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Who Do You Trust?

brightonsecurities — Mon, 13 Feb 2012 15:50:42 +0000

The S&P 500 is near post-financial-crisis highs. The 10-year yield on U.S. Treasury’s is near post-crisis lows. The former points to confidence and growth potential. The latter points to extreme risk aversion. The question is: who are you going to trust? The preponderance of the evidence, I believe, is currently in favor of the message that the Treasury yields are sending.

First, you have the rate of earnings growth at a low point during this “recovery”. That suggests we are near peak earnings in this cycle. Without stronger global GDP growth earnings are unlikely to accelerate again. Global GDP growth is being hampered primarily by the perpetual European financial crisis, which has already tipped many of the EU member nations into a recession and has left several big ones on the brink (Germany, France, UK). Although we may not share their fate and tip into a recession as well, it’s hard to see how we improve with one of our largest trading partners suffering so much. Additionally, we’ve used all of our ammo if another global shock hits; the Fed has already bottomed interest rates and our deficits are already north of $1 trillion annually. That leaves us vulnerable and it’s not hard to imagine where a shock might come from. We have Europe, as mentioned above. But there is also the Middle East. And those are the risks we know about. The ones that usually hurt the worse are the surprises.

It’s not all roses out there. So, what’s a smart investor to do? It will always seem attractive to think the market has returned to growth like we saw in the late 1990’s or again in the mid-aught’s, but the need for a conservative outlook is strong for the reasons outlined above. My suggestion, in general, is to be very cautious. In this climate, this essentially equates to pulling in the reins on your growth assets to an underweight position relative to your long-term financial plan. If you don’t have a financial plan that includes specific guidelines for investing, meet with an advisor as soon as possible to make one. Otherwise, it’s hard to know the specific risks you and your family are facing.

Brennan R. Redmond, CFA
Vice President
Brighton Securities

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

College Years: Debt, Value, Education

brightonsecurities — Thu, 09 Feb 2012 11:00:49 +0000

In yesterday’s D&C business section there was an article that compared the current state of student debt to the mortgage crisis before that bubble burst. The long and short of that crisis was that consumers took on too much mortgage debt on inflated home prices. The subsequent decline in investment markets traumatized the economy, unemployment skyrocketed and many folks found themselves no longer being able to pay their mortgages on homes with deflated values. They couldn’t sell them so they walked away. Whether the root cause was being uneducated, misled, misinformed or just plain reckless is for you to decide. What followed were many foreclosures which prompted Government to step in and offer bailouts.

The same thing is taking shape with student loans. Student loan debt is about $1 trillion and rising. President Obama while on his reelection campaign has made it a political issue, again offering bailouts. While I certainly agree there are circumstances in both cases for assistance, for the most part we have to be responsible for ourselves and our families. If you have family members that are nearing their decision to pick a college, have open discussions regarding affordability and strategies to find the best college that will achieve their goals. You can help give them a fighting chance to pay off their loans once they get into the working world.

Speaking from experience, I have two daughters who did their undergraduate studies at SUNY colleges. My older daughter is now pursuing graduate studies at a private college and my younger daughter is posturing for the same. Their foresight has allowed them to take only modest debt forward as they advance their education. As they said to me, “it’s not where you go to college but where your diploma is from that will count for an employer.” Music to my ears.

One of the many services we offer at Brighton Securities is a complimentary Education planning. Please feel free to call me at (585) 340-2239 if you wish to take advantage of this service, or to learn more about other services we offer.

Salvatore Fasciano
Financial Advisor

When is the last time you had an “Insurance Check-Up”?

brightonsecurities — Wed, 08 Feb 2012 18:33:14 +0000

It’s a good idea to periodically have your life, disability and long term care insurance policies reviewed by an insurance professional. An analysis may determine that your policies are just fine and that they fit your financial goals.

In some cases, though, a review uncovers internal problems with your policies, such as the fact that they may lapse prematurely without additional, unanticipated premiums. It may also be determined that the policy no longer fits your needs.

There are also two major factors at play. Many older policies were designed using mortality tables from the 1950’s, which assumed people died fairly young. Newer policies incorporate the use of updated mortality tables. Assuming that the “pool” of insured people live longer has driven down premiums for many policies. Additionally, the life insurance business is more competitive than ever, lowering premiums.

A review can identify opportunities to do a policy “replacement”, and move the existing cash value of the policy into a new policy, in a tax-free fashion. Sometimes such a move results in lower policy premiums going forward and/or additional death benefit. Of course, there are many issues to be considered when doing such a change, such as the fact that starting a new policy may mean starting a new “surrender period” where there will be a (declining) penalty if you surrender the policy within a certain number of years.

One of the many services we offer at Brighton Securities is a complimentary insurance review. Please feel free to call us at (585) 340-2229 if you wish to take advantage of this service, or to learn more.

Susie L. Light
Financial Advisor

Harvard vs. Hartwick: The Economics of College Tuition

brightonsecurities — Tue, 07 Feb 2012 11:00:29 +0000

Several years ago, when my daughter was a high school senior, my wife bought a softcover book with a page on each of hundreds of different schools (I think it was this book). It wasn’t an important reference for us because she had pretty much already decided to attend Sarah Lawrence College. I had heard that Sarah Lawrence was an expensive school, according to some article I had read. So out of a bit more than idle curiosity, I picked up the book and sought the page on Sarah Lawrence. Yes, the book confirmed it to be expensive, and on a whim I paged through looking for Harvard University to compare. On the way to Harvard’s page I came to Hartwick College, of which I know little other than it’s in Oneonta, and an acquaintance attended school there. I was surprised to find that Hartwick’s total cost for a year was within a few hundred dollars of Sarah Lawrence, and even more surprised to find that Harvard’s total cost fell neatly between the two. I think at the time that the total annual cost was in the $40,000 range, making a few hundred dollars of difference practically meaningless.

Now, they are all good schools, but you will have a hard time convincing me that you will get 99+% of the benefit of going to Harvard by attending Hartwick. If Hartwick is not a Chevy it might be a Buick, but Harvard is a Mercedes; they’re not the same. Why do they cost the same?

At the root of the price of anything is that eternal equation: supply and demand. Add to that my theory of “Next-Best.” In this case, Harvard University is perceived worldwide as a desirable school, and it receives so many applications each year that it accepts only a small percentage: 6.2% last year. That leaves 93.8% of Harvard’s applicants to seek another school – the one they view as “next-best.” As demand cascades from first to second choice (or to third or fourth), there remains enough demand to keep pricing high even among choices not otherwise seen as equal. That’s cold comfort to families struggling with the cost of college and graduates grappling with student loan debt. Higher education costs may be just a footnote in the presidential election, but whoever wins you can look for this topic to rise in prominence over the next few years.

GTC

Freddie Mac and Inverse Floaters: a love story

brightonsecurities — Mon, 06 Feb 2012 18:56:40 +0000

In an interesting twist to the current Freddie Mac situation (which I blogged about here), President Obama has decided to elaborate on his New Housing Proposal that he briefly mentioned in his State of the Union Speech last Tuesday. Obama’s plan to expand the Home Affordable Refinance Program HARP would assist homeowners who are attempting to qualify for refinancing. According to the HARP website, the program expects to refinance “as many as 2.85 million loans by the end of 2013.”

How does the Freddie Mac bet against homeowners affect this goal?

First, let’s look at Freddie’s questionable position:

Freddie Mac has bought ‘inverse floaters’ which essentially means they invested in packages of mortgages and sold off their right to collect on the principal of those mortgages with the mindset that they would just collect the interest rate payments. This is a bet that people will continue to pay these interest payments and one way that they may get out of paying those interest payments is to replace them with a new loan with lower interest payments – that’s a little something called ‘refinancing’. Well, if you or I invested in inverse floaters like those bought by Freddie Mac, we could debate the merits and risks of that investment. But Freddie Mac is charged with helping people refinance – so why would Freddie Mac make such an investment? It was likely a hedge – a way to trade off some possible risk in other investments. But here’s the kick: there should never, ever be even a hint of a conflict of interest in an organization’s positions, even in a hedge.

The answer is simple: as long as Freddie Mac has an role in refinancing, they must remove their hedge against it.

As I have been writing, I noticed a little piece of news float up: Freddie Mac seems to know this is a bad idea to some extent, although they don’t seem to know why.

Jonathan Marlowe
Financial Advisor Trainee

The Super Bowl Indicator

brightonsecurities — Sun, 05 Feb 2012 13:00:55 +0000

Did you know that the direction of the stock market in any given year is determined by the outcome of the Super Bowl? Well, not really, but there is a fun statistic that has been dubbed The Super Bowl Indicator (SBI).

According to the Super Bowl Indicator, if the winning team is from the old American Football League (now the American Football Conference, AFC) the market will have a down year. Conversely, if the winning team is from the old NFL (now the National Football Conference, NFC) the market will rally this year.

The SBI boasts a high accuracy rate, coming in at about 80%. For the 30 years between 1967 and 1997 the indicator correctly forecasted the subsequent year’s direction with about 90% accuracy – the last 14 years must have been harder to forecast.

Of course this correlation is nothing more than a fun anomaly (like the predictive octopus or politically-sensitive Spider Monkeys or everyone’s favorite meteorological rodent), but I always enjoy watching every year to see if the SBI can pull it off once again. In any case, I hope everyone has a fun weekend and stays safe.

Sam DiNorma

Eastman Kodak Shares

brightonsecurities — Fri, 03 Feb 2012 19:30:31 +0000

One of my favorite lines from the Lord of the Rings trilogy is when the wizard, Gandalf, speaking to Frodo about feelings of regret at having to witness difficult times, says, “So do all [people] that come to see such times, but that is not for them to decide. All we have to decide is what to do with the time that is given to us.” So it is with the shareholders of Eastman Kodak’s (EKDKQ) common stock. Ten years ago it was worth over $30/share. Today it is worth a bit more than $0.40/share.

We’ve been getting questions about what happens to common stock in bankruptcy. The answer is that it’s possible there might be some value left to the stock in bankruptcy, but it’s pretty unlikely. Common Shareholders come last in bankruptcy (right after Preferred Shareholders) and have a residual claim on assets of the company assuming there are any left – and that’s a very large assumption. So, the question Common Shareholders should be asking themselves is not will I get any value out of this stock through the bankruptcy, but rather what should I do with it now?

The punch line is to suggest it for bathroom wallpaper. But beyond the minimal price you might fetch in the market today or any residual claim you might get at the end of bankruptcy, there could be some value in tax savings from the loss of your investment’s value. For those who own Kodak stock outside of an IRA or other tax-advantaged accounts, selling the stock at such a steep loss can shield you from having to pay taxes on some gains derived from elsewhere in your portfolio. If there are no other gains to offset, or you have exhausted your ability to offset gains and still have losses leftover, you can offset up to $3,000 per year in ordinary income.

You may elect to take advantage of these losses by selling Kodak stock at any time up until the shares stop trading. It is important to know that you must begin to book the loss on your taxes within the calendar year that you either sell or when the stock goes to $0.00 and stops trading. If you do not promptly report the loss on your taxes you will not be able to record the tax loss in following years. We don’t believe Kodak’s stock will stop trading and become worthless until 2013. If that happens in 2013 and you still hold it, then that is the year in which you must book the loss or risk forgoing the potential tax savings forever.

Regrettably, this is probably the most value you will realize from the shares have owned for years.

For more information about the tax advantage, look for a blog to follow today from our Director of Tax & Business Services, Joe Arena.

Brennan R. Redmond, CFA
Vice President
Brighton Securities

Free Lunch - Kodak's SIP, Fixed Income Fund

brightonsecurities — Fri, 03 Feb 2012 17:02:29 +0000

Yesterday, I was contacted by a client who asked me about the effect on SIP funds that had undergone the change from the Fixed Income Fund to the Short-Term Bond Fund (Here is T. Rowe Price’s notice about the change and new fund).

For those that don’t know, The Fixed Income Fund, which used to be called ‘Fund D’, was for years an investment with above-market returns and below-market risk. Almost 70% of SIP participants were invested in ‘Fund D’ – and why shouldn’t they have been? You might ask ‘How could this fund have such characteristics (and why couldn’t I get into it)? The answer is that this fund was, to the best of our analysis, subsidized by Kodak. One way the principal was protected (that would be the below-market risk part) was through an insurance wrapper. About a week after the bankruptcy filing, T.Rowe sent notice to fund participants that the wrapper would be going away effective February 1.

This was, to say the least, worrisome to a number of people, although in truth the fund was changing from exceptionally low risk to very low risk. We’ve been doing our best to give our community some relief from worry. “It’s very unlikely,” we said, “that your principal will fall off a cliff on February 1.”

Based on all the hype and hysteria that had been generated since Kodak’s bankruptcy filing, it’s easy to understand why SIP participants would want to confirm that their SIP balance did not go down on 2/1/2012 (I’m calling the day ‘Ex-Fund-D-Day’).

What I found when I checked was a welcome 3.5%+ increase in SIP short-term bond fund values compared to the day before! For Kodak retirees that did not move their funds for fear of losing principle, this is a very welcome one-time gain.

In the end it seems that Fund D went out with a bang. This is the closest thing to a free lunch that we’ve ever seen. Now that the SIP fund options have changed we continue to believe that patience, due diligence, and sobriety are the best way for SIP investors to move forward.

It’s essential to note that this may not happen the next day, that in fact this increase is caused by some specific movements in bond markets, and it should in no way be looked on as what will happen tomorrow. But it’s something to be happy about on a day many Kodakers were dreading.

If you want to talk about the details, you’re more than welcome to contact us at Brighton Securities to get answers to your questions. Our phone number: 585.473.3590

Joe Boyd
Financial Advisor
Brighton Securities

Kodak Shareholders: Value in a Loss

brightonsecurities — Thu, 02 Feb 2012 19:15:52 +0000

Since the Eastman Kodak bankruptcy announcement we have been getting many questions regarding the income tax impact of losses on Kodak stock.

In general, if your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately. If your total net capital loss is more than the yearly limit of $3,000, you can carry over the unused part to the next year and treat it as if you incurred the loss in that next year, and continue each year until the total loss is used.

In the case of Kodak there are two scenarios that would result in your taking a capital loss. The first scenario is if you sell your shares while they are trading in the stock market. The second scenario would be if you held on to the shares and if the bankruptcy court decided to cancel the shares and declare them worthless. In the first scenario you would receive a 1099 form indicating your gross proceeds from the sale and the difference between your cost basis and the proceeds would be your capital loss. In the second scenario you are permitted to report a loss in a security equal to your tax basis in the year the security becomes completely worthless.

For many Kodak shareholders the difficult process will be calculating their cost basis as many retirees’ have accumulated shares over many years.

As always, you should seek professional advice before making major financial decisions.

Joe Arena
Director of Tax & Business Services

IRS CIRCULAR 230 NOTICE:

As required by U.S. Treasury Regulations, please be advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Sweet

brightonsecurities — Wed, 01 Feb 2012 20:54:50 +0000

I’m not sure why the quarterly earnings reports from Hershey are more blogworthy than others. Maybe it’s because I like chocolate, so the very name Hershey always makes me smile. But Hershey shareholders have plenty to smile about today, too. That’s because the company reported higher earnings today and projected that 2012 will keep kids and customers (and their dentists) smiling with even better results.

The roots of Hershey’s current success go back a few years. The company made a few acquisitions to broaden their confectionary product lines, and transformed their supply chain to get their products to market more efficiently. With cash dividends to shareholders raised 9 out of the last ten years (including a 10% increase announced today) that makes for a sweet time all around.

GTC

Eating Apples, or Nothing Lasts Forever

brightonsecurities — Wed, 01 Feb 2012 18:43:26 +0000

There is an interesting article in yesterday’s New York Times discussing fallen giants such as Polaroid, Palm Pilot, Atari, Sony Walkman, Pagers, and potentially BlackBerry. I read this article and I think of one company, Apple (AAPL). Then I begin my struggle to understand why Apple can maintain momentum when all of these other once-great names could not. And it is a struggle.

Granted, Apple has already succeeded beyond the best any of these other companies ever did. But can they keep it up? Can they avoid having done unto them what they’ve done unto so many others? Motorola was the greatest until BlackBerry. BlackBerry was the greatest until Apple.

What can trump Apple? I have no idea. But history makes me confident that something will. I am also confident that this is a lonely perspective to have these days.

Brennan R. Redmond, CFA
Vice President
Brighton Securities

The Federal Home Loan Mortgage Corporation’s Bet Against Homeowners

brightonsecurities — Tue, 31 Jan 2012 20:57:09 +0000

After a bailout in 2008, tax payers like you and me own Freddie Mac, a government-sponsored enterprise that exists to work with mortgage lenders to help citizens get lower housing costs and a better opportunity for home financing. However, a National Public Radio and ProPublica exclusive report on Monday, January 30^th, discovered that Freddie Mac, in an attempt to make additional money and potentially hedge itself, has invested in securities that benefit from higher mortgage payments. This is simply an act of betting against the very the purpose it stands for.

What does this mean?

With financing rates at a historic low, homeowners across the nation are looking to benefit through refinancing their home mortgages. Freddie Mac should be fulfilling its mission of making (or keeping) more homeowners by being a resource for refinancing. Instead, it is betting on mortgages with high-interest rates not being refinanced – an exact opposite of its mission statement. So now, either Freddie Mac will attend to its own interests and act to prohibit homeowners from attaining lower borrowing costs, or Freddie Mac will act in accordance with its mission and lose money on its in-house investments!

Should a government entity be betting against the very purpose for which it exists?

Jonathan Marlowe
Financial Advisor Trainee

MF Global, Chemists or Criminals?

brightonsecurities — Mon, 30 Jan 2012 19:01:10 +0000

Are you kidding me?

MF Global Funds Feared “Vaporized” WSJ 1/30/2012 (subscription req’d).

What does that even mean? Vaporized!? Was there some type of chemical experiment conducted with MF Global’s clients’ money? I bet the clients never authorized that experiment. This story line would actually be funny if it wasn’t so insulting and sad.

Here is what happened, so we can all understand this very technical financial vernacular: MF Global took money it was not authorized to take, made investments it was not authorized to make and lost the money on those investments. The money was not vaporized – it was lost, plain and simple. The only thing I do not understand is how Jon Corzine is not in jail.

(For those without a WSJ subscription, articles covering the same topic may be found here, here, or here.)

Doug Hendee, CFP^®

Kodak’s Day in Court

brightonsecurities — Thu, 26 Jan 2012 14:49:43 +0000

We have been saying at our Community Resource Meetings that Kodak’s management may have a bumpy road in bankruptcy. Specifically, there are signs that the bondholders, represented by Akin Gump & Strauss, may challenge Kodak’s management and possibly ask the court to throw out the senior management team at the company. In the first court hearing, last Thursday, Kodak asked to draw down $700 million of their $950 million DIP credit line. Bondholders objected, saying:

“What’s past is prologue,” said Michael S. Stamer, of Akin Gump Strauss Hauer & Feld LLP, counsel for an ad hoc committee of second-lien noteholders. The post-petition financing agreement as originally conceived “gives them too much money. And if you give them too much money … they’ll spend it, to everyone’s detriment.”

The judge then reduced Kodak’s approved drawdown to $650 mil, a small but significant reduction and a concession to bondholders.

Latest court action was yesterday, when Kodak requested that $40 million of their $332 million in unsecured debts to suppliers be made a priority. Specifically, Kodak claimed that the $40 million was owed to “critical” suppliers who should be paid now and paid in full. The remaining $292 million in supplier debts would have to wait until the end of the bankruptcy process (a year or more) to get paid what is likely to be pennies on the dollar. This request the judge turned down flat. “Don’t be optimistic” said Judge Allan Gropper.

Kodak’s bankruptcy, at least in court, is not going to be the smooth transformation that Mr. Perez may have expected. With bondholders objecting and the judge indicating skepticism of management’s requests, there will be bumps in the road to the New Kodak.

Kodak Roundup

brightonsecurities — Mon, 23 Jan 2012 13:57:52 +0000

As the sun rises on Kodak’s first full week in Chapter 11 bankruptcy protection, many questions are being answered, and a few ones are being raised.

A Q&A piece issued by Eastman Kodak after their bankruptcy filing has stated clearly that current and former employees who have a balance in Kodak’s 401k (known as SIP) can rest assured that their money will remain accessible to them without interruption. Some observers had speculated that SIP access would be frozen. Dispelling this notion was one of the principal reasons our firm developed our Community Resource Meetings for Kodak employees and retirees, in an attempt to bring clarity to a situation filled with rumor, half-truth, and urban legend.
We have been saying at our meetings that the insurance “wrapper” that has kept the SIP Fixed Income Fund a stable, comparatively high-yielding investment would at some point be discontinued. It didn’t take long for that. The Fixed Income Fund (formerly “Fund D”) will be no more, effective February 1^st 2012. All assets will be moved into a new Short-Term Bond Fund comprised of high quality bonds. We’ve heard from many participants who are apprehensive of the change, mainly due to concerns about risk. But the new fund should have very low risk, if equally low return.
An ominous note was sounded by the Pension Benefit Guarantee Corp (PBGC) about Kodak’s pension, known as KRIP. The latest numbers we have about KRIP stated it was 96% funded, a comfortable level. PBGC’s latest release mentions 86% and calls KRIP “reasonably well-funded” (our italics). The lower funding level may be a result of differing assumptions by Kodak and the PBGC, but we will be watching carefully for what they mean by “reasonably.”
CEO Perez mentioned in his recorded statement last week that it would be “business as usual” at Kodak. I suppose if doubling the collective blood pressure of your work force and requiring court approval for every dollar you spend is business as usual, he’s right. At least the company will continue to operate while it seeks to reorganize.
Remember Collins Ink? They are the Kodak supplier that caused a splash last fall when they sought to cancel their agreement with Kodak out of concern that a bankruptcy would leave Collins, a small company, stuck with a large unpaid bill. A quick trip to court settled the matter and Collins kept supplying ink. Unfortunately for Collins, their prediction came true. They are owed $1,889,468 and will likely get only a fraction of that amount when the bankruptcy is settled.
This bankruptcy may be shaping up to be a fight between management, who expect to control the process and lead the company back to health; and bondholders, who have lent Kodak nearly $2 billion and would like to get paid. It looks like bondholders may challenge management for the right to run the company. Attorneys for the bondholders took shots at the Perez team in court, suggesting that management bled the company and that giving them too much cash would be “to everyone’s detriment.”
On Friday January 27^th, in conjunction with Senator Joe Robach’s office, we will be hosting another Community Resource Meeting at the Town of Greece Community and Senior Center, 3 Vince Tofany Blvd in Greece. We’ll have room for 300 people, but like our other meetings, this one is beginning to fill up. For seats, please call our Kodak Hotline at 585-340-2246.

GTC

We’re Going West

brightonsecurities — Fri, 20 Jan 2012 16:09:42 +0000

With over 25,000 Kodak retirees residing in the town of Greece, Brighton Securities is taking our Kodak Community Forum to the west side next week. At the request of Senator Robach and Assemblyman Reilich, we’ll be hosting a forum to answer your questions and address your concerns about Kodak’s bankruptcy.

We’ll also give analysis on the company financials which will be released the day before on Thursday, January 26^th.

As always, our hotline remains open throughout the crisis Please call 585-340-2246 with your questions or to register for the meeting.

Residents of Greece and surrounding west side communities are welcome to attend next Friday’s meeting at the Greece Community Center. There is room for 300 people, meaning there will be a large group of other retirees and employees present to share your concerns and questions.

WHEN: Friday, Jan. 27, from 5 pm – 6 pm

WHERE: Town of Greece Community Center

3 Vince Tofany Blvd., Greece, NY 14612

WHO: George Conboy, president of Brighton Securities

@gtconboy

Senator Joseph Robach @SenatorRobach

Assemblyman Bill Reilich on Facebook

CONTACT: For more information on the Kodak community meeting in Greece, visit http://www.brightonsecurities.com/ or call the Brighton Securities hotline to register (585) 340-2246.

Alexandra Conboy

Bankrupt

brightonsecurities — Thu, 19 Jan 2012 16:12:33 +0000

Kodak, bankrupt. How can it be? Who would have thought, ten years ago – even a year ago – that this would come to pass. And yet here we are. Our firm has been busy holding Community Resource Meetings for Kodak employees and retirees, helping to provide clear information at a time when rumor, half-truth, and urban legend have all circulated throughout the community. We have another session tomorrow night here at our office and one a week from tomorrow in Greece, home of the largest concentration of current and former Kodakers.

Here’s a quick rundown of what to expect – and what not to:

Bankruptcy means reorganization for Kodak – not liquidation. The company will try to sell its patents and some business units with a plan to slim down and emerge a smaller and more profitable company. Estimated time in bankruptcy: about 18 months.
For retirees who are receiving monthly pensions, no worries. Your pensions are safe and will continue to be paid. Some special executive plans will probably suffer, and current employees may find available pension options curtailed. But KRIP pensions are well-funded and safe.
SIP, Kodak’s well-known 401k plan, is also safe. Kodak cannot touch those assets and neither can its creditors. There should be no meaningful short-term change in investment options, including the Fixed Income Fund (still known as “Fund D” to many).
Health insurance benefits are safe – for now. Since Kodak will operate under bankruptcy protection, the company cannot terminate or alter retiree health benefits without court approval. It’s true that Kodak could move quickly and ask the court to approve a prompt termination, but we see that as highly unlikely. Current view: retiree health insurance will not end prior to the end of bankruptcy.
Employees will keep their jobs and benefits – for now. Kodak will try to sell businesses (consumer is high on the list) but even if sold a lot of jobs will remain.
Many of the upbeat projections rely on a sale of patents for the higher end of the range, $2 – $3 billion. A strong patent sale will lubricate the entire process.
Still waiting to hear a realistic, believable scenario from the office of the CEO. Because this time last year, here was the story

Stay with us on Facebook and Twitter for the latest. For Kodak employees and retirees with questions, our hotline is 585-340-2246.

GTC

Are you one of the 99 thousand?

brightonsecurities — Fri, 13 Jan 2012 16:10:03 +0000

For years the Internal Revenue Service has encouraged taxpayers to receive their refunds through direct deposit. The Internal Revenue Service recently announced that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks for last year that could not be delivered because of mailing address errors. The undelivered refund checks average $1,547.

Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “Where’s My Refund?” tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Senator Chuck Schumer (D-N.Y.) recently announced that New York State has over 7,000 state refund checks returned by the post office as un-deliverable due to address issues. These checks total about $14.5 million or an average of over $2,000 per check, sitting in a bin somewhere in Albany.

Direct deposit is definitely the way to go!!

Joe Arena

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

On The Brink

brightonsecurities — Fri, 13 Jan 2012 13:39:01 +0000

For months the story of Eastman Kodak has swirled with rumor and urban legend. Word from the CEO had been relentlessly upbeat, despite what employees, retirees, investors, and everyone else could see happening: cash dwindling and lawyers circling. Patents have been up for sale but no deal has been struck. Stories of “rescue financing” have circulated, but no one has been willing to lend to a company whose situation has become so precarious. And then last night the word came from Bloomberg News that Kodak is in “advanced discussions” for bankruptcy financing.

Sometimes when there’s smoke it’s just smoke. But with Kodak lately I think fires are raging on the top floors of 343 State Street. Sources inside Kodak are speaking out, and the same goes for people connected to the banks who may lend. There are credible stories that some of the leaks may have been engineered by Kodak itself, as a way of preparing the public for an imminent bankruptcy. Last week’s resignation of Kodak’s Chief Communications Officer Gerard Meuchner was just one more troubling sign of turmoil at the top.

All that turmoil has meant sleepless nights for thousands of Kodak employees and retirees, who are concerned about what a bankruptcy would mean to them and their families. If there’s any silver lining to this story, it’s that most retiree benefits will remain intact (except healthcare) and that Kodak will not simply shut down and send all of its employees home.

We have been saying for months that Kodak is headed for bankruptcy, and it looks like they are about to file. As the event looms near, I’ll feel no satisfaction if we’re proven right.

Questions or comments? Find me on Twitter to continue the conversation.

GTC

Hail to the Chief

brightonsecurities — Thu, 12 Jan 2012 20:31:08 +0000

Brennan Redmond has many titles. He is a Financial Advisor, a CFA, and a (newly-promoted) Vice President. Today he added one more: President.

After serving as its Treasurer, Brennan was elected President of the Brighton Chamber of Commerce today.

He’s just the kind of guy we like here at Brighton Securities – committed to the community inside the office and out (also he scored some runs on our company softball team last summer). Way to go, Brennan!

Alexandra Conboy

The "Fed"

brightonsecurities — Thu, 12 Jan 2012 18:45:53 +0000

I had the pleasure of attending the Simon School’s Annual Economic Seminar yesterday. I enjoyed Federal Reserve Bank of Philadelphia President Charles Plosser’s thoughts and perspective. Mr. Plosser gave a fairly subdued yet constructive outlook on the nation’s economy. He believed the U.S. would not find it’s way into recession this year, he believes the nations GDP will track at a 3% growth rate. He feels the housing market will stabilize , however, does not foresee robust growth. All in all, my sense is he is in the “muddle along “ camp.

I thought the most interesting points Mr. Plosser made were in reference to his interpretation of current and future Fed policy decisions and how the message is disseminated to the public. Mr. Plosser assured me that the federal reserve does have independent thinkers who are encouraged to voice their opinion both publically and privately. A quote that struck me was ”federal reserve policy should not be set by the calendar.” This is a reference to Dr. Bernanke’s decision to publically disclose that the Federal Reserve will hold short term interest rates low until mid 2013. Mr. Plosser’s contention and I wholly agree that “ how does anyone know now what fed policy should be 12 months from now?” Mr. Plosser also contends that the more transparency there is with respect to how Fed policy is established and what the factors were that went into the policy decisions the better it is for our nations citizens. Once again, I agree.

Doug Hendee, CFP^®

Tis the season!

brightonsecurities — Tue, 10 Jan 2012 16:27:52 +0000

My favorite season is about to kick off…tax season. This year we do not have many major changes in the tax law. Here is a brief summary of some changes to expect:

Overall, many of the dollar thresholds were adjusted upward for cost of living increases. This includes tax brackets, standard deductions, retirement contribution thresholds and amounts, etc.
The “Making Work Pay” credit is gone. For the past couple of years you received an extra $400 ($800 for a working couple) in your pocket. You will not see this on your 2011 tax return, so refunds should be smaller this year.
Business mileage rates for 2011 were 51 cents per mile thru June 30 and jumped to 55.5 cents for the balance of the year. In 2012 business mileage will remain at 55.5 cents, medical and moving mileage will be 23 cents, and charitable mileage will be 14 cents per mile.
The most daunting change will be the reporting of capital gains on your investments. A new Form 8949 for reporting capital gains/losses will be required to summarize your gains and losses before they flow to Schedule D. Form 8949 will separate the reporting of cost basis into three potential categories before short term and long term gains/losses are summarized.
We do have until April 17^th to file this year.
Some other changes can be found on our website.

Have a happy season!

Joe Arena

Bankruptcy at Kodak? Brighton Securities is Taking Questions.

brightonsecurities — Fri, 06 Jan 2012 21:40:44 +0000

The general consensus and our opinion: Kodak is not doing very well.

As long time residents of our fair city, we are sad to see what was such an innovative and influential company take such a bad downturn. However, we can’t spend too much time in lamentation – we have work to do. It is at difficult times like this one that talking to a knowledgeable financial professional can be comforting and helpful. We like to be a resource for our city. Here’s how we’re doing that right now:

Last night we had a very successful meeting with our clients and the public about likely effects of Kodak’s potential bankruptcy. We put this meeting together quickly in response to a deluge of calls from our clients, from Kodak employees and retirees and from concerned Rochesterians.

We also added a new spin to the meeting: we opened it up to our Twitter followers and fielded many questions from folks through social media. This got us some nice press here, here and here. This kind of meeting is called a Tweet chat and, as far as we know, no other financial services firms are talking to their communities this way. We’re pretty proud that we are and we intend to do more and more of it. Search #ROCKodak to see what the conversation was like!

Last night was such a success, that we’ve got two meetings planned for next week. On Wednesday, January 11^th at 5:30 p.m. and Friday, January 13^th at 4 p.m. we will have more Q&A’s. You can come in person (reservation recommended), reach out via twitter (@gtconboy, @chris_crom, #ROCKodak), or post to our wall on Facebook.

Additionally, we have opened a Kodak Bankruptcy Hotline. Anyone can call (585) 340-2246 to get their questions and concerns addressed by one of our top advisors. The hotline is open from 8 a.m. to 4 p.m. Monday through Friday.

If you have anything regarding Kodak that you’d like to talk about, please reserve a spot at one of our meetings by using the hotline number (585) 340-2246. Or call us! Or Tweet! Or post on FB! However you want to talk to us, we’re listening.

Chris Cromwell

This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Short Squeeze

brightonsecurities — Thu, 05 Jan 2012 19:27:52 +0000

There has been a lot of buzz about the recent news of Kodak preparing for bankruptcy. A few of my friends and colleagues have asked me if I thought it might pop back up as the result of an overreaction to its recent fall. As far as Kodak is concerned, I have no idea and I’m not willing to bet on it. This does however bring up an interesting concept that was one of my favorite “plays” when I actively day-traded. It’s called the Short Squeeze. When a stock is heavily shorted and a large portion of its outstanding shares are being borrowed by short-sellers, often there is no one left to sell. Typically you will see price consolidate or “base” around a certain level. As no one is left to sell, price will rise to a point where many have set protective stop orders. These orders will trigger en masse as short-sellers rush to cover their positions. The resulting price action can often be very explosive to the upside. Below I show a stock price chart of Netflix, which was up nearly 13% yesterday as short-sellers scrambled to cover their positions. Netflix has been in a downward spiral since it topped out at $305 in July of last year, and is now trading at around $80, ouch. The overall health of a company might not matter in the short-term however, as speculators are forced to take action and cover losses/lock in gains.

Sam DiNorma

You’re Invited: Open Forum Tonight on Kodak Bankruptcy

brightonsecurities — Thu, 05 Jan 2012 18:35:35 +0000

WHAT: Today Brighton Securities representatives will host a meeting on Kodak’s bankruptcy and what it means for Kodak retirees and SIP (Savings and Investment Plan) members

Free and open to the public, we welcome you to attend and ask questions. If you cannot make the 4:30 pm meeting are encouraged to tweet questions to George Conboy @gtconboy using the #ROCKodak and he will answer them live via a 4:30 pm tweet chat.

WHEN: TODAY: Thursday, January 5, 2012 at 4:30pm

WHERE: Brighton Securities Office

1703 Monroe Avenue, Brighton, NY

WHO: - George Conboy, president of Brighton Securities

- Brighton Securities’ representatives: financial analysts, certified financial planners, etc.

Come out and bring your questions!

Alexandra Conboy