Stock Market Correcting, but not Collapsing

This week’s commentary was penned by LPL Financial, but does a really good job of describing the potential “Spring Slide.” If you have any questions please don’t hesitate to contact us.

-The Prosperion Financial Advisors

Almost like an uncontrollable allergic reaction rather than rational thought, the stock market reacted to spring with another sneeze. This year marks the third in a row where the S&P 500 experienced a greater-than-10% decline, a move often referred to as a “correction,” beginning in April. In the previous two years, the volatility and unease lasted into the summer months, and we believe that this is the case again this year.
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The Motivation of Prize and Uncertainty

Innovation often serves as a boost to an economy. After all, it tends to be a driving force behind the creation of new markets and the growth of existing ones. But innovation isn’t something that can be bought and sold… or is it? If we look through historical examples a trend emerges; great innovation comes about as the result of an incentive or prize.

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Reflections About Memorial Day

Memorial Day weekend is upon us and for many it signifies the official start to summer.  Originally called Decoration Day, the true meaning of Memorial Day is not burgers by the pool, but to remember and honor those men and women who have given their lives in service to our country. Officially declared by President Lyndon Johnson in May 1966, Memorial Day can trace its roots back to the Civil War and the remembrance of Union soldiers.

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The Biggest Loser

After JP Morgan announced a $2 billion trading loss last Thursday (due in part to a risky strategy focusing on credit derivatives) several parties are feeling the pain. But to determine who is the biggest loser we have to look at each of them individually.

The first is JP Morgan –they’ve lost $4 billion of net income over the past three years and approximately $25 billion in shareholder value according to the Wall Street Journal.

But the shareholders also took a hit after losing approximately 14% of the share price this past week.

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Pomp and Circumstance

What do John F. Kennedy, Michael Dell, Barbara Walters and Will Ferrell have in common? All are known for giving famous college commencement speeches. Across the nation students are donning cap and gown to parade across a stage in front of proud friends and family. But before getting the coveted diploma, they must endure a graduation speech.

Winston Churchill famously told graduates to “…never, never, never give in.” U-2 rocker Bono challenged Penn grads to work on poverty and health issues in Africa “… because we can, we must”. Steve Jobs said that Stanford students should “stay hungry” and “stay foolish”.

But some of the best advice given to graduates was by Chicago Tribune writer Mary Schmich in a 1997 article known widely as the “Sunscreen Speech”.

Besides encouraging grads to “wear sunscreen”, Schmich gave some great advice about life that has much value for investors.

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Long Term Perspective in a Short Term Focus World

The challenge in today’s market is a matter of perspective. For many it can be hard to ignore the constant clutter and loud volume of media analysts pitching today’s hottest stock. It seems like every economic data point is over-analyzed, over-interpreted, and over-emphasized.

Then there are the privileged few; the “clairvoyant” investors who must know something the rest of us don’t. But are they really using a crystal ball or are they just sticking to their plan? I think their secret is a long-term perspective.
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How to Stay Ahead of the Investing Curve

Here’s a quiz question: Why did the average investor see a 3.5% return while the U.S. stock markets averaged annual returns of 7.8% over the past 20 years?*

The answer is simple, the average investor bought high and sold low.

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The Constitution’s Limiting Principle

Those who followed last week’s Supreme Court arguments on President Obama’s health care law got a lesson in Constitutional Law. While the scope of the three-day hearings was breathtaking it is disheartening as we likely will not hear the outcome until June.  While legal issues dominated the conversation, economics also came into play. The question: Is the market for health insurance so unique that the federal government can penalize someone for not buying it.

This is no small matter. The federal government has never before required citizens to buy a private good or service. If the Federal Government could force people to buy something, as Justice Kennedy said, it would “fundamentally change the relationship between the individual and the government.” If it can make us buy health insurance, what Constitutional principle prevents it from making us buy something else?

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Press Release: Steve Booren Ranks High on Barron’s List for 2012

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LOCAL FINANCIAL ADVISOR NAMED IN BARRON’S TOP ADVISOR RANKINGS
Prosperion Financial Advisor Named to Barron’s List

 

Prosperion Financial Advisors’ Steve Booren was the highest ranked financial advisor in Colorado with total assets under management of less than $500 million according to a Barron’s 2012 Top Advisor Rankings.

This is the fifth consecutive year an advisor from Prosperion has placed in the top ten in Colorado.

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Our Three Principles of Trust

As I was reading the New York Times I came across an article that concerned me. Titled “Why I Am Leaving Goldman Sachs,” the article was written by Greg Smith, the firm’s former executive director and head of United States equity derivatives business in Europe, the Middle East and Africa. It describes in detail why he chose to leave such a decorated position at the company.

“To put the problem in the simplest terms,” Smith said, “The interests of the client continue to be sidelined in the way the firm operates and thinks about making money.”

That’s a bold statement coming from an employee who spent almost 12 years working for one of the largest financial service firms in the world. But it highlights an important issue: can financial firms, advisors or anyone with ties to Wall Street be trusted with your life and financial future? Do they really make clients their number one priority?

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