Back to Within Spitting Distance of All-Time Highs for the S&P-500

Well my mind is officially blown. I could never have imagined getting back to these levels on the S&P-500 so quickly. I thought it might take a few years like the recovery after 2009.

As further proof things are crazy, gold is up 33% YTD while US long term treasuries are up 25% YTD 2020. Wow. And this huge run-up in the SPY’s has them at 3.5% up YTD.

Although this Friday looks to close in negative numbers for the SPY and the QQQ, it has been an amazing 10 day run. I can’t wait to see what is next.

Volatility has been slowly shrinking for stocks, but has increased for gold, silver and the miners. Happily, all three of those assets have been hitting new highs almost every day for the last month or so. This may be counterintuitive, but upward volatility is almost as dangerous (risky) as downward volatility, because these assets fall faster than they climb. So… I’ve been rebalancing the position sizes of gold, silver and the gold miners in any accounts where they appear during this runup.

We end the week with a lot of cash. I’ll be reinvesting as the overall portfolio volatility dies down some more.

Have a great weekend.


Stocks Break Overhead Resistance

Yesterday, the S&P-500 closed above resistance created at the beginning of the crash earlier this year. The Nasdaq has been reaching all-time highs for over a month now. Also, daily volatility has steadily reduced, finally falling below crisis levels in the VIX index.

Accordingly, we began reducing our cash and investing into stocks, metals, and the miners.

It will be interesting to see if the S&P-500 can regain the all-time highs from early in 2020. If so, that would be the fastest recovery from a 30% drawdown in history.

On a side note, silver has crossed above $20/oz, reaching a level not seen since 2016. Gold is above $1800/oz. and also climbing. Whatever the reason (probably the Fed pouring trillions of new US dollars into the financial system), our portfolio model is happy to see this.



A Sideways Week Before Memorial Day

Hello friends! Happy Memorial Day! Thanks to the generations of soldiers, airmen, Navy, Coast Guard, and Marines who have served our country so well.

Well the fireworks have subsided somewhat in spite of the the disturbing news from Hong Kong, China, Brazil and Russia… oh yes! and Washington DC. I can’t tell which end is up or who to believe, so I admit I’ve sort of checked out.

The US stock markets have moved sideways in a fairly small range for a couple of weeks now. Accordingly, our portfolios haven’t moved much either. We are still 50% in cash because I expect a big push either up or down from this narrow range we’ve been in. While my instincts tell me the big push will be UP, the risk of a downside move after the weekend is keeping our cash position high.

Please be safe and enjoy the long weekend.

Many, many thanks to our healthcare providers who have faced great risks to care for our sick family and friends during the last few months. Many of them didn’t “sign up” for this, but have bravely fought the good fight.

God Bless you all.


Take a Look at Your Portfolio

We have seen a nice bounce back from the bottom in March 2020. As of this writing, in 2020:

SPY (S&P-500 ETF): -10.43%
GLD(Gold ETF): +12.35%
IYR (US Real Estate ETF): -17.65%
TLT (Long US Treasuries): +25.04%
VXF (US Russell 2000 stocks): -17.24%

Wow! You mean stocks are not back to our highs? No stocks are not even back to the start of the year 2020. As you see, bonds and gold are up quite a bit and helped our methodology results this year. As I wrote in recent blogs, I removed Russell 2000 stocks and real estate from our portfolios earlier this year because of the unprecedented Covid-19 situation. Actually, the VXF was removed before the crash. I sold half the real estate before the market crashed, and sold the other half during the decline.

What should you do now? Well, this blog is educational in nature and not intended to be investment advice, so I won’t say “do this” or “do that”. However, the way I’ve been managing our portfolios is to:
1. Raise cash early in the crisis to reduce risk / volatility in our accounts.
2. Gradually invest some of our cash on the way down.
3. Gradually rebuild the cash cushion by selling on the way up.
Go back to our normal methodology after the volatility in the markets returns to “normal” or something like it was in the year or so before the crash.

“Wait !,” you say. “It’s too late! My advisor (or myself) did not raise any cash ahead of time.” “Heck! He/she/me just tells me to hang on and rebalance every quarter and hope for the best!”. So how does that make you feel?

In my view, it is not too late to think about implementing your own version of the 1-2-3 plan above, depending on how close you are to retirement or needing the money.

Noone knows the future. But the markets, the Fed and Congress, and person who is signing those aid checks 🙂 … have given us a great gift in the stock market rally. Think of three different scenarios:
1. Stocks roll over and go back to the lows of last month. Would you be glad you raised cash? Would you kick yourself for NOT raising cash?
2. Stocks continue to rally back to the all-time highs in February. Would you kick yourself for raising cash? Would you be glad you held on to your stocks all the way back?
3. Stocks keep moving sideways. . . up a few percent, then down a few percent, like the last couple of weeks. Would you feel good or bad about your plan?

If you think in terms of scenarios: best case, worst case, middle case, making the decision may be easier. If you cannot live with the worst case scenario, then you might want to think about how to eliminate that scenario or at least mitigate it.

Take care and stay safe


The Stock Rally Continues

After a two day pause earlier this week, stocks are finishing the week strongly. As of Friday afternoon just before the close, the SPY is trading just above 285; a level we haven’t seen for about a month. Yay!

Of course, stocks are still quite a ways below the all-time highs in February just before we came down with the virus. To all of my friends who read these blogs I say, “Please be careful and safe.” I can’t think of many things more important than your health. Even if some people are tooling around as if they didn’t have a care in the world, there is no reason for us to take thoughtless risks. I don’t know if the virus pandemic justifies the extreme measures worldwide governments have taken. But I can’t say for sure the measures were NOT justified. I will continue to be careful and take prudent risks when I feel they are justified by what I stand to gain.

That risk management philosophy is what informs my investment methodology. As of today, we have about 68% of our portfolios in cash. We sold stocks and real estate before the crash. We bought on the way down. We sold on the way up. Now we will stay cautious and wait for the crazy market swings to calm down.

I’ve been in touch with my clients this week to let them know exactly where their accounts stand so far in 2020. They are very pleased.

Please let me know if you would like some help with your portfolio. I’d be happy to review with you your life and retirement situation from a risk management perspective.

Have a great weekend.


No, This Is Not the Bear Market Bottom … according to Richard Bernstein

Here is something from that might interest you: 

Richard Bernstein: No, This Isn’t the Stock Market Bottom

We are still 38% in cash, except for the aggressive portfolios. Other asset classes are becoming slightly less volatile. As that continues we will put more cash to work. However, if we have another big leg down in stocks, volatility will increase and we will hold on to our cash.

Be safe and have a good weekend.


Stocks Rally at the End of March

We are finishing March focused on managing risk (volatility). We avoided the worst of the crash by (for the balanced portfolios) selling all of our stocks and half of our real estate before the crash began. The timing was fortunate, but not pure luck, because I was very concerned that the covid-19 virus would cause more problems than were being reflected in the markets.

Now, we are about 60% invested, with 40% in cash, since the daily range of movement (volatility) is beginning to taper off. The 60% is invested in a modified version of the standard portfolio. Instead of the SPY ETF, I’m combining the Vanguard VTI (total US stock market) and XLU (the US Utility sector paying 3.4% dividends) for the stock allocation. I’ve completely removed the real estate sector from our portfolio for now, since it is unclear how many landlords are going to go broke because the tenants (commercial and individual) can’t pay the rent. Finally, the gold allocation is actually split between gold and silver ETFs.

If volatility continues to taper off, I’ll continue to invest cash in our “crisis” model until we are fully invested again.

Stay safe and have a good week.


We’ve Had a Couple of Very Good Days

Last Friday, I was getting a little down. I was hoping for some kind of bounce to begin last week. Well, our bounce began this week. While stocks were mostly down yesterday, our gold, silver and gold miners made a big move up. Today, everything but US Treasuries is up big… perhaps in the hope that the politicians will take care of this huge aid bill they have promised.

I don’t mind saying this two day rally in our portfolio has been a big relief. At least, for now, gold is not being sold to meet margin calls for stock, real estate, and mortgage-backed securities. Yes, those and car loan-backed securities are in trouble again. It looks like they may be bailed out again, too.

I’ve used the rally to raise more cash. I want to see volatility (wild intraday swings) decrease before putting all of our cash back to work.

We still have a ways to go, in my opinion, but I’m really liking this bounce.



My Optimism is Fading on Friday the 19th

During this week, I was hopeful we would see some kind of snapback rally off the recent stock market lows. At this writing, 12:42 Central time, I’m beginning to have doubts.

It seems that every upward move is met with relentless selling over night. Today, there was an upward move in the morning that didn’t quite get ahead of yesterday’s close followed by another selloff. We may still see a rally before the end of the day, but I doubt traders will want to stick their necks out by going long stocks into the weekend. Only institutions or the fabled government plunge protection team have the staying power to buy today without worrying about another possible 20%-30% downside.

No, I’m not going to go to cash. We have about 38% in cash right now, so we’re fine. For the diversified, conservative portfolio, we have about 23% in stocks acquired in the last two weeks. After all, I don’t manage the portfolios based on how I feel or what I predict. We could hear announcements over the weekend that cause the stock markets to open 10%-15% higher, for all I know.

Stay safe. Be kind to yourself and others.

Have a good weekend.


My Annual ADV and We May Have a Market Bounce

As of this writing on Wednesday 3/18/2020 at 9:16 Central, it looks like the markets are trying to rally from the lows of recent days. We should have an idea by the end of today.

Also, attached for your reading pleasure (just kidding) is my annual update to the ADV Brochure update which FINRA regs say must be distributed to clients each year.

The market gapped about 6% lower this morning from yesterday’s close, then rallied about 3.5-4% in the first hour or so. If the buyers step up, we may see an intermediate bottom. I added positions in Microsoft and Apple just after the open today, bringing the total stock allocation for the Conservative Portfolio to 24%. We still have 35% in cash.

If you manage your own money, it probably makes sense, depending on your overall financial situation, to put some money to work. The markets are below the lows of 2018 and are at levels we saw back in the Summer of 2017. Wow. Gold and Silver have been sold heavily over the last 7-10 days, but we are holding for the long term. The Fed is fighting deflation by creating money and spreading it around, so the metals help provide a haven against the devaluation of the US dollar. If the Fed does not succeed in fighting deflation, the cash we hold will help us weather the storm.

Time will tell. Be safe and be kind to others.