Municipal Bonds: Ratings look favorable

Moody’s, S&P and Fitch are the companies whose analyses of the legal, contractual and moral promises made by municipal bond issuers result in a scorecard grade that may suggest the likelihood of full and timely repayment of their debts.

First, there are 13 states that garner no less than a triple-A (AAA) rating from one or all of the above agencies. States such as Alaska, Delaware, Georgia, Maryland and North Carolina are part of a subset that have triple-A from all three.

Second, apart from Puerto Rico and other Territories of the U.S., the lowest-rated states are California (A1, A-, A-) and Illinois (A2, A, A). Neither one has anything less than an A- from at least one of the three agencies. In fact, included in the list of the 10 lowest-rated states are New Jersey (Aa3, AA-, AA-) and Michigan (Aa2, AA-, AA-).

The point? Though this just speaks to state issuers, since the bottom of the investment grade range is BBB-, the general quality of bonds appears very strong. As shown in the graph, the average rating among all U.S. states is AA. In the context of a broadly diversified portfolio, the quality could represent a high likelihood of full repayment.

Note:  Anything lower than a Baa/BBB-/BBB- rating is considered a non-investment-grade, high-yield or junk bond.

Source:  James Colby, MarketVectors
  
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

After the Fiscal Cliff, the Future Still Looks Bright for MLPs

Investors in master limited partnerships (MLPs) have been on a good run. Since 2007, MLPs have generated a total return of 86.5% compared to just 4.5% for the S&P 500.

Does the investment potential for MLPs still look promising going forward? As usual, it's all about the government-and taxes.

MLPs got their big push with the Tax Reform Act of 1986 signed into law by President Reagan, which created a simpler tax code with fewer tax shelters. It also encouraged the development of domestic energy resources by exempting resource-heavy MLPs from corporate taxes.

Fast forward to the recent McConnell-Biden "fiscal cliff" compromise. Although the bill allayed the fears of a devastating tax hike, it stated nothing about MLPs' tax status.

There remains a remote possibility that MLPs could figure into negotiations over broader tax reform. But there are good reasons to believe that not only will the benefits that MLPs provide for infrastructure improvement be recognized and protected, but even extended.

If that happens, investors seeking the high income MLPs provide could flock to the sector in large numbers.

Opportunities Ahead - MLPs in the energy services sector-like pipeline operators, storage managers, import/export terminals and distributors-could be one of the best ways to invest. Why? Because no matter what oil and gas prices do, these MLP service businesses get paid anyway.

MLPs are also among the very few sectors that have been able to raise equity in a way that's accretive to profits immediately. And with North American oil production on track to double in a decade, there's no shortage of opportunities to lock in robust long-term cash flows from stable sources.
This, in turn, ensures strong distribution growth, which is the fuel for consistent price appreciation.

Global X MLP Exchange Traded Fund (MLPA) is a component of the D2 Capital Management Multi-Asset Income Portfolio. 

Source:  Roger Conrad, Investing Daily

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

The most common mistake in investing

"...Too many investors are reactive decision-makers. If something has gone up, they say, "Ah, that's a good investment." They don't say, "That's more expensive."

And so, that's the most common mistake in investing.

I think the important thing here if I'm an investor is that the most important thing you can have is a good strategic asset allocation mix.

In other words, you're not going to win by trying to get what the next tip is – what's going to be good and what's going to be bad. You're definitely going to lose.

So, what the investor needs to do is have a balanced, structured portfolio – a portfolio that does well in different environments..."

Source:  Ray Dalio, founder of Bridgewater Associates*

* Bridgewater manages approximately $130 billion in global investments for a wide array of institutional clients, including foreign governments and central banks, corporate and public pension funds, university endowments and charitable foundations.

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

 

The 6 Biggest Ways Bad Credit Can Mess Up Your Life

Bad credit is something you don’t want associated with your finances. Unfortunately, you may have less than stellar credit at some point in your life. Credit scores represent a person’s credit worthiness, designed to show a lending institution who is a good investment, and who is… not so much. Banks believe that credit scores — i.e. past financial behavior — are a good indication of an individual’s future financial behavior. Whether or not you agree with that statement, the negative effects of having bad credit are undeniable.

Here’s a list of things that can get pricey or are unattainable if you have bad credit.

1. Car insurance. Insurance carriers in 47 states check your credit score when arriving at a rate. They’re with the banks in assuming that your credit score will indicate how risky of an investment you are. This means that you may have higher than average rates for years or that you may not be approved for insurance coverage at all by a certain carrier, depending on how low your credit score is.

2. Mortgage loans. If you’re trying to buy a home you will most likely apply for a loan. You can be certain that financial institutions look at your credit score during the process. Bad credit means possibly being denied a loan or can result in being charged higher interest rates. This is because the amount of interest you pay is based on your level of risk and the current market rate. The worse your credit is, the higher your level of risk is and the higher your interest rates will be. This difference can amount to tens of thousands of dollars over the course of a mortgage’s lifetime.

3. Credit cards. If you are approved for a credit card, you can bet on having higher than average interest rates. Credit card interest rates range anywhere from 7 percent to 36 percent. With a good credit score you can expect to land somewhere between 10 percent and 19 percent. With a bad credit score, you can expect to be somewhere around 22 percent and up.

4. Car loans. You’ll likely need a loan when purchasing a vehicle as well. And banks will check your credit score before approving your financing; interest rates on your loan will sway with the results; results could vary by up to 2 percentage points.

5. Cell phone plans. Did you know that some cell phone carriers, like car insurance carriers, check your credit score? They do — another reason why it’s important to pay your bills.

6. Job hunting. Under the Fair Credit Reporting Act it is legal for a future employer to review your credit report with your written approval (they don’t check your score, however). Hiring managers can use this information when making their decision. Some states do have laws that limit the use of credit information in the hiring process.

To make sure that your credit does not interfere with your employment, interest rates, your ability to buy a cell phone or a vehicle, or your car insurance rates — make sure to take control of the situation by obtaining your free credit report annually.

Source:  Alysha Beers, Credit.com

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

Tax-Free Bonds Offer Tempting Yields

As Washington struggled to sidestep the fiscal cliff last year, municipal funds sank. During December, the average intermediate tax-free fund lost 1.2%, according to Morningstar. Investors worried that Congress would undo some of the advantages of municipals. But since tax legislation passed on Jan. 1, the funds have gained back much lost ground.

The markets cheered the legislation because it did nothing to change the tax-exempt status of municipals. In addition, Congress raised the top tax bracket from 35.0% to 39.6%. That may be painful for high income earners, but it makes the tax exemption of municipal bonds more valuable.

To appreciate the impact of the tax rise, consider that the average intermediate-term municipal fund delivers a tax-free yield of 2.5%. In 2012, that yield was the equivalent of a taxable bond with a yield of 3.8% for investors in the top tax bracket. With top rates higher this year, the equivalent taxable yield has jumped to 4.1% -- a fat payout at a time when money-market funds yield almost nothing. "Demand for municipals has been strong because the yields are compelling," says Peter Hayes, who heads BlackRock's municipal group.


Source:  Stan Luxenberg, TheStreet.com

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

Suitability Vs. Fiduciary Standards

In the investment field, there are two primary entities who offer investment advice to individuals. These are investment advisors and investment brokers. Many clients may consider the investment advice they receive from each party as similar, but there is a key difference that may not be completely understood by the investing public. The difference pertains to two competing standards that advisors and brokers must adhere to, and the distinction has important implications for individuals who hire outside financial assistance.

Investment Advisors - According to the Securities and Exchange Commission (SEC), investment advisors provide many services, including assisting individuals and institutions in making financial decisions pertaining to planning for retirement, saving up for a child's college education or planning and developing investment strategies to manage assets and portfolios. They can charge fees for their services, which can be on an hourly basis or a percentage of the assets they manage for clients.

Broker-Dealers - Broker-dealers serve many of the same functions as investment advisors in that they help individuals make important financial decisions. The SEC does make certain distinctions though, such as considering them financial intermediaries who help connect investors to individual investments. It details that a key role is to enhance market liquidity and efficiency, by linking capital with investment products that range from common stocks, mutual funds and other more complex vehicles, such as variable annuities, futures and options.

The SEC defines a broker as someone who acts as an agent for someone else, and a dealer as someone who acts as a principal for their own account. An example of an activity a dealer may carry out is selling a bond out of his or her firm's inventory of fixed income securities. The primary income for a broker-dealer are commissions earned from making transactions for the underlying customer.

The Fiduciary Standard - Investment advisors are bound to a fiduciary standard that was established as part of the Investment Advisors Act of 1940. They can be regulated by the SEC or state securities regulators, both of which hold advisors to a fiduciary standard that requires them to put their client's interests above their own. The act is pretty specific in defining what a fiduciary means, and it stipulates that an advisor must place his or her interests below that of the client. It consists of a duty of loyalty and care, and simply means that the advisor must act in the best interest of his or her client. For example, the advisor cannot buy securities for his or her account prior to buying them for a client, and is prohibited from making trades that may result in higher commissions for the advisor or his or her investment firm.

Avoiding conflicts of interest is important when acting as a fiduciary, and it means that an advisor must disclose any potential conflicts to placing the client's interests ahead of the advisor's.

The Suitability Rule - Broker-dealers only have to fulfill a suitability obligation, which is defined as making recommendations that are consistent with the best interests of the customer. Broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA) under standards that require them to make suitable recommendations to their clients. Instead of having to place his or her interests below that of the client, the suitability standard only details that the broker-dealer has to reasonably believe that any recommendations made are suitable for clients, in terms of the client's financial needs, objectives and unique circumstances. A key distinction in terms of loyalty is also important, in that a broker's duty is to the broker-dealer he or she works for, not necessarily the client served.
The need to disclose potential conflicts of interest is not as strict a requirement for brokers; an investment only has to be suitable, it doesn't necessarily have to be consistent with the individual investor's objectives and profile.

Potential Conflicts - The suitability standard can end up causing conflicts between a broker-dealer and underlying client. The most obvious conflict has to do with fees. Under a fiduciary standard, an investment advisor would be strictly prohibited from buying a mutual fund or other investment, because it would garner him or her a higher fee or commission. Under the suitability requirement, this isn't necessarily the case, because as long as the investment is suitable for the client, it can be purchased for the client. This can also incentivize brokers to sell their own products ahead of competing products that may be at a lower cost.

The Bottom Line - With cost being one of the primary determinants of investment performance over the long term, the fiduciary standard has the upper hand in terms of providing a benefit for clients. Given the more stringent stipulations for investment fiduciaries, there is little question that the fiduciary standard better protects investors, than the suitability standard. Federal securities laws consider investment advisors fiduciaries, but this does not apply to broker-dealers across the board. Overall, it is best for individuals to find an advisor who will place his or her interests below that of the client.

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

Simplify Your Portfolio

Investors today have vastly more investment choices than ever before. Yet, despite this wealth of available options, investors continue to struggle. Could it be that the flood of products, vendors and account alternatives is actually making the investment decision process more difficult? Are there ways to simplify your approach and still succeed?

Starting With the Proper Perspective - There seems to be a prevailing misconception that one can quickly "invest" his or her way to a fortune. Throughout history, only a rare few individuals have accomplished this feat and even they typically took on vastly more risk than the average investor could tolerate. Finding the next Microsoft or day trading your way to wealth is not the mindset one should have when approaching the investment landscape.

As a general rule, you will generate substantially more income and wealth-building potential from your job than you ever will from investing. Wealth is created over time by saving part of this generated income. With a generous income and a disciplined saving habit, a material amount of wealth can be accumulated over an extended period, even if that wealth is invested in nothing more than a traditional bank savings account. Enlightened investors, however, recognize that they can expand the growth of net worth by investing accumulated savings in other assets with greater growth potential.

Different Packaging, Similar Contents - Financial firms, recognizing that they are all fishing from essentially the same asset ponds, seek to attract clients by finding different ways to combine and package investment assets. As a result, thousands of mutual funds exist today that are essentially just different combinations and packaging of the same stocks and/or bonds. The result of all these multiple account structures and packaging options is that investors often accumulate investments in a hodge-podge manner over time.

Owning several different investments can often mean that little thought is given to how these various parts work in concert with one another. In addition, there is typically no way to discern how they are performing in the aggregate. The task of keeping track of the many statements and assorted paperwork becomes a logistical nightmare for investors and their tax advisors. As a result, investors start looking at the individual accounts and investments as separate parts rather than one, concerted investment portfolio. This is known as "mental accounting" in the behavioral finance world, and it can be detrimental to your long-term investment success. It would be far better to employ a more simplified approach.

The Impact of Asset Class - Despite all of the many different ways they are packaged, investments largely contain one or more of just a few asset classes. These asset classes include stocks, bonds, cash (or cash alternatives), or physical assets like land, real estate, precious metals and commodities. Other, more complex investment alternatives are based on these underlying assets. Derivatives derive their value from some asset. Options give you the option to buy or sell an asset at a particular price and at a particular time. Futures give you the right to deliver or take delivery of some asset at some set price and at some set point in the future.

The more exotic investment alternatives serve their purposes in certain settings, but you do not need to use them. In fact, you can create an effective investment strategy by sticking to the asset classes with which you may be most familiar - stocks, bonds and cash. The world of investing can be immensely complex, but you can build significant wealth over time without ever getting involved in the esoteric areas of investing.

Different asset classes have demonstrated certain performance characteristics over time. No one can predict the future, but a basic knowledge of how these asset classes have tended to perform and how they relate with one another will go a long way in helping you establish a long-term investment strategy that stands a chance of meeting your goals and objectives.

The Bottom Line - A simple and straightforward approach can be employed by anyone who wants to establish and maintain an effective long-term investment strategy. First, keep the proper perspective. Do not attempt to get rich quick. In other words, keep your day job! Second, keep accounts and product selection to a minimum. Finally, focus on asset class selection and the overall asset allocation of your entire portfolio, making sure that your asset class exposure is fully diversified. As you can see, your approach does not have to be overly complicated, it does not have to be time consuming, and it does not require a vast array of products or accounts. In the end, you may actually find that less is more.

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

Apple: Growth or Value?

In many money managers' eyes, the recent decline of Apple's share price could mark Apple's transformation from a fleet-of-foot growth stock—one that is seen as risky but whose growth prospects could lead to big gains—to a more plodding value stock—one that trades at a low price relative to earnings and offers regular payments such as dividends.

Apple has dropped roughly 28% from its closing high of $702.10 reached in September, wiping out about $200 billion in market value, about the equivalent of Pakistan's annual gross domestic product.

The big question is whether investors believe Apple's earnings growth can continue. The company is so large now—revenue is slated to exceed $190 billion in the year ending in October—that such outsize gains in its top line may be hard to achieve. That makes it unattractive to many investors seeking revenue and share-price growth. At the same time, many value investors aren't convinced the company is cheap enough, even though its price/earnings ratio is 10 times, compared with 13 times for companies on average in the S&P 500.

Apple is set to enter what is sometimes called "growth purgatory," an inevitable shift that occurs when a company becomes so big that it can no longer increase earnings at the same rate that investors had become accustomed to. Growth investors also likely sell at a faster pace than value investors buy.

Evidence of that is seen with investors seeking growth moving out of Apple for the past year. To some extent, value investors have moved in to replace them. In December 2011, some 82% of growth funds in a sample of more than 800 U.S. mutual funds with more than $1 billion of assets owned Apple.   These days, that figure is 77%.

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

Gold Coin Sales Keep Falling as Investors Buy Bullion Exchange Traded Funds

Humans have been hoarding shiny flecks of gold for ages, but investors are beginning to shift from physically stashing away gold under their mattress to gold-related exchange traded funds.

U.S. Mint’s gold-coin sales have fallen 25% from 2011. It was the third straight year of declines.

In contrast, gold in global gold exchange traded products rose about 44% over the past three years as investors sought an easy way to hedge against inflation, the falling dollar or even a breakdown in the financial system.

The demand for gold futures has also lifted gold prices to their 12th consecutive annual gain. Gold currently sits at about $1,680 an  ounce. Consequently, some observers believe that the higher cost of gold has constrained physical gold coin hoarders. It was much easier to buy gold coins when gold was a couple of hundred bucks.

On the other hand, investors can now choose among a variety of physically-backed gold Exchange Traded Funds, including SPDR Gold Shares (NYSEArca: GLD), iShares COMEX Gold Trust (NYSEArca: IAU), ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and ETFS Physical Asian Gold Shares (NYSEArca: AGOL).

“The ETFs are appealing because they are an investment product as opposed to a physical product,” Nolan Watson, president and chief executive officer of Sandstorm Gold Ltd., said in a recent article. “If you buy ETF shares, you don’t have to hide them under your mattress or bury them in your back yard.”

Source:  Tom Lydon and Max Chen, ETF Trends

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

High Yield Corporate Bonds For Yield in 2013

High Yield Corporate Bonds have enjoyed four solid years of returns while investors’ hunger for income-producing assets has pushed the sector’s yields down near record-low levels. As 2013 gets underway, some investors are again wondering if high-yield corporate debt is overvalued after such a strong run.

While High Yield Corporate Bonds were a high yield favorite last year, S&P Capital IQ reports the "junk" bond market may be a bit overpriced, it is still a hot spot to gain yield.  Especially since the low-yield environment in the U.S. is going to linger for some time.

“High Yield Corporate Bond performance is correlated to the corporate growth cycle, which remains solid albeit slowing, “ Alec Young of S&P Capital said. “High-yield defaults are at only 2.7% versus a 4.5% long-term average. While the 5% spread over 10-year U.S. Treasuries may not narrow much further, the 6% yield for the asset class warrants exposure even if it’s more a coupon play than a capital gain play after four years of stellar gains driven by narrowing credit spreads.”

Although High Yield Corporate Bonds are often considered high-risk and speculative, the asset class has outperformed the S&P 500 the past five years with less volatility, says Peritus Asset Management, the subadvisor for Peritus High Yield ETF (NYSE: HYLD).

Recent talks of a High Yield Corporate Bond bubble in fourth quarter of 2012 have been laid to rest for the start of 2013. Despite modest outflows from selected funds, the fact remains that inflows into High Yield Corporate Bonds were steady and heavy for most of 2012.

Peritus High Yield ETF is a component of the D2 Capital Management Multi-Asset Income Portfolio.  High Yield Corporate Bonds are also elements of many of the funds we use in our D2 Fixed Income and Equity/Income Model Portfolios.

Source:  Tom Lydon, ETF Trends

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

Stocks' Strong Start to 2013 Continues but...

The stock market rally that began the year continued last week, as the Dow Jones Industrial Average climbed 0.4%, the S&P 500 Index advanced 0.4% to 1,472 and the Nasdaq Composite rose 0.8% to 3,125. After only two weeks, US stocks are up between 3% and 3.5% for the year. European stocks have posted similar gains and equities in Japan have advanced even further.

The question that clearly arises from all of this is whether or not the equity rally will continue. For the year as a whole, we would expect equity markets to continue to advance and to outperform bonds, with the best performance likely coming in emerging markets. That said, however, we expect the current pace of gains to slow—if not immediately, then probably by February.

There are several reasons to be at least somewhat more cautious in the near term. First, we expect a good deal of headline risk coming in the next couple of months. Investors should expect continued dysfunction from Washington as lawmakers wrestle with the debt ceiling, scheduled spending cuts and the need for continuing budget resolutions. Not only are the odds of some sort of "grand bargain" diminishing, but the current bickering raises the possibility of another last-minute showdown and a potential debt downgrade. There is also political risk coming out of Europe, with Italian elections coming up in February. Should the election fail to produce a clear result, or should the voters choose a less market-friendly government than the one currently headed by Prime Minister Mario Monti, markets would likely react negatively.

The bottom line is that while we think stocks are reasonably valued (particularly outside the United States), we would expect tougher going as we head into February.

Outside of the political risks, we do have some lingering concerns about the economy. Once we get a look at January month-end data, we will see the first clues about how higher taxes are impacting the economy. Notwithstanding some of the stronger data we cited earlier, we are expecting the first quarter to show relatively soft economic data. In particular, we are concerned about consumption levels weakening in January as people come to grips with smaller paychecks.

We would also point out that although these risks are clearly evident, investors seem to be overly complacent. One way this can be measured is by looking at market volatility. The VIX Index (a widely followed measure of stock market volatility that is also known as the "fear index"), fell last week to its lowest level since June 2007. To us, this suggests that there is not much bad news priced into market right now, meaning that any negative shock would have the potential to drive markets lower. The bottom line is that while we think stocks are reasonably valued (particularly outside the United States), we would expect tougher going as we head into February.

Source:  Russ Koesterich, BlackRock Global Chief Investment Strategist

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

Muni Bond Health Check

The volatility in municipal bonds we saw at the end of 2012 due to speculation on the tax-exempt status of muni bonds and the U.S. fiscal cliff is pretty normal in terms of markets.

Market participants are normally used to seeing corrections, re-settings and re-balancings of opportunities in their markets. The same thing has just happened in the municipal marketplace.

It’s a healthy thing. Investors are going to find yields and opportunities in municipals even more attractive than they were back in October and November. Such has been the correction that’s occurred recently, but it is a healthy correction.

Nothing fundamentally has changed, and credit quality remains at the very top of the spectrum relative to other asset classes.

The outlook for states and municipalities in 2013 is improving. There are many reasons to be optimistic about the recovery and the health of communities around the country.

Although growth is not robust and we still face significant challenges, all evidence points to increased revenues and tax collections. States and municipalities must balance their budgets.

Constitutionally, they need to produce balanced budgets every fiscal year, which leads to more proactive participation on the part of legislators to actually manage revenues and manage through difficult times. I would say the outlook continues to be fairly positive for all states and municipalities who are issuers of municipal bonds.

Muni Bonds are the backbone of the D2 Capital Management Tax Free Income Portfolio.

Source: James Colby, VanEck Global

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

Preferred Stock ETF with 6% Yield Eyes Post-Crisis High

The largest ETF for preferred stocks, known for their above-average yields, is trying to break out to the highest level since 2008.

The iShares S&P U.S. Preferred Stock Index Fund (PFF) posted a total return of 18.2% in 2012 to outpace the 16% gain for the S&P 500, according to Morningstar.

For investors, preferred stock ETFs delivered the best of both worlds last year. They saw nice capital appreciation with less volatility, along with a healthy yield.

For example, PFF has a 12-month yield of 6%, according to manager BlackRock. It holds about $11 billion in assets.

“Preferred stock is a surprisingly good diversifier: it has low correlation to other income-generating asset classes like REITs, MLPs, corporate bonds, TIPS, and popular income ETFs,” according to Morningstar analyst Abby Woodham.

Preferred stocks are a type of hybrid security that exhibit the characteristics of equity and bond instruments. The shares are predominately issued by financial institutions, utilities and telecom companies. Preferred share dividends take precedent over common share dividends but fall below bonds in a company’s debt obligation hierarchy.

As many investors have noticed, this class of stocks provides high yields, but unlike regular stocks, the dividends are fixed, so investors can rely on a relatively stable source of income.

PFF is a component of the D2 Capital Management Multi-Asset Income Portfolio.

Source:  Tom Lydon, ETF Trends

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's Next in 2013? (BlackRock Analysis)

Executive Summary

Don't Ignore the Upside. While the coming year brings with it many of the same risks faced by investors in years past, perhaps the biggest challenge will come from making sure investors are not missing out on the upside. While the potential pitfalls are many, we believe the opportunities could outshine the risks. Below, we offer insight on the critical issues and questions facing investors:

• Fiscal Cliff: A huge policy blunder has been averted (for now), but fiscal tightening will take place. With additional negotiations to come, markets will be volatile, but long-term investors could find buying opportunities.
• US Economy. The United States will maintain slow but positive growth, much like in 2012, but should not enter a new recession. Look for stronger growth as the year progresses.
• Interest Rates and Inflation. The 10-year US Treasury yield should gradually rise through 2013 to 2.25%. Inflation should remain in the 2% range unless growth or oil prices spike.
• Europe. The European Central Bank (EC B) changed the game by taking the risk of banking collapse off the table. But key reforms are likely a year or more away. In the meantime, growth is elusive.
• China and Emerging Markets. China and emerging markets regain their growth trajectories in 2013, helping cushion any weaknesses in the United States and Europe.
• Risk-On/Risk-Off Redux? Markets are likely to remain volatile early in the year, but should respond more to fundamentals as clarity emerges.
• US Stock Market. While risks are elevated and valuations are relatively high, we still see opportunities, particularly in US mega caps.
• Global Stocks. Emerging markets offer faster growth, cheap valuations, lower inflation and relatively muted volatility.
• Fixed Income. What used to be "risk free" (i.e., Treasuries) has actually become risky. Over the long-term, we suggest migrating toward credit sectors.
• High Yield Bonds. Investors should consider diversifying their exposures in high yield to include loans and secured credit. The asset class continues to offer compelling yield and return potential, and default rates remain low.
• Municipal Bonds. Municipal bonds offer compelling taxable equivalent yields in the face of higher taxes. Munis are unlikely to lose their taxexempt status.
• Volatility. Alternative asset classes and strategies are increasingly mainstream and offer the opportunity to enhance portfolio diversification.

Source:  BlackRock

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

Time is Money for Many Retirees

It is a new world of retirement and investors are taking note of the challenges that come with it. 42% of investors in the BlackRock Investor Watch™ survey noted that they have lowered their expectations for the kind of lifestyle they will have in retirement. However, only 15% of investors reported that they had pushed back their date to retire later, a move that would allow more time for gathering and growing savings. It seems that rather than pushing back their retirement timeline, people are downgrading their expectations.

Source:  BlackRock

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

 

No cliff for Municipal Bonds

With many Americans set to pay higher taxes, muni bonds could become an attractive investment.

In the eleventh hour of the first night of 2013, Congress passed legislation which, among tax increases and other items, left the municipal bond coupon tax-free and unscathed. As you undoubtedly know by now, the bill provides for extensions of the Bush era tax cuts and credits and permanently "patches" the Alternative Minimum Tax (AMT) going forward.

Personal income taxes for individuals with income over $400,000 and households over $450,000 will increase; as will taxes on dividends and capital gains for those investors. There will be much more debate to follow as Congress must address the deficit and debt ceiling in the coming months.

At this time, tax-free investors can exhale knowing that their tax-free income streams remain preserved as we roll off the second strong performance year in a row; the Barclays Municipal Bond Index returned 6.78% in 2012. With higher taxes coming for many Americans, tax-free coupon can make munis all the more desirable.

Source:  James Col, 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.

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

Increase in cost of public college

Although the beginning of a new year is generally a time to look ahead, consider taking a moment to look backward-at trends in college tuition. Between the 2000-01 school year and the 2010-11 school year ten years later, prices for undergraduate tuition, room and board at public college and universities rose 42%, after adjustment for inflation. For the academic year at the tail-end of that decade (2010-11), that cost was estimated to have risen to $13,600 at public institutions. At private institutions that number could be on average $10,000 or $20,000 more, depending on whether the school is not- for-profit.

It is never too early to begin laying the foundation for future success through education. Consistent investing, sound financial advice and a 529 plan are the building blocks of a winning college savings plan.

Source:  BlackRock

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