Merry Crypto Christmas

It has been a great year for stocks. The other asset classes have been mixed, with US Treasuries hanging in there far better than many people predicted for 2017.

Probably the biggest news in financial areas has been the explosion of the valuation of BitCoin and the introduction of so many digital currencies. My sense is that this interest in Bitcoin is a manifestation of a global mistrust of fiat currencies and the governments that devalue them.

Gold has lost it’s place in the public mind as a hedge against financial disaster and devaluation of “paper money”. Now, “everyone” wants bit coin. Fortunes will be won, and lost, by people speculating in this new currency, although the upward trajectory might last for months or years to come.

I doubt bitcoin will be the long-term answer, although the blockchain technology underlying the currency is an idea that is here to stay, in my view. I don’t recommend more than a tiny speculative holding in bitcoin, and that only if you are a sophisticated, nimble, knowledgeable trader.

Our conservative portfolios have met expectations this year. As always, when people compare a diversified portfolio to the S&P 500 during a bull market, there is a temptation to feel left out of the big gains. However, nobody minds being in a diversified portfolio when the inevitable bear market in stocks comes along.

Nobody knows when that will happen. However, we can manage risk and adjust portfolios based on how the market behavior changes.

God bless you and yours during this festive and sacred season.



Performance Reports Coming Out This Weekend

I plan to get the performance reports out by Monday’s close of business. Before that, I’m getting the historical backtest models updated, so we can see how we’re doing vs. the theoretical models pertaining to each of you. I want to determine how much the overweighting in the precious metals and the miners has affected portfolio performance.

There’s no question in my mind that when the miners take off again, they will provide a huge lift, but the ride has been bumpy.

Look for something this coming Monday.

Gold Miner Stock Prices are Back to Where They were in the Winter of 2008!

Interesting, after the Fed increases it’s balance sheet hugely, and the US dollar drops 25% from where it was during that 2008 crash, that Gold Mining Stocks are back to where they were then! So, in spite of the fact we have excluded Gold and Gold mining stocks from our allocation as they fell, I am re-opening positions in GDX in our portfolios, based on the volatility driven asset allocation methodology we use (this means a very small position). I’m not trying to have perfect timing… but it doesn’t make sense that these stocks should be at prices as low as they were during the crash of 2008, while the price of Gold itself is so much higher, and while there are so many more US dollars floating around.


PBS Documentary – The Retirement Gamble Facing Us All

Take a good look at this PBS program. While listening, please be aware that, at Portfolio Wisdom:

  1. We are a fiduciary, legally required to put your interests first. Your broker, insurance agent, and 401k advisor are probably not held to that high legal standard. Industry lobbyists have defeated every attempt to hold the big financial firms accountable in this way;
  2. As a Registered Investment Advisor (RIA) we can, and do, actually actively manage client 401k’s for them on a fee-only (no-commission) basis.  Your broker, insurance agent, or 401k provider do not. They are sometimes actually instructed by their compliance and legal people to avoid the liability, since they are not getting paid commissions or fees on your 401k;
  3. For those who can’t afford management fees, we provide free online help at to help you make the least expensive 401k choices available to you, and we help you manage risk by providing model portfolio’s of the lower cost choices.


Watch The Retirement Gamble on PBS. See more from FRONTLINE.

Putting a Little Cash Back to Work

Well, Gold and Silver have dropped about 7-8% since we sold. Stocks have fallen 2-3%, so, for the more aggressive clients, I put some cash back to work over the last two days. The markets do not look like they are going to completely break down right now.

However, we are still holding a fair amount of cash for the Balanced accounts and the more conservative accounts.

If we could just get a really nice 15% drop in stocks, I would gladly go back to the portfolio models 🙂

Have a great weekend.

This LIBOR Thing Bothers Me a Great Deal

I’m on vacation this week, but I spent the morning watching Ben Bernanke’s testimony on TV because I wanted to hear what he says about the LIBOR (London Interbank Offered Rate) manipulation by Barclays Bank (and others), ongoing since 2008. This thing reminds me of the initial news in 2007 that a couple of hedge funds in Europe had closed because they didn’t know what their holdings were worth. That news was apparently ignored by the markets, but was the first overt indication of the coming financial armageddon.

I don’t like what he said, and I don’t like the way he evaded questions from Congress about why he and the Fed did not expose this problem when they knew about it. I think this stinks. Essentially, it seems that big bankers lied about the true interest rate transactions occurring in order to under or overstate LIBOR interest rates to benefit trading positions held by, you guessed it, big banks. Our Fed and our regulators knew about this for years, but never blew the whistle, although they claim to have been working behind the scenes with European regulators to try fixing the problem. My personal opinion is that they cut the banks some slack because they did not want any more of them to fail, thus further damaging the flawed financial system. In other words, the ends justified the means.

The possible implications are far reaching and market reactions to this kind of thing are unpredictable. Markets might depart from normal behavior in some drastic move. So, for the second time this year I have raised a lot of cash in client accounts to wait and see how this all plays out. I’m not predicting a crash, but the risks of it happening in my view, are very real.

My primary job for you, as I see it, is managing risk and avoiding a big hit to your life savings. Sometimes I will appear to be too cautious, and miss opportunities when the market shrugs off my concerns. That’s OK with me.

If you, however, are still far from retirement and want me to be more aggressive with your accounts, please let me know directly. I can put your money back to work right away and let you ride things out.

As always, thanks so much for your trust.

What is the Goal of Investing?

Seems like a silly question to ask, but bear with me for a moment.

Any knucklehead mutual fund salesman or “advisor” can show you a hypothetical illustration with a better historical track record than the one you have (or the one his own clients have). All he has to do is go through the thousands of choices and pick one to show you that looks good. If you ever see an illustration like that from an “advisor”, ask if he recommended that investment to any of his clients five years ago. Then ask him to show you several proposals he made to clients several years ago. I’ll bet you the investment recommendations are very different than his current recommendation. I’ll further bet that both illustrations emphasize funds or asset classes that have been doing particularly well over the 3 years prior to the creation of the hypothetical illustration. That’s what “sells”.

At we believe the goal of investing is to use existing money to make more money in support of your life goals (such as retirement), as safely as possible. We strive to get from “point A” to “point B” steadily, without any big losses along the way. If, year over year, you see gains (or small losses in “bad years), then we are accomplishing our goal.

The goal is not “to beat the market” or “to beat a benchmark”. Because everyone follows the S&P500 or the Dow Jones Industrials or the Dow Jones Global Stock index, we compare our quarterly performance with those indexes. Since our portfolios are widely diversified, we also include a bond benchmark and a real asset benchmark so you can compare how your portfolio is doing in the context of the overall existing investment environment. It turns out that, over the last seven years, every one of the PortfolioWisdom models outperformed the S&P500 in our theoretical backtests, net of fees, but that is not the main point.

If the person who wants to be your advisor can show you that her past proposals and methodology are consistent with the ones she is showing you today, then you have probably found a true professional.

I wish you the best in reaching your goals.

Current Model Portfolio Allocations

Here are the current 6 asset model portfolio allocations. They will be updated every 4 weeks or so, depending on market behavior. For the sake of consistency, this table will use the same ETF’s as the PortfolioWisdom Mobile App. Be aware that the PortfolioWisdom Mobile App may produce slightly different allocation calculations, because the data updates to the App may not occur at exactly the same time as the data update to this spreadsheet.  If you always want the latest allocation calculations for 6, 9, or even 12 asset classes, feel free to subscribe to the PortfolioWisdom Mobile App. Also, be aware that Mr. Beals will sometimes use different ETF’s for his client portfolios or otherwise customize the models to their specific situations. Use the tabs in the embedded spreadsheet to view the allocations for each different model.