Weekly Market Review ~ Friday, 12/14/12
On Monday, the major indexes traded in a narrow range around the unchanged mark as investors continue to wait for progress to be made in fiscal cliff talks. Despite marginally bad wholesale inventory and business optimism index reports, stocks enjoyed a strong showing on Tuesday, as the Dow moved back above the mark it held on election day last month. On Wednesday the Dow extended its winning streak to six sessions, albeit with a very tiny gain, despite the Fed’s announcement that interest rates would remain very low as long as the unemployment rate stays above 6.5%. A larger than expected drop in jobless claims failed to spark the market on Thursday, as moderate losses brought stocks down. The week ended on Friday on another down note as the S&P 500 lost its weekly gains despite a lack of bad news on the day.
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Do I need to worry about the “fiscal cliff”?
This is a frequent question that we have heard from our clients and friends lately. Do I need to worry about the “fiscal cliff”?
We don’t think the fiscal cliff represents a long-term concern to investors’ portfolios. The market may make a temporary move down if a compromise is not reached before January 1st. However, an agreement is inevitable and the market should move forward with renewed confidence.
There are so many unknowns involved that the best course of action is likely no action at all. We are not making any special changes to our NorthStar client portfolios (FYI: our stock portfolio is up over 30% YTD for 2012; see details and performance disclosures).
It’s interesting to note that retail investors (aka individual, “mom and pop” investors) have been selling and fleeing the market in response to the fiscal cliff hype-a-palooza. Meanwhile, professional investors (institutions and hedge funds) have been strong buyers. See the chart below.
Weekly Market Review ~ Friday, 12/07/12
The Dow and S&P 500 receded half a percent on Monday on a surprising drop in a Institute of Supply Management manufacturing report. On Tuesday, the major indexes were stagnant on no major economic news. Rising optimism over a deal being reached to avoid a fiscal cliff propelled stocks upward on Wednesday. On Thursday stocks tacked on further gains as weekly jobless claims fell more than expected. The week concluded on Friday with another win for the Dow and S&P 500 as the US unemployment rate dipped to 7.7% from 7.9%.
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Can Your Edward Jones Financial Advisor Really Serve Your Best Interests?
For full disclosure, NorthStar Capital Advisors is a registered investment advisor that operates under the fiduciary standard of care for its clients.
A comprehensive examination of Edward Jones’ business model was published yesterday: Can Your Edward Jones Financial Advisor Really Serve Your Best Interests? (The Motley Fool)
The authors’ main thesis is the broker-dealer model that Edward Jones operates is generally inferior to a fiduciary model for individual investors seeking advice.
The authors feel Edward Jones advisors can’t really serve their customers’ best interests because of the multitude of ways they can get paid to preferentially push high-fee products. Here are some of the components of its financial advisor’s compensation:
The authors conclude: “investors are at greater risk of being taken advantage of when their advisor is not required to put them first, has strong economic incentives to generate fees, and doesn’t need to disclose those conflicts of interest in a particularly clear way.”
To its credit, Edward Jones does an outstanding job of disclosing how its financial advisors get paid in this 46 page document.
Please refer to the original article for a thorough vettting of Edward Jone’s approach.
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
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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