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Monday, March 2, 2015

February 2015 End of Month Update

Word for the week is perspective.

"The fact that we live at the bottom of a deep gravity well, on the surface of a gas covered planet going around a nuclear fireball 90 million miles away and think this to be normal is obviously some indication of how skewed our perspective tends to be." Douglas Adams

"We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses." Abraham Lincoln

"Some people see the glass half full. Others see it half empty.
I see a glass that's twice as big as it needs to be."  George Carlin

"If you look the right way, you can see that the whole world is a garden." Frances Hodgson Burnett

"Nothing is really work unless you would rather be doing something else."  J.M. Barrie

"I will love the light for it shows me the way, yet I will endure the darkness for it shows me the stars." Og Mandino

"Often it isn't the mountains ahead that wear you out, it's the little pebble in your shoe."  Muhammad Ali

"For what you see and hear depends a good deal on where you are standing: it also depends on what sort of person you are."
 C.S. Lewis

"Distance lends enchantment to the view."  Mark Twain


It is the end of another month and time to step back to gain some perspective.
It is important in gaining perspective to look at the present from another person's set of eyes!

Doug Short keeps an eye on perspectives in financial markets and updates data weekly.





Doug Short explains: "What are the Implications of Overvaluation for Portfolio Management?
  • The S&P 500 is likely to decline severely during the next recession, and future index returns over the next 7 to 10 years are likely to be low.
  • Given this scenario, over the next 7 to 10 years a buy and hold strategy may not meet the return assumptions that many investors have for their portfolio.
  • Asset allocation in general and tactical asset allocation specifically are going to be THE important determinant of portfolio return during this time frame. Just buying and holding the S&P 500 is likely be disappointing.
  • Some market commentators argue that high long-term valuations (e.g., Shiller's CAPE) no longer matter because accounting standards have changed and the stock market is still going up. However, the impact of elevated valuations -- when it really matters -- is expressed when the business cycle peaks and the next recession rolls around. Elevated valuations do not take a toll on portfolios so long as the economy is in expansion."



It is true the past is not the present. I have often quoted Sir John Templeton's words: "The four most dangerous words in investing are; 'this time it's different'".

It is also important to remember that past performance does not guarantee future returns.
Perspective on recessions and market valuations do not tell us what is going to happen today or tomorrow.
We do not know what will happen.
The importance of being widely diversified and tactically positioned in investment portfolios always makes more sense than not gaining the perspective of the past.

Marrs Wealth Management builds widely diversified portfolios with diverse asset categories and alternative investment strategies.
 



Gold win out this week.




The S and P 500 index trended down this week. -.28%
The Dow Jones World Index trended up this week. +.25%
The 10 year Treasury Yield index trended down this week.
-6.41%
The US Dollar index trended up this week. +.95%
The CRB Commodities index trended down this week. -.30%
The Gold Index trended up this week.  +.81%
Inflation Linked Bonds trended down this week. -.41%
US Aggregate Bond Index trended up this week. +.55%
The International Aggregate Bond Index trended down this week. -1.26%

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 1st qtr + 2.74%

2014 2nd qtr + 2.91%

2014 3rd qtr + 2.63%

2014 4th qtr +3.04%



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.


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.


Please forward this on to anyone who you think may be interested. 




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.



Tuesday, February 24, 2015

Weekly Update 2 21 15

Word for the week is smooth.

"If we all tried to make other people's paths easy, our own feet would have a smooth even place to walk on." Myrtle Reed

"A cloud is made of billows upon billows upon billows that look like clouds. As you come closer to a cloud you don't get something smooth, but irregularities at a smaller scale." Benoit Mandelbrot

"No individual is alone responsible for a single stepping stone along the path of progress, and where the path is smooth progress is most rapid." Ernest Lawrence

"The course of true love never did run smooth." William Shakespeare

"If there is any country on earth where the course of true love may be expected to run smooth, it is America." Harriet Martineau

"Monetary policy cannot do much about long-run growth, all we can try to do is to try to smooth out periods where the economy is depressed because of lack of demand." Ben Bernanke


"If we all tried to make other people's paths easy, our own feet would have a smooth even place to walk on." Myrtle Reed

One of the most essential contributing factors about reaching a goal is how smooth or rough the ride becomes in reaching a goal. This means the path road should not be stop and start, it is much more likely you will meet the goal if you remain on the path.
A smooth path in investing helps an investor reach their goal in more ways than one.
First, the smoother the path the easier it is to continue on the path.
Second, it becomes much easier to see the end of the path if the path is more consistent and straight.
Third, it is more likely you will get where you're going if the path doesn't have a lot of right, left or U-turns.
Fourth, you are likely to reach the destination faster if the road doesn't have deep ruts.

This is what diversifying with different investment asset classes and alternative investment strategies may do for your investment portfolio.
A study by Robert Baird Wealth Management group concluded that alternative investment strategies could increase the likelihood of reaching you goal faster, while enjoying a smother ride.
 








A similar study put out by BlackRock also concludes that alternative assets and strategies could have the benefits of a faster and smoother path to your investment goal.





"Dr. Christopher Geczy of The Wharton School concludes;

  • Modern Portfolio Theory did not fail during the credit crisis-portfolio construction did. Many investors did not have exposure to enough different asset classes.
  • Investors should consider incorporating a much wider range of strategies and assets as part of their core investment strategy.
  • The notion of "alternative" investing is often misunderstood. Gaining access to different types of investments is an approach that almost everyone should employ, and many strategies are now available to a broad range of individuals."
  





Past Performance is no guarantee of Future Return. All Investments may lose value. This is not an offer of advice to buy or sell any security. 

Marrs Wealth Management builds widely diversified portfolios with widely diverse asset categories and alternative investment strategies.




Stocks win out this week.




The S and P 500 index trended up this week. +.63% 


The Dow Jones World Index trended up this week. -.85%

The 10 year Treasury Yield index trended up this week. 

+5.54%

The US Dollar index trended up this week. +.22%

The CRB Commodities index trended down this week. -1.93%

The Gold Index trended down this week.  -1.87%

Inflation Linked Bonds trended down this week. -.11%

US Aggregate Bond Index trended down this week. -.15% 

The International Aggregate Bond Index trended down this week. -.27% 



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 1st qtr + 2.74%


2014 2nd qtr + 2.91%


2014 3rd qtr + 2.63%


2014 4th qtr +3.04%



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.


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.


Please forward this on to anyone who you think may be interested. 



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.


Tuesday, February 17, 2015

Weekly Update 2 14 2015

Word for the week is crossroads.


"Life presents us with moments of decision-crossroads where we either choose a new direction and move on, or cling to what we already have and be miserable." Mary Buchan

"Indecision is the reluctance or inability to pass a judgment on an issue under consideration. Indecision means you have come to crossroads and you cannot make your mind." Israelmore Ayivor

"Revolt and revolution both wind up at the same crossroads: the police, or folly." Albert Camus

"The lesson will always repeat itself, unless you see yourself as the problem--not others." Shannon L. Alder

"At every crossroads on the path that leads to the future, tradition has placed 10,000 men to guard the past." Maurice Maeterlinck

Truly capital markets and financial assets of the developed world are at a crossroads.
Again the S & P 500 hit an all-time high this week. The ten year US Treasury Bond yield is near an all-time low after three decades of declining rates. Valuations of Treasuries also are extreme premiums.
Many are partying like it is 1999, or you could say 1929, 1966 2007.

Investors often are caught in the middle of chasing after recent winners or investments that are seen as reaching new heights and going higher.

A piece I read this week suggest that investors would do better looking at things that are unpopular or out of favor.

 


Real Danger of Hot Stocks

"Is popularity dangerous? A new study suggests that investors seeking extra return on a portfolio without taking on more risk may be able to get it - by selecting "unpopular" equities."

The study - authored by Roger Ibbotson, Yale finance professor emeritus, and Tomas Idzorek, president of Morningstar Investment Management - takes as its starting point a basic premise: Risk is unpopular. As a result, all other things being equal, investors only take on more risk for a higher expected return.

"The authors used share turnover as a measure of popularity. Their reasoning: The most popular companies are the brand-name stocks that are in the news, which get more analyst coverage and have higher trading volumes."


"The study looked at the largest 3,000 publicly traded stocks over the 42-year period from 1972 through 2013. It then ranked the stocks each year by popularity and assigned them each to a popularity quartile. Each calendar year, the stocks were ranked again based on turnover in the previous year, and the stocks were reassigned to quartiles."



The author of the article referenced below details that US company earnings growth is declining, yet at the same time the profit margins are increasing.

There really does seem to be a crossroad event.  How long can earnings growth continue to be at a low point and profit margin continue to prop up stock values?


"Another Profits Recession Is Underway - Implications For The Stock Market" by Lawrence Fuller



Another author also sees a crossroad event at current levels of excess inventories in relationship to sales.







Consumer sentiment and retail sales both recently declined unexpectedly.

Expect the volatility of late to continue both up and down as I really believe the economy and financial markets are at a crossroad.

It is best to be widely diversified and maintain a patient long term view in investing.



Stocks and Commodities win out this week.


The S and P 500 index trended up this week. +2.02%
The Dow Jones World Index trended up this week. +1.74%
The 10 year Treasury Yield index trended up this week.
+4.26%
The US Dollar index trended down this week. -.57%
The CRB Commodities index trended up this week. +1.93%
The Gold Index trended down this week.  -.50%
Inflation Linked Bonds was flat this week.
US Aggregate Bond Index trended down this week. -.31%
The International Aggregate Bond Index trended up this week.
+.87%

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 1st qtr + 2.74%

2014 2nd qtr + 2.91%

2014 3rd qtr + 2.63%

2014 4th qtr +3.04%



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.


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.


Please forward this on to anyone who you think may be interested. 

 



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.






Monday, February 9, 2015

weekly Update 2 7 2015

Word for the week is balanced.


"Happiness is not a matter of intensity but of balance, order, rhythm and harmony." Thomas Merton

"There is no decision that we can make that doesn't come with some sort of balance or sacrifice." Simon Sinek

"Luck is a very thin wire between survival and disaster, and not many people can keep their balance on it." Hunter S. Thompson

"It is the harmony of the diverse parts, their symmetry, their happy balance; in a word it is all that introduces order, all that gives unity, that permits us to see clearly and to comprehend at once both the ensemble and the details." Henri Poincare

"A well-developed sense of humor is the pole that adds balance to your steps as you walk the tightrope of life." William Arthur Ward

"Man maintains his balance, poise, and sense of security only as he is moving forward." Maxwell Maltz


Balance in life as well as in investing is essential.

There are myriads of ways that one can balance investments, diversify and reduce the risks inherent to investments and investing.


The traditional, some would say outmoded way, is through a balanced combination of Cash, Stocks and Bonds. 



However as many have shown adding other investments such as commodities, real estate, hedging strategies and private investments may add a stronger risk adjusted return profile.


Mebane Faber has done extensive work and research on asset allocation construction and global tactical allocation management strategies. His working paper called; "A Quantitative Approach to Tactical Asset Allocation; circa May 2006, Working Paper, Spring 2007, The Journal of Wealth Management, February 2009, Update February 2013, Update: has a great deal of information and research.



In a 2013 blog post he detailed analysis of several well respected investment professionals and analyzed the results of each allocation.
 

Swensen Portfolio (Source:  Unconventional Success, 2005)
30% US Stocks
20% REITs
20% Foreign Stocks
15% US Govt Short Term
15%  TIPS

El-Erian Portfolio (Source: When Markets Collide, 2008) 15%  US Stocks
15%  Foreign Developed Stocks
12%  Foreign Emerging Stocks
7%  Private Equity
5%  US Bonds
9%  International Bonds
6%  Real Estate
7%  Commodities
5%  TIPS
5%  Infrastructure
8%  Special Situations


Arnott Portfolio (Source: Liquid Alternatives: More Than Hedge Funds, 2008)
10%  US Stocks
10%  Foreign Stocks
10%  Emerging Market Bonds
10%  TIPS
10%  High Yield Bonds
10%  US Govt Long Bonds
10%  Unhedged Foreign Bonds
10%  US Investment Grade Corporates
10%  Commodities
10%  REITs

Risk Parity Portfolio (Unlevered, Faber PPT)
7.5%  US Stocks
7.5% Foreign Stocks
35% US 10 Year Bonds
35% Corporate Bonds
5% GSCI
5% Gold
5%  Real Estate


All detail the diversification effect of multiple asset class investing. Please refer to the article referenced through the link above on details. Past performance is not a guarantee of future return. These portfolios do not constitute a recommendation. For informational purposes only and should not be consider as an offer of personal advice.



Recently Faber outlined similar portfolio allocation put forth of the last several years. Recently echoed by in a book written by Tony Robbins. Tony is the high profile self-promoter and motivator.

The results detail the ability to develop equity like performance with bond like standard deviation through various diversification strategies beyond stocks and bonds. 





Craig Israelsen has also demonstrated the long term benefits of wide diversification beyond the 60/40 portfolio of the past.




Another portfolio allocation model called "The Ivy Portfolio" is outlined in a book written by Mebane Faber. 
 



Faber outlines portfolios tactically rebalanced using the metric of a ten month exponential moving average.


At Marrs Wealth Management we use a widely diversified allocation of seven asset classes. Our process could help you to develop a personalized portfolio built to help you maintain your personal financial goals.
We also believe that the use of actively managed and tactically adjusted portfolios may bring the best results long term.

The following pictures from research by Astor Investment Management help to illustrate the benefits of tactical management. 





Stocks and Commodities win out this week. 



The S and P 500 index trended up this week. +3.03%
The Dow Jones World Index trended up this week. +2.28%
The 10 year Treasury Yield index trended up this week.
+15.70%
The US Dollar index trended down this week. -.22%
The CRB Commodities index trended up this week. +2.75%
The Gold Index trended down this week.  -3.82%
Inflation Linked Bonds trended down this week. -1.45%
US Aggregate Bond Index trended down this week. -1.08%
The International Aggregate Bond Index trended down this week.
-.26%

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 1st qtr + 2.74%

2014 2nd qtr + 2.91%

2014 3rd qtr + 2.63%

The Ten Year Treasury Yield is down 18% Year to Date.

Gold is the leader Year to Date
 


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.


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.


Please forward this on to anyone who you think may be interested. 

 



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

Monday, February 2, 2015

Weekly Update 1 31 2015

Word for the week is value.

"It's not that some people have willpower and some don't... It's that some people are ready to change and others are not."
 James Gordon

"The foolish man seeks happiness in the distance. The wise grows it under his feet." James Oppenheim

"The road to success is always under construction"  Lily Tomlin

"Control Your Own Destiny or Someone Else Will" Jack Welch

"A challenge only becomes an obstacle when you bow to it."  Ray Davis

"Go as far as you can see and you will see further."  Zig Ziglar

"Love is an energy which exists of itself. It is its own value."

"Strive not to be a success, but rather to be of value."

"Price is what you pay. Value is what you get." Warren Buffett
Where an investor starts in making an investment is sometimes one of the most important ingredients to the value received. The other thing that has great importance is when and how you receive the gain of that investment.

The definition of a value investor is making sure the price paid is within the parameters of the value received.

Starting value has nothing to do with timing. It has everything to do with managing investment choice and expectations of return.
A deep value investor takes a long term patient focus. As value investors we are looking for companies and assets that have the ability to compound wealth over time.

We don't time markets but for every investment in value assets and companies, there is a point of being overvalued, fairly valued and undervalued.

These points constitute times of rebalancing or holding.


Given the current level of US Stock market indices based on several valuation metrics the expectations for forward returns maybe should be adjusted. 


Historically the expectation for S & P 500 Index type funds moving forward from today over the next ten years, should average around .5% to .9% annually. 



Why are most investors' expectations much higher?

Most investors around my age or somewhat younger grew up when valuations were far below the average long term valuations of the S & P 500 Index.

If you graduated High School or College in the mid-seventies to the 1990. You were able to get in on an S & P 500 Index type fund and ride valuations up to high peak into the year 2000.
Tremendous gains were earned.  

Since the year 2000, not surprisingly returns have not met the expectations of investors who are between the ages of 65 and 45. Their prior experience was skewed by a low starting valuation and the "irrational exuberances" of the dot com bubble. In 2001, 2002 and 2008, 2009 devastating losses were seen.








Rather than an approach that sticks with an S & P 500 Index style fund or US Large Capitalization investment, investors would do well to look for value in other areas.

Unfortunately traditional bond investments are at all-time highs also, in relationship to traditional values.

Your best approach may lie in non-traditional strategies, active deep value management and what are termed alternative assets?
The prudent person would do well to be widely diversified across non-correlated asset class categories with a focus on strong active management.

At Marrs Wealth Management we take great care to constantly research and monitor the investments and investment managers we use on behalf of our investors.

No one is good at predicting market directional movements.

We are very good at adapting to various market environments.


Year to date the only sectors positive continue the bias towards defense.




The S and P 500 index trended down this week. -2.77%
The Dow Jones World Index trended down this week. -1.67%
The 10 year Treasury Yield index trended down this week.
-7.82%
The US Dollar index trended down this week. -.29%
The CRB Commodities index trended up this week. +1.03%
The Gold Index trended down this week.  -1.15%
Inflation Linked Bonds trended down this week. -1.06%
US Aggregate Bond Index trended up this week. +.59%
The International Aggregate Bond Index trended up this week.
+.90%

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 1st qtr + 2.74%

2014 2nd qtr + 2.91%

2014 3rd qtr + 2.63%

The Ten Year Treasury Yield is down 18% Year to Date.

Gold is the leader Year to Date


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.


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.


Please forward this on to anyone who you think may be interested. 



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.