Tag Archives: politics

The Election

Posted November 5, 2012 by admin. tags:Tags: , ,
American Flag waving

Written by Dave Young, President of Paragon Wealth Management

The number one question I am frequently asked is, “How do
I think the presidential election will affect the market?”  In prior elections, I have always had a
preference who won, but my preference did not affect our investment
strategy.  This election is
different.  I believe the outcome of the
election will affect our management strategies, possibly significantly.

I will apologize in advance to those who do not share my
political views.  I do not mean to offend
you.  However, my opinions are based on
my experience managing portfolios for the past 26 years rather than pure
political ideology.  I look at this
election from an investment perspective and the potential impact it will have
on your portfolio.

Historically, in an election year, the market is usually
weak and trending down during August and September.  Then, during October it turns up.   November and December are usually choppy but have
an upward bias.  If a Republican or the
incumbent wins, the market is usually stronger going into the election.   Historically, over the course of the year,
the market ends the year about eight percent higher if a Republican wins rather
than a Democrat.

From an investment standpoint it would be nice to know how
this election is going to play out.  That
is the trillion dollar question.  Most
polls show the race very close with Obama having the edge in some swing states.  On the other hand, political pundits make the
case that the polls aren’t accurate, just like they weren’t accurate when they
showed Carter six points ahead of Reagan just days before Reagan won that
election.

This election is very close.
It is unlikely to be clear until after the election.  It is a tossup on who will control the Senate.  We do know that Republicans will continue to
control the House of Representatives.

If Obama wins a second term and the Democrats maintain
control of the Senate, it is unlikely that we will see a meaningful change in direction.  Thus far, their unsustainable path took our
national debt from 10 Trillion to a mind boggling 16 Trillion dollars in just
four years.  President Obama has promoted
an agenda of class warfare and demonized the job creators who currently pay
most of the taxes.  This divisive agenda
has scared many investors out of the market.
It has created uncertainty for anyone starting a new business or who
needs to invest for their future.  Obama’s
policies have significantly slowed the economic recovery and kept unemployment
at historically high levels.

Stocks have moved up against a backdrop of a very low GDP
and very high unemployment.  That is hard
to understand until you take into account the effects of three years of
artificially held super low interest rates, exceptionally strong corporate
profits (fueled by layoffs) and relatively low stock valuations.

Regardless of who wins, it will take a few years for the
impact of their decisions to play out.
Realistically, if Obama wins then we will not feel the full negative effects
of his policies until 2014 or 2015.
Likewise, if Romney wins and does what he has campaigned on, then we
won’t feel the positive effects until 2014 or 2015.  So, the markets may just meander along or
even drift up until then.

On the other hand, because so many investors invest
emotionally and are afraid of Obama’s policies, we have to be ready for the
possibility that those investors may sell out of the markets because of an
Obama victory.  Conversely, a Romney
victory could have the opposite effect with investors piling into the market
and pushing it up, albeit purely for emotional reasons.

In summary, leading up to and after the election there are
compelling arguments to be made for staying invested as well as selling out and
going to cash.  It depends on who wins
and how investors react.  For us, the
investors reaction to the election will be more important than its actual
economic impact.

There is a compelling case for a potential bull
market, a bear market or a flat market.
Accordingly, we will be watching the markets intently, following our
indicators closely and adjusting our portfolios accordingly.  It’s ironic that in order for investors to once
again have hope and see real change they might need to elect Romney rather than
the official “Hope and Change” candidate.
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.

Downgraded…

Posted August 8, 2011 by admin. tags:Tags: , , , , ,
6a00e54fa07ce2883301539089610e970b-800wi


Written by Dave Young, President of Paragon Wealth Management

Over the past couple of weeks we’ve seen extreme volatility in the financial markets.

The volatility started with political drama over the debt ceiling, which initially created uncertainty for investors. After a high drama last minute agreement, which apparently didn’t solve anything, the markets sold off hard. Uncertainty in Europe exacerbated the situation.

It looked like we might have put in a market bottom last Friday with the selling reversing midday. Then, Friday evening we found out that the S&P Bond Rating Agency had lowered their rating on U.S. Treasury Bonds to AA+ from AAA.

Their timing couldn’t have been worse. 

I knew we were in for a ride, but wasn’t sure how much of one. U.S. Treasury Bonds have held a AAA rating ever since the rating agencies were created and started rating bonds. United States Treasury Bonds have always been considered the icon of safety and security. Their yield has always been always been characterized as the risk free rate of return. Historically, no security has been considered safer than a U.S. Treasury Bond.

Downgrading U.S. Treasury Bonds takes us into unknown territory. It’s that unknown that causes investors to panic. Panic ruled the day today with stock investors taking the Dow Industrials down another 634 points on top of the 513-point loss last Thursday. This puts the market down over 1900 points in 12 days.

This extreme drop in a short amount of time with the bulk of it happening over two days. This type of market action is virtually impossible to avoid by moving to cash. It was driven by politics and occurred so quickly that there was no time to react and move to safer assets.

On a chart this drop is extreme, which puts us into very oversold territory.

Often, when you have moves this extreme, either upside or downside, they are followed by extreme reversals. The problem is that nothing is guaranteed, and you don’t know that for certainty. All you know that the probabilities favor it.

A hard and fast sell off out of nowhere, like the one that we have just experienced, creates a quandary for investors. They consider selling because they don’t want to see their account go down anymore. If they absolutely knew that the market was going to keep going down then it would make some sense to sell.

However, they know that selling into a panic is usually a mistake, because it locks in their losses and hurts their long-term returns.

On the positive side, stocks are not overvalued like they usually are when you have a bear market. A combination of falling prices and rising profits has pushed stock valuations 20 percent below historical P/E ratios. More than 75 percent of corporations in the S&P 500 index exceeded their earnings estimates in the second quarter. In total, corporate earnings are expected to rise 18 percent in 2011 and 14 percent in 2012 (recent Bloomberg studies).

According to another Bloomberg survey, chief strategists at 13 of the largest banks still see the S&P 500 ending the year around 1400, which would be 25 percent higher than it closed today. While I’m not that optimistic, it is positive that they see fair value 25 percent higher based on corporate earnings.

Another positive is that fear and panic hit extremes today.

The VIX closed today at 48, which shows extreme fear. Historically, 42 on the VIX has been a level where markets reverse and start to rebound. The 2008 bear market was the only exception to that rule that I know of.

The negative side of the equation is made up of macro issues.

1- Europe has a debt mess that is trying to sort out and yet to do so.

2- Economic growth in the U.S. is slowing. Most economists don’t believe that we will see a double dip recession, but that is currently a concern.

3- Politics and our debt are creating uncertainty for investors.

4- Panic is currently ruling the markets. Even though the markets are severely oversold and undervalued, there is always the possibility that they can become more oversold. That short term selling pressure can be unduly stressful if your risk tolerance is not correctly set.

Is today’s market action creating a buying opportunity over the next one, three and five years? Or should you be selling? If you think prices will be lower over the long term or you need the money right now, then maybe you should sell. If you believe that prices will be higher one, three or five years from now, then this may be a buying opportunity.

My best advice is to stay focused on the long-term. Generally, decisions made in a panic situation are bad ones.

If you have questions or concerns, feel free to call us at 800-748-4451 or email us (dave at paragonwealth.com, nwhite at paragonwealth.com).

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.  

If Mike Lee or Bob Bennett Win the Race – Energy Solutions Wins

Posted May 3, 2010 by admin. tags:Tags: , ,

Written by Dave Young, President

I don't usually write about political topics in Utah, but with all of the attention the senate race is getting, I thought i would add my two cents…

Controversial Energy Solutions is sitting quietly on the sidelines. In the upcoming election, if the senator they want wins, it will significantly increase their political strength for the next six years. They are on track to bring large amounts of nuclear waste into Utah and create the largest privately owned nuclear waste facility in the United States. With the state convention coming up, state delegates have a responsibility to fully understand the politics around energy solutions.

A January 20th, Mason-Dixon Poll discovered that 76 percent of Utahns oppose disposal of thousands of tons of depleted uranium that Energy Solutions wants to bring to their state. Opposition was evenly distributed among republicans, democrats, men and women.

Because of opposition by the people of Utah, Energy Solutions has taken another approach to get their way. With their staff of attorneys, lobbyists and public relations experts their strategy is two pronged. They are spending large amounts of money to change public opinion and more importantly, influence legislators.

The first step is to change public perception and convince Utahns that they want nuclear waste that the rest of the world does not. This is done by ongoing advertisements and mailings extolling their virtues. Even though they do not sell consumer products in Utah, they spend a lot of money to put their name on the most popular sports stadium in the state. They run enough advertising on radio stations to put the talk show hosts on their side.

Their second step is to influence the local and national politicians that make the laws. If you have the ear of the people who make the laws that regulate you… you win. 

How do you influence a politician? It is simple. All you do is contribute to their campaign. It is surprising that it doesn't really cost much. Energy Solutions through its PAC and employees is one of the largest campaign contributors in the state. They aren't partial, and they give money to any politician, republican or democrat, local or national, that might further their cause.

So far, their strategy is working. On the national side, Rob Bishop, a former company lobbyist, is not a U.S. House Representative, representing Utah. On a local level, many legislators are changing their stance and now favor Energy Solutions. Never mind the controversy over their expanding beyond what they originally promised Governor Huntsman or the controversy surrounding the science behind the "blended waste" they want to bring to the state.

The poll mentioned earlier also said that 68 percent of Utahns want to ban importing radioactive waste from foreign countries. Energy Solutions employees and PAC donated about $47,000 to Bob Bennett. That donation went a long way as Bennett ignored the polls and is currently blocking legislation that would stop Energy Solutions from bringing nuclear waste from Italy. With his campaign chairman being a former Energy Solutions Vice President, draw your own conclusion as to where Bennett's loyalties lie. Attorney Mike Lee is another senate candidate with direct ties to Energy Solutions. When asked about his involvement with Energy Solutions, Lee brushes it off by saying, "I just helped them with one small case" he successfully argued against the will of the Northwest Compact, which is made up of Utah and seven other states, against Governor Herbert and according to the poll, against the people of Utah.

Using the free commerce provision of the U.S. constitution, he argued the state and won the right for Energy Solutions to bring low-level waste in from Italy to Utah. Utah argued that once waste from Italy is allowed, then neither the state nor the NRC will have any way of limiting waste from all over the world. The shipment from Italy is the largest amount of low-level radioactive waste the Nuclear Regulatory Agency has ever been asked to allow into the U.S. For obvious reasons, no other country accepts foreign radioactive waste for disposal. Also in line are pending applications to import waste from Brazil and Mexico for disposal in Utah. This was not just "one small case."

Two of the four leading senate candidates do not have ties to Energy Solutions. Those two without ties are Cherilyn Eagar and Tim Bridgewater. If as the poll says, 76 percent of Utahns oppose bringing thousands of tons of depleted uranium her for burial, it might make sense to elect a candidate that shares Utahns' views.

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.

Stop Spending Now!

Posted April 22, 2010 by admin. tags:Tags: , , ,
Real American Money

photo by photos8.com

Written by Dave Young, President of Paragon Wealth Management

In the past we have written about the negative impact of politics on our economy and how politics impact the investment markets.

Political meddling affects the markets in several ways. It creates a host of problems, with slower long-term growth being directly affected.

The problem is fairly simple.

Every couple of years politicians run for office. In order to get elected they make all kinds of promises to those who give them money and votes. In order to pay back their supporters they pass laws and spend money to benefit them. That translates into massive unnecessary spending, which costs everyone but only benefits a few.

The politicians are happy to spend endlessly because they figure that someone else – in the future – will pick up their tab and pay the bill. In other words, there is no accountability or responsibility for their spending because they don’t have to pay for it.

On a national level, the debt they have created has become enormous. The numbers are so huge that most people just glaze over them. In other words, if something doesn’t make sense to us then it doesn’t sink in, and we don’t really understand it. We just ignore it, and we don’t worry about it.

It is time to worry about it.

If this financial mess and its damage is going to be stopped, it is up to the people to get involved and elect people who will stop the out of control spending once and for all.

George Bush was fiscally irresponsible and spent far more than he should have when he was president.

With his promise of “change” Barrack Obama is on track to create a debt in 20 months equal to the debt that it took George Bush eight years to create. After that his own projections show it getting worse.

The short video below puts the debt in perspective. It also shows how insignificant the $100 million dollars that the White House is going to “save” is. It is time to get serious about the debt.

The time for political games is past.

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.

Politics are Affecting the Market Again

Posted January 22, 2010 by admin. tags:Tags: , , , , , ,
American Presidents


photo by Beverly & Pack

Written by Dave Young, President

During the second half of 2008 and the first three months of 2009, politics had more of a negative impact on investors than I have seen in 23 years of wealth management. Over the last nine months that negative impact seemed to diminish, and we saw a serious rally in the market.

As we move into earnings announcements, the market looks pretty good.

So far, about 65% of companies are beating their estimate, which is exceptional. Normally, you would expect the market to continue gaining ground. That is usually how it works, solid earnings translate into a happy stock market.

Instead, this week politics trumped earnings.

Tuesday, we saw the Dow Industrials rally 115 points in anticipation of Scott Brown, a republican, winning a Massachusetts senate seat. That was perceived as positive by investors because it broke the democratic majority in the Senate and indicated a more bipartisan approach to government going forward.

Wednesday, politicians in China decided that their economy was growing too fast. (In the big picture, that seems like a good problem.) They announced some steps they were going to take to slow down their economy. That caused world markets to sell off, with the Dow losing 122 points.

Thursday, the Dow dropped 213 points after Obama announced they were going to regulate the size of banks and impose a 100 billion dollar tax on them.

This was viewed as a populist response by the administration. The market did not like the tax because it was largely viewed as unfair. Fannie Mae, Freddie Mac and the automakers who were  all large contributors to the economic mess of the last two years, were exempt from the tax. Meanwhile, many of the banks that did not want government money and/or have since paid it back are going to be taxed punitively. Markets did not see that as a good idea and sold off significantly.

Today, Friday, word leaked out that both Republicans and Democrats are potentially blocking Fed chief, Ben Bernanke’s confirmation to a second term. Most investors believe that Bernanke, not perfect, is the best choice to lead the Fed in this environment. Politicians need someone to throw under the bus and blame for their economic mess so Bernanke seems to be the likely candidate. Investors, once again, see this as another bad decision and sell their stocks with the Dow losing another 216 points.

All in all it was a rough week for the market. Will politicians ever get it right?

Regardless, we’ll continue to follow our models and adjust our investment portfolios accordingly.

What do you think? Feel free to leave comments.

 

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.

The Stock Market Drama Continues…Part 2

Posted April 30, 2009 by admin. tags:Tags: , ,
The Bear

As seen in Paragon’s 1 Quarter 2009 Print Newsletter
Written by Dave Young, President of Paragon Wealth Management



photo by nicknbecka

POLITICS

In stark contrast to his popularity with the general public, a recent Wall Street Journal poll of top Economists gave the president an “F” grade for his performance so far. Every day Obama introduces a new program, makes an appearance on television, and there is news from Washington that affect the markets.

According to the metrics we follow, the selloff in October should have marked the bottom of this bear market.

I believe this bear market would have ended last October if it weren’t for the perpetual bad news from Washington.

To recap:

· After the election the market sold off hard and hit new lows on November 20because of investor fears surrounding a new administration.

· As rumors swirled that Obama would govern from the center and not the left, the market rallied up until the first week of January. Hopes were high that the Obama administration would quickly provide a comprehensive solution.

· The market dropped 4% on inauguration day, which is the most it has ever dropped.

· Obama appeared on TV every day and repeatedly used words such as crisis, catastrophe and Great Depression. Traders began to sell the market short during each TV appearance.

· On February 10, the new Treasury Secretary gave a highly anticipated speech about the administration’s new plan to save the banks. The speech was not what the market hoped for or expected, and once again the market sold down to new lows.

· Next, the White House and Congress worked together to jam a $787 billion “stimulus” package (the largest ever) through Congress in four days. Investors were initially optimistic about a stimulus package until they realized it was comprised of one third legitimate stimulus and two thirds social programs. This caused investors to sell stocks again.

· The stimulus bill was followed by a $410 billion omnibus spending bill.

· That was followed by a gigantic proposed budget that will double the national deficit in five years and triple it in 10.

In summary, Obama’s enormous spending plans, proposed tax increases, and lack of focus on the economy caused the market to drop 25% from January 1 to March 9.


WHY BE OPTIMISTIC?

Once you hit a certain point you run out of sellers and there is nothing left to bring the market further down. It appears we may have hit that low point on March 9.

The market was down 54% from its peak at that point, and it appeared as though everything negative had been factored in, maybe several times over. With confidence completely destroyed high yield bond portfolios default rates are projected at double what they were during the Great Depression. Another metric shows consumer spending at the same level it would be if unemployment were 30%. (It’s actually 8.5%)

Looking forward, not backward, things actually look pretty good.

Imagine you were asleep the past 18 months and just woke up. This is what you would find:

· Six of our eight “bull watch” indicators support the case for a new bull market.

· Six of the 10 leading economic indicators were up in February.

· Housing is more affordable and mortgage rates are lower than they have been for some time.

· Energy is more affordable for consumers and businesses.

· Credit is loosening, and interest rates are extremely low.

· There will be massive global government stimulus forthcoming.

· Abundant amounts of investor cash is on the sidelines.

· This has been called “the sale of the century.” In inflation-adjusted terms, the Dow Industrials it is at that same level it was 43 years ago. In 1966 we didn’t have PCs, Internet and our work force was half the size of what it is today.

· Four fifths of top economists in the latest Wall Street Journal survey said now is a good time to buy stocks.

· Investor sentiment has reached negative extremes and started to reverse.

GOING FORWARD

We are holding a significant amount of cash equivalents in our conservative portfolios, and are waiting for tape confirmation that this market has turned before we are fully invested. We are fully invested in our growth portfolios in the areas of the market that have historically performed the best after a bear market. After the 2000-2002 bear market we were close to doubling the return of the market averages by positioning our portfolios in the best places.

As I’ve mentioned before, this is the 34th bear market in the past 100 years. The future always looks bleak when the bear market is the worst, and people become irrationally pessimistic.

That is when the naysayers have their day of fame. The media loves to cover them. They always expect things to get worse, and attract a lot of followers.

They have been wrong every time. Not wrong once or twice, but the past 34 times.

Our economic system is very resilient. Our markets and economy have always recovered from difficult times in the past. We’ve made it through recessions, world wars, a civil war and a depression. I believe in the free market system.

Our market and economy will recover again, in spite of our politicians.

 

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