I am often asked by clients how they can participate in an IPO of this renown. But before I answer this question, a little background information is needed.

Several major investment banks are involved in the Facebook IPO.  Morgan Stanley is the lead underwriter, but others will include Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital and JP Morgan.  Shares in the IPO will be allocated to each of the underwriters depending upon their participation level in the issuance.  These underwriters in turn may allocate shares to other brokerage firms like Charles Schwab, Fidelity Investments, other national and regional brokerage firms, or various mutual fund families.

If your brokerage firm is fortunate enough to receive an allocation of shares in this highly sought after IPO, they will likely take the following steps to provide their clients access to the shares:

• Clients must first subscribe to the issue.
• The brokerage firm will allocate shares based on the total subscription and give weight to the size of your relationship and participation level in previous IPO offerings.

Research shows that an overwhelming majority of IPO investments are worth far less (1) month after issuance than at the time of purchase.  And to underscore the speculative nature of this investment, Facebook’s valuation would put it at 100X + Earnings (P/E).  This fact compounded with the risk component of investing in an IPO makes it a gamble on a good day.

To answer the question above, we find that only the largest and best clients will receive shares in an offering of this caliber.  That said, will Facebook, Inc. be different?  We don’t know and are certainly not making a recommendation for the issue. 

For most of our clients, Facebook would not be an appropriate investment or risk for them to assume.  But if you are interested in Facebook, let’s first discuss whether it is a risk you should take and how it fits into your situation.

Questions about this offering or how IPOs work and if they fit into your plan?

jon.dinkins@glassjacobsonIA.com

If you have questions about your investments, or want to discuss your financial plan, contact us today.  The beginning of the year is a good time to set some goals!

Recently, I finished reading the New York Times bestseller, Moneyball, and was drawn to the similarities between baseball’s use of statistical analysis to evaluate undervalued players (sabermetrics) and the processes we deploy in managing our clients’ investment risk in their diversified equity portfolios. It seems that when sufficient information exists, markets are efficient at processing the information, determining the true value of all things in that market, be it investments or baseball players. As we saw in major league baseball, whatever inefficiencies may exist are eliminated over time.

Widespread studies on investor psychology reveal that many individuals abandon their investment plans in the face of negative news and painful losses in their portfolios. Knee jerk reactions such as this wreck havoc with their long term investment strategy, and cause realized losses that the investor may never recover from. Instead of realizing losses, investors should understand that the long-term upside potential of equity investments are greatly enhanced after a prolonged period of loss, as historically low prices are the catalyst for the next bull market. Don’t forget, the largest run up in the stock market in 75 years occurred immediately following the market disaster of 2008.

On Paul DePodesta talking with Michael Lewis, “It’s looking at process rather than outcomes,” Paul says.  “Too many people make decisions based on outcomes rather than process.”  Lewis, Michael , Moneyball – The Art of Winning an Unfair Game, W.W. Norton & Co., New York, NY, 2004, p. 146.

Paul, we feel your pain.  This is the most common theme we encounter with clients and we strive to help them stay true to their long term investment plan.  Our client portfolios are statistically designed to capture market returns.  Said another way, our portfolios possess a very high probability of providing successful outcomes for our clients.  But, this requires commitment to a long term portfolio management process.  Any deviations or short cuts from the process will only add additional risk to the desired probable outcome.

The above chart illustrates the rolling 10 year returns for the S&P 500 Index.  We see a handful of negative returns, but in each instance, the following cycles produce satisfactory if not spectacular returns.  Billy Beane, the Oakland A’s General Manager (as played by Brad Pitt in Moneyball), recognized early on that baseball was managed like the Good Old Boys club, and that it was resistant to change.  Following his belief system, choosing to apply process over gut feeling,  he is widely credited with changing the way professional baseball is managed today with its’ use of sabermetrics.   Much like Moneyball, our hope is that this chart will help you see the “light at the end of the tunnel” and encourage you to hold the course.

Graph represents the S&P 500 Index from 1928 through 2010.

Past performance is not a guarantee of future results.

Securities by Licensed Individuals Offered Through Triad Advisors, Inc.,
A Registered Broker/Dealer. Member FINRA/SIPC.



We also touch on a few things to think about in the stock market going forward.

If you haven’t revisited your personal finances recently, contact us to make sure you are still on track.

Questions?

jon.dinkins@@glassjacobsonIA.com

Today’s seminar, held over lunch, focused on women in the empty nest stage.  Women at this time in their lives finally have a moment to think about their own future!  Christine Schmitz of Glass Jacobson shared some interesting financial tools women can use to accumulate assets for their retirement, Kim Battaglia of Hodes, Pessin and Katz talked about legal ways to protect those assets, and our special guest, Elise Rubinstein, a Health Coach, helped us understand how we can feel good enough to enjoy them.

We will be posting the tools, articles and handouts from today’s session here.

Our next seminar, Business 101, is scheduled for November 15th from 11:45-1:30.  More details to follow.

Volatility was the name of the game last week, marked by the Dow’s history-making 400-point daily swings over a four-day period, driven primarily by the S&P’s downgrade of the U.S. credit rating and the European debt crisis.

Recent weeks have seen investors lowering their growth expectations on a worldwide basis.  Their wide-ranging worries concerning the strength of the world markets are very reasonable, given that available fiscal and monetary policies designed to stimulate have already been set in motion in numerous areas globally.

The Federal Reserve announced at its regular policy meeting last week that it intends to maintain the Fed Funds rate at its current level (0% to 0.25%) through mid-2013.  This is the first time the Fed has ever provided a set timeframe on a rate decision.  In its commentary, the Fed indicated that first-half growth in 2011 was “significantly lower” and consequently lowered its future expectations.

While the Fed may be right in its belief that the U.S. economy’s growth will be weak, we maintain our view that fundamentals will be enough to keep us on the path to recovery.  Nonetheless, given the worsening financial conditions, it is becoming apparent that, if central banks were to intercede, it may improve confidence and ease the pressure on the economy.  Currently, the Bank of England and the Fed are considering more asset purchases and the ECB may be getting ready to expand its bond-purchase program.

On a positive note, initial jobless claims for the week ended August 6 came in under the 400,000 mark.  This supports our expectation that the labor market continues to slowly strengthen.  Also of note, June retail sales figures were revised upward, and July’s retail sales increased.

It is clear to us that a double-dip recession in the United States is weighing on our clients minds. We ask that clients consider that market behavior is an unreliable gauge of recessions and company fundamentals continue to be robust.  Companies are holding cash on their books at a level not seen in over 60 years.  Cash on the books of non-financial corporations is running around 11%.  Additionally, earnings results in the second-quarter reflect an 18% year-over-year increase in conjunction with an approximate 10% climb in revenues. While stock prices are hovering around 35% below where they were four years ago, corporate earnings are on a path this year to outdo the highs they set back then. This setting further highlights how incredibly cheap stocks are right now. So, while the market may be choppy in the near-term due to the current economic issues and debt concerns, our long-term attitude towards equities remains optimistic.

Questions?

vanessa.duchman@glassjacobsonia.com

Dear Clients and Friends,

We have experienced a significant decline in the financial market during the last few days. Since the end of the second quarter the major indices have lost approximately 10%-15 % in value. Even with the downgrade in US debt rating to AA+, the current state of the economy is not all doom and gloom.

Let’s take a look at the current market conditions:

• The debt ceiling crisis is over

• 75% of companies beat earning estimates

• Household debt obligations (rent, bills, car payments divided by income) are at a 1992 low

• Manufacturing and service sectors are still expanding

• GDP growth is still expanding

• Oil price settled around $80 / barrel

• Car sales are up 5.8%

Historically, a downgrade does not set up any specific trends for market behavior. When Canada lost its AAA rating in 1993, the country’s stocks gained more than 15% in the subsequent year. Later in 1998, the same trend was observed in Japan. The stock market gained 25% during the following 12 months after a Moody’s downgrade.

We understand that it is extremely difficult to continue investing and remain calm in this unstable market. Once again, it is important to follow your long-term goals and discipline.  We want to stress Warren Buffett’s opinion regarding the S&P downgrade: “there’s no question that the United States’ debt is still AAA” and he’s not changing his mind about Treasuries based on Standard & Poor’s downgrade. The legendary investor continues: “If anything, it may change my opinion on S&P.”

As always, please call with questions.

Regards,

Glass Jacobson

Questions?

jon.dinkins@glassjacobsonIA.com

Glass Jacobson’s Vanessa Duchman explains what’s been going on.

Questions?

paula.friedman@glassjacobsonia.com

vanessa.duchman@glassjacobsonia.com

How many of you dentists and non-dentists out there approach your financial future like you do your vacation?  How many of you plan for the future:  your retirement, your children’s education, your insurance needs and other financial needs?  My professional experience has been that many more people plan their vacations than plan their financial future.

The are many reasons:

• The time necessary to gather the material to start the process
• The cost
• The fear of not being able to implement the plan
• Not wanting to be constrained to a budget
• Embarrassed at how much wealth one has accumulated

I am frequently asked by clients how much they should contribute to a child’s 529 Plan or what type of mutual fund purchase is best.  While these may sound like simple questions there are many factors that need to be taken into account.  The answer for each individual or family will be different.  There are no cookie cutter answers to these questions.

We’ve all seen commercials where it says some stunt was performed by a professional and to not try this at home.  Planning for your financial future works the same way.  Unless you have the time and resources available you should be leaving your financial plan to professionals and not try it at home.

The financial services professionals at Glass Jacobson can help you plan for your future so you don’t get lost.  You should put as much planning into your financial future as you do your vacation.  We would be happy to discuss your financial needs with you and put you on the right path.  Give us a call today.