May 2012 - NorthStar Capital Advisors

Smart Money Newsletter ~ May 2012

Who are better investors — men or women? In the May issue of Smart Money newsletter, we take the battle of the sexes into the financial arena (Do You Invest Like a Girl?).

Smart Money is a NorthStar publication that covers financial education, money management, and investment strategies.

The latest issue examines how well men and women invest, lays out the perils of private student debt, and defines simple rules for investing.

Click the cover image to view or click here to download it directly. You can always get the latest issue of Smart Money by visiting www.nstarcapital.com/newsletters.

We hope you find this information useful. Please feel free to share with family and friends if you find it valuable.

Weekly Market Review ~ Friday, 05/25/12

After a two-week beatdown, stocks staged a comeback on Monday, with the NASDAQ leading the way with a 2.5% gain. On Tuesday, early gains were erased by the end of the day, as concern over Greece’s exit from the European Union erased the possibility of back-to-back wins by the major indexes. Wednesday was the mirror image of Tuesday, with stocks staging an impressive late-day rally to finish near the unchanged mark. The Dow and S&P 500 managed a small gain on Thursday after the Italian premier stated he believed Greece would remain within the European Union. Stocks finished the week on Friday with little fanfare, as investors were unwilling to make any big moves before the long Memorial Day weekend.

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Happiness & Goals of the Top 1% Versus the 99%

An interesting vignette of the 1% versus the 99%. Can money buy happiness?

Click to enlarge:

Source:
American Express Publishing and Harrison Group
The 2012 Survey of Affluence and Wealth in America

Weekly Market Review ~ Friday, 05/18/12

Last week’s slide continued on Monday with a 1% loss on concern that Greece may disconnect itself from the Euro currency. On Tuesday the Dow fell to a 4-month low, once again on worries about Greece. It was much of the same on Wednesday, although the Dow managed to keep its losses small. The losses continued on Thursday, as the small-cap Russell 2000 index has dropped 10% since its recent high in March. Stocks finished off the week on Friday with yet another loss. Even Facebook’s IPO could not energize the markets, as the Dow finished with a loss in 12 of the last 13 trading sessions, including every day this week.

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Facebook — How Not To Invest in the Stock Market

Despite predictions that its stock would soar on its first day of trading, Facebook was a big fizzle. In fact, Facebook’s underwriters struggled to keep the price from plunging through the initial offering price of $38 to avoid a huge embarrassment (note how the price flat lined at $38 starting at ~3:30pm on Friday, 5/18/12).

Despite widespread belief to contrary, buying a stock because you know the company or “feel good about the company” is no way to invest. This kind of thinking can be very dangerous to one’s financial health. Moreover, this approach is usually coupled with a strong emotional attachment that causes investors to hold onto that company much too long once the share price begins to deteriorate.

Warren Buffet once said, “You may have all these feelings about a stock, but a stock doesn’t know you own it. It doesn’t care what you paid for a stock.” It’s wise to use your head, not your heart, to keep emotions from corroding your investment discipline.

Weekly Market Review ~ Friday, 05/11/12

Major political upheaval in France and Greece over the weekend failed to have much of an impact on the markets on Monday, as initial trepidation in the morning faded, and the major indexes finished near the unchanged mark. On Tuesday, the Dow lost ground for the fifth straight session on concerns over the fallout from the recent Greek elections. The slide continued on Wednesday, with Spanish stocks falling to to their lowest levels since 2003 as Eurozone unrest continues. On Thursday the Dow finally managed a gain after six consecutive losses, although the gain was quite modest, following a mildly encouraging US labor report. Stocks finished the week on Friday down once again after J.P. Morgan announced a $2 billion loss that temporarily roiled banking stocks.

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Credit Unions vs. Big Banks

Click to take a closer look

Weekly Market Review ~ Friday, 05/04/12

On Monday, stocks finished off the month with a loss following news that Spain’s economy shrunk again for a second consecutive quarter. Still, the Dow managed to end the month with its seventh consecutive monthly gain. May started on an up note on Tuesday, with the Dow once again hitting a four-year high on good manufacturing news. On Wednesday the major indexes finished mixed, as a report indicating that private-sector job growth seems to be slowing dampened buyers’ enthusiasm. On Thursday, stocks fell once again in anticipation of Friday’s US employment report. The selling accelerated on Friday, as the employment report failed to meet expectations. While the unemployment rate slipped down to 8.1%, this decline was mainly due to workers leaving the work force rather than an increase in the number of new jobs.

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Leveraged and Inverse ETFs — Most Investors Should Avoid Them

Leveraged and inverse ETFs are difficult to understand and are not a good fit for long-term investors.

Exchange-traded funds (ETFs) trade daily on exchanges like stocks. Leveraged versions use complex futures and derivatives to amplify the daily returns of an index, often times trying to double or triple the return. Inverse ETFs strive to return the opposite of the index.

When ETFs are held for longer than a day, the effects of compounding can produce results that vary significantly from the one-day outcome. This makes leveraged and inverse ETFs unpredictable and risky to hold for longer periods.

Citi, Morgan Stanley, UBS and Wells Fargo are paying $9.1M to settle allegations on leveraged ETFs. These banks were fined $7.3 million and they agreed to pay $1.8 million in restitution to some customers who were sold leveraged and inverse ETFs. Industry regulators allege the banks sold billions of dollars of these volatile investments without properly assessing their risks and whether they were suitable for retail customers. (“Retail” customers are individual investors versus “institutional” investors like pensions and hedge funds).

The Financial Industry Regulatory Authority (FINRA) and the Security & Exchange Commission (SEC) have previously warned the investing public about the risks of leveraged and inverse ETFs, particularly for those investing for the long term.