You may have heard recently about Coca Cola’s stocks splitting. But what does that really mean? Is it a good or bad thing? Why do stocks split in the first place? Let’s dive in to the matter.

April 2012 – Coca Cola announced it was going to split its stock 2 for 1. This means if you own 100 shares, you are going to have 200 now. At the time they announced the split in April, the stock was trading at $78. Therefore if you owned 100 shares you were worth $7,800. In August 2012, the stock became $39 but if you previously owned 100 shares, you now own 200 shares. You’re still worth $7800. So why split a company’s stock? Most stock splits occur when companies feel positive about their future. Companies split their stock when they feel the price is too high and is keeping investors from buying their stock. In Coca Cola’s case the stock was $78/share at the announcement and will trade around $39 at the date of split. They also may have looked at stocks that are similar to them in the S&P 500. At the time of the split announcement the average price of a stock in the S&P was $56/shr. Coke was almost 40% higher than other stocks similar to them.

Some history: In 1919 - Cocoa Cola came out in its IPO at $40/share. This is the 10th split since 1919. If you have held the stock since then and reinvested all dividends and received all the stock splits your $40 stock would be worth $10,000,000.   Not a bad long term investment.

Be careful if you hear about a reverse stock split. Stock trading at $1/share and you own 100 shares. The company announces a 1:10 reverse split. You now own 10 shares at a price of $10/shr. As you can see in this example and most reverse splits they are done on low priced stocks. Investors look unfavorable on low priced stocks, sometimes called penny stocks, because of increased risk either real or perceived. Also many mutual funds and large pension funds can not invest in stocks priced less than $5/shr.

Stock splits usually are a positive but results still reflect a company’s earnings now and in the future. Stock splits should not be the only reason to invest in a particular company but it could be positive among other positives. Reverse stock splits are usually a sign of negatives, but again it should be part of your research.

 Give your advisor a call when you hear about a stock split to get details about the split and the possible   positives or negatives. For more on stock splits or any financial advice visit www.dlgwealthmanagement.com or call 518 348-0060.

                                                                                   

Today many investors are very worried about the stock market. The volatility in the equity markets has made many investors draw out money from equity funds and put the money in bond funds at a record pace.

When you invest in bonds you are lending your dollar. Lending your dollar means to give your dollar to an entity that will pay you interest on your dollar for a specific length of time. The basic concept that bond investors must understand is how bonds fluctuate in value. When interest rates go up the value of bonds you hold goes down & when interest rates go down the bonds you hold go up in value. Today, interest rates are being kept at very low levels by the Federal Reserve policies. There will come a time when the Federal Reserve will not be able to hold interest down. They are sitting on a very tightly coiled spring (interest rates), when the Fed starts to release this coiled spring rates will rise very fast causing large losses in bond portfolios.

Investors should make sure portfolios are not over weighted in bonds. Not sure about your portfolio? Be sure to bring this up with your investment advisor. For more information on investing in bonds, portfolio management or for other financial advice, speak with an investment advisor at DLG Wealth Management today, located in Albany, Saratoga or Utica NY.



For more Money Monday segments, visit DLG Wealth Management's News page.

Managing Director, Andy Guzzetti breaks down the numbers of JPMorgan’s $2 billion loss

JPMorgan lost $2 billion dollars on its London trading desk when a derivative hedge blew up. CEO Jamie Dimon had to announce the loss before the trade was unwound, this could cause the loss to go as high as $4 billion. The pro “increase regulations” crowd, has jumped on with both feet. Instead of allowing the markets to punish JPM and its poor handling of risk, the political positioning has begun. Congressional investigation, DOJ probe into possible criminal charges and the public outcry for additional regulations all because a publicly traded U.S. company lost money. We must understand that JPM lost money on this trading desk, approx. $2 billion, the company did not lose money for the 1st quarter and will report approx. $15 billion of profit for the year. $2 billion is a lot of money but JPM is a well run company that can handle that loss and still make money for its shareholders. A very important point to make is that JPMorgan will not need a government bailout. It’s just a loss they do not want to take and one that shows they did not handle risk very well.

POLITICS
The index JPMorgan lost money on was the CDX.NA.IG.9 Index. This index is made up of 125 company’s credit default swaps. This is a very intricate investment vehicle that is used to hedge bank positions. CEO, Jamie Dimon has been an advocate of getting rid of regulations and fighting with the administration about the DODD FRANK LAW and its Volcker Rule. The Volcker Rule is a rule that would prohibit banks from using their own capital to make bets on the direction of the market. This proposed rule states that commercial banks cannot proprietary trade (they can’t trade to make money, they can trade to hedge. In other words, to hedge some of the risk in their other investments).

The 2008 financial crisis began with investment banks and insurance companies, not commercial banks. In 2008 there were hundreds of billions of mortgage related securities which were rated AAA by rating agencies that should have rated them as junk. To equate JPM loss to the 2008 crisis is crazy. Proprietary trading in the banking industry did not lead to the 2008 crisis and has never led to any other financial crisis. Let the markets punish banks for poor risk management. Additional regulation is not needed.

Investment Advisors at DLG Wealth Management Discuss the Basics of Investing in Bonds

There is no question that the volatility in the equity markets has many investors worried about the stock market and drawing out money from equity funds and putting the money in bond funds at a record pace. With the state of the market, it is important to discuss the basics of investing in Bonds and the reasons why investors should be careful about being in bonds.

When you invest in bonds you are lending your dollar. Lending your dollar means to give your dollar to an entity that will pay you interest on your dollar for a specific length of time.  What are some common ways of lending your dollar?

•    The most common way is to lend your money to a bank by opening a savings account. The bank will pay you interest on your money in return, as long as the money stays in the account.
•    Certificates of Deposits or CD’s pay a higher rate of interest because you tie up your dollar for a specific time (typically 1 month to 5yrs).
•    You can lend to the U.S Government (Treasuries). The government will pay you an interest rate depending on the maturity. The longer you go out the higher the rate of interest.
•    Corporate Bonds – let you lend your dollar to a corporation (IBM, APPLE). You will receive a fixed interest payment usually paid every 6 months for a specific amount of time. These corporate bonds usually pay higher interest rates than the bank but do have more risk. The longer the maturity is the higher the rate of interest. The higher the risk (can the corporation make its interest payments and pay the bond back at maturity) the higher the interest rate. All of the above examples of lending are taxable.
•    Municipal Bonds are issued by states, state agencies & local governments. The interest is federal tax free and can be state tax free if you lend within the state you reside.

All these lending vehicles can be done within a mutual fund that can specialize in all or certain areas listed above. By investing in a mutual fund you can diversify your lending which can lessen risk. This lending is known as “fixed income” investing.


It is important to understand that bonds fluctuate in value. When interest rates go up, the value of bonds you hold go down. When interest rates go down, the bonds you hold go up in value. Today interest rates are being kept at very low levels by the Federal Reserve policies. There will come a time when the Fed will not be able to hold interest down. They are sitting on a very tightly coiled spring (interest rates), when the Fed starts to release this coiled spring, rates will rise very fast causing large losses in bond portfolios. Investors should make sure portfolios are not over weighted in bonds. If you have a question about your portfolio, make sure to contact your advisor. For more information, contact us.

Managing Director, Andy Guzzetti, discusses what effects the debt crisis could have on the U.S.

All eyes are overseas again as the looming Eurozone meltdown hits some more bumps. What does this all mean to the economy of the United States and the world for that matter?

The voters in Greece and France have sent the word “we don’t want to give up entitlements and we don’t want to cut spending”. These election results turned things upside down and made all World markets nervous. We have talked about “PIIGS” before. “PIIGS” (Portugal, Italy, Ireland, Greece and Spain) are all countries part of this Eurozone debt crisis. We can add F & C to this acronym.

•    France has been thrown into the mix; France’s President, Nicholas Sarkozy, was voted out and replaced by a Socialist who campaigned against austerity. Sarkozy, in an effort to control France’s debt problem, proposed raising the pension age from 60 to 62. Although this proposal was needed, the French electorate said no.

•    Greece, on May 6th, voted in the anti-austerity candidates as well. The top vote getter, when trying to form a new government, asked all participants to sign a document to rescind the EU bailout plan that contained austerity measures. The threat of new elections loom. Greece will run out of money in July.

•    I have added the “C” for California. We all know that California is not part of the Euro Crisis, but it is part of this debt crisis. California has announced this past weekend that they have a $16 billion debt crisis that they can’t cover and are looking for help from the U.S government to cover them. Of course their plan is to raise taxes and cut funding to education and government programs.

So what does this all mean? If Greece cannot get its political house in order and has to forfeit on its debt payments this will put pressure on the EU to let Greece go. Banks that are holding Greek debt will have to take major hits and a weak world economy gets weaker. Besides the banking industry taking a major hit, corporations will see revenues drop. The markets are anticipating a default as the S&P 500 is down 3.2% this month.

Interest rates – The bond vigilantes, those bond investors who watch these developments, will demand countries like Greece pay a higher interest rate to borrow money. Already the 10 Spanish bonds are yielding close to the 6% level. This 6% level usually means disaster for these countries who are struggling.

Gold / Dollar- During this crisis the dollar has strengthened because it is considered a safe haven. This is surprising as some analysts think gold would be the safe haven. As the dollar strengthens, because gold is dollar denominated, gold prices have plummeted. Most Americans are watching to see the outcome because the United States is not far behind. We have refused to address our debt problem, we have refused to cut spending and we have refused to cut back entitlements. Sounds like Greece and France and the “bond vigilantes” are watching.

For more information on managing your finances, or other financial advice, contact us. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.

DLG Wealth Management Discusses 3 Things To Do With A Dollar

Sometimes when things seem to be too much to understand the best thing to do is go back to the basics. In the world of investments things can get quite overwhelming, so let’s slow it down and discuss the 3 things you can do with a dollar. SPEND, LEND, OR OWN. These are the only 3 things you can do with a dollar, although some would say there is a fourth - DESTROY. We will leave that to the Federal Reserve.

SPEND

• If you have a dollar you can buy a hamburger, pay a bill or get a haircut. Pretty simple to understand.

LEND

• The second thing you can do with a dollar is lend it. Lending your dollar means to give your dollar to an entity that will pay you interest on your dollar for a specific length of time. The common way of lending is to give your dollar to a bank (savings account) and the bank will pay you interest as long as you keep the money in the account. Investors who want a higher rate of return from the bank can look at Certificates of Deposits (CD's). CD’s pay a higher rate of interest because you tie up your dollar for a specific time (1 month to 5 years).

• You can lend your dollar to the U.S Government (Treasuries). The government will pay you an interest rate depending on the maturity. The longer you go out, the higher the rate of interest.

• Another place to lend your money is with Corporate Bonds. By lending your dollar to a corporation (IBM, APPLE, etc) you will receive a fixed interest payment usually paid every 6 months for a specific amount of time. These corporate bonds usually pay higher interest rates than the bank but do have more risk. The longer the maturity is the higher the rate of interest. The higher the risk (can the corporation make its interest payments and pay the bond back at maturity) the higher the interest rate. All of the above examples of lending are taxable.

• You can also lend your dollar and receive a tax free interest payment. Municipal Bonds are issued by states, state agencies & local governments. The interest is federal tax free and can be state tax free if you lend within the state you reside.

All of these lending vehicles can be done within a mutual fund that can specialize in all or certain areas listed above. By investing in a mutual fund you can diversify your lending which can lessen risk. This lending is known as “fixed income” investing.

OWN

• The last thing you can do with your dollar is own your dollar. You can buy a house, buy stock in a corporation, buy a business, buy collectibles or buy many other assets. Buying means you own an asset. That asset may increase or decrease in value but you own it. When you invest in a stock, you own a piece of the corporation (hoping the value goes up). Owning your dollar usually is called equity investing. As with bonds you can invest in a mutual fund to diversify your dollars owned which can lessen risk.

Seems pretty simple, right? There are only “3 things you can do with a dollar”. You can spend it, lend it or own it. It gets a little more complicated when you have to decide where you want to spend, lend or own. For more information on managing your finances or other financial advice, contact the financial advisors at DLG Wealth Management today. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.

Some may or may not have heard of High Frequency Trading or HFT. To discuss what this is and what this means to the market, Managing Director of DLG Wealth Management, Andy Guzzetti, breaks it down.
High Frequency Trading is the computerized trading of stocks. Computers, using sophisticated technological tools (algorithms), are trading stocks at lightning speed and can make 20,000 to 50,000 trades in just seconds. As an example of how fast these computers trade, slap your hand on your desk, in the time it took you to slap the desk, a computer can do 50,000 trades. By conducting high frequency trading, traders can buy or sell millions of shares in a short period of time. These HFT firms are looking for very small differences in the bid and ask of an equity or option. Computers do not worry about traditional analysis of companies such as earnings, profits etc. Positions are held for very short periods, from seconds to hours. Some argue that HFT provides no actual value to the market, but rather absorbs capital from slower trading platforms.

Currently, high frequency trading, accounts for 50 % of the volume in the market. On the New York Stock Exchange (NYSE), they account for 70 % of some individual stocks. This type of trading is affecting the markets and the traditional investors who are trying to save for retirement, increase their income or save for their kids’ education. These HFT programs thrive in volatile markets even as proponents will argue HFT reduces volatility.

Is high frequency trading a good thing?

FLASH TRADING
One area of concern relates to “flash trading”. Flash trading allows certain participants to see incoming orders to buy or sell securities earlier (30 milliseconds) than the general market participants in exchange for a fee. Many exchanges have opted out of these programs, but there are some exchanges that still offer the program. Many opponents of HFT site this flash trading as a program that creates a two tiered market giving a certain class of traders the ability to “front run”.

2010 FLASH CRASH
HTF has come under increased scrutiny since the practice has been linked to the “2010 FLASH CRASH” that occurred May 6, 2010. Investors lost $800 billion of net worth in 20 minutes. Investigations pointed to a program trade that was incorrectly submitted by a trader at a mutual fund company. The trade triggered HFT trading that caused the DOW to plunge to its largest intraday point loss in history. The computer programs either pulled bids and asks or widened them. In any case HFT caused the plunge or exacerbated the down fall in prices. Many market observers point to this FLASH CRASH as one of the reasons retail investors have not participated in the 1st Quarter rise in the markets. They fear this volatility and the chance for another May 6th event.

STOCK MARKET AS AN ECONOMIC INDICATOR
The stock market has always been a leading indicator to the direction of our economy. If you look at the performance of the markets in the 2012, the 1st quarter seems to be indicating a rebounding economy. Many analysts were surprised when we started to see weaker job numbers. Many investors are questioning the value of the stock market as a indicator of our economy when 50% of volume now is HFT. Computers do not discuss company earnings, company revenues or company hiring. These areas would be great indicators of the strength or weakness of the economy. The equity markets were set up to help raise capital for businesses, and allow investors the opportunity to own corporations, building their net worth. The equity markets were not set up to be a race track that rewards the faster program. This situation has to be investigated before we have another “FLASH CRASH”.

For more information on managing your finances, or other financial advice, contact DLG Wealth Management. You can also see Andy Guzzetti every Monday morning on WXXA Fox – Albany.

Are you deciding whether to open a Roth IRA or Traditional IRA? Both forms of IRA are great ways to save for retirement. Find out more about IRA's, the benefits and financial planning from financial advisor, Andy Guzzetti, from DLG Wealth Management:



Every Monday morning at 7:45 a.m., don't miss the "Money Monday" segments on WXXA Fox 23 News Albany. Managing Director of DLG Wealth Management, Andy Guzzetti, gives tips on how to manage your money and protect your finances. Miss a segment? Get all the information you'll need about wealth management on DLG Wealth Management's News page.

Managing Director of DLG Wealth Management, Andy Guzzetti, and Senior VP and Advisor, Manuel Choy, discussed the Dow hitting the 13,000 point barrier on WNYT – NBC Affiliate in Albany on Tuesday.

Guzzetti and Choy explained that investors can start to feel some confidence in the market, taking a few risks as long as they have a protection plan in place, in case the market drops.

"With the Dow hitting 13,000, we're also cautioning our investors that they need to be careful and there are investments that can potentially go up when the stock market goes down," said Choy.

Check out the full interview with DLG Wealth Management on YouTube for more on what gains their clients are seeing in their portfolios. For more information on portfolio management or other financial planning questions, contact a wealth management advisor from DLG Wealth Management today.