Financial Pain Relief

The following may surprise you. But it's true.

A recent national survey found that the two primary concerns for individuals over the age of 45 are their health and their wealth. But, that's not the surprise.

The same survey discovered that although we do give a lot of thought and attention to our health, the same cannot be said of our other primary area of concern. Most people spend more time planning a vacation than planning for their lifetime financial security.

And, that's not the only difference. If we have a persistent health problem, we often seek a second medical opinion. But, even when facing serious financial security challenges, few of us bother to get a second opinion regarding our financial goals and how we hope to reach those goals.

So, ask yourself, "If I am willing to get a second opinion for a serious health issue, doesn't it make sense to get a second opinion for my serious wealth challenges?"

Of course it does. A second opinion will either validate your existing strategies or provide other possible remedies to consider. Either way you can't lose. It's a win-win situation.

I would welcome the opportunity to tell you how easy and painless our "second opinion process" can be. And best of all, it will cost you nothing . . . other than a little time spent thinking about one of the most important aspects of your life.

I look forward to helping you understand how easy and painless our "second opinion process" can be. Best of all, it won't cost you anything but a little time.

-Bill Spiropoulos
President & CEO
CoreStates Capital Advisors

Top 10 Investing Mistakes

Once you've made it... Mistakes can still take it!

We all know the formula for investment success is to invest early, invest often and invest broadly. These are the core principles of achieving wealth through saving and investing. Do this diligently over an entire working career and you are virtually assured of a lifetime of financial security. But, for those who have already done this, or who for any other reason find themselves responsible for a substantial sum of money, the rules are a little different. The focus must change from accumulating assets to protecting wealth and preserving purchasing power. And, the mentality of the investor must change. Investing “right” still matters, but the greater concern must be not investing “wrong.” At this stage, mistakes can be lethal to your financial security, largely because the time needed for recovery from any setbacks is limited.

So, what are the most common miscues investors make in this wealth preservation stage?

1. Maintaining insufficient liquidity
This is the big one. You must never have to sell an investment to raise needed spending money. All spending should come from stable value investments and accounts – like short-term fixed income securities and checking, savings, or money market accounts. You want to sell investments (stocks, bonds, real estate, commodities, etc.) to fund the stable accounts only when the investments are trading at favorable prices. Second best (and more practical for most of us) is to liquidate investments only on a regular, periodic basis – the opposite of dollar cost averaging in. Neither approach can be achieved if your checking account is empty and bills are due.

2. Ignoring inflation
The end of the accumulation phase of an investment program is not the end of the investment program. Tempting as it may be to seek the “safety” of stable investments with all of your investment dollars, this safety comes only at the expense of significant risk to your purchasing power. If your future spending needs extend five or more years into the future, it is simply not prudent to expect to fund those future needs with current dollars. This is especially true with today’s rampant Federal spending, which almost assures significant inflation in the years ahead.

3. Forgetting your legacy
Investors with the good fortune to have assets well in excess of their personal or immediate family needs may be able to ignore inflation. They have virtually no risk of running out of money. But, based on our many years of experience working with such people, even those who start out with a strong preservation focus often begin to see their role not as owner, but as temporary custodian of their assets. They come to realize that they have the ability to favorably influence the lives of others, now and well beyond the end of their own lives. This sometimes encourages immediate gifting and donations. Or, it may introduce a much longer investment time horizon within their own portfolio, which warrants a much different investment approach with that portion of their net worth that exceeds their personal lifetime financial needs.

4. Carelessly selecting an advisor
The Bernard Madoff scandal provides a vivid warning to all investors not to pick their advisor based on image, reputation, or social standing. Some homework is required. Visit the CoreStates website at www.corestates.us and see our “Qualifications of a Financial Advisor” and “Commitment to Fiduciary Responsibility” (both located under the “Learning” tab) for our list of the key criteria that every investor can and should look for before entrusting assets to any financial advisor.

5. Settling for hazy investment objectives
Risk tolerance, time horizon, return objectives – these are important concepts. But, they are only concepts. It is important for you and your advisor to have a clear, mutual understanding of your current and anticipated financial resources, expected additions to your investment account, expected needs to be funded from your investment account, and how much flexibility you have in how and when these needs are met. And then, keep your advisor updated. Only by discussing your particular situation in these very tangible terms can you maximize your chances of long-term financial security.

6. Pursuing investment fads and fashions
Besides their financial aspects, investments can serve a valuable recreational purpose. Investing can be fun and exciting, and can convey intellectual and emotional prestige. To capitalize on this, financial product marketers provide a constant flow of new investment ideas. Most are merely the old standards repackaged, but many are much more insidious, and some, as we just learned, are downright toxic. All investments differ in only two meaningful respects – the expected amount and timing of cash returns to be provided, and the certainty (or potential variability) of those future cash returns. If you don’t understand how these two variables compare to more straightforward investments like CDs, bonds, and stocks, don’t buy them. And, if you do understand the differences, make sure they add value. In most cases, they won’t.

7. Obsessing over the parts while ignoring the whole
An investment’s price really matters at only two times – when you buy it and when you sell it. If that investment is part of a well-constructed portfolio, your manager will have the discretion to buy it and sell it whenever the price is deemed to be favorable. And, a well diversified portfolio will at all times have some investments at favorable prices and some . . . not so much. That’s how portfolio diversification works. So, if you see some investments that currently “aren’t working,” they may signify only that the portfolio is effectively diversified, and is behaving exactly as it should.

8. Confusing a Net Worth Statement with Cash Flow Analysis
While the net worth statement is a great way of assessing your financial well being, it captures only a single frame of your financial picture at one point in time.
Unlike your net worth statement, the cash flow analysis tracks your income/expense ratios over an extended period of time. That is like comparing the features of a picture camera and video camera.
For an individual investor, no diagnostic approach is more important than the Cash Flow Analysis. Not only will you become acutely aware of how expenses, taxes and inflation affect your lifestyle, you and your advisor will also have the proper basis for making investment decisions.
And because you are recording all your transactions, coming in or going out, this makes your cash flow analysis dynamic, allowing you to review your financial decisions from time to time.
There are many approaches to control expenses and spending habits. But the critical starting point is to generate and maintain your own Cash Flow Analysis.

9. Losing faith in your investment program
Investors must play a continuous game of emotional “chicken” with the market. Don’t let it scare you to the sidelines, or hype you into a high-risk investment position. A sound investment program will respond to the market cycles in a prudent way at the manager/investment selection level. Major revamping of the overall portfolio in response to market swings is almost always detrimental to your long-term wealth. It may help to remind your self that, by definition, the market is at its low when investor fear is greatest, and at its high when enthusiasm peaks. Acting on your emotions will almost guarantee buying high and selling low.

10. Forgetting that wealth is the means, not the end
In a capitalist economy and a culture focused on continually improving living standards, money becomes a measure of success. But, that’s not all it is. It is also a means to less tangible ends. It can support favored causes, facilitate desired change, and promote higher principles. It can allow you to accept the challenge of the great religious leader, Mahatma Gandhi: “You must be the change you want to see in the world.” Let it help you to be the person you want to be, in the country where you want to live, and in the world you want to leave to succeeding generations.

An Attorney's Advice... At NO Charge

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate Attorney sent the following out to the employees in his company.

1. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED..."

2. When you are writing checks to pay on your credit card Accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Put your work phone # on your checks instead of your home Phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. You can add it if it is necessary, but if you have it printed, anyone can get it.

4. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to Call and cancel. Keep the photocopy in a safe place. I also carry a Photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a Name, address, Social Security number, credit cards.

If you have had the unfortunate luck of having your information stolen, you know that you need to cancel your credit cards immediately. But the key is having the toll free numbers and your card Numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit Providers you were diligent, and this is a first step toward an Investigation (if there ever is one).

But here's what is perhaps most important of all: (I never even thought to do this.)

7. Call the 3 national credit reporting organizations Immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over The Internet in my name. The alert means any company that checks your Credit knows your information was stolen, and they have to contact you by Phone to authorize new credit.

1.) Equifax: 800-525-6285
2.) Experian (formerly TRW): 888-397-3742
3.) Trans Union : 800-6807289
4.) Social Security Administration (fraud line):800-269

20/20 Global Vision is Right on Target

One of the critical differentiating factors at Corestates Capital Advisors is our strategic view of investing. Our mission is to sustain acceptable portfolio growth with limited risk. To accomplish this we believe portfolios can no longer be guided by predominantly domestic strategies because they tend to be overly-influenced by US Monetary Policy and US Foreign-Policy. Our 20/20 Global Vision encompasses the 20 critical global issues that will influence portfolio performance over the next 20 years. Listed below are the current 20 issues that we think will have enormous influence.

With recent developments regarding the Swine Flu Virus #19 best describes the value we bring with the 20/20 Outlook.

Economic Issues

1. Accelerating globalization
The process of globalization will accelerate as expanding communications, development of transportation infrastructure, and more favorable trade policies encourage individuals worldwide to pursue a better economic life. The world will move closer to being one economic community.

2. Leveling of living standards
Differences in standards of living among most of the world’s economies will shrink as developing areas see rapid increases in the wealth of their citizens. At the same time, the populace of developed nations will suffer the impact of increasing global competition.

3. Moderation of economic cycles
Normal economic cycles will moderate as the major central banks become more adept at tempering inflation and managing their economies. But, this tampering with otherwise free markets could also contribute to infrequent but severe economic super-cycles.
4. Growth of the “BRICs”
Developing countries — led by Brazil, Russia, India, and China — will play larger and broader roles in the world economy and geopolitics. And, will occasionally suffer serious growing pains.

5. End of disinflation
After declining for most of the last 25 years, the global rate of inflation will begin to rise, but continuing productivity increases and global competition will moderate price increases for many goods and services.

6. Increasing petro-power
Oil and gas reserves will become an even more formidable source of power – with economic, political, and cultural impacts. Those with control of these reserves will be flexing their strengths in more and different ways, to the general detriment of the more developed economies.

Political Issues

7. Spread of capitalism
Capitalism and free markets will continue to spread. Economies that for generations relied on central planning will loosen economic constraints, allowing their citizens to profit from their ideas, initiative, and industry.

8. Creeping socialism
As capitalism displaces socialism and communism in developing economies, socialistic programs will become more pervasive in traditionally capitalistic economies as they adopt policies and programs that reward their less productive citizens at the expense of the most productive.

9. Some nationalization
The route to national prosperity through expanded personal freedoms and free markets will be readily apparent, but not all nations will choose to participate. Some natural resource-exporting countries will even move in the opposite direction, implementing broad nationalizations of resources and industries within their borders, to the detriment of world trade, as well as to their own economies.

10. National fiscal (un)fitness
Some of the world’s major representative democracies will suffer continued financial decline from the inherent lack of incentives for politicians to limit spending or raise taxes. This will raise their borrowing costs, furthering their fiscal decline.

Demographic/Social Issues

11. Diverging demographics
With the pace of natural deaths exceeding that of births, populations of the developed economies will stabilize and become older on average while populations of developing economies increase and grow younger. This will further strain the national balance sheets of developed countries, aid those in developing regions, and foster increased immigration in both directions.

12. Widening wage gaps
For low-skill jobs, wage differentials among countries will decrease, but productivity-related wage gaps will grow. This will create increasing friction between perceived “haves” and “have-nots,” which history has shown can be damaging to even well-established civilizations.

13. Rise of virtual communities
Heredity and geography no longer define an individual’s community or even family. The Internet, cell phones and other technologies give people worldwide the capability and anonymity to redefine themselves and their worlds. As the behavior-moderating effects of the family and community dissipate, the resulting individual freedoms will allow both the best and the worst of each of us to be displayed.

14. Intercultural friction
Peoples of different ethnic backgrounds, religions, and economic values will increasingly find the need to interact, often resulting in some form of cultural conflict. The ideal of melting-pot-merging of cultures will continue to be elusive.

Natural/Scientific Issues

15. Alternative energy sources
Heavy dependence on oil will continue as long as oil is readily available. When new energy sources are developed, however, the changes are likely to be significant and abrupt, to the betterment of high energy consumption nations and to the detriment of today’s energy producers

16. Mobility of production
Information technologies will continue to become faster, cheaper and more accessible. This will accelerate the movement of both industrial and knowledge-based business to the lowest-cost global providers, regardless of their locations.

17. Demand for natural resources
Just as demand for energy will outpace supply, so will demand for other natural resources like metals, timber and even water and food. This will create additional scientific challenges and global tensions, including finding ways to shelter poorer nations from the resulting price inflation.

18. Climate change
The growing worldwide demand for energy will collide with increasing pressure to address the risks of climate change. The need for energy will prevail in developing nations, accelerating their growth, while efforts to limit harmful emissions dominate in industrialized nations, restraining their economic growth and global competitiveness.

19. Global interdependence
Greater interconnectivity of the world’s peoples and economies will mean greater interdependence. This can amplify the impact of acts of terrorism such as dirty bombs or electronic jamming, and of natural disasters like viral pandemics, asteroids, or tidal waves.

20. Accelerating space exploration
As the earth becomes more vulnerable and less capable of supporting its burgeoning population, the push to accelerate space exploration will intensify, ultimately leading to discoveries that have the potential to radically change life on earth and beyond.

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Why Currencies Make Sense!

"It is interesting to note that while it is theoretically possible for stocks, bonds and commodities to all fall in price at the same time, it is not theoretically possible for all currencies to fall at the same time, because the value of currencies are expressed in terms of other currencies. If one goes down, another must go up."
-Richard Shaw

If you had the opportunity to visit our website www.corestates.us, you may have seen a short video explaining the concept of negative correlation. Simply stated, several asset classes have opposite reactions to the same set of market conditions. Much like an eight cylinder engine that works most efficiently when one piston provides specific power in correlation to the other pistons. When one piston is up the others are in various stages of the engine cycle.

At CoreStates we allocate our eight cylinders across various asset classes that have tendencies to move just like the pistons. The four traditional asset classes that we use are comprised of stocks, bonds, cash and real estate. The nontraditional asset classes that make up the eight cylinder engine include energy, precious metals, commodities and currencies. The reasons that currencies make a lot of sense in a diversified portfolio are as follows:

1. The currency market is the largest in the world
The massive volume of currency transactions,
nearly $2 trillion daily, allows extremely low transaction costs and provides a level of liquidity unmatched by any other asset class.

2. It is a market that never closes
Even the most liquid market is totally illiquid . . . when closed. And remember, the stock and bond markets closed for several days following the 9/11 terrorist attacks. The currency market did not. Investors in this market were able to transact while others could only wonder what their investments might be worth.

3. Most stock and bond investors are already exposed to currencies
Any company or government that does business overseas brings currency risk to its lenders and investors. Changes in the value of local currencies relative to the home currency (the dollar in our case) can turn a profitable business or investment transaction into a loss.

4. Major market participants aren't all in it for profit
Whether it is a Central Bank attempting to influence the value of its currency or a corporation hedging its international business transactions, their goal is stability, not maximum profits. In few other markets are major participants not seeking and fostering large price moves in either direction.

5. Returns from currency trading rarely coincide with other investment returns
Adding currency strategies to a diversified investment portfolio stabilizes overall portfolio values and helps assure that favorable returns are always available from at least one asset class.

6. The currency market is crash resilient
Each individual currency trades relative to another currency (for instance, the number of yen per dollar, or dollars per euro). So, every gain in one currency is matched by a loss in another. Individual trading strategies, if applied properly, will see varying degrees of success or failure, but the overall currency market will remain resilient because of these offsetting currency value changes.

7. Currencies are no more exotic than languages
Doing business in a foreign country usually requires the translation from one language to another, and the conversion from one currency to another. Both are simple, straightforward and necessary aspects of our global marketplace.

These unique aspects of the currency market make professionally managed currency-trading portfolios a valuable and readily accessible investment alternative for institutional and individual investors alike. CoreStates Capital Advisors has extensive experience with these strategies and makes available to its clients some of the nation's best currency managers - just one more way in which CoreStates seeks to fulfill its commitment to protect your lifestyle and preserve your legacy.

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Take Off Your Blindfolds! It's NOT Pin the tail on the Donkey!

Never before in the post-war era have U. S. investors had to deal with a crippled financial system, such monumental depth and breadth of change, and a pervasive uncertainty about the future. And, never in any modern era have we had to do so while also experiencing the waning of our nation’s global economic power, international prestige, and internal potential for future growth.

Even more importantly, never before have U. S. investors had to deal with the kind of investment markets produced by this new economic environment – investment markets that lack the underpinnings of a consistently growing and increasingly productive economic base. In this previously unknown environment, most investors will be essentially investing blind.


The reasons behind the gradual dissipation of the foundational substance of our nation and economy are many, varied, and controversial. So, I will leave the explanations and evaluations of the causes (e. g., the opinions) to the political pundits and economic editorialists.

The more important issue is this: What can investors do to protect their lifestyles and preserve their economic legacies in this extremely hostile financial environment?

At CoreStates Capital Advisors, we have been pondering this question since well before the severe market erosion began. Our approaches will continue to develop and evolve, of course, but the following are some of the key concepts, strategies and tactics we have been implementing for our clients in our pursuit of investment success in this new environment.

21st Century Diversification
The four-cylinder portfolios (stocks, bonds real estate and cash) of the 1980s gave way to the eight cylinders (adding energy, precious metals, commodities and currencies) of the 1990s, but success in the 21st century will require all of this, plus the ability to be long or short in each category, and with manager discretion within each of the categories to move among style boxes, or even to abandon the style box concept for a more opportunistic approach.

Emphasis on Liquidity
An investment’s returns become “real” only when the investment is sold. Until then, they are only on paper. But, when sold, the return is locked in. So, it is critically important never to be forced to sell an investment, especially a highly priced volatile investment, at an inopportune time. The only way to achieve this is by maintaining enough liquidity in price-stable form or in truly uncorrelated assets to meet any scheduled or unscheduled cash needs.

Dynamic Allocations
The days of fixed allocations . . . never really existed. Going forward, dynamic allocations will become even more important as most markets see their historically upward bias diminish or even reverse, making all markets into trading markets and generously rewarding those investors able to capitalize on their inherently higher volatility.

End of Indexing
The days of buy-and-hold investing are also over. Active security selection will be more important than ever as increasing global competition as well as the mounting geopolitical challenges make the generation of corporate earnings increasingly difficult. In a flat-to-declining overall economy, “par” corporate performance will be insufficient to provide attractive returns to shareholders or even to maintain long-term credit quality. We must invest accordingly.

Focus on quality and valuation
The easy investment approach for the coming years will be to focus on quality . . . and settle for near-zero nominal returns in a potentially high-inflation environment. True growth of purchasing power will be achieved only by correctly evaluating investment quality and being willing to trade among quality levels based on their current relative valuations.

Polar Portfolio Positioning
Implement all of the above points and you are likely to find yourself with a “polar” portfolio – one consisting primarily of some very high quality, liquid assets and some very cheap, but rather speculative, exposures. Middling opportunities are likely to provide piddling returns as most investors seek to improve on low risk, low return investments by edging up the risk spectrum, thereby bidding up prices and diminishing their returns.

Importance of Judgment
Investing driven by historically based, “black box” models becomes less and less effective as the future becomes less and less like the past. The sea change in our worldwide investment landscape is rendering not only past models ineffective, but weakens the very concept of historically based investment models. The next generation of quantitative market analysis will require a higher level of investor behavior-based sophistication, as well as a very influential overlay of superior investment judgment.

Commitment to Patience
A more volatile, changeable market demands a more resolute, patient investor. Returns are certain to be erratic. Extreme market moves will be more common. Directionless markets will become the norm. Periods of steady, positive returns will be extremely rare.

We at CoreStates have no legacy investment styles that we must maintain. Our product is building client portfolios in whatever way we believe will be most effective in the years ahead. This gives us the freedom to truly serve our clients’ needs as those needs, and the market’s nature, change over time.

To us, this is the only way to do business.