Sniffed Links - 9 Years

Celebrating my 9th wedding anniversary this week. Time flies. We were showing my 4 year old daughter our wedding video from 2008 and it looked so old. Ironically it was the same year the iPhone came out. And we were in the full midst of the recession and a major market decline. From a technology standpoint 2008 seems like forever ago. An iPhone can take better footage than whatever the videographer used 9 years ago. From a market standpoint it feels like yesterday. It is important for advisors to have gone through that market and the aftermath. That’s not to say there aren’t amazing advisors and planners out there with less than 9 years of experience but what we learned during those 18 months will last our careers.

The Next Hot Housing Market: Starter Homes - WSJ

American Gods

Paris Hilton Invented Everything You’re Doing in 2017, and She Knows It

Enjoying This Week:

Nick Murray’s Simple Wealth, Inevitable Wealth. Whenever there is a fairly large market decline (even just for a day or two) I go back to my highlights from this book.

Sniffed Links - Federal Fiasco

It’s hard to write a short commentary without at least acknowledging the federal government. The firing of FBI Director Comey dominated much of the news this week preceded by the first step in the potential repel of Obamacare. There is nothing left to be said that hasn’t already so I tried to make sure this week’s links offered nothing related to the fiasco that is the current US Government. I have done some reading of the new potential healthcare bill but I will wait to see what the final bill looks like if/when it comes to that. Most people who take an unbiased review of Obamacare can agree that it is far from perfect but building upon it would be a prudent way to go rather than doing a complete rewrite but alas this is where we are.

Have a great mother’s day weekend.

The Psy-Fi Blog: A Catalog of Investing Errors

Managing Household Records | Independent Thought

Regulating the internet giants: The world’s most valuable resource is no longer oil, but data | The Economist

Yes, that’s J Peterman from ‘Seinfeld’ pitching and IP on TV - YayYo IPO advertised on TV - Business Insider

Useful Thing I Am Enjoying
Stance Socks. Really great.

Market Commentary - May 2017

While we are only four months through 2017, I'm always fascinated to see how quickly investor sentiment can change. As mentioned in our September Market Commentary we felt emerging markets may be leading a global "recovery" and igniting further market gains. Things were moving along leading up to the election but afterwards there was an immediate sell off in both foreign and emerging market equities and bonds as people interpreted a Trump victory could lead to more protectionist trade policies which could damper imports and slow growth outside of the U.S. 

As we approached the end of 2016, the Federal Reserve increased its key interest rate by .25% and hinted at multiple hikes in 2017. Much of the investment community seemed to argue for a continued overweight in U.S. equities and bonds over foreign and emerging holdings. The data backed this up as net redemptions from Emerging Market Equity funds hit a five week high and net weekly redemptions from Asia (Ex-Japan) equity funds was the highest since September of 2015. One could argue this strategy had worked well since the start of 2014. Why would it stop given the political backdrop and negative investor sentiment towards non U.S. investments?

Through March of this year, the top performing equity asset class by was Emerging Markets followed by Foreign Developed. The top performing bond asset class was Emerging Market Gov't Bonds. Quite the opposite of what many thought. 

Not surprising but now inflows into these two areas are increasing as emerging market equities and debt are seeing some of their largest inflows in over 8 months. It's important to remember that this is a short period of time and and small data size but it goes to show how unpredictable markets are and how quickly investor sentiment can change. Will this continue for the rest of 2017? Your guess is as good as mine but many investors constantly seem to forget that markets are a forward-looking mechanism and place too much emphasis on past results and assumptions.

The reality is an investors focus should be on expected future growth and investor sentiment. Emerging market earnings growth is expected to increase significantly in 2017 and provide some of the best growth in years, yet sentiment became extremely negative after the elections. Couple that with Emerging Markets struggling over the last 5 years, and the bar was set fairly low. This reminds me of the famous Wayne Gretzky quote, "Skate to where the puck is going to be, not to where it has been." The same can be applied to investing and while it's not easy, history has proven this to be a winning formula. At times it does make sense for an investor to over or underweight certain asset classes, but this is typically done at the wrong time. We will have to see how the next few quarters shake out before making any type of conclusion but it just goes to show how money inflows in certain assets seems to come in after gains have been shown. 

Sniffed Links

We saw the market continue its trend of reacting to news on the short term. We got our first taste of Trump’s tax cut plan this week. We’ll have to wait and see if any of it comes to fruition. We also saw an early week rally due to the French elections. Let this serve as a reminder how short term volatility in both directions can be caused by almost anything.

The troubles at the American mall are coming to a boil - The Washington Post

How to Decipher a Financial Aid Letter

Scott Galloway - How is Dismantling Retail - YouTube

20 Years In, Have TIPS Delivered?

Useful Thing I Am Enjoying

Actually, I am not enjoying these since they are my wife’s but she seems very pleased with the Apple AirPods. I’ve read a lot of good reviews about them online also. At $179 they aren’t cheap but if you want listen to a lot of music or podcasts in “stealth” mode they are a good deal. Unless you lose them.

Cybersecurity Reminders

Instead of a list of links this week I want to share a few reminders regarding cyber security.

I received a call this week from someone saying they were with Apple Support and that my iCloud login was attempted a dozen times and it looked like someone was trying to get in. I found it fishy because I had not received and email from Apple and I happen to know they email first when they think there may have been a security issue.

The lady wanted me to login to THEIR servers. Bingo. Never ever do that. Also never let someone take control of your computer unless you know who you are talking to is with the company supporting you.

What is worrisome is that I can see how a lot of people could fall for this sort of scam. A good rule of thumb is to always ask for a number you can call them back on. It is likely they will hang up on you at that point. Immediately search online for the support number to the company they said they were with and call to ask if the issue was real.

Also this week a client received a phishing email from Fidelity. She forwarded it to us because she didn’t think she had any accounts there. Feel free to always forward these to us because we typically know what these scams look like. Also we can report them to the financial institutions. Anyway, this was also a clever one that said there was an issue with an account and linked to a site that looked a lot like Fidelity. What they try to do, however, is grab your login credentials. Always check to make sure the URL linked from an email is something you recognize and look for the "https:" at the beginning. Also, in this case it never hurts to call the company directly as well.

Stay vigilant.

Sniffed Links

With the airstrikes in Syria we continue to be in a time of global uncertainty. It is important to remember, however, this is always the case. There is always something and there are always uncertainties. We just deal with them as they come.

Investors Underperforming Their Own Investments

You Should Work Less Hours—Darwin Did

The Quietest Quarter for the Dow Jones Industrial Average in 51 Years - WSJ

Social Security Cards Explained - YouTube

Interesting Thing I am Enjoying

The Masters app on the Apple TV is amazing.

Market Commentary - April 2017

If we assume the recent market run up is due to the presumption of certain things getting done in DC then we could be setting ourselves up for a market decline. Let’s not forget, however, the problem with assumptions regarding markets is they are often proven wrong. Many are assuming the two major political issues driving markets right now are tax cuts and infrastructure spending. I don’t necessarily disagree with this entirely but if this is true then what happens if these don’t come to fruition?

Last month the healthcare reform bill was pulled because a lack of votes. Many assumed the market would have a sharp sell off as it implied gridlock in DC and the potential for other things like infrastructure spending and tax cuts to also fail. The markets again remained resilient. There was a short term sell-off but then it resumed its current course. This left many scratching their heads wondering how the markets could once again brush things off so quickly.

Immediately the attention turned to another area that many call a "make or break" for markets; tax reform. Specifically reform around lowering corporate and personal tax rates. Many analysts and economists are stating that without significant tax reform, global markets could be in for a large correction.

Could this be the case?

If tax reform doesn’t take shape will markets turn?

The market will always have “correction” periods, it is the timing that is difficult to predict and often the consensus is wrong. Global markets have rallied tremendously the last 5 months and many attribute it to potential tax cuts. It leaves me wondering however if one component can make such a difference to market performance for more than a short period of time.

There have been instances where the S&P 500 index rose significantly even as corporate tax rates increased (1949-1952 & 1967-1968). There have also been instances where there the S&P 500 saw minimal gains while corporate taxes decreased (1969-1971). It is difficult however to point to tax changes being the cause of the markets rise or fall during those periods. It goes without saying other components influence markets. Inflation, interest rates, employment, GDP and wage growth also can influence markets. And let’s not forget corporate earnings, growth and profitability.

Bottom line is that it's important to remember the stock market is complex and tax reform is just one of many components that factors into the markets performance. While the talk of tax cuts can move markets on the short term it is hard to point to one thing leading to a sustained rise or fall. Making an allocation decision based on one component of the financial system is not advisable, especially for a long term investor. Let the speculators speculate and move the markets on the short term. That is their game. Yours game is longer term.


Annual Returns on Stock, T.Bonds and T.Bills: 1928 - Current

Corporate Top Tax Rate and Bracket

Sniffed Links

A few links of note for your weekend reading. I’m behind on reading this week due to the launch of our new client portal but not to worry my read later list is full and I’ll be catching up on it this weekend. I think I might also start sharing some interesting non reading things I have come across that I really like each week also.

Online Tool to Apply for College Aid Was Taken Down Due to ‘Criminal Activity’ - WSJ

Forget Miles per Gallon! The Case for Switching to Gallons per Mile | The Lowdown | KQED News

Updating My Favorite Performance Chart for 2016

Interesting Thing I am Enjoying

You probably get a decent amount of robo calls to your phone. You wouldn’t believe how many we get. Our numbers are publicly available because of our SEC and state registrations so we got a ton. It seems the consensus among iPhone users that the current app of choice for blocking these calls is an app called Nomorobo. So far I have been very pleased with it.

Sniffed Links

Market Commentary - March 2017

Last year at this time the S&P 500 was recovering from one of the worst starts to a year in history and this year it is off to one of it’s best starts. Furthermore, as I write this, the first day of March is providing the largest gains of 2017.

While the US market continues to establish new record highs, the real head scratcher for me is the lack of volatility. The Dow Jones Industrial Average just ended a streak of 12 consecutive record closings. That has only happened two other times in the last 120 years. Even more surprising is the S&P 500 Index has gone over 90 straight days without dropping more than 1% in a market session.

Politics aside, markets seem to be embracing the administration’s goals of sharp tax cuts for corporations and individuals, reduced regulation and a $1 trillion spending proposal on infrastructure. Now this is where things get a bit tricky. If the market is “building in” pricing based on these potential events what happens if they don’t come to fruition? This could be many months or years down the road but it is still something we think about.

John Maynard Keynes said, "The market can stay irrational longer than we can stay solvent." Markets are forward looking mechanisms and at present seem to be pricing in the new administration’s plans. Some say it is extremely overvalued and some say there is plenty of upside left to come. These differing opinions are what makes the market. Remember for every buyer there is a seller.

Obviously there are many questions still to be answered. While reducing taxes and boosting infrastructure spending sounds favorable, the question remains how will this be financed? Reducing government inflows (taxes) while boosting spending can lead to further deficits and cause severe economic damage if economic activity doesn't accelerate fast enough. Furthermore the Federal Reserve seems very confident on raising rates multiple times in 2017 and that increases borrowing costs for corporations and governments. The last 10 years the global economy has become accustomed to ultra low rates and we have to see how the economy handles multiple rate hikes.

I’ll probably keep saying it throughout my career but our opinion remains that the “answer” to the unknown in markets is a risk adjusted globally allocated portfolio that takes into account taxes and fees.

New Year, New Links

Sniffed Links

The Fed raised rates this week for the first time in a year. We think this was the right move. As for next year and the notion they will raise 3-4 times...let's hope so. It's time. 

Only one of this week's links has to do with investing or finances (the last one). The other are just some really good things I came across over the last couple of weeks. Enjoy.

How to Write Email with Military Precision

Tilting my mirror (motivation is delicate) | Derek Sivers

A Realistic, Positive Picture of the State of Humanity

Diversification Is No Fun


All opinions in the links are the authors' own and are not meant to be investment advice.

Sniffed Links

Some really good reading this week. Particularly the "Something I'm Worried About" piece regarding the scary state of pensions. The last article from Morningstar actually attacks their own star ratings. We don't hear much about star ratings anymore but back in the early 2000's almost every investor we met with would ask about the "star rating" of a particular fund. We knew back then that the ratings had very little to do with the potential of the fund but it was hard to get that point across. Now it is much easier.

Only In 403(b) Land Could You Find This

How to Get Better Prices on Amazon Automatically – Kate McConnell – Medium

How Bad Could Bond Market Losses Get?

Something I’m Worried About

Does the Star Rating for Funds Predict Future Performance?


All opinions in the links are the authors' own and are not meant to be investment advice.

Not A Rally

This market “rally” was something we can say that no one saw coming. U.S. markets rallied nearly 7% from the lows of Tuesday night to the close on Wednesday. The Dow had its best week since 2011. This is yet one more example of why we usually tell clients to not try and time the markets.

The rally however was not as much of a rally as some seem to think. A well-diversified portfolio didn’t see the gains you might expect. While the Dow Jones and Small Cap Indices hit all time highs, many equity and bond markets were sold off as traders repositioned assets based on what they perceive a Trump victory will mean on the global economy. Asset classes such as emerging markets, European stocks, commodities, alternatives, emerging market bonds, European bonds and most U.S. bonds sold off sharply from Wednesday to Friday after the election. Utilities and consumer staples were also down. Facebook, Amazon, Netflix, Google. All down. Bonds suffered their worst week in over 3 years as the yield on 10-year treasuries surged and more than $1 trillion was erased from bond values.

Still, though, the collapse that some were worried about and others were rooting for has not taken shape. It seems much of Trump’s focus is going to be on possible de-regulation and infrastructure spending. Time will tell. Time will also tell if these things will help the economy and the markets. But we may not know until the next President is in office. Many financial policies take years to take shape and make their effects known. It is highly likely we could have a recession during Trump’s term. Whether it will be his fault or whether it is just the cycle of the economy will be an argument for the economists.

It is important to remember that diversification helps minimize the volatility in a portfolio but there are short periods where it doesn't work as effectively as we like but over the long-term diversification is a must. Making investment decision should never be based off one week, regardless of how bad it is and one must always focus on the big picture as investors in the market are not day traders and have a longer outlook then 1-2 weeks.

The rather quiet volatility environment we saw over the summer has ended and we are once again facing fragile markets that will likely respond to every piece of news. Every political appointment and every time Trump speaks will be an opportunity for the markets to react.

Pre Election Thoughts

As we have mentioned previously we believe there may be some market volatility after the election. We have seen some of this already as the markets react to polls. The only thing more uncertain than polling date is short term market movements. While the markets very well may react to either candidates election it seems that it may react more negatively to a Trump win. Either way it is important to remember that emotion is something we all should strive to eliminate from investing decisions. Much of what may occur in the markets initially will be based off emotion. We compare it to the post Brexit reaction. Remember, the markets recovered much of those loses within days. 

The longer term effects a President has on markets and economies are often not determined for years, if ever. Many policies either never come to fruition or get so watered down through the actual political process that the effects are minimal. 

Like many of you, we are ready for it to just be over. And therein lies what we think could be the biggest issue to markets. If we wake up on Wednesday without a clear winner then the process could be extended for weeks or months. Our assumption is the markets will not like that sort of uncertainty. That is the worst case scenario as far as the markets are concerned. 

We are certainly not recommending clients make changes to portfolios based on any of this. Speculation and market timing is not something that puts the odds in investors' favor. It is important to look at the long term and take as much emotion out of investing as possible. This election makes it much harder for investors because of the amount of emotion involved this time around. As always, however, let us know if you have any concerns you'd like to discuss.

Market Commentary - November 2016

The current state of the economy is one in which there are conflicting signs of strength and weakness. Economists are finding it harder to use traditional data to project their opinions. One of the reasons for this is the rise of the “sharing economy”. If you are unfamiliar with this term you are probably very familiar with some of the apps and services that make up this growing sector of the economy that is somewhat unaccounted for in traditional economic statistics. The sharing economy is basically the sharing of resources. These resources can come in many different forms. Time, intellectual, and physical goods are just a few examples.

Airbnb and Uber are the poster children for the sharing economy but there are hundreds of others (i.e. TaskRabbit, Fancy Hands). With Airbnb people share their home. With Uber people share their car and time. An economic transaction occurs outside the norm of traditional transactions like hotels and taxis. It allows almost anyone with time to make money and anyone with money to save time.

Elon Musk has talked about a time in the future when someone who drives their care to work can stop just having it sit in the parking lot all day but instead have it drive around and pick up people who don’t have a car and need a ride. The economic transaction for this type of thing includes one person making money off a resource while another person saving money by not having to buy an expensive car. In traditional economics this could make the economy look worse off. Why? Decreased car sales.

In the same way jobs numbers can appear worse than they really are. If you own a house with spare space in a metropolitan area you could make a decent amount of money renting a room out on Airbnb. Maybe this allows you to not work full time at a traditional job. Or, maybe you get tired of the traditional 9 to 5 job and decide to take tasks on Task Rabbit. Maybe you are a stay at home parent whose kids are in school and you want to take on a few “jobs” during school hours every once in a while and sign up for Fancy Hands. In all of these “alternative work relationships” your work may not appear as such in the BLS jobs numbers since their data is compiled by surveys and answers based on how people view themselves. I doubt many Airbnb “landlords” considered it employment.

Though the sharing economy is a relatively new concept, A survey conducted by Pricewaterhouse Coopers indicates that 7% of adults are working on sharing platforms. This is expected to continually increase each year as people continue to adapt. Even further, a survey conducted by Pew Research indicates that 72% of American adults have used at least one sharing service.

A 200k+ monthly jobs report was a regular occurrence in 2014 and 2015, happening 19 out of 24 months. 2016 paints a much different picture as it has only occurred three times year to date. The global economy did not fall off a cliff in the last two years and while many uncertainties still exist, part of me thinks the shared economy is having a bigger impact and making the BLS jobs numbers look worse then they actually are.

For those who want to learn more about the sharing economy, here is an insightful podcast to listen to.

Sniffed Links

Back with your links this week. With the recent Wells Fargo fiasco it is a good reminder to check your credit reports regularly.  It also makes we reflect on how these things can happen. With the numerous regulatory agencies in existence it is beyond me how any bank and financial institution can get away with things like this. Of course the problem lies in how these regulatory agencies are structured. In our world it is FINRA and the SEC. The Consumer Financial Protection Bureau will surely be making its voice heard soon and now we also have the DOL in our "business". FINRA, SEC and CFPB are much different from the DOL in the fact that they can levy fines. Fining companies is needed but it also is what leads to the bigger problem in my opinion. The CFPB's fine on Wells Fargo came well after the acts started. Shouldn't the acts be caught sooner and stopped? Are these organizations protection agencies or fine generators? This is a much longer discussion for another day but the conversation is needed.

Policing the Banks Is an Inside Job - The New York Times

America is running out of vacant apartments - Business Insider

Why does it feel like the economy is still stuck in neutral?

FAFSA and DRT Process


All opinions in the links are the authors' own and are not meant to be investment advice.

Market Commentary - October 2016

I guess this month is as good as any to address the election year and the relationship to elections and markets. Before sharing some statistics let’s address the fact that this year’s election seems to be bringing out more “fear” of what the market may do if a particular candidate wins. While the markets could have a short term reaction we do not believe it is necessary to make any sort of long term investment decisions based on this. Volatility is what makes markets what they are and at times it is higher or lower than the average, but volatility is a constant. This is not to say tweaking a portfolio is unwarranted but making drastic changes based on who the next President might be is not advisable.

Now on to some anecdotal numbers just for fun. Historically, both parties have been good for markets with average annual gains of 6.7% under Republicans and 9.7% under Democrats. A misconception (one we have even made) is the assumption that a divided government is better for markets since both parties will have to "give in" and compromise or get nothing done. The annual returns paint a much different picture. In the two years following an election, the S&P 500 has gained on average 16.9%, when one party controls the White House and Congress vs. 15.6% when one party controls Congress and the other party controls the White House

One final interesting stat I came across was regarding the S&P 500's performance the three months leading up to an election. Since 1948, if the S&P 500 rises from July 31st through October 31st, 88% of the time the incumbent party/person gets reelected. Take that for what it's worth, which honestly isn't much!