November 2012 - NorthStar Capital Advisors

Weekly Market Review ~ Friday, 11/30/12

The Dow and S&P 500 experienced modest losses on Monday following last week’s huge upswing, as slightly disappointing Black Friday sales dampened the mood a bit. Still, the NASDAQ managed a small gain. On Tuesday selling accelerated as word sperad that Republican and Democrat leadership were not making any progress on fiscal cliff talks. Stocks bounced back on Wednesday following remarks by House Leader John Boehner and President Obama expressing optimism over a deal being reached. On Thursday stocks zigzagged with each sentence uttered by the leading politicians to settle somewhat higher. The market closed the week on Friday with little fanfare, as US consuner spending slipped for the first time in six months.
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Ameriprise Employees Seek Class-Action Lawsuit Against Ameriprise for Bad 401(k)

Employees of Ameriprise Financial Inc. are suing their employer claiming Ameriprise loaded up the company 401(k) with its own expensive, underperforming mutual funds and charging employees excessive fees.

“Of any company, Ameriprise should know what is a good financial product,” said plaintiff’s lawyer Jerome Schlicter. Ameriprise is the largest employer of certified financial planners in the nation with over 14,000 employees.

Lawyers for Ameriprise argued there were sufficient non-Ameriprise fund choices. U.S. District Judge Susan Richard Nelson dismissed this rationale saying, “Merely including a sufficient mix of prudent investments along with imprudent options does not satisfy a fiduciary’s obligations.”

Most of Ameriprise’s in-house funds were labeled RiverSource funds before being rebranded Columbia after Ameriprise purchased the Columbia Management fund business from Bank of America.

The lawsuit also claims that Ameriprise used worker retirement assets to seed new and untested mutual funds to make the funds more marketable to outside investors and thus generate more profit for the company.

Source: The Star Tribune

Weekly Market Review ~ Friday, 11/23/12

More positive housing data coupled with optimism that an economic fiscal cliff can be avoided sent stocks soaring on Monday, as the Down gained over 200 points. On Tuesday stocks were largely unchanged as the momentum from the previous two sessions’ gains was dampened by Fed Chair Ben Bernanke’s warning that the Fed has only limited resources to counteract a recession brought about by the failure of Congress and the President to enact a viable economic plan. Light volume marked the day on Wednesday prior to Thanksgiving, with the major indexes making moderate gains. The week ended on Friday with another very healthy gain as a cease-fire in he Middle East as well as encouraging economic news from China led US stocks higher.
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Fiscal Cliff’s Jagged Edge

If Washington can’t end the budget dilemma by year-end, most households will be impacted by the “fiscal cliff”.

As the table below shows, lower-income people would see the steepest tax increases in percentage terms. For example, an average married couple making $20,000 to $30,000 would see their tax go up $1,423, from receiving a $15 refund to paying $1,408.

Here are the key drivers behind the tax increase broken out by group:

Single unemployed person: loss of benefits
College student: loss of education breaks as well as the payroll tax holiday
Lower-income working couple: loss of Bush-era 10% bracket, loss of relief from so-called marriage penalty and the reduction of the child credit
Retiree households: loss of Bush-era tax rates
Higher income professional: loss of protection from the alternative minimum tax (AMT)
High-income couple: disappearance of Bush-era tax cuts & AMT relief plus higher taxes on investments

source: Wall Street Journal

Weekly Market Review ~ Friday, 11/16/12

The markets opened the week on Monday, with little direction, as investors unsure about “fiscal cliff” concerns were unwilling to make a commitment either way. On Tuesday several of the major indexes fell to three month lows, even though Home Depot released a positive earnings report, another indicator that the housing market is improving. Losses accelerated on Wednesday, as both the NASDAQ and Russell 2000 have lost more than 10% off their recent highs, termed a correction by investors. On Thursday stocks finished with surprisingly small losses despite concern over Middle East violence and a spike in initial jobles claims. Friday concluded the week with a modest gain by stocks on optimism that President Obama and Congress showed signs of compromising to avoid the looming “fiscal cliff”.
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Smart Money Newsletter ~ November 2012

The latest issue of Smart Money is hot off the press!

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

Here’s what you’ll find in the latest issue:

Financial Readiness — As Critical As Fully Charged Batteries
In light of the incredible impact of Megastorm Sandy last month, we want to spotlight the importance of “financial readiness” when it comes to disaster preparedness. It’s just as critical as filling the gas tank in your car and making sure you’ve got plenty of batteries ahead of an emergency.

What to Do With Your Old 401(k)?
Be it from changing jobs or retiring, it’s very common to have at least one old 401(k) account accumulating cobwebs in a dark corner of your financial closet. Shine a light there and make sure you’re doing the right thing. Here’s a quick overview of how to make a savvy decision with managing your old retirement accounts. Want more details? Check out our in-depth companion article on 401(k) choices available here.

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.

Given the universal importance of financial readiness, please do your friends and family a favor by sharing this article with them.

Weeky Market Review ~ Friday, 11/09/12

Stocks finished slightly higher on Monday on light volume as investors took a wait and see approach to the upcoming US presidential election. On Tuesday, the Dow surged 133 points on little economic news, as an uptick is often the case on election day. Those gains were lost and then some on Wednesday, as the market experienced its worst day in almost a year on Wednesday. Gloomy economic news from Europe sent stocks south, as investors who had bet against an Obama victory were saddled with heavy losses. Things only got worse on Thursday with the Dow registering another 100+ point loss, as concern grew about whether the economic fiscal cliff can be avoided now that the presidential race is decided. The bleeding finally stopped on Friday with small gains registered by the Dow and the S&P 500, helped in part by positive consumer opinion and wholesale inventories reports.
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10 Most Common Behavior Biases of Investors

Robert Seawright with Madison Avenue Securities assembled this list of the ten most common behavioral biases that hinder investors:

Confirmation bias – we gather facts and see those facts in a way that supports our pre-conceived conclusions
Optimism bias – our confidence in our judgement is usually greater than our objective accuracy
Loss aversion – the pain of losing $100 is at least twice as impactful as the pleasure of gaining $100 (causes investors to hold onto their losing stocks too long)
Self-serving bias – the good stuff that happens is my doing while the bad stuff is somebody else’s fault
Planning fallacy – overrate our own capacities and exaggerate our abilities to shape the future
Choice paralysis – we are readily paralyzed when there are too many choices
Herding – we run in herds, latching onto the group think and moving in lock step
We Prefer Stories to Analysis – people love a good narrative and prefer to be swept up by the story rather than work through the definitive numbers
Recency bias – we tend to extrapolate recent events into the future indefinitely
Bias blind-spot – the inability to recognize that we suffer from the aforementioned cognitive distortions!

Weekly Market Review ~ Friday, 11/02/12

Wall Street experienced a rare shutdown on Monday and Tuesday owing to Hurricane Sandy’s deluge crippling parts of the Eastern US seaboard. Trading resumed on Wednesday with an initial rise, but stocks settled near the unchanged mark by the end of day on near-normal volume. Positive consumer confidence, worker productivity, and manufacturing reports sent stocks soaring on Thursday, as investors received encouraging economic news on multiple fronts. On Friday, the previous day’s gains were eventually lost despite a dramatic rise in job growth in October. The national unemployment rate, however, ticked up by a tenth of a percent to 7.9%, possibly indicating that more people have restarted their search for employment.
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Financial Readiness: As Critical as Fully Charged Batteries

In light of the incredible impact of Hurricane Sandy on the East Coast of the U.S. this week, we want to spotlight the following important FTC Consumer Alert:

Home is where most people feel safe and comfortable. But sometimes — say, when a hurricane, flood, tornado, wildfire, or other disaster strikes — it’s safest to pack up and go to another location.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, says that when it comes to preparing for situations like weather emergencies, financial readiness is as important as a flashlight with fully charged batteries. Leaving your home can be stressful, but knowing that your financial documents are up-to-date, in one place, and portable can make a big difference at a tense time.

Here are some tips from the FTC for financial readiness in case of an emergency:

Conduct a household inventory. Make a list of your possessions and document it with photos or a video. This could help if you are filing insurance claims. Keep one copy of your inventory in your home on a shelf in a lockable, fireproof file box; keep another in a safe deposit box or another secure location.
Buy a lockable, fireproof file box. Place important documents in the box; keep the box in a secure, accessible location on a shelf in your home so that you can “grab it and go” if the need arises. Among the contents:
- your household inventory
- a list of emergency contacts, including family members who live outside your area
- copies of current prescriptions
- health insurance cards or information
- policy numbers for auto, flood, renter’s, or homeowner’s insurance, and a list of telephone numbers of your insurance companies
- copies of other important financial and family records — or notes about where they are — including deeds, titles, wills, birth and marriage certificates, passports, and relevant employee benefit and retirement documents. Except for wills, keep originals in a safe deposit box or some other location. If you have a will, ask your attorney to keep the
  original document.
- a list of phone numbers or email addresses of your creditors, financial institutions, landlords, and utility companies (sewer, water, gas, electric, telephone, cable)
- a list of bank, loan, credit card, mortgage, lease, debit and ATM, and investment account numbers
- Social Security cards
- backups of financial data you keep on your computer
- an extra set of keys for your house and car
- the key to your safe deposit box
- a small amount of cash or traveler’s checks. ATMs or financial institutions may be closed.
Consider renting a safe deposit box for storage of important documents.Original documents to store in a safe deposit box might include:
- deeds, titles, and other ownership records for your home, autos, RVs, or boats
- credit, lease, and other financial and payment agreements
- birth certificates, naturalization papers, and Social Security cards
- marriage license/divorce papers and child custody papers
- passports and military papers (if you need these regularly, you could place the originals in your fireproof box and a copy in your safe deposit box)
- appraisals of expensive jewelry and heirlooms
- certificates for stocks, bonds, and other investments and retirement accounts
- trust agreements
- living wills, powers of attorney, and health care powers of attorney
- insurance policies
- home improvement records
- household inventory documentation
- a copy of your will
Choose an out-of-town contact. Ask an out-of-town friend or relative to be the point of contact for your family, and make sure everyone in your family has the information. After some emergencies, it can be easier to make a long distance call than a local one.
Update all your information. Review the contents of your household inventory, your fireproof box, safe deposit box, and the information for your out-of-town contact at least once a year.

Source: Federal Trade Commission