Investing in Everyone's Future

Our Kiva.org loan portfolio

Perhaps that I feel some works of charity should not be hyped.  I’m very old fashioned in that regard and view that charity should not come with strings nor attention but times are changing.  I’ve always admired when an athlete or celebrity engages in some charity but demands there be no publicity.  May the angels come to your rescue if you publicized all-time hockey great Bobby Orr spending an afternoon with a Cancer stricken child and family in his own home. That being said, I’ve been asked to mention that since April 2015 a portion of our client fee’s have been donated to Kiva.org The current administration’s view of withdrawing financial aid to needy countries and causes places everyday people and organizations to fill in the gaps.  I expect we’ll see some form of activist funding to fill in the gaps voided by new administration policies for the Arts, Planned Parenthood, school lunches, homelessness, military family support, climate change and technology, LGBT rights, etc. We’re just doing our bit. If you never heard of Kiva.org they’re a non-profit micro lender for small borrowers around the globe.  They offer funding to vast array of borrowers and purposes in some of the most dangerous and remote parts of the world. Quarterly, we allocate a portion of our collected client fees and assign them to Kiva for loans.   When the loans are repaid (some do default) the funds are recycled to new loans.  In my mind there is no “profit” in these loans and we don’t intend to ever reclaim the funds.  We intend to let them recycle through the Kiva system indefinitely. We’ve made...

Performance update on the Vegan Growth Portfolio

I should get around to doing this more often as we are in the minority when it comes to investment advisors willing to post portfolios and returns.  I’ve advocated for years that retail investors don’t have to settle for the returns offered by indexers and robo-advisory firms.  Robo’s are cheap but you won’t receive what we offer in terms of returns and bear market protection. The Vegan Growth Portfolio is a name we use to describe the concept of investing with Vegan perspective.  Its a diversified portfolio that usually has about 30 holdings when fully invested.   When our indicators tell us that when stock market risk in unacceptable due to the potential for recession we reduce our stock holding and focus on Treasury bonds or cash. Collective2.com offers a unique opportunity to create a mirror portfolio of our client holdings in the Vegan Growth Portfolio.   In other words, the same day we buy or sell a stock for our clients we also buy or sell it in the VGP.  The price may differ by a small amount but the Vegan Growth Portfolio shown on Collective2.com is close approximation to our client accounts. As you can see we are soon arriving to the important 5-year return milestone.  As of 2/24/2017 the compounded annualized rate of return is 17.3% which is net of all fees and expenses.  The gross (before fees) return is 18.8% per annum. We respectfully ask when a potential client’s first question revolves around fee’s is which would you prefer:  Make 4%-6% net at a indexer or robo-advisor like Betterment or our returns which charge more?...

In Loving Memory

In loving memory of our dear girl Alexei who passed away today from cancer at just 5 1/2 years old.  Many thanks to Dr. Boo and the caregivers at Colorado State University Veterinary hospital, we did all we could to help her. Our ranch and family will never be the...

Reflections On A New Era

The next four years could be a bit awkward especially for new readers.   One might assume that I applaud the Trump Presidency but my political and social views are of secondary concern.  My role is to interpret the direction and behavior of policies and markets and hopefully be on target. Quick Summary of 2016: One year ago our base case scenario was the economy and markets were rolling over into recession and that downside risk of stocks was much greater than the potential upside.  This proved to be the correct assumption as many categories of stocks (especially Value stocks) were in full-fledged bear markets.  We avoided a sharp 15% decline in January-March and the Brexit decline in July.   During the April-May period forward looking economic data began to improve sharply and the recession was avoided (first time for such a turnaround since 1985).   While I deeply regret lagging the major indices in performance this year, the risk/reward last Spring was disproportionally negative and preservation of principal is always my #1 priority.   2016 will represent an economic mid-cycle bottom which supports the prospects of acceleration in 2017. Below is a basic trend model which uses the 12 month moving average (ma) of the S&P 500.  When the SPX is above the 12 month ma the trend is bullish/positive.  Moves below the 12 month ma indicate a potential change in trend and a time for caution.  It’s not perfect but when combined with an eroding economy the results can be devastating to the Buy and Hold investor not paying attention.       And then there was the election…… We’ve now...

The false virtue of simplicity

When markets rise inexperienced investors want to buy and hold and view simplicity within investing as a virtue. When markets fall investors wish their adviser had a risk strategy that raised cash which by default increases transactions and complexity. A few $8 trades can save tens of thousands of $ and allows you to buy in after the bottom. You can’t have it both ways. Brad...

Waiting for the fat pitch

Our mean reversion strategy has reached the point where a low risk entry point can be made but we continue to wait.   Rising poll numbers and increasing odds for the Republican candidate continue to put pressure on US markets.  Markets can continue to increase their oversold status by becoming more so but that may also mean a stronger resulting rally. Should the Republican candidate win next week I would expect a sharp woosh down in US stocks and the USD.   At some point there will be stability where new positions can be established. Since everyone seems to be concerned with the negatives, there are important positives to consider: The 50 day moving average of the SP500 remains above the 200 day moving average and GDP growth is accelerating (These are not bear market conditions). Since the newsletter being sent to clients two days ago our cash position has increased to 50%+. Should HRC win the presidency I’d expect markets to stabilize after the election.  In the meantime high cash levels will be maintaned. november-2016-client-letter Brad...

Stocks presenting a low risk entry point.

Ideally we could have used additional weakness to increase the oversold status of US stocks.  The lack of volatility and any follow through are likely with us till earnings season or the election are over.  ...

Present status

At present we have 35% of client assets in cash as the markets have receded from a high risk level.  The late September/early October time period is notorious for steep market weakness.   Should we witness a further pullback in the indices we’d have a low risk entry point to use our sidelined cash. In the meantime a Green energy related company Advanced Energy Industries is behaving extremely well.   We have only a small holding in The Vegan Growth Portfolio but would like to add more on any market pullback.  AEIS is completely ignoring any market weakness as demand for the shares is very strong. Long AEIS  ...

Optimizing Risk and Exposure in a low return market

Over the past several weekends I’ve been looking into developing strategies that could maximize return in a relatively flat market.  While its true that the major indices broke to new highs only a month ago, meaningful confirmation of what could be a new leg up has not materialized yet.  Plus, I’m a bit concerned about the upcoming election and the potential for chaos, not unlike 2000. The point of this blog entry is to show a technique that would identify low risk/great entry points for the equity investor to be 100% invested.   Other than these time periods the investor should be less than 100% invested.  I fully realize this goes against many traditional investment tenets but in our testing those tenets of being 100% invested at all times don’t hold to be worthwhile.   After all, if you’re already 100% invested how can you add to your holdings on a market pullback?  At worst, the gains you may have realized in a rally are going to be at least partially dissipated during an eventual sell-off. Technique: % of Nasdaq 100 stocks above the 50-day moving average This first chart shows the Nasdaq Composite over a 5 year period moving in a range between roughly 80% above the 50-day moving average to below 20% below the 50-day moving average.   Ideally a client should begin to move from underweight stocks to fully invested when the % drops below 20%.  Likewise begin to lighten up your investments on a rise above 80%. One of the great advantages to this technique is realizing that market sell-offs are inevitable whereby your state of...