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Events & Resources 

The Red Sky Report delivers timely market trend commentary, highlights unique risks and opportunities and educates investors about the realities of behavioral finance.

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Mid Year Investment Themes

Mid Year Investment Themes Given all the cross currents in the market, especially in light of the US economy, political forces, Fed policy and global trends, we thought this would be an especially important year to offer our take on what’s happening. On Monday, next week, we will be recording our first ever Red Sky Report LIVE as a video broadcast of our Mid Year Investment Themes. This update will set the stage. We hope you enjoy both the written and upcoming live versions.

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Gain Keeper, The “Right” Variable Annuity for You

We are heading into the heat of the summer here in Denver, and I wanted to talk about everyone’s favorite subject—variable annuities (kidding …). Annuities are generally sold, not bought. In many cases, they are a solution looking for a problem. We speak to a lot of clients / prospects, and no one ever seems happy with the annuities they have purchased over time. High costs, hidden commissions, surrender charges, and confusing language make it hard for most to know what they have purchased. The main issue is the lack of transparency.

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On the Rise

Summer is here! The sun is shining. Impending vacations are upon us. Overall, everyone’s mood seems to be on the rise. Speaking of “on the rise”, I wanted to give you a quick update on our Freeway Income model, and more specifically, the municipal bond part of those portfolios. We continue to believe that now is a great time to deploy any excess cash into the Freeway, given that the market is already talking about the Federal Reserve cutting rates over the next 12-18 months. Forward returns on cash are likely going down. The Freeway Income Model is built for taxable money. As such, we want to exploit the tax-advantaged nature of the municipal bond market. If you attended our Solution Series in May, you know that we increased the allocation to municipal bonds earlier this year in order to generate higher after-tax yields for clients.

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Three Lies and a Truth

As a spin on the summertime car game of three truths and a lie, we’re going to work through a few realities regarding recent history of Federal Reserve monetary policy, the timing of rate cuts and the impact on the financial markets. This will be more fun and educational than it sounds. Game on! Three Lies and a Truth We’ll format this game by posing a statement and then reveal the answer as True or False, with an explanation. Most of the questions are those you have heard recently in light of all the chatter about the Federal Reserve and when (or if) they will cut interest rates.

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Top 5 Mistakes I see Today

We all make mistakes. It’s not realistic to say that we can be error-free or avoid being wrong. The trick is to recognize when we are making a mistake and correct it quickly to limit any damage in the future. Seasoned investors understand this well and it takes the form of cutting your losses short (and letting your winners ride). This update will offer some insight into how your investment portfolio should be allocated now across the various asset classes. But there are other mistakes I see happening now outside of your investment portfolio.

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Lighthouse Project

Anyone familiar with the ad campaigns from Motel 6? Does Tom Bodett ring a bell? As the story goes, the iconic phrase that runs through the Motel 6 ad campaigns started as an ad-lib from Tom back in the mid-80's. The phrase-- “We’ll leave the light on for you” -- was a fantastic, down-home way to let customers know that Motel 6 cared about them. Thoughtful. Reassuring. This phrase was designed to evoke comfort after a long day of travel. In a similar way—and perhaps, only slightly less iconic—our “Lighthouse Project” is designed to provide similar assurances to our clients / prospects. The Lighthouse Project was designed to provide some guidance on active 401k and other self-directed investment accounts not under our management. It never hurts to know the risk and return potential of what you own, especially if you are looking to retire in the next couple of years.

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Good Buy or Goodbye?

Since mid-April, we have been talking at length about the sharp rise in market risk from a technical perspective. May has proved why it is important to have strategies that manage market risk. The technical damage has been severe enough to turn most intermediate term indicators down for the first time since last November. In the short term, there is an above average chance that this level will market a Good Buy. But there is certainly growing evidence that we’re saying Goodbye to the bull market of the last 10 years. Our clients should not be concerned. We have been moving aggressively out of stocks since April for our Tactical Equity models while our Blended Asset and Income models have been almost entirely in bonds. Household portfolios in aggregate are in heavy capital preservation mode as they should be considering the bear tracks all around us.

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Goodbye Chai

Hello everyone, my name is Sam and I have a problem. I like to drink Chai tea in the afternoon. For years, I hit Starbucks around 3:30 when my energy hits a low spot and order a “tall” Chai Latte. Tall is really a misnomer at Starbucks because a Tall is about 6 oz worth of anything. While I like to think of myself as somewhat economically insensitive to small purchases, I must announce that I have had my last Chai Tea from Starbucks after paying $5.03 yesterday for a tiny, tiny cup. I took a picture to commemorate the moment (below). Actually, I’m done with Starbucks altogether effective immediately. For those who don’t care about my whining and habits, there are some important things we can learn about the current state of globalization, consumer trends, trade wars and ramping inflation… all from a little cup of Chai Tea.

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Changing Allocations Again

This marks the third time since January of 2018 that we are moving incrementally toward a more defensive position with our asset allocations, specifically within our Blended Asset Strategies (All Season, Foundations and Gain Keeper). Last week’s bloodletting in stocks was another tip from Mr. Market that the risk/ reward ratio for global stocks is just not there.

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Focus on What Matters With Your Money

Focus on What Matters With Your Money Ben Carlson of A Wealth of Common Sense posted another gem this morning. He hit my radar on the topic of “Overlooked Investment Decisions” which is something I’ve been covering in client meetings quite a bit. Good stuff for all to remember. Making money net, net, net, net with your investment dollars isn’t often about buying that special stock or fund.

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New Power - 6 Years Ago Today

I always remember April 15th as the day we chose to remodel our New Power strategy. The remodel had nothing to do with taxes beyond perhaps trying to distract myself with a project to avoid screaming in frustration. Six years ago, today, we made the decision to rebuild our New Power strategy. The results since then have been excellent and we’re proud to show the fruits of our labor. Excellent design and execution do yield strong results in our business. This is one of those success stories.

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Net Exposure Model Turns Positive 3/29

This is sort of a big deal. Since late October of 2018, our Net Exposure model has remained stubbornly negative ranging from deeply negative at the end of the year to hovering just below the zero line. Last Friday, the model turned definitively positive with the close of the week.This changes our view regarding future market opportunities as we move from trading with short term expectations to investing with a longer-term vision. Read all about it!

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Wisdom From Ben

Wow, two updates in one week. I think that’s a record. I ran across this article from Ben Carlson who writes a blog, A Wealth of Common Sense. I have mentioned Ben before and think he offers a lot of good insight for your every day household trying to figure out personal finance. The article was titled, “The Market Won’t Provide High Returns Just Because You Need Them”. I’m teaching a Business and Finance class at our local high school and this will be part of their required reading next week. It should be for every investor. Here’s the link to the article followed by my own summary, input and observations.

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Show Me

Looking back over the last six months, with perfect 20/20 hindsight, we can now see that the 4th quarter mini bear market was effectively a technical decline based largely on fear. But as of today, the fear is gone, prices have returned to their pre-crisis position and the whole episode appears to be in the rear-view mirror. Now that the brief cycle of action and reaction has been given a little exercise, investors will turn back to the longer-term drivers of price. With the new quarter, market direction and general price action will highly depend on earnings, fundamentals and trends in global economies.The burden is now on the bulls as we enter the “Show Me” market.

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Investor Returns Over the Long Term – Not What You Think

This is an incredible moment in time. This week marks the 10 year anniversary of the bottom of the bear market of 2007-2009. In addition, as of this week, prices have moved back to a critical resistance level which marked the breakdown point from last year. Furthermore, we have a tenuous balancing act in play in our Federal Reserve policies, the status of trade wars and another pending government shutdown/ constitutional crisis (thank you Mr. Trump). And finally, the three horsemen of retail, housing and employment numbers appear to be turning in the direction of recession. Wow! With all of this in mind, this is a great time and place to look at long term returns. Why? Because investors need to set expectations right here, right now and make plans accordingly.

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Are We Out Of The Woods Yet?

Are We Out of the Woods Yet? That phrase always catches me. We love the woods here in Colorado – biking, hiking, skiing. I don’t get it. Anyway, after a near vertical move of +18% off the Christmas Eve lows, are investors safe to get back in to the market? Has the environment become more positive and constructive? Should we expect all time new highs? Read all about it.

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Another All Time New High

Well it’s that time again. Time to flex. This week, both of our High-Income strategies moved out to all time new highs net of all fees. What else is trading at all time new highs you might ask? Nothing. We’re obviously doing something right here. Settle in to read about why this program continues to generate results over time, recent history of changes in our holdings and when our clients find this strategy attractive.

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Half Full / Half Empty

Half Full/ Half Empty I must admit that the rally off the lows in late December has been impressive. We expected some sort of a rebound rally from the extreme oversold condition set up on 12/24 but this was a whopper. Now that the market has moved all the way back up to the failure point and our predefined resistance level, we must consider several outcomes. Inside, we’ll review the current state of our Net Exposure model and look at the market from half full and half empty perspectives.

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We Told You So

We really try hard to tell our clients and interested readers when conditions are changing, when the markets reach a point when action is necessary and what we should do about it in terms of our investments. We’re not perfect but we do tend to hit the highs and lows closely as well as provide some reasonable forecasting. As our first post in 2019, let’s review what was said when and finish with our current view of how market trends are likely to play out in the foreseeable future.

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Calling All Cars- Part II

What a treat, we get two opportunities to add money to our passive accounts in 2018. Our first notice was on November 1st with instructions to add PART OF YOUR ANNUAL CONTRIBUTION LIMIT to passive accounts like 401k plans or education accounts. Additionally, we suggested that investors could wait to actually invest the contribution in your portfolio of securities. Now, the markets are either approaching or already experiencing bear market losses of 20% from the highs AND we have a few days left to flesh out those annual contributions!

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