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CNBC segments with Schatz:
 01/12/17 - Dow 20,000 will be 'a rally you can sell'




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FOX BUSINESS segments with Schatz:
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GE cut highlights peril of relying on income from dividends
Author: Lorie Konish
Date: Nov 14, 2017
Publication: CNBC
Link to Article

  • GE is cutting its dividend in half, which will give investors in the company $4.1 billion less each year.

  • The move is a reminder to investors who count on income from dividends to carefully evaluate their investments, experts say.


The decision by General Electric to cut its dividend in half as the company restructures should be a warning to investors: Don't count on income from dividends.

GE's move reduces its quarterly dividend to 12 cents a share from 24 cents and will give its shareholders $4.1 billion less each year.

Because the company has only cut its dividend twice since 1899, the move may come as a surprise to some shareholders. Yet experts caution that investors need to be ready for such moves when investing in dividend stocks.

"There are no guarantees and the marketplace can change, so you need to be flexible," said financial advisor Greg Ghodsi, managing director, investments at 360 Wealth Management Group of Raymond James.

Investors need to watch out for getting too emotionally attached to a single company, say when they inherit the stock from a parent who worked there for 30 years, Ghodsi said.

They also need to keep their time horizon in mind. A retiree who has plenty of income from a pension and Social Security may be OK holding onto the stock. Someone else who relies on that income could be overexposed, according to Ghodsi.

"It is critical that they know exactly what they own," Ghodsi said. "Today it's GE, but in a month or six months it will be another company."

Individuals looking to invest in dividend stocks should evaluate a few things, according to J.J. Kinahan, chief market strategist at TD Ameritrade.

First, look at the stock price.

"You tend not to get any dividend cuts when the price is stable," Kinahan said.

Second, for companies that don't have a long history of paying dividends, look to see where else the company is putting its money. Signs of a strong business model include investing in new products and research and development, Kinahan said.

"Nothing is safe if you don't regularly review it," Kinahan said. "Be prepared and do a little homework."

While some financial professionals see opportunity in the GE news, others say it's another reason to be wary of large dividend-paying companies.

"I think this is the first time I've been positive on GE since the 1990s," said Paul Schatz, president of investment management firm Heritage Capital in Woodbridge, Connecticut.

"I think people are going to mistake GE's idiosyncratic problems with problems with large-cap dividends," Schatz said. "There are plenty of really good stories out there in the dividend space that people should not ignore."

Stephen Aniston, president and chief investment officer of investment advisory firm Black Peak Capital in Fairfield, Connecticut, said he sees other examples of dividend-paying companies that have had declining cash flows, earnings and sales, such as Coca-Cola and Caterpillar.

"They have had steady declines in earnings and cash flows over the last few years. They trade at increasingly higher multiples," Aniston said. "The fundamentals of their businesses do not support increasing the dividend."


Nightly Business Report – November 13, 2017
Author/Anchor: Sue Herera
Date: Nov 13, 2017
Publication: NBR - CNBC
Link to Article



Tonight on Nightly Business Report, GE cuts its dividend for only the second time since the Great Depression. Plus, as airlines pay more for jet fuel, will fares go higher?


Why the Dow won't be haunted by an October market crash this year
Author: Adam Shell
Date: Oct 5, 2017
Publication: USA Today
Link to Article

October has a sinister reputation on Wall Street. Stock market crashes in 1929 and 1987 are mostly to blame. But doomsday predictions for equities this October are conspicuously absent.

Indeed, instead of spreading a message of doom and gloom, portfolio managers and investment strategists interviewed by USA TODAY are calling for continued gains for U.S. stocks and downplay the risk of a big fall in equity prices.

The optimistic market call has been correct -- at least so far.

In the first four trading days of October, the U.S. stock market has been in rally mode. The Dow Jones industrial average has closed higher each day, notching its 43rd, 44th, 45th and 46th all-time highs of the year. The blue-chip average is up more than 15% in 2017 and is within 255 points of 23,000.

In another sign of strength, the Standard & Poor's 500 stock index has posted record closes six straight sessions, its longest string of all-time highs since 1997, according to S&P Dow Jones Indices.

The sizable gains have come despite fears of a U.S. military confrontation with North Korea, President Trump's stalled economic agenda and a market that has become pricey relative to earnings.

The basis for the bullish trading action boils down to two things:

First, the record-breaking stock market is being supported by improving business conditions around the globe, which bolsters the earnings power of publicly traded companies.

The second big reason for optimism is there are few present signs of traditional bull market killers, such as wildly overvalued stock prices, overly optimistic investors, rapidly rising interest rates and contracting economic growth.

"Most of these ingredients that cause market meltdowns are missing," says Peter Cardillo, chief market economist at First Standard Financial, a financial services firm headquartered on Wall Street in New York.

With fewer bad things in the pipeline to trip the market up and the economy and corporate profit growth coming in at or above investor expectations, Cardillo says he doesn't expect an "October surprise."

Barring market angst caused by an unpredictable geopoltiical event, the "market is likely to move higher," he says, adding the market can suffer short-term blips, or pullbacks, at any time.

If Cardillo is right, investors that suffer from the Wall Street malady "October-phobia" —or the fear of a stock market crash such as the Dow's 22.6% drop on Black Monday in October 1987 — might get a reprieve from their angst and find their heightened anxiety level is misplaced.

October's Dark Past

Thanks to tumultuous, wealth-destroying market events, October has a dark past.

The 1929 crash that caused the Great Depression happened in October. So did the 1987 crash. Stocks also suffered a short drop of nearly 10% in October 1997 in a selling panic sparked by a currency crisis in emerging markets. The last bull market also died in October 2007, setting off the worst stock market decline since the Great Depression. Stocks also cratered nearly 17% in October 2008 during the financial crisis.

All the stock market dives in years ending in "7" — 1987, 1997 and 2007 — give investors pause, Paul Schatz, president and chief investment officer of Heritage Capital, a personal investment management firm in Woodbridge, Conn., said in a research report.



"Octobers in years ending in 7 have had unique behavioral patterns to the downside," he wrote. The good news, he counters, is that most of the biggest declines have come when markets were already in decline heading into the month. Stocks, of course, have been on a tear all year long.

Reasons to be Bullish

Bad memories of short-term stock losses overshadow the fact that October' s overall performance over the years hasn't been as horrific as the highly-publicized plunges suggest, data show.

October, for example, actually marks the end of what historically has been the worst six months for stocks and the start of the best three-month period, which is the year-end stretch from October through December.

October has also been the Dow's second-best month in the past 20 years, posting gains of nearly 2% and finishing higher 70% of the time, according to Bespoke Investment Group. And since the end of the 2008 financial crisis, the broader Standard & Poor's 500 stock index has gained nearly 3% in October from 2009 thru 2016, versus an average gain of 0.9% for the month dating to 1983, Bespoke data show.

Rock-tober gains in 2017?

The recent strong performance in October is seen continuing this year.

Chris Retzler, manager of the Needham Small Cap Growth fund, says despite October's "frightful reputation," he does "not expect a negative October surprise."

Stocks will benefit from improving global growth prospects and "potential clarity" on government policies, including President Trump's recently proposed tax cut plan, Retzler says. Any pressure on stocks that results from fear of the Fed removing stimulus from the financial system will be offset, he says, by the pro-growth policies and deregulation from the Trump administration.

In the end, Wall Street doesn't see the bottom falling out of the stock market because the foundation of the rally is supported by economic growth, strong earnings and low borrowing costs.

"There's just not a lot to fear in the outlook," says Chris Rupkey, chief financial economist at MUFG Union Bank.


Schatz: Bull market far from over
Author/Anchor: Alexis Christoforous
Date: Oct 4, 2017
Publication: Yahoo Finance
Link to Article



Even with major indexes sitting near all-time highs, Paul Schatz, President of Heritage Capital, says this bull market is far from over.




Unlucky 7? Dow looks to dodge curse of years ending in a 7
Author: Adam Shell
Date: Oct 4, 2017
Publication: USA Today
Link to Article

Will the curse of the calendar doom stocks again this October?

October is best known for stock market crashes in 1929 and 1987. But what investors may not know is that many of the market’s worst-ever drops have occurred in October when the last digit of the year ends in a 7, notes Paul Schatz, president and chief investment officer of Heritage Capital, a personal investment management firm in Woodbridge, Conn.

“Beware October in Years Ending in 7,” he warned in a report.

What’s up with this seasonal stock market quirk?

Well, in 2007 stocks rallied into October only to hit a wall amid lofty valuations and early hints of the coming mortgage crisis. October turned out to be the top in the 2002 to 2007 bull market and the start of the worst stock market decline since the Great Depression.

In 1997, a currency crisis in emerging markets sparked panic selling that briefly pushed the Standard & Poor’s 500 stock index down nearly 10% in October.

And pretty much everyone knows that on Oct. 19, 1987, the Dow Jones industrial average suffered its biggest one-day percentage drop ever. The 22.6% plunge is referred to as “Black Monday,” the worst day in Wall Street history.

But so far this year, October has bucked the trend. The Dow has rallied to new highs the first two trading days of the month amid continued economic optimism. Still, October and years ending in 7 are “something investors need to be aware of with North Korea percolating,” Schatz says, citing a geopolitical event that could upend markets.


Betterment partners with BlackRock, Goldman to offer more portfolio options
Author: Jeff Benjamin
Date: Sept 13, 2017
Publication: Investment News
Link to Article

Robo-advice pioneer gets more sophisticated with smart-beta offering

Betterment has partnered with BlackRock and Goldman Sachs to push its digital platform further into the realm of more-complex investment strategies.

The robo-advice platform, with $10 billion under management, announced Tuesday it is adding an income portfolio option from BlackRock and a smart-beta option from Goldman.

The latest additions continue a theme, according to Dan Egan, Betterment's vice president of behavioral finance and investing. The strategies join core tax-advantaged, taxable and socially responsible portfolios, and two municipal bond options for high-tax residents of California and New York.

"These are all examples of us trying to make it even easier for our clients to reach the appropriate investment solution," Mr. Egan said. "Across the board, we are looking at more personalization, with services and features that families tend to use."

But as Betterment has continued to evolve, some have started to question the direction of growth for a digital platform that is leveraging low-cost investing to the mass consumer market.

"In the grand scheme of things, this means nothing because the average Betterment client has no idea what the pros and cons of something like smart beta are," said Paul Schatz, president of Heritage Capital Management.

But Mr. Egan said the strategies being added to the Betterment platform, specifically the smart-beta portfolio, is appropriate for the target market.

"We're seeing more appetite for variety and tailoring, and we need the right breath of solutions to allow investors to do that," he said.

Smart beta is a generic term for strategies that alter allocations within traditional indexed portfolios. There are multiple varieties of smart beta, which attracts as many proponents are critics.

"Smart-beta products can play a role in risk reduction and possible return enhancement, but they're complicated enough that it requires some investor education," said Todd Rosenbluth, senior director of mutual fund and ETF research at CFRA.

Mr. Schatz was more direct, describing smart beta as "quasi passive management."

"For people to think smart beta is a new and unique thing makes me laugh," he said. "Betterment should have just stuck to their knitting of cheap, passive strategies."

Meanwhile, as part of the statement, Betterment founder and chief executive Jon Stein said the robo-platform is responding to customer demand.

"Betterment has an increasingly diverse customer base; they all want to put their money to work, but not necessarily in the same way," he said. "Adding these options to our existing portfolio strategies will help us deliver on our promise to provide customers with a personalized investment plan tailored for their individual needs and preferences."



Analyzing stock market behavior after disasters
Author/Anchor: Nicole Warren, Senior Producer
Date: Aug 31, 2017
Publication: WTNH - NEWS 8
Link to Article



(WTNH)- With Hurricane Harvey and the associated historic, catastrophic flooding the area is experiencing and the country is watching in real time, financial expert Paul Schatz of Heritage Capital LLC started thinking about how the stock market (S&P 500) and insurance stocks fared during previous disasters.

Schatz says when Superstorm Sandy hit, stocks were already pulling back. They rallied for a day before falling to their ultimate lows two weeks later. From there, it was straight up.

Hurricane Katrina is different story because it had two landfalls, first in Florida which people forget and then in Louisiana. Katrina was also a category 5 storm in the gulf which somewhat led to the pullback into its second landfall. Stocks opened lower on Katrina day and then rallied for two weeks before rolling over again to the final low in October. Then it was up, up and away.

With Hurricane Andrew, stocks had already been pulling back when this monster made landfall in 1992. Similar to Katrina, stocks rallied immediately for two weeks before rolling over to their ultimate lows in October before soaring again.

Today, the stock market has been in pullback mode, which has been a theme all month. It’s not really conforming to any of the previously mentioned disasters.

If any sub-sector should be impacted by disasters, you would think it would be the insurance group. Schatz looked at how the Dow Jones Insurance Index behaved around the events.

Sandy was already pulling back when it hit and continued to weaken for two more weeks before blasting off to the upside. This was basically in line with how the stock market did although a little earlier.

Reaction to Katrina was surprisingly strong as the sector did not have much downside immediately following although the S&P 500 was much stronger. And when the S&P 500 declined into October to new lows, the insurance group made a higher low, indicating possible future leadership which came to fruition through November.

For Northridge, he used the stock of Allstate. While the S&P 500 rallied and then declined, Allstate was literally straight down for several months with barely an intervening rally.

With Andrew, he used the stock of Travelers since Allstate wasn’t public yet. Similar to the S&P 500, Travelers rallied a little and then declined although it wasn’t perfect.

Today, we see that the insurance group has been under pressure for a few weeks, oddly up ticked on Friday and now is declining. If history is any guide, we should see a good buying opportunity in this sector sometime in September.




Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?
Author: Jeff Benjamin
Date: Aug 18, 2017
Publication: Investment News
Link to Article

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media

Jeffrey Gundlach's new aggressive Tweeting style has sparked a discussion as to whether it makes sense in the financial services industry.

The founder and CEO of DoubleLine Capital, a $111 billion asset management firm specializing in fixed income, has been? expressing himself on Twitter in ways that have been compared to some of the unfiltered tweets by President Donald J. Trump.

Over the past several days, Mr. Gundlach has been aggressively tweeting about an upcoming story by the Wall Street Journal, describing it as a "hit piece" and "fake news," and calling out reporters for their tactics.

Mr. Gundlach, who opened his Twitter account in May as @TruthGundlach, has nearly 34,000 followers, despite posting just 120 tweets.

The appeal, aside from the obvious direct perspective from one of the country's leading bond-fund managers, might be the kind of candor Mr. Gundlach has been expressing toward various media outlets.

But, what makes for a good tweet isn't always the same as a good business strategy, according to April Rudin, founder of RIA marketing firm, Rudin Group.

"Just because you can do something doesn't mean you should do something," she said. "I would never advise clients to do something like this themselves, but I think people are feeling empowered or enabled by what the president is doing on Twitter."

Controversial or not, and many of Mr. Gundlach's tweets are light-hearted and outside the realm of asset management, the DoubleLine company perspective is that this is one of the advantages of running a private business.

"DoubleLine is a very unique firm that is independent and privately held, and Jeffrey is his own man and he speaks his mind," said Loren Fleckenstein, DoubleLine analyst and spokesman.

He added that, similar to the popularity of Mr. Gundlach's public speaking and quarterly conference calls, "registered investment advisers love what he's doing, and they've told him that."

Paul Schatz, president of Heritage Capital, who is also not shy about expressing his views on Twitter, thinks Mr. Gundlach should rise above whatever negative press coverage DoubleLine is receiving.

"He clearly loves the spotlight, but it seems only on his terms," Mr. Schatz said. "He's a masterful fixed-income manager, but he should leave it at that."

Carolyn McClanahan, founder and director of financial planning at Life Planning Partners, also believes fights on social media can become petty.

"I prefer respectful discussion and discovery of where points of view come from with a focus on possible solutions," she said. "I wish we could quit the 'gotcha' mentality that is pervasive on Twitter."

That wish might be comparable to the challenge of putting toothpaste back in the tube, according to Jason Lahita, president and co-founder of FiComm Partners, a public relations firm specializing in the financial services industry.

"Twitter has effectively become, particularly in recent years and accelerated by Trump, a powerful PR tool and must be managed as such because anything on it is fair game for reporters to use," he said. "The Trump-crazy approach does not work in financial PR, so one hopes Gundlach is not borrowing from that playbook, but his tweets do bear resemblance to The Donald's."

In practice, however, what works might depend on what you're trying to accomplish.

"All I can say is, Gundlach always seems to be right in his judgment, even if he isn't always gentle in his delivery," said Bob Veres, owner of Inside Information.



A Check On 2017 Mid-Year Finances
Author/Anchor: Amanda Raus
Date: Aug 11, 2017
Publication: FOX 61



Financial expert Paul Schatz from Heritage Capital LLC talks with Fox 61's Amanda Raus about checking your 2017 finances now that the year is more than half over.




Mid-year financial check-in
Author/Anchor: Nicole Warren, Senior Producer
Date: Jul 26, 2017
Publication: WTNH - NEWS 8
Link to Article



NEW HAVEN, Conn. (WTNH) — (WTNH)- It may be hard to believe but 2017 is half over and that means its a good time to be pro-active with your investments and not wait until the end of year when it may be too late. Paul Schatz, president of Heritage Capital LLC in Woodbridge, has some ideas:

    - Update financial inventory of your current holdings
    - Check credit report
    - Update budget
    - Analyze credit card debt
    - Mortgage refi
    - Rebalance 401k or other retirement accounts
    - Increase 401K contribution
    - Update tax situation




Since its IPO, Snap Inc. did exactly what it said it would, so why is its stock struggling?
Author: Paresh Dave
Date: July 14, 2017
Publication: L.A. Times
Link to Article

Conduct exit interviews, stay positive and learn something when a client is just not that into you

The Los Angeles tech company behind Snapchat offers a simple sales pitch to investors: We’ll release features niftier than anything our competitors can produce.

In its first four months as a publicly traded company, Snap Inc. has kept its part of the bargain. It has debuted a new mapping tool that reveals the location of friends and trending events, launched several short video series and made it easier for any advertiser to buy commercial time on Snapchat. The firm also caught up to rival Instagram by matching options for replaying messages.

Yet, despite the changes, investors don’t consider Snap any more valuable than when it went public. In fact, Snap shares have fallen below their $17 opening price in March to $15.27 on Friday. The company’s market capitalization of around $18 billion sits right about where it did in the months leading up to Southern California’s biggest initial public stock offering.

What gives?

There’s no shortage of concerns swirling around Snap, which is scheduled to reveal its second-quarter financial results Aug. 10. But chief among them, investors remain unsure whether or how Snap will generate a profit someday. Snap declined to comment.

Financial analysts estimate the company will lose $3.3 billion this year, according to a tally by investment research aggregator FactSet. Much of Snap’s expenses is stock compensation to employees.

Questions about making money dogged Snap before its IPO too. Investors and analysts say what has led the stock to drop is a creeping sense among investors that no matter how many creative features it launches, Snapchat just may be too small a player in the app economy to command a high valuation. That has investors wondering when shares might settle at a comfortable price.

At the moment, as Snap stares “down the face of very pronounced head winds, we’d rather fish in better waters,” said Christopher Versace, chief investment officer at Tematica Research, which provides guidance to individual investors.

Advertiser reactions are mixed

Snap generates its revenue by selling ads that appear inside Snapchat. Varieties include 10-second commercials bought by the likes of Adidas, Spotify and Emirates in addition to small decorative graphics that anyone, including regular users, can buy to celebrate an event.

But it remains a work in progress for many big-budget advertisers to figure out whether the spots they’re buying are worthwhile. Snap in recent months introduced more sophisticated measures to help retailers track whether ads lead to in-store visits and purchases.

Morgan Stanley stock analyst Brian Nowak reportedly said this week that the initiatives have been underwhelming, and he lowered estimates for Snap’s ad sales growth. Others have voiced concerns about users skipping past ads on Snapchat and the special effort required to design commercials for the app.

Martin Sorrell, chief executive of ad agency giant WPP, gave unenthusiastic mentions of Snap in TV interviews in recent days. He said Facebook — which has duplicated many of Snapchat’s best-known features in its Instagram and Messenger apps — had “successfully” countered Snap.

WPP spends about $2 billion annually buying ads on Facebook for clients such as Ford and Procter & Gamble. Its spending on Snapchat ads could double to $200 million this year.

Versace, the investment research analyst, said Snap also could take a hit if companies lower their growth forecasts after initially thinking the economy would grow faster under President Trump.

“This coming earnings season, there’s a high probability we see companies dialing back expectations for the second half of the year,” he said. “I wouldn’t be surprised if we see Snap doing the same.”

Credit Suisse stock analyst Stephen Ju said this week that he's had encouraging conversations with advertisers about Snap being on the right track. But he still lowered second-quarter sales assumptions.

“While we were hoping for Snap to exhibit a more comfortable growth path, we are reminded that nascent companies sometimes grow in fits and starts,” Ju wrote.

Analysts estimate Snap picked up $190 million in revenue during the second quarter, with a full-year estimate of $980 million.

“The big concern is you have a company that’s not profitable and doesn’t show a clear path to how it’s going to become profitable,” said Steven Dudash of IHT Wealth Management.

User growth remains difficult to predict

One of Snap’s biggest priorities for the year has been loading up the app with a daily batch of short, scripted videos about sports, celebrity life, food and even dating. But analysts are getting mixed data on whether shows and other features are roping in new users or getting existing Snapchatters to spend more time on the app. More users and more time spent increases the opportunities Snap has to display an ad.

Snap’s moves to increase usage may be cutting both ways. For instance, its new location-sharing feature has unleashed a wave of privacy concerns that could see parents more closely monitor or restrict their children’s app usage. On Wednesday, Arkansas Atty. Gen. Leslie Rutledge joined numerous schools and public officials in alerting consumers to be cautious about Snap Map.

Scott Devitt at Stifel, Nicolaus & Co. said in a note to investors Thursday that stock buyers should give Snapchat a try — and that becoming a user might assuage some of their skepticism.

“Many of these individuals don’t use or understand Snap (yet), leading to a negative bias despite healthy underlying growth,” Devitt said.

Snap Chief Executive Evan Spiegel has told The Times it could take several years for the public to understand his company and its products.

An increase in stock supply looms

The 200 million Snap shares available are expected to turn into 1.2 billion by the end of the summer as trading bans lift on employees, advisors and top investors. Increased supply tends to dampen prices.

How many shareholders will actually start selling their newly freed stakes “is a wildcard,” Versace said.

InvestForTomorrow

Veteran tech and media executives who took pay cuts to work at Snap may be interested in cashing in sooner rather than later, while co-founders Evan Spiegel and Bobby Murphy may hold off indefinitely. Both had opportunities to get millions in cash through company loans and sales in the past.

Spiegel and Murphy, who already control most of the company's voting power, may decide to even add shares to their holdings in the coming weeks. Such a move would be a strong signal of their faith in their long-term plan.

Snap's biggest venture capital investors, Benchmark and Lightspeed Venture Partners, didn’t respond to requests to comment on their plans for their soon-to-be unrestricted Snap shares. Before its shares of Twitter became unrestricted three years ago, Benchmark forewarned that it wouldn’t be an immediate seller.

Stock indexes could keep Snap out

Snap also could automatically lose potential buyers in the coming months. Operators of stock indexes such as FTSE Russell, Standard & Poor’s and MSCI are considering, and perhaps leaning toward, leaving out companies that don’t offer investors voting power. An exclusion policy would be bad for Snap, whose publicly traded shares carry no votes, because several major investment funds maintain portfolios that match indexes.

The issue adds to the defense of people who are not only betting on Snap shares to fall, but also paying one of the market’s highest options fees to make that wager.

There is a limit to how far skeptics think shares will sink, and some think it’s near. Paul Schatz, chief investment officer at Heritage Capital, said Snap is “close to a low” as it moves into “the typical four- to six-month-after-IPO zone where a bottom is likely to appear.”

He had called the shares "garbage” in March when Snap traded in the $20s. At $16 months later, he says, “I am a lot less negative.”




How to handle getting fired by a client
Author: Jeff Benjamin
Date: May 01, 2017
Publication: Investment News
Link to Article

Conduct exit interviews, stay positive and learn something when a client is just not that into you

Unlike fishermen, financial advisers don't typically boast about the one that got away. But when pressed to reflect on the times they've been fired by clients, the stories can be insightful, educational and even entertaining.

"In 28 years, I've had a few clients leave, and I'm skeptical of anyone who says they haven't had clients leave," said Leon LaBrecque, managing partner and chief executive officer at LJPR Financial Advisors.

Mr. LaBrecque recalls being blindsided a few years ago when a client for which he had gone "above and beyond the call of duty," literally used the words "you're fired" when parting ways.

"He seemed quite happy and he took me out for a drink, where he thanked me for all the good service and then said, 'You're fired,'" Mr. LaBrecque said. "I thought he was kidding, but he said, 'No, you're fired, I don't need you anymore.'"

As is often the case in service industries like financial planning, client relationships can be fragile and sometimes advisers don't recognize the breakdowns until the client is gone.

"I guess I should have known better since that particular client was an executive in charge of downsizing at a major company," Mr. LaBrecque said. "I got downsized by a downsizer."

April Rudin, founder of the RIA marketing firm Rudin Group, said being fired by a client is a reality of having clients, and that the key is learning how to benefit from the experience.

"Advisers don't usually want to talk about it or think about it because it seems like a bad experience when a client leaves. But you want to learn from it, and you shouldn't fall into the habit of blaming the client," she said.

But in some cases, blaming the client might be the easiest way of coping with what is essentially a relationship gone bad.

"Because of the nature of my business, which includes hourly consultations, I don't get so much fired as people just don't come in as often or at all, which I think in the dating world is called 'ghosting,'" said Kristi Sullivan, owner of Sullivan Financial Planning.

"It may be because they feel they've gotten what they need from me and are ready to be independent, or maybe they didn't like me, but don't want to tell me," she added. "I figure if they don't feel they need me anymore, then they don't."

Like Ms. Sullivan, Tim Holsworth, president of AHP Financial Services, takes the attitude of letting bygones be bygones when a client hits the bricks.

"I don't typically focus on the clients that have left, because I'm almost never given a reason, and it's almost always a surprise," he said.

Mr. Holsworth said he might lose a couple clients per year, but usually only one of those clients is "somebody I really don't want to leave."

"Sometimes you might be blamed for the market, but most of the time I think clients leave because of a personal matter or some other song and dance," he said. "It's human nature to feel bad when somebody leaves, and I wonder if maybe I should have seen them more often. But I don't really know because I don't have any long discussions with people who are leaving."

But, according to Ms. Rudin, discussions of some kind are among the best ways to benefit from the loss of a client.

"You should always try to do an exit interview, because there are a million lessons that can be learned from being fired," she said. "Some people will be honest and others won't, but you can certainly gather the information."

Ms. Rudin added that a pattern of clients leaving could reflect a larger practice management issue, but usually the problem is that the client was a bad fit from the start.

"There's an adviser mentality sometimes that any client, particularly one with lots of money, is a good fit," she said. "But the number one reason clients leave is because the adviser is onboarding the wrong type of client."

Ms. Rudin gives the example of a prospective client who is a business owner nearing retirement.

"That might look like a good client, but you might not have the resources or network to handle that type of account," she said. "The assets can make advisers turn themselves inside out. But the cost of the account might get too high because you end up spending too much time on it, which jeopardizes the relationship with that client, and it hurts the relationships with other clients who are being ignored."

Carolyn McClanahan, founder and director of financial planning at Life Planning Partners, recalls a client leaving due to opposing political views.

"As soon as I started saying good things about the Affordable Care Act, this particular client was having an issue with that," she said. "It's turns out she is very, very far right, and I'm a moderate."

Ms. McClanahan, who said she typically loses about one client per year, believes the key to keeping clients is frequent communications.

"One of the most important things about being a good adviser is good communication from the beginning," she said. "There will be signs that people aren't happy because they will never ask questions, or they will be hard to get in touch with."

Kashif Ahmed, president of American Private Wealth, also recalls having a client leave him for political reasons.

"They pressed me to share my political views, and I suspect that's why they left, because we didn't share the same political views," he said. "But I also suspect they're not happy where they are now because they keep emailing me with questions about their financial situation."

Mr. Ahmed said he learned not to discuss politics with clients.

Paul Schatz, president of Heritage Capital Management, said there is an endless list of reasons why clients might want to leave, and advisers should be open to the reality that some client relationships just won't work.

"I have lost clients because they didn't value the services we provide, and because we never had a strong relationship and because of a period of weak market performance," he said. "The one thing I never do is get angry or argue with the client who is leaving, because I tell my clients all along that I don't want a client who doesn't want to work with me. And if they don't trust me, don't like me or don't have confidence in me, it's unlikely to change and we should part ways."




Trump's plan to ditch AMT welcomed by advisers, but tax savings may be minimal
Author: Jeff Benjamin
Date: Apr 27, 2017
Publication: Investment News
Link to Article

Removing big deductions could nullify benefits of repealing the alternative minimum tax

The Trump administration's proposed repeal of the alternative minimum tax might remove some tax-planning headaches, but it isn't likely to reduce anybody's tax burden, according to tax-planning experts.

The AMT, which adds an extra layer of tax calculations for individuals earning more than $200,000 a year, has been put on the chopping block as part of President Donald J. Trump's tax plan.

Even though the AMT is widely viewed as a tax on the uber-wealthy and requires taxpayers to pay the higher of two separate tax-bill calculations, it actually has the biggest impact on filers earning between $200,000 and $1 million, according to Megan Gorman, managing partner at Chequers Financial Management.

"If you're in that group, you're initial reaction should be great, but you need to keep in mind that (President Trump) also wants to get rid of big itemized deductions like state taxes and property taxes," she said. "So, if you're a taxpayer subject to AMT, to some degree, your life doesn't change much."

But if you're a financial adviser, the removal of the AMT could still put a smile on your face.

"I hate anything that is so complicated you can't explain it in plain English to the clients," said Rose Swanger, president of Advise Finance, a $10 million advisory firm.

"I welcome a simpler and cleaner tax code," she added. "Getting rid of the AMT will be a first step."

Leon LaBrecque, managing partner and CEO at LJPR Financial Advisors, is also not a fan of the AMT, which he prefers to call the "mandatory maximum tax."

He manages nearly $700 million in client assets.

"It catches mostly taxpayers in the $200,000 to $500,000 range, but I have definitely seen it hit a lower income," he said. "My bigger-income folks usually don't pay AMT, since their tax bracket goes over the 28% AMT rate. "

Congress enacted the AMT in 1979, after learning that in 1966 there were 155 taxpayers with incomes above $200,000 that used deductions and other loopholes to avoid paying any federal income taxes.

By the late 1990s, the AMT was affecting about a million taxpayers a year, and currently affects about 4.5 million taxpayers.

Ms. Gorman said about 31% of those earning between $200,000 and $500,000 are now subject to the AMT. And the tax hits about 60% of those earning between $500,000 and $1 million.

"It typically hits people in high-tax states where there are significant property taxes," she said.

According to some estimates, the repeal of the AMT, without factoring in the loss of major deductions, will reduce tax revenues by $35 billion.

Not only was the AMT never indexed to inflation, but it also was not designed to target a specific slice of what are now considered upper-middle-income earners in some high-tax states like New York, New Jersey, and California.

"It really affects a limited number of people, and mostly those with incomes of between $200,000 and $500,000," Steven Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center.

"Because Congress did not inflation-adjust the tax brackets, over the years the AMT has hit a wider and lower range of taxpayers," he said.

Regarding published reports of President Trump's $31 million AMT payment in 2005, Mr. Rosenthal attributed that to a $109 million net operating loss that was carried forward from prior years.

"That was a very strange and very rare situation that you would almost never see," Mr. Rosenthal said.

According to Ms. Gorman of Chequers Financial Management, the AMT does not allow deductions for state and property taxes, and the tax rate starts at 26%, then quickly climbs to the 28% bracket.

The non-AMT calculation factors in income minus deductions, with the rate starting at 10% and potentially climbing to 39.6%.

"Even though the AMT looks like a lower tax bracket, you're having more of your income taxed at a higher rate sooner," she said.

Paul Schatz, who manages $90 million as president of Heritage Capital Management, said the AMT goes against many of his fiscally conservative beliefs, but he doesn't think it should be repealed without a way to replace the tax revenue.

"The intent of the AMT was very sound, but it's application is sorely lacking," he said. "Fix the problem by making it current and indexing it to inflation, because people making seven figures a year should not be able to deduct away their fair share to zero. Wow, I sound like a Democrat."




How To Beat 90% Of Mutual Fund Managers In The Long Run
Author: Ky Trang Ho
Date: Apr 12, 2017
Publication: Forbes
Link to Article

It is the painful truth Wall Street doesn't want you to know. All that time you spent researching mutual funds and comparing star ratings in hopes of the finding a Warren Buffett was a waste. You would have been better off watching cat videos and creating memes to cyber shame United Airlines. You could have beaten 90% of mutual fund managers the past 15 years by investing in plain-vanilla index funds like SPDR S&P 500 ETF, Vanguard 500 Index Fund or Vanguard Total Stock Market Index Fund.

The SPIVA® U.S. Scorecard, issued by S&P Dow Jones Indices today, reveals the vast majority of mutual funds across the board fail to surpass their benchmarks in both the short and long term. Two-thirds of large-cap funds, 89% of mid-cap funds and 86% of small-cap funds lagged their indexes last year.

Fidelity Investments is the nation's largest mutual fund company.

The data is even worse over the past 15 years, which captures a complete market cycle. Ninety-two percent of large-cap funds, 95% of mid-cap funds and 93% of small-cap funds fell short of expectations. These data would be even worse without survivorship bias. That's because the study only counts funds that lived long enough to have 15 years of performance history.

"After 15 years, only 34% of large-cap funds remain available today ,” S&P Dow Jones Indices wrote in a statement. “For mid-cap and small-cap funds, those numbers are 49% and 52%, respectively."

The performance was just as grim for foreign funds.
  • 80% of global equity funds lost to the benchmark in 2016.
  • 83% of them fell short after 15 years.
  • 64% of emerging markets funds missed the bogie in 2016.
  • 90% of them floundered after 15 years.


Fixed-income funds also want to wither into a hole.
  • 88% of long government funds, 94% of high-yield funds and 72% of general municipal debt funds missed the mark in 2016.
  • 97% percent of long government funds, 96% of high-yield funds and 84% of general municipal debt funds trailed the benchmark after 15 years.
Fixed-income funds also have high death rates.

"After 15 years, 42% of long government funds, 51% of high-yield funds and 47% of general municipal debt funds remain available today," S&P Dow Jones Indices wrote in a statement.


The SPIVA® U.S. Scorecard was released by S&P Dow Jones Indices April 12, 2017. S&P Dow Jones Indices

Why Do Investors Buy Actively-Managed Funds?

Index funds not only do better but also charge less. Actively-managed funds on average charge 0.84% of assets annually versus 0.11% for index funds. Only 19% of assets held in defined contribution plans were invested in index funds from 2004 to 2015, according to the Investment Company Institute. Overall the U.S. mutual fund industry has nearly $16 trillion in assets as of 2015. But only $2.2 trillion is invested in index funds, according to ICI.

If the vast majority of mutual funds fail to outperform their benchmarks, why do investors cling to them like an airlines passenger who doesn't want to be "reaccommodated"?

"Most advisors won't sell an index fund because they don't pay a commission," said Andrew Denney, founder and CEO of Prosperity Financial Group in Springfield, Mo. "Also, they don't want to be perceived as someone who charges a fee when you can invest in an index for free."

Employee retirement plans, through which most people invest in the stock market, may only offer actively-managed funds because employers were wooed by their sales people.

"Additionally, and perhaps most importantly, until about 15 years ago, 401Ks were littered with actively-managed funds because they had the money to pay to play," said Paul Schatz, president of Heritage Capital in Woodbridge, Conn. "Index providers did not or it wasn't part of their business model."

People may be more familiar with active funds because they do more advertising and marketing.

"Many investors stay invested in actively-managed funds because they have not been well informed about the choices," Justin J. Kumar, senior portfolio manager at Arlington Capital Management in Arlington Heights, Ill., said in an email. "Clients are not aware of the inducements or kickbacks, although they can see the blimps, stadiums, and events sponsored by these active management firms."

Investors hellbent on beating the market naturally seek out managers with the perceived ability to do so, said Jonathan Camarda, a Certified Private Wealth Advisor® at Prosperity Capital Group in Jacksonville Beach, Fla.

Why You Might Buy Actively-Managed Funds

Should you give your mutual fund manager the bird? Not necessarily. Actively-managed funds may serve a purpose in your portfolio overall.

"Net net during times of volatility a higher percentage of active funds proved worthy if their fees, especially in the midcap and small cap spaces," said Camarda of Prosperity Capital. "Furthermore, in the rebound years of 2003 and 2009, many outperformed their benchmarks to the upside."

The stock market itself may be irrational at times.

"No doubt, indexes outperform most active managers. The issue is that a high stock market can distort this phenomenon,” said Holmes Osborne, CFA, of Osborne Global Investors in Santa Monica, Calif. “This was the case in the late 90s with the internet boom. Many great managers closed their doors because they refused to buy into the whole internet bubble."

The tide could switch in favor of active managers during bear markets, says David Hunter, chief macro strategist, at Contrarian Macro Advisors in Bedford, N.H.

"Indexes typically outperform at the end of a market cycle,” said Hunter. “I think we are at a secular top and expect the indexes to be hit very hard in the coming bear market."

“At the end of a long bull market a small number of momentum stocks account for a disproportionately large percentage of the gains,” Hunter added. “Rational, active managers typically will shy away from those stocks that appear overvalued and look for stocks that might be emerging. In the short run, that approach can lead to underperformance.”

Actively-managed funds may make more sense for investing in foreign stock markets and small caps, says Denney of Prosperity Financial.

"Most international stocks lack transparency in what the company does and makes,” said Denney. “So an active fund manager can have boots on the ground and tour the different companies they are investing in.

“Also, small-cap stocks makes sense for active management. Some of the smaller companies are thinly traded. So having a manager that can select the different companies is a benefit."




Paul Schatz has some tips for tax time
Author/Anchor: Tim Lammers/Amanda Raus
Date: Apr 5, 2017
Publication: FOX 61



Financial expert Paul Schatz from Heritage Capital, LLC talks with Fox 61's Amanda Raus to give some tax tips. Aired on Fox 61's Good Day Connecticut on April 5, 2017.




Stocks bouncing back ahead of Obamacare repeal vote
Author/Anchor: Alexis Christoforous
Date: Mar 23, 2017
Publication: Yahoo Finance
Link to Article



Stocks (^DJI, ^GSPC, ^IXIC) are edging up in midday trading, with the tech sector (XLK) lagging and financials (XLE) leading. Jonathan Corpina of Meridian Equity Partners joins us live from the New York Stock Exchange.

To discuss the other big stories of the day, Alexis Christoforous is joined by Yahoo Finance’s Nicole Sinclair and Paul Schatz, president & CIO at Heritage Capital LLC.

Stocks attempt to bounce back ahead of Obamacare repeal vote

US stocks are still rebuilding after Tuesday’s selloff, the worst of the year. Financials are springing back to life after getting beaten down the most in the sell-off. Of course we have that big vote on Obamacare repeal today. But we’ve seen stocks bounce back quickly after previous political uncertainty.

Bob Iger extends Disney Deal to July 2019

It seems like it’s pretty hard to leave the Magic Kingdom, as Bob Iger has extended his contract to lead the company through July 2019. The stock is up on the news. How big of a surprise is this?

Holding off retirement

The House will decide what’s next to the GOP’s health care bill. And people getting ready to retire are on the edge of their seats. The uncertainty of health care costs is putting their plans on hold. Many are playing it safe by working longer.

Renters are taking over the US

It looks like “renting” is back in vogue in the US. Renters now make up half the population of major US cities. Even though home ownership rose slightly in the second half of 2016, many analysts believe the trend to rent will continue as well.




Snap Most Popular Kid In Grade School, But Will It Last Throughout Life?
Author: Mark Melin
Date: Mar 06, 2017
Publication: ValueWalk
Link to Article

Investors love Snap Inc (NYSE:SNAP). After the stock price surged over 44% in its New York Stock Exchange debut Thursday, it climbed another 11% on Friday to end at $27.09 with a market value of nearly $30 billion. But is the company open for a short or is it a long-term hold?

After losing $500 million in 2016 and faced with corporate governance challenges — shareholders will generally not have voting rights and co-founder and CEO Evan Spiegel and co-founder and CTO Robert Murphy own a total of 40% of Snap's market cap and 89% of the voting rights — investors nonetheless snapped up the shares. The concept of democracy apparently isn't in vogue, but one trend — tech IPO investors having early valuations in excess of actual profits - remains.

Snap had a strong revenue generation year in 2016, improving sales 7 times to bring in $405 million. This could be one reason Snaps roadshow to institutional investors was reported to have attracted such strong interest. the Snap offering came to market with a bang amid record stock market highs, post-election optimism and little supply of IPOs coming to market.

"With the lack of recent exciting IPOs and SNAP’s IPO a constant media topic, we expect that demand for this IPO will be high," Ihor Dusaniwsky, Head of Research, S3 Partners, said in a note to clients. "There is a strong chance that the initial IPO rally will continue into a follow-up rally, which will spur even more short demand."

Investors could be eying Facebook, valued at $400 billion, or Google, at $600 billion, and think Snap has a similar long runway ahead. Those legendary tech firms could also provide a challenge by adopting Snap's technology and muting their growth.

"Clearly, the Snap (IPO) is representative of a frothy environment," Heritage Capital Chief Investment Officer Paul Schatz told the Fox Business News show "Wall Street Week," calling it "almost garbage" as he expressed concerns over potential competition to emerge and questioned their revenue path. What Schatz didn't much analize was the democracy angle.

Snap is asking investors to give up accountability rights and lock-in their relationship status.

Democracy can be messy and inefficient, no doubt. But Snap investors seem to think a company run without accountability to shareholders isn’t an issue and should be locked into a relationship that could get abusive without checks and balances.

Snap co-founders are hoping to convince investors that they not having a voice in the company isn’t a bad thing. And they want 25% of IPO buyers to agree to an extended lock-up period of one year, just to make sure they don’t get jumpy. Such efforts are designed at reduce stock selling, which impacts market liquidity.

Dusaniwsky, for his part, looks at recent tech IPOs and relates it to the Snap liquidity.

"Stock borrow availability will be tight initially and stock borrow fees should start around the 25% fee range," he wrote. He thinks if settlement issues emerge early on in the IPO process, stock availability will be limited in lending programs for short selling and borrow rates could increase. "If, as expected, SNAP's stock price rallies, short demand would increase in tandem and short interest would quickly climb to 25% of the initial offering - pushing total short interest well above the $1 billion mark, and stock borrow levels into the 30% to 50% fee range."

There are recent IPOs that Dusaniwsky thinks could point to Snap’s short interest path.

"Twilio Inc.’s IPO in June 2016 provides insight into SNAP’s preliminary short activity," he wrote. TWLO’s short interest climbed to $80 million in the first week after its IPO, which was 20% of the initial offering, and three weeks after the IPO short interest continued to increase.

Three months later short interest peaked along with the stock price. By the end of the summer, almost half of the stock was being borrowed to cover short sales, he noted.

Looking back at recent IPOs, including Twilio, Nutanix (NTNX US), Planet Fitness (PLNT US), Athene Holding (ATH US) and Shake Shack (SHAK US), to use as examples of post-IPO short interest, we see the results are binary in nature. Either short demand continues to increase in the name if the stock's price has a significant follow-up rally in the stock after the initial post-IPO run-up with borrow supply tightening and borrow rates spiking into the 20% to 50% fee range. If the secondary rally is absent or muted, which allows short interest to either decrease or stabilize, borrow availability will increase over time and borrow rates will remain within the 1% to 3% fee range For those considering short selling, Dusaniwsky has a message that speaks to the recent market run-up as well: "SNAP short sellers will certainly need conviction in their trades."




Should investors continue to buy into the Trump rally?
Author: Paul Schatz
Date: Mar 03, 2017
Publication: FOX Business
Link to Article






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