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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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Opportunities Away From Stocks

Experts say diversification is one of the only “free lunches” in the investment business. Well, October felt like we were back in the middle school lunchroom dodging bullies trying to flip our tray! Practically every asset is down on the year-- a short-term disappointment, for sure, but not a reason to abandon our discipline of spreading risk around. Below is a graphic from Deutsche Bank showing the percentage of assets down on the year:

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This is What I'm Excited About!

This is What I’m Excited About! After 25 years of managing money, it’s actually hard for me to get excited about much when it comes to the markets and investing.I really feel like I’ve seen it all at this point. I’ll quickly cover some of the stuff that makes me yawn and get to the real update which is about our New Power strategy where I actually can feel my blood pressure rising!

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If It Walks Like A Duck

I’ve received a lot of positive feedback from our last post titled, “Exit Stage IV”. That tells me that our readers are hungry for more knowledge and education regarding market and economic cycles, where you should put your money and what we can expect next. The current situation is pretty classic and obvious at the moment, which serves nicely as a textbook case to study. I’m going to throw in one of my favorite “behavioral econ” charts for your entertainment as well to help you see your own pattern of psychology as it relates to investment decisions over time.

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Exit Stage IV

Exit Stage IV There is a lot to be said for the regular practice of identifying stages of the business cycle. Regular readers know that we lean on our cycle work, especially from the source, Martin Pring who devised appropriate asset allocation models for the six stages. This work is the genesis of our company brand “All Season Financial” as well as our mantra of “Create Wealth/ Defend It”. Here’s where we are in the business cycle, how you should be allocated (by asset types) and what comes next.

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Big Bold Investments

This is not our first rodeo in terms of dealing with tough markets. And there are few instances (very few) in history when all major asset classes fall simultaneously as they just did in October. As the dust is settling, we’re finding pathways toward the future opening. This is what we’re really excited about now.

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October Free Fall - One for the Record Books

“A bad month. The S&P suffered 16 negative days in October, tied for 3rd worst since 1928 and the most since 1970. The pressure was enough to trigger a sell signal for a popular trend-following strategy, with a close below its 10-month average” – Jason Goepfert, Sentiment Trader.com 10/31/2018

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Calling All Cars!

Yes, this is the notice you’ve been waiting for.This is that all-important time zone when we should add some new money to our investment accounts if you have the means or need to do so before year end. This Calling All Cars is a tentative suggestion with considerations for different types of investors and larger cycle implications. Please read this update thoroughly and feel free to call us with questions or clarifications about your specific situations.

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Developing Opportunities

Taking losses is painful, especially in the short term. Emotions run high. Sometimes there is even a physical reaction as we extrapolate the worst. While we don’t like losses any more than you do, market moves, like we have seen the last couple weeks, do create some tremendous opportunities for us. Our portfolio approach tends to have us lose right along with the market for the first 5-10% decline as we raise cash. We raise the cash for a couple of reasons: 1.) to soften the blow should things get worse from here; and 2.) to allow us to take advantage of opportunities should volatility subside. As always, we will adhere to our process, scope out the opportunity, and react further as needed.

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The New Investing Environment

Well, here it is. The market environment has changed as our Net Exposure model indicated earlier this month. The “change” is really making it more difficult for investors on a lot of fronts, which we’ll discuss today. Also, the change requires that we adjust our approach and decision making criteria. Lots to take in.

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Will "Buy The Dip" Work This Time?

While we’re always big fans of buying anytime there is a discount, or a reasonable looking entry point, it appears to be too early to buy this dip right here, right now— unless you fancy yourself to be a short-term trader. In fact, we might need to wait longer than normal for our next opportunity to develop. Here’s what we see that indicates this decline may prove to be more than the standard price corrections we have seen in the last two to three years.Remember, these are good days for investors, when value and opportunity are on the rise as prices come back to more attractive levels. We are going to take a few lumps, yes, but that’s part of investing. But, we also try to keep our losses recoverable and our capital intact for that all-important time when real investors make real money.

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When Expectations and Reality Don't Agree

Bull market tops are messy. They can last a long time spanning 6 months to almost 2 years. We’re in that period of time now and in my experience, they can be very frustrating. Let us provide a quick update acknowledging how you might feel right now and finish with a reality check. Our intention to set expectations to better sync with current market conditions.

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Extreme Behavior

Every day, I find something that just blows my mind. Today I found four things. Two are just illustrations that support some of our recent commentary. This will be short and sweet.

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