Money Managers Live

Volatility Unleashed (Continued)

Written by Dave Young, President of Paragon Wealth Management
Taken from Paragon's 4Qtr 2011 print newsletter

Going Forward

Europe is still a major issue. It seems that the markets have mellowed somewhat though. Recently, European news that would have sent the market down 1000 points only sent the market down 150 points instead. The Europeans have made a lot of progress, but there are still a lot of unknowns. Until those unknowns begin to get resolved, it will be difficult for stocks to progress.

If you get past the European overhang, there really are a lot of positive factors for stocks.  Price earning ratios are well below their 10 and 15 year averages.  Corporate earnings continue to be at record highs – their highest point in the last ten years. Corporations still hold $2 Trillion in cash, the largest amount since 1959.  Dividend yields of 2.2% on stocks are higher than the 10-year treasury bond. All of this is very bullish for stocks .

My advice continues to be the same. Keep a long-term perspective. Investing for the long-term has worked out well for our investors. From 1998 through 2011 our Top Flight portfolio returned 11.79 percent compounded versus 3.71 percent for the S&P 500 (see disclosures and track record on page 7). I really believe that keeping a long-term perspective is the key to investment success.

On A Personal Note

When clients open up an account for the first time they often ask me, as tactfully as possible, “So, what happens to Paragon, and specifically my account, if something were to happen to you?”

After I tell them that my friends and family would be very sad, I explain that we manage our portfolios using quantitative models that have been developed over the past 25 years. Our systems are designed to take emotion out of the investing process. We work as a team, and if something were to happen to me then Nate and our staff would continue to run those models and manage the accounts accordingly.

Unfortunately, I had the opportunity to test out this concept over the holidays. I went into the hospital December 14th to have knee replacement surgery. In the days following the operation, I had some additional complications that required emergency surgery and additional time in the hospital.

I’ve been home now for a couple of weeks and am slowly but steadily recovering. I hope to be back at work soon. In my absence, Nate and our staff have done a great job of running things without me. They have not skipped a beat.

I wish you all the best in the upcoming year.  Please let us know if you have any questions or would like to review your portfolios. I wish you all the best in the upcoming year.  Please let us know if you have any questions or would like to review your portfolios. You can call us at 800-748-4451 or 801-375-2500. You can also email me directly at dave@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.  

February 2012 Stock Market Update

Paragon Wealth Management's investment advisers give their thoughts on what happened in the stock market in January and what they think will happen going forward.

Stay tuned next week for the rest of Dave Young's article "Volatility Unleashed".

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.  

Volatility Unleashed

Written by Dave Young, President of Paragon Wealth Management
Taken from Paragon's 4Qtr 2011 print newsletter

2011 was a very difficult year for investors. Even though it was one of the most volatile I have ever experienced, the year ended about where it began. The overall trend changed so many times that it was impossible to extract any gains from it.  A thousand point move up followed by a thousand point move down became routine. Since August, intraday daily swings averaged 261 Dow points.

The initial 2300 point sell off in July was triggered by our Treasury Bonds being downgraded for the first time in history. Next, the market became manic-depressive and entered an entirely new realm of volatility. The up and down gyrations were unbelievable and continued for almost six months. Over that time period there were over 20 significant market swings - with the market moving 400 to 1200 points at a time. It was impossible to lock onto a trend because there wasn’t one.

It was a war between the bears and the bulls. The bulls could not believe how cheap stocks were. Prices are close to where they were 12 years ago even though earnings have almost tripled since then. It doesn’t make sense for stocks to be trading at such low prices, based on their continuously increasing earnings.

On the other hand, the bears were scared to death with what was going on in world financial markets. Our treasury bond downgrade had all kinds of potential negative ramifications. No one knew for sure how it would affect the thousands of other bonds issued by U.S. corporations and municipalities. No one knew how it would affect stocks. The outcome of the downgrade held a lot of unknowns, which in turn created a lot of fear and selling.

An even bigger problem was the situation in Europe. The countries of Italy, Spain and Greece were on the verge of a financial meltdown. If a solution was not found to deal with their debt, then it was likely that those countries would default. If they defaulted, they would likely destroy Europe’s biggest banks. If the European banking system went down, it could potentially take some big U.S. banks down with it. That could trigger a major financial meltdown and have the potential to create a repeat of the 2008 meltdown all over again.

This was a high-risk situation with a lot of moving parts. Because it was outside the United States it was very difficult for U.S. investors to understand or assess what was going on. The lack of transparency made investors very nervous and ready to sell at a moment’s notice, which they did repeatedly during the second half of the year.

Usually when markets sell off we start buying aggressively because the downturns are temporary. This time the situation with Europe was different. Our research showed that unlike most downturns, if the worst case played out we could potentially see a rerun of 2008 or worse. That forced us to hold more cash than normal and to invest in defensive sectors for protection – just in case.

Our clients pay us to generate the best returns we can. They also hire us to do what we can to help protect their investments. Historically much of our excess returns have come from minimizing losses in rough markets.  This year our efforts to protect client accounts from a potential European meltdown reduced our overall returns.

To summarize what made 2011 so difficult:

• The volatility was unprecedented and created endless whipsaws.
• There was no trend to capitalize on.
• High correlation between market sectors limits our ability to generate excess return. Usually there is a large range of varying returns among the 250 sectors we track, and we are able to identify those sectors that are growing the fastest. For the last 18 months the range of returns between the sectors has been much smaller than normal limiting our ability to benefit by identifying top performing sectors. 
• The extreme level of risk created by Europe forced us to be very defensive.
• It was reported in October that 75 percent of all active managers had underperformed the S&P 500. In part that was because large cap stocks (the S&P 500) were the best performers in 2011. Many hedge fund managers got knocked around in the volatility as well. No one was immune with big names like John Paulson (down 35 percent) and Bill Gross (2010 manager of the year) underperforming 90 percent of his peers.  

To be continued next week...

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.  

Tips For Working Seniors

If you are among the increasing number of people who continue to work into their retirement years, keep these tips in mind when planning for your financial future.

8 Financial Tips for Seniors Who Work

Visit USNews to view the complete article

The percentage of persons past the age of 65 who are still employed has risen because of the Great Recession. Even without a downturn, however, there has been a longer term trend of more people wanting to keep working. There is the money, to be sure. But many people stay on the job to retain professional relationships and a degree of social engagement they think will be hard to match in retirement. Much of our personal identity is related to our work; it can be tough to give up a big hunk of self worth along with the paycheck.

Whatever the reason for continuing to draw a paycheck at age 65, here are eight recommended actions that older employees should consider:

1) Watch Your Tax Bracket. Check out the current IRS tax brackets and see where the income breaks are for tax-rate changes. Look at your taxable retirement income from Social Security, pensions and retirement accounts. Understand the impact of employment earnings on your tax bracket. Higher taxes may not drive your employment decisions. But it could make good sense to explore tax-deferred retirement accounts so you can avoid higher taxes and park your earnings until you can withdraw them when your taxable income has declined and you are paying lower rates.

2) Beware of Losing Social Security Dollars. Social Security rules calculate a full retirement age, which is 65 or 66 for most people. If you elect to begin receiving Social Security benefits before your full retirement age (you can start getting benefits when you turn 62), your benefits may be reduced if you also earn outside income.

3) Review Social Security Claiming Decision. If employment earnings reduce your need for Social Security benefits, deferring the date when you begin claiming those benefits may be a smart decision. You are entitled to 100 percent of your benefit when you reach full retirement age. However, for each year you delay, your benefit will rise by 8 percent a year. That's a nice increase, and it's adjusted for inflation as well. The longest you can delay and still get higher benefits is age 70, at which point your benefit will be 132 percent of what it was when you turned 66 (assuming this is your full retirement age). Outside income may also influence the way couples approach Social Security benefits. The Center for Retirement Research at Boston College has a useful Social Security Claiming Guide.

4) Seek Higher Investment Returns. Financial planners Carnathan and DeCarolis both say it may be appropriate for employees of retirement age to build a more growth-oriented investment portfolio if they are continuing to work and earn employment income. They are not subject to as much risk of a stock-market decline as a fixed-income retiree who has no other source of income and doesn't have time to wait for depressed market holdings to recover. However, they stress that asset allocation decisions must reflect a person's risk tolerance. Even "doing the right thing" won't seem that way if it runs counter to your feelings. "You can't make someone do something they don't want to do," DeCarolis says.

5) Keep Employer Healthcare Coverage. "Health care is the big reason my clients don't retire before 65," DeCarolis says. No wonder. Private health insurance for people in their late 50s and early 60s is very expensive, assuming you can find coverage at all. The health reform law will help here but its provisions don't take full effect until 2014. In the meantime, keeping employer health insurance is an important consideration in the work or retire equation. Turning 65 and qualifying for Medicare hardly resolves this issue. Basic Medicare has big coverage gaps. So, if you can retain some form of health insurance along with a paycheck, consider yourself fortunate.

6) Play Catch Up With Retirement Accounts. Tax rules generally allow older employees to park an extra $1,000 in tax-deferred retirement accounts. This is on top of existing annual maximum contributions. Assuming you don't need the current income, plow as much as you can in these tax-deferred accounts. You'll be storing money you will need in retirement, and lowering current taxable income as well.

7) Keep Good Expense Records. Understanding exactly what you spend is great training for retirement and should be part of your retirement planning. Having such a record will make it easy for you to estimate your post-retirement spending needs and whether you will have enough retirement income to live comfortably. In addition, you might be able to deduct certain employment expenses on your taxes. With more and more people telecommuting, home office expenses can be considerable. Also, if you volunteer, there are deductible expenses that can reduce taxable income.

8) Watch Your Cash Flow. Carnathan says a solid cash flow analysis is a fundamental part of a client's retirement thinking. He recommends doing scenarios with different time frames, looking out a year, three years, and five years. This helps clients better understand the merits of continuing to work. Equally important, it moves them into a life transition process. This process is really a more accurate description of retirement than a specific trigger date. "People tend to gravitate toward a specific scenario," he says. "From there, we go on to figure out the best mix of assets" that will support their longer-term income needs.

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.

 

Market Mayhem

What to do while we're between a stock and a hard place.

Written by Dave Young, President of Paragon Wealth Management

At Paragon, during the 1980's and1990's, our primary focus was on growth.  Our objective was to grow our accounts as much as possible.   We controlled risk by monitoring the business cycle and the strength of individual companies and industries. 

Since the economic meltdown of 2008 the challenges and number of risks to investors has multiplied.  Significant new risks are the result of the 14 Trillion Dollar Debt that our government has created.  Government debt has always been a concern. Recently it has moved past the "concern" stage and into the "critical" stage. I believe we are approaching a tipping point. 

In 2010 the U.S. budget deficit was about $1.3 Trillion. To put that in perspective, $1.3 Trillion is close to the total amount of debt our politicians accumulated from 1776 to 1984. In one year, 2010, they added as much to the debt as they added over an entire 208 year period.

Current government projections show that from 2011 to 2019 they will add  $900 Billion to the debt -each year. If their projection is accurate then the debt will double by 2020, just nine years from now. A debt of that magnitude could potentially cause economic chaos. It would likely cause taxes to rise, benefits to fall and interest rates to go up.

Even now, our investment decisions are directly affected by the debt on a regular basis. Historically, political issues had little effect on our investments. Currently, they are the primary driver effecting the markets. For example, in July the political drama over the budget and our treasury bond rating pushed the global markets down. Recently, our trading has been driven by the political debt drama in Europe.

For savers, those that invest in savings accounts, CD's, and annuities, life has gotten very difficult. There is not a saving option that is safe and pays a decent interest rate. It does not exist. 

Those "safe" accounts pay between 0% and 2% and provide about the same benefit as putting the money under a mattress. With inflation running at 3.5% savers are  losing money on their investments. Each year, they watch their net worth lose value. If you consider the effect of taxes then it is even worse.

If you to move to bonds for safety, then your situation is potentially even worse. Bondholders have had a great ride for the past 30 years. Owning bonds as rates dropped from 17% to 2% worked extremely well and lulled bondholders into a false sense of security.

When interest rates start to increase, bondholders will see the value of their bonds decrease accordingly. For example, the owner of a ten year treasury bond yielding 2% will see their bond lose 10% of its value when interest rates go up only one percent. If rates go up two percent then they lose 20%. If rates go up three percent, then they lose 30%, and so on.

Investing in the stock market is much more difficult as well. It's likely that only certain areas of the market will benefit depending on which economic and interest rate scenario plays out. Being in the wrong areas of the market will be costly.

So what should an investor do? Hiding the money in a bank isn't the solution because of the effect of inflation. Moving to the safety of bonds doesn't  really provide safety at all. For stock market investors, following the typical "buy and hold" advice that you hear from the big institutions is full of potential obstacles. Buying into gold which is priced for perfection, at the highest prices ever, doesn't seem to make a lot of sense either.

Investing in the right place at the right time is more important than ever. Building wealth is first about preserving wealth and capitalizing on opportunities when they present themselves. I believe that in this environment that you must have a strategy in place that allows you to increase and reduce your market exposure as needed. You need to be able to move between market sectors when market conditions change. You must be flexible and able to adapt to the current market environment.

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.

 

Happy New Year!

The New Year is upon us and there is no better time to review risk tolerance and how you are allocated in your investment accounts. Please contact our office if you would like to discuss your 2012 investment strategies with one of our advisors.

We hope the start of this New Year will bring happiness and success to you and yours!

From all of us at Paragon Wealth Management

A Holiday Wish From Paragon

We hope you have a very Merry Christmas and Happy New Year!

The Paragon Team

Happy 25th Anniversary!

FOR IMMEDIATE RELEASE

Provo, Utah (Dec. 16, 2011) - Paragon Wealth Management, originally called The Center for Financial Excellence, celebrated 25 years of business this month.

Dave Young, president and founder of Paragon Wealth Management, started The Center for Financial Excellence in 1986 to give investors an opportunity to do more with their money.

“I originally started Paragon to manage money,” said Young. “I sold over a dozen businesses I owned, and wanted to invest the proceeds, but wasn’t able to find an investment advisor who met my needs. I spent the next year researching different investment methods and then started The Center for Financial Excellence.”

The company was registered with the SEC in 1993, and the name was changed to Paragon Capital Management. It was changed to Paragon Wealth Management several years later.

“This is a difficult industry to be in,” said Young. "We are happy to be a successful business this long."

Paragon's team celebrated their anniversary this month at their office in Provo, Utah with a cake, balloons and happy employees. Visit Paragon's YouTube Channel to watch a video of the celebration.

Paragon is known for its growth portfolio called Top Flight. It has generated a total return of 378.74 percent versus 64.76 percent for the S&P 500 from its inception on January 1, 1998 through October 31, 2011. Its compound annual return is 12.06 percent versus 3.7 percent for the S&P 500. (Visit paragonwealth.com to see complete track record and full disclosures).

About Paragon Wealth Management
Paragon Wealth Management is a registered investment advisor (RIA) in Utah that actively manages all types of traditional and retirement accounts such as IRA and 401(K) rollovers, and pensions and trusts. Paragon has received numerous awards such as the Best of State award in Investment Advisory Services in 2011, and the NABCAP Premier Advisor award in 2010. Paragon has also been recognized on several lists such as WealthManagerWeb's Top Wealth Manager's list in the U.S. in 2010 and others. Call 800-748-4451 or visit paragonwealth.com for more information.

Paragon cannot guarantee the accuracy of information from other sources. Opinions are as of the dates indicated only. This report is not a solicitation for any security. Past performance is not a guarantee of future results. Investments in securities involve the risk of loss. Do not rely upon this information to predict future investment performance or market conditions. This information is not a substitute for consultation with a competent financial, legal, or tax advisor and should only be used in conjunction with his/her advice.

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Are we in a Recession?

 

Some people say we are currently in a recession. Others say we aren't... 

Watch this short video to learn Paragon's wealth managers thoughts on being in a recession. 

What do you think? We'd like to hear your feedback. 

This video was filmed on Nov. 30, 2011.

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.

Paragon's Stock Market Outlook for the end of 2011

Several of our clients have asked us where we think the market is headed. Watch this video to learn our thoughts on where it has been and where it might be going. This video was filmed yesterday, November 30, 2011.

We'd like to hear your thoughts. Feel free to leave comments. 

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.