Category Archives: Fixed Income

Tariffs Are the Headline—But These 3 China Risks Are the Real Market Threat

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Dear Mr. Market:

What If Tariffs Are Just the Beginning?

The tariff headlines are back, and as usual, they make for great cable news debates and political talking points. But beneath the surface, there are far more serious considerations. Recent commentary has raised three key concerns about the escalating tensions between the U.S. and China—and none of them are as simple as price hikes at Walmart.

Let’s break them down:

Read more: Tariffs Are the Headline—But These 3 China Risks Are the Real Market Threat Continue reading →

Going Long in Two Fields: Why TLT Could Be Your MVP During Recessions

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Dear Mr. Market:

First off, if you want to know how amazing Artificial Intelligence is, the following list of article titles were generated for this article in the matter of four seconds! (we picked the first one and the rest of this article is typed with regular human toiling!)

FYI: If you’ve never used ChatGPT, before try it! Much of its delivery is on what and how you ask things and in this case here is the prompt/reply that we asked of it:

Certainly! Here are a couple of article title ideas that play on the “going long” football reference while discussing extending bond allocations, especially in a recessionary context and using the TLT ticker symbol:

  1. “Going Long in Two Fields: Why TLT Could Be Your MVP During Recessions”
  2. “Huddling Up for Stability: TLT’s Game Plan for Going Long in a Recession”
  3. “Scoring Big in Bonds: Going Long with TLT Amidst Recession Signals”
  4. “Touchdown for Investors: TLT’s Playbook for Going Long in Uncertain Markets”
  5. “Bonds and Touchdowns: TLT’s Strategy for Going Long in Recessions”
  6. “From Gridiron to Portfolio: Going Long with TLT’s Defensive Play”
  7. “Executing the Long Game: TLT’s Endurance in a Recessional Season”
  8. “Tackling Recession Risk: Going Long with TLT’s Defensive Line”
  9. “The Bond Field Advantage: Going Long with TLT Amid Market Turbulence”
  10. “Scouting for Opportunities: Going Long with TLT’s Recessional Defense”

Now…on to business and what we’re talking about today, which is not related to football but rather recession worries, market strategy, and in our opinion how one should consider adjusting the bond piece of their allocation to hedge what we see coming. If you’re in the growing and increasingly popular camp of preparing for a stock market crash or just a general recession, here’s one adjustment and hedge that you may want to consider.

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Bear Market

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Dear Mr. Market:

Simple title.

Simple reality.

That’s exactly where we’re at right now. We’re not going to wait for the financial media to announce it or tell us that it’s only a bear market if we officially drop -20% or more. The intent of this article is to explain not only what a real bear market is, and how this one has behaved differently, but also what to do next.

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Sell in May and Go Away?

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Dear Mr. Market:

Does the old stock market adage of “sell in May and go away” make sense? We’ve actually written about this one spring about nine years ago where we actually advocated taking some chips off the table, however it had less to do with a cute stock market rhyme and more due to profit taking. Where are we at now going into May and is this allegedly poor seasonal time of year appropriate to sell or perhaps not?

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I got in at the top of the market…Now What?!?

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Dear Mr. Market:

It’s over.

The “fat lady is singing”, the alarm bells are ringing, and you are literally the last dunce in the room who decided to get into the market at the all-time high. Now Mr. Market shows you what real pain looks like and sells off like nobody has ever imagined.

Let us preface this article by stating it’s worth bookmarking and revisiting for those times when you may be rethinking your investment time horizon or just how much risk you truly are able to take on.

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Good news = Bad news

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Dear Mr. Market:

Last week was a microcosm of how stock market headlines can really lead you to hear one thing yet see another. For a while now we’ve been barking about how the FAANG stocks have artificially propped the market as there are some serious underlying health concerns. As a reminder for our newer readers, FAANG refers to the five major U.S. technology companies – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOGL). These household names have driven the markets and camouflaged some warning signs of risk on the horizon for quite some time. If you want a peek under the hood or a refresher on just what their impact, valuation, and market caps are relative to the broad market, please click here. (pay close attention to figure 18 which shows market cap with and without FAANG as well as Figures 13 & 14 for some relative earnings/revenue performance)

So…what happened last week? Why did the markets get hit so hard? It was indeed a rough week but then again not too many weeks feel all that bad when we take a quick look in the rear view mirror. (last year there were some mornings when the stock market was down literally -9% before you had your first sip of coffee) Albeit not a pleasant memory, don’t ever forget that (we’ll touch on why later in this article).

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Revisiting the Permanent Portfolio

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Dear Mr. Market:

It’s been seven years since we last reviewed the Permanent Portfolio. Please click here to view the original article.

Why do we bring up this article now? Lots has changed but lots has not! More than anything we believe that our current environment has so many unknowns embedded in it after one of the wildest rides in stock market history. We won’t dig into the weeds too much but one could easily make the case that any of the following scenarios could take place over the next year:

  1. The Stock Market could absolutely continue to defy odds and climb higher.
  2. We could see another market crash like we saw in the spring this year as there are plenty of issues that have not gone away (Covid-19, political unrest, handcuffed economy, geopolitical concerns)
  3. A deteriorating dollar, inflation on the horizon, a ticking time bomb of debt, and more fear of a prolonged recession, negates any appeal for stocks for quite some time.
  4. We trade up, down, and basically sideways as this market consolidates and digests one of the most tumultuous years in history.

Without rehashing all that has transpired in 2020, we believe that being properly allocated and prepared for just about anything that comes our way seems like a wise way to go. The market is almost always unpredictable but there are times when reading the tea leaves and figuring out clear direction is even more difficult; we believe that’s exactly where we’re at right now.

If you didn’t read our old article from 2013, the basis for the Permanent Portfolio strategy is simple at face value: You divide your portfolio into four distinct and fairly uncorrelated asset classes (Cash, Bonds, Gold, and Stocks). Ideally at any point in most economic cycles one of these asset classes will stink it up but the others could compensate and outperform. During prosperous times Stocks should win. When there is inflation a case can be made for Gold. Should the opposite occur and we get deflation you would ideally see long-term Bonds do well. Lastly, during a severe recession Cash is perhaps your best friend. When coupled together you may never hit a home run but this approach can mitigate disaster and still produce modest long-term returns.

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Panic is never a strategy…

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Dear Mr. Market:5 years

Today marks the anniversary of the stock market bottom 11 years ago. How ironic is it that on March 9th 2009, when the market and everyone in finance was curled up in a fetal position, we now are witnessing a market drubbing like we haven’t seen in years on that same anniversary date? For those with short-term memory lapses, 11 years ago the Dow Jones went from 14,164 in October of 2007 down to 6,547 on March 9, 2009. The “Financial Crisis” of that period effectively saw a -53.77% decline in the stock market.  What has ensued since then happens to be the longest bull market run in history. Continue reading →

Social Security Scam Alert

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Dear Mr. Market:Scam Alert

We normally pen all of our articles (letters) to you but in this case the work was already done. This one has nothing to do with the stock market or economy but everything to do with your hard earned money being threatened by another scam.

Scams are nothing new but they sure seem to be getting more prevalent and slicker by the day. As you’ll note from the chart below the number of scams are predominantly centered around Social Security and that trend is on the rise.Top Government Imposters

Click here to read an article written by Michelle Singletary in the Washington Post. In the timely article she includes a helpful list and some links that serve as critical reminders of what to be aware of out there.

Have a great weekend and stay alert!

 

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March Madness: Final Four Investing Bracket 2019

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Dear Mr. Market:

Has your alma mater or favorite team already been bounced from the NCAA basketball tournament? My Portfolio Guide can’t change that fact but we can offer you a fresh chance with our annual spin on March Madness. For the ninth year in a row we are rolling out our unique way to share investment themes and overall thoughts on the stock market.

We’re proud to say that My Portfolio Guide was the first financial advisory firm to publish a March Madness investing tournament where we share our picks and match them up against each other! We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

Click here to see Final Four Investing Bracket Picks 2019

 

Large Cap

The most boilerplate of portfolios has won out by riding the safe bet over the past few years. This is akin to the March Madness office pool where your coworker, who knows nothing about sports and couldn’t differentiate between a basketball and a football, wins the whole pool of money by simply picking the highest seed in each bracket. What we mean by this with regards to investment asset classes is that since 2013 the Large Cap asset class has been the easy money pick. If you had a decently diversified portfolio (which by design should include exposure to International and Emerging Markets), you lost to the boilerplate and simpleton portfolio that is mainly weighted towards Large Cap. Continue reading →