Gold up big. Stocks are down

Well the timing of my decision to take profits in stocks and real estate last Tuesday turned out to be fortunate. The allocations to gold and US Treasuries are up strongly, US stocks are down more than 1%, and real estate is about flat, at this writing on Friday afternoon.

Of course, this could be just another minor pullback in stocks, like all the others we’ve had the last 10 years. In fact, you could say the markets were getting ahead of themselves and this pullback is very healthy. So, I’m not making predictions. That is not our business.

Our business is investment management with a primary focus on risk management. Getting good long-term risk-adjusted returns is a worthy goal. It just doesn’t seem to me like the markets are properly pricing in the risks of the corona virus, the ever growing consumer and corporate debt, and the various political issues we face around the globe.

Have a great weekend.

Dale

Corona Virus – Managing Portfolio Risk

Well, I’ve been watching our portfolios and the US stock markets grind slowly higher. It’s been really nice. Now, I feel the time has come to take some profits off the table in SPY (S&P-500 ETF) and IYR (Cohen & Steers Realty Index ETF). Just these two positions have added approximately 2% to our total portfolio returns over the last month or two.

We are still very close to all-time highs in the US stock market, so you might ask me “Why are you doing this now? My answer is, “To be safe rather than sorry.” Yes, I know that we could miss out on further gains, but the markets seem to be ignoring the potential economic damage the quarantines and efforts to fight the virus could cause.

Since many of my clients are at or past retirement age, today, I sold all of the SPY position and half the IYR position. I will continue to watch the TLT (U.S. Treasuries ETF) and the GLD (Gold ETF) very carefully. Right now, they are both rallying strongly. If either of those asset classes shows weakness, then I’ll take profits there as well.

The “standard” very conservative portfolio allocations are still shown on the portfoliowisdom home page.

Cheers.

Dale

It's December 2019!

Well, Cyber Monday is tomorrow, and I wonder if the deals will be any better than they were for Black Friday. Now that people have been “trained” to spend a lot of money during this season, I can’t help wondering if many advertised “deals” are not quite that good. Hmmm.

After trailing other asset classes most of 2019, stocks are now on top for the year. Gold, silver and the miners entered an intermediate-term downtrend last week. Accordingly, we are increasing allocations to stocks and real estate; underweighting US Treasuries and gold. This market behavior reminds me of the end of 2017 when many people were calling for a recession, but the market kept chugging upward.

As I’ve written many times before, we are not in the business of predicting the market. Our methodology simply responds to recent market behavior to manage downside risk.

Have a great December!

S&P-500 Set a New, Record High

Stocks are back in an intermediate uptrend and breaking new, higher ground. While stocks were turning around, precious metals and the miners have been consolidating after a huge jump this Summer. Real Estate has been on a tear, also setting new highs.

It seems that the financial markets are paying no attention to slowing capital expenditures, shrinking profits, larger Federal deficits, record debt of all kinds, and increasing consumer loan delinquencies. Go figure.

As a great investor once said, “The stock market can remain irrational far longer than you can remain solvent”. How does that apply to us? We can have an opinion about what should be happening, or what will happen soon. However, we allocate our portfolio based on our methodology and what the markets are doing now. Sooner or later, economic fundamentals will have their impact. Our goal is to respond to current market behavior and make money… not try to “be right”.

Cheers,

Dale

PortfolioWisdom.com is 10 Years Old!

Thanks to our friends, customers, and investment clients for making portfoliowisdom.com a success. We founded Dale Beals Financial Wisdom, LLC (d/b/a PortfolioWisdom) on June 3, 2009, because there had to be a better way to treat clients than the way a typical “wire-house” (like Smith Barney or Merrill Lynch), or bank would behave.

Without going into many negatives about those business models, we set out to:

  1. Share your pain as well as your investment success by offering to reduce our fees in any year you had a net loss.
  2. Remove the financial conflict of interest by establishing a fee-only relationship instead of selling products on commission.
  3. Reduce your overall investment costs by eliminating hidden “middle-man” expenses, soft dollar agreements, and by charging reasonable advisory fees for our work.

During the last 10 years, we have developed and refined asset allocation models for both conservative and speculative clients. Those refined models are working well, and we use them to manage our own money.

We are very grateful. Thanks again.

Dale Beals

Quite an Interesting Week – The Fed Folds

Stocks got a nice lift when the Fed said that, all of a sudden, they were looking hard at LOWERING interest rates. Not two months ago, they were claiming the economy was great, and they would be RAISING rates twice more in 2019.

The real story is gold and the miners. They absolutely exploded right through the ceiling of $1350/oz for gold that has held for the last five years. Yes five years. Gold is finishing the week at $1404/oz.

Thankfully, we fully benefited from this move.

Have a great weekend.

Stocks Looking Dangerous

Gold and Bonds are up while Stocks are down big today. The trade war is being blamed, but there are a number of possible causes in addition to trade wars.

  1. Consumer debt has never been this high. People owe more than they did just prior to the Financial Crisis of 2008.
  2. Living costs are rising, even though the Fed says inflation is low.
  3. The US budget deficit continues to grow, and our total debt is growing at the rate of over $1 trillion per year. Actually, the last trillion dollars of debt took just 10 months to accumulate.
  4. More car loans are delinquent (more than 90 days overdue) than ever before.
  5. More credit cards are delinquent (more than 90 days overdue) than ever. I read today that 80% of American families are one missed paycheck away from serious financial trouble.
  6. And our politics! Don’t get me started.

In spite of these factors, the US Dollar seems to maintain its strength. Gold gets crushed every time the price reaches $1,350 / oz. And US stocks are still within 7% or so of all-time record highs… even after today’s selloff.

So who knows? I sure can’t predict what will happen. Is this the beginning of the big reckoning? Or just another sudden dip on the way to new highs? Time will tell.

For now, our methodology has Gold under-weighted due to its intermediate trend, and real estate under-weighted due to recently high volatility. We have roughly 9% in cash and 40% in Tips.

Have a great long weekend!

Brutal Day on Wall Street

As of this writing on Monday afternoon, the S&P500 is down approximately 2.6%. Gold is up 1%, Real Estate is flat and US Treasuries (TIPS) are up just a little.

Now that the test of top has failed, and we passed the deadline without any settlement in the trade war, pessimism rules.

Manage your risk carefully, based on your personal objectives and situation in life.

Dale

US Stocks Fail the Test of Top

Blame the trade war or blame the Fed. Whatever you blame, we’ve seen stocks nearly 4% below where they were just a week ago or so.

Every major asset class has been nicked, but stocks, coming off record highs, may be getting hit the hardest. Gold and real estate seem to have stabilized over the last couple of days.

Looking at the charts, I don’t anticipate any new signals from my methodology next week, but volatility is definitely beginning to creep back up.

Let’s stay alert!

US Stocks Holding at Record Highs Today!

My last post covered the test of previous highs for the S&P500. A few days ago, the stock market pushed above the previous highs. After the Fed’s rate decision and announcements about their interest rate policy, ALL of the major asset classes took a big hit for a couple of days. However, today, all major asset classes are back on the rise, and, at this writing, the S&P500 is right back at the record highs.

Interestingly, gold, silver and the miners all established intermediate downtrends just this week. Accordingly, I rebalanced the portfolios, reducing the gold allocation and increasing all the other asset classes. It’s nice to have the luck for all of these assets we bought Wednesday and Thursday to be up nicely today.

Have a great weekend!