Winning at Powerball?

A common behavioral error occurred last week: Many people thought they could increase their odds of winning the $587.5 million Powerball jackpot by purchasing more than one ticket. On the surface, the logic makes sense. Buy two tickets instead of one and you double your odds. Buy 50 instead of one, and your odds are 50 times better. The problem with such logic is that it doesn’t consider whether buying the extra tickets has any significant impact on the probability of winning.

Powerball, like other forms of gambling, has a fixed number of outcomes. The lottery game picks five unique numbers between 1 and 59. A sixth number, the “Powerball,” is then drawn. The Powerball number ranges between 1 and 35. A total of 175,223,510 combinations can be formed. Since there are a fixed number of combinations, it is easy to calculate the probability of winning the jackpot for any number of tickets purchased. We simply need to divide the number of tickets purchased (assuming each has a different combination of numbers) by 175,223,510.

If you bought one ticket, you had a 0.00000057% chance of winning. Not very good, but a ticketholder in Missouri and a ticketholder in Arizona did win last night. Buying two tickets increased your odds to 0.00000114%. Yes, this was technically twice as good, but your odds were still very low. Splurged and bought 100 tickets (a $200 expenditure)? Your probability of winning only improved to 0.00005707%.

If your goal was to just to have a 1% chance of winning, you would have had to spend $3,504,470, at a price of $2 per ticket. (You would also need several very patient store clerks, the free time to have all of those tickets printed, a system to avoid any duplicate tickets being selected and a method for checking all of those tickets.) Even with the large expenditure, there was a 99% chance you wouldn’t have won the jackpot. You also didn’t have any guarantee of winning enough of the smaller prizes to compensate for the money you spent on tickets.

Source: AAII

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Annual Retirement Survey

BlackRock Investment Company's Annual Retirement Survey identified major regrets from retirees that can serve as "lessons learned" for those who are still working.

The retirees surveyed had four major regrets. 87% regretted not making the most of their 401(k) plan, and 90% expressed regret over not enrolling in a retirement plan early enough. 85% expressed regret at not making a financial plan for saving early enough in one's working life, and 78% showed regret at not saving the maximum amount of money for retirement.

Source: BlackRock Annual Retirement Survey 2012 

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Average Cost Of An American Christmas

Thanksgiving has come and gone, and the holiday shopping season is now upon us. With just a few weeks until Christmas day, many shoppers are feverishly trying to find the perfect meaningful gifts for everyone on their list. Between the shopping frenzy of Black Friday and Cyber Monday to the last minute sales just before Christmas, the American commercialization of Christmas plays a very big part in how much the average American pays for all of his or her holiday expenses. Between gifts, holiday parties and decorations, Christmas in America seems to be getting more and more extravagant. Here is a look at the average cost of an American Christmas and a glance at why the cost of the holidays is steadily rising.

Americans Spending More on Gifts in 2012 -  According to a study performed by the American Research Group, Inc., Americans will be spending more money on gifts in 2012 than they did last year. In 2011, the average American spent $646 on holiday gifts. In 2012, it is expected that the average American will be spending $854 in gifts for friends and loved ones. It should come as no surprise that the average cost of gifts is so high. With advertisements for big sales everywhere, there is a greater chance for impulse buys and overspending. Additionally, rising from a period of economic turmoil, many Americans may be more willing to spend this year after years of scrimping.

American Parents Spend $271 on Christmas Gifts Per Child -  Costs can rise for families, especially for parents with underage children. According to an article released by MSN in December 2011, American parents planned to spend an average of $271 per child in Christmas gifts. One in 10 parents said the plan was to spend over $500 per child. While this is just an average, American families can definitely spend an astronomical amount of money on Christmas gifts.

Larger families with several children may have to work evern harder to avoid the holiday spending hangover. While this excess would be better placed elsewhere, such as parents creating strong financial futures for their families, these warnings often fall on deaf ears. Christmas spending has taken a dramatic increase in recent years and shows no signs of slowing down.

Dramatic Upswing in Spending Since the 2008 Recession -  In 2008, a recession hit the United States, and with many people out of work and struggling, holiday costs dropped significantly. According to Gallup surveys, in 2008 the average American spent 29% less on Christmas gifts than in 2007. Meanwhile, since the economy has slowly recovered, spending has gradually increased. In comparison to the spending levels of 2007, the United States is not spending quite as much. The average family expected to spend $764 in 2012. As the employment rate increased, and the housing and auto market has begun to recover, so have American's spending habits. Although this might support an economic recovery, consumers will have to sacrifice their savings.

The Bottom Line - Americans have been spending more on holiday gifts every year since the 2008 recession. Only time will tell if the predictions are correct. If 2012 keeps in line with past holiday spending, 2012 will be a very big year indeed in the United States for holiday spending.

Source: Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Should you take Social Security at 62?

Taking Social Security as soon as you're eligible is tempting. After all, you've likely been paying taxes into the system for your entire working life, and you're ready to get your benefits. Plus, you would get a boost from the guaranteed monthly income.

But there’s a trade-off. Claiming your retirement benefit when you turn 62 can be a pretty costly decision. Some of the costs are associated with the rules of the program and others with retirement planning in general, so it’s important to understand them fully.

If you can afford it, waiting is often the better option. Ideally, you want to evaluate your decision on when to take Social Security based on how much you've saved for retirement and your other sources of income. While most people would benefit from waiting to, say, age 67, to take payments, others could risk running out of money too soon and may have fewer options.

The costs of taking Social Security early

For starters, you'll forfeit future increases in your monthly income if you take Social Security early. Suppose you’re 62 and eligible for $1,200 per month. If you wait until your full retirement age (FRA) of 66 to start claiming benefits, that amount will rise 33% to approximately $1,600 per month. Claiming at 62 reduces your benefit approximately 25% below your FRA amount. If you delay taking benefits until you are 70, your benefits will jump another 32% to $2,112 per month. Plus, your annual cost-of-living adjustment (COLA) is based on your benefit. If you begin Social Security at 62, your COLA will be lower too.

If you plan to claim benefits based on your spouse's work record, you'll lose even more by taking benefits before you are 66. The benefit reduction is greater for a spouse—30% instead of 25%. For instance, if you're the spouse of the person in the above example, you'd be eligible for only $560 a month at age 62, which is 30% less than the $800 a month you would get at your FRA of 66.

Your decision to take benefits early will live on even if you don't. If you die, your spouse is eligible to receive your monthly amount as a survivor benefit (if it's higher than his or her own amount). But if you take your benefits early, those payments will be less than they could have been for the remainder of your spouse’s lifetime.

Broader costs to your retirement plan

It's natural to want to retire as soon as you can, but it's crucial to consider the earning and investing power you may give up if you stop working full-time to take Social Security at age 62. Most obviously, if you leave a job with good pay and benefits, it may be difficult to ever regain that level of compensation if you need to return to work later.

And while you are eligible for reduced Social Security benefits at 62, you won't be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments: The average yearly cost of health insurance for a 62-year-old individual is $9,825, and prices have been rising much faster than inflation or Social Security COLAs.  Why cut your benefits permanently just to pay for health insurance?

Moreover, if you stay on the job past age 62 your Social Security retirement benefits will increase each year, up to age 70. Delaying retirement for even a few years can substantially increase the size of your retirement savings and at the same time increase your Social Security income. Both of these factors combine to increase the chances for a successful retirement plan. Conversely, if you stop working at 62, you will stop tax-advantaged saving opportunities and cap your Social Security benefits. You may begin to draw down your savings earlier.

When cash is available, it's always alluring to take the money and run. But when it comes to Social Security, this can indeed be a very costly decision. Draw benefits as soon as you can, and you will permanently reduce payments to you and your spouse and lose the chance to keep saving and planning as advantageously as possible. It's often better to wait, and to tap other savings if you need to. Then Social Security can fund the largest possible portion of your retirement for the rest of your life.

Source:  Fidelity Investments 

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

What The iPhone Means For Apple Stock

Apple is the most valuable company of all time, with market cap reaching a high of $621 billion earler this year.   Microsoft previously set the record for a public company’s valuation at $618.9 billion in December of 1999.
 
Apple is over $100 billion ahead of Exxon Mobil Corporation in terms of market cap. Apple Inc. is also far ahead of their top competitors Google Inc and Microsoft with regards to the same metric.
 
Quarter after quarter, Apple has managed to outperform both earnings and expectations. This success has primarily been a function of its four major product lines: its computers, tablets, iPods and iPhones. The firm's iPhone is especially important to the company's profitability, contributing an estimated near two-thirds of Apple's profits. As a result, Apple's reliance on the iPhone as a profit-driver is far more extensive than most people are aware of.
 
A History of iPhone
 
On Jan. 9, 2007, Steve Jobs presented the first iPhone to the world. A computer, camera and iPod all in one, the iPhone 2G utterly shocked the world. At first, the market was torn between two camps: those who claimed that the iPhone would be a smashing success and those who maintained that the iPhone had fundamental issues that would hamper it from meeting its sales targets. Of course, it revolutionized the phone industry and helped Apple shatter its earnings estimates.
 
The iPhone 3G, or the second iPhone, was introduced on June 9, 2008, to even more fanfare. The new iPhone allowed third parties to create and sell mobile applications through the App Store, an important development that led to increased market share and profitability. In fact, Apple sold over 1 million iPhone 3Gs in the first three days of its release, a much faster pace than the iPhone 2G. Later, the iPhone 3GS was released, with minor system upgrades. Again, Apple had achieved massive success with its cellular product line.
 
Next came the iPhone 4: heralded as "the biggest leap since the original iPhone," the product's announcement on June 7, 2010, created an international frenzy. This iPhone was the thinnest phone to date with the ability to multitask - an improvement that greatly enhanced the capability of the operating system. In addition, the phone's sleek new design captured the imagination of millions. Like every model before it, the iPhone 4 dominated the cellular phone market from the day of its release, selling 1.7 million products in the first three days. Apple's iPhone 4S included a system upgrade and introduced Siri, an iPhone intelligent assistant.
 
Apple's most celebrated product launch to date, the iPhone 5 was exposed to the world on Sept. 12, 2012. The company's latest phone model is lighter, faster and bigger than ever before. Analysts from J.P. Morgan estimated that the iPhone 5 could contribute up to half a percentage point of annualized GDP to the U.S. economy. While the record-breaking initial sale total of 5 million units over the iPhone's first weekend of availability did not meet analyst projections of 6-10 million, Apple CEO Tim Cook attributed this disconnect to a supply-side failure to meet demand.
 
AAPL Stock and the iPhone
 
Not every iPhone launch has resulted in quick riches for Apple stockholders.
 
While initial consumer excitement often drives a brief upturn in the value of the security, whether or not sales of the product itself are successful and the company's bottom line have more powerful market influences. As Apple's keynotes tend to wow viewers, this phenomenon should be of no surprise.
 
The announcement of the iPhone 2G resulted in a brief 7% jump in Apple stock. However, a full week's time dampened this result.
 
Next, the release of the iPhone 3G again elicited a brief market high, that fell by week's end to down 2.63%.
 
The iPhone 4 launch actually resulted in an immediate dropoff in the price of Apple stock.
What's the point? The price of Apple stock is a function of the company's financial wellbeing in the long run, not whether or not the company misses or makes analyst earnings projections.
 
The Bottom Line - After all, selling the iPhone seems to have become indispensable to Apple. As sales of the device compromise a vast majority of the firm's revenues, the iPhone 5 is an incredibly important device. Another success will be sure to propel Apple stock to new heights. A swing-and-a-miss on any iPhone, however, would have disastrous ramifications for the company.

Source: Investopedia   

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

How Does Google Make Its Money?

How does Google make money?   As the company's annual report succinctly puts it, "We generate revenue primarily by delivering relevant, cost-effective online advertising."

There was a time, not that long ago, when Northern Light and Ask Jeeves were the default search engines of choice for many people. But within a couple years of its 1998 incorporation, Google went from a burgeoning upstart company to verb status - almost a genericized trademark. How did this happen?

In a word, AdWords. In some respects Google is essentially the world's largest bus shelter, deriving 96% of its revenues from ads. That's what separated a nascent early-2000s Google, known primarily as a search engine, from its competitors. Google's founders realized that if people were going to visit the site and enter a term in the search box, they wouldn't be landing on the subsequent page by accident. Thus they'd be motivated to buy a product from any advertiser sharp enough to place an ad there.

How Google Profits Off You

Say you run a small company - a bakery located in Jacksonville, Florida, for instance. It's safe to say that people who would Google the words "Jacksonville" + "bakery" would likely patronize your business. Buy an ad on a page that'd be visited only by people who are looking for a Jacksonville bakery, and you're targeting about as accurately as it's possible to target a potential clientele.

From a Google customer's perspective (defining a customer in the traditional sense, as someone who gives the company money in exchange for its service), this is a proposition with little risk. AdWords typically operates on a cost per click basis, meaning that an advertiser can place an ad with zero obligation. If no one clicks on the ad, the customer doesn't pay a dime.

A Revolutionary Business Model

The traditional advertising media - radio, television, newspapers et al. - were and are incapable of drawing a distinction between patrons looking to generate traffic, and those looking to make the public aware of their brand. A static general-purpose ad can't tell who's actively in the market for whatever product it's selling, and who's just passively sitting there. To accommodate the latter - people who aren't ready to buy, but who might otherwise keep your competitors top-of-mind - Google lets you pay per impression. That means that the moment a Google user accesses a page on which an ad appears, Google charges the company that placed the ad. Which also literally doesn't cost a dime, but that's a function of the small amounts involved. A typical such agreement allows several views of your ad for less than a penny.

But Wait, There's More

But AdWords is only one prong of Google's dual revenue strategy. A related and similarly named but different service is AdSense.

Rather than having ads appear on search pages accessed upon visiting Google.com, AdSense allows owners of other websites to join Google's network and run Google-branded ads. Google's algorithms do all the work, too. Sign up for the network and your website devoted to Bikram yoga might end up running ads for mats, props, etc. Companies that pay Google to run those ads indirectly benefit site owners who use AdSense.

According to Google's income statement, about 70% of its advertising revenues come from AdWords, the rest from AdSense.

The Bottom Line - Every other service Google offers - from Maps to Earth to Gmail to Docs to Drive - exists to further the primary business. Those services were expensive to create and require great resources to maintain, but for the result - having users spend more time on Google and thus perpetuate reading and clicking on Google ads - it's money well spent.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Plain English: The Fiscal Cliff Explained

There's no escaping it. The fiscal cliff is everywhere. From water coolers at the workplace to the mainstream media, everyone is talking about it. However, like most conversations that involve Washington, important facts are often missing. Let us look beyond the noisy details of Capital Hill press conferences and social media opinions. Instead, let's view the fiscal cliff through the lens of simple fact. What is the fiscal cliff and how will it affect your life?

Who Coined the Term? - Who actually first uttered the words "fiscal cliff" is not clear. Some believe that it was first used by Goldman Sachs economist, Alec Phillips. Others credit Federal Reserve Chairman Ben Bernanke for taking the phrase mainstream in his remarks in front of Congress.

What Is the Fiscal Cliff? - The fiscal cliff refers to a number of tax hikes and spending cuts that will go into effect on Jan. 1, 2013. If Congress and President Obama do not act to avert this perfect storm of legislative changes, America will, in the media's terms, "fall over the cliff." Among other things, it will mean a tax increase the size of which has not been seen by Americans in 60 years.

How Big Are We Talking? - The Tax Policy Center reports that middle-income families will pay an average of $2,000 more in taxes in 2013. Many itemized deductions will be subject to phase-out, and popular tax credits like the earned income credit, child tax credit, and American opportunity credits will be reduced. 401(k) and other retirement accounts will be subject to higher taxes.

In addition, the Congressional Budget Office estimates that 3.4 million or more people will lose their jobs. This will result from a combination of a slowing economy and reduced government spending. Many people disagree about the details, but virtually everybody agrees that all Americans will feel the effects of the fiscal cliff.

What Are the Bush Era Tax Cuts? - At the heart of the fiscal cliff are the Bush Era Tax cuts passed by Congress under President George W. Bush in 2001 and 2003. These include a lower tax rate and a reduction in dividend and capital gains taxes as the largest components. These are set to expire at the end of 2012 and represent the largest part of the fiscal cliff.

Is There a Bright Side to This? - Yes. According to the Congressional Budget Office, by 2022, the budget deficit would fall to $200 billion from its current level of $1.1 trillion. That would all be welcome news, but in order to get there, the nation would face almost certain financial turmoil.

How Do We Fix It? - Recently, lawmakers met at the White House over this issue. Both sides called the meeting productive, but neither side indicated that a deal was imminent. Democrats want to see more revenue (tax increases), especially from the nation's wealthy, as part of any deal. Republicans favor more spending cuts, especially to entitlements like Medicare. While both sides subscribe to different philosophies concerning taxation, each have indicated that they are willing to compromise on many of the more critical issues leading to Jan. 1.

Cliff or no cliff, deal or no deal, Americans will almost certainly pay more taxes. It is just a matter of how much more. Therefore, any compromise will probably include tax increases, just not to the magnitude of those mandated by the fiscal cliff.

Will Fixing the Fiscal Cliff Solve the Economy's Current Woes? - Not at all. The Bush Era tax cuts and other stimulus measures have propped up the economy, as it continues to recover from the 2008 recession. Some investors believe that much of the most recent stock market decline has to do with the looming fiscal cliff. They believe that once a deal is announced, and economic uncertainty is removed, then the market may recover to near its recent highs. Others believe that if the deal includes another one-year extension (or something similar to the debt ceiling negotiations), investors will not be impressed.

The Bottom Line - When will a deal come? Nobody knows, but both sides of the aisle are admitting that fighting and bickering is not the answer. A more conciliatory political environment will give both parties a better chance at gaining control of Washington in 2016. Ultimately, when the deal comes, it will almost certainly result in some combination of tax rate increases and spending cuts. The willingness of both sides to compromise is crucial to any final agreement.

Source: Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Why fresh investing ideas go stale fast

If someone tells you they have come up with an investing system or methodology that delivers a predictable edge over ordinary stock-market returns, they may be right.

They just won’t be right for the long.

In the stock market’s unique way of beating up on braggarts and know-it-alls, the fastest way to turn market-beating methods into average results is to let the world know what you’ve got. In fact, a recent study that looked at academic research purporting to give investors an edge found that the mere act of publishing a research paper to announce the results to the world was enough to crush the advantage of the strategy.

And that’s writing for academic journals, it’s not basing a mutual fund, newsletter or any other investment product that might be selling its strategy as delivering a specific above-the-norm difference.

That’s why any investment strategies that purports to surpass market returns by a predictable amount should be labeled “the Stupid Investment of the Week.”

The problem with such claims is clearly pointed out in a recent research paper “ Does Academic Research Destroy Stock Return Predictability ,” written by David McLean, a visiting professor at MIT Sloan, and Jeffrey Pontiff of Boston College.

The professors looked at 66 different studies which basically plumbed the depths of 82 different market anomalies that were supposed to lead to predictable gains.

The academics weren’t trying to predict market returns, but instead were looking at theories like “low- priced stocks do better than high-price stocks,” or “stocks with strong six-month momentum will continue their strong results for another six months.”

But it gets worse.

After the paper has been published, it looks like people do start to trade on these and the average strategy declines by about 35%, so if a published paper says you can make X-percent returns on this strategy, after the paper has been published the return is 35% lower.

Once you take 35% off the top because everyone else is trying to do the same thing.  The advantage is gone.

The drop-off is even greater when the strategy is concentrated in investment areas that are easier and less costly to trade in, such as big, brand-name stocks. The easier it is for people to emulate the strategy, the faster the edge disappears.

That doesn’t mean investors should not pick out strategies that they think work, but instead it means they need to give up on the idea that they’re getting some kind of predictable, maintainable edge.

Consider, for example, the “Dogs of the Dow” strategy, which involves buying the highest-yielding stocks that are part of the Dow Jones Industrial Average. It’s a strategy that a conservative investor can be comfortable with, but they can’t necessarily expect it to beat the market consistently; in the last six full calendar years, for example, a Dow Dogs strategy topped the Standard & Poor’s 500 index three years, and lagged behind it in three others.

That didn’t mean the strategy was taking investors to the poor house — it didn’t, and there are still believers in it today — but people using the method to gain an edge never really had an advantage.

“If you feel strongly about an investment style or method, that’s good, and that’s going to help you be successful with it,” McLean said, “but if you believe that a strategy is going to give you 2% better than the market — or if a newsletter or mutual fund tells you their strategy can deliver that all the time—it’s just not going to happen. The market is going to step in and work on that until the advantage is gone.”

Ultimately, there are plenty of investment practices that average investors can gravitate toward; from buy-and-hold to swing trading, tactical asset allocation to technical analysis, there’s no one right way to make money.

And if you have found one you can be comfortable and that gives you a return you can be comfortable with, stick to it.

But if you think the strategy gives you an edge on the market, shut up.

The minute you tell the market how smart you are, the market is coming to get you.

And the moment an average investor falls for that kind of sales pitch, they have stepped onto a road headed for disappointment.
 
Source:  Chuck Jaffe, MarketWatch

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

New taxes under the Affordable Care Act

Here are some of the new taxes you're going to have to pay to pay under the Affordable Care Act:

• A 3.8% surtax on "investment income" when your adjusted gross income is more than $200,000 ($250,000 for joint-filers). What is "investment income?" Dividends, interest, rent, capital gains, annuities, house sales, partnerships, etc. With the expiration of the Bush tax cuts, taxes on dividends will rise rise from 15% to a shocking 43.8% on January 1st, unless Congress cuts a deal with respect to the fiscal cliff.
• A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you're self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%.
• Flexible Spending Account contributions will be capped at $2,500. Currently, there is no tax-related limit on how much you can set aside pre-tax to pay for medical expenses. Next year, there will be. If you have been socking away, say, $10,000 in your FSA to pay medical bills, you'll have to cut that to $2,500.
• The itemized-deduction hurdle for medical expenses is going up to 10% of adjusted gross income. Right now, any medical expenses over 7.5% of AGI are deductible. Next year, that hurdle will be 10%.
• The penalty on non-medical withdrawals from Healthcare Savings Accounts is now 20% instead of 10%.  That's twice the penalty that applies to annuities, IRAs, and other tax-free vehicles. (ATR.org)
• A tax of 10% on indoor tanning services. This has been in place for two years, since the summer of 2010.
• A 40% tax on "Cadillac Health Care Plans" starting in 2018.Those whose employers pay for all or most of comprehensive healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays.
• A"Medicine Cabinet Tax" that eliminates the ability to pay for over-the-counter medicines from a pre-tax Flexible Spending Account. This started in January 2011.
• A "penalty" tax for those who don't buy health insurance. This will phase in from 2014-2016. It will range from $695 per person to about $4,700 per person, depending on your income.
• A tax on medical devices costing more than $100.  Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures.

Source:  Multiple Sources


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Make the Tax Man Wait

Would you rather pay a lower tax now or a higher tax later?  The easy answer might not be the right answer.

Suddenly, it seems, everyone is talking about selling profitable stock positions before the tax rate on capital gains goes up.  If you have held a stock for more than one year and you sell it at a profit before the end of 2012, the Internal Revenue Service will take up to 15% of that long term capital gain.

On 1 January, unless Congress and the White House strike a deal, the tax rate on long term capital gains will jump to a top rate of 20%.  Upper income taxpayers will owe another 3.8% on top of that as part of the Affordable Care Act.

Taking a tax hit this year to avoid a bigger one in future years can make sense for people in special situations or with short horizons.  For most investors, however, paying higher taxes later beats paying lower taxes now.  The longer you can keep Uncle Sam out of your pockets, the more wealth you should be able to build.

If you sell a stock in 2012, you can immediately buy it back and as the jargon goes, "reset your basis."  You once again hold the same position, but at a higher purchase price than before.

It is a trade off.  Sell this year and your gains will be taxed at a minimum of 15%.  But the immediate tax hit leaves you with less money to invest upon which you can earn future gains. 

On the other hand, the decision not to sell exposes you to the risk of paying taxes at a much higher rate down the road.  But it does ensure the 100 cents on the dollar will rise tax-deferred along the way - assuming, of course, that the markets produce positive returns.

The longer you want to stay invested, the higher your anticipated return and the lower the rise you expect in the capital gains rate, the more inclined you should be to stay put.

In many cases it makes sense to defer your capital gains into the future even if tax rates do go up.

If you have a holding that you were going to sell in the next 12 months anyway, then selling it before the end of 2012 makes sense.  Also, you probably should sell if you need the cash or you think the investment is overvalued.

Source:  Jason Zweig, Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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Surprise! 401(k)s rode out the Great Recession just fine

The Annual Transamerica Retirement Survey was recently released. It offers an enlightening look at retirement plan trends from both the employer and employee perspective and provides recommendations for improvements to plan sponsors, participants and policymakers. It's consistent and comprehensive.

The latest survey — its 13th annual report — looks at how 401(k) plans have fared over the past five years during the Great Recession.

Despite economic difficulties, access to retirement savings plans increased over the past five years. The percentage of employers offering 401(k) plans rose from 72% in 2007 to 82% in 2012. During the same five-year period, the number of companies offering traditional defined-benefit pension plans decreased from 19% in 2007 to 16% in 2012.

Although the percentage of employers offering matching contributions decreased from 80% in 2007 to 70% this year, half of those who decreased or suspended their match since 2008 have already reinstated it.

Automatic 401(k) features such as automatic enrollment and automatic escalation are on the rise. The percentage of large companies, defined as those with 500 or more employees, offering automatic features increased from 31% in 2007 to 45% in 2012. And a whopping 84% of them have adopted a Qualified Default Investment Alternative solution, such as a target-date fund or managed account, for employees who fail to make their own investment selections.

The percentage of employers adding a Roth feature to their plan increased from 19% in 2007 to 32% in 2012.

Meanwhile, American workers continued to save for retirement during hard times. Participation rates remained strong and steady at 77% and in 2012, the median annual salary deferral rate returned to the 2007 level of 7%, after dipping to 6% during 2009, 2010, and 2011

Unfortunately, the recession affected retirement savings in other ways as some workers, particularly those who became unemployed or underemployed, had to take loans or hardship withdrawals from their accounts.

Despite the impressive savings gains, current account balances are inadequate for many workers to meet their future retirement income needs. Consequently, the majority of workers—56%--plan to work past age 65, including 43% who plan to work past age 70 or who do not plan to retire.

Source:  Mary Beth Franklin, Investment News

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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UNF economist projects sluggish economy post Obama re-election

As University of North Florida economist Paul Mason was about to address a real estate group at a Wednesday luncheon about the post-election economy, he said his speech might make some people spit out their food.

“Growth has been pretty mediocre,” Mason said of the distasteful economic assessment. But he also acknowledged the election campaign season and turbulence in Europe caused uncertainty that slowed economic activity.

Still, after the election was settled last week and Barack Obama got another four-year term as president, Mason said there are some bleak indicators of how the economy might progress in the wake of the “great recession.”

“The outcome just doesn’t seem to be very positive,” he said at the year-end economic meeting of the Northeast Florida Commercial Real Estate trade association at the Jacksonville Golf & Country Club.

Mason said the European Union is about to head into recession and, because it is the major trading partner of the United States, there is little doubt that will stunt economic growth here. He also said decreasing trade with China and the specter of increased domestic taxes also could slow any significant economic rebound.

In one of the few bright spots, local building permits for residential housing jumped from about 1,100 in August to 1,256 in September in Baker, Clay, Duval, Nassau and St. Johns counties.

“There are positive signs in the housing industry,” Mason said. “So, it’s not all bad news in terms of growth. But there’s still a lot of room for improvement.”

But the nation still faces a stubborn unemployment rate, which was at 7.9 percent in October. Mason said this will be one of the most difficult factors to reverse and only the private sector will be able to improve such a stark figure.

But American businesses are slow to invest right now and banks are reticent to lend due to historically low interest rates. Until that trend reverses Mason said slow economic growth will continue.

Traci Jenks, president-elect of the real estate group, said there are plenty of upbeat trends beyond the gloomy projections.

“I think it’s kind of the same thing we’ve been hearing for the past four years. I personally am getting numb to the stories,” said Jenks. “I’m seeing quite positive things. … I’m seeing companies expanding in this market. I’m seeing things a little differently than the economists are seeing things.”

Source: Drew Dixon, Florida Times Union

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

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Tax Threat Prompts Selloff

Politicians are locked in a battle that will determine which Americans pay higher taxes. But many investors aren't waiting to find out the answer.

The prospect of higher taxes on capital gains is prompting many to unload some of their winning stocks.

Tax-induced selling is one factor some market watchers attribute to the recent declines.

The potential rise in the capital-gains tax is included in a raft of potential year-end tax increases and spending cuts, known as the fiscal cliff. Leaders in Washington are likely to spend weeks wrangling over which taxes get increased, and many investors anticipate capital gains will be one of them.

The wave of selling is a twist on the usual year-end rush among financial advisers, who typically help their clients sell their losing stocks to offset gains from other investments.

The Standard & Poor's 500-stock index has climbed 9.7% this year, but stocks continue to find skeptics, who point to Europe's debt crisis, Washington's political gridlock and disappointing corporate earnings.

Any increase in taxes on investment gains would dig into the paper gains that investors have enjoyed as the S&P 500 doubled off its March 2009 lows.

That could be behind the recent selling, investors say. Even those who predict Congress does a deal may be selling simply because they think others will.

Under the current rules, married joint filers with taxable income above $70,700 in 2012 pay 15% on long-term gains of assets they sell. But that rate is set to rise to 23.8% on Jan. 1 for most couples with more than $250,000 of adjusted gross income. Dividend taxes could jump to as high as 43.4%—almost triple the current rate of 15%.

It is hard to assess what impact this selling may have on the market. Many investors hold their stocks in tax-deferred or tax-exempt accounts, and the tax increase applies only to stocks that have been held longer than one year. Also, it doesn't apply to large institutional investors.

Source:  Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Top 3 Ways to Ruin Your Financial Life

You may have seen the TV show on Spike called 1000 Ways to Die which essentially profiles all sorts of deadly, freak accidents. Ghoulish stuff for sure, yet surprisingly thought-provoking. In some ways, author, actor and humorist Ben Stein has written the monetary equivalent of this quirky show, with a book that lists dozens of ways that people kill themselves financially.

Remember, these tips are things Stein advises you NOT to do.

1) Trade Frequently - "If you trade frequently you're almost guaranteed to lose money," Stein says in the attached video. "Unless you're a high frequency trader with access to incredibly powerful computers, a limitless base of capital and access to inside information" the only road to success is to "buy and hold big, broad indexes forever." 

2) Trade Foreign Currencies - The second financial landmine that Stein brings up is trading foreign currencies, a racket he describes as "so treacherous and so difficult" that the top dogs at the top firms can barely make a go of it with the very best resources and technology. He says ordinary investors should stay away from forex markets, and instead seek out what Warren Buffett urged him to invest in. "Just buy productive assets, in the form of stocks, and then buy the indexes and hold on for dear life," he says. 

3) Go With Your Gut and Pick Stocks - And finally, Stein adds to his financial disaster list the doomed notion of believing in your heart that you can pick stocks. "If you're Buffett and you have incredible opportunities and if you are an incredible genius beyond reasoning" then sure, go be a stock picker. "But for anyone else, no!" Stein advises.

Source:  Ben Nesto, Breakout

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Secrets of High Credit Scores

Have you ever wondered: Just what do I have to do to have a superhigh credit score?

MyFico.com, the consumer arm of FICO, creator of one of the most widely used family of credit scores, has published a report on those it considers “high achievers,” or those with FICO scores of 785 or higher.

FICO scores range from 300 to 850 — the higher the score, the better your credit profile, and the more likely you are to get a loan at a favorable interest rate. Scores are based on information reported by lenders to credit reporting bureaus like Experian, TransUnion and Equifax.  You can have multiple scores, depending on what sort of loan you’re seeking and which credit bureau is doing the reporting.

More than 50 million people — about a quarter of all people with credit scores — have scores of 785 or higher, and they exhibit “strikingly similar” credit habits, regardless of background and life experience, according to myFico. (The analysis is based on April data and used FICO 8 scores, the most recent version of the “general purpose” FICO score.)

Over all, those with the highest scores keep low revolving balances relative to their available credit; they don’t “max out” their credit cards; and they consistently make payments on time, even if it’s just the minimum required amount.

High credit achievers aren’t debt-free. One-third have total balances of more than $8,500 on nonmortgage accounts. The rest have total balances of less than $8,500.

But while they may carry a balance, 96 percent of high achievers show no missed payments on their credit report. And those who do have late payments had one four years ago, on average. Less than 1 percent of high achievers have an account past due.

This is important, because payment history represents 35 percent of an individual’s FICO score. So making at least the minimum payment in every billing cycle helps support a high score.

Even those with excellent FICO scores may have had bumps along the way. About one in 100 high achievers has a collection on a credit report, and about one in 9,000 has had a tax lien or bankruptcy.

But high achievers often keep balances low and use an average of only 7 percent of their available revolving credit.

The FICO high achievers have a well-established credit history and seldom open new accounts. Over all, their average credit account is 11 years old.

“While people with a high FICO score are not perfect, their consistently responsible financial behavior usually pays off over time,” Anthony Sprauve, credit score adviser for myFico, said in a statement.


Source: Ann Carrns, The New York Times

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

5 Common Mistakes Investors Should Avoid

While modern-day investing can't be considered easy, it's not necessarily difficult either. The secret to success is usually just avoiding the small mistakes that end up costing big bucks.  With this in mind, here are the five most common pitfalls investors should make a point of avoiding no matter how tempting the alternative looks...

1. "Conceptual" investing - Investors love great stories. After all, it's fun to be able to say you own the hippest dot-com stock, or you're invested in the biotech stock that's working on a cutting-edge treatment for cancer. But there's a problem with focusing on a general theme and ignoring everything else. Eventually, bills have to be paid. Unless the investment idea actually bears a decent amount of fruit compared to what the stock costs, then what's the point?

Conceptual investing ran rampant in the dot-com era in the late 1990s and early 2000s, and ultimately crushed many investors.

2. Not selling - Warren Buffett frequently says his favorite holding period is "forever," meaning he never buys a stock he thinks he might have a reason to sell at some point in the future. It's his quaint way of suggesting investors think long and hard before becoming a stakeholder in any company. The problem is, he may say one thing, but he does another.

Buffett does sell his holdings, mostly when the position's maximum value has been priced in, as was the case of his holding in Intel. Though the Oracle of Omaha only stepped into his position in late 2011 at an average price of less than $22 per share, he sold his stake in May of last year at $27.25 a share. The exit locked in a short-term gain of 24%, which was a brilliant time to take profits, in retrospect. The stock currently trades at roughly $21 a share.

The quick lesson in this story is: If a stock can be priced low enough to make it a "buy," then by the same line of reasoning, it can be priced richly enough to make it a "sell."

3. Lack of consistent approach/chasing hot trends - Remember the old cliche, "Even a stopped clock is right twice a day?" It's a bit of a back-handed compliment, omitting the obvious fact that a stopped clock is still wrong the other 23 hours and 58 minutes a day. Yet, at least by doing nothing, that clock is still occasionally correct. But if the clock's owner was randomly swinging the hour-hand and minute-hand around at various times of the day, then it would probably never be right. Traders who jump from one approach to another at the drop of a hat are also apt to miss out on ever being right for reasons other than pure luck.

4. Trading binary events - It's unfortunate that many investors' first foray into the market is with a trade that's effectively a coin toss. If the news is good, then the stock might soar and the trader reaps a big reward. If the news is bad, then the trader is left holding the bag and can lose a lot of money in a matter of seconds.

It's called a binary trading event, or a piece of impending news that can only have one of two possible outcomes -- either a very bullish one or a very bearish one -- no in-between. It's also an approach investing heroes such as Buffett, Benjamin Graham and Peter Lynch wouldn't use in a million years, simply because there's too much risk and no way of hedging it. These market veterans pick stocks that give them multiple ways to win in multiple timeframes. With a binary event, there's only one way to win -- once.

The most common binary event trades come from the world of biotech, and usually surround a drug's approval (or lack thereof). Guessing wrongfully can be far more painful than it's worth though. As an example, shares of InterMune plunged 80% when the Food and Drug Administration rejected the company's highly-touted lung disease drug Esbriet.

This kind of risk is rarely worth it.

5. Underestimating the power of income and dividends - Growth stocks and big gains are what investing dreams are made of, but these dreams don't always pan out nearly as often or nearly as well as initially hoped. The fact of the matter is, income and dividends may not seem sexy, but a full 40% of investors' long-term gains are the result of dividends rather than capital appreciation. Throw in the fact that dividends are consistent while price appreciation can be erratic, and some investors might start to wonder why they bother with growth stocks at all. The best way to build your portfolio for long-term growth is with Retirement Savings Stocks, which you can learn more about here.

Bottom Line - Avoiding all five pitfalls just seems like a matter of applying common sense when talking hypothetically, but they're not as easy to recognize when it comes time to make decisions about how real dollars should be allocated, especially when it comes to your retirement portfolio. Investors who can see when they're about to fall into one of these five traps, however, stand to outperform the majority of their investing peers.You should always look for safe income, that's why Retirement Savings Stocks are always a great addition to any portfolio.

Source: Investopedia 

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

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D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Tax on your Social Security? Yes, there is...

Many near-retirees may not realize part of their Social Security benefits could be subject to income tax.

For most of one’s working life Social Security is a tax so it might seem unusual to then pay a tax on the benefits that are eventually received. But, in fact, no income tax has been paid on the Social Security money paid in over the years by the employee or the employer.

Whether a recipient pays taxes on Social Security benefits depends on how much additional income the person receives, above and beyond their benefit. Taxes are never applied on all of the Social Security benefit no matter how much a person earns; the maximum amount ever subject to income tax is 85 percent of the benefit.

Whether taxes must be paid depends on the person’s combined income, which is the total of any salary or wages earned, pension benefits, investment income, tax-exempt interest and half of the Social Security benefit.

If combined income for a single person is between $25,000 and $34,000, up to 50 percent of the Social Security benefit is subject to tax. If the amount is more than $34,000, up to 85 percent of the benefit is taxable.

For a married couple filing jointly, the combined income limit is $32,000 to $44,000 for up to 50 percent of the benefit to be taxable and above $44,000 for up to 85 percent to be taxable.

Married couples filing separately will likely have to pay income tax on some of their benefit because there is no minimum income amount, says the IRS.

The percentage of the Social Security benefit on which income tax is applied is based on a sliding scale depending on how much outside income the person has. If a person relies solely on Social Security, no income tax will be applied.

Income taxes could be applied to other income besides Social Security benefits, to include investment income, depending on deductions and exemptions.

A person can elect to have income tax withheld from Social Security benefits by contacting the IRS and filing the tax withholding form. Withholdings can be made of 7 percent, 10 percent, 15 percent or 25 percent.

Source:  Karen DeMasters, Financial Advisor Magazine

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

The Jacksonville Business Journal has ranked D2 Capital Management in 

the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association