Reuters Money
One man’s retirement crusade to help Detroit and baby boomers
Randal Charlton has had a long, colorful career with plenty of ups and downs. In his 71 years, he’s done everything from tending dairy cows for a Saudi sheik to starting a jazz club in Florida. And as a lifelong entrepreneur, he has bought and sold 14 different companies.
Charlton’s last venture was a Detroit-based biotech company called Asterand, which he co-founded and then merged in 2006 with a U.K.-based competitor. He was 67 years old after the deal closed – a time when many would hang up their spikes and take it easy.
Instead, Charlton took on a daunting new challenge: fighting Motor City’s economic blight by building a successful business incubator for entrepreneurs called TechTown. Charlton raised $24 million from foundations and government, gathered together an impressive array of resources for training and start-up funding and recruited a small army of start-ups that have created a total of more than 1,800 local jobs.
TechTown is located in an old five-floor automotive plant with 130,000 square feet. When Charlton took over, just one floor was built out, and the center was running on loans guaranteed by nearby Wayne State University. Since then, the incubator has been home to 250 companies, and more than 2,200 entrepreneurs have graduated from its training programs. Last year, 14 TechTown companies received capital infusions totaling more than $1.35 million. The incubator has invested $700,000 directly in early-stage businesses and helped clients raise $14 million in follow-on funding.
Charlton’s work has just been recognized with a 2011 Purpose Prize, announced today. The award, given annually by the Encore Careers campaign, recognizes older career trailblazers who have demonstrated creative and effective work tackling social problems. Now in its sixth year, the prize was created to promote and encourage civic engagement among baby boomers. It’s a program of Civic Ventures, a nonprofit that works to engage boomers in encore careers combining personal meaning, income and social impact.
Each prize winner receives $100,000. The other winners this year include a San Francisco-area screenwriter who adopted two daughters from China in her fifties, then found a way to partner with the Chinese government in efforts to transform the care of 800,000 orphans there; an Oregon woman who produces and distributes low-cost, safe, fuel-efficient cookstoves in Latin America; and a Santa Fe, New Mexico architect working to improve energy efficiency and reduce emissions in buildings.
A native of England, Charlton started his career after college as an agriculture journalist, and then worked for an agricultural export company. His work has taken him to 40 countries and many adventures, including living for weeks in a Saudi Arabian desert nursing a sheik’s herd of cows back to health. Later he acted as a consultant for cattle breeding associations and for the European Development Fund, and as an executive for several global biotechnology companies.
With few female angel investors, signs of change
In the traditionally male world of angel investing, Ed Reitler is used to having his voice heard. A partner in Reitler Kailas & Rosenblatt LLC of New York City, he’s also the founder of the ARC Angel Fund, a New York-based investing launched in 2010. So when he says that it’s “incredibly important” to develop female angel investors because “they are crucial to ensuring the funding of a more diverse group of companies,” you’d hope his male counterparts would take notice.
After all, Reitler’s got a point. A 2006 report by the Ewing Marion Kauffman Foundation on women and angel investing concluded that “women entrepreneurs gravitate to women angels,” and that those benefactors “look at more women’s start-up businesses than some of the more traditional [male] groups do.”
That also explains why Reiter serves as a male mentor to the Pipeline Fellowship, a group that trains women to become angel investors through education, mentoring and practice. Its young founder and CEO, Natalia Oberti Noguera, is a lady on a mission: to change the lopsided ratio of male-to-female angel investors, and get female angels involved in finding and supporting female entrepreneurs.
In a new report from the Center for Venture Research at the University of New Hampshire, author Jeffrey Sohl outlines how women represent just 12 percent of all angel investors, and women-owned ventures account for 12 percent of entrepreneurs seeking angel capital. Of these ventures, about one in four received angel investment during the first two quarters on 2011.
Low as those numbers look, they were actually higher in 2010, when 13 percent of angels were female, and women-owned ventures accounted for 21 percent of entrepreneurs seeking angel capital.
Less than two weeks after the Center for Venture Research released its findings, Oberti Noguera hosted an event in New York City on Oct. 20 to announce that Pipeline’s 2011 fellows would invest $50,000 in PhilanTech. Based in Washington, D.C., the company produces an online grants management system for foundations, nonprofits and corporations.
Combined with another $55,000 from the Pipeline Angels alumni network, that means $105,000 in fresh capital for a company that had struggled to gain investment traction — even though PhilanTech’s founder, Dahna Goldstein, was lauded by Bloomberg Businessweek as one of 2009’s most promising social entrepreneurs.
Meditations on money mania: Why we gorge on the financial buffet
Are you a money maniac? While finishing up Michael Lewis’s “Boomerang,” his latest book on the financial meltdown, I was intrigued by a few of his observations on a cultural and psychological malady.
Since some of my academic training is in psychology, I’ll take a stab at what I think is going on. We spend (and eat) too much because the culture encourages it at every turn, but we have the ability to resist temptation. We’re hardwired to do the wrong thing, yet can still make rational decisions.
There’s also a part of the brain that Lewis didn’t really explore in much depth. I’m not sure what it’s called, but it involves conflating risk with the likelihood of financial success. Behavioral economists have many descriptions of these miscues. One might call it intentional and persistent denial.
Invest in the stock market through your 401(k) and forget about the risk to your long-term wealth! Use those multiple credit-card offers you get in the mail every week to borrow to the hilt! Get an extra 10-percent off at the department store if you sign up with their onerous credit plan!
We just can’t escape what I call “the buffet effect.” All of these financial goodies are laid out all the time for one seemingly low price. So we gorge on this table of plenty, only to later find out how empty financial calories can hurt us. Many of us just can’t help ourselves. That’s our culture. We’re not only in the land of plenty, we’re in the never-never land of too much.
When I eventually waded through Lewis’s perversely scatological insights on Germans and wondered if Icelandic men were really that overconfident that they could morph from fishermen to currency traders in a matter of weeks, I found a real nugget in the research of Peter Whybow a psychiatrist and neuroscientist.
Dr. Whybow, author of the more useful American Mania: Why More Is Not Enough, says it’s our “lizard brain” that is driving our overconsumption. After all, when we were living in caves (and much earlier), we hoarded food and firewood and worried about saber-tooth tigers. Now we substitute debt-driven obsessions for those primal concerns. Maybe we squirrel away credit cards because of a misperception of scarcity.
FYI, funny story – Iceland. Early in WW II the Brits needed to protect their N. Lant convoys so they invaded Iceland and built an airbase at Keflavik. Very quickly the relationship between the Brits and Iceies went very sour, and we ended up having to step in and take over the base (when the Brits left they dynamited their buildings in Reyk rather than turn them over to Iceland, there were still embedded fragments visible in buildings as late as ’72).
FF to circa ’72-73. The base at Kef is now key to ASW activity against Soviet subs in N.Lant, and Iceland is in the Cod War with the Brits (which consisted of the tug boat Thor sailing out to confront the RN frigates defending the cod boats against the Icelandic assault (throwing potatoes at the RN sailors (I AM NOT MAKING ANY OF THIS UP))). Anyway, Iceland threatens to turn the Kef base over to the Bolshies if they don’t get the Cod grounds. Nixon capitulates.
FF to financial collapse, and Iceland in hock to Brits, who have veto over Iceland entry into EU. There was a meeting in Reyk with a bunch of finance types in which Iceland tried to hardball repayment. One of the reps was a Russkie, and Iceland rep told U.S. rep in presence of Russkie that if they did not get relief they would turn Kef over to Bolshies. Russian rep looked at Iceland rep and replied that Russia had no interest in the air base at Keflavik. The Cold War actually ended that day, regardless of what history says.
It’s still going on, I saw an article about a month ago about Iceland trying to encourage Chinese tourism, and hinting that the base might pass to Chinese control.
Recent sell-off sets up next gold rally
The following is a guest post by Lawrence Carrel, author of “ETFs for the Long Run” and “Dividend Stocks for Dummies.” The opinions expressed are his own. Full disclosure: The author has had 7 percent of his personal retirement account in a gold ETF for the past four years.
When the price of gold plunged 20 percent last month, many market watchers declared the gold boom over. Stalled, yes; ended, no, according to many gold analysts, who believe the precious metal may instead be near a new sustained rally.
“I can tell investors don’t sell off your gold,” says Martin Murenbeeld, the chief economist at DundeeWealth. “We’re at a crossroads here.”
During the summer, gold surged 29 percent to a record high of $1,920 a troy ounce. This jump caused the price to drastically detach from its 200-day moving average, an important trend line in technical analysis that the gold price had closely hugged for much of the last decade. Technical analysts considered this jump unsustainable and in September gold gave back most of these gains.
Gold fell to a low of $1,534.49, much to the technicians delight, and it bounced off the 200-day moving average’s support level of $1,527. While most gold watchers expect the metal to experience turbulence during the next few months, the world hasn’t changed much, and gold prices may climb higher because of its status as a safe-haven during turbulent times.
“Have the countries around the world solved the debt crisis?” asks Nick Barisheff, president of Bullion Management Group, a precious metals investment company based in Toronto. “Have the bailouts ended? Have their currencies stopped tanking?“ With the world already worried about Greece’s fiscal problems, gold summer’s rally was sparked by fears that the U.S. might default on its debt.
After Standard & Poor’s downgraded the U.S. debt, investors flocked to gold as one of the few safe havens left. This raised the specter of recession, which is never good for gold. The combination of increased collateral requirements for trading with falling commodity and stock markets, gold tumbled as investors sold it for liquidity amidst a flurry of margin calls.
The stupid stuff is nearly worthless. Some sensible applications in circuit boards. If you had a ton of it in your backyard you’d by rights have to pay someone to take it away. Incredible that in the 21st century people still buy and sell it as if it has mystical qualities.
Big banks want your big bucks, but you have other options
Big banks just don’t want to sweat the small stuff.
Despite receiving some $4.7 trillion in taxpayer bailout funds, the largest of them are moving more towards wealthy customers with assets to invest and away from low-margin checking accounts. That doesn’t mean you should invest with them, though.
The banks side of things is that that want well-heeled wealth management or brokerage clients, not people who are writing small checks to pay bills. For instance, Bank of America, which recently announced a $5-a-month debit-card fee, said about two weeks later that it was planning to nearly double the number of “Financial Solutions Advisors” for its mass affluent clients.
The growing array of banking fees — common at most big banks now — are a red herring for bankers’ larger agenda of generating more income from advisory and brokerage accounts, as brokerage accounts have the potential to generate hefty commissions and advisory fees.
I suspect that BoA, which recently fell to the second-largest bank by assets, would rather get more customers into its Merrill Edge account. BoA is offering $100 plus up to 30 commission-free online trades to sign up. Just deposit at least $10,000 in cash or securities in their Merrill cash management account first.
What if you have some serious retirement or discretionary money to invest? Are big banks giving you more bang for your investment buck? As you shop for new investments, keep in mind that big banks may continue to raise fees and charge high commissions.
Here are some key questions to ask your bankers if they want your business:
I’m sick of this economy and how much money I’m NOT making. I started taking online paid surveys in order to make a little bit of extra cash. I made about $100 last week by just answering some questions. It’s not a lot, but it’s nice to have some wiggle room
http://yourtoppaidsurveys.weebly.com/
^Check out that link for more information.
5 tips to surviving a bear market
Do you need a special kind of financial adviser to deal with a bear market?
Few will debate that the months ahead will be challenging, and that the extreme market volatility will continue. There are a number of steps you can take with your adviser — or on your own — to weather these changes.
The first thing to consider is that the cards are lining up for the U.S. and European economies to backslide into recession. The Economic Cycle Research Institute is calling for two quarters of negative growth. The European sovereign debt crisis is like a wounded beast. The Federal Reserve doesn’t seem to be able to help, despite lowering short and long-term interest rates.
But a more telling indicator might be the gold-to-copper ratio, which is diligently tracked by Jack Ablin, U.S. portfolio strategist at Harris Private Bank in Chicago.
Copper, which is linked to the construction industry and economic growth in general, tends to underperform gold if a downturn is imminent, Ablin has found. “Over the past six months, copper has underperformed gold by 22 percent, suggesting an economy in reverse,” he says.
“Now that the Fed is out of ammunition, it’s unlikely that the central bank will help spur growth,” Ablin wrote in his Oct. 4 market outlook.
Of course, economists’ tarot cards are not precise. It could happen that the Europeans could figure out a grand solution to their debt woes, recapitalize their banks or buy up the bad debt. Washington may come up with a way to unfreeze the glacial housing and market. Job growth may return. Then again, I could be rabidly optimistic.
Target date funds get better and bigger, report finds
Target date funds are getting better – and that’s good news, because they’re also becoming the 800-pound gorilla of the workplace retirement saving scene.
The use of these funds, which invest in a mix of assets with the aim of reducing equity exposure as participants approach retirement, has accelerated sharply in recent years, due in large measure to the growth of auto-enrollment options in workplace plans.
Brightscope/Target Date Analytics reports that the TDFs account for 10 percent of total invested assets in retirement plans, a figure that is expected to hit over 28 percent by 2020. And Vanguard reported recently that 79 percent of the plans it administers offered TDFs last year, up from 13 percent as recently as 2004. Likewise, 42 percent of Vanguard plan participants used TDFs last year, up from just 2 percent in 2004.
But they’ve been criticized for maintaining levels of equity exposure too high for older investors, and for steep fees. Yet a study released Tuesday by Brightscope and Target Date Analytics reveals target date funds are improving their performance in both of those areas.
The study finds that the industry is moving toward a more conservative posture on the critical issue of fund series glidepaths – that is, the year targeted for the lowest exposure to equities. “Funds can take very different approaches to the glidepath,” explained Brooks Herman, Brightscope’s head of research. “Sometimes the landing date can be many years past the target date in the fund name.”
The Brightscope/Target Data Analytics study finds that 40 percent of TDFs are now using a “to versus through” approach to glidepath, up from 30 percent as recently as 2007. That means the most conservative asset allocation is reached in the year of the fund series name. “We like that, because it’s truth in advertising,” Herman said. “As an investor, I know what I’m getting.”
The study’s glidepath findings are consistent with an analysis by Morningstar for Reuters Money back in August, which found that losses during the summer market meltdown were far less severe for 2010 and 2015 TDF series than losses were for those funds in 2008.
Educated and affluent = potential investing fraud victim
If you’re well-educated and affluent does that make you invulnerable to fraud? Hardly. If you’re willing to make high-risk investments to get high-return, there’s not only a target on your back, but experts say your personality types makes you susceptible to be taken.
“Most of us think of ourselves as invulnerable,” says Shoshana Lucich, of the recently opened Stanford University-based Research Center on the Prevention of Financial Fraud.
A really good con artist has the ability to get buy-in even from people who believe they know better.
“If it sounds too good to be true, you’re probably dealing with an amateur,” Lucich says, quoting Pat Huddleston of The Investor’s Watchdog.
The Bernie Madoff case is an extreme example, but an example nonetheless, of how even well-heeled people can shift their focus to the dollar signs and away from due diligence. Another is the case of Raffaello Follieri, actress Anne Hathaway’s former boyfriend, who was convicted of ripping off a collection of wealthy victims, including investor Ron Burkle.
The institute, sponsored by the Stanford Center on Longevity and the Financial Industry Regulatory Authority’s Investor Education Foundation, is collecting information and encouraging the study of a variety of frauds, including investor fraud. An estimated $1.7 billion was lost to fraud in the U.S. in 2010. The institute is hosting a fraud summit in Washington, D.C. next month.
Lucich says fraud is a difficult area to get a handle on since a many victims deny being taken. That is widely attributed to their shame and disbelief.
Tactical asset allocation might become your new normal
Market volatility is like a headache that hangs on. The cure may lie in shifting your mind from keenly focusing on risk instead of returns.
For many, this is an obvious no brainer, but it involves much more than simply shifting into cash, bonds or gold. What if you don’t want to exit stocks entirely? Then you may need what money managers call tactical asset allocation.
Instead of a long-only, hold-on-for-dear life approach of traditional investing, tactical planning involves shifting in and out of assets as market conditions dictate. In a turbulent market, there are several asset classes that can buffer stock downturns that can be found in several off-the-shelf mutual funds.
The linchpin of tactical investing is flexibility. It’s the opposite of the 60-percent stocks, 40-percent bonds fixed template. As a dynamic model, tactical portfolios are often open to moving into non-financial assets such as gold, real estate and commodities.
What I like best about tactical allocation is that it doesn’t go whole hog on any one asset class. Instead of loading up in the usual suspects in a bearish stock market — such as U.S. Treasuries or gold — it’s open to opportunities around the world. This can avoid big timing blunders and the prospect of being stuck in the wrong asset when markets turn.
It may be a while before the stock market turns bullish again when it’s being pulled in a number of negative directions. European debt woes, a sluggish U.S. economy and the prospect of a global recession are a menacing “lethal trifecta,” as Mohamed El-Erian, Chief Executive of PIMCO, noted recently.
“I worry that, absent a dramatic change in policies in America and Europe,” El-Erian wrote, “things will get worse before they get better. I fear that, given this possibility, it would then take years, if not decades, to repair the underlying damage done to economies, jobs and people’s lives around the globe.”
Excellent article explaining the numerous benefits of tactical asset allocation. When correctly implemented, these strategies can provide a significant boost to a portfolio’s returns with limited risk. There are several resources on the web that provide evidence of the power of global tactical asset allocation based on relative strength for example. See details at My ETF Hedge Fund website: http://myetfhedgefund.com
5 ways to make a bond ladder work for you
The mention of bond laddering often makes one think of retirees sitting on the sidelines of the market, buying individual bonds with staggered maturities to goose up their yields, but lately it’s not such a doddering strategy.
With bond yields low, savings account interest rates microscopic and stock volatility scary, younger investors and even college savers are starting to embrace the time-honored laddering strategy. If can work for people who don’t want to lock up all of their money in long-term investments but want more yield than they can typically get in short-term savings vehicles.
Bond laddering also adds an element of predictability to a portfolio, since each bond produces a set amount of income and returns principal at a specific date.
Stan Richelson, a financial advisor in Blue Bell, Pennsylvania, recently constructed a ladder for a couple whose child was starting college in six years. The first of the four investment-grade municipal bonds, which matures freshman year, has a tax-free yield of 1.5 percent. The last, which matures in 2020, yields 2.35 percent. That translates into taxable equivalent yields of 2.24 percent and 3.5 percent, respectively, for investors in the 33 percent federal tax bracket.
“That may not sound like all that much,” he says. “But you’re still getting a decent return and you know the money will be there when you need it.”
Bond ladders have some limitations, though.
But buying individual corporate and municipal bonds usually requires a total investment of at least $50,000 to $100,000 to get adequate diversification and avoid high markups on small transactions, says Kathy Jones, a fixed income strategist with Charles Schwab. Smaller investors can get around that by laddering Treasury securities or certificates of deposit, since investment minimums are so low.
