Archive for August, 2009

On March 6, I sent an email entitled “Investor Sentiment Signaling a Bottom?”. As it turned out, March 6 was the absolute bottom of the market, and I attribute my email to luck and not any ability to divine the market. I do think that paying close attention to prevailing sentiment can be helpful in identifying major turns in the market. Investor Sentiment is a funny thing in that people have a tendency to be most bearish at market bottoms- when they should be bullish- and most bullish when the market is screaming- exactly the opposite of how they should be “feeling.” The investment business is one of the few businesses in which people are hesitant to buy when the merchandise is on sale (market bottoms), but are happy to pay full retail when merchandise is fully priced (market tops).

So, how are people feeling right now? Click on the link below or cut and paste it into your browser.
http://www.marketwatch.com/story/investor-sentiment-index-reaches-late-07-levels-2009-08-26?siteid=yhoof

So how does one use Investor Sentiment readings? An  investor’s asset allocation, as defined by his or her Investment Policy Statement (you do have one, don’t you?) is the investment “road map.” Indicators such as Investor Sentiment should be viewed as the accelerator pedal of the automobile- when sentiment is extremely bullish, it may be a good time to ease off the accelerator: i.e. raise a bit of cash, and move towards the more conservative constraints of the Investment Policy Statement- without making major “bets” or entirely throwing away the road map.Because of the huge rally we have enjoyed since the March lows, many portfolios are now overweighted in equities relative to the stated objectives of the Investment Policy Statement. Investor Sentiment readings are saying now may be a good time to be a bit more conservative and be very protective of the down side.

The information contained in this e-mail, and any attachment, is confidential and is intended solely for the use of the intended recipient. Access, copying or re-use of the e-mail or any attachment, or any information contained therein, by any other person is not authorized. If you are not the intended recipient please return the e-mail to the sender and delete it from your computer. Although we attempt to sweep e-mail and attachments for viruses, we do not guarantee that either are virus-free and accept no liability for any damage sustained as a result of viruses.

Please refer to http://disclaimer.bnymellon.com/eu.htm for certain disclosures relating to European legal entities.

This from Global Finance Magazine’s annual list of the world’s safest
banks.The link is at the bottom.

The Bank of New York Mellon (#32 Worldwide)

Banking Industry Stats*
Size: $11.12 trillion
Key Interest Rate: 0%-0.25%
Total Commercial Banks: 1,750**

In the Global Finance ranking of the world’s safest banks, the US banking
industry only has 6 of the top 50. Bank of NY Mellon is the most
highly-ranked American bank, but only finds itself at #32 overall, with a
market cap of $34.8 billion. JPMorgan is listed at #39, while Wells Fargo
(#42), US Bancorp (#47), and Northern Trust (#49) are the only other US
banks on the list.

* US Federal Reserve data as of 3/31/09
** Insured US-Chartered Commercial Banks that have consolidated assets of
$300 million or more

http://www.cnbc.com/id/32537102?slide=7

Dave Lamere, CEO of BNY Mellon Wealth Management, recently appeared in a television interview with New England Cable News on their “CEO Corner” program. In the interview Dave addresses our parent company’s Q2 earnings report; our outlook for the economy; the need or “for more regulation, but not more regulators”; and the future of the wealth management business. While the video is about 8 minutes in length and well worth watching, I know you are busy, so I’ll provide the executive summary:

1. Second Quarter Earnings: Down 46% from the second quarter of last year, but the comparables are very difficult. We had a very strong second quarter last year-  just before things began to fall apart in the third quarter- so the recent quarter looked weak as a comparison to last year. What is very important to note is that the firm’s financial strength, capital base, and liquidity have all improved over the last year.

2. Our economists expect to see growth resume in the 4th quarter, albeit from a very low starting point. This year’s 4th quarter will look great compared to last year’s, primarily because last year was so terrible. Kind of the inverse of our 2nd quarter earnings report.

3. BNY Mellon Wealth Management’s Family Office Services Group, which serves families with net worth exceeding $100 million, grew revenues by 20% over the past year as high net worth individuals sought safety and stability in their wealth management services provider.

4. Our Wealth Management Group enjoyed strong growth in market share. Dave specifically mentioned Atlanta as one of the strong growth markets. Another sign of health, he said, is that the firm continues to hire client-facing professionals across the U.S.

5. Asked what investors should do going forward, Dave’s answer was simple: “Know what you are investing in. Know your company. It’s back to basics.” A company’s reputation for integrity is what’s important to anxious investors, he said.

To view the interview, please follow the link below.
http://www.necn.com/Boston/Business/2009/07/27/BNY-Mellon-CEO-on-lessons-of/1248741368.html

Lastly, if you know of someone that is not completely satisfied with the wealth management services they are receiving, we would be thrilled to meet with them as part of their due diligence process.

Hello everyone,

I am Laurel’s new intern and I will be writing the blog for the next few months. A little about myself: I am a senior at UGA and I am majoring in Family Financial Planning. I grew up in Fredericksburg Virginia, but now I live on Tybee Island with my parents. I spent my summer running a YMCA swim camp and dodging the film crews that infiltrated Tybee for a Miley Cyrus movie. After three months of dealing with Miley mania,  I am ready to be back at school and enjoy my final football season. As for the blog, I would love to know what topics you would like me to cover; please send me a message whenever you think of an issue.

Thank you,

Alden Mergenthal

Rarely have I had a client who actually knew his or her net worth. Occasionally, my clients can give me a ballpark figure. Busy schedules and the swift pace of time often are the reason behind this phenomenon.

As the years go by, our financial situation grows ever more complex. Just keeping up with monthly bills can be challenging enough. So it is no surprise that, generally speaking, most people do not know exactly what their financial picture looks like.

If you don’t know exactly how much money you have or where all of your accounts are located, you are not alone. I realize this is a shocking statement to make. But if you think about it, you might realize you have some forgotten assets hanging around out there.

Do you have some old savings bonds or stock certificates your grandparents gave you as a child? What about that life insurance policy your parents took out for you before you went to college? Or the 401k from your first job that you never rolled over into an IRA.

What about a more current viewpoint regarding those statements you haven’t opened for fear of knowing how much your portfolio has lost in the downturn of the market?

Consumers who go through the financial planning process are forced to answer these questions. Financial planning requires you to take a look at your complete picture.

Real estate assets, bank and brokerage accounts, retirement benefits, debt and life insurance details are all required to produce an accurate picture of your current financial situation. Complete and accurate data are necessary to provide a precise projection into the future as you and your financial planner come up with strategies to obtain your financial goals.

The primary purpose of financial planning is to provide yourself with a strategy to obtain your financial goals. An interesting by-product of having a comprehensive financial plan simply is the organization of your financial information into one central location.

By compiling all of your financial data into one location for planning purposes, you also have provided your heirs with the necessary information to effectively handle your financial affairs in the event of a disability or death.

Everyone should have a comprehensive financial plan. If you cannot afford to hire a financial planner, it is worthwhile to try to do it yourself with online help such as www.simplifi.net. Design a strategy for achieving your financial goals and do not leave unclaimed assets behind.

• Laurel S. Alberty, CFP, is president of Alberty Financial Planning Services Inc. in Watkinsville.

Originally published in the Athens Banner-Herald on Sunday, August 23, 2009

Generally speaking consumers understand their health insurance benefits. We usually focus on things such as which doctors are included in network, what co-pays will be due, as well as deductible and premium amounts. As I started my journey to fight cancer, I learned a few additional things about health insurance that I think are worth sharing.

First, I started to think about my lifetime maximum benefit. When we signed up for our health insurance, I can distinctly remember thinking that our maximum lifetime benefit would cover any health care emergency we might have over the working years. But as I started to receive the bills, I soon realized how quickly that maximum might be met if I continued to be sick. I advise consumers to consider whether or not your lifetime maximum is really sufficient for a major medical emergency.

Then, I was pleasantly surprised to discover that our total out of pocket maximum was quite low. Since we had historically been a very healthy family, we had never come close to meeting the out of pocket maximum. The out of pocket maximum usually includes the amount you pay toward your deductible plus any co-payments you might make up to the maximum listed on your policy. This amount resets every year.

Another pleasant surprise was the appearance of case worker that was assigned to me specifically. Out of the blue I received a call from someone from our insurer who was designated to help me navigate our policy and how our coverage worked in covering my specific disease. I learned that there was an allotted amount for travel and lodging for me and my caregiver. My case worker also educated me about the limits for specific treatments such as my stem cell transplant.

In order to know your health insurance benefits, it is financially prudent to know your lifetime and out of pocket maximum benefits. If you have questions about your coverage, don’t hesitate to call your insurer to find out more. As a healthy young woman, it never occurred to me to ask any questions beyond the basics. I hope my experience will help others become more acquainted with their own coverage.

Consider these items:
Taxes: A plan can be setup so that money set aside every month from your paychecks for retirement is not taxed. If you pay down the mortgage after-tax dollars have to be used. Depending on your tax situation you could lose 30% to reduce a loan with an interest rate of 5.00%.
 
Retirement plans that have a matching offer. This means that whatever you contribute (up to a certain percentage) will be matched by your employer. This is a great thing if your employer offers it: it is a 100% return in the first year for a contribution. If you take away $100 away from retirement to pay off your mortgage you are also losing $100 from your employer match.
 
Liquidity: If you are uncertain if you are going to move in the next few years it may not be wise to pay down on your mortgage. If the mortgage is paid down you are locking up cash in an illiquid asset. This could have big consequences should a relocation be forced.
 
Opportunity cost: If you have extra dollars to pay down your mortgage but put them in an investment yielding more than your mortgage you can come out ahead.

The choice to carry or eliinate debt is a personal one and you need to do what is right for you.

If you are concerned about inflation increasing in the future Treasury Inflation-Protected Securities (TIPS) may be the way to go. TIPS were created to provide protection against inflation and were not available in the 1980’s when inflation ran rampant. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.
Like all Treasury Bills, TIPS pay interest twice a year, but the difference is payments rise with inflation and fall with deflation.
The relationship between TIPS and the Consumer Price Index affects both the sum you are paid when your TIPS matures and the amount of interest that a TIPS pays you every six months. At the maturity of a TIPS, you receive the adjusted principal or the original principal, whichever is greater. This provision protects you against deflation.
But if you hold TIPS to maturity, you’re assured that you’ll get back at least what you put in. Like all other Treasury issued bills, TIPS is backed by the United States government and is considered a “riskless” asset.