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Market Mayhem

admin — Thu, 01 Dec 2011 18:42:21 +0000

During the ’80s and ’90s, Paragon’s primary focus was to grow our accounts. 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 debt our government has created. Government debt has always been a concern. It has now moved past the “concern” stage and into the “critical” stage. 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 did during a 208-year period.
Current government projections show that from 2011 to 2019, $900 billion will be added to the debt — each year. If the projection is accurate, the debt will double by 2020. A debt of that magnitude could potentially cause economic chaos. It would likely cause taxes to rise, benefits to fall and interest rates to climb. 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 affecting 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, CDs and annuities — life has gotten difficult. There is not a saving option that is safe and pays a decent interest rate. It simply does not exist.
Those “safe” accounts pay between 0 and 2 percent and provide about the same benefit as putting the money under a mattress. With inflation running at 3.5 percent, savers are losing money on investments. Each year, they watch their net worth lose value. If you consider the effect of taxes, it is even worse.
If you move to bonds for safety, your situation is potentially bleaker. Bondholders have had a great ride for the past 30 years. Owning bonds as the rates dropped from 17 percent to 2 percent worked extremely well, but it 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 10-year Treasury bond yielding 2 percent will see his bond lose 10 percent of its value when interest rates go up only 1 percent. If rates go up 2 percent, he loses 20 percent. If rates go up 3 percent, he loses 30 percent. And so on.
Investing in the stock market is more difficult as well. It’s likely 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 provide safety at all. For stock market investors, following the typical “buy and hold” advice 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. In this environment, you must have a strategy in place that allows you to increase and reduce your market exposure as needed. You need to move between market sectors when market conditions change. You must be flexible and able to adapt to the current market environment.

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Roundtable – Online is not out of line

admin — Thu, 01 Dec 2011 18:38:47 +0000

4 local leaders talk social media, blogs, SEO and steak

Dave Decker, Kevin Winder, Adam Stevens, Seth Taylor

Have A Seat

admin — Thu, 01 Dec 2011 18:35:29 +0000

The task was simple: Take our cool chair and utilize it in a cool way.
And boy did we get what we asked for. In addition to the shots you saw in our cover story, here are some outtakes that couldn’t escape our glossy pages (as much as these cool folks may have wanted them to).

Enter The UV50

admin — Thu, 01 Dec 2011 18:33:06 +0000

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What Gives?

admin — Thu, 01 Dec 2011 18:31:04 +0000

Utah Valley businesses are no strangers to giving it their all.
Whether they do good once a year or five times a month, they do good. Period.
Meet five local companies who rise to the occasion with style.

Trusted Advisers

admin — Thu, 01 Dec 2011 18:18:10 +0000

Show us a business owner who does everything himself and we’ll show you a business owner who makes mistakes, who doesn’t have the best tax strategies and who is leaving money on the table.
Show us a business owner who knows when to bring in a trusted adviser, and we’ll show you an entrepreneur who can concentrate on what his business does best, who has time for a personal life and who has a team working beside him — and for him.
Meet eight trusted advisers who know how to show and tell smart strategies to smart entrepreneurs. Do tell.

10 Coolest Entrepreneurs

admin — Thu, 01 Dec 2011 18:05:33 +0000

Yo, yo, yo, Utah Valley!
It’s that time again — time to celebrate our local entrepreneurs who are the bomb diggity off the hizzie hook. (Did we say that right?)
Regardless of our wicked vernacular, these 10 crazy kids are legitimately cool — in business and in life. If there was an entrepreneur cafeteria, they would so own it.
Read on to find out who can bench press 300 pounds, who won a car on “The Price is Right,” and whose favorite movie is Justin Bieber’s “Never Say Never.” (Yes, this is the first time we’ve typed the words Justin Bieber onto BusinessQ’s glossy pages. And no, it probably won’t be the last. We’re cool like that.)

Highs and Lows

admin — Wed, 07 Sep 2011 21:16:42 +0000

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 caused 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 there has been so many huge, back-to-back, up-and-down market moves in a row. On a regular basis, the Dow Industrials 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 underperform the market indexes. The reason they underperform 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 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, decisions based on short-term market movement 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.

To learn more about how to implement these strategies, go to paragonwealth.com. Or for regular strategy updates, follow us on moneymanagerslive.com.

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Times, They’re A-Changin’

admin — Fri, 10 Jun 2011 16:49:48 +0000

Investing is difficult. You need to generate returns that will allow your account to grow and stay ahead of inflation … but you don’t like it when your account goes down in value. You need good returns … but you don’t like the uncertainty.

Whether it’s a tsunami, a drilling rig disaster, a financial meltdown or unrest in the Middle East, the world is a scary place. Something is always going wrong somewhere. So how do you invest and still sleep at night?

Set Your Risk Tolerance
The way to deal with uncertainty and manage the impact of unforeseen events is to build strict risk controls into your investment portfolio. While the risk of one-time incidents can’t be eliminated, through diversification and risk management we hope to limit the damage when negative events occur.

Considering this, it might be useful to provide an overview of our approach to risk management and portfolio construction. The first step toward controlling risk is to make sure your individual risk tolerance is set properly.

Your risk tolerance can depend on many factors, such as how close you are to retirement, your goals or your lifestyle needs. It is determined by the returns you need to generate in order to meet your objectives and by identifying how much risk you are comfortable with. If your risk tolerance is set too low, you won’t generate the returns you should. If it is set too high, should market conditions become difficult, you will feel pressure to sell your investments, which could cause you to miss out on superior long-term returns.

Once your risk level is set, it helps to identify the mix of stocks, bonds and cash that you should hold in your portfolio. It determines how conservative or how aggressive your portfolio should be. The allocation put together based on your risk tolerance strongly determines how much volatility you will have to endure when unexpected events occur.

Use Models to Reduce Risk
The second step to reduce risk is the actual process we follow to manage the portfolios. We seek to manage risk by using two unique groups of quantitative models. The first group of models is proactive in nature and determines which areas to invest in. The second group of models is protective in nature and determines how aggressively the portfolio will be invested at any point in time.

The proactive set of Paragon models are designed to identify trends and measure velocity within the universe of available market styles, sectors and industries. When trends are identified, the portfolio stays invested in those market areas until certain exit criteria is met. When that occurs, the funds are rotated into other areas that currently meet the model’s recommendations. This rotation is ongoing, and the models are constantly adapting to current market conditions.

The protective set of models is designed to reduce risk when possible. These models determine how aggressively the portfolio will be invested at any point in time. The models adjust market exposure up or down depending on how much risk is in the market.

Expect the unexpected
We’ve always had unexpected events and always will. And despite these unforeseen events, economies have grown, companies have prospered and stock markets have generated positive returns. The key to benefiting from this long-term growth is to structure your portfolio so that no single event can create permanent damage to your portfolio.

If you would like to determine your personal risk tolerance, go to www.paragonwealth.com and take the complimentary risk tolerance survey.

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Scene Stealers

admin — Fri, 10 Jun 2011 16:47:06 +0000

It was the best of times as the BusinessQ staff put together our cover package on local working wonders. And you know why? These folks are the best of the best — true story.