will be protected from or even benefit from
inflation.

Over the
next four years, these are scenarios that any serious investor needs to be
aware of and have a plan to deal with.  Watching
passively and hoping – is not a plan.

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. 

FIVE LESSONS LEARNED THE PAST 12 MONTHS

Posted September 27, 2012 by admin. tags:Tags: , , ,
The Canyon


Written by Dave Young, President of Paragon Wealth Management

“Buy and Hold” strategy doesn’t work.
The investment strategy that Wall Street and mutual fund companies constantly promote called “buy and hold,” has been a complete failure over the past 12 years. It has generated negative returns when adjusted for inflation.

Market forecasts by “experts” provide no benefit. 
Most forecasters completely missed this decline. The majority also missed the recent rebound.

Set your risk tolerance level.
Setting your risk tolerance properly before investing is critical to success. You must be comfortable with the amount of volatility in your portfolio or you are likely panic and sell at the wrong time. Once again, hoards of investors bailed out at the market bottom and then missed the entire rally.

Expect the Unexpected.
When building your retirement plan, hope for the best but plan for the worst.

Follow a disciplined, proactive investment strategy.
Remove emotion from your investment process. In the investment world, decisions based on emotion are usually wrong.

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.

Treasuries & The Retirement Crisis

Posted August 23, 2012 by admin. tags:Tags: , ,
Scale

The following article provides a good explanation on the risks inherent with owning US Treasuries at this time.

Treasuries & The Retirement Crisis

visit Seeking Alpha to view the complete article

I’m shocked to see how many average individual investors are still clinging to bonds. For many older investors, 50%-plus of their assets are in low-yielding US Treasuries. My jaw hit the floor when I heard this.

The common rationale goes something like this:

“Yes, government bonds provide very low yields but at least my capital is safe.”

Unfortunately, nothing could be further from the truth and this way of thinking is going to lead to a retirement crisis. Let me explain:

1. Income is at risk: First of all, it is wrong to simply dismiss the impact low yields can have on an investor’s portfolio and lifestyle. Today, if an investor wishes to live off coupons from 10-year US Treasuries, he’ll need a $3-million-plus portfolio to generate about $50,000 in annual income. This is simply not realistic, considering the average portfolio size.

2. Capital is at risk: While 30-year Treasuries could rally to a sub-2% yield (perhaps when EU crisis 4.0 hits), the risk-return profile doesn’t justify the opportunity. The ‘rallying room’ – that is the gap between current yields and the theoretical floor of 0% – is the smallest it has been over much of history. So to place so much faith in the continued flight to safety is to make an ill-balanced bet. The upside to yields is far greater than the downside.

True, investors holding US Treasuries to maturity will get their principal back. But you have to remember that when you’re dealing with a super-low yield to maturity the real return is often negative to begin with. Buy-and-hold Treasury investors are facing major headwinds even if yields don’t change.

But someday yields will normalize. That day may not happen in the next couple years, but it could. The markets are unpredictable. Did anyone five years ago forecast that US Treasury yields would be as low as they are today?

If yields continue to drop, Treasuries would rally, but I think investors should save the rate squeezing for the speculators. And that’s okay. In fact, for the more sophisticated Seeking Alpha readers, this might be a viable trade. But it takes a lot of time, effort and intestinal fortitude to profit from the last 100 basis points of a 30-year bond bull market. So be warned.

However, for the average retiree looking to preserve their nest egg, it’s time to dial down the exposure to US Treasuries. This doesn’t necessarily mean reducing the allocation to 0%. But it is imperative that investors evaluate their vulnerability to a single market factor – interest rate risk – and diversify accordingly.

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.

Backing Into A Dead End

Posted July 27, 2012 by admin. tags:Tags: , , ,
Dead End

photo by bennylin0724

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

Backing into a dead end is the way I feel about much of the bond market right now.  It might keep you off the risky streets, so to speak, but eventually gets you nowhere.  Just when you think rates couldn’t go any lower bond yields continue to hit record lows.  The 30-year Treasury hit a record low of 2.47% and the 10-year is around 1.42%.  Yields are getting compressed across the board.  Simply amazing to put it plainly.

Prudence would dictate to take profits on bonds but where would you put the money if you’re a conservative investor?  In order to get a real yield on any bond investment it must either be in the high yield (junk) space or you must go to the long end of the curve.  That means you’re taking on significant risk.   The alternative is to put your money in cash and get nothing and hope that inflation stays low so your purchasing power doesn’t erode.

Bonds seem to be entering what could be their final blow-off phase.  There is so much money that continues to flood into bonds due to many factors but there is not much road left at this point.  We are starting to hedge our bond exposure (almost all corporate) from this point on as the reward is just not worth the risk.  For example, as of 7/25 the iShares Barclays 7-10 year Treasury Bond ETF (IEF) has an average yield to maturity of 1.15% with an effective duration of 7.51.  What this basically means is that the price appreciation potential from this point is barely over 7.5% and the 10-year would have to drop to zero for that to occur.  Just a year ago the 10-year Treasury was in the high 2% range which was still amazingly low.  If the yield returned to that level the holder of IEF would lose 7.5% and it would take 6 – 7 years with its measly interest rate to get back to even.  That’s not the kind of trade-off I like but one that large numbers of investors are currently taking.

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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