Monthly Archives: October 2012

Economic Recovery – “Revving Up”

This is the latest edition of our Economic Recovery presentations. Click on the link for my 12 minute video. I’m slightly embarrassed to say I prepared this months ago but neglected to “publish” it. However the message is still very current and I urge you to watch it.

The script follows.

I’m pleased we can share what is mostly positive news this quarter.  We’ve been doing these presentations for a few years now, and although we try to present a balance report, frankly, the news hasn’t been all that great.

Fittingly this quarter, our theme is “Revving Up.”  Driven by a more confident consumer, the economic engine appears to be shifting into a higher gear. 

Today we will share the latest developments on several economic fronts, much of it good news, and we’ll point out areas where more work has to be done.  Finally, we’ll talk about how the economic recovery will impact your financial goals and how we can help.

Let’s start where the economy appears to have traction– on the consumer front.  Supported by good news about jobs and a stronger stock market, consumers are accelerating their spending. Part of it may be a pent up demand, as well as the fact that consumers are just feeling better about their situation. 

The Consumer Confidence Index, which measures how people feel about their personal situation, has increased noticeably. Consumers are purchasing more cars, RVs and other big-ticket items.  Interestingly, consumers remain thrifty with things like food, beverages and clothing, spending for which is flat or down slightly.

So where do we have work to do?  First, because wages remain mostly flat, consumers are dipping into savings, or using credit cards for new purchases.*
It’s also a mixed picture for retailers.  To attract price conscious customers, they’ve had to discount most merchandise, cutting into profitability, which in turn, impacts their willingness to hire.**
Finally, consumer sentiment would be even stronger were it not for rising gas prices.  With the average cost of gas now over $4 per gallon, consumers may cut back on summer vacations and other spending.
*”Consumer sentiment index at highest rate since late 2007,”  Los Angeles Times, March 30, 2012.

**”Spring Fever Draws Shoppers,” Wall Street Journal, April 5, 2012.
As we look at the markets from the first quarter, you can see that most asset classes finished in positive territory, some impressively so.

For those of us exasperated with market volatility, it is currently stabilized at a three-year low,  and provided the backdrop for robust investment gains.
The primary drivers were: Strong economic data supporting the U.S. recovery, and continued progress towards resolution of the European debt crisis.
Equity markets continued their 2011 end-of-year rally through the 1st quarter of 2012.
Emerging equities led their developed counterparts in the U.S. and international markets.

Now let’s talk jobs.  Again, like much of our discussion, it paints a mixed picture.  Overall, we are encouraged by the steady decline in unemployment, currently at 8.2% nationallyand 6.5% in Masachusetts.
The rate of job growth is accelerating. In fact, 8 out of the 10 sectors tracked by the government have picked up this year, led by construction – which has the farthest to go – and manufacturing.   
What is most encouraging is that we’re seeing job growth in all parts of the country.  The labor department divides the nation into nine regions. And while some areas are in better shape than others, unemployment dropped in all nine.
That’s good news, but we still have work ahead of us in the jobs market.
Because the unemployment rate is a national average, it disguises troubled areas. Unemployment in construction is twice the national average and remains at unacceptable levels in the public sector.*
*U.S. Bureau of Labor Statistics, March 2012 As I said, construction has been understandably anemic. But that is beginning to change. Two encouraging signs are increases in building permits for single-family and multi-family homes, a clear indicator of future construction. 
The sale of existing homes is at the highest level since 2007, which is surprising news given the number of foreclosed homes on the market.
Housing starts is another indicator, which as you can see here, is expected to climb slightly this year and next.
We should also note that the sale of existing homes in the first two months of the year was at its highest level since 2007.  Further, real estate prices are also bottoming out as more and more consumers are feeling confident enough to buy a home.
All that said, housing remains a sore spot in an otherwise healing economy.  Credit problems continue to persist, as nearly 11 million Americans owe more than their home is worth, while a hoard of foreclosed homes sit vacant, which in turn, impedes new construction. It’s classic supply and demand.
These problems notwithstanding, the housing market appears to be stabilizing, which bodes well for the overall recovery.
Now let’s step back and look at the bigger picture – Gross Domestic Product – which is a measure of the total goods and services produced in the United States. This chart shows annual GDP since 1981 through first quarter 2012. It tells the story very well – steady growth, but nothing to get excited about. GDP increased at an annual rate of 2.2 percent in the first quarter of 2012 compared with a 3 percent rate in the final quarter of 2011.
GDP growth is a reflection of the heavier consumer spending we talked about earlier. Cuts in spending by federal, state and local governments held the index back.
Given that 2012 is an election year, it’s worth spending a few moments on how elections affect the stock markets.  Let’s see if we can separate myth from fact.
This chart shows how the markets have performed during the four-year election cycle since 1952.  The yellow line shows the percentage change in the markets during the first two years of a presidential term and the red line shows the performance during the second two years. 
As you can see, the markets have historically performed much stronger in the second half of an election cycle. How do we explain this?  The answer is really more about the economy and fiscal policy than the elections themselves. 
The executive branch of government has the power to influence fiscal policy. More often then not, the administration in office has used that power to pump up the economy to win voter approval just prior to a presidential election.
On the other hand, post-election periods seem to have suffered from an opposite effect, resulting in less investor optimism, which can trigger recessions or bear markets. 
The end result is that investors have come to assume better times for business conditions and stock prices prior to a presidential election and less robust periods following the elections.
For us investors, however, we should not put too much weight on this cycle.  As we will discuss in a minute, we focus on building investment strategies around our lives and our goals, not around presidential elections.
One of the things we talk to clients most about is the negative impact of market timing.  To put it bluntly, it’s almost impossible to successfully market timer on a long term basis.
The results of a 2012 analysis of investor performance versus the market underscores this.  In 2011, the average equity mutual fund investor lost 5.73%.  However, if that investor had simply put his or her assets in the S&P 500 for the year, the return including dividends would have been over 2%. 
The reasons behind these results are clear.  First, investors lose faith and buy and sell too frequently.  Actually it’s letting your right brain take over the left brain. An examination of mutual fund retention rates shows the average (un advised) investor does not remain invested long enough to reap the benefits of equity investing.
More telling is their poor timing decisions.  The data shows that the investor’s ability to time the market is highly dependent on the direction of the market.  Investors tend to guess right more often when the market is on an upswing.  When the market is heading south, however, the fear of loss prompts the investor o guess wrong. I call this “confusing getting lucky with being smart”.
These are just a few things to avoid, and an example of how investors will do themselves a big favor if they plan long term, set up an investment policy to match their goals, and leave the market timing to the professionals. 
We can help you identify and track goals, develop a customized investment strategy and provide ongoing guidance, education and offer a seasoned professional perspective.
We can also help you manage your tax exposure.  For example, there are a couple of key tax law changes coming up that we will be reminding our clients about.
Time and again our clients tell us how much better they feel knowing they have a roadmap to guide them. They worry less when they hear bad news.  They keep their eyes focused down the road.  And they’re far less likely to behave irrationally.
In conclusion, let’s summarize the economic news.
First, I think it’s clear the economic recovery driven by consumer spending is sustainable.  Consumer confidence is driven in part by positive stock markets, steady job growth, and a recovering housing market.
Yes, trouble spots remain.  Job growth is not as fast as we’d like and the housing market remains challenged.  But if we step back and look at the big picture, I think we have every reason to feel positive about the direction of the economy.
Now, there are a few things you can do to help you and your families cope with market volatility and economic uncertainty.  First, your focus should be on goals, not the markets.  If you have a long-term plan, then periodic market gyrations are less relevant.  Yes, we need to pay attention to the markets, which is why we’re here today, but :  Make changes in your investment plan when your goals change, not when the markets change.
If you’d like to hear more about how we can help you cope with market uncertainty, please contact us today.  We appreciate your continued trust and confidence in us and look forward to working with you in the future.

In Case of Emergency – ICE

The ICE Book

My wife Elaine had chased me for the longest time to put EVERYTHING together in one place (estate plans, contact info, account numbers and account locations etc.)  “in case of…” and so I did. We’ve all heard about the cobbler’s kids having no shoes and I did not want that to be me. Having been a financial and estate planner for most of my adult life it was a point of professional pride that I get this done, and done well.  Not to mention that as a husband and father it seemed like a moral obligation to leave some kind of organized breadcrumbs so my family could find their way out of the financial woods “in case something happened to me.

I created a binder/book which I’ve updated annually for a number of years. The strange thing is, Elaine cannot bring herself to read the book that I have put so much time and effort into. She does find great comfort however in having the book “in case of.”  Along the way, through word of mouth, several clients have ask me to undertake a similar assignment for them.

This year I dove deeper into this project as a result of my professional network of advisors, attorneys, CPAs and bankers. Dagmar Pollex who is an estate planning attorney in our network writes a regular newsletter for advisor types like me, and in one of them this year discussed the concept of “digital assets” (like your online photos, Facebook account, etc.) and how to plan for their disposition or not. So with that as an initiative my deeper dive resulted in a complete rewrite of the book with the goal of having a book suitable to offer to clients.

Naming the book developed over a number of iterations: first it was just the generic “estate plan binder” but not every event requiring a book like this is the maturity of my estate plan. Next it became “the Ditch Book”( named after the ditch bag a sailor takes when he abandons ship and goes into the life raft), but the idea was too idiosyncratic and not everyone got it. Finally the ICE acronym (In Case of Emergency or ICE) made sense (after the practice of adding a phonebook entry in your cell phone called “ICE” – so first responders could contact who you wanted.) 

Take this story as a product roll out – we are live with offering the ICE Book to clients as of now. There are numerous free forms and questionnaires and templates you can use all over the internet.  I was informed by a couple of QVC fans that “Suzy Orman has a great CD and package you can buy on QVC and use.” Really? I’ll pay a $100 donation to the charity of you choice if you can show me right now – a fully completed Suzy Orman plan. Great idea, but highly likely to sit on your shelf unfulfilled. Remember the cobblers kids with no shoes? Ask your advisors if they have completed anything like an ICE book for their family? I’ll bet not.

The ICE book is a project that really needs Your Trusted Financial Advisor to bring it home for you. Pasted in below is a table of contents from an ICE book completed recently. The link will bring you to a sample book.

We are currently offering to prepare your ICE book for a flat $500 between now and 12/31/12. 

Call us now and begin the process of giving your family and survivors peace of mind… In Case of Emergency.

ICE Book Table of Contents

1.      Survivors checklist (instructions for funeral/memorial and body disposition)

2.      Letter of Instruction

3.      Estate plan documents

4.      Estate plan Diagram

5.      Duties of an Executor

6.      Digital Assets (Usernames / passwords and intentions)

7.      Safety deposit box information

8.      Social security statement

9.      Military benefit statement

10.  Insurance schedule

11.  Beneficiary designations (on IRA’s, 401k plans etc.)

12.  Personal financial statement with account numbers

13.  Household budget ( instructions re regular expenses)

14.  Child care information

15.  Pet care information

16.  Key advisor directory

17.  Relative and close friend contact directory

18.  Key document locator

19.  Organ Donation

20.  Sharing my thoughts posthumously on (


Compass Extends Lease for Extra Three Years

Tim Shanahan CEO of Compass Capital and John Ahern CEO of Compass Securities are pleased to announce that we have concluded negotiations with the Flatley Company to extend our lease at 50 Braintree Hill Office Park into an extra three years. Both Tim Shanahan and John Ahern felt that the Compass organizations were thriving sufficiently enough after several years in a row of business growth to lock down our occupancy for the near term.
Braintree Hill Office Park is considered one of Boston’s most prestigious “superparks”. It is distinguished by its prime location close to Boston and the many nearby desirable South Shore residential communities. The Park’s wide range of on-site and local amenities and its attractive master-planned setting have made it the South Shore’s premier corporate destination. The park is situated on the Braintree/Quincy line in a highly visible 40-acre campus setting. It is 10 miles south of Boston and Logan Airport (20 minute drive to each) at the junction of Routes I-93, 3 and 37 and close to the interchange of I-95/128.
Compass Capital Corporation is a SEC registered investment adviser and wealth manager with 10 advisers and actively manages approximately $140 million for approximately 500 clients in asset allocation strategies constructed by the Compass Investment Committee.
Compass Securities Corporation is an institutionally focused FINRA broker dealer with approximately 31 registered representatives who have raised billions of dollars of assets as a 3rd party marketer for a number of quality fund managers and sponsors in long only asset management, long/short/hedge, venture, private equity, frontier market, and tax credit equity spaces.