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The Northern Star Boilermaker Retirement Report

The Northern Star Boilermaker Retirement Report

Message from Jon

First time in the history of the markets?

Well, so far the year has not turned out as predicted. We have not had as much snow as predicted in the area. We have not had much to celebrate in the markets as predicted either. As a matter of fact, we have seen a historical beginning for the markets in 2016.

It was the first time the Dow has opened up down 5% in the first 4 trading days in history according to Factset. We would then go on to see a drop of over 10+% before writing this message.

This coupled with the year we had last year and according to J2 Capital, Crestmont Research, Spirestocks, Dorseywright and a slew of others, we have now entered into the next Bear Market condition. This market condition is MUCH different than a bull market condition in terms of investment strategy, return potential, investor expectations and so on.

During a bull market, the best approach is a buy and hold since the positive years outnumber the negative years and the negative years are not very deep or protracted to cause much erosion to principal. The bear markets are wrought with volatility and violent mood swings. Active management is the best strategy due to the fact that negative years out number positive ones and the "dips" tend to be deeper and prolonged causing the potential for significant erosion to principal over time. You could and should consider a more cautious approach to the markets where instead of return, the focus should be risk mitigation and reduction while still participating in the markets.

This is tough to relay to investors at times since the vast majority of data and research stems from the last bull market from 1982-1999, i.e. (buy and hold, all known data is priced into the markets making them efficient, etc). You wouldn't expect to get in your car on your way to a destination and not make adjustments for driving conditions so why on earth would you expect to make investments and not adjust accordingly to changes in market conditions?

We have finished our rebalance for clientele and right in the midst of this, our indicators demonstrated that we go into protection mode (i.e. sell all non-strategic investments but avoid buying new ones until conditions change). It doesn't take a significant financial IQ to recognize the change in conditions but it does take courage to change behaviors that have long been present.

Till we speak again, enjoy the beginning of your new semester!


sources: money.cnn.com/2016/01/07/investing/stocks-markets-dow-china/index.html, J2captial, CrestmontResearch, Spirestocks, Dorseywright, factset 


The Language Barrier

The biggest issue of investing is the language for most people. In this section, we will be striving to improve this for our readers by doing investing/economic terms per issue.

1) Bear Market Condition: 
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20\% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

2) Contagion Risk:
In economics and finance, a contagion can be explained as a situation where a shock in a particular economy or region spreads out and affects others by way of, say, price movements. The contagion effect explains the possibility of spread of economic crisis or boom across countries or regions. This phenomenon may occur both at a domestic level as well as at an international level. The failure of Lehman Brothers in the United States is an example of a domestic contagion. The fundamental underlying this scenario where price movements in one market are resultant of shocks or volatility in the other market is that there is a perfect information flow. With increasing interdependence and correlation between economies, this possibility has increased. While internationally, there could a number of other factors governing trade, which may influence the extent of this contagion effect across geographies.

3) Custodian:
A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. A custodian holds securities and other assets in electronic or physical form. Since they are responsible for the safety of assets and securities that may be worth hundreds of millions or even billions of dollars, custodians generally tend to be large and reputable firms.

1) http://www.investopedia.com/terms/b/bearmarket.asp
2) http://economictimes.indiatimes.com/definition/contagion
3) http://www.investopedia.com/terms/c/custodian.asp


Fidelity News!

Retirement's biggest enemy?

  • By Brian O'Connell
  • TheStreet.com
  • - 11/02/2015

When it comes to retirement savings, way too many Americans can't overcome the hurdle of procrastination.

It's all about setting goals and not meeting them, retirement savings-wise, and that credibility gap is going to take a big financial toll on kick-the-can-down-the-road long- term savers.

Biggest retirement regrets

Surprisingly, these five regrets come up repeatedly among retirees.
Read: You only get one shot at retirement
A majority (59%) of Americans set a 2015 goal to save for retirement, but so far this year, less than one-third (31%) achieved that goal, according to a new survey released today by Bank of America and Merrill Edge.
As usual, the primary challenge for U.S. retirement savers is their own questionable tactics for managing their household assets and steering those assets towards


Click Here to Read the Whole Article




Nearing retirement but don't feel financially ready?

Five Steps to Take

If you're getting close to retirement age, you may be wondering if you're financially prepared to stop collecting a paycheck. More than two-thirds (68 percent) of near-retirees (those aged 55-64) say they do not feel prepared for retirement, according to the TIAA-CREF Ready to Retire survey.1


Only 4 percent of respondents consider themselves "extremely prepared" for retirement. Many near-retirees are worried about running out of money, which is the No. 1 concern for those surveyed (45 percent).

 Click Here to Read the Whole Article



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