3 Lessons Investors Can Learn from Miguel Cabrera

 I grew up in a sports-loving household – playing sports and watching sports was a large part of my youth.  It should not be surprising that many of my key life lessons have been learned through sports analogies.  As I watch Miguel Cabrera -- one of the greatest hitters in Major League Baseball --  I can’t help but notice how investors might learn from three of his key skills:

1. Always keep your eye on the ball – Remember that your investments are tools to get you to your planning goals; don’t let the ups and downs of the market cause you to lose sight of your long-term goals.
2. Swing for a base hit – Keep your investment strategy balanced and stick to the fundamentals.  Taking big “swings” with trendy investment vehicles or making big shifts in your allocations may put you at risk for striking out.
3. Hit for average – The goal of your investment portfolio should be to return what is needed to reach your financial planning goals within your tolerance for risk.  Maintaining a moderate, but positive, average return over your financial life can get you farther than those who try to swing for the fences, but strike out more times than not.

As you are watching your favorite baseball team this season, keep in mind that the best hitters, like the best investors, stick to the fundamentals.  And don’t forget, your financial planner can be your most valuable hitting coach.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute investment advice.  Prior to making an investment decision, please consult with your financial advisor about your individual situation. Any opinions are those of Center for Financial Planning, inc., and not necessarily those of RJFS or Raymond James.  Investing involves risk, and investors may incur a profit or a loss.

Happy Centerversary

 Join with us as we celebrate two Center team members Centerversaries.  Jennie Bauder a Client Service Manager at the Center who, as of this month, has been a part of our team for 10 years and Gerri Harmer a Client Service Associate, who has been part of our team for 6 years. We like to honor Center employees when they reach a "Centerversary" because we value experience and committment (and quite frankly, we just like having Jennie and Gerri around)!  

We are proud to take a moment and recognize both Jennie and Gerri.  Managing Partner Tim Wyman said it well, "We are fortnuate to have you both."  

When we asked Jennie how it felt to reach the 10 year mark she said, "Working at The Center has endless rewards and has given me so much over the last 10 years.  It is a workplace I enjoy coming to every day and has a family feel amongst my co-workers and Center clients."

Gerri had these thoughts, "It's exciting to work in such a positive team-oriented environment with phenomenal staff and absolutely wonderful clients."

Signs Say Housing is Back

 If you haven’t noticed here locally, the housing market has really changed.  A client told me of a house they tried to purchase in the Detroit suburbs that had 70 offers last week. It was just two or three years ago when you couldn’t give these places away.

A recent well-known gauge for housing, the S&P/Case-Shiller 20-City Composite Home Price Index, which was released in May, posted the biggest gain in seven years.

The 20-city index--one of several S&P/Case-Shiller housing indices--showed a 10.9% gain between March 2012 and March 2013, the highest increase since 2006. In addition, all 20 cities tracked by the index had gains for three straight months. But not all markets are equal. Consider that San Francisco and Phoenix saw large price jumps of more than 20%. However, New York and Boston had smaller gains of 2.6% and 6.7%, respectively.

Also consider that all economic assets are eventually just a supply/demand equation. Prices should be rising given the low supply of homes, less new construction, relatively low prices, and low mortgage rates.

As for the economy as a whole, rising home prices often serve as an indicator that the economy is performing better since it generally demonstrates increased consumer confidence. And while this latest report is good news for homeowners looking to sell, it also provides welcome news to underwater homeowners who may now see an increase in their home equity.

Another gauge of the housing market is that a large number of institutional investors are buying properties to rent—suggesting that there is still a ways to go in terms of a full-fledged housing recovery.

You may hear people worry that another housing bubble is in the cards. Well not so fast! Consider that this economy is built on different terms than the one that led to the housing bubble burst in 2006. Those differences include a tighter mortgage lending environment and houses that may still be undervalued at prices that are significantly lower than they were at their 2006 peak.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

The Prescott tragedy hits close to home

 Founding Partner of The Center, Daniel Boyce, lives in Prescott, Arizona, just miles from where the Yarnell Hill Fire that took the lives of 19 firefighters. The tragedy was the greatest loss of life for firefighters since Sept. 11, 2001 and hit very close to home for Dan and his wife Sue. He shares his thoughts:

The loss of 19 elite Arizona firefighters is a devastating blow for our small city, made all the more poignant for all of us since the same crew had been active in putting out a larger fire much closer to Prescott just a week or so earlier. That fire started just 4-5 miles due west from our house, and within 9 hours was over 5,000 acres in size. Had the wind been from another direction, we would have quickly been in the "line of fire"; as it was, we had our car packed with our most important stuff, our cats sequestered to be able to grab them quickly, and were ready to evacuate if the winds had shifted. But thanks to more than 600 firefighters battling for over a week on rugged terrain, in the end there were amazingly no structures burned or serious injuries.

The Yarnell Hill Fire, where the tragedy occurred June 30^th, is about 15-20 miles south of us. We saw the air tankers loaded with fire-retardant slurry headed in that direction--run after run--little did we know what would ensue. Things around here have been tinder dry, and it has been unusually windy, making fire conditions extremely hazardous.

Sue and I sang in the choir at the memorial service for the 19 firefighters from Prescott. It was held at the largest arena in the area and still thousands who couldn't fit in sat outside to watch the service on jumbo screens. Though Sue and I don't know any of the fire victims personally, in a town of this size (~100,000) there is generally only one, or at most two, degrees of separation. It was an extraordinarily moving service and it reminded me once again how fortunate we all are, and how important it is to share our gratitude with those we care about.  So I'm doing just that.  Thank you for being an important part of my life.

Investment Commentary - 2nd Quarter 2013

While excellent equity market returns coupled with very low volatility have been the name of the game for much of this year, volatility has become the theme in recent weeks as returns across markets have varied quite widely.  Despite this recent volatility Equity returns still look strong to date this year as well as for the past year while bonds and commodities continue to struggle.

In recent weeks the Federal Reserve Bank (the FED) led by Ben Bernanke has been busy!  At their meeting in mid-June they started to give some guidance in which the seemingly unending stimulus that was termed “QE3” (Quantitative Easing) would start to be tapered off.  In September 2012 the FED started buying $40 billion per month of mortgaged backed securities, accelerating that buying to $85 billion per month in December 2012.  Their continued purchasing of this debt was pending the economy improving as measured by the Unemployment rate.  Recently Bernanke stated:

The Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7%, with solid economic growth supporting further job gains – a substantial improvement from the 8.1% unemployment rate that prevailed when the Committee announced this program.

Bernanke also stated that the federal funds rate would be kept in the current 0-0.25% range until the unemployment rate headed below 6.5%.  Immediately after this announcement the markets, all markets, sold off.  Domestic and International Equities, Bonds and commodities (most notoriously Gold) all sold off as investors sold first and asked questions later.  Interest rates on the much quoted 10 year Treasury note shot up significantly in the past month.

The selloff in the fixed income markets seemed justified to us, although maybe not across the board.  For the stock markets the reaction seemed  rather extreme because over the course of two days, June 19^th and 20^th, the S&P 500 was off more than 3 times what the Barclays US Aggregate Bond Index was off, ‑3.84% versus -1.21%. 

Since then positive news has been negative for markets while negative news has been positive.  Signs of an improving economy are met with negative returns because people fear this will accelerate the tapering schedule the FED has laid out.  On the other hand stocks have rallied into poor economic data headlines such as “1^st quarter GDP revision of economic growth going from 2.4% to 1.8%.” As equity markets find their footing again we would anticipate this to be a short term anomaly and an improving economy should be met with a positive note by markets going forward but only time will tell.

The bottom line is that QE3 was one of the largest forms of stimulus the FED has applied in its history.  Although 2008 is not yet a distant memory for most, the economy has been improving consistently now for four years.  When put that way it is hard to rationalize these extreme QE measures for too long.  We applaud the FED for its transparency as uncertainty is usually a more negative force in the markets than the actual facts.

On behalf of everyone here at The Center,

Angela Palacios, CFP®

Portfolio Manager

On a lighter note, as many of you know Melissa Joy, Partner and Director of Investments here at the Center, generally brings you our investment commentary.  However, she is taking a much deserved maternity leave after the birth of Josephine Pearl on June 18th!

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Required Disclaimers: The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Angela Palacios and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors.

There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices generally rise. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Please note that international investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Commodities may be subject to greater volatility than investments in traditional securities. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.

Investment Performance - 2nd Quarter 2013

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Why Being an Investor is Like Being a Sports Fan

As an enthusiastic fan of the Detroit Tigers, I entered into this baseball season with high expectations.  According to Las Vegas odds-makers, our local team is the favorite to win this year’s World Series, given the talented roster we have in place.  As the season has gone on, I have found myself riding a rollercoaster of emotions as the team has had impressive streaks of success, as well as discouraging displays of mediocrity.  In a way, this reminds me of the emotions many of us feel as investors as we watch the ebbs and flows of the stock market.

Behavioral Finance

Behavioral finance is a term used to describe the behavioral and psychological reasons why people make irrational financial decisions.  Interestingly, many of these behavioral tendencies are similar to those of sports fans.

• Following the Crowd (herding) – As investors and as sports fans we may jump on and off the bandwagon. As investors, we may panic and decide to make dramatic shifts in our asset allocation in reaction to a market downturn or upswing. As sports fans, we may bet our entire fortune on our favorite team when they’re winning or move our allegiance to another team altogether when they’re losing.

• Short-term Focus – With investments, as with sports, we care about what’s happening now, but can lose sight of the long-term goal. It is hard to keep in mind that the 5 game losing streak (or 5% market pull-back) may have little to no impact on the team’s record after 160 games (or achieving the results we need to meet our retirement goals).

• Finding Someone (or Something) to Blame – When things aren’t going well, there is always a scapegoat. When our favorite sports team is doing poorly, we can always find one player or coach that’s to blame. When our investments aren’t performing the way we’d like, we can find an investment vehicle or manager to blame. Know that if you have good line-up and a solid strategy, there is no need to place blame (especially when the investment you blame now may be your best performer next year!)

The ability to avoid reacting irrationally is the sign of a long-term investor and of a loyal sports fan.  When it comes to investing, your financial planner can be your best coach, helping you to stay in the game, even when the going gets rough!

Sandra Adams, CFP®is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investing involves risk and investors may incur a profit or a loss.

Serving our community and profession

 

Leadership Oakland announced the list of graduates of the 2012-2013 Cornerstone Program class. Among the 53 individuals representing businesses and non-profit agencies completing the requirements of the year-long leadership development program was our own Tim Wyman, CFP® JD.  When asked about his experience Tim said, “The program exceeded all of my expectations.  The experience provided a tremendous opportunity for both personal and professional growth as I continue to serve clients at The Center and the community.”  A graduation ceremony was held at the Fieldstone Golf Club in Auburn Hills where participants were recognized for their commitment to community and the program as well as a greater understanding of local issues.

Tim traveled to northern Michigan to begin the program with a kick-off leadership retreat held in early September.  The retreat was followed by monthly day-long sessions that delved into issues facing the region.  Tim remarked, “My appreciation of the wonderful resources and people in our region has increased tenfold.  My 52 class cohorts, along with the many people I met serving others in our region, have inspired me to be a better husband, father, business leader, and contributor to our community.”  Tim and his fellow graduates are now linked to one of the most powerful business networks in Michigan. Way to go Tim!

A New Kind of Bucket List

 Retirees love to talk about their Bucket Lists, their current adventures and travel, and all the things they would like to do before it is too late.  You can have great fun constructing this checklist of what is possible, what is probable, and maybe some things that are way out there.

This Bucket List theory can also apply well to retiree financial situations.  We know the volatility of the stock market causes people angst, distress, and can leave them unable to make decisions.  But think of your finances in two separate buckets.  The first is a cash bucket that has up to 18 months or possibly two years worth of cash that will be used for current spending.  This bucket includes pensions, social security, and income from investments that should be there for the designated time.

The second bucket is an investment bucket with a well-diversified portfolio, preferably managed by professionals. Although we never lose sight of the second bucket, we can let it ride through the normal gyrations of the financial markets.  This strategy can help provide investor confidence.

Our cash bucket can be replenished by adding dividends from the fixed income portion of our investment bucket.  Some folks like to add a third bucket, a wish list bucket to have cash available to fulfill the traditional Bucket List of adventures.  This can be filled when we do not spend as much as planned and with potential excess appreciation of portfolios.

So while you’re dreaming up exotic destinations, mountains to climb, or wineries to visit, also make plans to fill your financial buckets. It will make it much easier to check off the things you’ve waited your whole life to do!

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Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Investing involves risk and you may incur a profit or loss regardless of strategy selected.  Diversification does not ensure a profit or guarantee against a loss.  Dividends are not guaranteed and must be authorized by the company’s board of directors.

Triathletes come in all Shapes and Sizes

 This is my second year of triathlon competitions.  I use the term “competition” loosely as I am not going out there to compete against others, just myself.  For the first time in my life I woke up last year and said, “I’m going to complete a triathlon this summer.” What was really astounding is that I had never swam, didn’t own a bike and rarely ran.  With hard work, I not only met my goal but completed three of them.  Finishing the final event of the season was very bittersweet, a relief that I could take a break but sad because I enjoyed them so thoroughly. 

But the winter flew by and before I knew it, it was time to start training again.  This year I am doing the exact same series of triathlons that I did last year.  It is a familiar course which makes it easy to track my progress in fitness level from one to the next. 

I was surprised this year to notice many of the same people that I saw last year out there.  It got me thinking what a great crowd it is.  On June 19^th, about 500 people started the race and 430 completed it.  What really struck me about the crowd is how triathletes can come in all shapes and sizes.  Of course there are the super fit people who look like they eat nothing but birdseed for 3 meals a day and they finish without even breaking a sweat (yes you may read the slight jealousy in my writing).  Those aren’t the people who impress me though.  The people who impress me are the people who believe they can do something and set out to achieve it.  Many are moms that are obviously stretched for time, much like me.  Others are trying to lose weight and yet others are just trying to stay fit as they age.  In fact, the largest age brackets were people in their mid-30’s to 50’s!  This proves it doesn’t matter what stage in life you are in, just that you get out and do something!