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Refinancing near retirement can be smart

By Amy Hoak, MarketWatch

Marketwatch | December 10, 2012


CHICAGO (MarketWatch)—Tempting low interest rates continue to make headlines, making refinancing your mortgage look attractive. But when retirement isn’t far off, the decision to refinance can get more complicated.

After all, most pre-retirees are trying to reduce debt before their last day of work, not extend the amount of time they’ll be on the hook for payments.

Still, for some homeowners with retirement on their minds, it makes sense to trade their higher mortgage rate for one near record lows, said Keith Gumbinger, vice president of HSH.com, a publisher of mortgage and consumer loan information. The money saved each month on your mortgage can be poured into other investments that could pay off in retirement, “whether that’s a 401(k) or IRA or cleaning up other debts,” he said.

If you haven’t refinanced in the past few years, your monthly savings can be substantial. The 30-year fixed-rate mortgage averaged 3.34% for the week ending Dec. 6, while the 15-year fixed-rate mortgage averaged 2.67%, according to Freddie Mac’s weekly survey of conforming rates. For those with a current mortgage rate near 5%, refinancing could mean significant improvement to their monthly cash flow.

Consider this: A homeowner who’s 52 today and who wants to retire at 70 bought a home in 2002 with a $250,000 mortgage. He refinanced at 5% in 2003. If he refinanced again into a 3.49%, 30-year fixed-rate mortgage, his payment would go down $415 a month, according to Gumbinger’s math.

The downside is the loan wouldn’t be retired until he is 82, and it would cost $3,432 more in interest over its lifetime than if he didn’t refinance.

To make that kind of trade-off work for you, it’s critical to ensure the increased cash flow is used productively.

“You have to be determined to save the money and invest it in something that would yield a higher rate of return than the interest rate you’re paying,” said Rich Arzaga, founder of Cornerstone Wealth Management in San Ramon, Calif. Conservative vehicles including corporate or municipal bonds—held long term—are a good option, he said. Money market accounts and certificates of deposit probably won’t cut it right now, with the paltry returns they’re paying out.

For others, the monthly cash flow may not be worth the hassle or the cost of a refinance, especially if the homeowner is close to the end of the mortgage term. At that point, the bulk of the payment is going to principal, said Tyler Vernon, president of Biltmore Capital Advisors in Princeton, N.J.

“Banks do that because they know that most people don’t have a mortgage for more than six years, so basically they’re paid mostly interest up front,” he said. But by the time the homeowner has five to 10 years left on a mortgage, he or she is paying much less interest, he said.

It’s helpful to talk out your own personal scenario with a financial planner before deciding to pull the trigger. But here are a few factors to consider prior to making a decision.

Your personal time frames

When doing your calculations, it’s important to consider how long you’ll stay in the home and when you plan on retiring. Knowing your goals is essential in making this financial decision.

For instance, if your goal is simply to increase cash flow and owning your home free and clear isn’t a priority, perhaps refinancing makes sense. Some people plan on downsizing when they retire or trading in their home for something more suitable, Gumbinger said. If you’re one of those people, the idea of refinancing might not be as frightening—you’ll be paying off that mortgage anyway when you sell your home.

But the time you’re planning on staying in the home shouldn’t be too short, since you’ll want to be there long enough to recoup the closing costs on the refinancing.

That said, if you’re planning on remaining in the home for good, with a goal of paying it off, you’ll have to seriously think about how you’ll pay the mortgage when you’re no longer bringing home a paycheck. And you may have no interest in lengthening the mortgage term into retirement.

How old you are will also be a big factor. “If you’re closer to 65, that’s a different scenario than if you’re 55 or 52,” Gumbinger said.

Time left on the existing mortgage

Regardless of your personal time frame, if you have 10 years or more left on the existing mortgage, there’s a chance it may make sense to refinance. With more than a decade to go, you’re not yet applying as much payment to principal, said Bill Losey, president of Bill Losey Retirement Solutions, based in Wilton, N.Y.

For those with less than 10 years on the loan, it’s a different situation, since more of your mortgage payment goes toward principal.

Furthermore, while lenders might offer a refinance product with a 10-year term, it will be difficult finding a mortgage with a shorter term than that, Gumbinger said. And if you’re near retirement, it’s unlikely you want to add another 20 years to your mortgage through a 30-year fixed product.

Risk tolerance

In the end, only you can decide how much risk you’re comfortable with.

“I always say, you want to enter retirement completely debt free, with the only exception potentially being your mortgage,” Losey said. “No one should have a mortgage past 70 tops, even at these historic low rates.”

Others see some upside to extending your mortgage. With a mortgage paid off in retirement, you may have more control of your expenses but it could be more difficult to tap home equity if you need it. For instance, there’s no guarantee reverse mortgage products will be available at some future date, Gumbinger said.

And you may not want to go that route anyway. Investments such as bonds and stocks that refund dividends are more liquid than your home equity, which could be helpful when those on a fixed income need cash—whether the reason is unexpected or not.

Either way, take a pass on mortgage life insurance, Gumbinger said. That’s a policy that offers more protection to the lender, who will receive funds in the event of your untimely demise, he said. You’re better off considering a standard term life policy instead; that way, the beneficiary has the freedom to do what he or she wishes with the proceeds—including, if he or she wishes, paying down the mortgage.

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Tyler Vernon: Relentless Service

By Kathleen Biggins GENIUS COUNTRY

 Tyler Vernon watched both planes fly into the World Trade Center on 9/11, one from his office at Merrill Lynch, and one as he was fleeing Manhattan. 

 Like many New Yorkers, he thought about what would have happened if the plane had veered slightly to the left and into his building, and began reevaluating his own path. While already a Vice President, he felt he was “grinding” through his work day, and after 9/11 he began to plan for a change of life, and a change of venue. But first, he changed his marital status, quickly becoming engaged to Molly, who he had been dating since meeting at the Subway Series in 2000.

Like Molly, Tyler had grown up on a farm. His father was a veterinarian who owned a vineyard in Tewksbury, NJ. Tyler loved rural settings and dirt roads, as well as great restaurants, theaters and clubs. Molly’s love of Princeton and The Stuart Country Day School swayed him towards the Princeton area. Because his father had worked such long hours, Tyler was committed to headquartering Biltmore Capital Advisors in Princeton and avoiding the commute to New York City so he could spend more time with his family. 

Tyler’s approach to business is straight forward: work hard, do what you say, and do it when you say you are going to do it. He believes many people “don’t do the follow through,” even on the simple common courtesy things. Tyler follows this approach, but his success may be due in part to something else — his ability to deliver more than is expected.

When Tyler recounts how he got his first position on Wall Street, it is clear he has the buckle down, outperform mentality that helped him launch a successful new business.

As a college student attending Lafayette College in Easton, Pennsylvania, he realized engineering was not the right career path for him despite the fact math and science came easily.  He wanted something more people centric, and like many ambitious young students, cast his eyes towards Wall Street. He felt handicapped as his family did not have personal contacts to help get an initial interview.  He applied for an unpaid internship, but the hiring manager didn’t respond to multiple emails and calls. That didn’t stop Tyler.  He hopped a bus for the two hour trip to Manhattan, walked into the World Financial Center and announced he was there to see the hiring manager who had ignored him.  Not surprisingly, the manager was impressed and Tyler got the internship.

Perhaps equally telling, once he had secured the internship, Tyler did not let up.  He made sure he was the first intern to arrive in the morning, awakening at 4:30 am every Friday during the school year, taking the bus two hours in and two hours back. During summers he continued with unpaid internships while working at restaurants at night and weekends to pay for his walk-in-closet sized apartment in Queens.  ”I was pretty much working 24/7.  But I knew that’s what I had to do.  I had to create my own path,” he says with a shrug.

Tyler continues to buckle down and outperform. “Everyone calls themselves  ‘Financial Advisors,’ including CPA’s and insurance brokers.  We are looking for ways to set ourselves apart from the competition, thinking about what we can to do make clients lives easier, better, more confident in their investment and retirement plan,” he explains.

“The stock market has done nothing in ten years. We want to give people a new direction, a new way of living in retirement.  Not the same old thinking about investing in stocks, but strategies to approach other markets,” he explains, adding with a smile, “Our approach is catching on quickly.”

Indeed. Biltmore Capital Advisors signed on its first clients in early 2008, right before the meltdown leading to the Great Recession. At a time when many financial firms were imploding,  Biltmore Capital Advisors has been “catching on” — doubling its revenue in 2010 and growing 30% over each of the last two years, expanding to 15 employees, and opening offices in Dallas and Atlanta.  In fact, most of its high net worth individual and institutional clients live outside of the Princeton area, something Tyler would like to change long term so he and his employees can stay off airplanes and closer to home. 

To that end, Biltmore Capital Advisors has started to focus its marketing efforts in the tri-state area, and reaching out to make more local connections. Tyler has introduced clients from around the country to several local businesses, such as banks, mortgage companies and insurance firms. He is also holding events to showcase Biltmore Capital Advisors to local investors.  The last one, held at the Nassau Club, was so popular invitees had to be turned away.   

Tyler has grown to love Princeton, making good friends and reveling in the cooperative spirit among businesses here. In fact, Tyler believes personal relationships in Princeton helped his firm survive and thrive.  As Biltmore Capital Advisors was  launching in 2008, Tyler gave a presentation where he predicted the investment market was about to become “frothy” and advised investors to move towards cash.  News of Tyler’s investing wisdom created buzz on Wall Street and newsmakers from Fox Business News and CNBC quickly asked him to share his investing insights with their international audiences. Tyler became a regular commentator on both business news networks, and Biltmore Capital Advisors‘ name recognition soared.

Not surprisingly, when asked to reflect on his own success and to provide advice for others, Tyler’s answer sounds a lot like Molly’s, “Find a passion, run with it, and it will all work out in the end.”

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Stocks End Mixed; Fed Urges Action on Housing

By Kaitlyn Kiernan 01/04/12 – 04:20 PM EST

NEW YORK (TheStreet) — The Dow Jones Industrial Average shot into positive territory Wednesday as commentary from the Federal Reserve on plans to shore up the U.S. housing market overshadowed European debt crisis concerns.

The Dow rose 21 points, or 0.2%, to close at 12,418, after falling 0.5% earlier in the day. The S&P 500 climbed less than a point to 1,277, while the Nasdaq slid less than a point to 2,648.

The turn higher came after the central bank sent a white paper to Congress calling for the federal government to take more action to stabilize the still-floundering U.S. housing market. The paper suggests “redeploying foreclosed homes as rental properties” as a possibility for combating an expected flood of foreclosures hitting the market and prompting another pricing swoon.

“Continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery,” the paper said. In a letter to lawmakers on the Senate Banking and House Financial Services committees, Fed chairman Ben Bernanke wrote, “Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery.”

Concerns about Europe’s sovereign debt crisis resurfaced Wednesday with early declines underlined by fresh worries that the situation in Spain is worsening. The Iberian country is considering applying for loans from the eurozone bailout fund and the International Monetary Fund to help the restructuring of its banking industry, the Spanish newspaper Expansion reported, citing anonymous sources.

Also, overnight deposits of commercial lenders hit a record high at the European Central Bank, suggesting that Europe’s banks remain incredibly cautious about lending to each other. Shares of UniCredit, Italy’s largest bank, sank 14.5% after the lender said it will sell $9.8 billion worth of new shares to boost capital.

Investors are also sensitive to rising borrowing costs in the eurozone with a France holding a bond auction on Thursday, and Italy and Spain about to sell debt next week.

Germany’s DAX lost 0.89% while London’s FTSE was down 0.55%. Overnight, Japan’s Nikkei Average settled 1.24% higher, and Hong Kong’s Hang Seng was down 0.8%.

“We are holding very neutral until we get some better volume trading and a better sense of what investors are going to do,” said David Ader, rates strategist at CRT Capital Group. “On the surface we have mixed to bearish technicals, better data and some degree of calm in Europe.”

The U.S., however, received another piece of positive economic data. The Commerce Department reported that U.S. factory orders rose 1.8% in November after a 0.4% fall in October, slightly beating the 1.7% forecast of economists polled by Thomson Reuters. Meanwhile, General Motors(GM_), Ford Motor(F_) and Chrysler Group beat analysts’ estimates for December car sales, with sales getting a boost from increasing consumer confidence and ads around the holiday season.

GM said that its December sales rose 5%, led by a 9% gain at Chevrolet. For the full year, GM sales rose 14%, to more than 2.5 million vehicles, and GM gained market share. Ford said that its car sales rose 10% last month and 11% for the year. Meanwhile, Chrysler’s sales jumped 37% in December. GM traded 0.5% higher while shares of Ford rose 1.5% on Wednesday.

In other corporate news, Yahoo!(YHOO_) tapped PayPal President Scott Thompson, who runs eBay’s (EBAY_) online payments unit. Yahoo! had been without a permanent CEO since firing Carol Bartz in September. Shares fell 3.1% to $15.78.

A big mover in afternoon trades was Eastman Kodak(EK_) following a report that the 132-year old company is preparing to file for bankruptcy in the “coming weeks if it fails to sell its patents. The report from The Wall Street Journal, which cited anonymous sources, comes after months of speculation that the company was preparing to take this step. Kodak shares tumbled 28% to 47 cents.

Jefferies Group’s(JEF_) executives and other employees at the company’s prime-brokerage unit threatened to leave the firm in a dispute over issues including a recent restructuring and year-end compensation, The Wall Street Journal reported, citing people familiar with the matter.

Jefferies executives and its global head of prime brokerage, Glen Dailey, reportedly held meetings Tuesday to discuss the issues but Dailey said that no one was leaving, adding that the “family affairs are now in order.” Jefferies in recent weeks has seen its stock under attack over its European exposure. Shares slipped 2.6% to $13.64.

Acme Packet(APKT_), a networking-equipment maker, lowered its outlook for the fourth quarter. The company, whose products include both hardware and software, now sees non-GAAP earnings of 26 cents to 28 cents a share for the three months ended Dec. 31 on revenue ranging from $84 million to $86 million. The current average estimate of analysts polled by Thomson Reuters is for a profit of 37 cents a share in the quarter on revenue of $93.4 million. Shares plunged 19% to $25.70.

With most of the day’s trading in negative territory stocks barely hung on to Tuesday’s strong New Year’s rally, which saw the S&P 500 index finish at its highest level since late October. The Dow, up 1.5%, closed at its highest since July 2011.

Analysts think that the S&P 500 will gain 6.6% by the year’s end, compared with a flat finish for 2011, according to polls by Reuters. Investors are now looking carefully at how stocks perform the first days into the new year, as track records show that positive momentum in January often translates into a bullish year overall.

“Transports and technology stocks could help the market in the beginning of the year,” noted Tim Ralph, portfolio manager at Biltmore Capital Advisors. Both sectors benefited from online shopping in the holiday, explained Ralph. “We could see strength here later this month and in early February.”

February oil futures settled up 26 cents to $103.25 a barrel, while February gold futures gained $12.20 at $1611.90.

The dollar index was up 0.5%. The benchmark 10-year Treasury was down 12/32, pushing the yield to 1.991%.

– Written by Kaitlyn Kiernan in New York.

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Stocks trim gains on euro jitters

By Hibah Yousuf @CNNMoneyMarketsDecember 13, 2011: 11:55 AM ET

u.s. stocks

NEW YORK (CNNMoney) — U.S. stocks pared earlier gains Tuesday following reports that German Chancellor Angela Merkel rejected the idea of increasing Europe’s bailout fund.

At midday, the Dow Jones industrial average (INDU) was up just 59 points, or 0.5%, and the S&P 500 (SPX) gained 5 points, or 0.4%. The Nasdaq briefly drifted into the red, but recovered to rise 2 points, or 0.1%. All the major indexes started the day about 1% higher.

The pullback came after a Dow Jones report said that Merkel has rejected suggestions to raise the funding limit for the European Stability Mechanism, or ESM, which currently stands at €500 billion. The fund goes into effect next year and may run alongside the €440 billion European Financial Stability Facility.

U.S. stocks started the day with solid gains thanks to an initial void of bad news out of Europe. Though political leaders have been taking steps toward a resolution for the region’s debt problems, the details have yet to be worked out.

“All eyes are still on Europe,” said Tim Ralph, portfolio manager at Biltmore Capital. Official meetings and statements will be minimal as the year come’s to a close, but Ralph said that the market remains vulnerable to headline risks.

Investors are on watch for possible downgrades on European country credit ratings from Standard and Poor’s, which warned last week that it may strip some of Europe’s biggest economies, like Germany and France, of their AAA-rating.

Investors are also waiting to hear what the Federal Reserve will say at the end of its policy-making meeting.

U.S. stocks tumbled in a broad sell-off Monday, amid growing investor doubt that Europe’s debt crisis will be resolved, and a sales warning from chipmaker Intel.

Europe debt saga far from over

World markets: European stocks finished mixed. Britain’s FTSE 100 (UKX) ticked up 1%, while the DAX (DAX) in Germany fell 0.3% and France’s CAC 40 (CAC40) edged down 0.8%.

Asian markets ended lower. The Shanghai Composite (SHCOMP) lost 1.9%, the Hang Seng (HSI) in Hong Kong shed 0.7% and Japan’s Nikkei (N225) declined 1.2%.

Companies: Former MF Global (MFGLQ) CEO Jon Corzine is back to testify before Congress Tuesday, this time flanked by two former colleagues from the brokerage’s parent company, MF Global Holdings: Chief operating officer Bradley Abelow and chief financial officer Henri Steenkamp.

Seeking shelter in FDIC banks

Shares of electronics retailer Best Buy (BBY, Fortune 500) got slammed after the company reported earnings that fell far short of forecasts.

Intel warned that it will badly miss its sales forecast for the current quarter on Monday, because of the worldwide hard drive shortage caused by massive floods in Thailand. Shares of Intel (INTC, Fortune 500) dropped nearly 4% in trading Monday, and continued to slip on Tuesday.

Will Verizon Buy Netlix?

Netflix’s (NFLX) continued to rise, on chatter that the company could be acquired by Verizon (VZ, Fortune 500). On Monday, a spokesman for Netflix said the company doesn’t comment on speculation.

Economy: Retail sales for the month of November rose 0.2%, which was lower than expected, according to the U.S. Commerce Department. But the disappointing report had little impact.

Sales were expected to have increased by 0.6%, after a 0.5% increase the month prior.

Investors are also awaiting news from the Federal Reserve, which is expected to hold interest rates at 0.25% for the month of December.

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Stocks slide on Europe, China worries

By Blake Ellis and Hibah Yousuf @CNNMoneyMarkets

November 23, 2011: 12:37 PM ET

u.s. stocks
U.S. stocks slid deep in the red Wednesday, as eurozone fears rumbled on and a preliminary report showed that Chinese manufacturing slowed sharply.

An lackluster report on the U.S. job market added to the gloomy mood on Wall Street.


“You have a trifecta here — people may or may not be overreacting, but these are the things they are worrying about” said Tim Ralph, vice president at Biltmore Capital Advisors. “When you look at the U.S. you can see some signs of strength, but we’re going to continue to be shocked by the headlines from overseas.”

The Dow Jones industrial average (INDU) dropped 180 points, or 1.6%. The selling was broad, with all 30 components of the blue chip index losing ground. The S&P 500 (SPX) dropped 20 points, or 1.7%, and the Nasdaq (COMP) lost 47 points, or 1.9%.

Investors were rattled by a disappointing auction of German bonds. The debt of Europe’s largest and most healthy economy is often considered the gold standard of eurozone sovereign debt, and yields have managed to hold near record lows. But the dismal auction results raise concerns.

“The poor German auction plays to the grain that foreign investors are shying away from [eurozone] denominated bonds all together,” BNP Paribas said in a research note. “There are growing signs that the contagion from peripheral bond markets is moving to the core.”

Europe ups ante on eurobonds

The European Commission published a green paper on stability bonds Wednesday to help allay those worries, outlining proposals to fix the eurozone’s debt crisis. However, skepticism remains about how effective these plans will be.

Meanwhile, Chinese manufacturing activity fell to a 32-month low, heightening fears that the eurozone’s problems are spreading beyond Europe and added to worries about a global economic slowdown.

In the U.S., unemployment insurance claims ticked higher during the latest week, and the savings rate rose, meaning that consumers might be putting a break on spending.

Stocks have taken a downward turn in recent sessions, as rising bond yields in Italy and Spain continue to shake investor confidence.

IMF broadens lending power

Stocks ended in the red Tuesday amid worries about U.S. economic growth, though losses were trimmed after the International Monetary Fund unveiled a beefed-up lending program to help otherwise healthy countries with short-term financing problems.

World markets: European stocks closed sharply lower. Britain’s FTSE 100 (UKX) slipped 1.3%, the DAX (DAX) in Germany ticked down 1.4% and France’s CAC 40 (CAC40) slid 1.7%.

Asian markets ended in the red, after the report that showed Chinese manufacturing output fell to the lowest level since March 2009.

The Shanghai Composite (SHCOMP) ended the session 0.7% lower and the Hang Seng (HSI) in Hong Kong tumbled 2.1%. Japanese markets were closed Wednesday for holiday.

Economy: The government released several economic reports Wednesday including jobless claims, personal spending and income, and durable goods.

The number of people filing for initial unemployment benefits rose 2,000 in the latest week to 393,000. Analysts surveyed by Briefing.com expected 391,000 jobless claims for the week ending November 19.

What Congress has done to fix the economy (Hint: Nothing)

Personal income climbed 0.4% in October, while personal spending grew 0.1%. Analysts had expected both measures to rise 0.3%.

Meanwhile, orders of durable goods slipped 0.7% in October — slightly less than the 0.9% drop economists had been expecting.

Companies: Bank of America (BAC, Fortune 500) shares slid 4%, and briefly touched the lowest level since March 2009, after a report in The Wall Street Journal on Tuesday stated the bank was having difficulty meeting U.S. financial regulatory requirements.

Late Tuesday, the Federal Reserve also ordered the top 31 U.S. banks — with assets of $50 billion or more — to participate in stress tests that will simulate another financial crisis.

Tests will simulate a more severe global financial meltdown for six banks with the largest trading operations: Bank of America, Goldman Sachs (GS, Fortune 500), Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Morgan Stanley (MS, Fortune 500) and Wells Fargo (WFC, Fortune 500).

Shares of many of those financial giants took a hit Wednesday. JPMorgan Chase, Citi and Morgan Stanley shares all dropped more than 2%.


Shares of Groupon (GRPN) tumbled 14%, to $17.20 a share — well below its initial public offering price of $20. The Internet deal site’s stock has been pummeled this week — along with other newly public startups like LinkedIn — on renewed dot-com bubble concerns and worries of overvaluation.

John Deere (DE, Fortune 500) reported full-year earnings that hit a record $2.8 billion, and posted fourth-quarter net income that blew past expectations. Shares of the equipment maker climbed more than 3%, making it one of the strongest performers in the S&P 500.

Currencies and commodities: The dollar gained against the euro, the British pound and the Japanese yen.

Oil for January delivery slipped $1.53 to $96.48 a barrel.

Gold futures for December delivery fell $13.20 to $1,689.20 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged slightly lower, pushing the yield up to 1.95% from 1.94% late Tuesday

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IPOs With Brand Recognition


With well-known companies such as Skype SA and General Motors Co. planning to go public, investor interest in IPOs is picking up.

Brand recognition, however, isn’t making their advisers any more comfortable with the initial public offerings. Many worry that individuals will act emotionally and overpay for stock whose value hasn’t yet been determined by the markets.

Many investors overpaid for Polo Ralph Lauren’s 1997 IPO—top, Mr. Lauren with Dick Grasso, left, and wife Ricky. Some advisers worry Interent phone company Skype presents a similar risk.

“While we’re getting this buzz, we try to steer investors away from this,” said Tyler Vernon of Biltmore Capital Advisors, a family office firm in Princeton, N.J., who would rather see clients “play in Vegas than invest in IPOs.”

“I think people are looking for something new,” he said. “They’ve lost a lot of interest in the stock market, and they’re looking for other ways to build wealth.”

Traditionally, the average investor has had little access to IPOs. Institutional investors typically acquire 70% to 80% of the initial offering, and the remaining stock is distributed by the underwriters, often to their favorite big clients.

In the late 1990s, when IPOs often soared swiftly in value, investors scrambled to get shares. Many of the IPOs were technology companies, and when the bubble in that sector burst, so did investors’ appetites. The more recent financial crisis reduced both IPO activity and interest even more.

This hasn’t been a particularly good year for IPOs, said Linda R. Killian of Renaissance Capital LLC in Greenwich, Conn. “Some have done some spectacularly well, and some have done spectacularly poorly,” she said.

So far this year, 70% of 86 IPOs in the U.S. have seen their prices drop after the original offer, Ms. Killian said. In the past, individuals also made the mistake of overpaying for well-known brands, such as Polo Ralph Lauren Corp.’s offering in 1997, and then got stuck with underwater stock for quite a while.

GM last Wednesday filed plans to launch an initial public offering that Bill Buhr, IPO strategist at Morningstar, characterized as “an intriguing, high-interest deal.” The auto maker has shown signs of improvement, but a lot of questions remain, including whether the stock will be priced attractively, he said. Fees on the deal also will get extra scrutiny because of the government bailout of the auto maker.

Some advisers worry Interent phone company Skype presents a similar risk.

Investors must consider in any IPO who is going to benefit most from the sale, Mr. Buhr cautioned. They should beware if much of the proceeds are going to top managers or to existing investors.

If much of the proceeds are going to top managers, it could indicate that top management is getting bought out. If too much goes to the private-equity firm that took it private, it could indicate that the money isn’t going to the company for improvements.

Lee Munson, chief investment officer of Portfolio Asset Management in Albuquerque, N.M., steers clients away from all IPOs.

“With an IPO you have no price discovery,” he said. “The capital markets need to discover what something is worth.”

Looking back, he said: “In the dot-com days, all it was was a transfer of wealth from individuals and pensions to kids in Silicon Valley.”

Another problem, said Biltmore’s Mr. Vernon, is that “people get emotionally tied to the position. Sophisticated investors sell immediately and individual investors will get stuck holding the bag.”

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Stocks: A ‘schizophrenic’ day

By Hibah Yousuf August 1, 2011: 4:27 PM ETNEW YORK (CNNMoney)

Stocks took a wild ride Monday. The day started with an early rally fueled by hopes of a debt deal, but a weak manufacturing report quickly deflated that optimism — leaving stocks little changed as investors await a House vote.

The Dow Jones industrial average (INDU) ended down just 11 points, or 0.1%, after tumbling more than 1% earlier in the session. That decline followed a jump of 139 points, or 1.1%, at the start of trading.

Home Depot (HD, Fortune 500) and Merck (MRK, Fortune 500) were the biggest laggards on the blue chip index, with shares falling more than 2%.

The S&P 500 (SPX) slid 5 points, or 0.4%; and the Nasdaq composite (COMP) lost 12 points, or 0.4%.

While investors showed early enthusiasm for the debt ceiling deal, which still needs Congressional approval, the fragile U.S. economy quickly took center stage.

“The market is schizophrenic the way investors are getting overly panicked and overly excited,” said Tyler Vernon, CIO of Biltmore Capital.

Deal or no deal. Economy still stinks.
Last Friday’s second-quarter GDP report in particular served as a stark reminder that the economy is growing at a sluggish 1.3% pace.

The gloom continued into Monday, with a report that showed that the manufacturing sector nearly stood still in July. The Institute for Supply Management’s manufacturing index slid to 50.9 in July — much worse than the level of 54 that economists were expecting, and down from 55.3 in June.

“We keep seeing data that shows the economy is getting worse,” said Kim Caughey Forrest, senior equity analyst at Fort Pitt Capital Group. “Earlier this year, we thought the economy would improve — albeit gradually. But all the negative surprises are concerning investors.”

Stocks posted their worst weekly performance in more than a year last week, losing $700 billion in market capitalization.

America’s debt crisis: Obama announced late Sunday that lawmakers reached a deal to raise the debt ceiling and dramatically curb federal spending — and to avoid a costly default in the end.

But the president cautioned that lawmakers’ work was not done, with the deal expected to go up for a vote Monday.

Even if the deal passes, which many investors are expecting at this point, Vernon said he doesn’t think it will do much for markets. While there may be a short relief rally, the market is still facing serious longer-term headwinds.

“If I look out 18 months from now, I’m having a hard time seeing anything good for the economy — no matter what deal is made,” said Vernon, adding that investors are still concerned about high unemployment and the eurozone debt crisis.

Debt ceiling: What they’ll be voting on
“We’re going to see some high volatility and more of a trading up, trading down environment until these clouds clear,” he said.

Plus, a downgrade of the United States’ credit rating still isn’t out of the question — even if the debt ceiling is raised.

“Eventually there’s a downgrade coming, it depends on Moody’s, S&P and Fitch and they’re very slow-moving,” PIMCO founder and managing director Bill Gross told CNN Sunday. “This country has $10 to 12 trillion worth of outstanding debt. In addition, however, we’ve got about $60 trillion worth of liabilities. I call this Debt Man Walking.”

PIMCO’s Gross: U.S. is ‘debt man walking’
Economy: The job market remains one of the roughest spots in the economic recovery, and investors will be bracing for the all-important July jobs report due Friday.

The U.S. economy is expected to have created 78,000 jobs last month, according to a consensus of analysts polled by Briefing.com. In June, the economy added a paltry 18,000 jobs.

“We’re 25 months into the recovery, and the job market is moving in the right direction but it’s still abysmal,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “If the figures on Friday come below estimates, that will only compound economic concerns and lift the probability of the economy falling back into a recession.”

Companies: Shares of HSBC Holdings PLC (HBC) rose 1.6%, after the London-based bank announced it will eliminate 25,000 jobs by 2013. The bank has already trimmed 5,000 jobs. The job cuts are seen as a positive, since they will help the bank reduce costs. HSBC also posted a solid profit.

Defense contractors under debt deal cloud
Shares of defense firms slipped, since the debt deal includes about $2.4 trillion in spending cuts that would hurt major government contractors.

Shares of Northrop Grumman (NOC, Fortune 500) and Lockheed Martin (LMT, Fortune 500) sank more than 1%, while Raytheon (RTN, Fortune 500) and General Dynamics (GD, Fortune 500) also declined.

Currencies and commodities: The dollar rose against the euro, British pound and Japanese yen.

Oil for September delivery fell 81 cents to settle at $94.89 a barrel.

Gold futures for December slipped $9.50 to $1,621.70 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, pushing the yield down to 2.74% from 2.80% late Friday.

World markets: European stocks also drifted into the red in afternoon trading and ended lower. Britain’s FTSE 100 fell 0.7%, the DAX in Germany dropped 2.8% and France’s CAC 40 sank 1.9%.

Asian markets ended the session with gains, with Tokyo’s Nikkei leading the rally, after Obama announced the debt deal. The Shanghai Composite edged higher 0.1%, the Hang Seng in Hong Kong rose 1% and Japan’s Nikkei climbed 1.3%.

First Published: August 1, 2011: 9:38 AM ET

Link: http://money.cnn.com/2011/08/01/markets/markets_newyork/

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  • Biltmore Capital: UPS Options Strategies,
    Thursday, July 28, 2011
    In today’s Biltmore Capital Podcast, Chief Investment Officer, Tyler Vernon discusses the practical use of Covered Call and Puts writing strategies for UPS employees and retirees.

Biltmore Capital Advisors is a SEC Registered Investment Advisory firm with offices in Atlanta, Dallas, and Princeton. Biltmore caters to UPS executives and retirees nationwide. Besides offering HYPO rates at less than .80%*, we have the ability to lock rates for up to 30 years which may make sense with inflation on the horizon. The portfolio managers of Biltmore Capital Advisors have also designed proprietary strategies for UPSers designed to create extra income which can be used to pay down debt or fund retirement. Biltmore’s UPS strategy is also available on Fidelity’s platform for financial advisors who are looking for expertise for their UPS clients. If you aren’t a client already, please let us know if we can set up a call with a Biltmore Advisor in order to show you the platform that we’ve established for our UPSers or have your advisor contact us about how our strategies may fit into your overall financial planning.

To see recent appearances of Tyler Vernon on CNBC and Fox Business News, please visit our Media Center by clicking here.

For More information on our UPS Programs please visit here.

To schedule an appointment with a Biltmore Advisor please click here here.

Below we have included some research on the recent UPS Earnings for Q2 2011.

*Rates are subject to underwriting and qualification. Rates tied to LIBOR and change daily. Above rate is from July 29. 2011.



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Bankrate.com: What to do about foreign currency exposure

By Dan Weil

The dollar has taken a wild roller coaster ride over the past three years, wreaking havoc on a portion of many investors’ portfolios. If you’re wondering what to do about that, you aren’t alone.

“Everyone is talking about this. Clients are getting concerned,” says Tyler Vernon, chief investment officer of Biltmore Capital Advisors in Princeton, N.J.

Strategies to deal with the dollar’s fluctuation range from avoiding any foreign currency exposure to eagerly seeking it. Such exposure can help diversify your portfolio and enable you to benefit from a weaker dollar.

You can even speculate on the direction of currencies using exchange-traded funds, or ETFs, options or futures. But many financial advisers recommend against such activity, because the risks of speculation can be high.

Not for novices

“Most people don’t have the ability to analyze or anticipate these kinds of currency moves,” says Charles Lieberman, chief investment officer at Advisors Capital Management in Hasbrouck Heights, N.J. “That’s really a professional’s market, and professionals often get it wrong. It’s not something most individuals should be doing.”

He says you may want to avoid straying from the dollar at all. “We earn our compensation in dollars and spend our income in dollars. When you go into other currencies, it entails complications and costs that are significant.”

If you desire to tap into economic growth overseas, you can simply invest in blue-chip U.S. companies that generate a lot of their revenue there, Lieberman says.

Others are more adamant about the need for currency diversification. “If you’re a dollar-based investor, it’s worthwhile to have exposure outside of the dollar,” says Kevin McDevitt, a mutual fund analyst for Morningstar research firm in Chicago.

Given the dollar’s weakness in recent years and the strong possibility that the Federal Reserve will maintain an accommodative monetary policy, “it’s a good idea to look for ways to diversify out of the dollar,” he says.

To hedge or not to hedge?

The main currency question for most individual investors is whether to buy international stock and bond funds that hedge their foreign currency exposure. The managers of these funds often purchase their foreign stocks and bonds with the issuers’ home currencies.

But your fund shares are priced in dollars and any dividends and interest income are paid to you in dollars, of course. So the fund must translate its holdings from their native currencies into dollars. When foreign currencies rise and the dollar falls, that will boost the dollar value of fund shares and dividends or interest payments.

Conversely, when foreign currencies fall and the dollar rises, that will depress the value of fund shares and dividends or interest payments.

Hedging strategies, generally involving futures and options, allow fund managers to avoid any impact from currency fluctuation. Therefore, share and dividend-interest payment values won’t be affected whether the dollar goes up or down.

If you want to take currencies out of the equation, you’ll want to purchase funds that hedge, though you probably will have to endure higher fees to pay for the hedging strategy.

But if you want exposure to foreign currencies, which will help you when the dollar falls and hurt you when it rises, then you’ll want an unhedged fund.

‘Waste of money’

David Cowles, director of investments for Mosaic Financial Partners in San Francisco, recommends against hedging. “We like a diversified portfolio to hold U.S. and foreign assets,” he says. “But in the long run, we think currency movements are a wash. It does reduce volatility, but there is a cost. We think it’s a waste of money.”

If you have a strong view on the dollar or another currency’s direction, there are several ways to put your money behind your view. Perhaps the easiest and safest are currency ETFs. Conventional wisdom has it that emerging market currencies will gain against the dollar in coming years, says Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn.

If you want to speculate on that view, you can invest in a Chinese yuan, Indian rupee or Brazilian real ETF, for example. The fund’s value will rise if the currency does, and you will receive income based on the country’s money market rates. But beware: Conventional wisdom can often be wrong.

More sophisticated hedging can involve futures, options, managed futures funds and structured products. But most of these strategies are complicated and can incur substantial costs.

“For the average investor, getting involved in currency markets is probably way too complicated and not worth the hassle,” Sheldon says.

Link: http://www.bankrate.com/finance/investing/what-to-do-about-foreign-currency-exposure.aspx

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CNN Money: Earnings: The market’s bright spot

By Hibah Yousuf July 3, 2011: 7:26 AM ET

NEW YORK (CNNMoney) — Hooray for earnings! The economy may be slowing, but don’t expect too much of a hiccup in the upcoming earnings season.

Experts are optimistic that Corporate America’s balance sheets will continue to improve, and say earnings for S&P 500 companies are on track to rise 13% this year, according to an exclusive CNNMoney survey.

Of course that’s nowhere near the 47% earnings growth companies booked in 2010, but that’s to be expected since earnings were lapping the recession-dark quarters of 2009 last year.

Plus, when it comes to earnings and their impact on a company’s stock, it’s all about how they fare against the market’s expectations. So while year-over-year growth may slow, profits are expected to largely be in-line with or ahead of forecasts.

“We continue to look for earnings and revenues to exceed expectations,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “Will they slow some the second half of the year? Maybe. But it is all about expectations, and we think analysts are still too bleak as to how strong earnings will come in.”

A stormy year for stocks

Though the majority of companies don’t begin reporting results until the second week of July, a handful of firms that operate on a slightly adjusted calendar have already offered up a glimpse into what may come.

Last week, FedEx (FDX, Fortune 500) delivered earnings and sales that topped analysts’ estimates for its fiscal quarter ended in May, and issued a healthy outlook for the next quarter and full year.

“So far, so good,” said Donald Selkin, chief market strategist at National Securities. “There’s somewhat of a disconnect between the economy and Corporate America. Companies aren’t hiring, and there’s still not much pressure to do so. Savings from that have helped profit margins.”

Results from used car dealership CarMax (KMX, Fortune 500), supermarket chain Kroger (KR, Fortune 500), homebuilder Lennar (LEN) and retailer Bed Bath & Beyond (BBBY, Fortune 500) also beat expectations.

While Oracle’s (ORCL, Fortune 500) earnings and sales figures also exceeded forecasts, investors were disappointed by the software giant’s hardware sales.

CNNMoney survey: Where the markets are headed

At nearly 9%, profit margins are the fattest since 2007, according to Standard and Poor’s data.

Those will inevitably begin to contract, said Tyler Vernon, chief investment officer at Biltmore Capital, but revenues will strengthen so margins will ultimately remain at a healthy level.

But it’s not all sunshine and roses. There will be some weak spots.

In particular, companies that rely on commodities will be under pressure since prices for oil, metals, and agricultural products remain strong.

“Food-based companies and apparel retailers have been commenting that the high price of commodities are cutting into margins, and we’ll probably hear more comments along those lines in the second quarter reports,” said Peter Tuz, president at Chase Investment Counsel.

But even so, investors will likely look at those soaring commodity prices and subsequent economic weakness as short-term strains, and be willing to overlook the shortfalls, said Marc Pado, chief investment strategist at Cantor Fitzgerald.

Except for energy companies. With oil prices above $100 a barrel for the bulk of the quarter, companies like Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500) will likely enjoy a nice boost to their bottom lines.

Link: http://money.cnn.com/2011/06/27/markets/earnings_markets_in_depth/

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