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| PARAGON Perspectives:
2nd Quarter 2009 |
| Greetings!
We are pleased to share with you our 2nd Quarter 2009 PARAGON Perspectives newsletter. You will find up-to-date information on our current market and economic outlook. Also included are tax tips that you may wish to consider for saving money on taxes in the future. We also hope you'll enjoy our new segment, Client Inspirations, featuring PARAGON clients who are exploring and realizing life goals and dreams. |
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Are We There Yet? Are We There Yet? by Jon Castle, CFP, ChFC
It is amazing the difference a few days can make in the financial markets, isn't it? From the stock markets hitting lows in mid February and no good news to be found anywhere, to one of the strongest rallies in decades, all within the timespan of several weeks. I am reminded of the Chinese curse, "May you live in interesting times." If nothing else, the world of finance has certainly become more interesting over the last year or so. Even my children, ages only 8 and 10, previously oblivious to the workings of the financial world, ask about the economy almost daily.
Stock Market Update
Starting with an abrupt turnaround, the major equity markets started a powerful rally which, as of April 3d, allowed the S&P to climb approximately 24% off the market lows we observed on March 6th, and the NASDAQ to rally over 26%. The rally has been accompanied with flashes of good news - a believable plan by the Treasury to get the toxic assets off bank books, a relaxation of mark-to-market accounting, improved orders for durable goods, a slowing in the rate at which we are losing jobs, an increase in consumer spending, and an increase in home sales.
Several people have asked us if we think this is "the big one" and the stock market will continue to go up from here. While we cannot foresee the future, we are not quite bullish yet. The volume - the amount of shares traded - on the stock market's UP days during the last few weeks do not indicate that large investors (institutions and pensions, primarily) are buying into the stock market with large positions yet. Also, prevailing economic data suggests that we are still deep within a global recession. The present rally appears to be fueled mostly by short term traders, not long term investors with significant monetary backing. Until we see indicators of corporate stock buybacks, pension portfolios entering the equity markets, and high-volume institutional trading, we remain conservative, believing that we are still within the "bottoming process" and that continued ups and downs at or near the present market levels are likely to continue for a little while longer.
According to the Investment Company Institute, approximately $24 Billion dollars has re-entered the market from cash and money market positions over the last month. This number does sound large, and might cause many people to jump into the market. However, comparing this figure to the total amount of money sitting on the sidelines gives us a more realistic view. As of April 4th, over $3.4 Trillion is currently sitting out of play - over 40% of the value of all retail and institutional mutual funds registered in the US. An entry of $24 Billion dollars represents about 7/1000ths of that amount. Hardly an indication of a thundering herd of investors running pell-mell, elbowing others out of the way, to get back into the market!
That being said - the good news is that horrendous economic news is lessening. In a nutshell, the bad news (unemployment, foreclosures, etc) is getting less bad, and the bad news that we are hearing is likely already factored into the markets. For example, if GM does file for Chapter 11 bankruptcy protection - this will not be a real shocker, as most people figure it will happen anyway. We believe that stock prices already reflect that expectation - for the most part, and will hold up reasonably well if that event occurs. On a broader front, the speed at which we are losing jobs, and the speed at which the housing markets are declining - is slowing. These are good signs may indicating that the overall economy is beginning to stabilize and that the beginnings of a recovery in the financial markets may not be far off.
Both bond and stock markets are leading indicators of the economy. This means that stock market and bond market indices are very likely recover sharply several months before the recession is at an end; this has happened in every recorded recession on record in the U.S. thus far. When the major investors we mentioned above see a light at the end of the tunnel - indicators that the recession may end the following quarter and recovery is not far off - they are likely to commit the funds necessary to mount a sustainable bull market rally. While we do not think this time is quite at hand, we remain watchful for those indicators and prepared to take proactive steps to help our investors' potential returns at that time. Stay tuned; it is likely these indicators will appear very quickly and that positive and timely steps will be needed to take advantage of the coming recovery rally.
This newsletter is intended for informational purposes only. ALL investing involves the potential of loss - including invested principal. Indices quoted are general barometers of security price movement. You cannot invest directly in an index. Past performance is not a guarantee of future performance. This message is NOT personal investment advice and should not be taken as such, nor is it a recommendation to buy or sell any security. |
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PARAGON is pleased to present a new feature in its Quarterly editions of PARAGON Perspectives. Please welcome our "Client Inspirations" column. Client Inspirations will highlight PARAGON clients endeavoring and succeeding at lifelong dreams and new retirement passions. We hope you'll enjoy a little slice of the life experiences we interact with each day. |
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Client Inspirations: The Gage's 
Tom and Joanne Gage have been clients of PARAGON Wealth Strategies, LLC. for over three years. In 2008, they embarked on an exciting new chapter of their lives that we thought our other clients would find interesting, possibly helpful and inspirational. Let's start with a little background.
Tom and Joanne both grew up in upstate New York where they had separate but successful careers. Tom owned his own independent insurance agency, and Joanne was a marketing and public relations executive for a Northeast supermarket chain. The Gages often escaped the long, cold and snowy northern New York winters to a second home in south Florida, where they enjoyed the beaches and golf courses. The opportunity to become full-time Floridians presented itself in 2002, when Joanne was offered a position at Winn-Dixie, to help with the company's turnaround. After spending 48 years in upstate New York, Tom and Joanne decided to "go for it", make a life style change and move to Jacksonville, an area of Florida they honestly didn't know too much about.
Joanne took to her new job extremely well and became totally immersed in long hours. Tom, who was able to sell his insurance business, worked as a consultant to the agency for a year and then retired and took on all household, investment, and real estate development responsibilities, acquiring multiple properties along the way. They loved their new life and never looked back....until 2007. Although they enjoyed living in Jacksonville, they often found themselves longing for the beautiful Adirondack mountain region where, in the past, they had spent their summer weekends boating on historic Lake George, a beautiful glacial lake surrounded by mountains noted by Thomas Jefferson as one of the most beautiful places he'd ever seen. "Each year I seemed to have a tougher time tolerating the Jacksonville summer heat," mused Joanne, "and realized I was golfing and boating less in Florida than I did in New York. On those hot days, I would dream of plunging into the refreshing waters of Lake George".
The couple began to think about the future and what they would do once they were both "retired". The idea of running a seasonal business in the Adirondack Mountains intrigued them, and they took off on a fact-finding mission. Their search resulted in a new business that offers Adirondack vacation home rentals - EnGAGEing Enterprises, LLC. "The best way to experience the Adirondacks is to move into a real home and kick back and relax on your own "authentic" Adirondack chair," states Tom emphatically. "The Adirondack chair was invented and perfected in these mountains. We visited the Tennessee and Carolina mountains and, although the area is beautiful and we saw Adirondack chairs, it can be hot in the summer. We want to give people a true Adirondack experience and have them discover what we always loved about the area, but with all of the comforts of home - enjoying a camp fire and sleeping with the windows open, feeling the cool mountain air".
EnGAGEing Enterprises serves up a choice of distinct private residences available for weekly rentals during the summer and fall months in the Lake George region of the
Adirondack Park of New York State. Adirondack Park encompasses 6-million acres, larger than Yellowstone, Yosemite and Gacier National Parks combined. Tom and Joanne have painstakingly improved each of the properties, making sure that each showcases the best of what the region has to offer, including authentic Adirondack decor. Tom personally built The Saratoga Suite, a carriage house property, which gets its name and décor from the famous historic town of Saratoga Springs, a 20-minute drive away.
On Ideas, the Jacksonville marketing agency that Joanne now works for, designed the logo and website for the company, and the 2009 summer season is the first rental season.
The Gages hope that many of their fellow Jacksonvillians will decide to try an Adirondack vacation, especially if they haven't visited the area before. "It's great for history buffs, those who love the great outdoors, or those who have always wanted to be a part of the Saratoga summer horse racing scene", says Tom. "Plus our properties are within easy driving distances of Montreal, Boston and the Big Apple".
Tom and Joanne feel that PARAGON Wealth Strategies deserves some of the credit for the formation of their business. "The folks at PARAGON have been very hands on, helping us with our investments and overall financial planning needs. With their involvement and the advantageous pricing available in the housing market, we felt confident in moving ahead with this plan and fulfilling a life-long dream".
The Gages invite you to come and visit them in Lake George. To view the properties and learn more, visit http://www.enGAGEingenterprises.com. Mention that you saw this article in the Paragon Wealth Strategies newsletter and receive a 10% discount on your rental.
So what is your dream, vision or adventurous idea? Have you already achieved it or started working on it? If so, please share your story with us. Our other clients would enjoy hearing about it. If you have always thought that it was out of reach, call us, let us see if we can help you realize it.
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Tax Savings Tip When You're Not Able to Itemize
by Michelle Ash, CFP, CDFA 
For many people, owning their home free and clear of a mortgage is a desirable goal worth working and saving for. It is perhaps as fundamental to the American dream as home ownership itself. But homeowners who achieve this goal, or those within the home stretch of doing so, often realize that accomplishing this goal can feel like a double-edged sword. Once the home is paid off, or the mortgage interest reaches a relatively low level, there's no longer a tax advantage to owning the home. Having little or no mortgage interest to declare as a deduction, most people also lose the ability to itemize on their tax return once they have retired. A frustration often ensues: you still have to pay your property taxes, any remaining house payments, sales taxes, and any other items you previously were able to include on Schedule A for Itemized Deductions, but the totals of these amounts no longer exceed the Standard Deduction, thus eliminating the previous tax benefit of these payments. Many have often wondered whether there's a way around this loss of tax benefit. The answer is - maybe! However, it requires you to become proactive with your tax planning in order to do so.
First, let's review the current standard deduction limits, so we'll know what dollar amount we're trying to exceed. The Standard Deduction in 2009 is $11,400 for individuals filing Married Filing Jointly or Qualifying Widow(er), and $5,700 for individuals filing Single.
Now that we know the benchmark we're trying to exceed, how can we be proactive to maximize our tax savings? At this point, it becomes necessary to think of our tax situation over multiple years. Essentially, if we can take more of the deductible expenses in any given year, we might be able to exceed the standard deduction threshold in that particular year. While most people would agree that we don't want to pay out more money in order to get a tax break, what if we could instead shift the payment time frame to work to our tax advantage? For example, instead of paying one set of property taxes every year, and always falling short of the Standard Deduction threshold, it might make sense to pay two years of property taxes in one year - say in both January and December of the current calendar year, thus allowing us to reap two deductions within the same tax year.
As an example, Jane Doe, a Florida resident, gets her 2009 property tax notification in November 2009. Jane has until March 2010 to pay these taxes. Jane waits and pays the taxes in January 2010. Then, in November 2010 Jane gets notification about her following year's taxes. Instead of waiting, Jane pays these in December 2010. In this case, Jane has paid two years' property taxes in one year: first in January 2010 and again (for 2011) in December 2010. If Jane's property taxes equal $4,000 per year, she has just paid $8,000 total and can use the entire amount towards her itemized deductions. Assuming Jane files as a Single taxpayer, she has just enabled herself to itemize for tax year 2010, when otherwise she may not have enough deductions to exceed the standard deduction of $5,700 automatically granted to her.* Assuming she is in a 25% tax bracket, she has potentially saved over $500 in taxes for the 2010 tax year.
Going forward, for the 2011 tax year - the year in which Jane is not doubling up on her property tax payments - Jane simply uses the standard deduction, thus getting greater overall benefit of both the dollars paid and the standard deduction given to every taxpayer. She is not penalized for managing her finances so that she was able to itemize the previous year.
As with any tax strategy, we recommend consulting with your tax and financial professionals to discuss your individual situation before taking action. Should you have questions about this or other financial tax strategies, please do not hesitate to give us a call.
*Impact of deduction phase-outs not considered in this example |
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PARAGON Wealth Strategies, LLC, handles the complex financial needs of a select group of high net worth clientele. We are still accepting clients who have a need for comprehensive wealth management services:
- Tax Minimization Strategies
- Retirement and Income Planning
- Asset Management (Accounts generally held at Fidelity or Schwab Institutional)
- Risk Management
- Wealth Transfer, Inheritance Maximization, and Estate Planning
- Life Events (Business Exit, Divorce, Retirement, Inheritance)
If you feel you would benefit from our services, or know someone who would, please contact us to discuss how we may be able to work together. | |
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Investment advisory services provided by Paragon Wealth Strategies, LLC, a registered investment advisor.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. |
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