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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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Unconventional Wisdom - Part 1 Billion

Regular readers know this is one of my favorite subjects. I’m hearing way too much consensus thinking now to sit by without saying something. As our Explicit Investing Creed states; We are seeking Success over a reasonable Judgment Period by knowing when to embrace and reject conventional wisdom… We are approaching another one of those times. I’ll offer up just a couple items now and how you might accommodate when conditions change.

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Finding Value

I’ve been thinking a lot about this topic. We’ve moved forward in this economic phase to a place where value is being ignored and forgotten. In my years of experience, forgetting to focus our purchasing behavior on what is “valuable” is truly a mistake and one that can be devastating to your financial well being.

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If Not Now, Then When?

I’ve been managing money for a long time, 24 years to be exact. When you do anything for that long, you start to develop a few extra senses that are hard to describe. These senses nag at you as your brain absorbs information from research, observations, behavior, patterns, and other things that contribute to your perceptions about the future. It’s like a De Ja Vu experience where you know what’s going to happen but you can’t explain why (or even justify it with current evidence). For this update, I’m not going to provide a lot of evidence as much as simply describe what I’m feeling and sensing right now regarding a bunch of financial stuff. Take it for what it’s worth, which could be nothing beyond experiential guesswork.

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Market Waking Up

Well, it’s been a very dull month in the financial markets since our last update on July 12th, and I know most of you are paying more attention to your time with friends and family, but things are starting to move again with some notable new leadership and trends developing. We continue to believe the next 6-9 months are going to be critically important in terms of positioning your investments for what lies ahead.

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