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CNBC segments with Schatz:

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Finance tips for the end of the year
Author/Anchor: Tim Lammers
Date: Jan 14, 2019
Publication: FOX 61
Link to Article














Market downturn puts spotlight on active management
Author: Jeff Benjamin
Date: Jan 02, 2019
Publication: Investment News
Link to Article

One of the best ways active managers can earn their money in a down market is by holding cash, something index funds can't do

The momentum toward passively managed index investing is expected to lose some steam as the volatility in the financial markets shines fresh light on the benefits of active management.

It is as cyclical as the markets themselves, and a lot of financial advisers are already making asset-allocation adjustments to bring active managers off the bench as the stock market heads south.

"No question that this downturn in the market will favor actively managed strategies going forward," said Dale Wong, president of Missio Investment Management.

"Greater volatility and dislocation in a sharp downturn typically affects all equities, even those companies whose future prospects for growth and earnings are much more attractive," he added. "This creates dislocations in the market that enhances opportunities that active managers can take advantage of with greater likelihood of asymmetrical returns over a three-to-five-year investment horizon."

A decade-long bull market for stocks has made an easy case for riding along in low-cost index funds, but the spike in volatility over the past three months is triggering some altered viewpoints.

The S&P 500 Index declined by 4.38% last year. But the number that is getting more attention is the 13.52% decline during the fourth quarter.

Meanwhile, actively-managed large-cap growth funds, as tracked by Morningstar, declined by an average of 2% last year, though they were down 15.42% in the fourth quarter.

But inside those broad averages are such extremes as a 17% full-year return by the Fidelity Advisor Series Growth Opportunities Fund (FAOFX). The $680 million fund was down 10.4% in the fourth quarter.

The best-performing large-cap growth fund in the fourth quarter was the $265 million Madison Investors Fund (MNVRX), which was down 7.63%.

"To me, active management is risk management," said Barry Mandinach, executive vice president at Virtus Investment Partners.

"When people buy index funds, most of them don't know what they're giving up in exchange for the low fee," he added. "They're taking on a valuation- and quality-agnostic approach to investing. And that's like driving a car with no brakes, which is fine if you're only going uphill."

One of the best ways active managers can earn their money in a down market is by holding cash, which is something index funds are not able to do.

"In times of market volatility and selloffs, active management is getting paid a premium to keep you from losing too much ground," said Todd Rosenbluth, director of mutual fund and ETF research at CRFA.

"They can go to cash, they can raise cash, and they can buy on the dips, whereas index funds have to track the index," he added.

Dennis Nolte, vice president at Seacoast Investment Services, said cash management is the secret weapon for most active managers.

"If a fund holds cash and is highly correlated to the S&P 500, it'll outperform during down markets," he said.

While index investing isn't yet free, it is dirt cheap, which means most active managers must gain at least 100 basis points over an index just to cover the management fee differential.

But the tradeoff, from an adviser's perspective, is the ability of an active manager to buy low during periods of market volatility.

The flipside of being able to go to cash is that active managers suffer a "cash drag" during bull market periods, which is another reason index funds are more competitive in bull markets.

"Active mutual funds typically trail in the strongest of markets and perform better and better as that tails off," said Paul Schatz, president of Heritage Capital.

"The longer the stock market becomes challenging, the more the active fund manager takes measures, whether right or wrong," he added. "One thing they certainly do is run with higher cash levels. Just that alone can help reduce fee drag. Active managers will also often reduce beta in a portfolio to reduce risk if they don't want to raise cash."

Wall Street experiencing 'a relentless selling wave'
With: Alexis Christoforous
Date: Dec 18, 2018
Publication: Yahoo! Finance
Link to Article

Paul Schatz, president of Heritage Capital LLC, says we're seeing 'a relentless selling wave' even though 'you usually don't find any catalysts late in the year' for selling. Yahoo Finance's Alexis Christoforous speaks to him about how the markets are faring.

2019 could be a stellar year for gold
With: Alexis Christoforous
Date: Dec 18, 2018
Publication: Yahoo! Finance
Link to Article

Gold has been spiking higher in recent days as investors seek a safe haven, and could have a stellar 2019. Yahoo Finance's Alexis Christoforous, Heidi Chung and Paul Schatz of Heritage Capital discuss.

Finance tips for the end of the year
Author/Anchor: Keith McGilvery
Date: Dec 12, 2018
Publication: FOX 61
Link to Article

Paul Schatz, President of Heritage Capital LLC has these tips for your year end finances.

Top 10 Financial Tips for Year-End:
  • Do a dry run through of your tax return
  • Harvest capital losses
  • Recognize capital losses up to $3000
  • Beware of mutual fund distributions
  • Max out your 401K contribution
  • Take your RMD
  • Defer bonus
  • Donate your RMD to charity
  • Donate to charity
  • Spend FSA
  • Fund 529
  • Gift up to $15,000

This is an opportunity to buy cyclical stocks, says pro
With: CNBC
Date: Oct 29, 2018
Publication: CNBC
Link to Article

Paul Schatz, Heritage Capital president, and Jason Trennert, Strategas Research Partners chairman and CEO, discuss the volatility in the markets this month.

Stock market pullback brings out the buyers
Author: Jeff Benjamin
Date: Oct 24, 2018
Publication: Investment News
Link to Article

While some investors react with alarm to market decline, others see it as an opportunity to buy low

While some investors and market watchers are interpreting the latest stock market volatility as a call for caution, others see it as a rare opportunity to buy low.

"I probably carry more cash than I should in client accounts, but I do it for opportunities like this," said Paul Fenner, president and founder of Tamma Capital.

With the stock market nearly 10 years off its March 2009 bottom, advisers like Mr. Fenner believe it's important to take advantage of sudden pullbacks, especially for clients who are still in the accumulation phase.

With interest rates on the rise, Mr. Fenner has added to cash positions by trimming allocations to bonds.

"It's not easy to pull the trigger and buy when things are going down, and it doesn't mean things won't get cheaper, but you gotta have some courage to put some capital at risk when we have these pullbacks," he said. "The markets could bounce back as quickly as they did in February and March."

The S&P extended its October rout to 8.8% Wednesday, making it the worst month since February 2009.

That kind of volatility, especially in the midst of an historic bull market for stocks, has elicited the usual chorus of bear market forecasts.

But because a lot of investors have grown increasingly cautious as the bull market extended, the pullbacks now look like opportunities to some investors and financial advisers.

"We're seeing many investments that supported higher multiples coming back down to earth every day, so if we liked something at $100, why wouldn't we buy it when it drops to $80?" said Ian Weinberg, chief executive officer at Family Wealth & Pension Management.

"The fundamentals of this market and this economy have not changed, except for Fed speak, talk of trade wars and all the political stuff that's always there," Mr. Weinberg said. "We believe there is value in this correction. You can't time these things, and we certainly aren't selling here. Rather, we're buying or looking to buy more of the solid ideas we already have in our portfolios."

Across the industry, some advisers have clients sitting on cash because they've been nervous, while others are building cash positions by reducing allocations to bonds amid rising interest rates.

Looking across the market for opportunities, some categories have pulled back more than others.

Among U.S. equity funds, the small-cap value category as tracked by Morningstar is down 4.2% so far this year, followed by mid-cap value, which is down 4%.

The best-performing domestic equity fund categories this year have been large-cap growth, up 6.7%, and small-cap growth, up 6%. But over the past 30 days, large-cap funds have declined 7.4%, while small-cap funds have dropped 10.9%.

Those kinds of abrupt moves look like an opportunity to Dennis Nolte, vice president at Seacoast Investment Services.

"If you're rolling money over and wondering what to do with it, this is not a bad time to invest in areas like small-cap stocks and emerging markets," he said. "I've been waiting for something like this, and I think it's a good time to sprinkle some money in."

Fixed income is the one area that seems almost universally out of favor.

"We've talked about using CDs instead of bond funds," Mr. Nolte said. "I wouldn't put anything in fixed-income funds with rates going up."

Back on the equity side, the most extreme pullbacks this year have been experienced outside the United States.

Morningstar's category of India equity funds is down 24.9% this year, and down 12.7% over the past 30 days.

Diversified emerging-market funds, which Mr. Nolte is eyeing, are down 16% this year, and down 7.6% over the past 30 days.

Kashif Ahmed, president of American Private Wealth, said advisers should be nimble during market pullbacks because this is when "we earn our fees."

"This is not about trying to time the market, which is generally a dumb idea," he said. "This is about offering you an opportunity to rebalance, which is what you should be doing because buy and hold and doing absolutely nothing to the portfolio is also dumb."

Fear and greed and courage and logic aside, anyone investing at this stage of a bull market has a deep-down belief that the pullback is a temporary disruption and not the start of an angry bear market nosedive.

"I don't think the bull market is over," said Paul Schatz, president of Heritage Capital. "We won't see a bear market until the second half of next year."

Mr. Schatz expects at least two more strong runs for stocks, peaking at the end of this year, then again in July, to about 2% above where prices are today.

The current pullback, he said, is nearing a bottom.

"There's enough evidence that says the market is in the bottoming process right now, and when it's complete we should have a strong last six or seven weeks of the year," Mr. Schatz said. "I could see stocks gaining 5% to 10% in the last seven weeks of the year. Until proven otherwise, the bull market lives on. It's old and wrinkly but not dead."

Expert: Gold is the most unloved sector today, but it's smart money
With: CNBC
Date: Oct 18, 2018
Publication: CNBC
Link to Article

David Ellison of Hennessy Funds and Paul Schatz of Heritage Capital discuss specific stocks and sectors traders may want to look into as stocks continue to drop.

Even if the bull market is heading toward a correction, it’s likely to keep on charging
Author: Thomas Heath
Date: Oct 12, 2018
Publication: The Washington Post
Link to Article

Flight to quality overlooks the risks to fixed income that come with rising interest rates

Everyone is wondering when this bull market will come to an end.

Tomorrow? Next week? Next month?

After last week’s carnage, you might be thinking: soon.

People are in the news predicting its demise or its survival.

Join the discussion. Pick one.

A friend scoffed when I told him I was writing about Paul Schatz calling a few weeks back for a possible mini-correction.

That's because the stock market always, always, always reverses itself - by a little or a lot.

Yet I am a firm believer that the more information that's out there, the better. Let people read, think, decide for themselves.

Schatz is chief investment officer of Heritage Capital, a Connecticut-based investment firm. He thinks the fundamentals underlying the current bull market - strong corporate earnings, low unemployment, strong economic growth - will remain well into next year.

But he sees some signs that suggested the Dow Jones industrial average might have a steep and quick decline.

"If it comes, it’s a short-term pullback in an ongoing bull market," Schatz said. "Any weakness we get remains a buying opportunity."

He sees the 30-stock composite Dow, which has been bouncing near all-time highs in the 26,500 range, still hitting 30,000 by the Fourth of July.

In the meantime, he anticipated “some kind of mid- to-upper-single-digit pullback in stocks."

Schatz has a quantitative model that I don’t quite understand, which is why he is the guy who invests money and I am the one who writes about it.

"I need five closes above 27,000," he said, referring to the Dow. "Once it closes above 27,000 for five straight days, the next high will be 30,000."

Why the pullback?

"The reasons behind it are never apparent ahead of time," he said. "And it's never the obvious one. The reason this window is open is what's been going on beneath the surface of the stock markets."

Schatz said about 10 to 15 percent of the Russell 1000 Index, considered a bellwether for large-cap stocks, are trading in a bear market. That means they are cheap.

He is talking about General Electric, Ford Motor, General Mills, AT&T and some utilities, banks and home builders. These are large, older companies that tend to pay big dividends but at the moment are unappreciated by investors. Many are called value stocks.

The current bull market has been underpinned by growth companies such as Facebook, Netflix, (whose founder, Jeffrey P. Bezos, owns The Washington Post) and Google parent Alphabet.

Schatz sees a split between supercharged growth and lagging-value stocks that he calls "unhealthy."

"You have a surge in the number of stocks making new highs, and a surge in stocks making new lows,” he said. He was not sure why there is a split, but he sees it as a possible cause for a sell-off.

There are other signs, big and small, that portend a sudden pullback. The Dow has taken over leadership of the markets, making new highs ahead of the other, broader indexes such as the S&P 400 (full of midsize stocks) and the Russell 2000 Index small caps.

That means the gains are concentrated in a somewhat smaller sample size.

"To use a military analogy: The generals have continued into battle, but the troops have all died," Schatz said.

Just looking at the Dow, which is the most popular barometer, doesn’t tell the full story.

"I look at the number of stocks going up and the number going down every day," he said. "During the second and third quarters of this year, most stocks were going up on most days. Now that has turned around. For the past month, you have seen more stocks going down than going up."

Under Schatz's calculations, the conditions for a pullback will last only about a month to five weeks.

"How do you know you're right or not? Obviously, if stocks go down, I’m right," he said. "If they don’t, I’m wrong."

Jason Thomas, chief economist with the Carlyle Group, doesn’t see a serious pullback anytime soon.

"The slow pace of growth in this expansion reflects the lack of obvious excesses," Thomas said. "As a result, the next recession could be further off than people suspect."

I asked Ed Yardeni, president of Yardeni Research, for his take.

Yardeni phoned me while he was making the rounds of clients on the West Coast.

"They are fully invested but nervous," Yardeni said. "They're nervous that the business cycle is about to make a big comeback. With the labor market being so tight, they worry that wage inflation will suddenly spike up."

Even with the sell-off, Yardeni expects the bull market will charge ahead.

"If all it is is a single-digit sell-off, I wouldn't worry about that very much and just stay with a bullish market," Yardeni said. “The problem with predicting a sell-off is you also have to predict when to get back in."

Yardeni said he does not see anything convincing out there that a recession is imminent.

"This expansion could be the longest one once it crosses July of next year," he said. "It could continue into 2020. Until I see more compelling evidence, I'm staying bullish."

Expert Discusses Stock Market Dive
With: Heather Burian
Date: Oct 11, 2018
Publication: CNBC-TV18
Link to Article

Paul Schatz, president and chief investment officer at Heritage Capital, said the stock market swing is simply a "normal, welcome, expected and healthy bull market pullback."

Stocks in the red after yesterday's big selloff
With: Seana Smith
Date: Oct 11, 2018
Publication: Yahoo! Finance
Link to Article

Stocks (^DJI, ^GSPC, ^IXIC) are down, with the technology (XLK) sector the most in the green, and the energy (XLE) sector the most in the red. Yahoo Finance’s Jared Blikre joins us live from the floor of the New York Stock Exchange to talk markets. To discuss the other big stories of the day, Yahoo Finance’s Seana Smith and Dion Rabouin are joined by Dan Roberts, Ethan Wolff-Mann, Brian Sozzi and Brian Cheung. Also joining the show: Brian Brenberg, John Davi, Paul Schatz, and Peter Kenney

Dow fell for the first time in five days Monday
Author/Segment: Squawk Box
Date: Sep 26, 2018
Publication: CNBC
Link to Article

Paul Schatz, Heritage Capital market strategist and president, and Matt Toms, Voya, joins 'Squawk Box' to discuss markets ahead of the Fed's meeting and amid trade tensions.

Starbucks is reshuffling in post-Schultz era
With: Seana Smith, Dion Rabouin & Ethan Wolff-Mann
Date: Sept 25, 2018
Publication: Yahoo! Finance
Link to Article

In a memo last week, Starbucks CEO Kevin Johnson announced corporate restructuring plans which include layoffs. Yahoo Finance's Seana Smith, Dion Rabouin and Ethan Wolff-Mann discuss with Heritage Capital's Paul Schatz.

Stocks mostly flat following Trump's UN address
With: Seana Smith & Dion Rabouin
Date: Sept 25, 2018
Publication: Yahoo! Finance
Link to Article

... joining the show, president, Heritage Capital, Paul Schatz; CEO of ARM, Simon Segars; CEO Smarkets, Jason Trost; and PayScale’s lead economist and VP of data analytics, Katie Bardaro.

As Dow marches on, why energy and biotech sectors are ones to watch
With: Seana Smith
Date: Sept 25, 2018
Publication: Yahoo! Finance
Link to Article

Heritage Capital president Paul Schatz says stocks are hitting all of his targets and Dow 27,000 is next. He points to energy and biotech sectors as ones to watch. He sits down with Yahoo Finance's Seana Smith, Dion Rabouin and Ethan Wolff-Mann to discuss.

Advisers warn against fleeing stocks in favor of bonds
Author: Jeff Benjamin
Date: Sept 13, 2018
Publication: Investment News
Link to Article

Flight to quality overlooks the risks to fixed income that come with rising interest rates

Investors continue to favor fixed-income strategies over equities, which is contrary to what most financial advisers consider prudent at this point in the market cycle and suggests investors are anxious.

The latest data from show that more than half of the $4.2 billion that moved into U.S.-listed ETFs in the week ended last Thursday went into bond strategies.

Three of the five most popular ETF strategies last week were bond funds. The $34.5 billion iShares iBoxx Investment Grade Corporate Bond ETF (LQD) had more than $756 million in net inflows last week.

Meanwhile, the biggest outflows, totaling $2.1 billion, were from the $271 billion SPDR S&P 500 ETF (SPY).

"Interest rates are going up, so investors are heading into fixed income?" quipped Tim Holsworth, president of AHP Financial Services.

"We are, and have been, minimizing our fixed-income holdings for the past several years," Mr. Holsworth said.

The Investment Company Institute, whose data combine flows into mutual funds and ETFs, also shows a steady trend of investors fleeing equities and migrating toward the perceived safety of bonds. For the week ended last Wednesday, ICI reported $5.5 billion worth of equity-fund outflows, which includes $7 billion of outflows from domestic equity funds and $1.4 billion of inflows into world equity funds.

Bond funds, meanwhile, saw $3.5 billion worth of inflows during the week.

Todd Rosenbluth, director of mutual fund and ETF research at CRFA, is not surprised by the pattern of money moving out of stocks and into bonds because he thinks investors are more focused on stock market levels than they are on the effect of rising interest rates on bonds.

"Demand for fixed income has been strong in 2018 as investors have favored low-cost investment-grade securities," he said. "As the equity markets become more elevated, a rotation toward more stable strategies is appropriate."

With the S&P 500 up more than 10% from the start of the year, and up more than 325% since the March 2009 market low, it's not surprising that investors are starting to show signs of caution.

But the general trend in asset flows suggests investors might be missing the risk that's building on the bond side, according to Paul Schatz, president of Heritage Capital.

"It's counterintuitive," Mr. Schatz said. "The next crisis for retirees is going to be their loss of principal in the bond market."

Mr. Schatz said the 35-year bull market for bonds is over, citing the July 2016 bottom in 10-year and 30-year Treasury securities, and he expects to see moderately rising interest rates, which drives down the value of bonds, over the next couple of decades.

"The average retiree buying bond market indexes will be in for a world of hurt," he said. "In this environment right now, people should look at limited-duration bond funds as well as the less aggressive floating-rate bond funds. You've got a better economy that is accelerating, and in that environment, those two types of bond funds will do better."

Kashif Ahmed, president of American Private Wealth, agrees that exiting equities is a mistake that could come back to haunt investors.

"What this may be saying is that some investors may be succumbing to the narrative that the markets may be nearing a top, or that the headline risk is more of a threat than others believe," he said. "If investors are heading for the exits and piling into fixed income and still have plenty more life left in which they will need their money not to lose its purchasing power, then they are doing themselves a disservice."

10 years later, advisers still shudder recalling the financial crisis
Author: Jeff Benjamin
Date: Sept 17, 2018
Publication: Investment News
Link to Article

Historic chain of market events left advisers and investors more skeptical, cautious

When the 2008 financial crisis is documented by historians and market watchers, it's often pegged to Lehman Brothers' record-setting $691 billion bankruptcy. But for financial advisers the overall bear market period between 2007 and 2009 is more often recalled as a series of punishing waves that have forever altered the way financial planning and investing are done.

"Lehman may have been the bulls-eye event, but it was just so much more than just letting Lehman fail," said Paul Schatz, president of Heritage Capital.

Lehman Brothers has been cynically described as a real estate hedge fund disguised as an investment bank, given its lopsided exposure to mortgage origination. But the problems at Lehman were just one of many extreme risks overshadowing the financial markets at the time.

Mr. Schatz cited other 2008 events such as the fire sale of Bear Stearns to JPMorgan Chase, the government takeover of Fannie Mae and Freddie Mac, the sale of Merrill Lynch's brokerage business to Bank of America and the "breaking of the buck" by the Reserve Primary Fund, a money market fund. "Every week it was something else until it ended," he recalled.

"In hindsight, everyone now says investors should have just stayed the course, which is something I believe is complete and utter nonsense," Mr. Schatz added. "Stocks gave back more than a decade's worth of returns and then had to begin to recoup the losses."

While Lehman's Sept. 15, 2008, bankruptcy still stands as the largest in U.S. history, it's worth noting that of the 10 largest U.S. bankruptcies, six occurred in 2008 and 2009.

Financial advisers who lived through the period say they will never forget the disorientation and panic that ensued as they watched the S&P 500 Index suffer a 54% peak-to-trough drop from October 2007 to March 2009.

"We are all products of our past, so I think that means we are all more aware of how bad markets can get if seemingly everything goes wrong," said Tim Holsworth, president of AHP Financial Services.

"It also teaches the lesson that good investments recover, and at the same time, no one is immune, as any GM stockholder can attest," Mr. Holsworth said. "Clients still reference that time; it's way too early to forget."

Leon LaBrecque, managing partner and chief executive of LJPR Financial Advisors, vividly recalls the panic felt by his clients and himself.

"I remember thinking, 'This could be the end,' and that it might be time to start panicking," he said. "And I learned some lessons about being too smug, because I thought I had gotten out of all the subprime mortgage exposure and the really risky stuff, but I didn't realize it had infected everything."

By the time 2008 was complete, everything was in negative territory except for Treasury bonds and the Japanese yen. Even gold, which since the dawn of time has been considered a hedge against disaster, was negative.

Mr. LaBrecque said that while his "natural optimism" helped him get through the crisis, many of his clients are still frozen with fear of another financial market pandemic.

"I tell people, we will get another downturn of 20% and we will have another recession, but they're still afraid of another 40% market pullback," he said.

The economic impact of businesses leaving CT
With: Samantha Miller
Date: Aug 24, 2018
Publication: WTNH - NEWS 8
Link to Article

(WTNH) - Edible arrangements is the latest Connecticut company getting ready to pick up and move out of state. Financial Expert Paul Schatz, President of Heritage Capital LLC explains what this growing trend means for Connecticut's economy.

'I can't see the economy accelerating from here,' says strategist
Author: Rebecca Quick - Squawk Box
Date: Aug 24, 2018
Publication: CNBC
Link to Article

Mark Vitner, Wells Fargo Securities director and senior economist, and Paul Schatz, Heritage Capital market strategist and president , and guest host Peter Boockvar, Bleakley Advisory Group chief investment officer, join the 'Squawk Box' team to discuss what they're watching the market for and how they're factoring in the Fed's looming rate hike.

Rapper claims Musk scrambling to secure Tesla funding
With: Seana Smith
Date: Aug 14, 2018
Publication: Yahoo! Finance
Link to Article

Elon Musk says he's working with Goldman, Silver Lake to take Tesla Private. Yahoo Finance's Seana Smith, Myles Udland, Rick Newman, Dion Rabouin and Paul Schatz, President, Heritage Capitol discuss.

Are Democrats and Republicans rejecting capitalism?
Author: Seana Smith
Date: Aug 14, 2018
Publication: Yahoo! Finance
Link to Article

The Trump era has caused political parties to refocus priorities. Yahoo Finance's Seana Smith, Dion Rabouin, Rick Newman and Paul Schatz, President of Heritage Capitol discuss.

Bitcoin slides, takes other cryptocurrencies with it
Author: Seana Smith
Date: Aug 14, 2018
Publication: Yahoo! Finance
Link to Article

Cryptocurrency markets taking a big hit as Bitcoin tumbles. Yahoo Finance's Seana Smith, Rick Newman, Dan Roberts, Dion Rabouin, and Paul Schatz, President of Heritage Capitol discuss.

Turkey calls for boycott of U.S. electronics
Author: Seana Smith
Date: Aug 14, 2018
Publication: Yahoo! Finance
Link to Article

Trade tensions continue to escalate as Turkey retaliates against U.S. sanctions, Yahoo Finance's Seana Smith, Rick Newman, Dion Rabouin and Paul Schatz, President, Heritage Capitol discuss.

Facebook is a $90-$100 stock by 2020, says pro
Author: Andrew Sorkin - Squawk Box
Date: Aug 10, 2018
Publication: CNBC
Link to Article

Paul Schatz, Heritage Capital president and chief investment officer, gives his reasons for taking a bearish view on Facebook.

Brace for a bear-market drop for Facebook, says this strategist
Author: Barbara Kollmeyer
Date: Aug 09, 2018
Publication: MarketWatch
Link to Article

FB's Future?

Tesla’s potential go-private deal is still generating plenty of buzz.

But there are other matters worthy of attention. One market pundit believes we could be at the start of a long-term unraveling of Facebook shares.

Our call of the day comes from Paul Schatz, president of Heritage Capital, who is hanging a buyer-beware sign over Facebook FB, -1.55%

There is a “very good chance that Facebook has seen its peak for possibly many more years to come,” says Schatz, in a note to clients.

He notes that last month’s second-quarter earnings showed the impact of the backlash over privacy concerns won’t be short-lived, as this chart below shows:

Heritage Capital - Post-earnings rout for Facebook
    Post-earnings rout for Facebook

Schatz predicts that in the best-case scenario, the bull market for stocks overall will ride on into 2020 and Facebook can revisit its former high above $218 before it peaks again.

“Worst case is that the market is in the early stages of revaluing the company and after this rally ends, the stock not only heads below the July low of $166, but then below the 2018 low of $149 in the next 6-12 months,” he says. That would equal to about a 20% drop from current levels—Facebook closed at $185.18 on Wednesday.

Heritage Capital - Facebook’s run to $218
    Facebook’s run to $218

He adds that it will take an “awful lot” to change his opinion, given Facebook and Netflix NFLX, -1.00% are both on the defensive, means Apple, Amazon and Alphabet’s Google need to lead and keep outperforming.

“I had envisioned the FAANG stocks holding up until the bitter end of the bull market and find it hard to believe the bull market can easily live on without the group as a whole staying strong,” he adds.

Facebook is up about 7% this month, and it and other FAANG members are comfortably in the black this month as the Nasdaq train keeps rolling, which means some may not be ready to give up on the Zuck just yet.

Yahoo Finance Live: Midday Movers - Jul 25th, 2018
Author: Seana Smith
Date: July 25, 2018
Publication: Yahoo! Finance
Link to Article

Alphabet soup is hot, and clients will pay more for those letters
Author: Jeff Benjamin
Date: July 16, 2018
Publication: Investment News
Link to Article

Consumers value designations, although opinions vary on which ones carry the most swagger

Say what you will about the expansive alphabet soup of financial-planning credentials and designations, but new research shows consumers are migrating toward those advisers with letters listed after their names.

"We found that consumers value the designations, and are willing to pay more for advice from credentialed advisers," said Sterling Raskie, a lecturer at the Gies School of Business at the University of Illinois Urbana-Champaign, and co-author of the study published last month.

While the research did not identify which credentials and designations consumers are most drawn to, it did show a growing interest among consumers in advisers who have attained some designations.

"In the financial planning industry, we're not quite there yet as a profession because there are so many different methodologies when it comes to compensation and types of advisers," Mr. Raskie said. "I think consumers are becoming more educated and aware of things like fiduciary duty, and when an adviser sends the signal in terms of a designation, it doesn't take away the due diligence that a consumer should do, but it makes it easier."

As far as which credentials carry the most swagger, it depends on who you ask.

Linda Leitz, co-owner of Peace of Mind Financial Planning, is a certified financial planner, a certified divorce financial analyst and an enrolled agent of the IRS.

"What we're finding more and more, unless you're a CFP there's a big question mark in a lot of consumers' minds," she said. "Those credentials tell people you have the ability and expertise, and a lot more consumers are realizing they have to have a CFP and someone who is acting as a fiduciary."

Tim Holsworth, president of AHP Financial Services, is a CFP, a chartered life underwriter and a chartered financial consultant.

"It's all about credibility, I believe," he said. "I also believe many, many registered people do a terrible job managing assets. And I believe several designations are complete garbage."

For consumers what are paying attention, or trying to figure it all out, the industry does not make it easy.

The Financial Industry Regulatory Authority lists 184 designations on its website, ranging from accredited adviser in insurance to wealth management specialist.

In that mix, you'll also find such vague designations as global financial steward, master certified estate planner and qualified financial planner.

"I think clients should look for a CFP, but I don't know if they do or not," said Mr. Holsworth. "It's easier to market yourself as a planner with an actual demonstration of competence, but I don't think clients insist on it as much as they should."

Rose Swanger, president of Advise Finance, is a CFP, retirement income certified professional, certified divorce financial analyst and an enrolled agent of the IRS.

But even with such credentials, Ms. Swanger is not convinced of the value of designations.

"Clients value your personality, charisma and trustworthiness more than the knowledge," she said. "Having said that, without the knowledge and specialty training to back it up, the warm fuzzy feeling doesn't last long because ultimately all clients demand results."

Paul Schatz, president of Heritage Capital, has been in the business for 30 years and is only now coming around to the notion that consumers might be paying attention to designations.

"I'm not a big designation person, which is probably the main reason I have not committed to earning any," he said. "It just hasn't mattered, as far as I can tell, although I would imagine some prospects saw that I did not carry a designation and perhaps wouldn't even interview me."

Proving that times are changing, Mr. Schatz added that "there's a chance I will study for the certified fiduciary designation, as I do believe that can help."

Author/Anchor: Matt Scott
Date: July 11, 2018
Publication: FOX 61
Link to Article

Financial experts weighs in on mid-year budget check
Author: Carolyn Freundlich
Date: July 02, 2018
Publication: WTNH - NEWS 8
Link to Article

(WTNH) - We are already into the second half of the budget year and we are speaking with a financial expert weighing in on why now is a good time to take a look at your budget.

President of Heritage Capital LLC in Woodbridge Paul Schatz says now is the time to plan out how you are going to spend your money for the rest of 2018.

Schatz advises to keep on top of your credit report and to consolidate your debt. He also says that its time to rebalance investments accounts and 401Ks because both stocks and bonds have swing wildly this year.

Advisers take a short-term view of trade skirmishes
Author: Jeff Benjamin
Date: June 29, 2018
Publication: Investment News
Link to Article

Some advisers voice worries about repercussions, but say clients are calm

Heading into a week that includes the July Fourth celebration, it would be easy to overlook or ignore the impact of a potential trade war between the United States and several global trading partners.

But savvy financial advisers are paying attention.

"We've done a lot of research on the status of trade negotiations, and our clients are concerned about it because it has already had an impact on market volatility," said John DeSimone, chief financial officer at Dakota Wealth Management.

While Mr. DeSimone is careful not to describe the situation as an official trade war just yet, he is communicating to clients that the advisory firm is prepared to move client portfolios into more defensive positions if things escalate.

The potential for a global trade war, which would see nations and regions of the world introduce taxes on imports in retaliation for tariffs being threatened by the Trump administration, was the main topic of a raft of midyear economic outlooks from financial services firms over the past week.

Douglas Cote, chief market strategist at Voya Investment Management, said the "direct effects of a trade war" are placing a drag on an otherwise solid economy.

"Rumors of trade wars are always problematic since they slow growth and capital flows and exacerbate problems," Mr. Cote said. "So, it's important to see how the world economy is faring as the situation develops."

Barring fresh negotiations between the United States and China, a trade war could kick off as early as July 6, when the U.S. is scheduled to introduce a 25% tariff on $34 billion worth of goods imported from China.

To put that into perspective, the U.S. imported about $500 billion worth of goods from China last year. But the initial round of tariffs on China is just the first one on the Trump administration's agenda.

The U.S. exported $130 billion worth of goods to China last year.

"We have to look at each negotiation separately," Mr. DeSimone said. "I'm not too concerned about a trade war with the European Union. The situation with Mexico and Canada is a bit more complex."

Matt Forester, chief investment officer at BNY Mellon's Lockwood Advisors, said it will be up to investors and the markets to distinguish between "political rhetoric and serious trade policy."

While both consumer and business sentiment levels are currently hovering at record highs, Mr. Forester said the slight pullback in consumer sentiment this week reflects concerns over a potential trade war.

"The size of the impact now is somewhat limited, but it could be extremely damaging," he added. "The risks of a trade war are higher prices and lower output, neither of which is good."

Kashif Ahmed, president of American Private Wealth, said he is more concerned about short-term market gyrations than he is about the long-term impact of the international trading negotiations.

"These skirmishes, while they heighten volatility in the short term, are unlikely to develop into full-fledged trade wars," he said. "Despite the rhetoric from individual leaders, governments are more than one person, with varying levels of checks and balances."

Mr. Ahmed is confident that "plenty of cooler heads will work behind the scenes to prevent this, because no one will be left unscathed on the other end."

John Lynch, chief investment strategist at LPL Financial, said in the case of China, the U.S. has the advantage.

"With far fewer goods exported to China than imported from China, the U.S. retains a structural advantage in a trade dispute," he said. "Consequently, China is going to run out of direct reprisals quickly should it try to match U.S. tariffs."

But as most market watchers and analysts have argued, there are no real winners in a trade war.

"China loses more than the U.S., but the U.S. also loses," said Paul Schatz, president of Heritage Capital.

Asked how worried he is about a possible trade war, Mr. Schatz said his concern is high but not yet keeping him up at night.

"If it was anybody other than President Trump, I'd say the tariffs are coming to fruition, but given his pattern of unusual behavior, I'm counting on them not coming to fruition," Mr. Schatz added. "I'm hopeful for a compromise."

Italy's woes spread to U.S. markets — and advisers' clients
Author: Jeff Benjamin and John Waggoner
Date: May 29, 2018
Publication: Investment News
Link to Article

Some advisers voice worries about repercussions, but say clients are calm

Worries about Italy's political turmoil sent U.S. stocks falling like a Ferrari on a ski jump, and some advisers warned that the situation could become more serious in the short term.

The Dow Jones Industrial Average fell 505 points at its low Tuesday before finishing the day down 391.64 points, or 1.58%. Of the 30 Dow stocks, only one – Coca-Cola – rose. The yield on the 10-year Treasury note fell to 2.77%.

The proximate cause of the downturn was political turmoil in Italy, as the government blocked the formation of a coalition government between the ultra-right League party and the antiestablishment 5-Star party, raising the prospects of new election and, ultimately, withdrawal from the Eurozone.

"The markets are tumbling today due to the worrisome political situation in Italy," said Phil Shaffer, founder of Halite Partners. "This is just another chapter in the European debt crisis contagion saga. The impact of austerity measures taken after the credit crisis have led to the rise of European populism. The situation has the making of a potential European collapse as the story unfolds, but the story is currently far from over."

Christian Thwaites, chief strategist at Brouwer & Janechowski, agreed. "We absolutely should be concerned about the situation," he said. "Greece and Cyrpress were small and containable. Italy is the third-largest country in the European Union, and that's including the United Kingdom. The fear here is that the two parties are talking openly about exiting the Eurozone and the same kind of reforms that the new Greek governmetn was talking about."

And Italy isn't the only thing to worry about. "Italy's dysfunctional political system is being blamed, but the seeds for this decline were sown a week ago when market internals began to deteriorate as prices went higher," said Paul Schatz, president Heritage Capital. "The news today just accelerated the pullback."

Sam Stovall, chief investment strategist for U.S. equity strategy at CFRA, noted that increased volatility is common in the second and third quarter of a midterm election year. "It looks like the market is looking for a reason to go down, and it's saying, 'Let's blame Italy,'" he said. "But the volume wasn't great, and how excited can you be about a downturn if the volume isn't there to confirm it?"

Leon LaBrecque, managing partner and chief executive at LJPR Financial Advisors, agreed that Italy may just been a convenient excuse. "The Italians have been having political crises as long as there have been Italians," he said. "And, if political crises did have lasting effects, then what about Greece, Brexit and Trump? More likely the market overreacted, and this is a buying opportunity. Stay calm, this opera has just started, and [the fat lady] hasn't even started to sing. "

Advisers said that being proactive during the year has helped soothe clients. "We've told clients we're not in any foreign bonds at all," Mr. Thwaites said. "But we have some sophisticated investors who wanted to know what all this means. "

Others said that clients have been extremely calm. "I have not heard from any clients today," said Tim Holsworth, president of AHP Financial Services "My clients rarely react to a bad day or week. Overall, I think they are far more optimistic since the presidential election."

An indicator that's '90% accurate' suggests hidden strength in the stock market
Author: Ryan Vlastelica
Date: May 14, 2018
Publication: MarketWatch
Link to Article

The U.S. stock market may feel particularly risky right now, as major indexes have been volatile throughout 2018 and there are a number of headwinds that investors are monitoring, but things may not be as bad as they seem.

There are multiple signs of equity strength going on below the surface of the major indexes, which could be a signal that the recent uptrend in stocks is justified and could continue.

One positive signal looks at the ratio of rising stocks on the New York Stock Exchange to the number of falling ones over time. Paul Schatz, the president of Heritage Capital, referred to this as "the one indicator that's 90% accurate" for forecasting moves.

Currently, the NYSE's advance/decline line is at an all-time high, as seen in the following graphic from StockCharts, which Schatz included in an email.

NYSE AD line
    StockCharts data, courtesy Heritage Capital

"When the major stock market indices make new highs but the NYSE A/D Line does not, that's where bulls should begin to worry," he wrote, adding that “the exact opposite is happening," which he said was “typically a good sign for further strength in stocks over the medium-term.”

Both the Dow Jones Industrial Average DJIA, +0.37% and the S&P 500 SPX, +0.17% are more than 5% below their records, and they have been in their longest stretch in correction territory since the financial crisis.

The improving A/D line is an encouraging signal for the investors who have been worried about market breadth, especially as some of the market's biggest names — notably the FAANG group of large-capitalization internet and technology stocks — have been leading the overall advance. Because the market's biggest companies have been seeing the biggest gains, those leaders can mask weakness in smaller companies. Schatz compared it to a building where the foundation "is full of cracks and is crumbling but the penthouse looks flawless with million dollar art and furniture."

The improving breadth is helping to support equities, which can be seen in the broader indexes themselves. The Dow Jones Industrial Average, for example, is coming off seven straight positive sessions, while the Nasdaq Composite Index COMP, -0.03% has risen in five of the past six. The Cboe Volatility Index VIX, -4.38% fell for a fifth straight week last week, a sign that anxieties are leaving the market.

"We found good support at the low end of the trading range we've been in, and now all of a sudden we're getting a breakout. We haven't made a new high since January, which is a long time, but the pattern is starting to change. The highs we're making are getting higher," said Donald Selkin, chief market strategist at Newbridge Securities.

Both the Dow and the S&P have shown signs of maintaining their longer-term positive momentum. Both broke below their 200-day moving averages on an intraday basis twice earlier this month, but they subsequently rebounded to close above it each time. Ending below that level, a closely watched gauge for long-term price trends, is seen as a bearish signal, but holding it could be a sign of support for equity prices. Since testing the level, the Dow and S&P have returned above their 50-day moving averages, which is used as a proxy for short-term momentum trends.

NYSE AD line

Again, this isn't simply a matter of the market's biggest names leading the overall indexes higher. According to StockCharts, 61.1% of the S&P's components are now above their 200-day, up from just 50% last week, and back above the 59.55% average over the past 50 sessions (the 200-day average for S&P 500 components above their 200-day moving average is 69.44%).

For the 50-day moving average, 61% of the S&P's components are above this level. That's above this ratio's 50-day and 200-day averages, as well as up from 47% last week.

Ari Wald, head of technical analysis at Oppenheimer, added that the number of net new lows — the number of stocks making 52-week highs minus the number making 52-week lows — had been dropping, a trend that suggests “the selling in stocks is getting less bad.”

He added, “This means that we've been holding up well in periods of consolidation and that the market has been finding a base. This is setting us up for the next move higher in the bull market.”

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