August Market-Linked CD's

Dear clients and friends:  
                                                                                             August 9 '12
The August Market-Linked CD offerings are interesting...the estimated caps on which the interest is paid are between 5% to 7%.

The commodity-linked CD this month featured below includes both GOLD and SILVER; CORN, NATURAL GAS, & WHEAT also - an excellent way to participate here without any risk to your deposit.
To get more information on these FDIC insured CD's, contact me at (954) 719-1151 , or reply to this e-mail. Thanks. Barry Unterbrink, Chartered Retirement Planning Counselor

Market-Linked Certificates of Deposit can be a smart solution in today’s environment.

With interest rates near historical lows, bonds and typical CDs no longer offer returns that can potentially outpace inflation.  Originally developed by Chase Manhattan bank in 1987, Market-Linked CDs (MLCDs) may be the solution you are looking for as one of the few principal-protected products still offering the potential for annual interest greater than 2.50%.
 
Potential benefits of MLCDs.
1.       Safety - Principal Protection.1
2.       Insurance - FDIC Insurance.2
3.       Potential - Historical interest paid = 2.75%.3
 
The Basics.
§  The issuing bank will return 100% of your principal at maturity.
§  Deposits are insured by the FDIC up to statutory limits, generally $250,000 per bank.
§  MLCDs pay interest each year based on the performance of stocks or commodities.4
§  Some Market-Linked CDs also offer minimum guaranteed interest (such as the one below).
§  If you need to sell your MLCDs prior to maturity the issuer will buy it back at the current market value.5
 
One Example.
§  Commodity Linked CD issued by Bank of the West.
§  Pays interest each year based on the performance of 10 Commodities (includes GOLD & SILVER,
§  Minimum interest will be at least 0.30% annually (GUARANTEED).
§  Maximum interest can be up to 6.5% annually (CAP).
§  This particular CD must be funded by August 24, 2012.
 
If you would like more information on MLCDs.
Please contact BARRY UNTERBRINK , Chartered Retirement Planning Counselor (954) 719-1151, barry@stetsonwealthmanagement.com (Fort Lauderdale, Florida)
 
The above summary is not intended to be an offer to purchase CDs.  Interested depositors should request full offering documents from their financial consultant.  1 MLCDs are 100% principal protected when held to maturity based on the credit strength of the issuer. 2 MLCDs are FDIC Insured up to statutory limits, which are described in detail in the offering documents, generally  up to $250,000 per bank, per account registration.  3 34 MLCDs on this platform have paid interest with an average payment of 2.75%, however past performance is not a prediction of future results as each MLCD offers different variables which will affect actual interest paid. 4 Interest is subject to a CAP.   5 If MLCDs are sold back to issuer prior to maturity, depositor may receive less or more than original deposit.

The Asset Allocation Advantage

The financial markets ended June and the first half of the year in an explosive fashion last Friday. Stocks rose two to three percent. Gold gained 3%, oil shot up 9%. Today, stocks are giving back some due to the weak employment report this morning. As June ended, the stock market averages could not pull positive for the second quarter; The Dow, SP500 and Nasdaq were off 2-5%. For the first half of 2012, the numbers show more strength; with price gains of 7-12%. To achieve those results, you needed to withstand reductions (drawdown) in your account value of 9-12% however.

It’s somewhat disconcerting in that the wild price swings have continued this year. A news announcement in Asia or Europe ripples across the time zones, and jerks our markets up and down. This often gives us reasons to question the validity of our investment strategies, and the strength of our stomachs. In the markets, when your money is invested, it's the journey along the bumpy road that will test your will and often de-rail your chances of achieving your goal. Another roadblock to our long term success: fear and greed. We’re wired in a way to avoid fear and crave success, which can turn to greed if not reality-checked. This usually leads to making poor decisions regarding our investments. It’s much better to have a plan, and then a backup plan also. The skittishness and price swings of the stock markets are forcing most investors to re-think the strategies of the past that have stopped working recently. The “buy-and-hold” approach with stocks and mutual funds has not produced decent enough gains to achieve many people’s goals the past 10-12 years.

One old-school paradigm that we agree is gaining steam is “asset allocation”; that is – designing a portfolio with specific allocations to stocks, bonds, metals, commodities, cash, and others that will perform well in most time periods, while lessening the big drawdowns in the overall portfolio, and provide some income. I’ve uncovered one such portfolio run in real time since the early ‘70’s that’s produced over 9% average* gain for 40 years; it has been implemented with our clients started last year. Ask me for details.

Retirement (I.R.A.) Deadline Looms

I.R.A. and Retirement Plan deadlines in two weeks !

At this time, it's probably a good bet that you're working away at your income taxes. Every year, it seems like an increasing chore to get all the papers in order, then decide if you can get-r-done yourself, or hire a tax preparer to make the numbers "dance" - while hoping for a nice refund.

In all this paper-shuffling, let's not forget the "free lunch" (well-almost) that the tax code offers us; contributing to or establishing a retirement account to lessen our taxable income. This year's deadline for the 2011 tax year IRA contribution is April 17th*, fast approaching. A prior blog covered some of the account growth you could achieve by regularly contributing  to your retirement account every year. You can view that at: http://moneyruminations.blogspot.com/2008_03_23_archive.html The IRA contribution limits are $5,000 per year, and $6,000 for those over age 50.

A few additional actionable points on this topic that may help you:

* Run your tax return with and without the IRA contribution to see how much you will save in taxes, then determine if it is worthwhile to contribute to 2011, or to designate 2012 for the pay-in. You can contribute to both years from January 1st thru April 17th) If your income was low (out of work, etc.) in 2011, you may wish to split your contribution into 2011 and 2012, depending on your income forecast for 2012.

Markets Hit Speed Bump - Retirement Planning Study

Retirement Income Planning - Market Linked CDs
(Risks you face in funding your retirement income)

The financial markets hit a rather nasty speed bump yesterday, as the overnight (Monday) sell-off in the Asian markets moved West into Europe and then onto our shores. Foreign markets fell about twice what we experinced (Dow off 1.4%, SP500 down 1.6% and Nasdaq off 1.4%). Financial stocks, which led the market's rather robust 2012 start, suffered 1.5% to 2% lower. Still one day's action does not dictate a trend, but it bears watching closer. Commodities followed stocks down moreso, but bonds gained some steam as interest rates fell. We are busy watching the charts and allocating to cash or stronger market areas. Your portfolio positioning is ever important now, since you no doubt have some gains to crow about this year, and you may need a strategy to hold onto a few of them. Today prices are back up 1/2% or so. Gold and silver up also.

Stock Market Doubles since 2009.

The stock market hit the level of 13,000 last week, and that marks a double in price from the bear market lows registered March 6, 2009 around Dow 6,500. With such rapid movements and swings in stocks prices, this causes people to overeact and emotionally make decisions that are harmful to their finances. Question: what were your thoughts back in late 2008-early 2009?  Did you sell, buy, allocate money to cash, reballance to a pre-determined allocation across stocks, bonds and cash? Or did you have the nerve and fortitude to just stay put and not worry about it? I reported last blog that bonds and cash do deserve a portion of your investments, especially if your are nearing retirement age. The "safe money" strategies that I've written about should be considered seriously: we never know when the next 30% - 40% - 50% decline in stocks will start, and it would be VERY ill-timed to start your retirement income plan at the depths of a nasty market bottom. Being married to your spouse is great, but being "married" to the stock market with too much risk could result in a nasty financial divorce.

Market Update; A Good Start to 2012

Hello and happy belated New Year investors and savers:

The last quarter of 2011 provided some relief from the drubbing of about 15% in the stock market’s third quarter, as share prices rebounded about 11%-12%. That still left prices basically unchanged dating back to the early August level before the USA’s credit ratings’ downgrade.The main market-related, but non-economic story in my opinion was the off-the-charts volatility of stocks and bonds. I reported on the crazy swing in stock prices during the third quarter in my blog post of mid-November.

Our stock market here in the USA strengthened its engagement and ties to the European mess playing out on the world stage daily; let’s pray a marriage proposal isn’t imminent. In 2011, foreign bourses fared much worse than their North American counterparts. The scoreboard: USA: +2.11% on the S&P 500 Index, Canada, -11%, Latin America, -22%, European region, -15% (the best performing markets there were Ireland, -1% and the U.K., off 6%). Asia and the Pacific region pretty much followed along on the downside: Pacific region, -18% (Indonesia and the Philippines were leaders here, up 3% and 4% respectively); Japan and China down 17-20%). The fear in Asia: they export big time to Europe and the U.S. so our slowly recovering demand-based economy has hurt their pocketbooks also. Does any of this make you feel any better? What worked best, in hindsight here on U.S. soil, was to shun stocks and pile into bonds.
 
Consumer prices (inflation) headed higher in 2011; the final tally was +3.0% up sharply from +1.6% for 2010 – hurting or at least hampering domestic spending, not to mention your dollars worth less even if you spend nothing. “Invest in inflation, it’s the only thing going up", Will Rogers once said. Employment, the chief driver of happiness and consumer confidence now-a-days, remains stubborn at 13.3 million folks jobless, or 8.5% (luckily 141 million still punch in for their daily grind).
 

Using a System for Better Investing Success

Using “systems” to reduce risk and improve investing performance.

Using a system to manage your finances is critical and most often extraordinarily worthwhile – in terms of reduced stress and reduced losses. Being organized just makes you feel better and in control. I contend that your finances and your health rank as the top two areas of your life that are most important to your well-being. I will let the doctors help you with the latter concern. The last blog post I promised to address this topic, so follow along here.

Money management should be treated somewhat much different than most other work-a-day fields of study, as there are various roads to success (and failure). One size does not fit all. The landscape and markets change and force us to change along with them. Using a system should allow you to assess your track record if followed with discipline, to know why it did or did not work, and then to fine-tune it for better success.

So what are some ‘systems’ used? Two for today bear mention, and we'll dwell on technical systems. We’ll stick within the category of stocks since that’s the most popular vehicle for investing now-a-days.

The two broad types or categories of systems are FUNDAMENTAL and TECHNICAL. The difference? Fundamental systems deal with company-specific operational data such as earnings, sales, profit margins, dividends and the like. Filtering stocks that earn a 15% profit growth year-over-year would be criteria for your fundamental investing system. Or buying stocks that pay a 4% dividend yield and earn 10% on capital may be your criteria for this type of fundamental system. TECHNICAL systems use no company data; they rely on TRADING data for the stock as buyers and sellers trade it on the stock exchanges.

Mr. Toad's Wild Ride; Markets Fall Hard in 3Q

Mr. Toad's wild ride comes to Wall Street

At Disney World's Orlando theme park, a popular ride for many years was Mr. Toad's Wild Ride. The rail-based vintage car transports you through a 5 minute swirling journey banging into doors, creepy and devilish characters with scary music and noise. Towards the end, a  train light in the dark approaches you, and then you end up in; well - that place opposite of heaven. Luckily this all takes place in FantasyLand and all-aged riders escape back to daylight and reality in the end.

The latest quarterly period in the markets would have made Mr. Toad proud. If you're an investor, you won't be missing that stretch of 64 trading days one iota. It was a hellaceous ride - a long summer of increased volatility and gut wrenching price swings: when the final closing bell tolled at 11 Wall Street, New York, 13-15% had disappeared from most U.S. major stock averages. Don't get upset on my general bias of negativity - I'm just the messenger here today. It's warranted so we can learn and move on.
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Dissecting the price action on the Standard & Poor's 500 Index, there was about an even chance to make money, sort of; if you could guess the up from the down days. Thirty-one days were gainers and 33 days losers. I can't recall a stretch of time where the market action resembled casino action. I was expecting the local brokerage office to place roulette wheels and craps tables in their lobby and take away the ticker-tape on the wall. One-third of the losing days saw price declines of 2% or more and 7 up days ran as high. The biggest gaining and losing days were +5% and -7% respectivly. Keep the bromo-seltzer nearby.

The quarterly mutual fund stats were released last weekend in the Barron's Financial magazine. Many mutual fund managers didn't fare well either, mainly since the funds they manage are mostly fully invested in stocks with little cash holdings and do not time the
market to reduce risk.

The laundry list by category: Diversified Equity -17%, Science & Technology, -17%, Financial Services, -21%, Global large cap, -17%,  International large cap and multi cap, -20%. With Europe in a mess of indecision (it's getting closer this week to meaningful reform decisions), Europeon objective funds fell 23%, China funds -26% and Latin America -25%. The bright spots (ahem, losing less) were Japan, -5%, U.S. Utility stocks, -6%, and precious metals, off 6%. Gold and silver, which ran counter-cyclical to U.S. stock prices most of the year, de-coupled after Labor Day, falling 15% and 25% respectively into month's end.

This 'safe haven' to offset risk had also went kaput. It's thought that the metals were sold to meet margin calls on borrowed shares (read: sell what's up, to CYA on what's going down). On a brighter notation, staying in bond mutual funds and related ETF's were risk averse places to camp last quarter. The safest debt, relatively speaking - the US's, rose 2-6% (total return: price gain + interest) for those bonds, while falling interest rates aided Treasury bills and notes gaining nicely (2-4%). Foreign and US high yield (junk) debt funds fell one-third to one-half as much as US stocks did, so little salvation there.

With the end of summer, more favorable investing trends could develop. It's a seasonably favorable time to own stocks (see my blog post, "Sell in May..." posted 4-30-2010; the link is http://moneyruminations.blogspot.com/2010/04/sell-in-may-and-go-away.html The November - April period is favorable for rising prices, as more than a few significant stock market lows have been registered in October-November, providing some favorable entry points to own stocks for impending gains through the winter and into Spring. In fact, since WW2, quarterly losses 14%+ have been followed by rebounds 89% of the time*. But as we've seen, prices rise and fall faster now in the claws of economic uncertainty globally. No two year's are quite the same using any system.

System - are you following one?
I believe it's important to follow a "system" for investing, a well-defined system. I didn't say a system that works well all the time (there aren't any). A system that works for your style of investing, time horizon and tollerance for risk. Professional gamblers know that you can be wrong on your bets 60%+ of the time and still make nice money. We faithfully follow a trend-following, low-drawdown system to make money when the markets are positive, and limit losses of capital when markets decline. We use technical (chart based) moving averages and stops, and some fundamental data in our ETF selections and percentage invested numbers. The more "rules" that you have in place with your system, the less you will rely on your emotions and "gut" to direct your investment decisions. Hope and prayer and not investing systems, by the way.

Our risk reduction system and strategies with client portfolios fared rather well in the period. We made about a dozen tweeks to our invested percentages, and wound up with losses no greater than 6% across the range of portfolios. In the next blog, I'll discuss some popular and do-able systems that could help you if you're a do-it-yourself-investor, or to hold your advisor accountable for the "system" that you're implementing now.

Be well until next post!
~Barry Unterbrink, CRPC

* Ned Davis Research

Market Linked CD's - Insured Safety with a Twist

Market Linked CD's - Want Your Cake, and Eat it Too?
An investors balance of risk of loss and earning income is a very tricky widget to get your hands around now. One idea: Market-Linked CD's, outlined in this space back in late June. This "safe money" alternative offers safety of principal with a stock market 'kicker' - to earn substantially more interest than traditional Certificates of Deposit. I'm revisiting it here since I feel it again deserves some attention for investors of many stripes.

The Market-Linked CD's are FDIC insured and a CD hybrid – offering safety of principal and perhaps some growth. This Certificate of Deposit tracks a basket of stocks (domestic or global) to determine the interest payments to you. There is no set interest rate – the rate will vary year by year. They are offered in 5,6 and 7 year terms. The price performance of a basket of 10 stocks determines the income you receive. Operationally, you add up the price changes on the stocks, divide by 10 and that’s it. There is a ‘cap’ or maximum that you can earn each year for the CD’s term. That’s because the principal of the CD is insured by the F.D.I.C., so certain parameters must be set to protect principal. Once interest is earned, it cannot be taken away. In years that the stocks perform poorly, you may have 0% interest credited. The CD’s are approved for both taxable and retirement accounts such as IRA’s. Low minimums to invest do apply.
Just across my desk, a new CD-linked to a basket of 10 commodities, including copper, corn, silver, sugar and wheat. This could prove to be a great way to combat commodity inflation with no downside risk to your insured deposit. Contact me to determine your specific needs - no obligation to meet with you.
Barry Unterbrink, CRPC
(954) 719-1151

Market Update / Safe Money CD Option

More stock market see-saws; A "safe money" option

The stock market last week managed a decent run – up about 4-5%. The prior week it fell 4-5%, and year to date it’s down 5-7% on the popular averages. So what’s up? Certainly not the average investor’s portfolio. Stuff that’s up include consumer prices, rising at a +3.6% annual rate; commodities like food, energy and the market volatility index – not good signs for investors. On the brighter side, if you’ve followed my blog posts this spring and summer, Gold is ahead 6% this month, and silver up 5%; offsetting some of the stock market declines. The metallic duo are up 30% for 2011 so far.


The Federal Reserve’s recent update on its stance on the economy and interest rates was not good news to "Safe Money" savers and investors. Their decision to keep rates stationary until mid-2013 was reassuring to bond investors in that they now could invest without the risk of rising rates, which hurt bond prices. Bond prices shot up sharply, while interest yields fell sharply. Treasury notes and bonds yields are 1/2 to 3/4ths of one percent lower than just 30 days ago. In fact, the 30 year Treasury bond, near 3.6% yield today, just offsets the latest 12 month rise of consumer prices. Seems that the saver is bamboozled again - low rates for savings for two more years and higher prices at the checkout line for goods and services. So how's a saver to get ahead absent a lucky lottery ticket?

CD’s and Fixed Annuity Interest Rates.
CD rates are so low now, that they should be the joke line on the late night comedy shows. I read somewhere that a foreign bank was charging customers to hold their money on deposit. It’s gotten that bad. A friend suggested that I look into the stocks of mattress manufacturer’s; “that’s where people are stashing their money – at least they can sleep well with little worry”.
It’s endemic across multiple areas; CD’s, Savings accounts, annuities, bonds. Three-year CD’s are at 1.70% and 5 year CD’s at 2.4% now. Bond mutual funds and bond ETF’s (exchange-traded funds) offer somewhat higher yields, but as they are securities, they move up and down in price with interest rates and demand. August interest rates have cratered; declining as investors pulled their money from stock-based investments and bought bond-type investments. Short term interest rates are near zero, hence the term “mattress money”. It’s not unusual for 1 percent plus price swings in a single day when money scurries out of bonds and into stocks or gold. So there’s an added level of work owning bond mutual funds or ETF’s - first monitoring them and also paying attention to the dividend dates so you get paid your interest. Plus, remember that bonds' twin nemesis are rising interest rates and inflation. Until you can earn 3.6% on your money, you are losing purchasing power to inflation. Inflation can help you if you are prescient to own "things" that benefit, like gold, silver, and commodities. Annuity guaranteed rates for the terms cited above are low and falling with each rate update. An 8-year fixed annuity now about matches the inflation rate; near 3.5%.

Want Your Cake, and Eat it Too?
An investors balance of risk of loss and earning income is a very tricky widget to get your hands around now.  One idea: Market-Linked CD's, outlined in this space back in late June. This "safe money" alternative offers safety of principal with a stock market 'kicker' - to earn substantially more interest than traditional Certificates of Deposit. I'm revisiting it here since I feel it again deserves some attention for investors of many stripes.  

The Market-Linked CD's are FDIC insured and a CD hybrid – offering safety of principal and perhaps some growth. This Certificate of Deposit tracks a basket of stocks (domestic or global) to determine the interest payments to you. There is no set interest rate – the rate will vary year by year. They are offered in 5,6 and 7 year terms. The price performance of a basket of 10 stocks determines the income you receive. Operationally, you add up the price changes on the stocks, divide by 10 and that’s it. There is a ‘cap’ or maximum that you can earn each year for the CD’s term. That’s because the principal of the CD is insured by the F.D.I.C., so certain parameters must be set to protect principal. Once interest is earned, it cannot be taken away. In years that the stocks perform poorly, you may have 0% interest credited. The CD’s are approved for both taxable and retirement accounts such as IRA’s. Low minimums to invest do apply. Client's will receive the August terms and cap rates in a seperate e-mail in 1-2 days.


Just across my desk, a new CD-linked to a basket of 10 commodities, including copper, corn, silver, sugar and wheat. This could prove to be a great way to combat commodity inflation with no downside risk to your insured deposit. Contact me to determine your specific needs - no obligation to meet with you.


If I can make a forecast. I think that the future holds promise for savers and investors even in this low interest rate era. People have been hammered in their savings and retirement plans twice now in 10 years with serious consequences; falling interest rates and wild swings in the stock markets. The October 2007 high in the stock market is still 2,600 points away on the Dow, or about 20 percentage points lower today. Reminds me of the adage "Fool me once, shame on you; fool me twice, shame on me"; fool me thrice...(add your expletive here!)


Investors (me included) just want a fighting chance to get ahead of taxes, inflation and keep their standard of living static or even growing slightly. My prediciton is that Wall Street, the Banks and Insurance Companies will continue to introduce safer money products that can accomplish that for you and I. It's my job to unearth and analyze these for you; ideas that you may not hear from your stockbroker or financial advisor. I enjoy bringing them to you. Post a reply at the link below or send me an e-mail to barry@stetsonwealthmanagement.com if you want to know more, or have topics of interest you desire covered in upcoming posts.

Do have a great Labor Day holiday!
Barry Unterbrink, (954) 719-1151
Chartered Retirement Planning Counselor

Market Update: Stocks crater; bonds and precious metals have their game on!

Stocks crater; bonds, and precious metals have their game on!
It's been rough sledding in most of the equity (stock) markets the past couple months. The second quarter (April-June) saw no growth in the major stock indexes. In the period, stocks gained 7%, then fell 7%, then rallied into late June to finish even-steven for three months. July saw stock prices fall 2%.

It appears that the stock market wasn't at all inspired by the debt limit and spending brouhaha and negotiations and then passage by the Congress yesterday. Stock prices have fallen 8% in the past 8 sessions; and today looks like it might eek out a small gain. Year-to-date, the S&P 500 Index turned negative yesterday; no gains since New Year's. That is why it is imperative to mitigate your risks of owning stocks by investing in other areas. To wit, Asian stocks have basically ignored our troubles here, and rose in price by nice amounts: markets that you don't hear much about by the "talking heads" on the televison. Singapore, Thailand, Indonesia to name a few. Another area regaining it's glitter is gold and silver, which I've discussed in prior posts. July gains of 10% and 14% in the duo, respectively helped offset weakness in the US stock market. Bonds too are the preferable place to normally be when you have cash sitting on the sidelines and not stock invested. Bond, bond ETF's and bond mutual funds have been on fire of late as interest rates fall (bond prices rise). Gains of 1.5% to 3% are seen on the charts just in the past couple weeks. Phenomenal if you hold them.

Depending on your portfolio structure, a 10-15% allocation to metals or foreign stocks can have a noticeable effect on your performance. As for bonds, they can lessen your portfolio losses as well and keep you sleeping at night. Plus an added benefit is not being in the position to have to sell ALL your stocks in the bad times when your money is spred outside of US stocks. It's the mixture of stocks / bonds / cash that mostly determines your portfolio performance moreso than the individual securities owned.

In really nasty down markets, often staying even, or losing less is a favorable outcome. Remember, virtually all 30%-50% stock market declines start with a 5%, 10%, 15% decline first. Is your financial advisor offering you ideas like this?

National Deficit Math

We better get used to the "T" word now that we're deeply into the Trillions of dollars in our national indebtedness; $14 trillion last time I saw that clock-thing counting higher on the T.V. So just how much is $1 trillion?  It's 1,000 Billion dollars. It's 1 with 12 zeros trailing. It's a whole lot of coin! Per capita (per person) in the United States, that would equal about $44,000. So if we all chip in, we could wipe out all of America's debt over 10 years with JUST $12/day for you and me and the kids until year 2021. Any takers? Anyone trust our government not to get back into this mess again? Ponder that until I post again.

Personal Note:
August 2 marked my 29th year in the financial services business; starting 1982 at Dow Jones level of 822. My father hired me to join his investment newsletter and money management business out of college with my finance degree; thanks, Dad - for then and for all your assistance and mentoring through the years!