Still Cautious

Well, a couple of weeks ago I had to laugh at the bold predictions of another 15% upside in the S&P500 this year. Since then, the S&P500 dropped sharply and has rebounded back near the highs of 2012 and about even with the highs of 2011. However, bonds have dropped down near the lows of the range they have inhabited for 3-4 months. So, at this date, our portfolios are little changed… right near the highs of 2012.

It is at times like this that I’m grateful I no longer feel the need to predict the future in order to make good investment decisions for my clients (like I used to). Of course, many pundits make a lot of money by making a huge number of predictions. When a few turn out to be right, they publicize those few (ignoring the bad predictions), and gull a new group of people into becoming their clients.

I am remaining cautious because risk (volatility) seems to be increasing for a bonds, gold, and now equities as well, from very low levels. To use my boat out on the water analogy, the waves are just starting to kick up a little and the ride is getting just a bit choppy. So, I’m continuing to hold a fair amount of cash, while investing the balance according to the portfolio models appropriate to my clients.



I had to laugh

I had to laugh when I saw that, in conjunction with the latest vote in Greece (and riots in the streets), there were articles and pundits predicting a 20%-30% gain for the equity markets in 2012. Where were these people 4 months ago at the end of September, 2011? They must have been predicting another 10%-15% to the downside.

To be sure, I’m not saying they are wrong… I don’t do predictions as a part of investing your money. However, I am saying that risk is beginning to increase. Bond volatility has begun to grow over the last few weeks. Although equity volatility has continued to decrease month over month, it has almost stopped decreasing, and is at a low comparable to … you guessed it … previous highs in the equity markets.

Could markets go higher… even much higher? Absolutely. Will we bet on that over and above my methodology? Absolutely not. As I write this post, we are near the equity highs of the day on Monday morning after the “good” Greek vote.

I am raising some cash in our portfolios, while staying with the methodology allocations for the amount that remains invested. Have a great week.

The Most Important Thing

Hello Everyone,

As you know, I’m almost always reading one or two books. For those interested in learning about the financial markets with something that is very readable and not too technical or mathematical, I highly recommend The Most Important Thing by Howard Marks.

Here are a few brief nuggets of wisdom:

“The road to long-term investment success runs through risk control more than through aggressiveness. Over a full career, most investors’ results will be determined more by how many losers they have, and how bad they are, than by the greatness of their winners. Skillful risk control is the mark of the superior investor.”

“Rule number One: Most things will prove to be cyclical.”

“Rule number Two: Some of the greatest opportunities for gain and loss come when other people forget rule number one.”

“Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero. And there’s little that’s as dangerous for investor health as insistence on extrapolating today’s events into the future.”

Thanks everyone, I’ll leave you with those thoughts.

Have a happy February


What does Food have to do with PortfolioWisdom?

Hello Everyone,

Our friend Cindy Landham has been of great value to my wife Sue and me over the last 4-5 years through her work at

Here is an interesting bit of information she sent me and I thought I’d pass it along…

This is how your body likes to work:          (From the Tennessee Heart & Vascular Institute P.C.):

  • The body wants between 200 and 500 kilocalories of fuel every 2 to 4 hours. When we eat over 500ish at one sitting all the extra kilocalories will be stored as fat.
  • While you sleep your body only needs 40 kilocalories an hour; this night-fuel comes from the liver and not your intestines. Any food eaten less than 2 to 3 hours before sleeping will be stored as fat.
  • Foods that are highly processed enter the blood stream so fast that insulin is over-released. This turns on the fat storage system in your body so these foods are more easily stored as fat.
  • Foods that your body actually get to grind up and slowly digest are satisfying and effective for your health. [For some ideas see Low Glycemic Index Foods: High Fiber foods:  Other: ] These are NOT diet foods. These are foods your body knows what to do with because it was made to live on them. Slowly add a few at a time until you are around 80% real food and enjoy feeling frisky!

Let’s get well!


Think a new way to live a new way.

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2012 … So Far, So Good

Hi everyone,

As you know I don’t feel any big urge to continually pontificate on the markets, so I don’t have much to say this week except, so far, so good. The markets have been kind to our portfolios so far, and, as long as volatility continues to decrease (see my previous posts from October/ November 2011) things should continue along. Don’t pay too much attention to the news or the financial channels in the meantime.

On another note, my Mom and my Dad both had major surgery this morning, so let me apologize in advance if I’m not as instantly responsive as usual.

Take Care,


2011 Q4 Performance Reports are Available

Happy New Year Everyone!
The Q4 Performance Reports, which include full-year 2011 numbers, are available online at Morningstar through the client link at

We are completing  a good year in a very tough market, and I’m grateful for the way we performed.

I’m also very optimistic about 2012.  Please call me with any questions.


2011’s Been Quite a Year

Hello everyone,

It has been an interesting year so far. Here is a spreadsheet with a summary of the performance of each asset class in our full 12 asset models for the Fourth Quarter 2011, and for the Year to Date.

This table is a great example of why people to claim to predict the future are dangerous. Many people, including a local bank’s chief market strategist, predicted a year ago that stock would rise and bonds would fall in value as interest rates rose in 2011. They were right for the next few months, but look what happened…. Gold, bonds, and real estate are up for 2011. Stocks are down, and international stocks were hammered.

In spite of that, most of our client accounts are positive for the year and very near their highs. That is why I’m increasingly confident that our methodology works in bad times and good.

Merry Christmas and Happy Holidays!




9/22/2011 Historical Post

From: Dale Beals <>

Subject: Market Update – and encouragement
Date: September 22, 2011 11:15:45 AM CDT
Hello again everyone,
It looks like the equity markets are crashing today, but I am very satisfied with the way we are positioned. The conservative accounts are approximately 70%-75% cash, and the aggressive accounts are approximately 55%-65% cash. I actually added stocks and real assets to most accounts this morning.
After watching the market reaction to the Fed’s announcement yesterday, I closed out the hedge on the US dollar because everyone flees there in a crash. This morning I sold the last of the bonds and will be sticking to equities, real assets (and cash) for awhile.
Right now, the equity markets are down about -10% for the year, and about -20% from the highs this spring while we are roughly flat overall for the year, depending on your risk model. I expect the forced selling to continue through the end of the month, but I will stick to my plan rather than try to predict the future.
Look for the quarterly performance reports to come out in the first 5-10 days of October.
Best Regards,

9/21/2011 Historical Post

From: Dale Beals <>
Subject: Client Update … My view of the markets…
Date: September 21, 2011 8:49:28 AM CDT

Hey everyone,

I just wanted you to know I’m making a (hopefully) temporary adjustment to your portfolios…
Based on recent market activity, I now think that bonds, especially U.S. Treasuries, are more “dangerous” … that is, vulnerable to a sudden, big drop in value … than stocks. I’m not actually making a big bet on stocks… they could still drop from here. But we have dodged the big bullet with the recent stock drop, in my opinion. Many of your accounts are at, or near the highs for 2011, so I’m comfortable with our positions in equities and real assets.
So, I’m continuing to use my allocation model to manage portfolio risk, but I’m removing bonds from the asset mix for a time. This means that, until the equity and real asset markets calm down, your accounts will have a lot of cash.
To hedge that cash against a sudden drop in value of the U.S. dollar, I’m going to put part of your cash into an ETF that basically holds other, higher interest currencies around the world.
Please call me with any questions. Thanks for your business and your trust.

8/10/2011 Historical Post

From: Dale Beals <>
Subject: Update on Market Behavior and how it Affects Us
Date: August 10, 2011 10:32:57 AM CDT

Hi Everyone,

Remarkably, the equities markets needed only about 10-12 trading days to erase almost all the gains of the last 12 months! I will say that this does NOT look like the crash in 2008-2009 to me. In my view, it seems more like the “flash crash” of 2010 played out over days instead of minutes. Note that people have been buying Gold and bonds as desperately as they have been selling stocks. In the 2008 crash, there came a time when people were selling everything simultaneously.
We, however, are doing very well relative to the markets. My rough estimate is that accounts have dipped from your recent April-May highs by no more than 1.5-3% (vs. the markets 13-18%), depending on how conservative or aggressive your strategy is. Part of that is due to my investment model and part is due to my decision to move you to cash just before the fatal vote by our leaders in Washington. I’ve been re-investing gradually as markets fell and am now just about at the target allocations for your model portfolios.
Though I normally only send out performance reports quarterly, I will be sending my clients an interim performance report after August 15th, so you can see how things are going. I am very pleased with how well the asset allocation model has shifted away from the increasingly volatile stocks toward asset classes like bonds, gold, and cash. I plan to stick close to my tested strategy, rather than try to guess what will happen next.
Looking ahead a few months and years, I believe we will work through many of these problems that seem insurmountable now. In my view, stocks and real assets (commodities, real estate, etc) will be the best performing asset classes.  In the short run, making bets on what will happen tomorrow or next week is a losers game in my opinion.
Please feel free to call me with any questions you may have.
If you know of anyone who is not happy with the communication or service or risk management they are receiving from their current investment advisor, please direct them to me. The character of the markets has changed, perhaps permanently, and I believe the old way of investing is far too risky for the people you care about.
Thanks for your trust,