Money Management & Retirement Planning Advice by Barry Unterbrink, Chartered Retirement Planning Counselor

Wednesday, October 04, 2017

Third Quarter Tally Impressive for Stocks, Bonds, Gold

The third quarter turned in some decent results, in light of the historically weak seasonal period most years. We saw disparity in the market sector performance - that it - there was a wide range between the highest and lowest performing stock sectors.

Technology came out on top, with a gain of 8%, Financials, +4.7%, and Healthcare, +3%. Utilities, Communications gained about 3% each. Industrials, Energy up near 6% each, and Consumer Discretionary and Consumer Staples lagged; +1% and down 1%. There are 10 Sectors to the market: 5 beat the market itself, and 5 did not.

For the three months, we held the same two sectors - Technology and HealthCare. This improved our client results, as the “market” was up near 4% on the S&P 500 for the quarter. Combined with our holdings of bonds and gold, that was a winning combination with less risk than holding an all-stock portfolio. Gold rose $70 an ounce, or 3%.

So, for the quarter: Technology sector ETF, +8%
                               HealthCare sector ETF, +2.8%
                               S&P 500 (the market), up +3.9%
                               Gold, up +3.1%
                               Bonds, even to +1%

Remember that these sectors of the market are not stocks, they are Exchange Traded Funds (ETF’s) that hold many stocks but trade as a single security. We use these for most client portfolios to reduce individual stock risks. We also use bond ETF’s when clients desire monthly income.

The two other ‘core’ stock-based ETF holdings we use returned 2% and 4% for the quarter (clients: you will see any new selections for October by week’s end in your accounts).

As we all get older (don’t remind me), we are less comfortable to accept the risks of the markets; losing principal namely. We aim to generate performance that is diversified and pretty darn safe in bad bear markets. 

With stocks up about 15% through nine months this year, we’re pleased to show gains of +9% to +12% depending upon the client objective and mix of stocks / bonds / gold we recommend. Call me to see how we may help you.

In early August, it occured to me: I've been in the financial services business for 35 years! In 1982, I joined my father's investment firm after spending a year or so after college at Manufacturer's Hanover Bank in Durham, North Carolina. I wish to thank immensely my father Larry for his guidance and teaching me this business through the ups and downs.

He is still quite active on the job most days as Research Director - and we spend time every week discussing strategy, odds, and ideas that make sense for our clients and family investments.

With 78 years of experience between us - we've seen it all (or close to it all).

Thanks for reading.

Barry





   




Wednesday, May 17, 2017

Stocks Fall, Bonds and Gold Rally Sharply


U.S. stock prices fell today by about 2% across the broad gauges of measurement; Dow Jones, S&P 500 and Nasdaq markets. That's quite a hit for just one day. However, unless you live in a cave, or under a rock - you have to know that the stock market has been performing rather well the past few years.

If all your money is in the stock market - which is not common for most folks, then your gains or losses today would be different than what the media reports on the nightly news tonight.

Before today's action, stocks were ahead 8% on the year. Today they are 2% less, so we're about +6% year-to-date.


If most folks don't own all stocks, what do they own? A normal, balanced portfolio would own some bonds, and some fixed interest investments (CD's and fixed annuities, or cash), and perhaps some contrarian - asset like silver or gold.

We own bonds and gold in all client portfolios, and like to see it offset the risks of an all-stock portfolio. It has proven itself over 40 + years.

Today, Gold rocketed up $25 an ounce - that's +2%.

And bonds; they rose also as prices rose from demand that was leaving stocks today. Interest rates fell quite a bit: The popular bond funds and ETF's gained between 1/2 percent and 1% - a huge gain on one day for a bond investment!

All said and done, if we look at a diversified portfolio, stocks fell 2%, bonds gained about 1%, Gold gained 2% and cash under the mattress is still all there. If you held all 4 of these "buckets" of money with $100,000 total, you gained $250 today !

We always advocate a balanced approach to investing; it keeps the stress lower and we can sleep well at night.


Contact me for further information on our money management and planning services. Thanks for reading!

~Barry Unterbrink
(954) 719-1151







Friday, July 08, 2016

An Historic Day in 1932

July 8th, 1932, a historically significant day in the USA's financial system.

A rather obscure factoid, it marked the day that the stock market fell to a low never to be evidenced since. 


Most remember the 1929 stock market crash, which touched off the 10-year Great Depression. The crash affected all Western industrialized countries. If you are in mid-life, either your parents or grandparents experienced this dreary time for the USA first-hand. Ask them about that sometime.

From it's high near 400 on the Dow Jones Industrials Average in 1929, the stock market FELL 89% in value to close at 41.22 on July 8th, 1932.


Given today's Dow Jones level of near 18,000; that same decline would take us down to Dow Jones 2,000 !


I'm certainly not predicting that same outcome in the future, but I am not ruling it out entirely.

It would take 25 years for the 1929 stock market highs to be seen again, in late 1954.


Monday, June 27, 2016

Gold's Role as Stock Market Insurance



by Barry Unterbrink
A minority of the population understands that gold is a monetary asset that should be held as wealth insurance. A larger percentage of the population is confused about gold because of mainstream sources of information many people consider gold a risky investment when in fact gold bullion is not an investment of all a rather money itself just like any Fiat currency held in a vault, gold does not pay interest or dividends.

It is important to understand the role of gold as money in relation to Fiat currency. Governments and banks work hard to ensure that people remain confident in their debt backed paper currencies, and the economy in general. Financing is Wall Street's lifeblood, so it will always seek green shoots of recovery around the corner just as it did in 1929, 2000, and 2008. Consumer spending and bank lending is what keeps the Fiat shell game going and people do not borrow or spend when they feel uncertain about their financial future.

There are three essential characteristics of money: it must be a store of value; it must be accepted as a medium of exchange; and it must be a unit of account, meaning that it must be divisible in each unit must be equivalent. Fiat currency has failed as a store of value and it has no intrinsic worth. How much does it cost to type and zeros on the computer screen or on a piece of paper?


Certainly less than it does today a drill a mile into the earth and extract and refine 2 grams of gold from a ton of rock. The U.S. Federal Reserve was created in 1913. From its creation through to this day, the U.S. dollar has lost approximately 98% of its purchasing power. On the other hand,  Gold has retained its purchasing power rising from around $21 an ounce in 1913 to $1,300 today. Through the ages, whether in Roman times, in 1913 or today, 1 ounce of gold has at least provided a man with a pair of shoes, a custom suit, and a briefcase, or the equivalent.


Gold as Stock Portfolio Insurance

Gold is the closest most negatively correlated asset to traditional financial assets such as stocks and bonds. Physical gold bullion should be a significant part of the strategic long-term allocation within a diversified portfolio. Wall Street pundits and the uneducated media regularly dismiss Gold, and other commodities as speculation, not to be owned for most investors. Do they know – or have taken any time – to research Gold’s role in a portfolio; to dig into the numbers and important relationships? 


We have looked at the Gold statistics over the past 40+ years, using publicly and historical information, and determined from the data that while Gold does not move in lock-step always to offset losses in stocks, it does show a very reliable pattern to mitigate losses in bad bear stock markets, and during times of high inflation. Your amount of assets in Gold should be your decision, based on your individual needs with your money; income needs, withdrawal rates, capital gains, liquidity, etc.

 

The Case for Gold Ownership 1972 - 2015
Note Golds surge after President Nixon took the U.S.A. off the Gold Standard in 1971, during which Gold's price was fixed at $35 an ounce. Stocks were entering a bear market, losing 40% during 1973 and 1974, while Gold skyrocketed almost 4 times in price, rising from $40 to $160.
Then a few years later, in 1978, we were hit with an Oil Embargo (remember gas rationing?), which started 4 years of high prices (inflation), which hurt the U.S. Dollar’s purchasing power. From 1978 through 1981, inflation ramped up a combined 50%. Gold prices rose +135%.

Fast forward to the next major bear market, known as DOT COM. This referred to the period at the turn of the century, 2000, where the Internet funding craze ramped up to unprecedented levels. Public offerings of Initial Public Offering shares in the technology sector met with wide-open pocketbooks with individual investors and institutions alike clamoring for ginormous profits. In the five years ending in 1999, when the DOT COM craze finally ended, stocks gained 228%, while Gold also rose 55%. Then when stocks fell about 40% in 2000-2002, Gold participated also and rose 18%.

Gold then began a 10 year rally, with no losing years starting in 2003, rising from $350 to $1,650 an ounce into late 2012. So far, investors, doesn't it looks like Gold is helping a portfolio including stocks, especially when the stock market is falling in bear markets?

The last period to measure is the 2007-2008 era real estate-led bear market in housing prices and financial assets, causing the stock market to lose half its value in a short 17 months. This should be in most of our minds, if you were an investor or saver 8 years ago.


Gold had its best year in 2007 (up 30%) since the late 70’s, as it rose perhaps in anticipation of / and on the fears of the banking and lending fiasco that led up to the falling stock market.

During 2007-2009, stocks lost 15% in those 3 years, while Gold gained $450 an ounce (+70%).

Granted, the long term record also shows Gold’s poor showing the past three years; being down sharply.  Is this cause for concern? We feel the roughly 40% decline in Gold prices since 2013 are due to super low interest rates competing with the no-dividend paying precious yellow, and a decent stock market. Owning Gold through 2015 was a drag on your returns in a diversified portfolio. Stocks gained about 45% the past three years. That's a healthy clip.

So the take-away here is that Gold is reliable for mitigating losses when stocks are down sharply, and when Gold really tanks, stocks usually have a a great year (1975, '83, '91, '97, '13) or at least stocks provide a nice offset to Gold's lesser declines, in years 1976, '88, '89, '96, '98, '14, '15.

Could the economic uncertainty (Brexit vote) and renewed price gains in Gold this year, up $250 an ounce, or +22%, be a precursor to an even worse stock market ahead in the second half? We’re not sure, but we are not selling our allocation to Gold for ourselves or our client accounts. Any geopolitical risks should only add to the demand for histories most popular precious metal, GOLD.


   





Tuesday, February 23, 2016

Stay Diversified My Friends

Bonds and Gold have held off the red ink thus far in diversified portfolios.

An equal mix of stocks (S&P 500), bonds (20 yr T-Bond), Cash and Gold has produced a positive return through today of +4.3%. The full tally.

Stocks  - 5.5%
Bonds  + 8%
Cash    +0%
Gold   +15%