Sound Financial Advice

January 17, 2010 by  
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The best advice you can get is sound financial advice. Sounds simple, but it is really hard to find. That is why you need the professionals at Saint-Laurent … We are firmly dedicated to your financial success.

Planning vs. Insurance

January 17, 2010 by  
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 PLANNING vs. INSURANCE – Not Just Words

Protect Assets You Have Worked Hard To Save Utilizing Basic Education & Facts

To be clear, this is not a solicitation for insurance

We are sure you have heard the advice and reports about how your assets (even your home) can be lost due to a long term illness.  This may be true considering that seniors have a 1 in 3 chance of needing long term care, and 44% of these long term care recipients are between age 16 and 65.*  Comparatively, the chances of using your auto insurance policy are 1 in 40 while your homeowner’s insurance ratio is just 1 in 80.**   Now consider the fact that the national average, annual cost of long-tem care, which is between $12,000 for in-home care and $50,000 for skilled nursing homes, will more than double in two years. 
Let us be clear, this is not a solicitation for insurance. However, Saint-Laurent Advisors does encourage you to consider if you may be a candidate for “long-term care planning” in order to protect your assets in the event of a long-term or unexpected illness.  That is why we use the word “planning” versus insurance.  Although, many sales people and advisors believe insurance is the only answer to protecting assets from long-term illnesses we only suggest insurance when it is absolutely necessary.  Make no mistake, we would not recommend solutions that are inappropriate or cost prohibitive.  In fact, an analysis could show that insurance is not an option at all.
By definition Saint-Laurent Advisors has an obligation as a registered advisor to explore and explain all options available to preserve assets as well as maximize future retirement income.  We know that many people discount insurance because they believe that the cost of long-term care insurance is not within their budget.  Knowing this, you may feel comforted to know that most long term care planning can be done with out buying insurance, particularly if planning takes place well in advance.
Regardless, the first step is education.  Therefore, we suggest discussing options available to you if long term illness occurs.  Keep in mind that if you decide that insurance is the best option, we now can custom build a policy to suit your needs and budget. Most people are surprised to find that the new policies allow more flexibility in structuring affordable plans.  In reality, an average policy used as a hedge to cover potential long term care expenses could cost as little as 0.5% – 1% of retirement savings per year.  Return-of-premium (cost of insurance) options could recoup premiums by returning the cost of insurance to the estate if not used.
Please know that we are here to provide information and discuss your planning needs and options at no cost and no obligation.

Richard Saint-Laurent, CFP

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Saint-Laurent Advisors & Associates
100 Cummings Center, 322A
Beverly, MA 01915
Tel: (978) 232-9990 ·

We are on the watch for the municipal bond issues of the profligate spenders!

January 17, 2010 by  
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We are on the watch for the municipal bond issues of the profligate spenders!

The three biggest categories of debt in the United State are the debt of the federal government and its agencies, mortgage-backed debt, and municipal bonds. Over the past decade, the municipal markets have moved from being safe haven to a $2.5 trillion active market, complete with its own indices, ETFs, and credit default swaps. The size and sophistication of the muni market masks the following current sources of instability.
1. The states have, for years, been underfunding their pension plans, while at the same time, adding to their rolls. There are, currently, large gaps between the present value of the promised benefits and the value of the assets available to pay them. This is a structural problem that will not go away without a number of years of extraordinary investment returns, a reduction of benefits, increased taxes, or a combination of all three. At the same time, other state-mandated spending (schools, medical support, and public assistance) has increased to more than 50% of revenues that states take in via taxes. This higher mandated spending has not been matched by the politically unpopular solution of increased taxes. Instead, it has been addressed in large part by issuing bonds.
2. In the current economic downturn, the main sources of state revenues – property, income, and sales taxes – have all taken a hit. If a home has declined in value, then, with some delay, the property assessment will also fall. Houses that stand vacant often do not pay taxes, and homeowners in default on their mortgages are unlikely to pay property taxes. Tax receipts will not recover until house prices gat back above their pre-crisis levels. And house prices will not recover until the unemployment situation ameliorates.
In recent years, there has been a change in our national understanding of the sacred nature of contracts. We have seen untold numbers of homeowners default on mortgages with the justification that the bank should never have lent them the money. We have seen the banks improvidently speculate with other peoples’ money and then justify it by saying that they were only doing what the customer wanted. This same mentality is evident in the municipal governments. Harrisburg, Pennsylvania councilwoman Susan Brown Wilson exemplified the ominous trend when she said recently, “By no means should the citizens of Harrisburg alone be strapped with the debt created eight years ago by a prior administration.” Are we not responsible for what past administrations have done? Isn’t that principle what secures any bond issuance? If Mrs. Wilson’s attitude is becoming the prevailing attitude, muni bonds are nothing more than colorful paper
The number of muni bonds on dealer desks wanting bids is as large as at any time in history. Maybe this is dumb money getting out, creating a golden opportunity. (The more bonds available on the market, the more the price for those bonds declines.) But it could be smart money running from a market that has many of the characteristics of the pre-2008 mortgage markets: lack of transparency, legal obscurity, inflated values, and deteriorating economics. That’s a risk we, as investors cannot afford to ignore.
We are confident that municipal bond issues invested through Saint-Laurent Advisors are placed with reputable investment managers, who are actively attempting to identify problem states and municipalities. Those questionable muni bonds are being culled from portfolio, and replaced with quality issues. Among those of particular interest are bonds issued by California, Illinois, Michigan, Massachusetts, and New York.
Liken this problem with a few “bad apples” in the barrel. Because of the rumors of municipal default in some states, the municipal bond market is painted with the same brush, and is currently in decline. Not all of the municipal bonds are in danger of default, but we have begun selling out of certain muni investments of particular concern.

If you have questions about any municipal investments in your portfolio, and you wish to review, please call to arrange a meeting.




Richard St-Laurent


Saint-Laurent Advisors & Associates

100 Cummings Center, 322A
Beverly, MA 01915
Tel: (978) 232-9990 ·    Email:

Computer Trading Is Eyed

January 17, 2010 by  
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Debate Turns to Absence of Circuit Breakers, Market Makers as Mystery Plunge Is Probed

Traders parsing the mystery of Thursday’s stomach-churning stock-market plunge are focusing on whether rapid-fire computer trading, coupled with the market’s complex trading systems, triggered a free fall that appears to have begun with an order to sell a single stock.

A big order to sell Procter & Gamble Co. shares came a little after 2:40 p.m., when the stock market was already jittery over turmoil in Greece. Minutes later, the market plunged, ultimately declining nearly 1000 points before rebounding rapidly.

Dow Jones Newswires’ Paul Vigna discusses today’s volatile financial markets; and Eduardo Kaplan and Mike Reid talk about how mounting European debt jitters are straining markets. Plus, an inconclusive election in the U.K.; and media columnist Jon Friedman on why he believes Jon Stewart should succeed Katie Couric.

The sell order was sent to the New York Stock Exchange, where it caused a log-jam in trading. Suddenly, P&G shares, among the market’s most stable, fell about 35%.

It’s not clear precisely how the P&G trade affected other securities. But the tumbling blue-chip stock helped drag down the Dow Jones index. Traders believe the big drop in P&G was picked up by computer models, which set off a chain reaction of selling in other stocks.

The violent fall has prompted an examination of the limitations of existing market “circuit breakers” and exposed weaknesses brought about by the changes in the character of modern stock markets, where most trading takes place at high speed between computers, rather than directly between human brokers.

At a minimum, traders said, the selloff shows that regulatory oversight of stock trading has not kept up with the changing nature of trading.

“There’s no mechanism in the current system to stop an error from crushing a stock,” said Dan Mathisson, head of electronic trading at Credit Suisse. “The regulators will need to explore restricting the use of market orders, or adding some type of circuit breakers.”

Over the past two decades, stock trading has gone from a relatively transparent network of human “market makers” executing buy and sell orders at a handful of exchanges to an almost entirely computer-driven system fragmented among dozens of players. And regulators don’t have the ability to directly monitor many of these new players.

Thursday’s trading “clearly exposed the flaws in the current system,” said William O’Brien, chief executive of Direct Edge, an electronic exchange. “We need to learn from this.”

President Barack Obama said regulators “are evaluating this closely with a concern for protecting investors and preventing this from happening again.” A House subcommittee set a hearing for Tuesday to investigate.

In a joint statement, the Securities and Exchange Commission and the Commodity Futures Trading Commission said: “Thursday’s unusual trading activity included extreme volatility for a number of individual securities. This is inconsistent with the effective functioning of our capital markets and we will make whatever structural or other changes are needed.”

A review of trading logs and interviews with traders suggests an outline of how a large but somewhat routine selloff spiraled out of control.

For a good part of the day, markets were down on worries about debt woes in Europe and unrest in Greece.

Shortly after 2 p.m., traders on the floor of the NYSE say, they noticed some wild moves in currency markets, and gold was ticking up. Stocks fell further.

Around 2:40 p.m., with the Dow Industrials down about 500 points, a big high-speed trading firm, Tradebot Systems Inc., stopped trading to limit its losses. Other high-speed firms also pulled back. These firms typically buy and sell when other investors need to trade, so their withdrawal could have primed the market for a fall.

Around the same time, the big P&G sell order hit the NYSE floor. It is not clear where the sell order came from and how big the order was. It overwhelmed available buy orders, traders say.

Because that order came amid the market selloff, a NYSE system kicked in that’s designed to slow trading when there’s a big move in a stock’s price or trading volume. That so-called liquidity replenishment point system stopped the NYSE’s electronic trading in some stocks, down-shifting into “slow” mode.

The system is supposed to allow designated market makers—human traders who work on the floor—to help bring order to the market. These traders are required to step in and buy or sell stocks when there are no other investors willing to make the trades.

Starting at 2:45 and 52 seconds and continuing for nearly two minutes—an eternity in markets where millions of shares trade every second—no P&G trades were reported by NYSE. For about 80 seconds, not a single share of P&G stock traded through the Big Board.

Sell orders continued to flood into the NYSE. When the orders couldn’t be filled, they spilled into other electronic trading venues.

That created an overload of sell orders and caused temporary divergences in prices between stocks on the NYSE and other exchanges. Essentially, there were no buyers for many stocks, which allowed their prices to fall until a trade was done, in some cases to 1 cent.

During that time, P&G declined 35%, then began to rebound. At 2:47 and 42 seconds, the NYSE reported a new P&G trade at $56.27, just below where the stock was changing hands before the trading halt. Meanwhile, the broad market was falling more than 100 points a minute.

“We were here and didn’t know what happened out there,” said Doreen M. Mogavero, president of Mogavero, Lee & Co., a floor broker. “We thought something horrific happened.”

Some traders say one culprit for the quick downdraft might have been a type of trade called an “intermarket sweep order,” or ISO. ISOs, which some studies say account for nearly half of all trades, send trades to whatever exchange that has the best price. The order can remain there until it is filled—even if that means the price falls to near zero.

A large number of stocks that plunged dramatically Thursday were ISO orders in which there were no apparent buyers, data shows.

Shares of consulting firm Accenture PLC fell from $41 at 2:30 p.m. to $32.62 at 2:47:46 when a trade was routed through NYSE Arca Exchange. Seconds later, at 2:47:50 p.m. an ISO trade cleared through Nasdaq at $5.54. Moments later, an ISO trade went through on Nasdaq at $3.04. The shares traded at a penny at 2:47:53 p.m.

—Matt Phillips and Donna Kardos Yesalavich contributed to this article.

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