JP Morgan’s $2 billion loss

No big whoop (article HERE). While a $2 billion loss certainly sounds big, and grabs headlines, it’s actually less than 11% of what the bank earned last year ($17.5 billion). At no time was the “financial system” in jeopardy as the politicians & the media might lead you to believe. (That said, more transparency would be a good thing – which is different than more regulation).

Recent Correction

As we’ve mentioned in the past, the market has 3-4 corrections each year around 5% +/-.  And every 1.1 years the market has a 10% +/- correction. That is considered “normal volatility” for the market. Over the last few weeks the market has corrected about 5% – the first real correction since November 2011!

No one can “predict” what will cause these corrections – we just know the odds are that we will have them. Those “corrections” are in your Plan. We use those to make adjustments to the portfolio &/or invest funds (it’s great to have the opportunity to buy when things go on sale – and like any retail store, we know they’ll have a “sale” at least 3-4 x each year).

Positive Outlook for Us

Two good articles on what I’d say are why things are better than they seem.

Liz Ann Sonders of Schwab (HERE)

• They believe the stock market correction will be less severe than in 2010 & 2011
• The Macro concerns (Europe & US Debt crisis) are trumping better mico news

Daniel Gross – the US is better, stronger and faster than anywhere else in the world (HERE)

• Continued Economic growth; Monthly exports up 50%, etc
• An abundance of “positives” too long to list, please read the article

In sum, there's much to fret about, and volatility is likely to remain elevated until this correction has run its course. But a lot has changed in the past two years—much for the better—particularly for domestically oriented US companies. There's at least a little bit of decoupling underway, certainly between the United States and Europe, and that's likely to assist in keeping the correction from mirroring the ones in 2010 and 2011.

We’re not saying “it’s different this time”; we’re actually saying the opposite – corrections are just part of “normal” market movement. We’ll stay on top of things if the fall out of the “normal” range & we’ll make adjustments.  Recall our favorite saying – you can’t predict the future, but you can Plan for it. We're only an email or phone call away if you'd like to discuss your situation in more detail.

They say most business owners’ mindset is “plan, optimize, execute”; but the most successful business entrepreneurs’ mindset is “act, learn, build” – or the Nike slogan “Just Do It”

Serial entrepreneurs, those individuals who have successfully started multiple companies, have mastered managing the unknown. To follow their lead and take control of the future, small business owners must:

• Begin by taking a small (smart) step forward. It may not be the right direction, but as the owner of a small business, you will never know if you do not try. When starting a new venture, ask potential customers what they think about each idea.
• Evaluate the feedback and see what you have learned. If potential customers have an idea about the business, listen to them. Their response is invaluable and could offer a new outlook.
• Build that learning into what you do next. Take this first-hand feedback and, if necessary, reconstruct your path. Take a step in a different direction to see what happens as you experiment with new ideas.

These serial entrepreneurs take these steps and repeat until an outcome is achieved — either the business is up and running or the owners decide they can’t afford or don’t wish to continue.

I guess I’d say it’s the opposite of “paralysis from analysis.” That’s why many small business owners are often their own biggest impediment to success.

Facebook, in the news a lot right now as they head towards their IPO, is a great example of “Just Do It”. The company “tries” different ideas – some good & some not so good; they then evaluate the feedback & then decide which direction to go. (It’s called A/B testing – redirecting a percentage of viewers to an alternate site & evaluate the response – but you can Google “A/B testing” to learn more about it).

So, if you have a new marketing idea – “Just Do It” & test it out on a small scale; ask for feedback; adjust.

If your office manager has an idea to improve efficiency around the office – “Just Do It” & test it out on a small scale; ask for feedback; adjust.

The predictability of the world has changed drastically. Shouldn’t our way of thinking keep up?

• Gold really thrives during times when inflation fears are running rampant. This is not one of those times. The sluggish U.S. job market, slowing growth in China and recession in much of Europe all scream global economic weakness – not inflation
• Yes, gold surged to an all-time high last September. That was shortly after the credit rating of the United States was cut by Standard & Poor's following the debt ceiling mess on Capitol Hill.So it seemed last fall that gold was being viewed as a classic safe haven.
• But that may have created some froth in the market for gold. So this recent pullback may be the continuation of a needed correction. (The SPDR Gold Shares Trust, an exchange-traded fund that invests in the commodity, is still up more than 65% since the stock market bottomed in March 2009).
• Ritholtz, who said his firm does have a position in gold, said that having some gold investments makes sense. Gold should rise when the U.S. dollar is weakening and inflation is a worry.
• But he added that Gold is not easily valued – “Gold doesn't have any earnings. It doesn't pay you interest. It's a shiny yellow metal. Its value only comes from its relative rarity. It should trade on supply and demand," he said.
• Gold is a commodity first and foremost, not a currency. Commodity prices, even for something like gold that doesn't have as much commercial use as other metals, tend to closely track consumer demand. So it should be no surprise that gold prices are now tumbling.
• After all, copper prices are sliding. So are the prices of silver and platinum — and just about every other commodity. Oil is at a five-month low. Wheat, corn and cotton prices are all much closer to their 52-week lows than highs.
• "This should not be a surprise. There are good economic reasons for gold prices to be falling," said Gendreau. "A slowdown in Europe and China and lower retail demand for jewelry in India and other emerging markets should lead to a soft market for gold for awhile."

Summary of the article / video:

• The lows of March 2009 marked the beginning of an unexpected recovery—not the beginning of an era of irreversible stagnation.
• The U.S. economy went from shrinking at a 6.7 percent annual rate in the first quarter of 2009 to expanding at a 3.8 percent annual rate in the fourth quarter of that year—a turnaround unprecedented in modern history.
• The stock market has doubled since March 2009, while corporate profits and exports have surged to records.
• The U.S. economy has regained its 2007 peak, and is now growing at a 3 percent annual clip—a more rapid pace than any other developed economy.
• Pretax corporate profits rose from $1.25 trillion in 2008 to $1.8 trillion in 2010, and to $1.94 trillion in 2011
• From the fourth quarter of 2008 to the fourth quarter of 2009, productivity rose 5.4 percent. And it rose an impressive 4.1 percent in 2010
• The typical passenger car sold in 2010 averaged 33.9 miles per gallon, up from 30.1 in 2006
• To hear declinists tell it, the U.S. doesn’t make anything anymore. Well, yes, except for the $180 billion in goods and services Americans export every month. Since bottoming in April 2009 at $124 billion, monthly exports have risen nearly 50 percent.
• The US is the food export kings – exports hit a record $115.8 billion in 2010, and in 2011 soared to $136 billion—nearly double the 2007 total
• In 2010, when the economy added 1.03 million new jobs, the number of jobs supported by exports rose by 500,000, from 8.7 million to 9.2 million.
• The crucible of the recession forged an economic structure that is more resistant to shocks than the brittle vessel that shattered in 2008.
• Meanwhile, Europe continues to grapple with insoluble banking and sovereign debt crises, and developing-economy juggernauts like China and Brazil are showing signs of cracking.
• Contrary to the declinists’ view, global growth has not been a zero-sum game for America’s economy
• It’s easy to look at the record of the past few years and despair. The U.S. has a very long way to go to make up for lost ground in housing and, especially, in jobs. The resurgence of the corporate sector, which provides ample reason for optimism, hasn’t translated into new positions for the legions of unemployed. But here, too, there’s positive news. Since February 2010, the private sector, which accounts for 83 percent of all employment, has added nearly 4.1 million jobs, or about 160,000 per month. That’s not sufficient, but it’s a sign that the jobs machine is clearly working again. (The public sector has been the sole source of job loss: austerity-minded government entities have cut a million jobs since 2010).
• In the months since the Lehman debacle, the U.S. has not lost its ability to grow and innovate. And despite all the headwinds, there’s no reason the expansion that started in July 2009 can’t go on as long as the previous three, which lasted 73 months, 120 months, and 92 months, respectively. When the definitive history of this period is written, it is possible that this post-bust era will go down not as a time of economic decline, but as one of regeneration.

In actual fact, the 1% look a lot more like “regular folk” than most of us really realize. According to the survey:

• 67% grew up in a middle class or poorer household.
• 85% made their wealth in their lifetime.
• 76% describe themselves as “Middle Class” at heart.
• 3% is the sum total of their assets that they inherited (they Earned their wealth).

According to the research they are the “Triumph of the Middle Class” – they see themselves as the quintessence of the Middle Class. That means hard work. That means the value of education. That means the value of family and luck.

How did they make their money – most of these “Middle Class” millionaires wealth came by striving to create a business or idea or product of excellence. The wealth was a byproduct, came to them suddenly and unexpectedly, usually through a liquidity event, such as a big bonus at a major company, or a private equity buyout of the firm they built from scratch.

Why should the public care? Very simply – new jobs are the result of risk-takers making investments. (70% of all new job growth comes from these types of business owners)

It’s an interesting perspective & I encourage you to read the full article

Here’s a synopsis of the USA article:

No pension, no retirement savings — and no solid plan for how they will fund the latter part of their life. That's the dire situation for many small-business owners.

About a third of small-business owners do not have a personal or business-sponsored retirement plan such as a 401(k), a SEP IRA or deferred annuity, according to a new survey from non-profit the American College. Nearly the same numbers haven’t estimated how much money they need for retirement.

Many workers feel unprepared for their golden years. But a lack of retirement planning by small-business owners is stunning because they "have no one else to rely on," says Mary Quist-Newins, director of the State Farm Center for Women and Financial Services at the American College.

Unlike government or company employees, who are eligible for 401(k)s or similar plans, small-business owners are often solely responsible for their retirement planning, she says.

And that can be a difficult task for a business owner who is already taxed time-wise. Saving for retirement falls to the bottom of the to-do list. "They are just so living in the moment," she says. "They are just trying to keep this (business) going." Other reasons business owners aren't better prepared for retirement:

• Just surviving takes priority over saving. Businesses that are in the start-up and early growth phase often reinvest money into the firm, and don't put it into retirement funds.. And many owners — even those of more mature businesses — severed retirement funding during the downturn."Certainly when you're worried about your business surviving, you're not worried about funding your retirement," says an adviser with the non-profit Institutional Retirement Income Council.
• They think the business will provide for their needs. Some owners solely plan on continued revenue from the business or proceeds from selling the firm to sustain them later in life. And there are those who prefer to rely on their business' returns rather than unpredictable stock and bond funds. But if the firm goes south, "They are left with nothing," Preisz says.
• Setting up a company savings account appears daunting. Many haven't set up an employer-sponsored plan since the paperwork can seem time consuming and complex.
• They don't consider retirement. Many entrepreneurs "love what they are doing and don't see the point of retiring," so they don't plan for it, says Patricia Greene, the Paul T. Babson Chair in Entrepreneurial Studies at Babson College. "It's hard for many of them to think what life would be like without (running) the business."

Working with many successful business owners over the years, we’ve learned that one of the essential requirements of “Joining the Club” is managing risk, which requires diversifying your investments away from your business. Consider this: owning a single stock is a riskier proposition than owning a mutual fund or ETF that invests in 100 stocks. Similarly, owning only your business presents more risk than owning a diversified portfolio of financial assets, which may include your business, physical real estate and securities, such as stocks, bonds and mutual funds.  At Mosaic Wealth, we can provide you with a practical framework for “Joining the Club.” Some of the wealth building strategies you may already be familiar with, while others may require some time, education and planning to implement properly.

That marked the sharpest one-year drop in the history of the survey, and institute officials attributed the plunge to growing concerns about health-care costs and the economy. Confidence in achieving a lesser goal—of having a financially secure retirement—also dropped, from 41% to 29%. The declines occurred across all age groups and income levels.

Lack of retirement planning fuels this anxiety. In the EBRI survey, fewer than 50% of respondents said they had even tried to calculate how much they would need during retirement. And in another recent survey, by Bank of America, only one in three respondents was “on track” with retirement planning; 23% said they haven’t started planning at all.

If you have a comprehensive plan for your retirement years, you’re bound to feel more confident, no matter what the economy or the markets are doing at the moment. But planning for retirement doesn’t end with drawing up a document. We’ll be with you all along the way, monitoring your progress and making changes when-ever necessary to keep you moving toward your goals. See for yourself if your retirement is “on track” with our FREE Roadmap (HERE). Remember, you can’t predict the future, but you can Plan for it.

But what if there were a simple way to turn back the clock? In a recent article in the British Journal of Sports Medicine reports that for people–64 and older, a vigorous, hour-long walk five days a week cuts a dozen years from their biological age.

The report found that beginning a program of vigorous aerobic exercise could restore about 25% of maximal oxygen intake within three months, raising that essential level by an average of six ml/kg/min and decreasing biological age by 12 years.

The study also found that regular exercise provides other benefits, helping prevent conditions that may hasten aging including obesity, high blood pressure, diabetes, heart disease, osteoporosis, and even some kinds of cancer. And the improved muscle tone that comes with brisk walking, swimming, or other aerobic activities may help older people avoid falls.

Another study, from Texas, further highlights what exercise can do. In 1966, five healthy 20-year-olds were kept in bed around the clock for three weeks—and suffered many of the ills normally associated with aging. They gained weight, their heart rates and blood pressure rose, and their hearts lost pumping capacity. Then, an eight-week exercise program more than reversed the effects of inactivity. In a follow-up with the men 30 years later, actual aging had imitated the effects of the forced bed rest. But here, too, an endurance exercise regimen undid most of the damage, restoring all of their lost aerobic capacity.

The moral? Exercise always helps, and it’s never too late to start pushing back the hands of time.

As evidence of how inappropriate these products are for individual investors, you'll never find a Registered Investment Advisor (RIA – like Mosaic Wealth Management) — someone who provides a fiduciary standard of care and doesn't accept commissions — that recommends them. It is commission-driven compensation, meaning the self-interest of the advisor or salesperson that drives the sale of these products, not an investor's best interests.

Rules to invest by                       

The field of behavioral finance has helped us to understand that we don't always make rational investment decisions. We often make poor decisions because of our biases. And the designers of structured product are well aware of these "flaws" in investor behavior. So they structure products that exploit our flaws.

The good news is that you're now aware that you don't need to have the skills to "reverse engineer" these complex products to figure out what the true risks and costs are. All you need to know is the following:

•Never buy an investment product if there's a commission attached to it.

•Only work with an advisor who offers a fiduciary standard of care.

•Only invest in a product if the seller can demonstrate that they also are investing in the same product.

•Never buy a complex product; if you can't fully understand the nature of the risks and the costs, run as fast as you can because you can be 100 percent certain the complexity is designed to favor the issuer. In other words, you'll be the patsy at the poker table who doesn't know he's the patsy.

•And if you can't adhere to these rules, hire a fiduciary advisor. The cost of the advice will almost certainly be a small fraction of the value added, simply by making sure you only buy products that are designed in your best interests.

I have to say he takes a harsh view on these products, but there are some words of wisdom in his thought process – I think he’s really saying the old “Keep it Simple” approach works fine.  I still believe the best place to start with investments is getting yourself a Roadmap – find out where you are today & where you want to be tomorrow to plot a Roadmap to get you there. We offer a FREE Roadmap at our website (HERE) – give it a try to find out if you’re on track

Key Points

• Market volatility has been relatively muted, with only the first 1% down day of this year
• After the strong run to start the year, another pause or pullback would not be surprising
• But we continue to believe the upward trend will largely stay intact
• Uncertainty abounds as to whether the Fed will unleash a new round of easing but liquidity remains abundant
• Rhetoric continues in Washington but any substantial fiscal or tax policy action this year seems unlikely, despite the many challenges that are looming
• Europe has stabilized somewhat but risks remain elevated
• Meanwhile, central banks around the world are loosening monetary policy, which could bode well for emerging market stocks going forward