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Monday, November 24, 2014

Weekly update 11 22 14

Word for the week is perspective.


"Shadow is the obstruction of light. Shadows appear to me to be of supreme importance in perspective, because, without them opaque and solid bodies will be ill defined; that which is contained within their outlines and their boundaries themselves will be ill-understood unless they are shown against a background of a different tone from themselves."

"Faith gives you an inner strength and a sense of balance and perspective in life." Gregory Peck

It's stunning to me what kind of an impact even one person can have if they have the right passion, perspective and are able to align the interest of a great team.
"A lot of people in our industry haven't had very diverse experiences. So they don't have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one's understanding of the human experience, the better design we will have."


Craig and I were asked to teach an advanced class in Finance at Iowa State University this past week on Risk and Investment Portfolio Allocation.
It was a lot of fun talking with students at Iowa State University.

I asked them between seven investment asset classes which ones were the top performing (in the top three positions of performance over the last twenty years?
Of course I wasn't surprised, nearly everyone said US Stocks. 
This is their experience, they didn't really have a focus on investments in the last twenty years. They were barely walking twenty years ago!
Their perspective on investments is the last three or four years and the US stock market has been an overwhelming leader.

The answer is Real Estate has been the leader, followed by Commodities, Non-US Stocks, and fourth is US Stocks, followed by Non-US Bonds, US Bonds and cash.

Quite a few people are losing the long term perspective. One person this week just absolutely claimed that he has a better track record on his own than working with us.

His reference point was the last two years. Almost everything was in US stocks.
We readily admit we are not trying to keep up with one single asset class and over the last two years have not outpaced the S and P 500 Index return.
The last ten years given our benchmark we have beaten the S & P 500 Index in reducing risk and increasing overall risk adjusted return.

*Disclosure below is a representative picture of our return benchmark. Actual client returns may be different and vary based on risk tolerance, time frame and overall financial position. 
 




*Above chart shows average return and risk as measured by three standard deviations of return over the last ten years ending June 2014.

Past performance is no guarantee of future return and any investments may lose value.
Many investors are losing that perspective and some believe this run up in stocks can continue forever.
We believe it has been prudent to take profits during the last two periods and reduce exposure to stocks.

I need to remind you that a return of one year of positive 40% and another of negative 40% does not leave you at even money. You still have a long ways to go in order to recoup your principal.
Moving averages don't always tell a clear picture. 



The last two periods of unrelenting upward movement in the  S and P 500 index ended badly for many folks. Yet here we are with people believing no downside risk is evident in the stock market.

I also asked the students if they knew what had the highest return over the last 15 years. They answered unanimously stocks.
Many people I know answer the same way.
But the Barclays Capital Bond Index has far surpassed the return of the S and P 500 over the last 15 years. Gold is out of favor now but it also far outpaced the S and P 500 Index.
I don't know the future, but I know enough to not throw all the eggs in one basket. 


Then I asked the students about the Nasdaq 100 Index where quite a few technology companies reside. Yes the technology sector is one of the hot investment areas.

 

Do you know what return you would have holding the Nasdaq Index represented by the Exchange Traded Fund QQQ? 


Assets that get bid up very high, because it is rationalized as a sure thing, often take a great amount of time to recover!
It happened with the Tech Bubble, the Real Estate Bubble and the Credit Bubble.

 

Jeremy Grantham wrote in September of 2007 in Fortune magazine of three certainties.
1.  Profit margins would greatly contract, 2. The housing market would collapse 3. Risk premiums would widely expand with severe consequences to the financial markets.

Grantham and many others are sending out similar warnings about the US market now. Grantham's firm GMO Capital is estimating US stock returns from this point on through the next 7 years at a negative 1.7% annualized.



The article referenced by the above link titled "HOW DOES OUR GLOBAL CREDIT EXPANSIONARY BUBBLE END?
Summarizes the thoughts as follows:

"Summary
  • We are nearing the end of the global expansionary bubble.
  • Major currency devaluations (wars) already underway are primary indicators.
  • Investors should prepare for rising volatility and rising interest rates worldwide."
In this piece they quote the founder of Austrian Economics.

 "It was Ludwig von Mises (1881-1973), the founder of Austrian Economics, that we believe gave us a perspective for what lies ahead. Von Mises famously predicted many decades ago:
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later, as the final and total collapse of the currency itself." 

Also quoted is the great mentor of Warren Buffett.  

"Global investors should be taking action to prepare for the end of the secular credit expansionary bubble. We have been experiencing major asset "busts" and financial crises virtually every 6-7 years since 1973. Now, six years post the Great Crisis of 2008-9, we are in the late innings of yet another major cycle.
We suggest taking to heart legendary investor Benjamin Graham's time-honored advice:
There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently."

Diversification has not paid off in the last two years, much of that may change in the not very distant future!

 

This week energy and materials sectors outperformed. Also gold and commodities were showing strength. This could begin a rotation of leadership within markets?






The S and P 500 index trended up last week. +1.16%
The Dow Jones World Index trended up last week +.94%
The 10 year Treasury Yield index trended down last week.
-.22%
The US Dollar index trended up last week. +.89%
The CRB Commodities index trended up last week. +.87%
The Gold Index trended up last week +.59%
Inflation Linked Bonds trended down last week -1.19%
US Aggregate Bond Index trended up last week +.10%
The International Aggregate Bond Index trended up last week +.82%

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%

Stocks lead along with Real Estate. 
 


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, Treynor 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.

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, November 17, 2014

Weekly Update 11 15 2014

Word for the week is productivity.

"The number one benefit of information technology is that it empowers people to do what they want to do. It lets people be creative. It lets people be productive. It lets people learn things they didn't think they could learn before, and so in a sense it is all about potential." Steve Ballmer

"The bottom line is, when people are crystal clear about the most important priorities of the organization and team they work with and prioritized their work around those top priorities, not only are they many times more productive, they discover they have the time they need to have a whole life." Stephen Covey

"The more generous we are, the more joyous we become. The more cooperative we are, the more valuable we become. The more enthusiastic we are, the more productive we become. The more serving we are, the more prosperous we become." William Arthur Ward

"So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system." Milton Friedman

Marrs Wealth Management appeared again this past month in the Wealth Management monthly Advisor Confidence Index.

 


I am on the monthly Advisor Panel that fills out a survey on the markets and economy each month for Wealth Management Magazine publications.
Last month I stated, "markets may move sideways with a lot of volatility over the next several months."
That was after a mini crash in October.
This month my comment was "Look out below"! It is a long way down from these lofty heights".
Yes I do believe the heights of the US stock market are in for a correction.
Why?
The long range forecast of three sources tell us historically a correction is well over due.
The Shiller PE is forecasting 10 year future returns on US Equities at below 2% annually, the GMO 7 year forecast for US Large Cap Stocks is at a negative 1.5% annually and Research Affiliates forecasts ten year returns in stocks at around 2.5% annually.

This makes very clear sense when you look at historical long term returns of the S and P 500 index at somewhere between 6.5% and 7.5% annualized.

It is very clear that 1995 to 2010 was not the norm, market returns were inflated by Central Bank policy making and speculation. We could say the same of (2003 to 2007) and (2009 to 2014).

These periods are not the norm they are outlier periods fed by artificially low interest rates and speculative investing based on margin debt.
That is unless this time is different?

"The four most dangerous words in investing are: 'this time it's different.'" Sir John Templeton

US Stocks may continue the steep climb into early next year but it will only be fluff on top and an eventually deeper drop or a longer term string of mediocre return years.
We are remaining widely diversified and underweight equities.



In a recent interview with Jim Grant, Steve Forbes asked some very important questions?

Forbes: Tell us, what is going on? We've had the worst recovery from a sharp downturn in U.S. history. Yet the monetary base has exploded far in excess of what it did in the '70s and yet we haven't had an explosion, at least in the Consumer Price Index. Gold is down from its highs of three years ago. Stocks are at a record high. What you call the taper tantrum, now the markets are in seeming calm about that. So what in the world is happening?

Grant: Well, I think first and foremost the patient is overmedicated. That is, the economic patient. Stimulus, by the bottleful, by the prescription fill, gradually and by degree are (and I guess not so gradually) the Federal Reserve has moved to substitute price administration for price discovery. And it seems to me that the Fed's kind of full-court pressed (to switch metaphors) on financial markets and pricing thereof has induced a deep complacency with respect to financial assets and has also introduced a sharp degree of optimism or what we might call even inflation in the financial markets.

Forbes: Stocks. How much of that is a distortion? People would say some sectors are kind of dicey. But PEs overall, not too out of line.

Grant: Yes. There is such a thing in analysis called the dividend discount model. And it says that the value of an equity is the value of its projected cash flows discounted by a suitable rate of interest. And there's more to it than that, of course.
But if the rate of interest one uses to discount cash flows is itself unsuitable or if it's suppressed, that means the cash flows are exaggerated or inflated. And the price is higher than it would otherwise be. And I think that's the risk in the stock market generally. I understand that many areas of the stock market are not certainly in the neighborhood of valuation where they were in 1999. But that doesn't mean that things are fairly valued. And also I think more broadly, more fundamentally, we are all doing business in a kind of valuation hall of mirrors on account of the suppression of interest rates and the general body English that our federal masters are giving the stock market. They want it higher for the so-called wealth effect. Wealth effect, mind you.





In a recent Seeking Alpha post the following chart shows that we are just below the high in 2000 and above the peak in 2007 looking at Market Capitalization related to overall GDP. 



Also corporate profits as a percentage of GDP are very elevated.
Notice the major peak in 1966 was the end of the Federal Reserve's first experiment in Quantitative Easing!
Then came nearly 20 years of sideways markets.




Dave Stockman writes in a blog on Seeking Alpha, "Well, now. Here we are nearing the end of 2014 and the nation's once and mighty "jobs machine" is fixing to utilize no more labor hours this year than it did way back at the end of the 20th century."
"And, no, that completely unsung fact does not reflect some anomalous quirk owing to the Great Recession. We are now 64 months from the June 2009 bottom and the index of total labor hours in the non-farm business economy stands at about 108--the same level first recorded in Q3 1999. This means that during the 21st century to date the US economy has been bicycling up-and-down an essentially constant amount of labor during the intervals between the serial financial market booms and busts engineered by our monetary politburo."


Production of goods is still well below the pace of 2000. Lower lows and lower highs!



Unemployment numbers continue to improve, but job creation lags. Lower lows and lower highs!










 The S and P 500 index trended up last week. +.39%
The Dow Jones World Index trended up last week +.54%
The 10 year Treasury Yield index trended up last week.
+.35%
The US Dollar index trended down last week. -.05%
The CRB Commodities index trended down last week. - 1.43%
The Gold Index trended up last week +.59%
Inflation Linked Bonds trended up last week +.63%
US Aggregate Bond Index trended down last week -.10%
The International Aggregate Bond Index trended down last week - .34%

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%

Stocks lead along with Real Estate. 



Another Cautionary Sign

U.S. Sector Returns Year to Date
Defensive Sectors (Healthcare, Utilities, Consumer Staples) and Technology Lead




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, Treynor 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.

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, November 11, 2014

Weekly Update 11 8 2014

Word for the week is confusion.


"Confusion of goals and perfection of means seems, in my opinion, to characterize our age." Albert Einstein

"Confusion is a word we have invented for an order which is not understood." Henry Miller

"When a man's knowledge is not in order, the more of it he has the greater will be his confusion." Herbert Spencer

"Be able to notice all the confusion between fact and opinion that appears in the news." Marilyn vos Savant

"Economists treat economics as if it is a pure science divorced from the facts of life. The result of this false accountancy is a willful confusion under cover of which industry wreaks its havoc scot-free and ignores the environmental cost."  

"A perfection of means, and confusion of aims, seems to be our main problem." Albert Einstein


A recent column in the Chicago Tribune was titled; "Investors are 'confused and harmed'"

The article voiced what many people are feeling. How do you know what a person does as a financial services professional?
Is there a difference between a person employed by and attached to an Insurance Company, Independent Broker Dealer, Bank or other financial services company?

The answer is there is probably not much difference! They all are under a compliance constraint called "The Suitability Standard." The SEC allows the employees of these entities to be called Financial Advisers as long as their advice to investors is "only incidental to the investment products they recommend". The recommendations only need to be "suitable" to the investor's situation, not necessarily in their best interest.

Now let me say first that most everyone I know in financial services is ethical and caring.
On the other hand their strongest loyalty is self and the company they represent.
I guess that is why we are independent and not attached to an Insurance company or a broker-dealer.





Another recent column was titled : An 'adviser' in name only!

The author states; "Calling a broker an adviser is dangerous, and it's time to embrace the black-and-white distinction
In objecting to a uniform fiduciary standard, some brokerages, insurers and advocacy groups have stressed that their business structure simply doesn't align with a straight fiduciary relationship and have asked for exceptions to always acting in a client's best interest."
"How can a broker ultimately serve two masters, the company and the client? One must win out when there's a conflict. The fact is that brokers don't have to choose. It's when they call themselves advisers that things get tricky."
"As Blaine F. Aikin explains in this issue's Fiduciary Corner column: "An often-overlooked fact is that anyone (even a broker) who provides personalized investment advice to investors is already subject to a fiduciary standard. This fact is generally ignored due to the SEC's failure to enforce the requirement established under the Investment Advisers Act of 1940."

A proposed standard disclosure statement is; "A two-sentence disclosure at the beginning of a relationship (and accurate representation in marketing) would tell clients what they need to know and keep everything aboveboard: "I'm a broker, and my primary obligation is to my firm. I'll do the best I can for you within that structure."
The author also talks about financial services representatives who also are registered as Investment Advisers; "Where do dual registrants fit? When do they exchange one hat for the other?"
"Having donned the adviser hat in establishing a trust relationship with the client, it cannot be removed during transactional activity. The moniker - and its requirement to act as a fiduciary - must stand in all engagements with the client. Broker-dealers also must abide by this and let advisers act accordingly."
"All parties would benefit from a stark distinction, a line in the sand. If advisers are working in a fiduciary capacity, no gray areas of loyalty exist - they must act in clients' best interest and not be reprimanded by firms for doing so."
"Clients also would be better off, as firms could no longer imply a trust relationship where one doesn't legally exist."



It is not that one way is always preferred or better for everyone. Some may value only a transactional relationship. If so there are plenty of low cost providers who will allow you to trade a security, buy a fund or sell you an insurance product.
For advice I would look for a "Fee Only" Investment Adviser who is part of a Registered Investment Advisor firm.
Realize that you might not always get what you think you want in such a situation, as the following column in Forbes stated.






Finally, beware of any "advisor" who swears you'll always be the boss. From a legal standpoint, brokers are free to carry out your orders, even ones they think are unwise. But mindful of his fiduciary duty, a true advisor will say he'd decline to make an investment he believes could threaten your financial health. At the very least, he should try hard to talk you out of it. If he can't, he should give you your money back and let you go it alone.

The following statements may help to clarify and clear the confusion.




"How is a stockbroker different from a fiduciary and why should I be concerned?"

"The fiduciary duty requires an investment adviser, by law, to act in the best interest of her clients, putting her clients' interests ahead of her own at all times.[i]  Under the fiduciary duty, an investment adviser must provide advice and investment recommendations that she views as being the best for the client.  In addition to being obligated to put clients' interests ahead of their own, fiduciaries must also adhere to the duties ofloyalty and care.[ii] "

"Stockbrokers (also called Financial Advisors, Wealth Managers, etc.)  are subject to the lower legal standard, known as the suitability doctrine (stockbroker).  Most of the financial advisors working at the largest Wall Street Brokerage firms (wirehouses) fall into this category.  Brokers carry a license called the "series 7."  Brokers are monitored by the SEC, state regulators and industry self-regulatory organizations."

"Dual Registration can make the legal situation very confusing.  Today, a large number of financial advisors serve as both investment advisers and brokers.  According to a FINRA study, 88% of investment adviser representatives are also registered as brokers.[x]  For example, you open several accounts with a financial advisor employed by one of the major brokerage firms.  The advisor may sell you a "fee-based" account where she acts an investment adviser and concurrently sell you bonds or limited partnerships in another account where she gets a commission (which you may not even see) and functions as a broker.  Which hat does she want to wear today and how much does she want to get paid?  The biggest issue for clients of dual registrants is that ultimately the lower legal standard typically applies to the dual registrant wirehouse broker who can function as both an investment adviser and stockbroker." 

"Insurance Licensing is also common for many brokers and investment advisers.  Insurance products can have massive embedded commissions and present significant conflicts of interest for financial advisors.  These conflicts of interest are generally not disclosed and the fiduciary duty is not followed."

"If you are a client at a Wall Street Bank/Brokerage firm, you will likely be exposed to significant conflicts of interest.  You are a client because you are looking for advice.  However, what you receive may be something very different.  These firms are in the business of selling products and producing a profit for shareholders. As brokers, exempt from the definition of investment adviser, advice from their salespeople is typically considered incidental to the sale of products they are promoting or helping you buy.  In other words, broker dealer firms are there to facilitate a transaction on behalf of the customer, with the focus on the transaction and not the advice.  Also, as we learned earlier, many advisors at these firms are able to switch hats on a whim playing broker one minute and advisor the next.  The broker's ability to offer both advisory and brokerage accounts creates serious conflicts of interest.  These conflicts are often centered on how the broker gets paid."




We subscribe to and are designees of the Accredited Investment Fiduciary designation. Below is our stated code of ethics at Marrs Wealth Management, LLC.


AIF® and AIFA® Designee Code of Ethics I recognize that this Code of Ethics, and its principles and obligations, are in addition to those set forth by any other Code that governs my professional and ethical conduct.
To my clients, I will:
1. Employ and provide the client information on the Prudent Practices when serving as an investment fiduciary and/or advising other investment fiduciaries.
2. Act with honesty and integrity and avoid conflicts of interest, real or perceived.
3. Ensure the timely and understandable disclosure of relevant information that is accurate, complete, and objective.
4. Be responsible when determining the value of my services and my form of compensation; taking into consideration the time, skill, experience, and special circumstances involved in providing my services.
5. Know the limits of my expertise, and refer my clients to colleagues and/or other professionals in connection with issues beyond my knowledge and skills.
6. Respect the confidentiality of information acquired in the course of my work, and not disclose such information to others, except when authorized or otherwise legally obligated to do so. I will not use confidential information acquired in the course of my work for my personal advantage.
7. Not exploit any relationship or responsibility that has been entrusted to me.
To my community (whether defined by work, family, and/or friends), I will:
1. Proactively promote and be a steward of ethical behavior as a responsible partner among my peers in the work environment and in my community.
2. Ensure that the overall promotion of my practice is implemented in the best interests of my profession.
3. Seek, accept, and offer honest criticism of technical work; acknowledge and correct errors; and properly credit the contributions of others.
4. Use corporate assets and resources employed or entrusted to me in a responsible manner.
5. Continue to improve my knowledge and skills, share ideas and information with colleagues, and assist them in their professional development.
Copyright © 2002-2011 Fiduciary360
Version: February 21, 2011


 


S and P Sector Returns YTD







The S and P 500 index trended up last week. +.69%
The Dow Jones World Index trended down last week -.21%
The 10 year Treasury Yield index trended down last week.
-.99%
The US Dollar index trended up last week. +.76%
The CRB Commodities index trended down last week. - .48%
The Gold Index trended down last week - .32%
Inflation Linked Bonds trended down last week - 3.06%
US Aggregate Bond Index trended up last week + .24%
The International Aggregate Bond Index trended down last week - .85%

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%

Stocks retake leadership along with real estate. 



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, Treynor 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.

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, November 4, 2014

Weekly Update 11 1 2014

Words for the week are changing seasons.

"When the seasons shift, even the subtle beginning, the scent of a promised change, I feel something stir inside me. Hopefulness? Gratitude? Openness? Whatever it is, it's welcome." Kristin Armstrong

"Everything has seasons, and we have to be able to recognize when something's time has passed and be able to move into the next season. Everything that is alive requires pruning as well, which is a great metaphor for endings." Henry Cloud

"When all the world appears to be in a tumult, and nature itself is feeling the assault of climate change, the seasons retain their essential rhythm. Yes, fall gives us a premonition of winter, but then, winter, will be forced to relent, once again, to the new beginnings of soft greens, longer light, and the sweet air of spring." Madeleine M. Kunin

"Listen! The wind is rising, and the air is wild with leaves,
We have had our summer evenings, now for October eves!"
 Humbert Wolfe




Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics

Who prophesize with your pen

And keep your eyes wide

The chance won't come again

And don't speak too soon

For the wheel's still in spin

And there's no tellin' who

That it's namin'.

For the loser now

Will be later to win

For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers

Throughout the land

And don't criticize

What you can't understand

Your sons and your daughters

Are beyond your command

Your old road is

Rapidly agin'.

Please get out of the new one

If you can't lend your hand

For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
Your old road is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.  Bob Dylan


The seasons are changing in many ways.
Late fall has the crispness of coming winter in the air.
Political changes may be coming in elections next week.
The Federal Reserve Bank is ending several years of increasing balance sheet assets through bond purchases.

Most believe this will mark the end of the steady and unprecedented rise of asset prices in both stocks and bonds.
At the least, this may signal a greater amount of volatility in capital markets.

One would be wise to rethink their investment portfolio?



source: Bloomberg











The S and P 500 index trended up last week. +2.72%
The Dow Jones World Index trended up last week +2.45%
The 10 year Treasury Yield index trended up last week.
+2.73%
The US Dollar index trended up last week. +1.38%
The CRB Commodities index trended up last week. +.64%
The Gold Index trended down last week -4.84%
Inflation Linked Bonds trended up last week +1.43%
US Aggregate Bond Index trended down last week -.22%
The International Aggregate Bond Index trended down last week -.40%

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%

Stocks retake leadership along with real estate. 
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, Treynor ratios, Sortino ratios, Up Capture/Down Capture 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.

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.