MPG Core Tactical 60/40: July 2014 Performance Update

MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Have you ever woken up long before your alarm clock was set to go off? Put yourself in that state of mind for a minute. You see the alarm clock, take a pleasant mental check that you still have some time to sleep and you pleasantly roll over and shut your eyes; it’s almost like you just were rewarded free time which is the one thing we can never get back!

CLANK, BANG, SCREECH, HONK!?!?! What on earth?? Something that is NOT your alarm clock rattles you awake and spoils this momentary feeling of pure relaxation.

That’s basically what Mr. Market did to everyone in July. The last day of July brought people a wicked reminder of what the market can do if you let it put you to sleep. We haven’t seen a sharp drop like this in a few years and it certainly got your attention, didn’t it?

We actually saw a rather sharp selloff in some of the technology and momentum stocks in April of this year but this time it is broad based and appears to be signaling something more. Before we talk further about the markets and how they may have finally awoken some of you, let’s refresh our often short-term memories on why we run this monthly series of articles.

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 (August 4, 2014).

Click here to compare our portfolio against the benchmark.

What adjustments did we make?

One thing we try to avoid when it comes to managing money is to “pat yourself on the back without breaking your arm”. We did very little this month aside from clearly communicate that we thought not only was the stock market ready to correct but we also laid out what we planned to do about it. Read and click here to see exactly what we said. The moves we made in advance of the worst down day of the year were as follows: Continue reading

MPG Core Tactical 60/40: April 2014 Performance Update

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

High Frequency Trading – How does it impact you?

HTF robotsDear Mr. Market:

The markets are constantly moving from one headline to the next – some of them having a profound impact on the markets. Last Sunday night “60 Minutes” aired a topic that has been lurking in the shadows for years, suddenly it jumped up and grabbed headlines raising concerns and paranoia with investors. High Frequency Trading (HFT) has dominated headlines over the last week prompting a federal investigation and hours of debate.

Michael Lewis, author of “Flash Boys”, has been on a publicity tour claiming the U.S. Stock Market is ‘rigged’. Is the average investor at a disadvantage, on the outside looking in at the security exchanges? This week we encourage you to view a letter being sent to our clients and friends of the firm (High Frequency Trading letter) Continue reading

How did your Portfolio do in January of 2014?

MW-BB798_sm6040_20130422180557_MD

Dear Mr. Market:

Apparently you’re kicking off February much like you wrapped up January; in correction mode.

A stock market correction is actually not a bad thing and in this case it’s actually a MUCH needed one. If you’re anything close to being a long-term investor you should be hoping for at least a 10% haircut at some point before 2014 wraps up. Without a breather or some form of consolidation this market has no chance to build a base and move to higher levels by year-end.

If you had a fairly well balanced and allocated portfolio in 2013 you probably looked at your statements and saw that bonds were not just dead weight but rather a huge drag on performance. Not only did the overall bond market lose at least -2% for the year, the proverbial “writing on the wall” was being etched in permanent ink ; bonds had zero upside and only risk associated with them. If rates are to rise, as so many speculate they will, we could see bonds sting investors worse than any other time in history. Bottom line: That’s scary stuff for anyone in the typical 60 / 40 model…

The place to be in 2013 was stocks, but let’s be honest… Did you really trust them to keep going higher and higher? Did a +32% return for the S&P 500 feel “real” to you? Most people we talk to still don’t trust stocks but they ironically weren’t invested in them as much as they would’ve liked. Those that couldn’t resist a record breaking stock market finally cut bait on their bonds. Unfortunately, the reality is that our 5 year stock market party is possibly coming to an end…or at least a healthy pause. Continue reading

Force your Portfolio to be Disciplined in 2014

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

How Should your Portfolio be Performing now?

outside boxDear Mr. Market:

How is my portfolio doing this year? Am I on track for retirement? Why is the market up big but I’m not? What would my portfolio look like if the market tanked again like it did in 2008? I’m in cash right now because I feel stocks have moved too high but I don’t trust bonds because we all know where they’re headed.

These are some common and very typical questions many investors are asking themselves this year. If any one of these questions applies to you or feels familiar, don’t think you’re alone! One common thread among all these questions or concerns is benchmarking. What exactly is a benchmark and which one is appropriate for you?

Far too often investors compare themselves to other investors, strategies or benchmarks that are completely unrealistic.  Investors need to take the time to truly understand who they are and what their goals are before they compare themselves to anyone or anything!   Let’s put this in perspective…. Let’s say you decided you wanted to start swimming to get in shape.  Would you expect to get in the pool and swim times comparable to Michael Phelps (winner of 22 Olympic medals) within a couple of weeks?  Of course not… that would be ludicrous and clearly not the right athlete to try and compare yourself to!  As crazy as this sounds many investors have similar expectations with their investment portfolio. Continue reading

What is a Stock Market Correction?

What is a stock market correction?

Dear Mr. Market:

Today we’re going to talk all about you and how you whipsaw investors into panic with stock market corrections. What exactly is a correction anyway?

To some this sounds like a simple question; to others, and judging on how they act with their investing decisions, it’s clearly not.

By definition a bear market is one that has stock prices falling by 20% or more and lasts for at least two months. A stock market correction is much shorter and is typically fast in nature. Corrections often come on the heels of investor pessimism or after a bearish story that later is found to be a relatively meaningless event. In other words, corrections bring a whole different sort of emotion to the game than a bear market.

What’s interesting to know about corrections is that they occur Continue reading