Our 2018 Re-Cap of the Markets

The financial markets to a large extent showed losses across stocks, bonds, and many commodities last year. Looking into the categories a bit more closely, bonds eeked out a small gains of even to 1-2  percent, including interest earned.

That was the rare bright spot, folks. Looking at stocks, 8 of the 10 S&P sectors ended in the red: Utility stocks and Health Care ended positive for the year. Commodities were mixed to down. Oil prices fell 25% last year, which was good for consumers, but bad for profits in the Energy sector.

Through nine months, the stock market looked impeccable; another year of double- digit growth looked very achievable. Then the road got rough – fast. As October unfolded, interest rates started to rise, and housing and mortgage growth slowed. China trade skirmishes didn’t help matters. Earnings growth was perceived as slowing, although very robust nearing its 10th year of an economic recovery (the longest in Post WWII times).

At the end of the day, more sellers were interested in moving money out of stocks, rather than make new commitments to buy. Suddenly, there were more reasons to be scared of stocks, and less reasons for confidence. And sentiment – what investors think and feel – are most important. You can rationalize all day, but the markets often act irrational in behavior.

The Dow Jones Industrials and Standard & Poor’s 500 Indices fell 3.5% and 4.5% respectively for 2018 including dividends, while the Nasdaq Composite lost -3.9%. Many stock fell much more, the smaller the company, the more chance of larger losses last year.

One final positive push was in store, as The Santa Claus rally surfaced, starting on Christmas eve, as the stock market (Dow) rallied a BIG 7% during the next 4 sessions to close out the old year, 2018. It’s an understatement that volatility increased dramatically in the fourth quarter.

Our favored commodity to own, Gold – fared well comparatively, as it moved just 1% lower; that’s $12 an ounce decline, to $1,279 on the year.

Where do we go from here?

First, we recommend to keep lots of cash on hand until conditions and the charts tell us it’s safer to invest and an uptrend is developing. You may miss some gains off the bottom bounce - that's starting to develop now as favorable news is reported and interest rates are backing down a bit. As the stock indexes move higher, confidence will come back, and it'll be a safer entry point.

Next, we watch the pot and don’t leave it unattended. BUY and HOLD is not in our vocabulary.
Thaks for reading and Happy New Year !

When To SELL; Technical Analysis for All

Investors: Is Your Selling Strategy in Order

Getting your selling strategy in order and formalized is probably one the facets of investing that you have the most control over. If handled properly, it will protect your money from big losses, instill confidence in yourself, and avoid much financial stress and anxiety.

Having an exit strategy is most appropriate now that the stock market is in a precarious place, having recently falling into correction territory with plus 10% losses in the popular averages.

With Thursday’s action behind us, the major equity (stock) market indices are down close to 20% from their late summer highs. That’s right on the cusp of a defined Bear Market! Note that bonds have come alive here and Gold is rising also.

Thus far in the fourth quarter, here’s the tally:

Stocks (Dow and S&P 500)  down 13% and down 15%
Bonds,  intermediate / long:  up 3.3% and up 4.5%
Gold, bullion price:  Up $72 / ounce, or up 6.1%
Cash and short term money market funds are paying 1.5% to 2% annually, so they were ahead a tad over the 3 months.

Technical Analysis - Think About the Math

Investors do not know with certainty how their stocks will perform. There are  just too many variables affecting the buy and sell decisions of millions of investors. Political, economic, company specific announcements, interest rates, etc. are all outside of our control mostly when assessing risks. These factors all swim around in a large punch bowl – we never know which sip will be the bad one for us.

BUT, what you can control to a large extent is your behavior with your investments on when to SELL. What does that look like? There’s one strategy that’ll work for us all. Perhaps your financial advisor or planner did not explain to you: STOP LOSS.

In its simple explanation, you would sell your stock when it fell a certain percent from your cost price – or the most recent HIGH price. That will lock in the gain or loss for you. Let’s look at Apple stock, a darling of Wall Street for years now, until the recent 30%+ decline. Apple stock reached $232.66 in early October (green rectangle on the chart). That’s factual and known then and now.

It does not matter what you paid for Apple stock – that is past news. You can only SELL it for what others will pay you today! So, the term STOP LOSS can either lock in a GAIN for you – if you paid less – or limit a LOSS for you – if you paid more.

I use a 7% to 8% stop price because that has shown to be a wide enough measure to weed out the short term blips of price action. So, your sale would be at near $215 using 7% or 8%. The blue line is another indicator (moving average) that I use as a confirmation signal to sell, beyond the discussion today).

See the green circle where the price was very erratic? If you were busy and could not sell, you should have SOLD in the $200-205 range as a final trigger pull. A $200 sale would be a 14% loss, which is still manageable and acceptable in fast moving conditions. 

 

You NEVER want to be in a position to give up a 30% or 40% decline in a stock you own, and could have mitigated that decline greatly!

Apple’s down $75 a share or 33% from its high; that means it needs a 49% gain to get back to $232! Likely soon?  A 15% loss needs just a 18% gain to get back to even-steven.

Caveat: Not every stock you own will show the same pattern or clarity that Apple has shown us. But in the end analysis, TECHNICAL ANALYSIS and STOP LOSS selling can provide you with a better batting average with your portfolio of stocks.

Browse on over to a popular financial site like: FINANCE.YAHOO.com, or your brokerages site and plug in the ticker symbol and view your chart to go through this exercise with your stock holdings.
 

E-mail or call with any questions, and have a Merry Christmas and safe Holiday ahead.

I’ll recap 2018 in my next post in January.

🎄🎄🎄
 

Sure enough, we’ve enjoyed a nice robust rally for close to 10 years now, and if you have been fortunate to own assets like stocks or mutual funds, you are no doubt happy campers.

Stocks Fall, Election Results Stall

Wall Street celebrated the Veteran's Day observed Monday by reeling and ending down sharply for stocks, while bonds stayed pat, and oil slid below $60 a barrel. Gold fell back towards the $1,200 level. Mid-day Tuesday, the averages are mixed to down a bit (100 points lower on the Dow).

Monday, stocks fell between 1.9% and 3% for the Dow, S&P 500 and Nasdaq Composite - rough sledding indeed on the day when banks and Federal offices were closed in observance of Veteran's Day, November 11th.

At the end of the day (I never did like that phrase), but it's appropriate here, sellers had the upper hand over the buyers. The fall today takes us back to near even-Steven for the past week; when stocks rallied sharply from the late October lows. Year-to-date, were up 2-3% in the popular averages. Many stocks now are NOT up this year, and have some real catching up to do.

What did work Monday were the defensive sectors: Utilities, Real Estate, Consumer Staples and Communication Services. The latter 2 were down less than 0.8%, while the first two saw small gains.

The contested election results in a few states - and the ensuing news over the weekend - probably did add to the uncertainty in Monday's trading. Tuesday marks one week since the election voting took place, and ballot recounts and court orders will take some time to sort this all out.

I'm not taking sides here, but having been a voter in Broward County, Florida for most of my adult life (since 1976), many of the elected officials are bad actors time and time again. 

Perhaps other Counties just don't get the attention of the larger Miami-Date, Palm Beach and Broward areas. Look up how many Broward School Board members have been sentenced to jail time for influence peddling, graft, corruption and the like. It'll make your head spin. Just follow the money, or this week the missing boxes of ballots - and you'll find someone with their hand in the cookie jar, so to speak.

My recommendation is to watch your pot of money, and allocate it away from an aggressive stance until conditions improve. You can then sleep better and have some liquidity for the next opportunity.

Will Rogers stated it this way. "I'm more concerned about the return of my money, vs. the return on my money". 

Thanks for reading.

~Barry

Scary Investment Trends; Fear or Greed?

Scary Investing Trends

With Halloween fast approaching, I'm seeing some very creative decorations around the neighborhood. Ghosts, tombstones with morbid etchings, and the like.



I am also seeing and want to report to you, some disturbing investment trends that are sure to scare some investors into making some bad money decisions. 

One trend in the works since the 2007-2008 market crash is stock ownership. The percentage of household that own stock has fallen from 65% to 55% in the last 10 years. 

Looking at the various age groups in the study, every age range except age 65+ saw a decline in stock ownership. And remember, we're had a very good bull market in stocks for 9 years now - after the bear market ended in March 2009! 



Why is that? Well, the reasons are many no doubt, but that last recession and bear market (2007-2009) cut deep into the psyche of many investors, many of whom lived through the 2000-2001 market meltdown also. As an example, if you were born in the mid-to-late 1970's and started your career and investing at age 25, in or near 2000, you experienced the "lost decade" from 2000-2010 when stocks were essentially flat; no gain or loss. Then you may have dipped you toe in the water in 2011 or 2012 and saw some nice gains from there. Fear of loss was stronger than your fear of missing out. 

Then a few years earlier, in 2005-2006, the real estate downturn started, and your biggest asset - your home - plummeted in value (unless you were prescient to sell at the top). 

No generation has been exempt from bear markets, where stocks fall sharply after bull markets end. That real estate bear market had never occurred before to that extent.

I will include real estate in this, and say that the 'lost generation of investors' includes those who owned stocks and real estate, since both suffered severe bear markets during that 10 year span. 

Looking really far back, to the Great Depression of the 1930's - research shows that adults who lived through that - they would be your grandparents or great-grandparents age-wise were 1/2 less likely to invest in stocks the rest of their lifetimes; just an average 13% ownership in stocks. 

That was the case for my grandparents, and I evidenced that first hand how they gravitated toward bank CD's, Government Bonds, and F.D.I.C. insured deposit accounts. 


Fidelity Investments dug in to their client accounts and unearthed what I find to be spooky trends that are in place right now.

 47% of Fidelity's 19.7 million retail brokerage accounts are invested in aggressive portfolios, defined as those containing 85% of more in equities (stocks). Huh? 85%? Maybe they have their bonds, cash and Gold assets parked with other brokerages or banks. Hmmm, not likely. 85% is okay if you are 25-35 years old, with 25-35 years until retirement, but not for many or all. As Clint Eastwood growled out in his 1973 Magnum Force movie, "A man's got to know his limitations".

On the brighter side, Fidelity also reported that one-half (50%) of their client's 401-k monies were invested in target date funds. Those are mutual funds and others that invest in stocks and bonds, but decrease your stock market exposure, and increase your fixed income (bond) holdings as you age, thus lessening the volatility of your money when you retire. That's a rather smart strategy if you don't want to hire a manager, or don't have the time or energy to do it yourself. To me, this show a reversal of the quip from above, in that investors are now more fearful of missing out vs. the fear of loss. 

Believe me, the fear of loss will rear its ugly head again. You could make an argument that it's begun already, with the popular stock market averages (Dow, S&P, Nasdaq) down 8%, 9% and 11% from their September highs as of today's closing quotes.

Bonds have been held back and have not countered the fall in stock prices. Gold has gained 4% since stocks peaked last month.



Be careful out there, watch the charts, and have a plan in place that's rules based, not emotional-based.






Important Deadline for V.A. Benefits Next Week

Dear Clients and Friends -  Please read this time sensitive news for potential benefit. 

I wanted to reach out to you today and let you know about some changes in VA Pension regulations that may impact some of the veterans or spouses of veterans that you know. 

Effective Thursday, October 18, 2018, the VA Pension program will be implementing a 3-year look-back period where all asset transfers will be closely evaluated by the VA.

If the VA believes that the veteran or spouse transferred assets for the sole purpose of qualifying financially for pension benefits, the VA may impose up to a 5-year penalty on the veteran that would block the veteran from receiving the necessary pension benefits.

Additionally, the VA has made some modifications to their definition of “net worth” for Pension program purposes and this may impact some veterans and put them over the financial limit to qualify for pension benefits. 

Any asset transfers that are undertaken prior to October 18, 2018, will NOT be subject to the 3-year look-back period.

So, if you know of veterans or spouses of veterans that may be needing VA pension benefits or Aid and Attendance benefits in the immediate future generally used to cover the cost of nursing home-level care, I would love to talk to them and see if there are any changes needed to their financial planning strategies so they can potentially qualify for VA pension benefits.

Any asset transfers that are undertaken on or after October 18, 2018, will be subject to the 3-year look-back period. So, any veteran or spouse who may need VA pension benefits should have a qualified financial planner and VA accredited claims agent review their specific situation to get the wheels in motion. 

I have a colleague, Christina Clark, who is a VA accredited claims agent and disability advocate, and she will work with me to assist any veteran or spouses of veterans who have interest in learning more about these VA pension regulation changes and how it may impact them in the future.

Please call me at (954) 719-1151 to schedule a time to talk!
My e-mail address is: Unterbrink@usa.net also.

Warm Regards,

~Barry L. Unterbrink

Chartered Retirement Planning Counselor

Stocks Sell Off 3%; Time to Have Your Plan in Place

It was a particularly nasty day Wednesday for the U.S. stock market. The selling started off from the get go at 9:30 a.m. on the opening, and continued into the close at 4:00 PM.

The reasons that could be used for the selling today include the recent march higher in interest rates, the uncertainty of the quarterly earnings reports to begin flooding out next week, the effect of the trade tariffs with China – to name a few. At the end of the day, sellers outnumbered buyers 9 to 1.

The popular Dow Jones Industrials fell around 830 point or 3%, the S&P 500 fell 3.3%, while the Nasdaq Composite shed 4%. Ninety percent of the trading volume was down trades. The Dow Jones stood at the 800 level when I started in this business, many moons ago !

The best performing sector, Utilities fell about ½ percent today, and very short term bond funds were break-even to up about 1/5^th percent. All 11 S&P sectors fell some to degree Wednesday. Gold rose $4 an ounce to $1,194 the ounce, so it did not provide much of a cushion; at least not yet.

We’ve enjoyed some nice gains the past few months in Technology and the Health Care sectors. They are ahead year-to-date 13% and 11% respectively after today’s sell-off. Just four sectors are losers this year thus far: Financials, Real Estate, Consumer Staples and Materials.

Before panic sets in, consider where we have come this year, on top of the nice gains of 2017 – up 25% - the Dow is back to where it stood in mid-August, while the S&P 500 is equal to its mid-July level. Generally the last two months of 4-6 % gains in these two indices has been erased thus far in October. For a long term investor, that should not be a concern…BUT, you have to assess what you own and how tough a stomach you have to hold stocks with losses – or perhaps gains that are eroding. For that, you need to do some math. Grab that calculator, or slide-rule. 

We suggest, as we’ve stated here regularly, to use a stop price at which you will sell. Your broker or advisor should be talking this up as part of your portfolio strategy. 

For instance, if you bought a stock or mutual fund for $100, you would sell it at $92 for an 8% loss if you used an 8% stop price. If you have further questions on this, e-mail me for a look-see on how to set this up. I offer free consultations.

Interestingly, on a historical basis, the last stock market bear market – the 2007 – 2009 financial crises, started in early October 2007; the 9^th of October to be exact. The Dow stood at 14,164 that day, and fell to 6,547 by March 2009, a 53% loss. It would take another 4 years, to March 2013, for the Dow to break above the 2007 high. That’s a lot of time to fret and second guess things.

So I recommend to have a plan, enact it, and then follow it. Take your emotions out of the equation.

Thanks for reading friends.

Labor Day's Origin; Market Update

As we head into the Labor Day weekend, I wish all of you - clients and friends - a safe and enjoyable time off with your family and loved ones.

Labor Day History

Labor Day honors the American Labor Movement and the contributions that workers have made to the strength, prosperity, laws and well-being of the country. 

Trade Unionists first set forth the idea in the late 19th century. The Central Labor Union organized the first parade in New York City in 1882. Oregon was the first state to make Labor Day an official public holiday 5 years later. By 1894, it was proclaimed as a Federal Holiday.

The selection of the date to celebrate the first Monday is September was thought to be contrived to be equi-distant between the July 4th and Thanksgiving holiday, as it nearly is so today.

Today, we think of Labor Day as the un-official end of summer, when vacations end, schools start back, and the seasons weather turns toward Autumn. Sports fans are ready for football games and baseball playoffs. 

Obviously, designating the day as a Monday holiday greatly helps those who work and wish to get away for a 3-4 day vacation. An estimated 30 million American’s will travel this Labor Day weekend, Friday being the busiest day.

In the financial markets, this summer is anything but boring. Many industries and companies are reporting excellent profits, and their stock prices are moving higher. Stocks are ahead 6% to 9% (Dow and S&P 500), while Gold and Bond prices are mixed with the higher interest rates affecting their attractiveness. Gold’s lost about $100 an ounce this year.

Employment is very robust, and unemployment falling rapidly this year to under 4%. This ‘bull market’ with rising asset prices is now the longest on record, commencing March, 2009. 

These times are getting a bit ‘giddy’ in my opinion. One example: the U.S. has legalized recreational use of marijuana in 5 states now: Alaska, Colorado, Oregon, and Washington state. Add Washington D.C. to that list also. Hmmm, maybe that’s why our politician’s are acting foggy and confused? 

Canada will legalize recreational POT in mid-October. Could this all add up to the great fall of Western civilization as we know it? Time will tell, readers.

My question on all of this (mostly) good news is: what will be the catalyst to cause the BULL to stop running? And what will that look like for investor’s portfolios? Rising interest rates along with inflation? Geopolitical events, the trade situation escalating.

The last bear market - in case you missed it - saw prices fall in half from 2007 to 2009; 17 months to be more exact. An equal fall today would take the Dow Jones Industrials Average down from 26,000 to 13,000. I think that’s not likely; but plausible. One last point for long-term investors. If you are disciplined and long term thinking, you can almost always recover from bear markets in decent shape - if you have the time and don't get too antsy.

To wit: If you bought all your stocks at the market high in October, 2007 - Dow 14,000 - and held them until today; you would have gained 7% on average each year.

Sure, that may not make you the hit of the party vs. your friends who own Apple or Amazon shares (or that 'hot' marijuana farm stock), but you can sleep at night by being conservative and diversifying your money across stocks and bonds, and some cash. And that's not a pipe dream.*  

Do have a happy and safe holiday.     

~Barry Unterbrink, C.R.P.C.

* an unattainable or fanciful hope of scheme.