May Gray turns into June Gloom

 

Dear Mr. Market:Unknown-3

We have discussed many times how emotionally driven you are. On some days you tempt us with your record setting high wire acts and on others we have our lips virtually wrapped around the barrel of a gun in desperation; the stock market is a wicked playground.

We don’t believe that computers or sophisticated investment algorithms can completely mitigate the perils of the stock market or protect everyone from getting out of their own way, but it can at least be used as a starting point. My Portfolio Guide relies on some very unique tools that assess the stock market each month with a fresh set of eyes. While our method of “reading the tea leaves” is not necessarily a crystal ball, it’s definitely not what most investment advisors use….which is the rear view mirror. Sadly enough, many investment advisors are just like you…they’re human and they chase recent returns and mistakenly look back in history as to what has done well. While this method of analysis is the easiest to sell clients (and themselves) it’s not as effective as taking a completely fresh look at what is happening right now and how that is statistically likely to play out in the near-term. Continue reading

Brexit too shall pass…

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Dear Mr. Market:

You hate uncertainty; that fact has been established from the day you began trading. If the rest of the investing public hasn’t heard about “Brexit” vs “Bremain”…it’s not necessarily a bad thing. There is always something to worry about and now with a vote by the United Kingdom to leave the European Union the potential implications and chants of uncertainty will continue to create worry and panic.

Ironically enough, even amidst all the doom and gloom, the world is not that much different than before the vote. Although the U.K. surprised many with its vote to leave the EU, this decision and the potential fallout will take a couple of years to fully play itself out. Even though there will clearly be political uncertainty and initial volatility (which is natural)…the UK will have two years to negotiate the terms of its exit and establish a new relationship with the EU. Although there won’t be a shortage of opinions, this doesn’t imply an automatic death to the stock market!

It’s times like these that are EXACTLY why people overreact and make critical mistakes. Once people get over their initial reaction (shock, surprise, fear etc) the markets will see relief in knowing there is a result and a definitive decision. In other words…there will be some basic element of certainty and that allows markets to naturally correct and go back to moving based on actual fundamentals as opposed to speculative forces or fear.

What should one do in the near-term and will this lead to something worse? Continue reading

3 old stories rattling the stock market in 2016

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Dear Mr. Market:

You’ve certainly kicked 2016 off with a bang! Even investors that rarely, if ever, look at their portfolio are aware of the rough start to the New Year. Over $8 trillion in market valuations has seemingly disappeared in the blink of an eye. Many are pounding the table with a bear market narrative capturing your attention and emotions but is there anything truly different this time?

There are many different factors at play in this volatile market environment but in our opinion none of them are really all that new nor are they indicative of a bear market, a recession, or impending crash. We’ll briefly touch on each of them but at the end of this article you may be surprised to learn why we believe this market could bounce strongly when least expected.

Currently there are three factors that are dramatically impacting the markets: China, Oil and the Fed. It appears that when these are combined it creates a combustible combination that not even the most seasoned analysts know how to handle! The reality is that the stock market and all the ‘experts’, who analyze and report on it, seem to have short-term memories. For lack of a better description people have also been put to sleep and forget what it’s like to see a normal market correction. Let’s quickly break them down and attempt to put them in perspective: Continue reading

MPG Core Tactical 60/40: July 2015 Performance Update

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Dear Mr. Market:

Yes…the stock market is down. Your portfolio is down. There is no way it is not down. We just said the word “down” three times in a row. Get it? Everything is down.

If you have a decently designed and intelligently constructed portfolio you are actually DOWN more than than the overall stock market! What does that mean? Most people look at the Dow Jones as their benchmark. That’s what the media tells you every night as to what’s happened. The media reports on the Dow Jones as though it’s an accurate index to let you know how the stock market is doing. Nope….As you become a more savvy investor you will learn that that the Dow Jones is just an antiquated index that means nothing. Yep….we said that! The Dow Jones means zilch!

Make no mistake about it. This is one of the strangest and least predictable markets ever…

If, however, we were to tell you the Dow Jones was about to get blasted and go down to 6,000 (currently at 17,500) it would be easy to lead you down that road. There are plenty of reasons why the market will get hurt more. Ironically enough…we could paint just as equally convincing a story of how the Dow will go to 20,000! That’s where we’re at right now. When you can find two opinions so extreme regarding the end results, yet each has its merits, you’re in a very precarious market environment.

Continue reading

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: 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

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