This week's theme is caution.
"Fools rush in where angels fear to tread." Alexander Pope
"Don't ever take a fence down until you know why it was put up." Robert Frost
"It is hard to be defensive toward a danger which you have never imagined existed." John Christopher
"It is a dangerous position to be in when you can't see, can't hear and won't listen..." Stella Payton
"We must learn by experience to avoid either trains of thought or social situations which FOR US (not necessarily for everyone) lead to temptations. Like motoring-don't wait till the last moment before you put on the brakes but put them on, gently and quietly, while the danger is still a good way off." C.S. Lewis
"Let's be cautious about relying so much on material things that we have no energy left for the spiritual aspects of our lives." James A. Forbes
"If I advocate cautious optimism it is not because I do not have faith in the future but because I do not want to encourage blind faith." Aung San Suu Kyi
"To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit" Sir John Templeton
"In the world of investing, being correct about something is not at all synonymous with being proved correct right away." Howard Marks
"Caution: Cape does not enable user to fly." Warning label on Batman Costume
Economic reports this week were not very positive, yet the US Stock Market was able to make a small gain. Biggest winner of the week was gold.
There is a fine line between being optimistic and hiding your head in the sand. One of my golfing friends every time I see him tells me how he hates what I write weekly in my update.
Although he says he likes the quotes!
All I can do is present the updates as they are reported. You the reader must decide if you need to take action.
Retail sales are approximately 70% of GDP in the US. Declining retail sales began well before the last two recessions.
"Sales growth estimates for companies around the world began sliding towards the middle of 2014 as the price of oil began its months-long setback. In the first chart below we show the average and median company's next 12 month sales growth estimate for the MSCI World Index which shows that the level of expected sales growth took a significant step down into the first quarter of 2015."
Company values go up either by expected sales growth or productivity increases.
These are some of the comments I have read or heard this past week from investment experts I respect.
"Between market values and fundamentals there is a disconnect. Either fundamentals need to improve significantly or market valuations need to come down significantly."
"There is a new class of investors currently buying in this market they are called by some "price insensitive buyers" or by others "value agnostic investors".
1. No one knows what the future holds, whether stocks or the economy will continue to go up or have a downturn.
2. US stock valuations are high, a prudent investor would reevaluate their investment allocation.
3. Interest Rates are at all-time lows, a prudent investor would look for other ways to diversify their investment allocation.
"The idea of "investing" has been sold to people as some sort of high risk & high reward pursuit. So we inevitably end up thinking about "the stock market" when we think about asset allocation.
In reality, we should be thinking about the full menu of options out there and they're much more expansive than just stocks. We actually shouldn't even think about "investing" as "investing". We should think of it purely as an allocation of savings. But the allure of "market beating" returns and getting rich in the markets is too powerful to convince people to pursue a more pragmatic approach."
If you saw last weeks' update you would have seen that of the last ten years eight of those years the 7 asset class diversified portfolio had the highest ten year rolling returns. Stocks only the last two years.
Many are over weighted in long only stock managers or stock market cap weighted index products. It could be more likely they would better reach their investment goals through a more widely diversified investment portfolio.
The S and P 500 index trended up this week. +.31%
The Dow Jones World Index trended up this week. +.78%
The 10 year Treasury Yield index trended down this week.
The US Dollar index trended down this week. -1.71%
The CRB Commodities index trended up this week. +1%
The Gold Index trended up this week. +3.21%
Inflation Linked Bonds trended up this week. +.22%
US Aggregate Bond Index trended down this week. -.12%
The International Aggregate Bond Index trended up this week. +1.9%
The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.
2014 2nd qtr + 2.91%
2014 3rd qtr + 2.63%
2014 4th qtr +3.04%
2015 1st qtr +3.57%
It pays to stay diversified and not chase prior winners!
Many investors take the wrong approach looking primarily at recent return.
Overall risk measures and managing downside risk play an increasing role in end results.
Investors instead should be focused on managing Dynamic Beta exposure, evaluation of Active Share, Sharpe ratios, Sortino ratios and Alpha.
Please forward this on to anyone who you think may be interested. You can view past weeks updates at;
The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. Decisions on making any investment should be made only subsequent to a thorough professional analysis of the overall individual financial picture and the goal for the investments. This writing is not to be construed as an offer of personal advice or an offer to follow any recommendation. Any investments should only be entered into after a thorough analysis from your personal Adviser and related to your current financial picture and goals.
Any investments can lose value. Diversification is not a guarantee against loss.
The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.