2ndQtr16 – Rolling Bear Continues, Stay Fully Exposed to Common Stock

Consensus of self-described “smart money” is for end of long term bull market around 2017 if not before. Contrarily look for 2016 and into 2017 for a long term (months to years) base to develop around 18,000 on Dow Jones Industrial average and 2100 on Standard and Poor’s 500 index. Recent smart money losses reveal a continuation of rolling bear market and exposes continuation of hubris misallocating capital as consequence to choosing mid and long term efforts missing consideration for opportunity costs (nascent investment opportunities and secular trends).

Overcrowding worldwide oil and gas patch investment reminds us that since midnight, December 31, 1999, if there was ever a lesson to heed by its continuous examples, it’s that smart money is the new herd (dumb money) – crowd behavioral phenomena (only in part due to the computer).

In my view, dual causes (both each private and public) include 28-year leadership vacuum contemporaneously misdirecting fiscal and asset allocation needs (and policy incentives therefore) while indoctrinating and polarizing American discourse to benefit a self-described “leadership.” Examples are definitely not inclusive: General Electric (GE) vacates constructive efforts to make money using others’ becoming major player in “banking crisis” only to reinvent itself from ruined riches into oil and gas patches; Each time a billionaire made news the past few years by involvement with Valeant (VRX), a five minute ratio analysis of financials revealed a speculative issue at best; Income producing enterprises (means to safety and security for a civil society) demonized by those dependent; Inheritance tax securing legacy of freedom from elite power dubbed by both political parties as “death tax”; Too simple (job eliminator for career politicians) to declare people, not income producing enterprises, as sole source for tax revenue. Obvious consequences are worldwide level playing field (U.S. leadership) for trade and forced fiscal discipline (no third party responsibility enabling a society on the take); and, economic polarization from both extremes offer equal consequences. Socialism from so called left and return to gold standard from so called right both equally shrink the economy (job losses!) while consolidating power.

No changes to the portfolio for 2nd quarter.

You may (I’m not – yet) with minor loss of visibility, add with equal weighting to the portfolio Time Warner, Inc. (TWX) and IBM (IBM). Yield to portfolio increases from 2.43 to 2.51%.

Russell 1000 index (IWB) ETF (exchange traded fund) is an alternative to SP500 index fund recommended in lieu of the portfolio due to cost. Unless you’re wildly rich or your tax deferred employer offered account is widely used (8 digits), costs for SP500 index funds range from .02 – more than 1%. IWB cost is .15%. Choose the least expensive.

In no way am I endorsing ETF’s. Always choose an index to an ETF unless the ETF is derived from an index. ETF’s other than index derived without leverage and subjective component selection by a third party create marketplace liquidity issues when least needed and participant anxiety during market dislocations. Just beware of ETF’s, those requiring subjective component selection require more work than stock selection. As an example three years removed (last time I looked at one) from reviewing a “Timber Real Estate Trust,” its’ over weighted primary component owned multiple paper manufacturing locations with all the equipment, pension and usual industrial obligations but owned not a single tree!

Happy Easter!





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