Albuquerque Financial Expert and Chief Investment Officer of Portfolio Wealth Advisors was asked his opinions about the strong US dollar and his outlook for stocks this year. “You can’t stop capitalism” was Munson’s response when asked how policies in Europe will affect their slowly recovering economy. “Just look at the huge relative performance of international stocks to the US and the ask why investors dumped these well performing securities last year.” Diversification is designed to make portfolios less risky and better performing, Munson says. Kudlow agreed with Munson that the strong dollar isn’t going to wreak the market. When asked his expert opinion about international markets Munson told Kudlow that a strong focus on value is key. “Over the long term, if you buy cheaper stocks with reasonable valuations versus overpriced securities, you have a better chance at success.”
We’ve heard the story more than once: A young, swaggering stockbroker finds he has a knack for the business, makes more money than God, gets caught up in the libertine excesses of Wall Street’s glory days, then finds himself questioning the morality of his chosen profession. He retreats from the life and emerges later as a reformed broker, shining a light on the dark corners of Wall Street and finding a new mission to put the interests of clients first, preach against the commission model, and embrace the job of independent, fee-only investment advisor.
But not all have ridden that pendulum like Lee Munson. In 2001, he was a 25-year-old Bear Stearns broker profiled in a New York Observer article as a prime example of Wall Street’s boom years gone bad. Full of outrageous quotes, overly confident braggadocio, and references to Prada, Gucci, BMWs and Nobu, it’s a portrait so over the top (“If I ripped my skin out, you know what would flow out?” he asked. “Bloody cash, baby. Money! Rip it out, it’s gold!”) even his wife claimed he should not be taken seriously.
Months later the Twin Towers fell, and Munson moved to New Mexico, where he evolved into the exact mirror opposite of the young player profiled in the Observer. He decried the commission model and joined NAPFA. He started his own RIA, Portfolio Wealth Advisors. And he published a book, Rigged Money: Beating Wall Street at Its Own Game, in 2011, about how the financial system is stacked against Main Street investors.
But there is a third act to this story. In short, Munson says now that there is a place for commissions, NAPFA is a “cult,” and despite what some financial-planning purists may think, it is okay to make a lot of money in this industry.
“I was a NAPFA cult member—if it wasn’t fee-only, it was evil,” Munson says. But he found his new firm wasn’t really able to offer the kind of holistic financial planning that he intended. “I realized that I wasn’t really hitting the mark with people. I wasn’t really able to do anything other than manage stock and bond portfolios. It just wasn’t satisfying to me, and it certainly wasn’t satisfying to a lot of our clients.”
Offering insurance, he felt, was a big way to close that gap. He partnered with Tracy Ann Miller, a chartered life underwriter who specializes in insurance consulting and financial planning, in January 2014.
So after denouncing the commission model for years, he did an about-face, ditching the fee-only mantra in order to make money on the insurance side. Insurance now accounts for about 10 percent of their business.
“The fee-only thing is a real disservice,” Munson says. He compares it to Alcoholics Anonymous; financial planners are basically saying they cannot be trusted to engage with any financial product that pays a commission. “I have a problem, and I can’t control myself. So I have to join this cult called NAPFA, and I have to tell everybody, ‘I’m not allowed to drive because I’ll get drunk and crash.’”
In fact, Munson was doing some insurance work for clients while he was fee-only, but not getting compensated for it.
“Basically I do all this work, but somebody else is getting a big fat check,” he says. When he asked other NAPFA members how they did it, they suggested he charge an hourly fee for the work, which Munson considers “double-dipping.”
“Economically, I don’t play these little shenanigans. Economically, this money is being generated; it’s going to somebody. Have it go to the person who’s actually doing the work.”
‘I’m Not Giving Up The Money’
Portfolio Wealth Advisors, with some $250 million in assets, still doesn’t have a broker/dealer affiliation, but since the change, Munson says clients are more satisfied, and it’s more of a pure business.
And more lucrative. “Everything last year just went like clockwork,” he says. “I personally never made more money. The firm’s never been more profitable.
“I think in our business, we always pretend that we’re not highly compensated. We always pretend, ‘Oh, I didn’t just buy that Ferrari. I’m not spending my weekends in Taos skiing.’
“It’s like, goddamn straight I did. There’s a quote from Mark Cuban that says, ‘If you feel like your customers own you, it’s because they do.’ This is very stressful. It dominates my life. It ruins my marriage. It takes time away from my kids. It’s highly paid. Do you hear surgeons going around saying, ‘Oh, I’m so sorry. I really just make $50 grand.’ You don’t.
“We got into this business because we wanted to make money. You stay in the business because you realize that people need help. If not, I’d be a stockbroker still. I got into the business as a stockbroker, so that should tell you something: I like to make money. But I changed to an RIA. Why? Because as I got older and started a family and started to think about who I was as a person, I thought, ‘You know, I’m not giving up the money. What I will do is give up being an ass.’”
Intel Corporation (NASDAQ:INTC) fell into the red after slashing its revenue forecast for the first quarter by $1 billion as the company continues to struggle with declining demand for personal computers. Challenging macroeconomic, as well as currency conditions, continue to mount more pressure on the giant chip maker. Fox Business’, Adam Shapiro, believes the only way out of the current debacle for investors is investing in companies that are not affected by currency fluctuations.
The macro environment has remained suppressed in the recent months forcing many people to shy away from upgrading their PCs the way they used to. The Dollar, on the other hand, continues to clock record highs against the Euro a key market for Intel Corporation (NASDAQ:INTC)’s PCs. Meaning the company will always end up with reduced income when converting earnings in Euro’s to dollars.
“I am not going to tell you what company you are going to buy the dollar is not going to get any cheaper over the next year or two. You should be looking at a company, which is not going to have to translate foreign currency back in the U.S dollar because you are going to take a big hit. That’s what is hitting Intel as well,” said Mr. Shapiro.
Intel Corporation (NASDAQ:INTC)’s problems, on the other hand, have been compounded by its late entry into the mobile business an area where QUALCOMM, Inc. (NASDAQ:QCOM) continues to reap big. The growth in popularity for smartphones and tablets has only gone to hurt Intel’s PC business as many people opt not to upgrade their old models at the expense of shifting to the small handheld devices.
Any investor should not be considering investing in the chip business, says Price Futures Group senior market analyst, Phil Flynn, as the situation could get worse going forward. Instead of investing in Intel Corporation (NASDAQ:INTC), Portfolio Wealth Advisors Co-founder, Lee Munson, believes NXP Semiconductors NV (NASDAQ:NXPI) would be the best option as it is not exposed to the effects of declining PC demand.
“What they have done is they have this similar to vertically integrated ecosystem, but it’s all about the internet of things and selling chips that have to do with high security. Security is a big issue it’s a big topic of conversation on Wall Street. So if you can find a chipmaker that does not have those legacy issues of making PCs and going to high security and all this little devices with smaller specialty chips. I think you’ve got out a winner,” said Mr. Munson.
Feb. 24, 2015 – 4:35 – FBN’s Cheryl Casone, Portfolio Wealth Advisors Co-Founder Lee Munson and Kaltbaum Capital Management President Gary Kaltbaum on the copper industry, what copper price movements mean for investors and the smart watch
Feb. 24, 2015 – 5:42 – FBN’s Cheryl Casone, Portfolio Wealth Advisors Co-Founder Lee Munson and Kaltbaum Capital Management President Gary Kaltbaum on where to invest as the Russell 2000, putting money in small caps and the homebuilders industry.
The words “oil” and “crude” don’t appear anywhere in Dunkin’ Donut’s Q4 earnings press release. The coffee and donut slinger reported what Yahoo Finance’s Jeff Macke calls a “squishy” quarter that included comparable sales that grew less than 2%. The company’s press release celebrates “growing transactions in the Dunkin’ Donuts U.S. business in the face of macroeconomic and competitive headwinds”.
A drink and a doughnut are seen at a Dunkin’ Donuts location in the Chicago suburb of Niles, Illinois, February …
“This just in,” Macke says, “You sell sugar and caffeine to motorists in America. The price of gas fell 50%, you can’t sell sugar and donuts, are you kidding me Dunkin’ Donuts?”
The problem, says Lee Munson of Portfolio, LLC, is that as American’s find a little extra cash in their pockets after paying at the pump, they are looking to spend it at a higher end establishments, at least higher compared to Dunkin’ Donuts.
“They’re not paying [that extra money] at Dunkin’s Donuts, they want to go to Starbucks,” he contends, adding McDonald’s is suffering from the same problem.
“When we have our next bear market Dunkin’ Donuts is gonna be the little darling even though I question the management at this time.”
Even with dismal sales, Dunkin’ did raise its quarterly dividend by 15%. Munson would like to see more companies do the same while energy prices are low. That way, he argues, when energy prices inevitably pop sometime down the road management can roll those payouts back.
As for Dunkin’ Donuts, Munson says, “If you can’t make money now there’s something really wrong.”
Source: Yahoo Finance
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Lee Munson, CFA and Chief Investment Officer Portfolio Wealth Advisors recently told Yahoo Finance “the economy is rocking and people are making big cognitive mistakes.” We asked him to highlight those rookie mistakes that are all too common in a bull market and how to avoid them.
Chasing Returns: Rear view mirror investors
U.S.A.! U.S.A! 2014 was a banner year for U.S. stocks which continued the long running bull market which will mark year six in March. 2014 was not so great for other regions. The iShares MSCI Emerging Markets ETF (EEM) dropped about 4%. So far this year the U.S. economy, for the most part, appears to firing on all cylinders, which may pull many investors into the foxhole. “They are going to leave emerging markets for dead and they’re going to put everything into large U.S. stocks because that’s what’s been working for the last couple of years.” Don’t chase returns cautions Munson, its usually the wrong bet.
Trading small-cap for large cap superstars
It’s happened to the best of us, you see a stock like Dow (^DJI) member Disney (DIS) this past week rally to an all-time high after earnings. Now you’re tempted to trade some of your small-cap, value oriented holdings, for large cap winners. Understandable, but the wrong move says Munson. “People are going to start dumping everything that’s small cap and everything that’s value oriented.”
Investors who owned small-cap shares are likely frustrated with the performance in 2014. The Russell 2000 (^RUT), the benchmark for small-to-mid cap stocks, returned just 3.5%, trailing the S&P 500’s 12% return. However, in Munson’s opinion, eliminating all exposure to last’s years underperformers does not make sense.
Inflation Hedges: One size does not fit all
Gold, Oil, Treasury Inflation-Protected Securities (TIPS for short)…take your pick! There are plenty of ways to hedge inflation. The problem is nobody can accurately pick which one will be the best bet cautions Munson. “People are trying to choose a particular outcome and they are putting all their money to hedges.” Instead, investors should have a diversified portfolio which can offer purchase power protection, inflation protection and growth of principle.