Monday, January 31, 2011

Securities broker sentenced for embezzling $1.7 million from clients

Gregory J. Buchholz, 46, of Bridgewater, Conn. was sentenced today to 4 years in prison, followed by 3 years of supervised release for embezzling approximately $1.7 million from at least 10 clients of his financial services business, according to David B. Fein, the U.S. Attorney for the District of Connecticut.

On Nov. 12, 2010 Buchholz waived his right to indictment and pleaded guilty to one count of wire fraud. He was sentenced by U.S. District Judge Janet C. Hall.

“For nearly a decade, this defendant raided the investment accounts of his clients, several of whom are retirees,” Fein said. “I want to recognize the diligent efforts of the FBI and Connecticut State Police, who jointly investigated this matter. The Connecticut Securities, Commodities and Investor Fraud Task Force is committed to investigating and prosecuting corrupt securities brokers and investment advisors, and seeking justice for victims of financial crimes.”

According to court documents and statements made in court, Buchholz, a registered securities broker working as an independent contractor operating a branch office of Raymond James Financial Services, Inc. in Southbury, engaged in a long-running scheme to defraud a number of his clients, some of whom were retirees, by embezzling funds from their investment accounts.

As part of the scheme which began in 2001, Buchholz liquidated investments his clients maintained in various securities, principally variable annuities and mutual funds, and deposited the proceeds of the sales of those securities into his personal bank accounts.

In order to conceal his fraudulent activity, Buchholz also made statements that were designed to lull his victims into not questioning their account balances, Fein's office said.

Buchholz was terminated from Raymond James Financial Services and he no longer is licensed to act as a securities broker.

Raymond James Financial Services cooperated with the investigation and agreed to reimburse victims for their losses. To date, the victims have been repaid the vast majority of the losses they sustained and Buchholz will be ordered to pay full restitution to Raymond James.

Officials in the U.S. Attorney's office, and I'll join them, encourage you to report any financial fraud schemes by calling, toll free, 855-236-9740, or by sending an email to

Friday, January 28, 2011

Gold gearing up for another rally

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

As I mentioned in my 2011 forecast, after two fantastic years for gold, I expect 2011 to be more of a digestion or consolidation year with a wide and very volatile trading range. I believe we will see $1500 at some point as well as a $100 down day during the year. When all is said and done, I think gold is going to finish 2011 with modest gains, best case scenario.

Several people have questioned why I don’t think gold has seen its bull market peak yet. As I mentioned in last week’s edition, commodities tend to see inverted “V” tops and long rounded bottoms. That’s exactly the opposite of the behavior we usually see in stocks. As a particular commodity gains steam and acceptance, it usually melts up in parabolic fashion.

The chart below shows where gold is today. IF the rally was terminal, it would have blown off to the upside (straight up) and then begin to go straight down. We’re not seeing that right now. It’s a sideways (trading range) that should eventually resolve itself to the upside.

On the far right of the chart below and the next one, you can see the two possible scenarios for gold in the short-term. I think the shiny metal either continues lower into February towards $1300 and then rallies. Or, we see a quick rally now and then another sell off next month before rallying. Either way, I believe the ultimate resolution to this range is a move back to the upper end.


I want to go back to offer examples of how gold behaves near peaks as I discussed above.  Before the last rally you can see in the chart above, gold looked a lot like it does right now. 

And before that, below, you can see another example of how digestion and consolidation led to another major rally.
Don’t get me wrong. This is not infallible, but it does have some solid support behind it. The hardest part is judging what’s going on in real time, not hindsight. Many times, the initial top looks like an inverted “V”, but never gets going to the downside or stops going down and begins to enter the digestion.

Case in point on the chart above was the peak you see on the far left side that has the makings of an inverted “V”. I remember turning negative on gold around $990 as I thought a major top was forming. Several months later after the bears tried and tried to make headway without success, the pattern certainly had changed to that of digestion and consolidation and I slowly went to neutral and then positive.

FYI, I will be on CNBC's The Call on February 1 at 11:05am.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz

Heritage Capital LLC

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Thursday, January 27, 2011

Checking your tax return? There's an App for that...

The Internal Revenue Service is keeping up with the times. This is the first tax season the government agency will offer an application for smartphones: IRS2Go.

“This new smart phone app reflects our commitment to modernizing the agency and engaging taxpayers where they want when they want it,” said IRS Commissioner Doug Shulman. “As technology evolves and younger taxpayers get their information in new ways, we will keep innovating to make it easy for all taxpayers to access helpful information.”

The IRS2Go phone app will also give you easy-to-understand tax tips.

Apple iPhone users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

I just downloaded it to my DroidX.

It opens with four options: Get your refund status (this will prompt you for information specific to your return); get tax updates (which will be sent to an e-mail account); follow us (via the @IRSnews Twitter feed); and contact us.

“This phone app is a first step for us,” Shulman said. “We will look for additional ways to expand and refine our use of smartphones and other new technologies to help meet the needs of taxpayers.”

Wednesday, January 26, 2011

CT guaranty fund repaid $2.7 million to homeowners last year

Connecticut's Department of Consumer Protection repaid 335 state property owners $2,728,365 in 2010 to satisfy unpaid home improvement-related court judgments from the Home Improvement Guaranty Fund.
When planning ahead to the spring 2011 home improvement season, DCP reports homeowners should choose carefully, get referrals from people they trust and always work with contractors who are registered to do home improvement work in Connecticut.

All home improvement contractors and salespersons working in Connecticut are required by state law to register annually with the Department of Consumer Protection and the agency keeps a public roster of licensees. A portion of each registration fee is allocated to the Home Improvement Guaranty Fund, a pool of money administered by DCP which is used to help satisfy an unpaid court judgment to a homeowner.

Consumers may be eligible for up to $15,000 per contract from the fund if they experience a home improvement problem that meets certain criteria. The Guaranty Fund can cover actual damages, court costs and attorneys’ fees as ordered in a court judgment, up to $15,000.

Here are some of the parameters:

• The contractor must have been registered with the Department of Consumer Protection at the time the consumer signed their contract, within two years before the contract was signed OR at the time of the court judgment against the contractor.

• The contract must have been for work on residential property (single or multifamily dwellings of six units or less, or condos or cooperatives).

• The total price of the work involved must have been more than $200.

• The consumer must apply to the fund within two years after receiving the court judgment.

More information and applications are available on the Department of Consumer Protection's website or by calling 1-800-842-2649.

Thursday, January 20, 2011

Financial and Physical Fitness… More Similar Than You Believe

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

This is the time of year when traditional New Year’s resolutions are all the rage. Membership departments at gyms are humming. Personal trainers and nutritionists are booked solid. And weight loss infomercials, always popular, dominate the late night and weekend paid advertisement schedule. Who doesn’t want to look and feel better in the New Year? And isn’t that the same thing with our finances? Most people strive for financial and physical fitness early in the New Year! Amazingly, there are so many similarities between the two.

For whatever reason, I have never paid much attention to making a list of resolutions. I could stand to lose a few pounds and get in better shape. I should strive to be a better husband and father. I could give more to charity. But as with most people, I am FAR from perfect! What I have done over the past five or so years is to pick one topic or project that is achievable and focus on it.

Last year, my goal was to become paperless. I wanted to reduce the filing cabinets in my office from three to one. I was so driven that I actually hired a woman whose primary function was this project. And I am ecstatic to report that we’re just about there. For 2012, my big picture goal is to increase our local business (within 25 miles of the office) by 25% through a variety of marketing initiatives.

Getting back to fiscally and physically fit, conventional New Year’s resolutions are usually very difficult to keep. When it comes to weight loss, “diets fail, people don’t” as my friend and fat loss guru extraordinaire Rob Nevins likes to say. I spent some time interviewing Rob just after January 1, by far, his busiest time of the year as you can imagine. Rob, with the energy of 100 people who never sit still, is the poster child and head cheerleader for fat loss through his Rob Nevins Living Lean company and has as many one liners as Rodney Dangerfield.

He shared that 65% of America resolves to lose weight and/or get in shape each year, but 97% fail. I would venture to guess that’s similar to those resolving to put one’s financial house in order. Also similar to my field, he urges people not to become another statistic. Generic diets yield generic results, something I wholeheartedly believe in the investment management business. The “one size fits all” plan rarely, if ever, works successfully. I have always espoused diversifying not only among asset classes, but strategies as well. Who do you know who has successfully retired using a cookie cutter investment plan?

Rob’s philosophy includes being able to enjoy a treat here and there, but starvation is the worst thing of all. Translate that into investing and I would say that taking a flyer every now and then won’t hurt you, but leaving your money in a bomb shelter earning nothing is a disaster. Just like with starvation, the CD or money market mentality allows inflation to eat away at your money day by day, bit by bit until you’re left with nothing but a skeleton.

I asked Rob for some of his “golden” rules for successfully cutting fat and your clothes size. He quickly quipped, “the scale lies, trust your size”. In investing, to me that means asset diversification (modern portfolio theory) isn’t the be-all, end-all. What good is being diversified if all those assets trend in the same direction, like 2008?

In the end, Rob Nevins said that all people should drink 8-10 glasses of water a day and enjoy three meals and two snacks. That’s a huge start, diet or not. It’s hard for me to just list two rules that everyone should follow. But here are two that are common sense enough. When you hear from the experts that “this time is different,” run away as fast as you can. Human emotion hasn’t changed in centuries and it’s never different this time around. Second is that when something seems so easy, so obvious, so universally accepted, the trend is about to violently change.

That wraps up a somewhat unconventional contribution this week. I hope to release my Top Shockers for 2011 next week. You can bet Apple’s fall from grace will headline the list.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz

Heritage Capital LLC

Thursday, January 13, 2011

Q4 in Review

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

As I reviewed Q4 of 2010, I was shocked to find how many folks had a sudden case of selective amnesia. It’s an affliction that affects people in the investment, usually two years after a bear market.

I think we all know and remember how tough 2008 was. Emotionally, financially, economically, systemically, politically. The very core of capitalism was being threatened, not to mention the very real risk of a modern day depression. Money managers all over the world saw their worst weeks, months, quarters and years of their entire career. The "deer in the headlights" syndrome fell over a good part of the industry.

What I find so "interesting", just three years later, is how many people either predicted the whole financial crisis and bear market or actually had an up year for clients. I cannot remember the last person who told me they got crushed in 2008. All I hear now is "well I knew it was coming" or "we finished in the black". You knew what was coming? You finished in the black what? Hole?

It's really incredible. I don't know if it's revisionist history or selective amnesia, but it sure sounds like a lot of bull to me! While our business really grew in 2008, and none of our programs lost what the market did, I don't think I want to live through a repeat of that scenario any time soon. There was nothing fun about it.

Turning to the highlights of Q4… Lacking during the final three months of 2010 was the theme of non U.S. geopolitical news. On that front, it was nice and quiet! North Korea may have rattled their saber, but that seemed more like a child craving attention than a nation on the verge of war.

The major headline news was two-fold and occurred during the same week in November. First we had the all important mid-term Congressional and Gubernatorial elections where the Republicans achieved an historic victory, more than reversing the tide from 2008. As I've written about before, I believe this will have positive implications for the markets and economy in 2011 by preventing the largest tax increase in history as well as temporarily cutting the payroll tax by two percentage points.

Not to be overshadowed, Bernanke & Co. formally announced the worst kept secret on Wall Street, another round of quantitative easing or QE2 to the tune of another $600B through June 2011. By QE2, the Fed has been buying the Treasury Bonds sold by the Treasury in hopes of keeping interest rates down.

Interestingly, the unintended benefit of QE2 has been the very positive correlation between the Fed's buying and the stock market rising. Almost every single day in December was up for stocks without even a single down day of 0.50%. That is historically remarkable! Given how poorly QE1 ($1.2T) supported the markets, it's astonishing on the surface that QE2 has been a risk investors' home run.

On closer examination, QE1 was attempted while the markets were in a clear downtrend, actually free fall. The government was trying to catch a falling knife. Bernanke & Co. must have learned their lesson as QE2 was initiated during a solid uptrend with much better results so far. Additionally, just like with interest rate cuts, it does take time to have all that money filter through the system. While Q4 was void of bad news, and I certainly hope that continues, the odds don’t favor another long stretch without some shoe falling somewhere.

FYI, I will be on CNBC's Worldwide Exchange on January 20 at 5:35am.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz

Heritage Capital LLC

Friday, January 7, 2011

Fearless Forecast 2011

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

One of the most worthless yet enjoyable topics of the year is the pundits annual forecast.

An unusual amount of time is spent discussing this in the media, but after January, no one ever reviews again nor seems to care. I usually end December with an idea of what I see ahead and then adjust according to how many others agree with me. As you know from reading the blog, I don’t like to be in the majority as that group is typically wrong.

Before I get to my forecast, which is not my annual “Shockers” list due out later this month, let’s do a quick review of what I envisioned for 2010.

Stock market - I thought we would see a generally flat market, somewhere between -5% and +5%, not the 15% we so gladly enjoyed! I thought the April peak would stand for the year. Stocks did go higher at the end of the year, but that call was pretty much correct. I forecasted a double digit decline, but thought it would unfold in Q4. We saw a 16% hit during the summer.

Long-term treasuries - would be a surprise leading asset class. They actually melted up through August and then melted down through November, finishing up 9%.

Dollar - I was bullish the dollar in 2010 and it gained a whopping 1.37%.

Gold - I was positive on gold and it gained 29%.

Inflation – It’s been the same forecast for 2010, 2009, and 2008. Inflation remains under wraps and not problematic.

Economy – I thought GDP (gross domestic product) would hang in above 0% during the first half and slip back into negative territory later in the year. I was right on the first part, but wrong on the second part.

Bernanke & Co. – Short-term rates would not be touched in 2010 and they are still in the same spot as they were 12 months ago.

So now, let’s get to my forecast for 2011

 The sooner I get it out there, the sooner I can be proven wrong! As always, I had a lot of fun thinking about it and creating it, although it has no bearing on how we manage money for our clients.

Stock market – We are now in the 3rd year of Obama’s term (presidential cycle) and traditionally, it’s the most bullish of all with an average return of 17% and only one down year in the past 70 years. When you examine the stock market decade by decade (decennial pattern), you find that the first few years of the decade tend perform worse than later in the decade. That’s two nice contradicting pieces.

Let’s add the almost uniformly bullish predictions from Wall Street into the mix with the average strategist forecasting double digit returns. Even former Merrill Lynch honcho and usually skeptical Richard Bernstein sees a 15-20% return for stocks. That’s shocking and worrisome! I have research dating back to 1990 and that group has been wrong roughly 75% of the time, although they hit the bulls eye in 2010. Kudos!

For 2011, I think the stock market will end the year modestly in the black, but only in the mid single digits. I envision corrective behavior in the spring with a more significant correction in late summer to fall.

Long-term treasuries – After attempting to rally in Q1, bonds resume their slide during the first quarter and into Q2, but firm up during the second half of 2011.

Dollar – I remain bullish on the greenback over the long-term, even if we see another selling wave back to the old lows. Ultimately, I think the dollar index will hit 100 and the euro will slide back below 100.

Gold – Clearly, after back-to-back strong years, gold is due for some pause to digest, in the short, intermediate and long-term. That can take shape in many ways. I think 2011 will bring a significant increase in volatility and I would not be surprised to see a $100 down day during the year. When all is said and done, I believe we will see at least $1500 hit during the first half of the year, but not another vertical assault like we saw in 2009 and 2010. Based on history, the year should end up with modest single digit returns, best case scenario, but outperforming its cousin, silver. Should that roadmap unfold anywhere close, that could set the stage for a monster blow off to the upside in 2012. But that’s getting laughably ahead of myself.

Inflation – Unlike the past few years, I see headline inflation percolating a bit, especially during the first half of the year, but the core (excluding food and energy) remaining tame.

Economy – If this was a “normal” recovery, GDP should explode higher this year, but especially during the second and third quarters. But I just can’t subscribe to the “normal” recovery theme. The economy has been juiced with free and easy money for years and once that spigot is turned off, similar to what FDR did in 1937, I believe we are in for trouble. Thankfully, Congress learned from their predecessors’ mistakes in 1937 and did not allow taxes to increase in 2011. Don’t underestimate how much that saved the economy and markets!

Federal Reserve – As the voting members of the FOMC turnover, expect the Fed to mirror Washington and get stuck in gridlock. Bernanke loses some internal power with Kevin Warsh sliding more towards the hawkish side and Plosser and Fischer coming back to dissent and push a more neutral stance once QE2 runs out by June. Keep a close eye on the two year note as the markets may force Bernanke’s hand later in 2011 to take action he clearly won’t want to take.

Unemployment – Sadly, the jobless recovery continues and unemployment stays stubbornly elevated above 8.75%. I think it’s going to take a second recession to cleanse the system and get put unemployment on a path back to 6% or lower sometime later this decade.

Natural Gas – Surprise! Surprise! Finally, the bulls take control and natural gas ends up as one of the top performing assets of the 2011.

So that’s it. Another fearless forecast in the books. I may add some items next Friday as I continue to read, research and digest, but I think you get the picture. As always, I am eager to hear to your comments. Please don’t be shy about emailing me!

FYI, I will be on CNBC's Squawk on the Street on Jan. 11 at 9:35 a.m.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC