Category: Portfolio Wisdom Blogs

We’ve had a really nice rally since the intermediate term bottom hit the day before Christmas 2018. Each time we’ve seen a morning drop in stocks, buyers have stepped in and almost always ended the day with overall gains. As of this writing on Tuesday, January 22, at 9:50 AM Central, the S&P500 index is down 1% and US Small Caps and the International Stocks are down more. We’ll see what happens.

The rally has regained about half of the big 20% drop from all-time highs last Fall, but our indicators do not show up-trends for any asset classes except gold. Accordingly, we are treating Gold as our least risky asset class … both in terms of weekly volatility and trend. Since our methodology is all about managing risk, the least risky asset class gets the highest percentage portfolio allocation.

We are at another potential turning point for US Stocks. If stocks continue rallying and enter an up-trend they will “earn” a higher allocation of our portfolios. The same goes for bonds. No changes for now.

Have a great week.

Well, Mr. Mnuchin announced last weekend that he was calling the big banks last week to ask for their help in restoring confidence in the markets. Monday was terrible because everyone was on vacation. But, Shazam! The day after Christmas, we saw the biggest one day point gain in history!

Can you say “Plunge Protection Team”? The PPT is an old urban legend in finance that there is a secret group of financiers that, upon request, will step into the financial markets and act to stop a crash.

However, we see that this “secret” group really does exist! The day after markets officially enter bear market territory, they go up 5% in one day! I’m sure many breathed a sigh of relief.

There’s only one problem, though. If the selling continues, how many times will this group (if it exists) continue to step in and prop up the markets? Hmmm.

No actions are necessary in our portfolios. Gold and the gold miners continue their uptrend. We continue to hold a lot of cash.

Cheers, and Happy New Year!

As of this writing on Friday afternoon, the S&P-500 is down about 2% today, to wrap up a pretty bad week for stocks. Thankfully, gold, US Treasuries and the miners are doing well, offsetting our stock allocations.

After last week’s announcements about the Trade Truce, many people seemed to be jumping back in to stocks. Then came Tuesday’s big drop, followed by the market holiday, then Thursday’s big morning scare followed by a rally to close Thursday almost unchanged.

Lot’s of volatility. Volatility equals danger for your portfolio, in my view. So there is no reason for us to change our allocations at this time. We’ll keep holding lots of cash.

Have a great weekend!

Over the weekend, the news hit the press of the “Ceasefire” in the US – China trade war. Stocks opened up 2.5% or so yesterday morning. As of this writing, Tuesday afternoon, the stock markets have already given all of those gains back.

Now, we must wait to see if the lift from the Fed’s statements last week that we are “close to neutral” on interest rates is lost as well.

Three things are reassuring for our clients:

• US Treasuries are rallying,
• Gold is rallying, and
• We are holding more than 50% cash.

Cheers

Yesterday Mr. Powell, the Fed leader, reversed his previous stance on the need to continue raising interest rates for a long time. Stocks, bonds, foreign currencies and precious metals soared on the news.

Our client portfolios did quite well, since all those asset classes appear in various client accounts.

Today gold is still going up along with bonds, while stocks are catching their breath. The more dovish the Fed gets, the more attractive gold gets, I believe.

Since gold and silver are at multi-decade inflation-adjusted lows and stocks are just 10% or so off all-time highs, it makes sense to over weight the former and underweight the latter. However, in our standard allocation, we do not anticipate the future. We simply allocate funds among the asset classes based on how they are behaving recently.

No action needed for now.

Cheers.

Many thanks to Chuck Butler of The Daily Pfenning for sharing this Alan Greenspan quote from 1966.

“This is the shabby secret of the Welfare Statists’ tirades against Gold. Deficit Spending is simply a scheme for the confiscation of wealth… Gold stands in the way of this insidious process. It stands as a protector of property rights. If one can grasp this, one has no difficulty in understanding the statists’ antagonism toward the Gold Standard”… – Alan Greenspan from Gold & Economic Freedom 1966

Don’t kid yourself. The United States had a $100 Billion budget deficit (we spent more than we brought in) in October 2018, the first month of our new fiscal year. That deficit is GROWING EVERY MONTH, with no credible end in sight. Don’t forget the budget deficit projections do not include unfunded liabilities like Social Security and Medicare. Yikes!

Something has to give someday. When the debt destruction wildfire occurs (think California Camp Fire), it will likely happen suddenly and “burn up” savings held in cash and “safe” investments like bonds. The middle class and poor will probably suffer, but many of the wealthy will likely be burned as well.

Word to the wise!

It looks like today (Thursday) the S&P-500 will open below where it started 2018. It was just a couple of months ago that “everyone” saw nothing but upside to the stock market and the real estate market … apparently too willing to forget 2006-2008, just 10 years ago.

I don’t know if this is the beginning of the big bear market or another scare. I have learned to stick to my methodology pretty closely and respond to what the market is doing right now, rather than try to predict the future.

We still hold over 50% of our non-speculative accounts in cash because of the increased risk. No need for any changes at this time.

Cheers.

Yesterday the stock markets had a great day on the heels of the mid-term election results. Perhaps with the Republicans controlling the senate and the Democrats controlling the House of Representatives, the markets expect some stability (i.e. gridlock) for awhile.

Whatever the reason, we had a great rally yesterday, with all classes being at least slightly up for the day. Today, things are quiet without much movement either way as of 12:34 Central.

No portfolio changes for us.

Cheers.