Friday, July 30, 2010
Of markets, strategies and risk + new web site
Well, the financial markets appear to confuse most by moving up and down with no clear trend of this year. As we almost have July on the books later today, the popular stock market averages are a couple percent on either side of even for the year! While July is shaping up fine, June and the entire 2nd quarter were a real downer. The second quarter shaved about 12% off stock prices, while June carried the brunt of that at minus 5% on the S&P 500 Index.
Our "sell in May" blog post at April's end has been on target. Since May 1st, the markets are lower by 5% to 8.5% (Dow, S&P500 and Nasdaq Composite). We don't religiously follow the strategy to a tee, as opportunities arise between May-October to capture some coin, but if you did, congrats.
One area shining of late is the bond market. It had a bang-up quarter led by lower interest rates and a flight to quality USA bonds. Gains of between 3% and 10% came in among various segments of the market - government, mortgage, and treasury. Junk bonds and emerging market bonds were about even. We've been using the low expense exchange-traded bond funds to juice up income when not invested in stocks. Most pay monthly interest and can be sold anytime during the trading day. By the way, when interest rates rise, watch out - bond prices will FALL. It won't happen overnight, but it will happen - someday.
RISK. We preach a good portion of text here on that topic. Our thesis: mitigate the risks and your money and happiness will increase. Control the risks you can, plan for those less manageable. Pay too much in fees, increase your risk of less money. You also need an action plan, whether it's "sell in May", or an asset allocation strategy, a loss-reduction strategy, technical timing system, or what have you. Just have some rules to follow. BY doing that, your results will be measurable. Systems are measurable and tell a story once they have been implemented. If you don't know where you're going, you'll probably end up there! True in life and in the financial markets.
I've noted a quote from a prospective client last month in her e-mail to me after we had met earlier in the year with the couple to offer options to plan their retirement "We are not doing ANYTHING right now. We're just hanging on to see what happens with this volatile market. Things were looking up for a while. Now I'm not so sure." Hmmm. Sounds like they have no plan here at all; faith, hope and prayer better work for them. I encourage another meeting. Money
management is a tough business - get help, devise a plan! Call me for a free review of your situation.
Retirement Planning Web site launched - www.barry.retirerx.com
I have launched a retirement planning web site with the help of The Retirement Pros, to serve you as a client, friend or both. I hope you can spend a few minutes there often to review and listen in on topics and advice that may help you plan your finances better. At the site, you can view newsletters and videos on topics such as IRA conversions, CD's, when to take social security, 401k plans, understanding annuities, etc. Downloads are there also to print. Ask me a question - and I will answer you. Just provide your name and e-mail address, and you will have access to all the helpful info.
Thanks for reading. Have a safe weekend.
~Barry Unterbrink, CRPC
(954) 719-1151
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
Thursday, June 10, 2010
Stetson Wealth Clients Lose No Sleep
No Sleepless Nights for Stetson Clients
We are supposed to be in the summer doldrums (see last post, "Sell in May...") but you would not know it from the action of the stock market of late. UP, Down, Up, Down, and then the recent volatility has been: Down, Down, Down, and Down.
Fortunately for Stetson Wealth Management clients our strategy has been to be mostly out of the stock market and into Bond ETF's (exchange traded funds) during this market correction.
In fact the Stetson owner's family funds and portfolios have also escaped the worst of the turmoil as we invest for ourselves just like we do for our clients. We eat our own cooking, as the saying goes.
We have also been switching from owning individual stocks to investing in ETF Funds for most of our investment. Using our classic market timing techniques with these baskets of stocks or bonds we have improved our performance AND reduced risk. For example, with the second quarter almost over the stock market is down over 9.4% while our major clients portfolios are UP amost 3%. If we could compound this difference over the full year the clients would have over 1/3rd more dollars than being fully invested in the market.
One might ask, "Why not just pick individual winning stocks and rack up gains as my broker wants me to do?" Well, there are problems with individual stock selection these days. Most Wall Street firms are cutting back on research dollars probably trying to make up the dollars lost from their past sins. The research they are putting out is increasingly faulty. Earnings and revenue estimates are wrong more than they are correct near market highs. If this is by happenstance rather than design I will not speculate but far too often Wall Street firms are falling back into their old habit of selling from their inventory stocks they are coincidently advising clients to BUY (conflicts of interest are rampant in this industry). Near market peaks one gets 20 buy ratings on stocks for every sell rating. Their Buy and Hold fallacious theory is perpetuated. This same plan has caused many investors and retirees to lose up to 50% of their life savings in the latest big stock market crash - in just 17 months!
University research has estimated that 70% of a stocks daily price change is due to the action of the market in general. Another 20% is due the SECTOR the stock resides in. i.e. Utilities, Energy, Technology etc. That leaves only 10% of the change is due to the individual stock. The ETF Funds of baskets of stocks or bonds packaged into all different sectors are ideally suited to take advantage of this situation especially if you are adept ar market timing. Selecting good sectors of the market combined with excellent timing have served us well at Stetson.
My son Barry and I cooperated in www.stetsonwealthmanagement.com We have collectively been investing and trading securities for over 70 years. We have become experts at selecting winning stock sectors and thus: ETF Funds are the right vehicle at the right time for us. ETFs make it easy to trade instantly baskets of stocks in any sector economically, many times with NO commissions. Is your broker using these techniques? This makes for big savings for investors on commissions.
Utilizing Funds we have been able to save our current clients over $200,000 in losses had they invested in the market at the recent market highs a few months ago. I consider our investment management a success if it greatly reduces or eliminates stress in our client's lives. Most of my philosophy can be summed up by the plaque I keep on my rolltop desk. It says:
The Two Most Important Rules of Investing.
Rule # 1. Never lose money.
Rule # 2. Never forget rule # 1.
We are supposed to be in the summer doldrums (see last post, "Sell in May...") but you would not know it from the action of the stock market of late. UP, Down, Up, Down, and then the recent volatility has been: Down, Down, Down, and Down.
Fortunately for Stetson Wealth Management clients our strategy has been to be mostly out of the stock market and into Bond ETF's (exchange traded funds) during this market correction.
In fact the Stetson owner's family funds and portfolios have also escaped the worst of the turmoil as we invest for ourselves just like we do for our clients. We eat our own cooking, as the saying goes.
We have also been switching from owning individual stocks to investing in ETF Funds for most of our investment. Using our classic market timing techniques with these baskets of stocks or bonds we have improved our performance AND reduced risk. For example, with the second quarter almost over the stock market is down over 9.4% while our major clients portfolios are UP amost 3%. If we could compound this difference over the full year the clients would have over 1/3rd more dollars than being fully invested in the market.
One might ask, "Why not just pick individual winning stocks and rack up gains as my broker wants me to do?" Well, there are problems with individual stock selection these days. Most Wall Street firms are cutting back on research dollars probably trying to make up the dollars lost from their past sins. The research they are putting out is increasingly faulty. Earnings and revenue estimates are wrong more than they are correct near market highs. If this is by happenstance rather than design I will not speculate but far too often Wall Street firms are falling back into their old habit of selling from their inventory stocks they are coincidently advising clients to BUY (conflicts of interest are rampant in this industry). Near market peaks one gets 20 buy ratings on stocks for every sell rating. Their Buy and Hold fallacious theory is perpetuated. This same plan has caused many investors and retirees to lose up to 50% of their life savings in the latest big stock market crash - in just 17 months!
University research has estimated that 70% of a stocks daily price change is due to the action of the market in general. Another 20% is due the SECTOR the stock resides in. i.e. Utilities, Energy, Technology etc. That leaves only 10% of the change is due to the individual stock. The ETF Funds of baskets of stocks or bonds packaged into all different sectors are ideally suited to take advantage of this situation especially if you are adept ar market timing. Selecting good sectors of the market combined with excellent timing have served us well at Stetson.
My son Barry and I cooperated in www.stetsonwealthmanagement.com We have collectively been investing and trading securities for over 70 years. We have become experts at selecting winning stock sectors and thus: ETF Funds are the right vehicle at the right time for us. ETFs make it easy to trade instantly baskets of stocks in any sector economically, many times with NO commissions. Is your broker using these techniques? This makes for big savings for investors on commissions.
Utilizing Funds we have been able to save our current clients over $200,000 in losses had they invested in the market at the recent market highs a few months ago. I consider our investment management a success if it greatly reduces or eliminates stress in our client's lives. Most of my philosophy can be summed up by the plaque I keep on my rolltop desk. It says:
The Two Most Important Rules of Investing.
Rule # 1. Never lose money.
Rule # 2. Never forget rule # 1.
by Warren Buffett
Clients: New statements in about 5 weeks. Watch for them.
Larry Unterbrink
Director of Research
Stetson Wealth Management
(954) 719-1151
Clients: New statements in about 5 weeks. Watch for them.
Larry Unterbrink
Director of Research
Stetson Wealth Management
(954) 719-1151
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
Friday, April 30, 2010
Sell in May and Go Away
April 30th, 2010
Sell in May and sail away?
It still holds true, current research shows that the old investment adage “selling in May and sailing away” still makes a lot of sense, according to an analysis of market history.
A look at the performance of the Dow Jones Industrial Average over the 59-year period through 2009 shows that the index produced an average gain of about zero during the six-month periods from May to October, according to the 2010 Stock Trader's Almanac.
Over the same 59 years, the Dow averaged a 7.4% gain during the six-month periods from November through April.
To put it another way, $10,000 invested in the Dow during each of the May-through-October periods beginning in 1950 would have generated a cumulative total loss of $474.
But $10,000 invested in the Dow index only during the November-through-April periods would have generated a total return of $534,348. Wow!
The general rational for the seasonal market slump has been that May represents the start of vacation season and the reduced trading activity tends to pull down or hold down the markets. This is especially true in foreign stock markets. University analysis shows the system has worked in 33 of 34 countries tested.
Following the pattern in 2008 would have helped investors avoid a 27.3% drop in the Dow. Of course, the index still lost 12.4% during the following November-to-April stretch.
Getting out in May last year would have meant missing out on an 18.9% gain, while the following six months produced only a 15.4% gain.
While the research proves an advantage over the long term of strictly following the trading strategy, prudence dictates it is always best to take into consideration the overall market and macroeconomic environment, and of course, your tollerance for risk and time frames.
As of now, late April 2010, the Dow is coming off a really good run, and there are all kinds of technical and geopolitical issues to consider such as the debt crises in Greece, Spain, Portugal and Ireland. It might be a good time to tighten some stop orders and put some limits on new stock and mutual fund positions.
Barry Unterbrink, CRPC
(954) 719-1151
Sell in May and sail away?
It still holds true, current research shows that the old investment adage “selling in May and sailing away” still makes a lot of sense, according to an analysis of market history.
A look at the performance of the Dow Jones Industrial Average over the 59-year period through 2009 shows that the index produced an average gain of about zero during the six-month periods from May to October, according to the 2010 Stock Trader's Almanac.
Over the same 59 years, the Dow averaged a 7.4% gain during the six-month periods from November through April.
To put it another way, $10,000 invested in the Dow during each of the May-through-October periods beginning in 1950 would have generated a cumulative total loss of $474.
But $10,000 invested in the Dow index only during the November-through-April periods would have generated a total return of $534,348. Wow!
The general rational for the seasonal market slump has been that May represents the start of vacation season and the reduced trading activity tends to pull down or hold down the markets. This is especially true in foreign stock markets. University analysis shows the system has worked in 33 of 34 countries tested.
Following the pattern in 2008 would have helped investors avoid a 27.3% drop in the Dow. Of course, the index still lost 12.4% during the following November-to-April stretch.
Getting out in May last year would have meant missing out on an 18.9% gain, while the following six months produced only a 15.4% gain.
While the research proves an advantage over the long term of strictly following the trading strategy, prudence dictates it is always best to take into consideration the overall market and macroeconomic environment, and of course, your tollerance for risk and time frames.
As of now, late April 2010, the Dow is coming off a really good run, and there are all kinds of technical and geopolitical issues to consider such as the debt crises in Greece, Spain, Portugal and Ireland. It might be a good time to tighten some stop orders and put some limits on new stock and mutual fund positions.
Barry Unterbrink, CRPC
(954) 719-1151
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
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