THE TACTICAL ADVISOR
BCA’s Tactical Advisor newsletter is emailed to clients throughout the quarter. Each issue includes information on active management - to help build an understanding of our investment approach - as well as articles on financial issues we hope you will find of interest. To receive email copies of the newsletter, please register through the signup form in the footer. Remember, all investing carries the potential for loss as well as gain. Past performance is not indicative of future returns.
Brian R. Carruthers, CFP®, CMTSM
Third Quarter 2017 Articles
The problem with writing a financial newsletter is that so often the topics seem to be downers – avoiding fraud, estate planning, market risk, etc. In this article, we promise nothing but good news.
There’s a one-size-fits-all mentality to much of the news coverage of investing, which typically defines successful investment strategies and successful investment managers as those that “beat the market.” In reality, the success of an investment strategy is determined how well it meets the investor’s goals. While most investors would prefer higher versus lower returns over a given period, they also have a wide range of objectives that don’t necessarily include beating the market, particularly when it comes with the risk of market downturns.
One of the big unknowns bearing down on the U.S. will be the impact of underfunded state and local government pension plans. On a national basis, public pensions are short an estimated $5 trillion of the funds they need to meet future obligations according to the Actuarial Standards Board’s Pension Task Force.
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Effective June 9th, the U.S. Department of Labor imposed a fiduciary standard that requires stewards of retirement savings accounts to act in their clients’ best interest. Many elements of the 1000+ pages of regulation are currently in force; other provisions will become active in January 2018. This article provides an introduction to the standard and its impact on investors.
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To combat financial exploitation of investment accounts of the elderly, the SEC has approved the adoption of new FINRA Rules to permit brokerage firm representatives/members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers; and requiring members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account.
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Second Quarter 2017 Articles
One of the most common arguments against trying to actively position assets to take advantage of market trend is “Missing the Best.” In this approach, the supporter of passive management points out that no one is able to perfectly forecast the market and if you miss just the best 10, 20 or 40 days of the market your returns decrease dramatically.
Which makes it interesting to take an updated look at the data behind the argument.
The Pluses and Perils of a Longer Life
Before you start planning your finances around a projected average life span of 84 (men) or 86 (women) years, remember that you could be among the 50% that live much longer. About one out of every four 65-yearolds today will live past age 90, and one out of 10 will live past age 95.
Checking the Facts
The headline was quite clear – THE MISERY INDEX IS ON THE RISE. The rest of the copy explained that increases in the misery index are followed by market downturns and that investors need to move now to position their assets safely. But was the message accurate? Thanks to the Internet, we have an incredible opportunity today to check the reality of facts that media, marketers and con artists throw at us each day. Before you panic, despair or bite on a dangling worm, take a moment to check the facts.
From the Movie “The Big Short”…
“The Big Short,” released in December of 2015, chronicles a small group of investors who collectively made billions off of the housing collapse in 2008. To explain complex financial transactions, the viewer encounters a model in a bubble bath, a chef, an alligator in the swimming pool and other incongruent explanations that work amazingly well.
The Number One Source of Identity Theft is Your Wallet
When it comes to identity fraud, the biggest source of information isn’t online, but in your wallet, warns crime prevention officers. Purse snatchings, pickpocketing, theft of purses from locked vehicles and robbery are the biggest sources of identity theft. While the victim may not be able to prevent the theft – and the officers urge individuals NOT to fight back or resist – they can avoid handing the thief all of their information...read more
First Quarter 2017 Articles
In Anticipation of Higher Interest Rates
On Jan. 20, 2017, Donald Trump will be sworn in as the 45th President of the United States. Two months prior, Wall Street began betting that interest rates are about to rise, with bets on U.S. short-term rates at $2.1 trillion. Expectations for a Trump presidency include a Federal Reserve that will be under pressure to raise interest rates in a way that hasn’t been seen for more than a decade. What will rising interest rates mean for investors?
Little has Changed in Retirement Account Contribution Limits
Retirement account contribution limits remain the same for 2017 with minimal adjustments in income limits for various account types. Remember to fully fund your account(s) for 2016 by April 15th and start funding your 2017 contributions as soon as possible to take advantage of compounding. ...read more
Combining Active and Fundamental Investing – or Why We Invest the Way We Do
Investopedia defines investing as the act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit.
At its core, investing seeks opportunities where the addition of money can create value in excess of the original investment. With respect to publicly owned companies, the addition of money/capital occurs when the company makes a public offering, exchanging stock for money, or issues debt, promising to repay the money with interest. In the process, shares of the company or debt obligations are created that can be traded among investors...read more
The Improbable Success of Seasonality Trading
When it comes to active investment strategies, one of the most fascinating – if simply because it worked for many years – is seasonality trading. Seasonality trading is based on the premise that there are good days and bad days to be invested and these days can be identified by looking at historical patterns. How can such simple systems work? Wharton University Professor Donald Keim asked the same question and confirmed that there are distinct calendar-based patterns to how stocks trade. ...read more
Fourth Quarter 2016 Articles
Are Minimal Returns in the Future for Equities?
With nothing but good news in recent market performance, why are an increasing number of big name firms and analysts projecting minimal returns for the stock market over the next five to ten years? At the root of their concerns is that the current market is speculation driven. For stocks to move higher – beyond the impact of pure speculation – according to fundamental valuation, they have to increase real revenues and earnings. The source of those increased earnings is the big concern. The U.S. economy has failed to achieve significant growth momentum for 10 years and the recent trend is not encouraging...read more
Passing on Assets Without a Will
Wills get a lot of attention because once they go through probate court, they become public documents. A copy is given along with a listing of all the assets of the estate to all the heirs and beneficiaries as well as the estate’s executor, lawyer, accountant and even the IRS. That’s a lot of disclosure that you may not want to happen. In which case, it’s time to look at how to die without having the majority of your assets and how you choose to dispose of them disclosed to the public or for that matter, family members and other potential heirs...read more
Metaphors of Investing
Sometimes, when investing seems to get entirely too dry and calculating, it helps to toss in a few metaphors to lighten the conversation. Black swans, castles in the sky, unicorns, witching hours and more terms have a very different meaning in the financial markets...read more
Outliving the Doomsayers … the One Constant is Change
In 1798, Thomas Robert Malthus predicted a grim future for mankind predicting famine and starvation, unless populations were controlled. Fortunately, he proved spectacularly wrong. Malthus was not the first, nor will he be the last to overlook the power of human ingenuity and technology to change the course of history. Before you accept any forecasts of impending catastrophe take a moment to consider how often the experts have failed to anticipate new technologies and how fast the world can change...read more
Third Quarter 2016 Articles
Waiting for the Recession
Recession - a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
When it comes to investing, recessions matter. They matter a great deal. Major stock market declines have occurred during recessions. When recessions start with stocks at high valuations, the largest declines have followed. ...read more
Missing the Good Old Days of 2000
The good news – Americans on the whole are feeling a lot more confident of their future than we were in 2009. For that matter, we are more confident than we have been ...
Financial Tool #1 – The Budget
“Budgets are what separate the financially successful from the financially mediocre.” Mindy Crary
Think of a budget as a brake. To become financially successful, you have to spend less than you earn. To control our spending, most of us need some form of a brake, a reality check as to how much we actually have and how much we spend. ..read more
Age is a Matter of Perspective
The odds are we are going to be around a lot longer than prior generations. The life expectancy for women is now 81, while men will reach an average age of 76. Keep in mind those are averages. At least half of us will live longer, some quite a bit longer. Now the trick is to make those years productive and enjoyable, and it turns out there is a relatively simple way to do so...read more
A Mind is a Hard Thing to Change
Can you trust your mind? Maybe. Maybe not. It really depends.
Our natural inclination is to cling to our beliefs, particularly if recent experience has reinforced them. The problem is that when we run into something that contradicts our beliefs, our mind works to reject the conflicting information even when we know it’s true. Scientists call this cognitive dissonance...read more
Second Quarter 2016 Articles
Living with your Investments in Volatile Markets
Yo-yo markets that are up one day, down the next, continually promising gain or loss, are among the hardest to endure. To be able to stay committed to investing in volatile markets...read more
Not on My Watch – Keeping a Great Depression at Bay
Could interest rates in the U.S. go negative? If they do, the rationale may be the memory of the Great Depression...read more
Fully Fund Your Retirement Accounts for 2015 and 2016
Before April 18th, fully fund your retirement accounts for 2015, and we would recommend that you begin to fund 2016 as well. The sooner your accounts are funded, the sooner your money goes to work for you. The following table shows contribution limits for 2015 and 2016...read more
Debts Can Live On After You
Toward the end, my grandfather paid for everything with a credit card, explaining that if he died, it would be like getting everything free. While great in theory...read more