Category Archives: Fixed Income

MPG Core Tactical 60/40: June 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MD

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 →

MPG Core Tactical 60/40: May 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Where have you been? Whenever you get quiet like this it makes us even a bit more nervous.

Hopefully you didn’t succumb to the alluring sounds coming from those in the “bear camp” last month. If you were tempted to “sell in May and go away” it still just wasn’t meant to be. As cute and trendy as that old investment adage is, we must remind you that it doesn’t necessarily have a specific date in mind. Proponents of this theme merely imply that the summer months are the ones to avoid and if there ever was a month of May to make this move…it was now. Or was it?

Now that the “sell in May” adage looks flat out stupid, you can perhaps resort to a “June Swoon” for the eye candy headline of the day. After all, June is the 10th worst calendar month of the year. Since 1950 it’s basically been a flat month but more recent history points to June losing an average of -1.33% over the past 10 years.

It’s not so much the market or serious investors that love catchy phrases but it’s those that feed you the news who are the perpetrators. If this article were being written in November we would have many of the same concerns as we do now. Many of the catch phrases will be stale by then but in the interim…much like a broken clock tells time correctly twice a day…eventually the bears will be right. Contrarian investors will point to this immediate period as the market climbing the proverbial “wall of worry”… or is it now a “slope of hope”?

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (June 9, 2014).

Click here to compare the MPG Core Tactical Portfolio against the 60/40 benchmark.

What adjustments did we make? Continue reading →

MPG Core Tactical 60/40: April 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Unless you’ve never picked up a financial magazine or read the business section of any newspaper, you have undoubtedly heard of the old investment adage “Sell in May and go away”. Many financial “experts” and journalists do their best to paint the summer months as those that are primed to underperform. Does history always repeat itself in exactly the same way? Nope. It’s not hard to find investors who sold last spring (or even the one prior) in anticipation of a nasty summer and they are still in cash or underweight equities. If you’re in that boat and don’t trust the stock market, you may sleep better at night for now but in the interim you’ve lost opportunity cost and missed another bull market.

The flip side to this is that bearish investors will eventually be right! The S&P 500 has not had a correction of -10% or more since October 3, 2011. Like many investors out there we firmly believe a correction of -10% to -20% is coming this year but we don’t think it will be the start of a bear market. The challenge behind all of this, however, is that the longer we go without a healthy correction the deeper and more severe the inevitable sell-off will be. Continue reading →

MPG Core Tactical 60 /40: March 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

March has turned in another month of stubborn market defiance as the investment world is waiting for a correction yet it never seems to come or fully develop! It’s without question that many of the warning signs continue to lurk below the surface but the S&P 500 has still managed to tack on about another +1%. Year to date we’re just about 1% of where we started 2014 but it sure feels uncomfortable for many.

If this is your first time reading about our MPG Core Tactical Portfolio please refer back to our first post. (click here) In short you will see what adjustments we make throughout the year on a $1 million dollar portfolio and how that performs relative to a portfolio that is rebalanced once per month with an allocation of 60% Stocks and 40% Bonds. Continue reading →

Update: March Madness: Final Four Investing Bracket 2014

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March MadnessThe 2014 NCAA Basketball Tournament certainly had an eventful weekend!  52 games have been played across the country with 5 of them going into overtime. The $1 Billion that Warren Buffett offered to anyone that had a perfect bracket is now a distant memory. Every year there are plenty of surprises and this year has been no different:

  • 3 of the 4 teams that were seeded as #12 in their brackets posted wins over teams seeded #5! The one team that lost was beaten by only 3 points in overtime!
  • #1 seed and ‘media darling’ Wichita State lost to #8 Kentucky in the 2nd round.
  • The 2 longest winning streaks in the country have both come to an abrupt end – Wichita State with 35 and S.F. Austin with 29.

 Here are some other mind boggling numbers to take into consideration with the NCAA Tournament:

  • The odds of winning Buffet’s $1 Billion prize was 1 in 4,294,967,296!
  • It is estimated that Vegas takes in over $100 Million from bets on the NCAA Tournament – experts think this represents only 4% of all the money wagered on games!
  • The NCAA tournament costs businesses $1.7 Billion in lost productivity during the month of March.

Continue reading →

Force your Portfolio to be Disciplined in 2014

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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 →

Should Bonds still be part of your Portfolio?

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Dear Mr. Market –

BondsWe are only a little over half way through this year yet you have already taken investors on a very interesting ride.  From posting impressive results through the first half of the year and then allowing volatility to enter the market through various headlines and worldwide economic news you’ve certainly kept us all on our toes.

As investors look at their portfolios and their performance results we have seen one alarming statistic over the last month and half.  In June alone individual investors took over $80 billion dollars out of their bond positions!  Investors moved out of their fixed income positions quickly due to rising interest rates and to chase the impressive returns that the equity markets have been posting.  Bonds are often treated as the ugly stepchild of investing but we find that they are typically not truly understood by the majority of investors.  Lets take a moment to get a better understanding on the basics of fixed income investing and more importantly how and why they have a place in your portfolio.

 Bonds/Fixed Income 101:

In their most basic form bonds are essentially a promise to repay money, with interest, on a certain date in the future.  Think of them as an IOU where the borrower is obligated to pay the lender (the investor) a specified amount of money at regular intervals and then to repay the principal amount at the bonds maturity date.  There are several different types of bonds available in today’s market, the following bullet points will focus on the most common ones: Continue reading →