Category Archives: Exchange Traded Funds

MPG Core Tactical 60/40: June 2015 Performance Update

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Dear Mr. Market:

Like clockwork you set us up for another stretch of pretending that you wanted to inch up higher and then sold off the last week of the month. How you behaved in May is similar to what you did in June except this time your volatile temper began to show more of a resolve and rattled investors. You began the month with some semi-positive economic news along with dovish Fed commentary all to have it dampened by the Greek debt fiasco.

The S&P 500 lost -2.17% for the month of June. The poor performance turned in by our domestic markets pales in comparison to what has transpired in China. If you’re waiting for another proverbial “bubble” to burst…perhaps it’s here. In about three weeks Chinese stocks sold off sharply losing -30%. We’ll talk more about this later in this article but for those “experts” claiming that this is a good time to buy Chinese stocks, consider the reality that they are still quite expensive. If you think our markets are frothy after a six-year bull market run and a current P/E ratio of 20.5, the median P/E ratio for Chinese companies is still at 55 (down from 108!).

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (July 2, 2015).

Click here to compare our portfolio against the benchmark.

What adjustments did we make? Continue reading →

MPG Core Tactical 60/40: May 2015 Performance Update

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Dear Mr. Market:

If you’re new to this monthly series…remember what we’re doing. This exercise, as we like to call it, is not an attempt to pick the best stock or “time the market”. We leave that futile task to those who own time machines and If you’re new to this monthly series…remember what we’re doing. This exercise, as we like to call it, is not an attempt to pick the best stock or “time the market”. We leave that futile task to those who own time machines and accurate crystal balls. For a refresher, see our first article on 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 (June 5, 2015).

Click here to compare the portfolio against the benchmark

What adjustments did we make?

We didn’t make any portfolio moves in May. Aside from collecting nice dividends through BND, LQD, and Conoco Philips (COP), the market environment did not warrant making any adjustments.

Why? Continue reading →

March Madness: Final Four Investing Bracket 2015

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basketball on cashWelcome to the fifth year of our March Madness Investing Bracket! This series of articles is always one of the most popular investing articles on the internet! We’re proud to admit that we were one of the first investing nerds to combine our love for the markets with the passion that college basketball brings!

It’s common knowledge that people love excitement and surprises. It’s also human nature to root for the underdog and many times those two themes can certainly play out on the basketball court as well as on the stock market floor. Much like two college basketball teams that never play each other our imaginations are swept up in wondering who will “win” between a relatively unknown investment or a popular stock that has the media in a frenzy.

You may be asking what does a basketball tournament have to do with managing your portfolio or the investment world in general? At first glance there might not be much but we thought we would have a little fun and couple it with some asset allocation parallels. After all, there are many folks who have simply thrown their hands in the air at one time or simply succumbed to the notion that investing is like educated gambling. There could be some truth to that depending on your approach…

For those of you that are not familiar with the NCAA and its annual basketball tournament there are 68 teams selected and each is seeded according to their results throughout the regular season and their relative rankings. Every March the NCAA holds a single elimination tournament to crown an undisputed champion. Part of the appeal of such a tournament is that theoretically any team that makes the “big dance” has a shot at winning it all. Each and every year there is a proverbial “Cinderella” team that surprises everyone including all the ‘so-called’ experts. Prior to the tournament there is always plenty of banter and opinion on who wasn’t invited or further arguments around the seeding of the teams that did make it. That’s where we see a parallel of sorts to investing and having to make decisions among the multitudes of investment choices. With so many investment choices available, there are also as many differing opinions.

In the “real” March Madness tournament this year there appears to be a hands down favorite with the undefeated Kentucky Wildcats. Hardly any office pool or basketball analyst is betting against such a heavily favored team. If they win it all it will be the first time in over 30 years that a team stays unbeaten the whole season. Our own version of this (using investment themes and choices) shares the premise that we have four very decent #1 seeds but there is no slam-dunk pick that everyone agrees on. For this reason, our 2015 bracket is perhaps as important as ever to understand that a dark horse could win it all…

Before we begin digging into each “region” of our bracket, let’s revisit something everyone claims they know but so very few actually follow with consistent discipline. (Asset Allocation)

If you have ever looked at a chart of all the different asset classes and how they perform year to year…there is rarely a pattern or consistent way to determine next years “winner”.

For the purposes our annual investing bracket we have “seeded” or ranked four major asset classes (like the regions) and chosen several individual picks within each. There is some basic science applied to this process. We consider how the “pick” did over the past 12 months and also how it has trended over the past three months. In some cases we gave a lower performing investment a higher seed if it was trending well with recent strength or was more consistent over a longer period of time.

Each asset class (Large Cap, Small Cap & Mid Cap, Bonds/Alternatives, and International) was ranked and seeded, then corresponding seeds were assigned to “picks” that we are either adding to the portfolio or establishing new positions in. Note that we’re not highlighting 68 new investments and will only discuss some investments that we are either actively involved in or looking to add to most portfolios.

OK…Let’s dig into some of the key match-ups and explain why our Final Four going into Q2 2015 looks the way it does (CLICK HERE to view our 2015 Bracket):

Large Cap

This is typically viewed as the ‘efficient’ asset class. Continue reading →

MPG Core Tactical 60/40: January 2015 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Even if you didn’t watch the 49th Super Bowl on Sunday, you inevitably heard something about it. We admittedly did not have a dog in the hunt and took the side of “let’s at least hope for an entertaining game”; and guess what folks…that’s exactly what America got!

 

Regardless if you rooted for Seattle or New England, there was plenty of excitement and surprises. Even if you could care less and were in the “I can’t wait until half time camp” you got to see Katy Perry perform with eight outfit changes. (yes…eight)

How does all this relate to the stock market and the MPG Core Tactical 60/40 portfolio? Well…we’re only one month into 2015 and volatility has come back with a vengeance! During the month of January the Dow Jones had 14 of the 20 sessions end up with triple-digit days to either the upside or downside.

The broader market indexes are now down -4% from their December 2014 highs. The S&P 500 also dropped -3.1% in January, which by the way…was the exact same performance as in January of 2014! For those with short-term memories, allow us to remind you how the “experts” said the bull market would end due to how we started the year out. (that doesn’t quite line up with how 2014 finished as a whole…does it?) Continue reading →

MPG Core Tactical 60/40: November 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Are you scared of flying? Even if you’re a seasoned traveler and airplane turbulence never fazes you, there are certain flights that would get your attention. If the stock market behavior in October was an airplane flight you undoubtedly survived a violent voyage. It would make the month of November seem like the smoothest flight ever, although anyone in their right mind didn’t trust in a safe landing until the wheels actually touched the runway.

After October brought triple-digit moves for the Dow Jones in 16 of the 23 trading sessions, we only experienced one such day in the entire month of November. Even though the Fed announced the end of its bond-buying program, the markets yawned and continued to stretch out to new highs. Small caps were also on a tear for about six straight weeks until literally the last trading day of November and they ended up sputtering in for a negative month. 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 →

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

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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 →

Dividend Investing … are you chasing yields?

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Chasing DividendsDear Mr. Market:

With interest rates at rock bottom levels many investors have gravitated to dividend yielding stocks over the last several years. Money markets, certificates of deposit and bonds simply are not delivering the rates that investors are looking for or have come to expect. It has left investors looking for other options to generate the income that they are counting on but what are the long-term ramifications? Are investors chasing yields with the risk of digging themselves into a deeper hole? What should investors look for and how can they manage their portfolios effectively?

It doesn’t take much effort to find a laundry list of stocks with very attractive yields. In fact if you simply run a screener on Google it will return a list of nearly 100 stocks that offer a yield of 10% or more! With the stock market continuing its upward trend investors have been moving to these stocks chasing the yields with little attention being paid to the underlying stock and the associated risks.

Before we jump into specific companies and industries let’s make sure we are all on the same page and understand what dividends are. Continue reading →

Alibaba – The next hot stock?

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Alibaba with chineseDear Mr. Market:

Every investor is looking for the next opportunity that looks like a ‘sure thing’. Throughout 2014 we’ve seen a plethora of IPO’s hit the market with the majority of them being well received. Currently there is a giant lurking out there and the markets have been licking their chops waiting to get a piece of it.   The stock is a behemoth based in China…Alibaba (anticipated to be listed as BABA).

Wall Street is expecting the IPO to hit the market sometime after the Labor Day holiday and this could certainly be an early Christmas present for the markets if it lives up to the anticipation. We have not seen hype like this surrounding a potential IPO since the dot-com era of the late 1990’s. Before you rush out in an attempt to participate in the IPO or buy through the open market, lets take a look at Alibaba to see if it warrants a position in your portfolio….

Summary:

It is challenging for the average U.S. investor to understand how large and diversified Alibaba is. Essentially Alibaba is: Amazon, eBay, PayPal, Cloud Services and much more wrapped up in one company. It has the fastest growing online commerce market in the world, last year it had transactions that totaled just under $250 billion! That is more than eBay (EBAY) and Amazon (AMZN) combined. To truly put the size of Alibaba in perspective let’s break down its largest components: Continue reading →