The Strategic Mile

Addendum to Market Trend 08 25 2010

mfalvey — Thu, 26 Aug 2010 18:00:40 +0000

August 26, 2010

I was asked about the Russell 2000 Small Cap Index and NASDAQ (Technology) Index since investors typically like to see Small Caps and Technology performing well, as it usually indicates a healthy market. Also, generally speaking, investors like to see the Russell 2000 and NASDAQ showing better relative strength compared to the S&P 500.

In the nature of trying to keep it simple, I have analyzed the Russell 2000 and posted a chart below with my annotations. The NASDAQ Composite shows a similar pattern in how it is trading as well as it’s relative performance compared to the S&P 500.

Again, next week I’ll update some changes that we made to our “Dynamic Asset Allocation” side of the portfolios starting yesterday. Our Tactical Model will be updated at the end of month.

See Russell 2000 chart and analysis below.

Best regards,

Matt Falvey

Chief Investment Officer and Managing Partner

Rich Investments, Inc.

Disclaimer: The views provided in this publication are intended to provide the reader with an introduction to Rich Investments, Inc. and its investment strategies. The data contained herein are provided “as is” and without warranty of any kind, either expressed or implied. Rich Investments, Inc, any Rich Investments, Inc. affiliates or employees, or any other third party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Rich Investments, Inc. publication. Nothing in this publication should be construed as a solicitation, offer, or recommendation, to buy or sell any security, or as an offer to provide advisory services by Rich Investments in any jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. Information in this publication is intended only for United States citizens and residents. Nothing contained in this publication constitutes investment, legal, tax, or other advice, nor should be relied upon in making an investment decision. You should obtain relevant and specific professional advice before making any investment decision. A copy Rich Investments current written disclosure statement discussing Rich Investments business operations, services, and fees is available from Rich Investments upon written request. Past performance, in any of the data in this publication, does not guarantee future results.

Linked Websites:

When you access certain hyper links on this website, you may leave this website and view content that is not provided by Rich Investments. Rich Investments does not make any representations or warranties as to the accuracy, completeness, or relevance of any of the information prepared by an unaffiliated third party provide whether linked to Rich Investments website or incorporated herein. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Market Trend Update 08 25 2010

mfalvey — Thu, 26 Aug 2010 17:03:24 +0000

August 25, 2010

Below are two looks at the S&P 500. I’ve annotated and marked some highlights within each chart. I think you will find why we are struggling in this market. It has traded sideways in a very volatile manner for several months now. This is the kind of market that can very easily cause one to abandon a disciplined strategy because there simply is no trend from a momentum standpoint and from a technical standpoint, indicators designed to identify the high probability of a trend get whip sawed or head faked, as they vacillate between overbought and oversold conditions….as you know, this has happened to us the past two months in our Tactical Model.

These markets do not last forever. At some point, and I believe we are close to it, this market will make a definitive move one way or the other. There is a potentially bearish pattern forming in all of the major US Indicies called a “head and shoulders pattern” and particular attention is currently being focused on the “right shoulder” if you will …. I’m not going to discuss that at this point. We will see where our Tactical Model takes us at the end of the month.

I’ll send out an email early next week on some changes that we are making to the portfolios as we continue to try to navigate this market while still maintaining the integrity of our disciplined system.

Charts of the S&P 500 below:

CHART #1, S&P 500 on a weekly basis:

#1 shows how the market still remains in a longer term down turn since 2007.

#2 points out the 10 week Exponential Moving Average in blue and the 40 week Exponential Moving Average in Red.

#3 shows the trading range of the market since April 2010.

CHART #2 OF THE S&P 500, a one year snapshot of daily price movement:

#1 shows the market’s approximate area of resistance since mid-May 2010.

#2 shows the market’s approximate are of support since mid May 2010.

#3 is simply the 50 day Simple Moving Average in red and the 200 Day Simple Moving Average in blue.

Best regards,

Matt Falvey

Chief Investment Officer and Managing Partner

Rich Investments, Inc.

Linked Websites:

Anomaly of Performance Bonds vs Stocks

mfalvey — Tue, 04 May 2010 14:45:41 +0000

I wanted to share the article below that was published by Fidelity in the beginning of April. I think there are some very interesting insights that can be drawn from this.

From a longer term or “secular perspective,” I believe that we have been operating in a “Secular Bear Market” that began in 2000. A Secular Bear Market typically lasts 10 to 15 years. Our last one was from 1966 to 1982….a time in which the Dow Jones Industrials lost over 20% of it’s value from start to finish.

I am intrigued at the article below which examines how bonds have outperformed stocks over the past two decades as well as the amount of money still being pumped into bond funds….perhaps a contrarian indicator for future bond performance relative to equities. It is one piece of data, that has me wondering if the Secular Bear Market that began in March of 2000 has run it’s course or not. Interestingly enough, The Leuthold Group published a study in June 2009 entitled Exploiting Generational Anomalies In Stock vs. Bond Returns. Here is what they wrote in the main summary from their 36 page paper:

“There are two important conclusions about the historical relationship of stock vs.
bond returns:
1.) The current stocks vs. bonds performance differential, over both very short and
very long time periods, is at or near historical extremes in every timeframe we
examined. This suggests that we are at the threshold of a major (but temporary)
market anomaly.
2.) Historically, periods when bonds have outperformed stocks over very long
timeframes have proven to be very opportune times to shift out of fixed income
assets and into equities.” – Eric Bjorgen, CFA, The Leuthold Group

I hope you find this data to be insightful and WE ARE CERTAINLY NOT RECOMMENDING THAT ANYONE ABANDON BONDS FOR EQUITIES. Bonds definitely hold a place in one’s portfolio…especially as a means to moderate equity volatility and risk. However, what we want you to take away from this is that mean reversion, or law of averages, exists in almost everything in life…from behavioral science to real estate to stocks and bonds. Are we at a period in time where stocks and bonds return to their historical performances? Only time will tell and we will let our model be our guide.

Regards,

Matt Falvey

————————————————————————————————-

Stocks anyone?

BY Dirk Hofschire, CFA, Vice President of Fidelity’s Market Analysis, Research and Education Group, Fidelity Viewpoints — 04/01/10

Editors’ note: The editors of Fidelity Interactive Content Services (FICS) selected this story for its analysis of investments in stock and bond mutual funds.

As the bull-market rally in stocks enters its second year, the gains thus far have been impressive. The U.S. stock market is up 72% from its March 2009 low—the fastest start to a bull market rally since the 1930s.¹² This dynamic has been cited by some technicians as a healthy contrarian sentiment indicator—a signal that no one really believes this rally, and thus there is still plenty of money on the sidelines that can boost stock prices if investor skepticism ever becomes enthusiasm. Unlike previous rallies, however, mutual fund investors do not appear to be swayed. While they plunked a record $385 billion into bond mutual funds during the past year, the move to put additional money into stocks has barely reached a trickle.

Traditional investor behavior

The behavioral patterns of mutual fund investors are viewed by many market technicians as a wide-ranging sentiment proxy for the broad public, which includes everyone from expert to novice investors. A common pattern of investor behavior goes something like this: Investors chase positive performance, moving into an asset category such as stocks after prices have gone up and the performance pattern is well established. When prices go down, some investors tend to stop buying or shift their new purchases to another category, such as bonds or money markets. This sort of behavior is backward looking and sometimes typifies a “herd mentality,” where investors make choices based on old (and not forward looking) observations, and they reinforce each other’s actions as being the right thing to do because everyone else is doing it. Market technicians, therefore, see big mutual fund purchasing trends as a possible sign of excessively positive sentiment, which would cause the “smart” investor to take the opposite or contrarian position by shunning the asset category when it is being flooded with net new flows, and vice versa.

The classic example of when this contrarian thinking would have worked was near the peak of the technology-stock boom in the late 1990s, when investors poured record amounts into stock mutual funds. The all-time peak of net new stock mutual fund flows ($338 billion) occurred during the one-year period ending in September 2000—near the start of a more than two-year slide that shaved 49% off the market’s total value.³ Three years later, when net redemptions of stock mutual funds hit all-time highs (investors were selling more assets in funds than they were buying), the stock market was just beginning its 2003 rebound that would start a four-year bull market (see Exhibit 1 below). At these turning points in the market, using extreme mutual fund flow signals as a contrarian indicator (doing the opposite of what other buyers were doing) would have worked quite well.

Exhibit 1: During the past year, investors have put a record amount of money into bond funds while stocks have outperformed bonds by more than 44% (top chart)…but on a 10-year basis (bottom chart), bonds have handily outperformed stocks, which raises the possibility that investors may be herding to bonds based on the longer-term relative performance of the two asset classes.

Why recent behavior may be different

The question this time is why is there no interest in stocks after a furious one-year rally? For investors looking for a contrarian indicator from this lack of buying, the problem is this: If mutual fund investors have not been chasing recent performance, how useful can flows be as a contrarian indicator? The premise of mutual fund sales as a proxy for what not to do is based on the idea that these sales represent performance-chasing, herd-following behavior. If recent fund flows do not follow that “herding” pattern, it seems their value as a sentiment indicator may have disappeared.

Are investors more intelligent or shell-shocked?

It is possible that the behavior of mutual fund investors may have undergone some sort of transformation. Perhaps it is not necessarily that we are wiser or less prone to peer pressure, but maybe just a bit shell-shocked from the brutal 2007-2009 bear market that was the worst since the 1930s. Put that together with the bear market in the early 2000s, and collectively stocks provided the worst calendar-decade returns on record. On top of that, current news about the economy still emphasizes high unemployment, huge government budget deficits, and general uncertainty about the vigor of the economic recovery. In that environment, it’s easy to understand how investors would be reluctant to put new money to work in the stock market.

Traditional stock/bond flow pattern

While undoubtedly these considerations are part of the story, a fuller explanation can be uncovered if we broaden this discussion to include the other major (non-cash) asset class—bonds. Because bonds are viewed as less-risky assets, they often see greater mutual-fund flows when investors move away from stocks, and vice versa. Exhibit 1 (above) shows the swings between one-year performance and flows of both bond and stock mutual funds. In general, when stocks have performed better than bonds, as they did for most of the 1990s, stock mutual funds gathered more flows. When stocks declined, as they did from 2000 to 2002 and 2007 to early 2009, bond flows typically received more flows.

2009-2010 anomaly: A lack of herding to stocks

The performance line at the end of the one-year chart (Exhibit 1 above, top chart) shows the one major anomaly to this traditional behavioral pattern during the past year: stocks have been outperforming but bond fund flows have continued to dominate. Bonds made small gains in 2008, easily outpacing stocks during the bear market. So in early 2009, perhaps investors were chasing recent bond returns and avoiding stocks given the recent downturn. During the past year, however, bonds posted decent returns but trailed stocks by the widest performance margin in at least three decades (44%). Yet, investors actually took money out of stock funds on a net basis during the past year. Meanwhile, the $385 billion of net flows investors put instead into bond funds is more than they ever put into stock funds during a 12-month period—even during the technology bubble of the late 1990s. Fund investors clearly were not chasing recent performance because they would have switched to stocks to fit their historical pattern of behavior.

Fresh perspective: Longer-term performance trend

What if investor memories are longer than just 12 months? Sure, stocks posted heady gains during the past year, but 2009 featured the conclusion of some of the worst 10- and 20-year stock performances relative to bonds ever recorded. For example, bonds bested stocks by more than 9% per year over the 10-year period ending in February 2009—the worst ever (see Exhibit 1 above). Going back even further, the 30-year period ending in March 2009 was the best on record for Treasury bonds relative to stocks, with stocks barely outpacing bonds over the three-decade period.⁴ While recent relative performance has slightly improved the long-term picture for stocks, bonds have still been more attractive in the long run.

So perhaps investors continued to put net new money into bond mutual funds (and not stock funds) because they were attracted by long-term bond performance instead of short-term stock moves. In other words, maybe investors were chasing 10-year bond performance instead of one-year stock returns. Looking back at history, the record flows into stock funds during 2000 also coincided with the conclusion of some of the best 10 and 20-year periods for stock performance relative to bonds in decades (Exhibit 1 above). Maybe when longer-term performance rotations between stocks and bonds are particularly one-sided, the long-term performance becomes more powerful than short-term rotations in the minds of investors. At these extremes, investors may simply overlook near-term gyrations and favor what appear to be the long-term performance winners.

If this is true, and if mutual fund sales indeed offer some type of contrarian sentiment forecast, it seems the record net flows into bond funds would represent a cautionary signal for bonds relative to stocks. That doesn’t mean bonds will necessarily decline or stocks will necessarily go up, but it is worth noting that record attention to one asset category over another after a long period of outperformance has often tended to be the high-water mark for a relative performance cycle.

Investment implications

Whether or not there is any validity to mutual fund sales being a contrarian sentiment indicator, when record amounts of money pile into one asset category they push up the prices and valuations of that asset class, invariably pushing down the future expected returns for those assets. For bonds, that means yields are currently near historical lows, making above-average gains more difficult. It is very possible there are some longer-term factors at work that could indefinitely keep demand for bonds high, including an aging population looking for income and a post-2000s bear-market realization by investors that they have a lower tolerance for risk than they originally thought. But the current lack of interest in putting new money to work in stocks, along with 30 years of lackluster stock performance, should give investors some comfort that owning stocks may be one of those non-backward-looking, non-herd-mentality, contrarian decisions that are sometimes rewarded over the longer term.

(The Market Analysis, Research and Education (MARE) group, a unit of Fidelity Management & Research Company (FMRCo), provides timely analysis on developments in the financial markets.)

The information presented above reflects the opinions of Dirk Hofschire, vice president of market analysis, as of March 30, 2010. These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based upon market or other conditions. Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk. Investing includes risk, including the risk of loss.

Past performance is no guarantee of future results.

Unless otherwise noted, all references to stocks or stock market performance in this article represented by S & P 500® Index; all references to bonds and bond market performance represented by Barclays Capital U.S. Aggregate Bond Index.

Unless otherwise noted, all indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income. The indexes are not illustrative of any particular investment, and an investment cannot be made in any index.

The S&P 500® Index, a market-capitalization-weighted index of common stocks, is a registered service mark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation. The Barclays Capital (BC) U.S. Aggregate Bond Index is an unmanaged market-value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The Ibbotson U.S. Long-Term Government Bond Index is a custom index designed to measure the performance of long-term U.S. government bonds.

1. Stock market performance from March 9, 2009, through March 9, 2010. Source: FMRCo (MARE) as of 3/23/10.

2. Source: Investment Company Institute, FMRCo (MARE) as of 2/28/10.

3. The S&P 500 Index declined 49.1% from a peak on 3/24/00 to a trough on 10/09/02. Source: New York Times, Haver Analytics, FMRCo (MARE) as of 3/23/10.

4. For the 20-year period ending 2/28/09, the BC U.S. Aggregate Bond Index outperformed the S&P 500 Index by 0.22%. For the 30-year period ending 3/31/09 the S&P 500 Index outperformed the Ibbotson Associates (IA) SBBI Long-term Government Bond Index by 0.39%. The IA SBBI LT Govt. Bond Index was used because it has a longer history than the BC U.S. Aggregate Bond Index. Source: Ibbotson Associates, FMRCo. (MARE) as of 3/23/10.

Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus containing this information. Read it carefully.

Brokerage products and services provided by Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917.

#547841.4

Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC (“FICS”), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend.Terms of use for Third-Party Content and Research. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC.

Fidelity Brokerage Services LLC Content marked with this symbol is provided by Fidelity Brokerage Services LLC (“FBS”), an SEC registered broker-dealer and member NYSE, SIPC. FBS makes available a full range of stocks, bonds, and mutual funds to individual and other investors through retirement and non-retirement accounts. FBS services its customers through local investor centers, regional telephone service centers and the internet. FBS is an affiliate of FICS.

Before investing, consider the funds’ investment objectives, risks, charges and expenses. Contact Fidelity for a prospectus containing this information. Read it carefully.

Disclaimer: The views provided in Matt Falvey’s Twitter posts, The Strategic Mile, and other Rich Investments, Inc. publications are intended to provide the reader with an introduction to Matt Falvey’s views, Rich Investments, Inc. and its investment strategies. Nothing in Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments, Inc. publications should be construed as a solicitation, offer, or recommendation, to buy or sell any security, or as an offer to provide advisory services by Matt Falvey or Rich Investments in any jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. Information in Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments, Inc. publications are intended only for United States citizens and residents. Nothing contained in Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments, Inc. publications constitutes investment, legal, tax, or other advice, nor should be relied upon in making an investment decision. Matt Falvey, Rich Investments, Inc, any Rich Investments, Inc. affiliates or employees, or any other third party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in Matt Falvey’s Twitter posts, The Strategic Mile or any Rich Investments, Inc. publication. You should obtain relevant and specific professional advice before making any investment decision. A copy Rich Investments current written disclosure statement discussing Rich Investments business operations, services, and fees is available from Rich Investments upon written request. Past performance, in any of the data in Matt Falvey’s Twitter posts, The Strategic Mile or any Rich Investments, Inc. publication, does not guarantee future results. Investing involves risk and Matt Falvey and Rich Investments, Inc. are not responsible for any reader who uses Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments publications to invest money. While we believe the data from third party sources (i.e. books, websites, news articles, press releases, quotes, etc…) utilized in Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments, Inc. publications to be accurate, we have not confirmed the data to be so. Matt Falvey and Rich Investments, Inc. are not liable or responsible for the accuracy or information of third party sources cited in Matt Falvey’s Twitter posts, The Strategic Mile or other Rich Investments, Inc. publications.

Definition and Importance of GDP (Gross Domestic Product)

mfalvey — Tue, 22 Dec 2009 13:06:04 +0000

Gross Domestic Product (GDP)

GDP is a comprehensive scorecard of the country’s economic health. It represents the total value of the country’s production and consists of purchases of domestically produced goods and services by individuals, businesses, foreigners, and the government.

It is released quarterly, with revisions, by the Bureau of Economic Analysis, U.S. Dept of Commerce.
Because the GDP is the all-inclusive measure of economic activity, it not only paints an image of the overall economy, but it also provides investors with insight about important trends within the big picture.
Components of the GDP, such as consumer spending, business and residential investment, and price indexes can alert investors to opportunities as well as provide guidance in managing a portfolio.
Typically, or generally speaking, stock investors like to see robust economic growth because it translates into higher corporate profits. Bond investors are very sensitive to inflation and strong economic growth could potentially lead to inflation.

Ask your advisor about the specific implications for your investments or send me an email at mfalvey@richinvest.com

Definition and Importance of Leading Economic Indicators

mfalvey — Thu, 17 Dec 2009 12:55:58 +0000

Leading Economic Indicators (LEI)

The index of Leading Economic Indicators is a composite index of ten economic indicators that typically lead overall economic activity.
It is released month by The Conference Board
The 10 components of the LEI are:
- Vendor performance
- Stocks
- Money Supply
- Interest Rate Spread
- Consumer Expectations
- Average workweek
- Unemployment Claims
- New Orders Consumer
- New Orders Capital Goods
- Building Permits
By tracking economic data such as the LEI, investors get a feeling for what the backdrop is for their investments and the various markets. When investors see healthy economic growth, they believe that the stock market is likely to respond favorably because it typically translates into higher corporate profits. Bond investors, however, prefer less rapid growth because the bond markets are extremely sensitive to whether the economy is growing too fast and causing potential inflationary pressures.

Here is where the trend has been:

If you have any questions or want ideas on how to align your portfolio with current economic trends, ask your financial advisor or give us an email at mfalvey@richinvest.com.

Be well,

Matt

Definition and Importance of Consumer Price Index (CPI)

mfalvey — Mon, 14 Dec 2009 22:10:37 +0000

Consumer Price Index (CPI)

The Consumer Price Index is released monthly by the Bureau of Labor and Statistics
It is the most widely followed indicator of inflation. Inflation is an increase in the overall prices of goods and services.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a fixed market basket of consumer goods and services. It is available nationally by expenditure category and by commodity and service group for all urban consumers and wage earners.
The “Core” CPI excludes food and energy prices, which account for roughly one quarter of the broad CPI and tend to fluctuate widely. Because of their volatility, excluding food and energy provides a truer reflection of inflationary trends.
In addition to other factors and risks, inflation basically explains how interest rates are set on everything from auto loans to mortgages to Treasury Bills, Notes and Bonds. As the rate of inflation and inflation expectations change, the markets will adjust interest rates accordingly. Very similar to throwing a stone into a placid pond, the inflation effect sends ripples across stocks, bonds, commodities, and YOUR PORTFOLIO in a dramatic fashion.
An investor who understands how indicators such as the CPI influence the markets, will benefit over those who do not.

Investors worried about high inflation, may attempt to “hedge” their portfolios by utilizing TIPs (Treasury Inflation Protected Securities), Commodities and Precious Metals, Real Estate Investment Trusts (REITs), and more recently the IQ CPI Inflation Hedged Exchange Traded Fund.

If you are concerned about inflation risks to your portfolio, have a discussion with your financial advisor or certainly feel free to email me at mfalvey@richinvest.com

Best returns,

Matt

Episode 4: www.Cancer-Warrior.org: Adversity Causes Some to Break and Others to Break Records

admin — Wed, 25 Nov 2009 22:18:40 +0000

Subscribe in iTunes

Life has taken Heather Barley down many different pathways. She has transitioned from stay at home mom, to co-owner of a successful business, to caregiver for her father after his diagnosis with pancreatic cancer to her current position as a cancer awareness advocate and entrepreneur. She started www.Cancer-Warrior.org to build awareness and raise funds for cancer research.

The “Cancer-Warrior” logo finally came to fruition in the summer of 2009, after two years in the making. Other designs soon followed.

The designs she has created on her T-shirts and sweatshirts and other apparel are truly designs from the heart. Her jewelry designs are something she started after caring for her father.“I needed something to help me focus again and designing helped me do that.”

Cancer-Warrior.org is about awareness; not only pancreatic cancer awareness, but all cancers.

Visit www.cancer-warrior.org to learn more and/or purchase merchandise.
Become a fan on Facebook at: www.facebook.com/cancerwarrior
Follow Heather on Twitter at: http://twitter.com/mycancerwarrior

Heather currently lives in York with her husband, their three children, and a menagerie of dogs, cats, fish and whatever else her children sneak into their bedrooms.

Tour of the Rich Investments PA Bunker for Strategic Investment Strategies

mfalvey — Wed, 11 Nov 2009 16:49:08 +0000

“There’s no place like home.” - Dorothy from the Wizard of Oz

Greetings from the Rich Investments Pennsylvania Bunker for Strategic Investment Strategies! Hope you enjoy the tour. This is where all the magic happens for the Chief Investment Officer of Rich Investments, Inc:

Be well,

Matt

Applying Zen to Today’s Stock Market (Part 2 of 2)

mfalvey — Fri, 23 Oct 2009 00:43:39 +0000

“You put water in a tea pot it becomes the tea pot. You put water in the cup, it becomes the cup. Now water can flow, or water can crash. Be water my friend, be water.” – Bruce Lee

PART 2 OF 2 PART BLOG

(PART 1 is here: http://thestrategicmile.com/2009/10/13/applying-zen-to-todays-stock-market-part-1-of-2/)

So I left you with this last week:

“The bottom line is this, a retirement crisis looms for boomers, young, and old…..UNLESS one begins applying the Beginner’s Mind to retirement and investment strategies.”

How do we do this?

In his movie, Heartbreak Ridge, Clint Eastwood led a team of elite Recon Marines in the Invasion of Grenada, codenamed Operation Urgent Fury. The mindset that he drilled into his Recon Team was this: Adapt, Improvise, Overcome. This is what would give them the advantage on the battlefield.

We can apply the same philosophy to investing in the stock market.

Be flexible. No one knows what the future holds, so why lock yourself into an investment for the indefinite future. Don’t be “married” or loyal to your investments. Be loyal to your investments to the extent that they are producing robust results…better than their peers! Ideally, with less risk.
Adapt, Improvise. The stock markets and global economy changes. Build a system and a discipline that allows you to follow market leadership. We use our proprietary computer-driven mathematical model to adjust our portfolios’ sails in order navigate the ever changing winds and currents of the financial markets. Remember the game “Leap Frog” that we used to play as a kid. Think of investing as being similar. Keep your dollars leap frogging towards those areas of the market showing the best leadership. It is important to note, that most mutual fund managers are locked into their own style of investing. Consequently, a great Domestic Large Cap (Company) manager will more than likely not be the person to invest money with when Small Cap Emerging Markets are where all the momentum is. Be opportunistic and find bull (rising) markets wherever they exist. There is always a bull market somewhere. It may in the broad equity markets, it may be in bond markets, it may be in a particular sector only, it could be in precious metals and commodities, maybe real estate investment trusts, or it may be a mutual fund that goes up when the broad market goes down. Your job is to do your due diligence and find these markets. Your dreams and goals are counting on you!

If you want to learn more about our methodology and philosophy, check us out at www.richinvest.com

Best returns,

Matt

Applying Zen to Today’s Stock Market (Part 1 of 2)

mfalvey — Tue, 13 Oct 2009 19:09:52 +0000

“In the Beginner’s Mind there are many possibilities, in the experts mind there are few.” – Shunryu Suzuki

PART 1 OF A 2 PART BLOG

The Beginner’s Mind is a term often used by martial artists or Zen practicioners. It refers to a mind that is innocent of preconceptions, expectations, judgements, and prejudices.

If you invest in stocks, bonds and mutual funds, you may find that applying the Beginner’s Mind to investing can improve your results and experience.

First we re-evaluate stock market expectations and define reality. Main stream financial media and traditional investment advisors love to preach about long-term investing. They say things like “stay the course” or “wait it out” or “you’re in it for the long haul.” Then they pull out their “Stock Market History” charts/graphs and tables and tell you that “since 1926, the stock market has averaged 11% per year, so wait it out and place the averages in your favor.” The sad thing is that most investors buy into this pile of hay that has been through both ends of the horse.

Let’s apply the Beginner’s Mind to some of this hog-wash and translate the above. Our translation: Traditional advisors and main stream media are saying “don’t think, don’t do anything to manage your returns and reduce risk. Just sit tight, hope you’re Methuselah and going to live 900 years so that you can wait for the long-term averages to settle the score.”

The reality of the stock market landscape is this. Ending 09/30/2009, the S&P 500 has a 10 YEAR total or cumulative rate of return of -1.52%! Furthermore, research from www.crestmontresearch.com traces returns of the Dow Jones Industrial Average (the Dow) back to 1901 (http://www.crestmontresearch.com/pdfs/Stock%20Secular%20Chart.pdf). What they show is that the stock market moves in Secular Cycles. Since 1901 to prsent day, there have been 4 Secular Bear Cycles where the average return is a far cry from the 11% per year that the traditional financial advisors tell you to expect.

Secular Bear Cycle 1901-1920, 20 years in length, the Dow returned a total return of 2%.
Secular Bear Cycle 1929-1941, 12 years in length, the Dow returned -63%.
Secular Bear Cycle 1966-1981, 16 years in length, the Dow returned -10%.
Secular Bear Cycle 2000 – ?????

The bottom line is this, a retirement crisis looms for boomers, young, and old…..UNLESS one begins applying the Beginner’s Mind to retirement and investment strategies.

PART 2 To be continued next week…..

Best returns,

Matt