LBA Certified Public Accountants Named Exclusive Jacksonville member of the Institute of Dental CPAs

Posted September 3, 2010

LBA Certified Public Accountants, PA, is proud to announce that they have been accepted as the exclusive Jacksonville member of the Institute of Dental CPAs. The Institute was founded to provide North American dental practitioners with a resource to turn to for all of their dental accounting, dental practice management, dental consulting, and audit needs.

 

The Institute is comprised of a group of member firms that have been carefully screened to ensure a dental practitioner can contact someone that truly understands dental accounting. Each firm has a designated dental CPA so they are held to higher ethical standards than a non‐CPA accountant.

 

The Institute's member firms have thousands of dental clients and an internal network for the exchange of ideas on dental accounting best practices, dental benchmarking and dental practice profitability, dental trends and other issues dental practitioners face daily.

 

"Running a successful dental practice has become more complicated," noted Bill Shelton, LBA's Partner in Charge of the firm's dental niche. "It's crucial that dentists have an advisor who understands their unique issues and can use this insight to assist them in improving their operations and profitability."

 

 

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Market Commentary

Posted September 14, 2010

The markets were generally volatile and down for the month of August. The S&P 500 was down 4.51% for the month, leaving it down 4.62% for the year. Through August, the other major equity averages were also down. However, in the first week of September the markets rallied and the S&P 500 is now in positive territory; a very nice recovery.

 

Other market averages have also improved since the end of the month. The Dow Jones Industrial Average is now ahead at 1.83% for the year, Mid Cap is up 5.82%, Small Cap is up 2.31%, Developed International is down 3.07% (cutting its decline in half), and Emerging Markets are up 3.81%.

 

Fixed income rates have declined to historic levels. This decline is indicative of continued weakness in the economy, fear of a double dip recession, and worries that we might have a Japan-like period of deflation. Prices on US Treasuries have reached bubble territory but may rise some more on the intermediate to long-term end of the yield curve.

 

CONTINUED UNCERTAINTY…

The current state of the economy and the markets continues to confound most investment strategists, including me. Economic data and market sentiment continues to fluctuate weekly. One week we are heading into another recession, a so-called "double dip", and the next week there is evidence of some economic growth with a glimpse of a recovery.

 

Our investment team has come up with some probabilities to address this unusually uncertain market. Our expectations for a double dip recession are very low while our expectations for robust growth are also very low. The most likely scenario is for a period of subdued economic growth, modest market returns and earnings, BUT not a big bear market or another recession (remember our projections for a square root recovery 12 months ago?).

 

On the equity side, the US and International Large Cap stock markets are still in a bull market cycle but within a secular bear market, hence the very modest returns for the market this past decade. The US market is normally or fairly valued – not cheap but not overvalued either. Because of the uncertainty and the very small probability of a double dip, we are favoring defensive industries and stocks, focusing on those with a decent dividend yield.

We are also favoring Emerging Markets that represent a small but growing percentage of the world’s equity markets, as measured by market capitalization. In contrast to the equity markets of developed countries, these markets are mostly in secular bull markets. Countries and equity market share are as follows; China 2.47%, Canada 4.43%, Australia 3.3%, Brazil 2.14%. These countries and other emerging markets have increased market share by 11.16% since 2003, reaching 19.65% currently. Market share for the US and Europe has declined 11.89% during the same period, shrinking to 68.13%.

 

We think the outcome of the November mid-term elections will be a turning point for the US market. Without change, businesses will be choked by regulation and individuals’ purchasing power will be diminished by higher taxes. So far the polls indicate change is coming but the outcome is not certain.

 

FIXED INCOME RISKS

The fixed income market has become a difficult and dangerous place to invest. Investors have lost patience with the paltry yield from money market funds and CDs and are chasing yield by increasing maturities or reducing credit quality. The flow out of money market funds since April, 2009 has surpassed $1 Trillion. Of that, $450 Billion has flowed into bond funds while $42 Billion has flowed out of equity funds.

 

The risk of extending maturities in order to pick up an additional 1-2 percentage points dramatically increases the risk of principal loss should the bubble in bond prices pop and interest rate increase. In our portfolios, we may be giving up a point in yield over the short term, but we are ultimately keeping risk low.

 

In summary, stocks are more attractive than bonds on a risk adjusted basis. Emerging Markets are more interesting than Developed Markets. Defensive industries (goods and services that consumers have to purchase) may represent the safest area of the equity market.

 

Should you have any questions, please do not hesitate to contact our team. As always, we are available to discuss our market outlook, portfolio positioning, personal financial situations, and planning goals.

 

Best regards,

 

David T. Albaneze, CFA

Chief Investment Strategist