MPG Core Tactical 60/40: March 2015 Performance Update

 MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

You don’t have to be a professional money manager to be aware that the swift decline in oil prices has been one of the most impactful financial headlines in years. As a matter of fact if you didn’t own a computer, read a newspaper, or have basic access to media, you would still know that oil has dropped like a rock. All you had to do was go to the gas station and see that it costs far less to fill up your tank today than it did last year.

What you may not have noticed, however, is the huge appreciation in the U.S. dollar. The U.S. dollar index compares the dollar with a basket of other currencies and it spiked up 50% in the first couple weeks of March. It has already risen almost 8% year to date and this has impacted the stock market in ways that many are unprepared for. With any situation like this there are silver linings and opportunities that we’ll discuss later in this article.

First let’s review where we’re currently at and what we did last month:

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (April 1, 2015).

Click here to compare our portfolio against the benchmark

What adjustments did we make?

The following moves were made during the month of March:

3/13/15:  Bought 200 more shares of VO (Vanguard Mid Cap Index) @ $126.19 ~$2 worth

3/25/15:  Bought 75,000 final shares of MONIF (Monitise) @ $0.191 ~$14k worth Continue reading

The Black Thursday you likely never heard about…

black swan 1Dear Mr. Market:

In all of our “letters” to you a recent market event perhaps best sums up how nasty and volatile you can be. This time you really pulled one-off and caught the entire financial world flat-footed. If such a world were painted as a lake we have been enjoying a fairly pleasant view with relatively calm and peaceful waters. Now, without any warning, you have sent not one, but rather two black swans to land on the lake and alter the serene setting…

First off, what is a “black swan”? InvestorWords defines it as:

Definition

“Colloquial term for any extremely rare event. The term was popularized by a book by Nassim Nicholas Taleb, entitled “The Black Swan”, and was based on a previous belief (now a misconception) that all swans were white and that black swans did not exist. The term is frequently used in the finance and investing sectors to denote an event that is unexpected, and impossible to accurately predict.”

INVESTOPEDIA EXPLAINS ‘BLACK SWAN’

“Black swan events are typically random and unexpected. For example, the previously successful hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of the ripple effect caused by the Russian government’s debt default. The Russian government’s default represents a black swan event because none of LTCM’s computer models could have predicted this event and its subsequent effects.” Continue reading

MPG Core Tactical 60/40: October 2014 Performance Update


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Dear Mr. Market:

When it comes to flipping over a new page of your calendar we know you could care less what month it is! You, (the market) have no idea (or interest) whether it’s November or March. Unfortunately, we are all inclined to pay attention to the calendar because those that run our 24 hour media/news cycle get paid to make such an imprint on our brains.

October is a bad month for the stock market, right?

Wrong!

Again, we’re trained to think so. Sure, October has had some dates to remember… The month is famous for some market crashes like the “The Panic of 1907”, “Black Tuesday” (which kicked off the 1929 crash), and “Black Monday”, October 19, 1987, when the Dow Jones dropped 22% in just one day.

Ironically enough, most bad Octobers have been due to issues that came from September. Two of the three above listed crashes were delayed reactions from catalysts that kicked off in September; which historically actually brings more down markets than does October.

All that being said, we had a wild October with some long lost volatility! After the S&P 500 peaked on September 18th, it was all downhill from there until October 15th. The last two weeks of the month were the strongest since July of 2009. For those with short-term memories, that was right after the sky had fallen and nobody trusted any “bear market rallies”.

This time “it’s different” in that we haven’t seen a meaningful correction in years. The S&P 500 bounced back 7% in two weeks and in case you’re wondering…we’re once again bumping up against “overbought” conditions. This is the type of market that can absolutely make you insane. (more on this thought later…

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (November 3, 2014).

Click here to compare our portfolio against the benchmark.

What adjustments did we make? Continue reading

Experts and Amateurs are Wrong on REITs

REIT2Dear Mr. Market:

Well look at you! You’ve done it again…. haven’t you, Mr. Market? On countless past occasions you’ve managed to fool not only the average emotionally driven investor but also the seasoned professional. Now you’re doing it again with an area of the market that has fooled everyone; not just this year but for decades!

Investing in real estate may not seem like something you need to do within your standard “stock and bond” portfolio. Some may argue that your house is enough exposure to real estate and for most individuals it’s their largest investment so it should suffice. Your home is actually considered a “consumption good” instead of a pure investment. Although it’s likely to appreciate over time you will not receive income from it, it most likely has a mortgage attached to it, and if you need to sell 10% of it tomorrow you’re out of luck. Additionally there are many areas within real estate aside from what’s happening on your residential street. Commercial real estate, for example, makes up about 13% of the U.S. economy.

In 2013 almost every expert pounded the table and made intelligent sounding comments calling for investors to reduce exposure to REITs. These words of caution came after it was first announced the Fed would slow down its bond-buying program (Quantitative Easing). Conventional wisdom tells us that when interest rates rise REITs (and other asset classes like Bonds) won’t perform well. Unfortunately most of these comments came after the fact and REIT investors were hit hard in May of 2013. Those who listened to the stale news proceeded to sell their REITs as that “wasn’t the place to be”. Continue reading

Currency Markets: Not the Roller-coaster you think it is!

dollar3Dear Mr. Market:

You’ve taken equity investors on a roller coaster ride this year with the Dow Jones now delivering negative returns year to date. Investors have been scrambling to find where to invest their money as they move out of equities. The fixed income markets remain an area of doubt as interest rates are near rock bottom levels and fear of rate hikes from the Fed continue to run rampant. With all these variables and negativity in the market where should investors consider looking to invest their cash?

We’ve discussed ‘Alternatives’ before and how they warrant a place in a diversified portfolio. Often investors become a bit skeptical when they hear the term Alternative Investment as thoughts of hedge funds and ‘ponzi schemes’ come to mind.   With new regulations and monitoring in place investors can feel confident when they consider adding these types of investments to their portfolios. The investments that typically come to mind when looking at this asset class are: real estate, commodities, futures and hedge funds. Today will take a look at one component of alternative investments that is often overlooked but investors interact with everyday– the dollar or currency markets in general.

If you turn on the nightly news or read any articles about the economy it is hard not to see headlines discussing the strength and/or weakness of the dollar. What does this really mean and how can an investor take advantage of these moves? Analysts and economists tend to use terms to make themselves sound like an authority while at the same time losing 90% of their audience. Below we will discuss some of the basics:  Continue reading

MPG Core Tactical 60/40: September 2014 Performance Update

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Dear Mr. Market:

October is historically one of your stormier months and it looks like you began to rumble a month or so early this year. We’re headed into the last quarter of the year but in case you’ve missed why we’re running a series of articles around the topic of a “60/40 benchmark”, here’s a refresher:

Click here to revisit the first edition of the MPG Core Tactical 60/40 Portfolio.

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (October 6, 2014).

Click here to compare our portfolio against the benchmark.

It’s finally happening. Yes…it appears the stock market is correcting. As a matter of fact for the second time this year alone the Small Cap asset class has endured a correction of -10% or more. What’s puzzling (and actually quite worrisome) is the divergence between what Large Caps and what Small Caps are doing. In a healthy and rising stock market, “as the tide rises so do all the boats”. We’ve had warnings before but the alarm bells are ringing louder since not all asset classes are moving in tandem as they once were. What we’re seeing now are perhaps the final signs of the rally peaking out.

What adjustments did we make?

The following moves were made during the month of September: Continue reading

MPG Core Tactical 60/40: August 2014 Performance Update

 

MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

As always it’s important for both our new readers and in some cases…our existing ones to revisit what we are doing here with this series of articles:

Click here to revisit the first edition of the MPG Core Tactical 60/40 Portfolio.

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (September 2, 2014).

Click here to compare our portfolio against the benchmark.

The expression of “the writing is on the wall” could not be more appropriate as we inch closer to wrapping up 2014. We work and interact with countless people in the financial services industry ranging from those who manage billions in the most sophisticated manners available, all the way to a retired blue collar worker who wants straight forward investor education and service on how to invest.

What each of these two parties have in common is that they don’t trust tomorrow and all of the warnings about a frothy and dangerous investing environment are as documented as they’ve perhaps ever been. Continue reading

MPG Core Tactical 60/40: June 2014 Performance Update


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Dear Mr. Market:

How did you treat everyone in June?

Last month we wrote about how “Sell in May and go away” did not work and for those expecting a correction…June would have to be the month something finally gives. Alas, for those in the bear camp we saw no such thing as a “June swoon” and the correction that has never come is still lurking out there somewhere. Everyone has telegraphed it by now and the longer we go without one the more severe it could be….or will it?

More importantly, is it even worthwhile trying to prepare for it? Can you prepare your portfolio for a market correction like you would your house for a natural disaster like an earthquake or a hurricane? Sure…you can but should you?

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” –Peter Lynch Continue reading

Clean Energy Fuels (CLNE): Bleeding soon to become Profit

anghmap-011614Just about anyone who has invested in Clean Energy Fuels Corp. (Nasdaq: CLNE), has traveled a rough road thus far. Clean Energy has serious potential but its great story hasn’t materialized at all. The stock has done absolutely nothing for shareholders and if you’re the type of investor that screens for strong fundamentals it probably hasn’t hit your radar; at least not yet…

What do United Parcel Service (UPS), Frito-Lay/Pepsi (PEP), Procter & Gamble (PG), Ryder (R), and Lowe’s (LOW) all have in common? Each of these companies, and more and more of corporate America, is pouring money into the natural gas industry. Companies like these all see the writing on the wall with regard to energy trends and they are expanding their natural gas fleets.

The U.S. heavy-duty trucking market is beginning to embrace the economic and environmental benefits of natural gas fueled trucks.  There are over 8 million heavy-duty trucks in the U.S. consuming about 20,000 gallons of fuel per year.  The operating cost savings that operators will benefit from by converting from gasoline and diesel to natural gas along with movements towards clean air regulations bode extremely well for companies like CLNE.

Company summary:

Clean Energy is headquartered in Newport Beach, CA and has a market capitalization of almost $1.1 billion.  CLNE supplies compressed natural gas (CNG) fuel for light, medium, and heavy-duty vehicles; and liquefied natural gas (LNG) fuel for medium and heavy-duty vehicles. They are the largest provider of natural gas fuel for transportation in North America. CLNE fuels over 30,000 vehicles per year at over 500 fueling stations throughout the U.S. and Canada. The company has created and continues to develop a network of fueling stations with what they call “America’s Natural Gas Highway”. This network connects major truck corridors across the country for coast-to-coast and border-to-border natural gas fueling. Continue reading

Force your Portfolio to be Disciplined in 2014

Rebalance Cartoon

Congratulations Mr. Market…you’ve delivered a tremendous year of returns to equity investors!  With the broad equity markets delivering returns over 25% (S&P =29%, DJIA = 25% and the NASDAQ = 37% as of 12/27/2013) investors are now faced with the question of what to do now?  For those investors that were invested in stocks, especially domestic stocks, year-end statements are going to look very impressive but remember that is only on paper. As we step into 2014 what should investors do with their portfolios?

Often investors choose to go with an adage commonly heard in casinos – “Let it ride!” Although the market defied odds and dodged several ominous obstacles, there is no guarantee that it will continue to do so going forward.  Sitting back and doing nothing could very well allow those returns to dwindle away and become nothing but a memory.  It wasn’t that long ago that ‘The Tech Bubble’ hit investors with a strong left uppercut that they never saw coming.  Mr. Market delivered three years of impressive returns (1997 = 33%, 1998 = 28% & 1999 = 21%) only to see it disappear with three consecutive years of negative returns (2000 = -9%, 2001 = -11%, 2002 = -22%) and let’s not forget 2008 (-37%).   How can investors avoid repeating history while also managing the risk and unrealized gains in their portfolio?  Continue reading