‘Super Bowl Predictor’ Says Patriots Could Deflate the Stock Market

By William Power, Wall Street Journal

The New England Patriots could deflate the stock market in 2015.

The so-called Super Bowl Predictor—the quirky indicator that predicts what stocks will do based on the outcome of the big game—is on a six-year winning streak. It now has accurately predicted the direction of the market for the year following 39 of the 48 Super Bowls, for an accuracy rate of more than 81%.

And this year, just like in 2014, stock-market bulls should root for the Seattle Seahawks. The reason: Based on the Predictor, the market will go up after a win by an “original” National Football League team (one that traces its history to before the merger with the American Football League) and go down when a team from the old AFL, such as the Patriots, manages to win it.

Seattle is a bullish team since they are a postmerger expansion team in the National conference; such teams count for the conference they are in.

This indicator, with that 81% success rate, is better than just about every other market-forecasting method. There is no science to it (not even air-pressure measurements), of course.

“It’s doing better every year,” says 88-year-old market strategist Robert H. Stovall of National Investment Services Inc. in Sarasota, Fla., who has long tracked the Predictor.

“It’s on a good streak.” He calls it an “amusing but accurate predictor.”

Last year’s win by the bullish Seahawks preceded a 7.5% rise in the Dow Jones Industrial Average for 2014. The Predictor hasn’t failed since 2008, when the bullish New York Giants won the Super Bowl, and the Dow fell anyway.

As The Wall Street Journal points out every year, there is a bit of Patriots-level gamesmanship to the Predictor. Markets tend to rise more than fall, and the American conference’s Pittsburgh Steelers, winners of six Super Bowls, fortunately “count” for the original-NFL side since that is where they got their start.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Real Estate Investment Trusts Keep Rocketing Higher

By Tom Lydon, ETF Trends

Aided by a significant drop by 10-year Treasury yield, real estate investment trust (REIT) funds were among 2014’s top performing sectors and that trend is continuing this year as income investors continue the hunt for yield.

The Bloomberg REIT Index is nearing its record high set almost eight years ago. So is the MSCI REIT Index, the benchmark for the Vanguard REIT ETF (NYSEArca: VNQ), the largest U.S. REIT exchange traded fund.

“The Bloomberg index’s dividend yield as of yesterday was 3.38 percent, or a full percentage point greater than the yield on the Treasury’s 30-year bond. The gap exceeded 1 point last week for the first time since June 2012, according to data compiled by Bloomberg. The MSCI index had an even higher yield, 3.53 percent,” writes David Wilson for Bloomberg.

VNQ gained 30.4% last year, about double the gains for the benchmark financial services index, on its way to collecting $4.76 billion in new assets. VNQ is up nearly 7% in 2015.

Investors’ affinity for REIT has not dampened in 2015 as VNQ has added over $439 million in new assets.

REITs provide a liquid alternative to owning physical commercial real estate properties. REITs investments also share similar attributes with stocks and bonds. Since REITs are required to distribute at least 90% of their income from rent payments to investors, these real estate investments can generate attractive yields.

Some may be concerned that REITs are sensitive to changes in interest rates. Notably, the fall in interest rates have made the asset more attractive as a yield-generating alternative, but some fear the asset will fall out of favor once rates rise.

Nevertheless, many analysts argue that REIT shares will continue to perform, despite rate risks, since interest rates alone don’t dictate REIT performance and other factors may override rate concerns. For example, a strong economy and greater mergers-and-acquisitions activity could outweigh rate fears.

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Vanguard REIT ETF (VNQ) is a component of the D2 Capital Management Multi-Asset Income Portfolio. Current yield on the portfolio is 5.51% and year to date the portfolio is up 0.44%, compared to the S&P 500 which is down 1.20% (as of 21 January 2015).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Parents Losing College Savings Plans?

In a State of the Union fact sheet, President Barack Obama proposes rolling back the tax advantages of College Savings 529 plans for new contributions. The way 529 plans work now is that you put away aftertax money into an account where it grows tax free and comes out tax free when you use it for college or graduate school expenses. President Obama’s proposal is to impose income tax on the earnings when you take out money, negating the driving reason to set up an account.

A lot of families are making the effort to save for college in 529 plans. There are 12 million accounts open with an average of $20,000 in each. Close to 10% of accounts are owned by households with annual income below $50,000, and over 70% of accounts are owned by households with annual income below $150,000, according to the College Savings Foundation, which has a strongly worded statement against the tax hike proposal here.

“Taxing college savings is detrimental and will have a chilling and resounding effect on the future of college savings, leaving families with an even greater reliance on student loan debt, which is currently at $1.3 trillion,” warns Betty Lochner, chair of the College Savings Plans Network if the proposal were to become law.

When 529 plans were created in 1996, earnings were tax deferred–taxed to the beneficiary at their tax rate at the time of distribution. In 2001, Congress instituted the current tax advantages and made them “permanent” in the Pension Protection Act of 2006. Savings in 529 plans spiked after those two tax events, says Lochner.

For details on 529 Plans (click here)

Source:  Forbes

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Oil-Induced Default Corporate Bond Risks Are Overblown

By Tom Lydon, ETF Trends

Despite concerns over debt issued by energy producers in a quickly falling oil market, corporate bond markets and related funds face low default risks.

Corporate bonds, notably high-yield speculative-grade debt, have been stuck in sideways trading, as skittish investors held off on concerns that oil companies would miss payments due to lower oil prices.

However, according to Moody’s Investors Service, a strong U.S. economy, improved corporate earnings and light maturity calendar will all help counterbalance falling oil prices and keep corporate default rates below historical averages this year, reports Vipal Monga for the Wall Street Journal.

“A lot of people have been surprised,” Albert Metz, a Moody’s analyst, said in the WSJ, referring to the low default rates. “But the fundamentals are there. So far, so good.”

Specifically, Moody’s calculates that global default rates could rise to 2.7% in 2015 from 2.1% in 2014, compared to the average default rate of 4.7% since 1983.

Nevertheless, some market observers are still worried that smaller oil exploration and production companies are seeing severe discounts on their debt and rising yields, which could signal potential defaults.

“Many of the credits in the exploration and production space, are deeply distressed,” Matthew Fuller, analyst for S&P Capital IQ LCD, said in the article.

However, as Joseph LaVorgna, chief U.S. economist for Deutsche Bank notes, the energy sector accounts for an “extremely small portion” of total U.S. employment and the impact of low oil prices on industry defaults could be contained. Additional LaVorgna points out that the benefits of cheap gas for large employers as an input cost would help offset any potential losses from smaller oil producers.

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AdvisorShares Peritus High Yield (HYLD) is a component of the D2 Capital Management Multi-Asset Income Portfolio. Current yield on the portfolio is 5.50% and year to date the portfolio is down 0.26% compared to the S&P 500 which is down 1.70% (as of 20 January 2015).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Muni Funds May Be More Attractive Than Treasuries

By Tom Lydon, ETF Trends

Municipal bond funds have been on a tear, and the munis market still looks relatively cheap compared to U.S. Treasuries.

Benchmark 10-year muni yields dipped 0.28 percentage point to a 20-month low of 1.83% this month, one of the steepest declines since January 2014, Bloomberg reports. Bond yields and prices have an inverse relationship, so a falling yield corresponds with higher bond prices.

Nevertheless, muni debt is close to their cheapest since December 2013 relative to Treasuries. Looking at the rates on state and local bonds relative to federal debt, the ratio of interest rates hit 106 percent Thursday, which suggest that municipal bonds have weakened relative to the federal debt. Historically, the muni-to-Treasuries ratio has been below 100% since interest on state and local debt is tax-exempt, which make the assets more attractive for high-income investors.

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The D2 Capital Management Tax Free Income Portfolio is currently yielding 4.58% (Trailing 12 month Tax Equivalent Yield at 28% Tax Bracket, as of 19 January 2015).  Year to date the portfolio is up 1.30%

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Stop Checking Your Retirement Portfolio So Often

Research from Columbia Business School found that checking in too frequently on your retirement portfolio can result in lower returns.

It’s a simple premise: Investors who are driven by daily fluctuation in the market rebalance their holdings to get out of stocks that are dropping and miss out when they go back up. The report suggests it’s better to rebalance less frequently and let the market go through its ups and downs naturally.

“History has shown us that the stock market is a relatively safe bet over the long term because it has typically grown,” Michaela Pagel, assistant professor of finance and economics at the business school, said in a statement. “Investors would be wise to keep this in mind, because those that check their portfolio too often and are driven by the daily or hourly fluctuations in the market may make decisions that have a negative impact on their long-term financial prospects.”

In an interview with ThinkAdvisor, Pagel said that when people have certain preferences, they’re happier when those preferences are met, an assumption that is “very different from what is assumed in standard economic models where people only care about consumption.”

The model she puts forth in her paper takes some of the preferences into account.

“Once you make those models more realistic with these new preferences, then you find that people like to be inattentive to their portfolios,” she said on Thursday. “They like to not monitor their portfolios constantly because they’re always more upset when they see the markets going down. The benefits of monitoring your portfolio constantly are very little because your consumption is very little affected by the stock market.”

Ultimately, Pagel found that her model investor only looks at his portfolio approximately once a year.

Source:  ThinkAdvisor

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Time to Upgrade Your Tech?

By Heidi Richardson, Global Investment Strategist at BlackRock

It’s amazing how tech- and Internet-dependent we’ve become.  I remember when cell phones were actually used to make phone calls and sending someone a birthday card required a stamp.  And I’m not that old!

For the record, I love the wonderful things my cell phone can do—I can deposit checks without going to the bank, order a ride that will appear in minutes, and am shamed if I slack off on my running schedule.

But from an investing standpoint, I am old school.  I like mature technology companies—think large established brands like Intel, IBM and Oracle. These companies can use healthy cash balances to unlock shareholder value, are more likely to fare well if the Fed starts raising rates as expected this year and stand to benefit from continued improvement in the U.S. economy.

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First Trust Nasdaq Technology Dividend Index Fund (TDIV) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  Current yield on the portfolio is 5.52% (as of 12 January 2015).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Changes in taxes for 2015

Dividend and Capital Gains Taxes 
Dividend and capital gains rates will remain the same in 2015 as they were in 2014, though the income tax brackets used to determine those rates have been adjusted for inflation. Investors who are in the 39.6% income tax bracket will pay a 20% tax rate on qualified dividends and long-term capital gains; investors in the 25% to 35% brackets will pay a 15% tax rate on qualified dividends and long-term gains; and investors in the 10% and 15% tax brackets for income tax will owe 0% tax on dividends and long-term capital gains. Nonqualified dividends, such as from REITs, and ordinary income from taxable bonds will be taxed at investors' ordinary income tax rates.

IRA Contribution and Income Limits 
IRA contribution limits are the same for 2015 as they were in 2014: $5,500 for investors under age 50 and $6,500 for those 50 or older. That limit is the same for both Traditional and Roth IRA contributions.

The key change for IRAs is that the income limits are jumping up a bit. Individual filers who can make a retirement-plan contribution at work can make a fully deductible IRA contribution if their 2015 income is under $61,000; they cannot deduct their IRA contribution if their income is over $71,000. (The amount of the contribution that is deductible is reduced--or phased out--for single taxpayers whose income lands between $61,000 and $71,000.) For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, Traditional IRA contributions are fully deductible if their income falls below $98,000; contributions aren't deductible if their income exceeds $118,000. (Contributions are partially deductible if income falls between those two thresholds.)

Roth contributions aren't deductible, but income limits are increasing here, too. Singles earnings less than $116,000 can make a full Roth contribution, but Roth IRA contributions are out of reach for single filers who earn more than $131,000. (Contributions are reduced if the single taxpayer's income falls between these two bands.) Married couples filing jointly can make a full Roth IRA contribution if their income is less than $183,000; they are ineligible to make a Roth contribution if their income exceeds $193,000. (Contributions are reduced for married couples filing jointly who earn between $183,000 and $193,000.)

Investors at any income level can contribute to a Traditional IRA, though they cannot deduct their contribution on their tax return if their income exceeds the deductible amounts outlined above. Instead, higher-income investors can take advantage of what's called a backdoor Roth IRA, converting their Traditional IRA to Roth shortly after funding it. Note that this strategy won't generally make sense for investors with large Traditional IRA balances, for reasons outlined here.

401(k) Contribution and Income Limits 
The headline here is that 401(k), 403(b), and 457 plan contributions are going up, to $18,000 for those under age 50 and $24,000 for those 50 and above. The contribution limit is the same for both Traditional and Roth 401(k) contributions. No income limits apply. If you're maxing out and would like to space your contributions throughout the year, bump up your contribution rate as soon as possible.

Saver's Credit 
This credit is designed to incentivize individuals and families with earnings under certain thresholds to put money into IRAs or qualified company retirement plans. For 2015, married couples filing jointly are eligible for the credit if their modified adjusted gross income is less than $61,000; single filers can claim the credit if their adjusted gross income is less than $30,500. The lower the income, the higher the credit--up to a maximum level of $1,000 for single filers and $2,000 for married couples filing jointly.

Education Savings 
Each individual can contribute up to $14,000 a year to a 529 college-savings plan on behalf of a specific individual without having that contribution count toward the gift tax. Additionally, investors who would like to make a large upfront contribution to a 529 can contribute up to $70,000 on behalf of a single individual in a given year; as long as he or she makes no future contributions on behalf of the same individual for the next five years, the contribution will not count toward the gift tax.

Medicare Surtax 
The income thresholds for the 3.8% Medicare surtax will remain unchanged from 2014 to 2015: $200,000 for single filers and $250,000 for married couples filing jointly.

Estate and Gift Tax 
The annual gift tax exclusion amount is staying the same, at $14,000. However, the exclusion amount for the estate tax is jumping up slightly, from $5.34 million in 2014 to $5.43 million per person in 2015.

Source:  Christine Benz, Morningstar

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Financial Woes for Job Changers’ 401(k)s

By Anne Tergesen, Wall Street Journal

Every year, millions of people leave their jobs—and fail to tell their former employers what to do with their 401(k) accounts.

Enter the forced rollover, also known as a “forced transfer.” The tax code allows 401(k) plans to weed out accounts belonging to former employees with balances of $5,000 or less, and transfer the money into an individual retirement account.

Those rollovers are almost always a financial disaster for the account holder, according to a new report from the Government Accountability Office.

Why? Under Labor Department regulations, these transfers must be invested conservatively—such as in certificates of deposit or money-market funds—or the employers who transfer the money may be held liable. The problem: Low risk equals low returns—and those returns frequently turn negative when fees are deducted from the accounts.

The GAO recommends that regulators change the rules on investing the money in these accounts, perhaps by allowing the use of target-date funds, which have become the default investments for many 401(k) plans. Target-date funds invest in a mix of stocks and bonds that grows more conservative over time.

For 401(k) participants, the message is clear: Don’t leave small balances behind.

And if you have experienced a forced transfer, quickly initiate another rollover—this time, into an IRA of your choice with an appropriate investment.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, 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.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.