MPG Core Tactical 60/40: November 2014 Performance Update

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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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

Currency Markets: Not the Roller-coaster you think it is!

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

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

Is Financial Engines right for you?

financial enginesDear Mr. Market:

If you were asked to list two or three of the largest Registered Investment Advisory (RIA) firms in the country which ones would come to mind first? You’d definitely hear many of the names associated with Wall Street and the investment industry. Names like: Merrill Lynch, Charles Schwab, Fidelity and Wells Fargo – while these are certainly large firms none of them are RIA’s. We’ve written on several occasions what an RIA is and how they are driven by their fiduciary responsibility to their clients. A simple online search of RIA’s will show that the largest firm is nearly 40% larger than any its closest competitor. It specializes in assisting individuals in managing their company retirement accounts and has become a behemoth in the investment industry. Financial Engines, Inc. has risen out of relative obscurity and is quickly becoming a household name.

Financial Engines is based out of Sunnyvale, CA, is publicly traded under the ticker symbol FNGN, and currently manages over $90 billion in assets! To put this in perspective the second largest RIA firm is Fisher Investments with assets under management of just over $50 billion. Fisher Investments is a marketing machine and if you have a portfolio over $500,000 in value, you’ve most likely received one of their post card mailings or solicitation emails.

Financial Engines, on the other hand, is a relatively young company and is the creation of some of the brightest minds in the industry that made their mark in the late 1990’s. The founders of the firm are Nobel Prize winning economist William Sharpe, Stanford Law Professor Joseph Grundfest, Attorney Craig Johnson and Jeff Maggioncalda. While the firm went through some minor growing pains, they have certainly found their target market – working with individuals and managing the investments in their company retirement plans. Continue reading

Alibaba – The next hot stock?

Alibaba with chineseDear Mr. Market:

Every investor is looking for the next opportunity that looks like a ‘sure thing’. Throughout 2014 we’ve seen a plethora of IPO’s hit the market with the majority of them being well received. Currently there is a giant lurking out there and the markets have been licking their chops waiting to get a piece of it.   The stock is a behemoth based in China…Alibaba (anticipated to be listed as BABA).

Wall Street is expecting the IPO to hit the market sometime after the Labor Day holiday and this could certainly be an early Christmas present for the markets if it lives up to the anticipation. We have not seen hype like this surrounding a potential IPO since the dot-com era of the late 1990’s. Before you rush out in an attempt to participate in the IPO or buy through the open market, lets take a look at Alibaba to see if it warrants a position in your portfolio….

Summary:

It is challenging for the average U.S. investor to understand how large and diversified Alibaba is. Essentially Alibaba is: Amazon, eBay, PayPal, Cloud Services and much more wrapped up in one company. It has the fastest growing online commerce market in the world, last year it had transactions that totaled just under $250 billion! That is more than eBay (EBAY) and Amazon (AMZN) combined. To truly put the size of Alibaba in perspective let’s break down its largest components: Continue reading

Top 3 Economic Sectors to Invest in Now

Dear Mr. Market:

It’s clear that nobody has a crystal ball but there are a few simple tools and “rules of the road” which can help manage your unpredictable and volatile behavior. For those of us who are visual learners this simple graphic is quite helpful in knowing where you may want to allocate your stock positions relative to where we are in the economic cycle.

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There are two curves laid over each other on this graph. Simply explained, the red curve shows you where the stock market is and the green curve shows you what stage we’re at in the current economic/business cycle. Aside from some possible ability to optimally allocate stocks within the most opportune sectors in the economy, the real impact this visual shows you is that the stock market is essentially a leading indicator. In general, the stock market is a forward-looking gauge of what investor expectations are of the economy and interest rates. Continue reading