Is the energy sector spOILing your portfolio?

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OIl#2Dear Mr. Market:

The price of oil has been dropping like a rock! On Monday (12/8/14) the price of oil hit a new five-year low at $63.05 per barrel; earlier this year it was trading at over $100. We haven’t seen prices this low since October 2009!   The press and media can’t stop talking about oil prices lately and that has many investors thinking that the sky is literally falling around them!

Many investors portfolios are over allocated to energy stocks as the sector has delivered impressive returns along with some very attractive yields the last several years. This decline is impacting many well-known energy stocks like: ConocoPhillips (COP), Exxon Mobil Corp. (XOM), Marathon Oil Corp. (MRO) and Chevron Corp. (CVX) as they are all posting negative returns this year and several of them are down -20% or more in the last 3 months alone.

The media is quick to point fingers as to who or what is to blame for causing this drastic price decline. When you look at both domestic and international factors it is challenging to figure out where to even start! Is OPEC (Organization of Petroleum Exporting Countries), ‘fracking’, shale production, simple supply/demand imbalances, global economies or countless other factors to blame? Our answer might actually surprise you… it doesn’t matter! Even if you knew what was causing this volatility, would it make the situation you currently find yourself in any better? This is the perfect example of a time when listening to the financial media will not help you or your decision-making; especially if you have too much exposure in the energy sector. 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 →

Avoid Holiday Stock Envy!

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holiday5

Dear Mr. Market:

The holiday season is upon us!  We will soon be spending time with friends and family at gatherings as we celebrate this time of year. Let’s take a moment to look at a conversation that commonly takes place this time of year:

John – “How are you doing? I heard you moved on to a new job a couple of months ago, how is that going?”

Jane – “I am great! Yes I did start a new job and am really excited about it, the company is doing great and I am excited about the future.”

John – “I’ve heard it’s a great place to work – their stock has been doing really well! How about the stock market this year, crazy huh?” 

Jane – “Their stock is amazing! It’s helped my portfolio a ton, I’ve also got a couple of stocks that got me back on track and might make retirement come much faster than I thought!”

John – “Really? I haven’t invested much in individual stocks. Do you do this yourself or have somebody that helps you out?”

Jane – “I read a lot and buy some newsletters but basically I do it myself.  It really isn’t that hard.”

John – “I just don’t have the time for that. What has worked out so well for you?”

Jane – “Well here are a couple of names you should look at that have been doing really well for me this year…”

And so the story goes… John writes a few stocks down on a cocktail napkin and puts it in his pocket with a smile as he thinks about the incredible growth his portfolio will soon experience. On Monday he signs into his online brokerage account and without doing any research or due diligence he buys large positions in 3 different stocks with the blind assumption that they will go nowhere but up…but do they?! Continue reading →

Team MPG : Ironman for Charity

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Dear Mr. Market:

You’re notorious for beating up investors and making even the brightest and the best mind on Wall Street feel broken. Next week a group of regular guys will be making an investment that will also beat them up…but in a different way and for a higher purpose. We would like to take a few moments to share something that is much bigger than the market…giving back and making a difference in other people’s lives!

As a firm we have always taken pride in the fact that we give back not only monetarily but more importantly with our time and energy. We prefer to roll our sleeves up and get our hands dirty rather than simply writing a check and walking away. Last year we decided to take our game to a new level  – we created a team of individuals to raise funds and awareness for charities and compete in Ironman Arizona (2.4 mile swim, 112 mile bike ride and then a 26.2 mile marathon run – that is 140.6 miles, all in one day!). Sure, there are plenty of financial firms that support some very impressive foundations but how many put their time, money and actual bodies on the line?

TeamMPG

Our journey began the weekend of November 17, 2013 as Team My Portfolio Guide (Team MPG) gathered in Tempe, AZ. We volunteered at an aid station helping athletes as they completed the biking portion of their 140.6 mile race. After that day each member of Team MPG began training and raising funds for a charity of their choice. The amount of hours spent in training are enormous but what carries even more of an impact is the story behind each athlete and the impact that these charities have made in both their individual and family’s lives!

After our team completes Ironman Arizona on November 16th we will be presenting the following charities with the funds we have raised to help them with their mission statements: 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 →

Experts and Amateurs are Wrong on REITs

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REIT2Dear Mr. Market:

Well look at you! You’ve done it again…. haven’t you, Mr. Market? On countless past occasions you’ve managed to fool not only the average emotionally driven investor but also the seasoned professional. Now you’re doing it again with an area of the market that has fooled everyone; not just this year but for decades!

Investing in real estate may not seem like something you need to do within your standard “stock and bond” portfolio. Some may argue that your house is enough exposure to real estate and for most individuals it’s their largest investment so it should suffice. Your home is actually considered a “consumption good” instead of a pure investment. Although it’s likely to appreciate over time you will not receive income from it, it most likely has a mortgage attached to it, and if you need to sell 10% of it tomorrow you’re out of luck. Additionally there are many areas within real estate aside from what’s happening on your residential street. Commercial real estate, for example, makes up about 13% of the U.S. economy.

In 2013 almost every expert pounded the table and made intelligent sounding comments calling for investors to reduce exposure to REITs. These words of caution came after it was first announced the Fed would slow down its bond-buying program (Quantitative Easing). Conventional wisdom tells us that when interest rates rise REITs (and other asset classes like Bonds) won’t perform well. Unfortunately most of these comments came after the fact and REIT investors were hit hard in May of 2013. Those who listened to the stale news proceeded to sell their REITs as that “wasn’t the place to be”. Continue reading →

Understand the Herd…don’t follow it!

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Investor StampedeDear Mr. Market:

It is human nature to want to fit in or be part of the crowd. We all like to feel that we belong to a group and are not isolated. Take a moment and go back to your youth…everyone can remember a situation when someone asked us if we did something, “just because everyone else was doing it?” Another favorite that is asked of children and teens is, “would you jump off a cliff if everyone else was doing it?” Investors don’t often ask themselves these questions but as the markets have now crossed into negative territory and volatility is present they certainly should be before rushing into any decisions.

Behavioral Finance is a fascinating field and the better you understand it the better off you are as an investor. A central theme in behavioral finance is the “herd mentality”. Investopedia.com defines Herd Mentality as: “A mentality characterized by a lack of individual decision-making or thoughtfulness, causing people to think and act in the same way as the majority of those around them. In finance, a herd instinct would relate to instances in which individuals gravitate to the same or similar investments, based almost solely on the fact that many others are investing in those same stocks. The fear of regret of missing out on a good investment is often a driving force behind herd instinct.” Every individual has made a decision to fit in or be part of a group but should that include financial and investment decisions? We would answer that question with an absolute NO!  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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MW-BB798_sm6040_20130422180557_MD

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 →

Bill Gross leaves PIMCO…Should you sell your funds?

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Pimco1Dear Mr. Market:

They say all news gets priced into the stock market. Proponents of the Efficient Market Theory believe that there is “perfect information” in the stock market. Any information or insight that is available is there for all to see therefore negating any possible edge in beating the market. All that being said, no matter how clear your crystal ball is, nobody expected the shocking news we received on Friday.

Bill Gross, the co-founder of Pacific Investment Management (PIMCO) in Newport Beach, quit and packed his bags to join Janus Capital this past Friday. Gross has long been known as the “King of Bonds” and considered to be the nation’s most prominent bond investor. Until last year he was responsible for managing the largest mutual fund in the world – the PIMCO Total Return Bond Fund (PTTRX). That title now goes to the Vanguard Total Stock Market Index but PTTRX is still the world’s largest bond mutual fund. So…what happened here and was the writing on the wall?

As alluded to above PTTRX, and PIMCO in general, has been suffering for quite some time. PIMCO isn’t the only bond fund manager who has struggled with outflows but the sheer volume has opened some eyes. From May to August of 2014 PIMCO has had over $70 billion in assets liquidated and withdrawn. Over the past 72 hours (only 1 trading day including the weekend) the firm has already seen $10 billion bolt for the door! Continue reading →