David Gallacher, Author at C.J. Lawrence
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27 Oct Note to Self: Double-Check your IRA Beneficiary(s)

When opening an Individual Retirement Account (IRA) the documentation requires you to nominate a beneficiary upon your death, other types of account do not typically ask for this information.  Your beneficiary can be anyone you choose: Spouse, children, grandchildren, your estate, friend, charity, trust etc… However, who you choose can have a significant impact on the great tax deferred benefits that IRAs offer.  The key is to make sure that the beneficiary nomination is completed.  If blank, your IRA will become part of your estate and be distributed per your will.  That sounds straightforward but is a crucial error.  Firstly, the IRA will be swallowed into the probate process. Secondly you potentially forfeit significant tax-deferral advantages.  Nominated IRA Beneficiaries have the option to liquidate and pay the taxes outright (not ideal) or ‘stretch’ the minimum required distributions over their lifetime and preserve the tax-deferred status of the pool of assets. Therefore, younger beneficiaries, if financially responsible, can be good options i.e. children if your spouse is already secured financially.  The calculations involved to demonstrate the benefits are beyond the scope of this Insight, but the bottom-line is ensure that the beneficiaries on your IRA documentation are clearly stated and they are up-to-date, those previously divorced take note.  Diligently updating your will does not necessarily ensure your intentions for your IRA assets are fulfilled.


Full Disclosure: Nothing on this site should be considered advice, research or an invitation to buy or sell securities, refer to terms and conditions page for a full disclaimer.


Terms and Conditions

24 Oct Brexit Stole My Lunch

Debate on the merits of remaining or leaving the European Union is giving way to ‘just get on with it’. Markets hate uncertainty and deadlock is dead boring for UK spectators. The cobbled Conservative coalition will be in power for the next 5 years (May May not), plenty of time to complete the task and move on for better or worse. UK economic growth is lagging the rest of Europe but it’s been lackluster for years not just the past post referendum year. Brexit could obviously be one of the reasons but that is opinion not fact. Exorbitant levies introduced to curb the housing market, so vital to the UK wealth effect, could just as easily be another reason. The steep decline in the sterling has made UK manufacturing more competitive, unemployment hovers at record lows, the Bank of England remains highly accommodative and the FTSE 100 is up almost 12% over the past 12 months. The FTSE250, a better gauge of domestic activity, is up over 14% during the same period. Not quite as good as the U.S. but better than the pre-Brexit 2015-16 that averaged 7% (FTSE100) and 12% (FTSE250).


Full Disclosure: Nothing on this site should be considered advice, research or an invitation to buy or sell securities, refer to terms and conditions page for a full disclaimer.


Terms and Conditions

17 Oct Europe – Unified Growth

Welcome back Growth! It’s been too long and we sure have missed you. Real GDP growth stands at 2.3% in the Eurozone slightly taller than the U.S. at 2.2%. Follow the Money and you’ll find Eurozone M3 supply up 5.0% years-on-year, 7% in the UK. Unemployment in Germany and UK has broken through multi decade lows, in France below pre-crisis 2011 levels and falling. Industrial Production across the region has surged above 2008 levels and climbing, same for retail sales and housing starts. The Euro is up 14% and Sterling 7% versus the USD. Did I mention European Equity markets? The STOXX600 is up 21% year-to-date in dollar terms. Great news? Well yes terrific if you owned sufficient European exposure, you had great kicker in your portfolio strategy. But, unfortunately, no if you have zero or minimal exposure which judging by fund flows is the more likely answer.

Investors should be forgiven their skepticism for European equities, recent history has proven treacherous for asset allocators leaving the homeland for anywhere outside of U.S. Treasuries and Large Cap. stocks. But 2017 has thus far proved significantly different, at least in terms of relative market returns, from the preceding half dozen. Europe and Emerging markets have finally awoken, supported by an economic recovery that has shifted from theory to reality, joining what is now a measured synchronized global expansion. Investors with a foothold in international markets should reap the benefits of a highly constructive macro backdrop. For those still with reservations and minimal exposure, tread wisely but tread. Accumulating exposure is our preferred path rather than chasing what remain risk on/risk off markets. However, if we watch and listen to the data isn’t this what you have been waiting for?


Full Disclosure: Nothing on this site should be considered advice, research or an invitation to buy or sell securities, refer to terms and conditions page for a full disclaimer.


Terms and Conditions

24 Feb Inflating European Expectations

The Wall Street Journal reported yesterday that for the first time in almost 4 years none of the Eurozone’s 19 member countries was in deflation during January.  Aggregate Inflation across the region is now 1.8%, approaching the ECB’s target of 2.0%.  The data is a notable marker that may be the signal for the ultra-accommodative ECB to reign in its QE program a little over two years since the Fed ended QE3 in the fall of 2015.  Such a move would have a profound effect on European currency rates with the U.S.  Fund flows follow real interest rates over the long-term.  With real interest rates higher in the U.S. than almost any Developed economy it is a no brainer that money should flow into the dollar.  As the fed began raising rates at the end of 2015 it is no surprise that European currencies correspondingly declined substantially over the course of last year. The Fed’s most recent hike has put further pressure on the value of GBP, EURO, CHF and Kroners. 

Enter the natural beauty of self-correcting global economics.  Between 2011 and 2015 global fx markets were mind numbingly boring.  During, what on the surface, appeared as a turbulent period in global economic history Sterling and the Euro traded within a very narrow range with the USD.   With virtually all central banks aligned behind hugely stimulate actions, transatlantic currencies traded largely in unison.  In such circumstances with the US ahead of the curve in terms of post crisis economic recovery the competitive advantage lay in North America.  The turn in Fed policy at the end of 2015 broke that trend and 2016 served as a corrective year in terms of currency equalization. 

The downdraft in European currency valuations has had the twin effect of boosting Europe’s competitive position and pushing up inflation as import prices increased.  European markets have quietly taken note.  Despite European equity performance in dollar terms once again falling behind U.S. in 2016, in local terms European equities had a strong year with aggregate performance reaching high single digits.  For U.S. based investors the benefits of increasing exposure to Europe are sweetened by the weak currencies and the opportunity to shop around for stock at attractive discounts.  Wow, even a Big Mac in London is now 6% cheaper than the U.S., in London! 

In the post crisis-era international markets have morphed into risk-on trades.  Despite positive U.S. based market returns, investors have remained jittery in recent years preferring assurance over risk.  As global economic growth increases and a reflation trade gets underway the irony of a successful Trump economy could very likely be that international markets begin to outperform as risk appetite re-emerges and investors seek higher returns at reasonable valuations–sounds like Europe to me. 

19 Sep The Opposite

Buy low sell high, it sounds simple enough but most investors avoid this anxiety ridden route at all costs.  Indeed, stocks are the one purchase item on the planet that buyers feel happier paying more for than less.  Such a paradox pervades global financial markets of every stripe.  Investors the world over continue to pile into bonds trading at all-time, never seen before, negative interest rates.  Utilities, which offer relatively zero underlying growth have been the shining stars of this year’s equity market.  Real Estate prices continue to rocket in London despite relentless warnings of Brexit fallout and it remains cheaper for me to fill my car with gas than my fridge with water. 

These trends are not new, in fact they have been stubbornly the conundrum of financial markets for what feels like an age.  Such persistence has led many to abandon time honored investment disciplines as if the world truly has turned on its axis.  At C.J. Lawrence we enjoy the benefit of a library of investment history that dates back well over a century and principals that while not stretching back that far have navigated more cycles than most.  To satisfy the regulators we avoid making explicit recommendations in our published work but with the weight of history behind us we can make bold predictions that are obvious but do not appear to be consensus.  Ready: Interest rates are going to rise, energy prices will recover, economic growth will return to trend (likely higher for periods of time) and real estate yields will normalize i.e. increase.  Of all of these events we are certain but time is the cruelest adversary and it is easy to go broke waiting to be right.  However, we do suggest that we are closer to the end than the beginning of these trends and their turn will be monumental for asset prices. 

So with a nod to George Costanza; investors who are frustrated and scared about global growth, fed policy, the upcoming election would be wise to bear hug fundamentals and survey what would happen should they take the opposing point of view that bonds prices look highly vulnerable at these levels, utilities are trading at unsustainable multiples, energy supply will be engulfed by demand in the coming years and should GDP increase to trend (3%) the stock market is going materially higher.  We may continue on the same course for some time to come but the end of this particular low growth, low inflation, zero interest rate, zero earnings growth road will come and you had better make sure you are positioned for the right road when we reach that intersection.  Time tested investment principals will reemerge and those investments that present true growth for the right price will always prevail in the long-term. 

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


08 Aug May Merkel Mediate an Amicable Divorce

Brexit, what Brexit?  Investors have largely brushed off the impact of the largest political event in the European Union’s short history.  The exit process will take years to unfold so the current relative market tranquility may be the most plausible outcome short-term but Brexit is real and undoubtedly there will be turbulence equally opportunity.  Truthfully no one really knows what the relationship between the EU and Britain will look like one, five or ten years from now but it will be different, at the very least constitutionally.  In such a scenario investors have no longer-term macro framework from which to reasonably forecast economic fortune for the region.  Some investors will guess right, some wrong but that’s not the way we do things at C. J. Lawrence.  When in doubt focus on company earnings.  Brexit will have a major impact on some industries/companies and virtually zero impact on others.  Our job is to identify those companies that we expect, with a high degree of confidence, to deliver superior earnings growth.  Whether investing in Europe, the U.S. or anywhere else in the world we hold firm to this rule and believe such an approach is the only insurance policy for equity price support. 

So what do we know so far about Britain’s status in the EU?  Well in the ten weeks since the vote was cast Britain has already a new Prime Minister.  For reference, Theresa May’s political fulcrum is right of Cameron and therefore pulls the conservative party towards conservatism, or to the right of the center ground that Cameron largely occupied over the past six years.  The UK also has a new Chancellor, Phillip Hammond will be driving Treasury policy.  May is traditionally a Eurosceptic who campaigned quietly for Remain leaving her ideally placed to succeed the premiership in the political embers of the of the Brexit vote.  May will need all of her political experience to capture the most favorable outcome possible for Britain during EU negotiations.

May’s most important partner in these negotiations will be Angela Merkel.  Trade between Germany and the UK is mutually crucial and Merkel, ever the pragmatist, has struck the most constructive tone among her European peers for a favorable exit outcome for all sides.  The two major building blocks of the EU will be the main focus of negotiation:  Trade and the Movement of People across the region.  Unsurprisingly Britain, who invented Trade Liberalism, are anxious to maintain friction free access to European markets.  However, Britain’s wish for sovereign control of immigration within the EU is the main stumbling block.  European leaders see these two issues as a mutually exclusive requirement for EU status.  There are some exceptions but Europe is determined not to set precedents that would encourage other partners to follow Britain’s exit if the terms are too sweet.   These negotiations will take considerable time but we believe ultimately a satisfactory outcome will prevail.

So what to do now?  Europe including the UK is in much better shape economically than it has been for years and has tracked our thesis for continued economic recovery.  Equity markets across the region have been volatile, certainly more so than the U.S. and a valuation discount is evident when comparing similar European and U.S. companies.  The currency environment particularly for the UK is even more favorable than it was when we banged the table last year and as an export region this will be a material tailwind.  Add to this backdrop central bank action that is as aggressive as anyone would have possibly dreamt of two years ago with the addition of the Bank of England that surprised markets with its injection of funding.  The result, Investors have a launch pad for equities that is unprecedented in economic history.  Answer─Buy European stocks with sustainable quality earnings growth, watch valuations and avoid the traps. 

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


20 May Stay Away From Grisly Bears

Investors have pulled more than $60bn out of US equity funds since the start of this year. Outflows in the 2008 financial crisis were $85bn and $65bn during bear market of 2002. Flow data for 2016 is magnified given companies themselves are planning to buyback over $600bn in shares this year. At the same time gold is up 21% y-t-d capturing almost three quarters of all flows into commodities. Rising U.S. rates, a strong dollar and benign global inflation have traditionally flashed sell signals for bullion. Crisis remains a rationale for gold’s ascent but where and which one(s) is unfolding: debt, negative interest rates, conflict..? Carl Icahn is betting on a market crash and investors could pull $500bn out of hedge funds in 2016 according to the New York Post. Sentiment is extremely negative and investing in the stock market appears to be a bad idea to many investors at the moment. But such uncertainty creates opportunity and risk is the price you pay for prosperity.

Despite the overwhelming tone, U.S. market behavior has been fair and reasonable. Since Q4 2014 when the fed ended its QE3 program, the S&P500, give or take a few percent, is essentially flat. The period has been interspersed with 3 scary corrections including the largest swoon in January/ February of this year but each event was followed by swift unexpected reversals. Warren Buffet was correct, “What we learn from history is that people don’t learn from history”, to the misfortune of many hedge fund managers.

Many cite the Fed as the market’s party pooper but look more closely and the real reason for the S&P’s trajectory over the past 18 months has been earnings. Coincidently or not S&P earnings peaked in Q4 2014 at $119. In 2015 earnings registered $115 and our forecasts suggest $118-$120 for 2016. Here lies the answer to market performance, certainly not a reason for celebration but neither for the kind of turmoil many are forecasting and dreading. That said if passive investors are to have any success this year they had better hope that earnings revisions move higher in the coming quarters because multiples are not going to expand in such a fearful environment with interest rates increases sprinkled on top. So what is going to drive earnings higher? 1. Global growth 2. The dollar 3. Oil prices, without these your S&P 500 ETF is dead in the water.

As 2016 unfolds and we look towards 2017, hope alone that earnings will rise will not to be a path to fortune. We have two encompassing conclusions regarding the earnings problem: 1. Companies that take market share will sustainably grow earnings 2. In a zero interest rate world investors will have to pay more for such companies. There are great companies in the U.S. and around the world that are flourishing despite the slow economic backdrop and the many uncertainties that pervade. Companies successfully growing their market share are innovators with loyal enthusiastic customers, financially strong with pricing power, and in most cases dominate in their industries. They can out muscle the competition and deliver appreciating earnings and subsequently higher stock prices. Investors should take comfort that such companies will provide the surest path to investment success over the long-term. We call them Bulldogs.

In the short-term, algorithms, emotion and institutional investors will eat amateur traders for breakfast. However, over the long-term the nonsense of minute-by-minute market information is superseded by the true results of the world’s great companies. Identify, validate and stay on top of the best and the short-term pain of volatility will give way to the assurance of hard fought reward.

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


 

 

13 Oct Bulldog – The Pedigree to Succeed in a Slow Growth Economy

Volatility has ruled for the past two months serving as a painful reminder to investors the risk to the reward of an elongated U.S. bull market.  The timing of Fed Lift off, a slumping Chinese economy, routed commodities and the dreaded R word creeping into select economic forecasts for the U.S. economy among other factors are fueling uncertainty in global markets. Unlikely that these disconcertion’s will be resolved before 2015 rounds out we need a north star to orient our expectations for this year and beyond. As always, we turn to earnings to anchor our market sensibilities and shape our outlook.

Despite the uncertainty that pervades, we are assured in our forecast that 2015 S&P earnings will be recorded as largely flat or just a hair ahead of last year. Our expectation of $118, give or take a couple of dollars puts the S&P 500 on a 2015 multiple of 17x as I write today. More tellingly, revenues for the S&P are going to decline this year versus last. We see evidence of wage pressure together with interest rates and credit spreads creeping higher. These two major cost inputs point to a tougher margin environment for companies going forward. Such as recipe cooks up a problem for earnings unless broad global economic activity picks up, not something widely forecast for 2016. Under these circumstances you are counting on multiple expansion for stock prices to move higher, yes that can happen particularly if interest rate increases get pushed out into next year, but you are blowing in the winds of ‘data dependency’ if that is your base case.

Putting all this together results in muted expectations for the broad market. But, that’s okay because the broad market is not a panacea for investment success, focusing on great companies doing great things regardless of prevailing market or economic conditions is. Take Apple as a great example, between 2008-2015─an economic period often characterized as the worst for half a century─ the company grew its earnings over 1000% and the stock price ascended in harmony. Other examples include Visa (500%), Starbucks (400%), Google (300%)…the list goes on.  During the same period the U.S. economy has expanded on average just over 2.0%. The point should be made that these are revenue driven increases in earnings not engineering through buybacks or M&A etc.

So why have these companies been so successful while the broad economy has been pedestrian? The answer: Their Bulldog qualities. When the economic pie is not getting bigger, in order to survive and thrive you need to take market share from your competitors or, in the case of the companies above, greater share of your wallet. America hasn’t had a real pay rise for a decade but during that period we have managed to carve out $200 per month for smart phones, $10 per week on coffee and have reallocated 60 minutes of our daily attention to the internet, Facebook and You Tube (Google) almost exclusively. The money and time to accomplish this is being taken from other sources. Earnings forecasts for Walmart, McDonalds, JC Penney, The GAP, Coca-Cola, IBM all show a flattening and in some cases a declining trend in top and bottom line growth. These iconic companies may offer value but without growth and/or PE expansion their stock prices are dead in the water.

Our Chairman Jim Moltz taught us that “buying stock in a company that takes market share is the only insurance policy one can get.” Bulldogs are all about growth in units, real growth. Few other breeds of strategy are likely to succeed as this slow growth economy persists.

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


 

 

02 Oct Seeing is Believing – Europe ’s Camouflaged Recovery

Turbulence has marked the 3rd quarter of 2015 for global markets.  Recent moves have been acutely painful but they are unremarkable in the context of long-term history.  However, investors’ short-term memories have been jolted; yes markets do go down as well as up and more often than not with greater violence.  No corner in the world has been spared the volatility, Europe especially.  The regional economy and markets are still closer to departure than destination on the road to recovery but unlike 4 years ago, during almost the same period of 2011, the region has held its ground rather than packing up and going home.  Sure it is heavy weather but European economic data weighs more positively than negatively and is crucially aligned with our base thesis of a continued slow march of recovery with significant headroom to expectations.

Headline risk is overpowering grass roots analysis in Europe.  Persistent negative headlines: Greece, migrant crisis, now Volkswagen (no we don’t hold this in the Euro Select) etc…have a stranglehold on investor sentiment for the region but closer inspection reveals a groundswell of better fundamentals supported by more optimism in sentiment indicators.  UK GDP growth continues to lead developed economies with 2.6% growth forecast for 2015.  Euro area growth is expected to average 1.5% heading towards 2.0% for 2016.  That puts the combined group almost on a par with near term U.S. growth.  When we launch the European Select UIT in early 2014, the region was barely breaking into positive territory.  Bloomberg data points to a 6.7% increase in earnings for Europe in 2015 compared with U.S. profits that are expected to barely breakeven with 2014.   Significant and prolonged under performance from European companies versus the U.S. leaves the region with plenty of room to run in the coming years.

Sentiment indicators in Europe have been robust despite the market turmoil.  Employment conditions across the region are improving, albeit slowly, and increased consumer spending is echoing the creeping improvements.   Three major tailwinds remain in place for European equities: low energy prices, a weaker Euro and ultra-accommodative central bank policy.  Oil prices have pushed inflation marginally negative, increasing pressure on the ECB to expand its QE program.  Estimates suggest that Draghi may push bond purchases beyond 2016 and expand the Central bank’s balance sheet by over Euro 2 trillion, an enormous injection of capital by any other standards. 

Of note also is the push across Europe for greater banking union.  The major market difference between Europe and the U.S. ─ and the main driver of Europe’s sustained economic underperformance─ is the region’s almost complete reliance on bank lending for business financing.  In the U.S. almost 80% of corporate financing is fulfilled through capital markets and only 20% through bank lending.  The implication are that post financial crisis where bank balance sheets are impaired corporate finance in Europe has been suffocated.  The EU is fully engaged with the problem and the creation of a true European capital market would provide a significant boost to the economy. 

European market performance is also showing signs of relative strength in an otherwise down market.  The STOXX 600 has round tripped from a positive 1st quarter return of 15% then pulled down during the (Greek crisis) second quarter and the global correction of the 3rd quarter to end September down just over 4% in USD terms.  That is compared to an S&P 500 down a little over 5% during the same period.  A fairly hollow claim but that’s the first signs of sustained outperformance by Europe in a very long-time and should encourage more investors to hang in there for better times ahead.


Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


 

 

15 Sep Back to School Financial Checklist

Summer is over, back to work everyone. I walked past a Christmas store on Fifth Avenue this morning. As we race towards the tail end of 2015 carve out some time in the coming weeks to make sure you are on target with the following checklist to help optimize your personal balance sheet to give you a feel good financial cheer for the holiday season.

  1. Max out your retirement plans – For many this is the one true no brainer of investing.  If you are lucky enough to get an employee match in your 401k take it! Regardless you need the tax deduction so whether you are employed or self-employed contribute the maximum you can to your retirement plan for 2015 before making any other investment commitments. 
  2. Create or review your will.  This is the first relatively simple step in ensuring adequate estate planning for you and your family.  A will ensures that your property is distributed fully according to your wishes and importantly if planned properly can avoid unnecessary financial and emotional uncertainty for your heirs. 
  3. If you already have a valid up-to-date will in place you may need to take the next steps in forming a more comprehensive estate plan.  If your overall wealth is expected to be in excess of $5 million estate planning is essential but even up to that level of wealth simply paying careful attention to ownership, location and family considerations in your current will help ensure your assets are safeguarded and distributed according to your wishes. 
  4. The low interest rate train will be departing shortly.  Before it leaves make sure you have reviewed all of your outstanding credit: mortgages, loans, car loans and unsecured credit to make sure you are paying the lowest rates available.  For example refinancing high interest rate balances on credit cards with lower rate facilities like HELOCs or bank loans is a prudent way to lower interest payments and increase your ability to reduce principal.     
  5. Ensure your assets are allocated appropriately.  Assess your return and risk objectives and make sure your investment portfolio together with your exposure to debt is appropriate.  August provided a strong warning of how aggressively markets can move.  Uncertainty prevails and volatility will likely persist.  Investors may ultimately be proved correct but staying solvent until that day comes is the crucial determinant if you are to be successful.  September has remained volatile but the large moves we saw in August have abated.  Reduce or add to positions as appropriate but do not over extend. 
  6. Assess your realized and unrealized capital gains and losses y-t-d.  If you are looking for positives from August’s market volatility here’s one to consider: regardless of where your assets are held and who is managing them your Investment portfolios are now likely sprinkled with losses.  Although investment considerations should always be first priority, if you can re-position your holdings and accomplish point number 5 while reducing you 2015 tax bill at the same time, that’s a win.  Be careful not to chase positions or leave yourself exposed but careful assessment of gains and losses is a valuable driver of total return after tax (the only number that matters)
  7. Plan your investment strategy for 2016.  You need to take a view.  Long-term common sense investing is the lowest but best denominator of investment success.  Careful investing is defending against risks while moving towards opportunity.  You may not be correct all the time, especially in the short-term, but understanding your positions and what makes your investment portfolio tick is crucial.  Simply throwing money into broad cross sections of all asset classes will leave you completely at the mercy of markets for better or worse. 

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


04 Sep How Much Time Does Money Buy?

Well it depends… but please read on because rather than evade the tough questions of investment management, we believe our job at C.J. Lawrence is to empower investors with the information they need to help guide their financial decisions for the future.

But first the hard truths.  On our website (www.cjlawrence.com) one of our tag lines states “At the core of every successful plan is a targeted and disciplined investment strategy”.  Translated, no matter how good your financial plan, it is worthless without the assets to support it.  So take your planning back to step 1 and ask the fundamental question: how much money do I need and when?  There are unlimited variables but the key ones include life: time to retirement, life expectancy, spending plans, cost of living, capital market assumptions…

We would welcome the opportunity to meet with you to better pinpoint the answers but in the meantime let us offer you the following reference points.  The U.S. Treasury 10 year yield remains in a choke hold between 2-2.5%.  That’s an annual income of $20-25,000 on $1m with no pay rise for a decade.  You may be a millionaire but long-term subsistence is barely realistic based on these numbers.  To increase your income your need to do one or a combination of the following: 1. Increase your return 2. Eat up your capital.  Both require greater exposure to risk, the former in market volatility the latter outliving your assets.  The realty of today’s zero interest rate world is that you need to carefully balance the risk you are willing to take with your spending assumptions. 

Historical stock market returns have ranged between 8-12%, depending on the period under review.  Many years have presented significantly better returns but, more critically, many significantly worse.  Investors cannot count on a consistent high single digit returns but history guides us that you need exposure to risk assets such as stocks if you have any hope of getting near the total return necessary for a comfortable retirement.  The longer your time horizon the higher the odds of hitting reasonable return targets, in the short-term you are relying on luck over rationale. 

Say you want $100,000 of income and assume a reasonable total return of 5%, inflation aside, $1m dollars will last you approximately 14 years.   If you want to increase either the time or the income you need to grow your assets.  $150,000 annual income to last you 20 years with similar return assumptions will require net assets of at least $1.9m.  Throw in some world travel, lingering college expenses for your kids and, god forbid, significant long-term care costs and your asset requirement ramps.  Ballpark assumptions for a healthy couple in their early sixties wishing to live an active life in an affluent location will need approximately $3m-$5m to fulfill their retirement aspirations and leave a legacy for their children.   If these numbers don’t make you blink congratulations you are officially wealthy and should inquire about our wealth management services immediately.  On the other hand if you, like the majority, feel unprepared financially fear not, it is never late to get serious about investing and establish a target.  At C.J. Lawrence we are here to help you reach your goals, call us and grab the reigns of your financial future.   

Disclaimer

We make no representations or warranties, express or implied, as to the accuracy, completeness of any information provided on this Blog nor do we undertake any obligation to update any of the information provided on this Blog. We expressly disclaim all liability for actions taken or not taken based on any or all of the contents of this Blog, as it is not intended as investment advice. This material is intended for discussion purposes only.  It is not an offer to sell, nor a solicitation of an offer to buy any security, nor does it purport to be a complete description of the terms of or the risks or potential of interest inherent in any actual or proposed security or transaction described herein. The data contained in this report were taken from statistical services, reports in our possession, and from other sources. The commentary, opinions and estimates expressed are our own and we make no representations either as to the accuracy or the existence or non-existence of other facts or interpretations which may be significant. The information herein was gathered from responsible sources but C.J. Lawrence cannot guarantee its accuracy or completeness. The directors, officers, and employees of C.J. Lawrence may either from time to time have a long or short position in the securities described in this reports and may buy or sell such securities. The information herein does not take into account the particular investment objectives or financials circumstances of any specific person who may receive it. Before making an investment, prospective clients are advised to thoroughly and carefully review our Form ADV with their financial, legal, and tax advisers to determine whether this strategy is suitable for them. C.J. Lawrence and Cyrus J. Lawrence are trademarks of Cyrus J. Lawrence LLC. C.J. Lawrence is a registered investment adviser.


David Gallacher, CFA is a Partner and Senior Managing Director at New York based C.J. Lawrence.

C.J. Lawrence

Investment Management