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Dear ,
Welcome to June 2013 issue of The Wealth Chronicle!
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Student Loans Set to Double
Unless a last minute deal is made, millions of college students will see their loan rates double on July 1st to 6.8%. This may not sound crazy, but consider this: the 10-year Treasury rate is just below 2.5% and the 30 year Treasury rate is 3.5%. Even 10-year government bonds from Spain and Portugal pay less than 6.8%.
The new, higher rate will affect about 7 million students and families, who qualify for the loans based on financial need. The government, the issuer of these student  loans is set to pocket a record $50 billion on student loans this year. Of course the government's profit will rise if rates rise.
The student loan rate raise can be crippling, but just as important is dealing with the much bigger issue of college costs. The cost of college is going up 5%, 6%, 7%, 8% every single year. College costs have increased more than 1,100 percent over the past 35 years. Even health care costs haven't surged as much, climbing just 601% during that same period. To put things into perspective, it is projected to cost $500,000 for a child born today to attend four years of school at Syracuse University when they would start attending college in 18 years.
Why have they raised so much? It's because the government makes it so easy to get a loan. Sounds familiar? It's a lot like what happened in the housing market over the past decade in the housing market where the government made it so easy to obtain a mortgage. Will the education industry go through the same crash?
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Money Lessons from "The Sopranos"
James Gandolfini, the actor in the iconic TV show "The Sopranos" passed away last week. MSN Money came out with an interesting article on money lessons from the show
1.There's money to be made in any economy.
Tony Soprano, complaining that his captains aren't bringing in more money: "Sil, break it down for them. What two businesses have traditionally been recession-proof since time immemorial?"
Silvio Dante: "Certain aspects of show business . . . and our thing."
Tony: "Now, that's it. That's all I've gotta say. Frankly, I'm depressed and ashamed."
2. Invest in land.
Tony talking to his son: "Buy land, A.J., 'cause God ain't making any more of it."
3. Being the boss is lonely.
Tony: "All due respect, you got no (expletive) idea what it's like to be No. 1. Every decision you make affects every facet of every other (expletive) thing. It's too much to deal with almost. And in the end you're completely alone with it all."
4. Make up your mind and stick with it.
Tony: "A wrong decision is better than indecision."
5. Delegate.
Tony to one of his men: "It's your job to make my job easier."
6. Pick up the tab and smile.
Tony to Christopher Moltisanti: "You know how many tabs, how many dinners, I've picked up over the years? . . . It's a sign of respect. Why don't you cheer up? One day some kid will be paying for your dinners."
A couple of the lessons above are good, but I think I liked the article better to reminisce about scenes from one of my all-time favorite shows. The Money Lessons from ......., are popular article subjects nowadays. My favorite one is probably Estate Planning tips from Downtown Abbey, the popular TV series.
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Investment Strategy - Institutional Ownership
On June 10th Facebook's stock price was up over 5%. They didn't release a new feature on their website or announce that 1 billion people are on Facebook. The reason for their gain was that there was a rumor that they would be included in the S&P 500 Index. That is important because one of the biggest jumps that stocks see is when they are added Indexes like the S&P 500. There is $1.23 Trillion invested in S&P 500 index funds and if Facebook was included in the index many mutual funds would be required to purchase Facebook stock thus almost automatically driving up its price.
The strategy of finding stocks right before they are about to be added to an index is one that was made popular by William O'Neill, founder of the newspaper Investor's Business Daily. In his book How to Make Money in Stocks, O'Neill writes about a strategy he uses to find diamonds in the stock market. The acronym for his strategy is CANSLIM. The I in CANSLIM represent institutional ownership, which is when mutual funds and hedge funds have added the stock to their portfolios.
The CANSLIM Criteria
Current earnings: At least 25% Quarter on Quarter growth and preferably earnings growth acceleration
Annual earnings: At least 25% Year on Year growth and at least 17% ROE
New: New products, New Business Model, New management, New conditions, & preferably New 52 Week High
Supply and Demand: Higher Volume on price gains, The less shares the better, under 200 million shares ideal, higher priced stocks favored
Leader or Laggard: Industry performance leader (Qualitative) and Stock price Performance Leader (Quantitative)
Institutional Ownership: Accumulation by Institutions such as Mutual funds & hedge funds, decent amount of Institutional Ownership.
Market direction: Bull or Bear market sentiment at time of investing
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Watercooler
Many people want to know what is going to happen to Interest Rates. This quote from Mark Okada, the co-founder and chief investment officer at Highland Capital Management, pretty much sums up the situation we are in. "It will be hard to call the exact move in interest rates, because we're in a massive global monetary experiment that's never been done before." "And anybody who tells you where rates are going, you shouldn't list to - besides [Federal Reserve Board Chairman] Ben Bernanke.
It's been a tough couple of months for Rutgers University. First a video circulates showing basketball coach Mike Rice physically and verbally abusing his players  leading to his and athletic director Tim Pernetti's ouster. Then it comes out that the coach hired to replace Rice lied on his resume about graduating from Rutgers. Then shortly after that it comes out that newly hired athletic director has a couple of blemishes with her past having similar incidents to what Rice had while she was a volleyball coach at Tennessee. Finally the icing on the cake was when Rutgers bond rating was downgraded by Moody's. Citing questions about how the merger with UMDNJ will impact Rutgers finances, Moody's downgraded Rutgers credit rating, making it more expensive for Rutgers to borrow money. Here is the full article on the downgrade.
An interesting chart of the 100 highest paid athletes in the world and what countries they come from.
A picture from Charlotte's Christening in mid April 2013
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Financial Help Desk
I recently sent out a letter offering a free "Help Desk" service for a couple of weeks to answer questions you, your friends, or colleagues may have. The response has been great and I have received some great questions on a lot of different personal finance topics.
If you have friends, family, or colleagues with any type of personal finance question - send them my way, I will do my best to answer it.
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Please contact me if you have any questions about the articles above or about your personal or business finances.
Sincerely,
Marc Bautis
Wealth Manager
office: 201-842-7655
cell: 201-221-6895
fax: 201-754-9760
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Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation. You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter
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 | | MEET MARC | |
Marc Bautis is a Wealth Manager specializing in working with young families as well as retirees and those nearing retirement. He understands that everyone wants to not only protect their principal, but also be sure that their money lasts. He is committed and proud to deliver independent advice, always in the interest of his clients.
Marc is the creator of the Retirement Fitness Challenge™, a program designed to be sure his clients enjoy the retirement years as they have always envisioned them. Marc's program is designed to prevent outliving your money but also to minimize expenses during retirement and find the best time to start taking Social Security benefits. Marc is also the author of a recent book The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime, which is available on Amazon.com.
Marc is a graduate of Seton Hall University. He is a Bergen County native, from Lyndhurst, where much of his extended family still resides. He currently lives in Hasbrouck Heights with his wife Katie, new daughter Charlotte and Old English Bulldog, Winnie.
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