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It’s The Issues That Seem to Come Out of Nowhere That May Hurt Us The Most.

Stock market crashes and big economic recessions can be caused by a variety of factors. The real concern are the factors that seem to come out of nowhere; the ones that catch everyone, even the experts, off guard.

Take all this talk by the media predicting an economic downturn with a grain of salt. It’s next to impossible to predict events such as the Great Depression or the Great Recession of 2008-2009.  Up until 2008, had you ever heard of a Mortgage Backed Security?

Bottom line: Your portfolio should be ready for anything at any point in time.

With Markets at All Time Highs, You Still Need to Be Prepared.

With the equity markets reaching all-time highs, you would think everyone on Wall Street would be dancing in the streets. Nope!  They’re using this time to talk about all the reasons why we’re in for a big correction, down turn, or crash.

This shouldn’t be a surprise. It’s never clear sailing when it comes to investing. There will always be issues that make investors nervous. And the markets will always experience recessions.

But investors might forget that the markets do this funny thing when everyone is expecting the market to rise (or fall)… it might just do the exact opposite of what we expect.  Despite all of the expert opinions and the number crunching, there will always be the human equation to factor in and that’s hard to capture. Perhaps all this fuss is just noise and the markets will continue to climb.

Bottom line: Your portfolio should be ready for anything at any point in time.

Rising Interest Rates Can Help Your Portfolio

Much of the attention over the last few months on the effects of interest rates and bond tapering on your portfolio focus on the immediate consequences – a decline in bond values.  But rising interest rates can be good for your portfolio over a longer time period due in part to reinvesting interest income.  Not to mention, it is a strong signal that the US economy can come off of life support.  See the chart for details.

So why did investors leave bonds during this summer? Could it be that investors are afraid another recession is around the corner and don’t have confidence in the markets?  Perhaps they are looking for a reason to sit in cash willing to wait for more clarity to come from the Fed.

That could be a costly mistake… just ask those who are sitting in cash since the Great Recession.

What a missed opportunity.


The US Energy Revolution Could Be Big


It’s hard to believe the energy revolution that is going on in this country.  It’s being touted as a “game-changer” and “transformative”.  The US is quickly becoming the low cost provider of energy. International companies are in the process of building new manufacturing facilities in the US because energy prices are so low (especially natural gas). Just to stay competitive, they need to set up shop in the US. In the next few years, the US could be exporting energy to other countries.

This could all lead to…

  • Lower cost to do businesses (especially energy dependent ones) can lead to more profits.
  • Industries could transform. Perhaps in the near future natural gas will be a bigger player in transportation.
  • Added infrastructure and jobs to support this booming industry

More stable energy prices.  It was just a few years ago that OPEC was discussed what seemed like daily on the nightly news and price swings at the pumps would occur everytime there was a disruption in oil production abroad.

If you’re interested in reading more, visit: Blackrock

Putting Economic Dark Clouds in Perspective

Many experts argue that the Great Recession may have been the worst economic event since the Great Depression. But how does it compare to other economic events that have happened?

According to a new more encompassing economic indicator by the International Monetary Fund, there are several other economic events in the country’s history that were worse than the Great Recession, one of which happened 25 years AFTER the Great Depression. The indicator charted below combines several measures such as inflation, unemployment, government deficit, and GDP growth in one chart.

Notice in the charts below how this indicator paints a different pictures. During the Great Recession the indicator dropped down to the orange zone. But there were eight other economic situations in the past hundred years that resulted in this indicator dropping to orange as well, including the time period around World War II.

You can read more about the IMF white paper here.

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Why You Shouldn’t be Afraid to Invest

This week when we reviewed accounts for several clients, we found a few examples of client portfolios that have doubled in value over 10 or 11 years. That equates to a 6%-7% rate of return each year on average. Not too bad given that happened during some turbulent times:

The Great Recession of 2008 and 2009, The housing bubble, Fiscal cliff, “The Lost Decade”, Hurricane Katrina, Increased political infighting, Slowing growth in China, War in Afghanistan, Hurricane Sandy, Failure of Lehman Brothers, War in Iraq, BP’s oil spill in the Gulf, Possible government default, Election turmoil, European debt crisis, Government bailouts, “The New Normal”.

The point is that investors have good reason to look beyond the day’s headlines.

If you or someone you know is sitting on the sidelines waiting for the dark clouds looming in the distance to blow away and for the sun to come out, you’ll end up waiting for the rest of your life.  There will always be a reason not to invest. There will always be a reason to sit on the sidelines.

The government is no longer shut down. The U.S. did not default.  Clouds are clearing, right? No, they’re still there just in the distance. We still have to worry about the debt ceiling, bond tapering, interest rates, Europe’s economy, tensions in the Middle East, a new Fed Chairman…

Perhaps it’s time to implement an investment strategy designed for investors fearful of what those dark clouds could do to their portfolio. Contact us to learn how we can help you.

Active Asset Allocation Trend Updates: October 2013

The Active Asset Allocation Portfolio utilizes a trend following strategy by buying and selling securities based on established price trends in each asset class. Below is a snapshot of the current trends we are following:

US Equities:

The bright spot in the world economy, US Equities have been one of the few asset classes that has been doing well this year. Almost everything else is flat or down. Dark clouds continue to loom in the distance for the US Equities like they have for most of the year. During each of our last updates this year, we have highlighted potential “speed bumps” stemming from issues/indecision from the Federal Reserve or the Federal Government. Fiscal cliff, bond tapering, government shutdown and now a possible default have all captured our attention and the headlines. The markets rally when there is clarity (either good or bad outcomes), but slowly decline as issues and problems drag on. This kind of response has been happening for over a year and will likely continue in the future.

Foreign Equities:

Trailing behind the US Equities are Foreign Equities. They have not been taking the indecision from the Fed or Federal Government as well as the US Equities. The charts show the Foreign Equities slightly more volatile than US Equities. Of course there are sub asset classes that have been doing better than others. We are watching Emerging Markets as a possible investment opportunity.


Bonds have been a minor holding in our portfolio for most of the year. Almost across the board, we have been lightening up on bonds. With the Fed announcing that the economy may be able to come off life support and can taper its bond buying program, it is reducing the value of existing bonds.
How does that work again? With the Fed buying less bonds there will be more supply than demand for bonds. That will result in bond issuers having to compete for a more limited number of buyers. They will do this by making their bonds more attractive – raising interest rates. New, more attractive bonds will make the existing bonds less valuable.
Ultimately, interest rates going up are a good thing for investors. The process of getting there is difficult.

Real Estate:

US Real Estate has been tracking closely with bonds – and for the same reasons. Foreign Real Estate has been performing better and could be an opportunity to invest if the positive trends continue.


Our holdings at this time are minimal.


The 25 Documents You Need Before You Die

Having these documents set aside can be a huge gift to your loved ones. Take some time to make sure that you have these documents in order and be sure to revisit it at least once a year.

The Essentials:
  • Will
  • Letter of instruction
  • Trust documents
Proof of Ownership:
  • Housing, land and cemetery deeds
  • Escrow mortgage accounts
  • Proof of loans made and debts owed
  • Vehicle titles
  • Stock certificates, savings bonds and brokerage accounts
  • Partnership and corporate operating agreements
  • Tax returns
Bank Accounts:
  • List of bank accounts
  • List of all user names and passwords
  • List of safe deposit boxes
Health-Care Confidential:
  • Personal and family medical history
  • Durable health-care power of attorney
  • Authorization to release health-care information
  • Living will
  • Do-not-resuscitate order
Life Insurance and Retirement:
  • Life-insurance policies
  • Individual retirement accounts
  • 401(k) accounts
  • Pension documents
  • Annuity contracts
Marriage and Divorce:
  • Marriage license
  • Divorce papers

If you need help with some of these documents. Please contact us and we can help you (or point you in the right direction).

*Special thanks to Wall Street Journal for pulling this list together.