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America’s Worst Charities

The Tampa Bay Times and the Center for Investigative Reporting identified the 50 worst charities in the US (see table below). These are organizations that purport to help the needy but devote pennies on the dollar to worth causes. The Pulitzer Prize worthy series is published in the Tampa Bay Times: America’s Worst Charities.

Here’s an eye-opening and infuriating preview:

The worst charity in America operates from a metal warehouse behind a gas station in Holiday.

Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families.

Every year, it spends less than 3 cents on the dollar helping kids.

Most of the rest gets diverted to enrich the charity’s operators and the for-profit companies Kids Wish hires to drum up donations.

In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity’s founder and his own consulting firms.

The following tips can help you make an informed decision when the phone rings from a charity:

Key questions to ask the caller:

What is the full name of the charity?
Do you work for a paid fundraiser?
How much of my donation actually goes to charity?
Will any local programs directly benefit? If so, how?
What is the website address of the charity?

Key facts to know:

The best charities spend no more than 35 cents of every dollar raised on fundraising costs
America’s worst charities spend more than 80 cent of every dollar on fundraising
Charities that use telemarketing firms and fundraisers are far more likely to receive only a fraction of the money raised

The 50 Worst, Ranked by Money Blown on Soliciting Costs

Rank	Charity name	Total raised by solicitors	Paid to solicitors	% spent on direct cash aid
1	Kids Wish Network	$127.8 million	$109.8 million	2.5%
2	Cancer Fund of America	$98.0 million	$80.4 million	0.9%
3	Children’s Wish Foundation International	$96.8 million	$63.6 million	10.8%
4	American Breast Cancer Foundation	$80.8 million	$59.8 million	5.3%
5	Firefighters Charitable Foundation	$63.8 million	$54.7 million	8.4%
6	Breast Cancer Relief Foundation	$63.9 million	$44.8 million	2.2%
7	International Union of Police Associations, AFL-CIO	$57.2 million	$41.4 million	0.5%
8	National Veterans Service Fund	$70.2 million	$36.9 million	7.8%
9	American Association of State Troopers	$45.0 million	$36.0 million	8.6%
10	Children’s Cancer Fund of America	$37.5 million	$29.2 million	5.3%
11	Children’s Cancer Recovery Foundation	$34.7 million	$27.6 million	0.6%
12	Youth Development Fund	$29.7 million	$24.5 million	0.8%
13	Committee For Missing Children	$26.9 million	$23.8 million	0.8%
14	Association for Firefighters and Paramedics	$23.2 million	$20.8 million	3.1%
15	Project Cure (Bradenton, FL)	$51.5 million	$20.4 million	0.0%
16	National Caregiving Foundation	$22.3 million	$18.1 million	3.5%
17	Operation Lookout National Center for Missing Youth	$19.6 million	$16.1 million	0.0%
18	United States Deputy Sheriffs’ Association	$23.1 million	$15.9 million	0.6%
19	Vietnow National Headquarters	$18.1 million	$15.9 million	2.9%
20	Police Protective Fund	$34.9 million	$14.8 million	0.8%
21	National Cancer Coalition	$41.5 million	$14.0 million	1.1%
22	Woman To Woman Breast Cancer Foundation	$14.5 million	$13.7 million	0.4%
23	American Foundation For Disabled Children	$16.4 million	$13.4 million	0.8%
24	The Veterans Fund	$15.7 million	$12.9 million	2.3%
25	Heart Support of America	$33.0 million	$11.0 million	3.4%
26	Veterans Assistance Foundation	$12.2 million	$11.0 million	10.5%
27	Children’s Charity Fund	$14.3 million	$10.5 million	2.3%
28	Wishing Well Foundation USA	$12.4 million	$9.8 million	4.6%
29	Defeat Diabetes Foundation	$13.8 million	$8.3 million	0.1%
30	Disabled Police Officers of America Inc.	$10.3 million	$8.1 million	2.5%
31	National Police Defense Foundation	$9.9 million	$7.8 million	5.8%
32	American Association of the Deaf & Blind	$10.3 million	$7.8 million	0.1%
33	Reserve Police Officers Association	$8.7 million	$7.7 million	1.1%
34	Optimal Medical Foundation	$7.9 million	$7.6 million	1.0%
35	Disabled Police and Sheriffs Foundation	$9.0 million	$7.6 million	1.0%
36	Disabled Police Officers Counseling Center	$8.2 million	$6.9 million	0.1%
37	Children’s Leukemia Research Association	$9.8 million	$6.8 million	11.1%
38	United Breast Cancer Foundation	$11.6 million	$6.6 million	6.3%
39	Shiloh International Ministries	$8.0 million	$6.2 million	1.3%
40	Circle of Friends For American Veterans	$7.8 million	$5.7 million	6.5%
41	Find the Children	$7.6 million	$5.0 million	5.7%
42	Survivors and Victims Empowered	$7.7 million	$4.8 million	0.0%
43	Firefighters Assistance Fund	$5.6 million	$4.6 million	3.2%
44	Caring for Our Children Foundation	$4.7 million	$4.1 million	1.6%
45	National Narcotic Officers Associations Coalition	$4.8 million	$4.0 million	0.0%
46	American Foundation for Children With AIDS	$5.2 million	$3.0 million	0.0%
47	Our American Veterans	$2.6 million	$2.3 million	2.3%
48	Roger Wyburn-Mason & Jack M Blount Foundation For Eradication of Rheumatoid Disease	$8.4 million	$1.8 million	0.0%
49	Firefighters Burn Fund	$2.0 million	$1.7 million	1.5%
50	Hope Cancer Fund	$1.9 million	$1.6 million	0.5%

Source: Tampa Bay Times

Annual Returns by Asset Class

These charts show how different asset classes rank each year over the past 10 years (best performers on top). This is an excellent demonstration of how hard it is to predict the future and how often the least-popular investments outperform common expectations.

Click to enlarge

Source: J.P. Morgan

The Cost Of Sitting On Cash

According to the latest financial security index by Bankrate.com, here’s how Americans prefer to invest money that they don’t need for more than 10 years:

26% say they prefer cash for long-term investments. Cash is arguably a great place to store your wealth briefly, however 80 years of data show cash is a horrible long-term investment.

The following chart shows that cash has averaged a negative real, after-tax return (be sure to click on the chart for a closer look). Inflation and taxes are killers.

Click to enlarge

“Americans not saving enough is well-documented, but hunkering down in cash investments and settling for low returns will only magnify the problem of not having a sufficient nest egg to meet longer-range financial goals such as retirement,” said Greg McBride, CFA, Bankrate.com’s senior financial analyst. “Other choices may not do the trick either, as real estate is not only very cash-intensive, but often illiquid. And precious metals spit out zero cash flows, with gains solely dependent on price appreciation.”

Sources:
BankRate.com

BlackRock

Strongest Bull Market Since WWII

The current bull market that began in March 2009 is the strongest bull market recorded by the S&P 500 since the end of World War II (see green line in chart above).

The market has accomplished this achievement despite a litany of negatives,

Fiscal cliff tax increases;
Sequester spending cuts;
High oil prices;
Italian election debacle;
Cyprus bank bailout;
Weakening Chinese economic growth;
Federal Reserve communicating the intention to end quantitative easing (QE);
Downward revisions to earnings growth estimates;
Rising interest rates;
A rise in geopolitical risk from North Korea, Egypt, and Syria; and
Bouts of defensive sector market leadership and weak trading volume.

Sources:
Chart o’ the Day: Strongest Bull Market In 65 Years
What’s Powering the Strongest Bull Market Since WWII?

Whose side is your financial adviser on, anyway?

This is not a fiduciary.

Does your financial adviser have a legal duty to give advice that’s in your best interests? The chances are that you think the answer to this question is “yes.”

Chances are, you’re wrong.

Not everyone who gives you financial advice has a duty to actually help you. The technical term for the true helpers is ‘fiduciaries.’ That means it’s their legal duty to always put their client’s best interests ahead of their own.

There are some financial helpers who are fiduciaries. That includes certified financial planners and Registered Investment Advisors – usually known as RIAs. Their job description includes warning you away from any financial cliffs. Unfortunately, these people are a small part of the financial advice world – they make up less than 20% of the universe.

NorthStar Capital Advisors is a Registered Investment Advisor and has a fiduciary responsibility to its clients.

Timing the Market Doesn’t Pay

Participant account balances increased from Q3 2008 – Q1 2013

Although it is tempting to actively alter your investments in an attempt to avoid loss in anticipation of market lows, historical data show that such efforts tend to backfire. Fidelity, one of the largest 401(k) providers in the U.S., recently published an analysis of 12.3 million retirement accounts that vividly demonstrates the financial risks of market timing. It’s important to note the comprehensive nature of the study period, Q3 2008 – Q1 2013, which starts from the pre-recession market high of 2008, through the deep bottom of Q1 2009 and the recovery to new highs in Q1 2013.

The figure above compares average account balance growth among three participant groups: Those who changed their asset allocations to 0% equity in the Q4 of 2008 or Q1 of 2009 and never returned (left pair of bars), those who moved to 0% equity but returned to some portion of equities by the end of Q1 2013 (middle pair of bars), and those who maintained an equity allocation throughout the period (right pair of bars). The blue bars represent all retirement accounts while the green bars track pre-retirees defined as participants age 55 and older.

As the figure above shows, the differences in growth are remarkable. Those who stayed the course fared substantially better than those who retreated altogether or tried to time the market. Investors who completely retreated from the stock market in Q4 2008 and failed to return saw their accounts grow by only 14.8% in the following 5 years (left blue bar). Contrast this to the exceptional 88.4% growth enjoyed by investors who stayed the course by holding stocks throughout the market cycle (right blue bar).

The takeaway is the same for pre-retiree investors (green bars). Disciplined investors who didn’t touch their stocks saw ~60% growth whereas market timers saw only half as much and those that fully retreated from stocks saw disastrous results.

Source: Fidelity

Thank You for Seven Years!

NorthStar would like to take this special occasion to thank you, our loyal clients and friends, as today we celebrate 7 years of managing investment portfolios. We have come a long way since we rolled out our objective and disciplined approach to investing in 2006. Our success is attributable to clients and friends who faithfully support our business and receive great service and advice in return.

We deeply appreciate your loyalty and support over the past 7 years. We hope you and your family have a safe and happy holiday!

With heartfelt thanks,
Your NorthStar Team

Fox Analyst Charles Payne Was Paid To Push Now Worthless Stocks

Yet another reason to avoid the talking heads in the financial media!

According to the investigative reporting of Eric Hananoki at Media Matters:

Charles Payne, a contributor and frequent guest host for Fox News and Fox Business, was compensated to promote the stocks of at least three companies since joining Fox. The practice of compensated stock endorsements is currently prohibited by Fox rules, and resulted in the recent contract termination of contributor Tobin Smith.

According to a Media Matters review, Payne was paid $40,000 to promote The Brainy Brands Company, “$25,000 by a third party” to promote NXT Nutritionals Holdings, and an undisclosed amount for a “consulting arrangement” to promote Generex Biotechnology Corporate.

Payne’s sponsored stock pitches shared a common theme: using his cable news and Fox credentials to assure skeptical investors that his advice was trustworthy. A direct marketing company which worked with Payne stated it brandished Payne’s Fox News connections “to build credibility” with his potential customers. The stock pitches were also used as a vehicle to entice readers to join Payne’s subscription newsletter.

Payne and his company, Wall Street Strategies, have a problematic history related to the disclosure of paid stock endorsements. In 1999, the Securities and Exchange Commission (SEC) announced that while not “admitting or denying” wrongdoings, Payne “agreed to pay a civil penalty of $25,000.”

Source: Media Matters

Not Googling a New Investment Advisor, Seriously?

It’s hard to believe, but there are people who sign on with a new financial advisor without bothering to do even the bare minimum due diligence. Consider the sad story of fraudster Janamjot Singh Sodhi who ran a Ponzi scheme promising high rates of return in a relatively short period of time.

Sodhi solicited and received funds from investors starting in 2005 and through the fall of 2011 despite the fact that

The New York Stock Exchange permanently debarred him in January 2006, and
The California Department of Corporation ordered Sodhi to cease and desist from dispensing investment advice in California.

Potential investors and soon-to-be victims could have easily learned about these serious redflags had they bothered to simply google “Janamjot Singh Sodhi”. Sodhi did not use an alias so the information and fraud was in plain sight.

“Forget about hiring an attorney or paying for a background check. If you just typed his name into Google you could find out that before he solicited you he was barred by the NYSE and threatened by the state of California. … People spend more time buying a used car for $2,000 than giving $10,000 or $1 million to someone they never met or checked out to invest.” This from Bill Singer, a lawyer who specializes in investor fraud.

Sodhi will spend the next four years and nine months in jail and required to pay back the $2.4 million he stole from investors.

Source: CNBC

Beware of Deceptive Refinance Pitches from BofA and Other Lenders

An article published by American Banker alerted us to a questionable refi pitch that Bank of America is currently making in direct mail advertising:

“See if refinancing could save you an estimated $4,344 in annual payment savings,” reads the pitch in boldface on a direct mail advertisement sent to a New Jersey borrower last month.

The ad compared the borrower’s current mortgage payment on a 20-year fixed-rate loan with an interest rate of 4% to B of A’s “new loan program” that offers a 30-year fixed-rate at 3.75%. B of A showed a breakdown in which the borrower would be paying two points on the new loan, adding an estimated $8,977 in fees and closing costs. That would increase the overall interest rate to 4.1%, excluding taxes and insurance.

In short, B of A’s pitch, with its focus exclusively on lowering the borrower’s monthly payment, implied that the deal was in the consumer’s best interest, even though the borrower would end up paying a higher interest rate and would be adding 10 more years to the overall life of the loan.

Such tactics are not in a borrower’s best interest and fly in the face of efforts by the Consumer Financial Protection Bureau to make consumer products more transparent, simpler and easier to understand, consumer advocates added.

Andrew Pizor, a staff attorney at the National Consumer Law Center, examined B of A’s letter and calculated that the new refinance offer would add $37,188 more in interest over the life of the loan compared to the borrower’s current mortgage.

“This ad clearly implies that this refinancing is right for this borrower,” says Pizor. “I think the pitch is kind of deceptive because it boldly mentions ‘save’ and ‘savings,’ repeatedly, and of course it refers only to the higher interest rate and overall loan amount in the footnotes. Marketers know those details will be overlooked.”

The list of frequently asked questions also gives borrowers the impression “that B of A is looking out for the borrower’s best interest,” Pizor says. “If I was representing this borrower, I’d argue that Bank of America has assumed a fiduciary duty to the borrower by making this promise. But I’m sure the bank wouldn’t agree.”

Bottom line: consumer advocates and banking industry officials appear to differ over whether ads such as B of A’s rise to the level of making false or misleading claims.

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