Buy Gold in Euros; Not Dollars

The S&P500 is at an all-time high. Will this last? Over the last two years, new highs have been erased with corrections, resulting in a market that until Brexit was trading sideways, and going virtually nowhere.

Britain voting to rescind its membership within the European Union was supposed to be a really bad thing. Yet, subsequent to what has been considered a devastating election outcome, markets have rallied. In the U.S., the market has broken out of its two year trading range. And, it seems as if a new all-time high is hit almost every day post Brexit. What gives? The only conclusion is that once again the market is interpreting bad news as good news in hopes of more easy monetary policies and low interest rates for longer.

The very same monetary policies and authorities who created inflated housing and stock markets before the 2008 crash are back at it. But this time, it is with vengeance. Interest rates around the world have never been lower. In fact, bonds issued by about a third of all the world’s developed countries issue negative interest rates. You have to pay Switzerland, Japan, and Germany for the privilege of lending them money. No thank you very much.

The July issue of the Felder Report illustrated how the inflation of asset prices relative to disposable income has never been higher, including the dot com and housing bubbles. For the last five quarters in a row, the cumulative earnings reported by the companies within the S&P 500 index have declined. World trade is compressed. And, gold which is a fear indicator has been by far one of the most superlative places to invest this year.

Because of the rise in gold prices this year, there has been tremendous demand for investing in the precious metal. Most Americans invest in gold denominated in dollars. There is generally a well -established relationship between gold and the U.S. dollar. The weaker the dollar, the stronger prices for gold go. Because of subpar GDP growth in the U.S. as well as other measures that do not indicate a strong economy, the U.S. dollar for the last year has declined.

The market is pricing in almost no chance for any significant interest rate increase in the U.S. before the end of 2017. All of this has led to a weaker dollar, and a boon for gold denominated in dollars. By loading up on gold expressed in U.S. dollars, investors are knowingly or unknowingly making a bet on when interest rates in the U.S. will rise and the inherent strength of the dollar. This to me is a big bet. Many of the same market participants who didn’t expect Britain to leave the EU are now betting on how far out the Fed will go before raising interest rates.

The stock market is trading in a way that is ignoring the fundamental weakness of the underlying economies. It is betting on more monetary stimulus and continued almost zero interest rate policy out to the distant future. Investing is about taking calculated risks. It should not be about gambling. This cycle has transpired longer than I imagined. Just like real estate that was appreciating from 2000 to 2007 at a rate far in excess of peoples’ wages, this cycle has gone for a long time.

I don’t know if the stock market can be compared to the housing market of 2005, or if it is more akin to the market of 2007, but for me, the mixed messages are disconcerting. There are many investments whose performance is agnostic to the direction of the market. One of these is gold. However, unlike the majority of U.S. investors who are allocating to gold denominated in dollars, I believe that notwithstanding our challenges, the U.S. is by far the strongest economy on the globe. I also feel that Europe is a grand experiment that is becoming undermined. For these reasons, where I am allocating to gold, I am doing so expressed in Euros. I believe these will appreciate not only with respect to appreciation of gold, but also relative to that appreciation compared with any depreciation in the Euro. I believe in the long term strength of the dollar, and I also believe that interest rates will rise sooner than the market is pricing. I also believe that the Euro will lose ground because of the fundamental weaknesses and challenges within the region. For all of these reasons, I want my gold measured in Euros, rather than dollars.

Unusual times call for outside the box thinking and strategies.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings and may not be suitable for all investors. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. There is no assurance any of the trends mentioned will continue in the future.

Why the Lower Wage Earner Should Request a Prenuptial

While it is certainly the case that I have female clients who earn more than their husbands, it is much more common, especially in a second marriage that the husband is the larger breadwinner. This reality is impacted by the fact that often the second wife is younger than her husband and therefore she didn’t have as a long an earnings history as her husband.

Especially for second (and subsequent) marriages, there are many reasons why the older, more established and financially secure spouse (husband) would want a prenuptial agreement. As the relationship deepens and the discussion of marriage ensues, broaching the subject of a prenuptial is front and center on the top wage earner’s mind. After all, his friends, relatives, and counsel all have his ear. Regardless how secure he feels in the relationship, there are still these voices in his head that come from these external sources which may make him question how much her interest in marrying him is related to financial security.

Instead of waiting for him to initiate the conversation, I suggest that it is in the best interest of the wife to suggest the prenuptial agreement before he does. After all, it is likely the million-pound gorilla underlying the wedding plans. I admit that there is some reverse psychology behind this suggestion. However, it could put the wife in the driver’s seat. He may be astounded that this was her idea which could make him agree to a whole lot more in the agreement than he would otherwise.  If there is going to be a prenuptial in any case, it is best to position oneself in the most opportune negotiating stance.

Incorporating psychology and outside the box thinking are what I most enjoy about my marital and divorce financial planning practice.

 

 

 

Divorce financial planning is a fee-only process that does not involve investment advice or securities transactions. All information provided herein is financial and educational in nature and should not be relied upon as legal or tax advice.  You should consult with your tax advisor or attorney regarding specific tax issues.

College Financial Assistance and Divorce

Many divorces occur concurrently with the last child leaving home for college. The questions to ask is how this will affect The Free Application for Federal Student Aid (FAFSA), and what are the respective financial planning opportunities.

FAFSA

Every year the U.S. Department of Education awards about $150 billion to help students pay for college. This federal student aid is awarded in the form of grants, work-study funds, and low interest loans. There is also aid from state government, scholarships, tax credits, and aid for the military.

For purposes of FAFSA, custody is established according to which parent the student lived with the most through the year. If the child when home lives mostly with his mom, then his mom’s financial information is all that FAFSA considers. Although the dad’s income might be high enough to preclude federal student aid, if the dad is not the custodial parent for purposes of FAFSA then his income is irrelevant and frankly not considered. If the couple were still married and/or still cohabitating, then his income would be factored into the equation.

Let’s say the mom is a social worker who earns $50,000/year while the dad is a surgeon who earns $350,000/year. Had the couple remained together, they would not have qualified for any federal student aid. However, upon divorcing, the mom as the custodial parent may qualify for such aid. Her assets and income, including any alimony would have to be revealed and factored in to determine the extent of eligibility, but the dad’s income would be ignored. I am involved with a case that meets this fact pattern. Mom will become the custodial parent. Her income is a small fraction of her husband’s. And, although she is likely to receive alimony, it might behoove the couple to engage collaboratively in divorce financial planning to transfer more of the husband’s retirement plan savings to the wife in exchange for less alimony as a way to support the educational financial planning opportunities.  The reason for this is because assets in a qualified retirement plan or IRA are excluded from FAFSA calculations. Therefore, if the wife can support herself on her salary and/or with additional but modest alimony, and if through the divorce agreement and transfer of enough assets from the husband’s retirement plan both she and the husband can live comfortably in retirement, then this might be a way of qualifying for federal student aid that would not otherwise have been available.

Remarriage and FAFSA

Although the dad’s income might be excluded from FAFSA calculations, if the wife remarries, her second husband’s income will be considered in arriving at any FAFSA eligibility. FAFSA looks at household income. Even though the step-dad might not share a biological bond with the student, his contributions to household income are relevant. Notwithstanding a prenuptial agreement to the contrary, the federal government still considers the step-parent as a source of support. This could possibly present a financial justification to delay a remarriage until after the child graduates from college.

Private versus Public Colleges

Most state universities use FAFSA to determine aid eligibility. However, many private colleges and universities use their own formulas to determine how much of their own available aid to award beyond what might be accessible through FAFSA. It is very common for private institutions to consider the income capacities of the custodial as well as the non-custodial parent as well as the earnings of step-parents. Not only are private tuitions significantly higher than those of public institutions, but additionally, they do not provide the same opportunities with respect to divorce and tuition planning. 

 

 

Divorce financial planning is a fee-only process that does not involve investment advice or securities transactions. All information provided herein is financial and educational in nature and should not be relied upon as legal or tax advice.  You should consult with your tax advisor or attorney regarding specific tax issues.

 

 

 

Itemize Before Re-Marrying

As sensible as it may be to secure a pre-nuptial agreement, particularly in a second or subsequent marriage, there are obvious emotional and personal issues that might prevent the party who would most benefit from the agreement to refrain, feeling uncomfortable even broaching the subject. I get that. It is easy for well-meaning friends, family and counsel to direct our lives. But ultimately, it is our life, and we have to weigh the pros and cons, and deal with the consequences.

As a low-hanging fruit concept for those who for whatever reason are not inclined to go down the pre-nuptial route, I suggest at least having both parties sign off as to the inventory of the assets each party is bringing to the marriage and value of those assets.

This isn’t asking either spouse to waive his or her interest in marital property or even the growth during marriage of non-marital property, which are common arguments against a pre-nuptial. Nor does it necessarily have to involve fees or other professionals.  Nonetheless, it can avoid lots of headaches, frustrations, and expenses should the marriage not last forever.

The reason I know this is that I am currently providing financial analysis for a second marriage that only lasted six years. By the way, the occurrence of divorce is much higher for those who re-marry than for first time couples. [1]Also, second marriages often last less than ten years[2]. In this divorce case, the husband has a business, retirement and non-retirement accounts, and they have lived in the home that he owned prior to the marriage.

Although both parties agree that the pre-marital value of these assets are non-marital, the wife will want to lay claim to half of the appreciation of each of these assets over the six years of the marriage. Now we have to re-construct the values for each of these assets not only today, but also as of the date of marriage, including the business, which can be very expensive and contentious to value.

We all have insurance policies which itemize the fair market value of valuables. If there is a loss, there already exists a valuation to which the parties agreed. In a similar fashion, it shouldn’t be too uncomfortable simply to itemize the value of assets each party is bringing to the marriage, and this serves as insurance to establish those values up-front rather than arguing and paying a fortune down the road.

Seeing so many things that go wrong after the marriage ends enables us to provide financial analysis and planning before the couple takes their vows. This aims to facilitate couples living happily ever after regardless whether they remain together or apart.   

 

* Divorce financial planning is a fee-only process that does not involve investment advice or securities transactions. All information provided herein is financial and educational in nature and should not be relied upon as legal or tax advice. You should consult with your tax advisor or attorney regarding specific tax issues.

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[1] Second (And Third) Marriages: Destined for Divorce? Huffington Post 02/08/2013,

[2] (1)National Center for Health Statistics, B. F. Wilson. 19B9. Remarriages and Subsequent Divorces: United States. Vita/ and Hea/th Statistics. Series 21, No. 45. DHHS Pub. No. (PHS) 89-1923. Public Health Service. Washington: U.S. Government Printing Office

Stock Options and Divorce

 A)           Overview:

Many executives of both public and private companies are granted stock options and restricted stock units either as an inducement to join a company, reward for past contributions, or as an incentive to remain tied to the company. These can represent an extremely lucrative portion of a marital estate; yet their valuations are often miscalculated.

 B)            Issues to Address:

The primary issues to address with respect to stock options in divorce is whether they are marital, vested, how will they be valued, how will they be divided, and what are the tax considerations. Whether they are treated as an asset or income or both will impact property division and spousal and child support. Options which are awarded and vested during the marriage are 100% marital. For options which are awarded but not vested, a determination must be made as to whether the options were granted as a result of past service or future performance.

 C)            Types of Stock Options and Tax Consequences:

Stock Options come in two varieties- incentive stock options and non- qualified stock options. Incentive stock options are not taxed upon exercise, but rather upon the sale of the underlying stock. Shares held for one year from the date of exercise and two years from the date of the grant receive long-term capital gain tax treatment. Incentive Stock Options must be exercised within 10 years of the grant and they can only be transferred as a result of the employee’s death. Non-qualified stock options are far more common. They are taxed at the date of exercise at ordinary income tax rates that reflect the difference in price between the lesser exercise (strike) price and the fair market value.

 D)           Division and Valuation:

The employee’s benefits have to be reviewed to determine whether the plan permits the employee spouse to transfer the options in kind to the non-employee spouse. It is much more likely that an in kind transfer is not feasible, and therefore a constructive trust might need to be executed whereby the employee spouse will in fact effectuate the transfer to the trust for the benefit of the non-employee spouse. In this case, the employee spouse needs to act as a fiduciary for the ex-spouse well after the divorce is finalized.

There are fundamentally two ways to value the options. One is known as the intrinsic value that simply measures the difference in price between the strike price and the value as of the date of divorce. This is very simple and may significantly undercut the other valuation method known as the Black Sholes pricing model. Black Scholes factors in various features of the option such as strike price, time to maturity, current price and historical price volatility, all of which are adjusted by a risk free rate of return, namely the rate on a 30 year Treasury. Google provides the daily volatility for any publicly traded stock and this number can be inserted into a Black-Scholes calculator. An option on a stock with nice historical appreciation would generate a significantly higher Black-Scholes value than an intrinsic value, and particularly for large awards this differential can be very significant. In other words, it is important to appreciate the impacts and distinctions between the two valuation methodologies. A spouse who seeks to minimize the valuation of options for a stock with good appreciation potential would argue for the intrinsic value method. However, the other spouse would want to negotiate a valuation based on Black Sholes. In valuing stock options, particularly if the value will be used to offset other aspects of the property settlement, it is important to calculate using both methods as this can represent a big bargaining chip for negotiations.

E)           Marital versus Non-Marital Calculations:

Stock options that were granted and vested during the marriage are clearly marital property. The challenge is valuing options that were granted during the marriage, but vest after the date of divorce. A time formula or coverture fraction is usually applied to determine the marital share. Other than options which are provided to a new employee as incentive to join the corporation, the formula used to establish the marital portion is known as the Nelson formula to reference the case from which it derived. The formula is as follows: the number of months between the date of the grant and the date of the divorce is divided by the number of months between the date of the grant and the date of exercisability. Then this fraction is multiplied by the number of shares which can be exercised, and that ratio represents the number of options which are marital property, which can either be exercised or used for purposes of offsetting the value of other marital property.

 F)            Mechanics:

If the non-employee spouse wishes to exercise the stock purchase when the option vests and hold onto the shares, and the plan does not allow for direct transfers of the options, then (s)he would have to have adequate cash to provide to the employee spouse to effectuate the purchase. The shares could then be transferred to the non-employee spouse. Alternatively, the employee spouse could exercise and sell the options simultaneously on behalf of the non-employee spouse. However, under both scenarios, there will have to be some remuneration to the employee spouse to account for the tax consequence resulting from the exercise. Therefore, the employee spouse may need to exercise more shares than (s)he will transfer to the non-employee spouse in order to gross up the associated tax liability. If a settlement agreement makes reference to the number of shares that the non-employee spouse may exercise based on the non-employee’s shares of the marital portion of the stock options, but does not make reference to how the tax ramifications of that exercise should be treated, then such ambiguity will result in problems, potential post-divorce litigation, and a tax nightmare. In addition to the settlement agreement providing clarification regarding the tax consequences of exercising the stock options on behalf of  the non-employee spouse, it should also specify that the employee spouse must provide the non-employee spouse with all vesting schedules, statements, and exercise options. The agreement should also put the burden on the non-employee spouse upon vesting to send written request to the employee spouse to request action. Stock options can represent a significant portion of a marital estate. It is essential to understand how such options can be valued as well as to document the rights and responsibilities associated with maintaining this asset.

G)           Disclaimer:

Divorce financial planning is a fee-only process that does not involve investment advice or securities transactions. All information provided herein is financial and educational in nature and should not be relied upon as legal or tax advice.  You should consult with your tax advisor or attorney regarding specific tax issues.

Why I Became a Certified Divorce Financial Analyst

Why I Became a Certified Divorce Financial Analyst by Gregory Gann

Alternative Methods for Separating Divorce has always surrounded my life. Throughout my early years living with my parents, I witnessed my father's innumerable telephone conversations with his clients whose divorces he was handling as their attorney. I had close friends whose families were impacted by divorce. The day after my wife and I returned from our own honeymoon, my parents announced their separation. Divorce has always been there in the background for as long as I can remember. A number of years ago, a close friend, who is a mental health professional, told me about a new way to divorce that was designed to be family-centric and produce much healthier results than what I had ever been exposed to through the traditional litigation approach. Within the last five years, she has literally transformed her practice. Today she dedicates the vast amount of her time and focus towards assisting families transitioning through separation by working as a divorce coach and parenting plan coordinator. . The idea of a family-centric, healthy divorce seemed like an oxymoron, but very intriguing. What I learned is that there are essentially four methods for going about separating and dividing assets and income. The alternatives are litigation, mediation, pro se, which means self-representation, and collaboration. I could provide an overview of each method as well as the pros and cons of each, but that is not the scope of this discussion. Suffice it to say that irrespective of the mode, the logical and sensible objective in divorce should be how to move forward, retain the bonds of family as expeditiously as possible, and retain as much money for the family rather than watch it dissipate to periphery parties. While I realize that this may sound lofty and far too idealistic because this topic involves such strong emotional pains, one should never underestimate the prowess of a skilled mental health coach. There are many families that thrive after separation. There are many parents who relate to each other much better after they separate and parent their children more favorably because they have resolved their differences and/or have simply benefitted from the detachment of space and time. The point is divorce does not have to mean war, and it does not have to necessarily be a bad thing or considered a failure. . A Healthy Divorce So, how do we increase the odds of a healthy, family- centric divorce? Just as there are no two marriages that are exactly alike, no two divorces are the same. The universal, central undercurrent in every divorce relates to the finances. How the couple navigates through the financial maze has a direct impact on the vibrancy and sanctity of the family, and perhaps forever. Without sounding sensational, anyone who has ever gone through divorce or is involved in the business of divorce will affirm that finances become THE central core and crux of the matter. Yet, there are very few certified divorce financial analysts. Something is just not right with this picture. If finances are the central area of contention and resolution, then why are the vast number of divorces managed without bringing in a divorce financial specialist? I don't care if one handles her divorce pro se, or through mediation, or with litigating or collaborative attorneys, shouldn't she know the financial implications of different ways to "equitably" distribute the assets? And, shouldn't she know the financial implications of various settlement outcomes? After all, an agreement is reached on a specific date, but the financial ramifications of the agreement last a lifetime. We ordinarily think of financial planning and analysis around major life changes, such as death, disability, graduation, and retirement. Well, divorce is arguably an even more significant life change. It seems penny wise and pound foolish not to incorporate a financial coach into such a momentous life event. Plus, anyone who has ever gone through divorce or is in the business of divorce will tell you that our system is broken. When I went to Amazon and ordered the documentary, "Divorce Corp", I knew immediately that I had to get involved as a catalyst for change. The documentary narrates the horrors and expense associated with ways with which we typically associate with divorce. Families can easily watch their children's college savings and their own retirement savings become evaporated. Judges are mere mortals with their own biases and prejudices. Lawyers relate to clients that one never knows the outcome of a family law trial because so much depends who the lawyer on the other side is and who is the presiding justice. Although we ordinarily think of the "law" as anything but arbitrary, it is in fact very cloudy.   Perhaps the documentary had an even greater impact and call to action for me because over the years, I have seen far too many clients whose lives were devastated financially post-divorce because they never received the proper financial analysis during the divorce. They outsourced their divorce to professionals who were not trained as financial analysts and who were therefore more concerned with reaching an agreement than the long-term, post-divorce financial implications. I recently met with one of the most highly regarded family lawyers who told me that she hesitated enlightening clients so much on the financial implications of what she negotiated for fear that they would perhaps want more money or the deal structured differently and therefore might become far less impressed with her legal acumen. She told me that many of her clients will live beyond the money that she was able to negotiate for them, but that was quite frankly not her problem, and was beyond the scope of her engagement. This is not an indictment on all lawyers. Mediators also are ranked based on how fast they can effectuate agreement. Being educated financially during the divorce process and its post-divorce implications should be a baseline, but very few are even offered any kind of exposure to the service. I want to be very clear and emphatic. Divorce incorporates both business (legal) and financial aspects and outcomes. No one should go through this process without having independent legal representation. It is just frankly too significant an event not to have a family law specialist in your corner and engaged in final agreements. Cheap gets expensive, and omitting an attorney and the value that the attorney brings is far, far greater than the hourly rate charged. There are costs associated with divorcing. It may not have been the desired outcome of one or both spouses, but life can bring curve balls. Being shortsighted and thrifty can be financially ruinous. Similarly, it can be just as financially ruinous not to include onto the team a divorce financial analyst. . Divorce Financial Analysis As a divorce financial analyst, I have evaluated the need for spousal maintenance and the sources of income to support the maintenance. We have considered implications of governmental assistance such as Medicare and Social Security at the appropriate ages. We have calculated future values and determined if those future values should be adequate to maintain lifestyle after spousal support ends. We have determined the value of both marital and non-marital property when assets share qualities of each. We have proposed a variety of settlement options along with their associated tax implications. We have evaluated alternative funding vehicles that have enabled spouses to comfortably come to an agreement. We have also calculated the present value of a pension plan as well as valuations of stock options and restricted stock. In short, divorce is both legal and financial. Anyone going through this process should be equipped with experts from both disciplines. In fact, my rate as a divorce financial is significantly less than the lawyer's rate. The good family law attorneys appreciate this fact and are anxious to bring the best experts in their respective fields to provide the best outcomes for their clients in the most cost effective manner. Many lawyers are advocating for the introduction of a divorce financial to distinguish their practices and demonstrate value add. Also, many clients are being enlightened about the importance of divorce financial planning through the internet and otherwise, and they are requesting us. Many people however do not appreciate the distinction between "traditional" financial planning and divorce financial analysis. Let me explain why I am not such an advocate for traditional financial planning, but have a passion for divorce financial analysis. The problem with traditional financial planning is that it incorporates so many assumptions over such an extended period that it becomes unreliable and filled with boilerplate fluff. Divorce analysis incorporates all the wisdom of financial planning, but it does so much more with a focus on the here and now and provides useful frameworks from which to negotiate and structure workable settlements. Having the financial facts and analysis of the facts generates clarification and leads to favorable resolutions. . In an information age with constrained finances, divorce is evolving because it has to. Divorce is emotional. It is financial. And it is legal. Having the right mental health, divorce financial, and legal team can make one of life's worst experiences a whole lot better for everyone involved and forever. That is why I am honored and grateful to have expanded my practice into this important resource. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Important Underneath the Hood Data

Opinions, as they say, are like one's derriere; everyone's got one. There is an incessant amount of talking heads postulating as to where market prices will go. Most of them are talking up their holdings, and are therefore biased and non-objective. I subscribe to multiple sources of objective, unbiased research. One of these is from Lowry Research Corporation. Lowry is strictly a research organization. It has no dog in the fight. It makes no forecasts, but rather objectively measures supply and demand. And, it has an eighty-eight year history doing so. Plus, Lowry has examined every major market top going back to and including the Great Depression. It has consistently found patterns, and these patterns have resurfaced within the past year.

 

Lowry has identified that market tops are deceiving and very difficult to pinpoint for the average investor. The reason for this is that the major indexes such as the S&P 500 are typically not crumbling and showing signs of deterioration even though such deterioration is brewing underneath the surface, and is not visible within the raw data of the indexes. What I mean by this is that a recurring pattern that develops through the making of a market top is that the price of the index is being upheld by fewer and fewer companies. Although the S&P 500 ended modestly down for the 2015 calendar year, so much of the index was supported by merely four stocks-Facebook, Apple, Netflix, and Google, (the so-called FANG stocks because of the acronym). For example, Netflix increased a whopping 134.38% in 2015 and Google "A" surged 46.61%. Also, the index was down a lot earlier in the year than where it ended after the Santa Claus rally.

 

Although the U.S. stock market indexes have not yet evidenced significant price losses, Lowry's measurements of the forces of supply and demand are demonstrating a very different picture. From December 31, 2014 to December 31, 2015, Buying Power decreased from 255 to 175, resulting in a loss of 80 points. Selling Pressure also significantly increased over the year. The established pattern in the formation of market tops is that price changes first impact stocks in the small-cap space. Then they move to the mid-cap. And then finally they are experienced amongst the large-cap players. True to form, Lowry calculated that the number of small-cap stocks that were trading within 2% from their highs at the end of 2015 moved from 14.38% to 3.33%. For mid-cap stocks this percentage deceased from 23.24% to 15.53%. And for large-cap stocks the percentage fell from 27.10% to 17.45%.

 

Furthermore, a bear market correction is commonly defined as a loss of 20% or greater. In 2015, the percentage of small-cap stocks that were in bear market territory increased from 39.05% to 61.71%. For mid-caps, this number increased from 18.06% to 34.36%. And for the large-caps this percentage moved from 8.87% to 19.81%.

 

All of this is to say that you can't judge a book by its cover, and that there is more going on underneath the surface than most of the prognosticators or talking heads realize. The bull market that has been fed with easy money, low interest rates, and major credit expansion has become exhausted. The strategies and types of investments that have been conducive during the bull market cycle emerging from the depths of the financial crisis are unlikely to prevail over the next cycle. Moreover, bond funds which have ameliorated returns even during bear market cycles over the last 35 years will also likely contribute to losses during this cycle as interest rates reverse their nearly 35 year pattern and now increase. I do not feel that this is a time for long-only stock and/or bond fund investing. Different market conditions demand various game plans. Let me know if you'd like access to our plays.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. There is no assurance any of the trends mentioned will continue in the future.