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

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

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

Don’t Neglect Bond Basics

 

Seesaw1Dear Mr. Market:

The equity markets typically dominate the headlines but recently there has been more and more talk about the Fed and where interest rates are going. Stocks are definitely a more intriguing topic as they can move very quickly in either direction and make a dramatic impact on investor’s portfolios. Future Fed activity will have an impact on what is often the most neglected portion of a portfolio – Fixed Income or Bonds.

Most investors spend a minimal amount of time with this portion of their asset allocation. It is often the textbook definition of a ‘buy and hold’ approach and why shouldn’t it be? For the last several years investors have accepted the fact that interest rates are essentially zero and this portion of their portfolio warrants little to no attention. While this approach has been adequate investors that subscribe to this approach could find themselves with losses in what they consider their ‘sleep at night’ portion of the portfolio. When and if the Fed makes any changes to their policy investors need to be prepared to make changes to this portion of their investment portfolio.

When rates do change the behavior of bonds can be explained using something that everyone has seen on a children’s playground…a seesaw or teeter-totter. It is based on a very basic concept – when one side goes up the other will go down. When using this analogy with Fixed Income, one side would have interest rates and the other would have the principal value of the bond or fund. As rates go down the principal would go up and if rates go up the principal would decline. Fairly straightforward…isn’t it? Additionally, the further away you are from the middle of the seesaw (fulcrum point) the harder your landing will be. This playground explanation paints a simplistic explanation of how the price of bonds is affected by interest rate changes but what should you focus on when it comes to your fixed income positions? Continue reading