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Data: BLS, FactSet, J.P. Morgan Asset Management. Source: Census Bureau, J.P. Morgan Asset Management; Unemployment rates shown are for civilians aged 25 and older.
Source: JPM Morgan Guide to Markets, Q2 2013
A New York Times article published last Friday tells the story of the 4th largest brokerage firm in America and its frequent run-ins with regulators.
Here are some key excerpts:
LPL Financial, has 13,300 brokers, 6,500 offices, 4.3 million customers — and a growing list of problems with regulators.
State and federal authorities have censured the company and its brokers with unusual frequency.
LPL brokers have been penalized for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients.
“LPL is on our radar screen more than any other firm,” said Lynne Egan, who oversees securities regulation in Montana.
Since the financial crisis hit in 2008, prominent firms like Merrill, which long catered to individual investors, have lost brokers and customers. Many investors have turned instead to independent brokerage firms like LPL. Unlike employees of the industry giants, LPL brokers are essentially contractors. They get LPL e-mail addresses and come under LPL compliance but pay for office space and staff.
LPL’s most serious case in Montana was resolved in 2009, when Donald Chouinard, an LPL broker in Kalispell, was sentenced to 10 years in prison for operating a Ponzi scheme. LPL paid Mr. Chouinard’s clients $1.3 million, and Ms. Egan’s office a $150,000 fine.
William F. Galvin, the Massachusetts secretary of the commonwealth, came to a $2.5 million settlement with LPL in February for selling the same product to investors in his state. Mr. Galvin said LPL had failed to properly examine who the products were being sold to, and had pushed the investments without mentioning that they provided big commissions to LPL and its brokers.
“What we really saw was a complete lack of supervision,” Mr. Galvin said.
Here’s an important reminder if you have an individual retirement account (IRA) or are considering opening an IRA.
2012 contributions to your IRA accounts can still be made up through April 15, 2013.
IRA Contribution Limits for 2012*
Traditional/IRA Rollover: $5,000 ($6,000 if you are 50 years old or older)
Roth IRA: $5,000 ($6,000 if you are 50 years old or older)
SIMPLE IRA: $11,500 ($14,000 if you are 50 years old or older)
SEP IRA: $50,000
*Note: The maximum contribution limit is affected by your taxable compensation for the year. Refer to IRS Publication 590 for full details.
We’re big fans of “Downton Abbey”, the television show that follows an aristocratic British family in the early decades of the 20th century.
Over the three seasons that the show has graced PBS’ “Masterpiece”, a number of money lessons have been showcased — mostly what NOT to do!
For example, don’t bet the family fortune on a railroad thousands of miles away (i.e., massive lack of diversification). A professional advisor working in concert with the Earl of Grantham probably would have prevented him from concentrating so much capital in a Canadian railway!
Downton’s money lessons include financial and estate-planning disasters, bad investments, messy trusts, and inadequate business succession plans.
Here are some key takeaways and tie-ins:
We can’t wait for more Dowton Abbey and money lessons in season four!
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The Dow climbed to 14253.77 on Tuesday to set a new all-time high. The economic landscape has changed a great deal since the previous record was set in October 2007:
Source: WSJ
Our friends at the The Big Picture have published an excellent and very up-to-date guide to buying and leasing a car.
Here’s an overview of how to expertly navigate this process while saving time and money.
1) Set Up Your Online Shopping Identify:
Get a Google Voice account (its free) then get a LeeMail account (its free). These are the only numbers/addresses you use until you decide which car you are getting from which dealer.
2) Do your homework: Before you ever step foot on a dealer’s lot, you need to figure out a few things:
a) What kind of transport? Are you looking for a minivan, convertible, truck, coupe, SUV, etc.
b) The range of competitive vehicles for that car type
c) Your actual budget (including your “bottom line” monthly price)
d) Buy or Lease? (see #3)
3) Buy or lease? Most people should own, not lease cars. Its better not to pay for just the most expensive years of a depreciating asset.
The exception is if you can lease with pre-tax dollars — if you own (or are senior enough in) a company, than a lease may be a great deal. But without that tax advantage, the numbers favor owning.
4) Know Your Price Range and Approximate Cost of Cars: All of the cars I mentioned have extensive websites where you can build and price vehicles. You end up with MSRP.
5) Understand Factors Which Impact Pricing: The cost of any given car is a function of its retail price (MSRP), specific programs dealers are running, financing, what is hot or not, and other factors.
6) Be aware of the sales routine: If you followed steps 1-5, you know the approximate cost of the car, plus the options you want, and how that prices it.
7) Understand the buying/leasing math: The purchase math is simple: Negotiated cost of car plus financing expenses.
8) Use Online Salespersons: I asked several dealers for quotes on cars. If they ignored my request for an emailed quote and called, I held that against them. Different dealers have differing demands for specific cars. Some of the deals were very competitive .
9) Go to Competing Dealerships: Don’t be afraid to cast a wide net.
10) Use a car buying service: That was the suggestion for people who are too busy or intimidated or who simply dont want to be bothered. Leading suggestions: USAA, Credit Unions, and (mulitple recommendations) CostCo.
Check out TBP’s full guide at http://www.ritholtz.com/blog/2013/02/guide-leasing-buying/
We are disappointed to report that the Nightly Business Report has been purchased by CNBC.
“Nightly Business Report,” the 34-year-old nightly business news show that airs on public television stations across the country, will start being produced by CNBC, according to a deal announced today.
We have often referenced NBR as trusted source for unbiased advice, news and perspective for long-term investors. However, the takeover by CNBC is a cause for grave concern. CNBC, in our opinion, is a source of financial “noise” that inspires investors to take rash decisions and erode they long-term investing discipline.
We fear the public’s interest will be supplanted by private interests. The worst is the name will probably be kept giving the appearance that NBR puts the public’s interest ahead of the interests of CNBC shareholders and advertisers.
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The S&P 500 has more than doubled since March 2009 but individual investors have been selling stocks almost the entire time!
In January 2013, equity funds took in $19.6 billion. This was the largest inflow since ICI started tracking the data six years ago. During the prior 4 year rally, outflows exceeded $435 billion.
This is a very visual example of how emotions can wreak havoc on an investor’s ability to build long-term wealth. Investors allowed fear to control their investing behavior and entirely miss this 4-year bull run.
This negative behavior is nothing new. Over the 20-year period from 1992 to 2011, the S&P 500 returned 7.8% annually, while the average stock investor in the U.S. earned only 3.5%.
Source:
David Wilson
Chart of the Day, February 14, 2013
Bloomberg
Do you ever get the feeling that managing your finances is like herding cats? If you’re like the typical person with dozens of banking, credit card and investment accounts housed at an array of financial institutions, it sure can feel like it!
Here are two great ways to corral your accounts and take control of that herd!
#1 Use Mint.com to get a comprehensive, “live” view of your accounts
Mint.com is a free web-based personal financial management service. Mint’s primary service allows users to track bank, credit card, investment, and loan transactions and balances through a single user interface. Users can also make budgets and goals.
It takes less than five minutes to set up an account and start loading your accounts. Each time you log in, Mint automatically polls your financial service providers for the most up-to-date balances for all your accounts.
#2 Consolidate your retirement accounts
It’s not uncommon for people to have four or more investment accounts (e.g., 401(k)s, profit-sharing accounts, IRAs, etc) that they have accumulated from working at various companies or even inherited. You should consider rolling accounts that have the same tax deferred treatment into a single giant IRA.
Consolidating your accounts will make it easier for you to monitor performance, rebalance your portfolio, maintain your asset allocation, and manage required distributions.
NorthStar Capital Advisors has an article What to Do with Your Old 401(k) that walks through the options including creating a consolidated “Rollover IRA” that will help you see the big picture more easily and help you make more informed decisions.
Stocks took a breather on Monday from their recent upward trek, with the Dow and S&P 500 registering small losses on the day. On Tuesday, the Dow marched ahead to yet another 5-year high on little economic news of note. Stocks gave back some of Tuesday’s gains on Wednesday following the Fed’s statement that the economy has stalled recently, as well as a preliminary report showing that the 2012 fourth quarter GDP declined slightly rather than expand by 1.0% as predicted. On Thursday the month ended on a down note, as new weekly jobless claims rose. This was all forgotten on Friday, as the major indexes jumped more than a percent on positive job and manufacturing reports. The Dow reached the 14000 mark for the first time since October 2007.
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