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The US markets had another good year as the rebound from 2009 continues. My guess is at some point the rebound will end, and the market will take a drop. Not a crash per se, but a pull-back.
Our gold miners and oil drillers lagged in 2012 but have done very well in 2013. Oil has stayed above $90.
As in the past, our bonds and fixed income have done quite well for our conservative portfolios. We are still finding corporate bonds that yield above 3% which beats the heck out of what the banks are paying.
Aren’t you glad the elections are over? It’s hard to believe that the news is already talking about who may be running in the 2016 election. Let’s concentrate on the next four years, not the next elections!
I predict over the next ten years the American stock market will show a modest annual increase — probably around 3% a year on average. Earnings have been strong since 2010 but earnings, like everything else in our economy, are cyclical. Eventually, corporate profits should weaken.
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We are in the process of starting a hedge fund named “Global Concentrated”. The fund is based upon my personal IRA and is a high risk, high reward investment.
A dollar invested in my IRA in 2008 had grown in five years to almost $4 by the end of 2012. A dollar in the S&P 500 over the same time frame would have shrank to 80 cents. Bear in mind, this was accomplished by holding single positions, selling out of the market in 2008, and buying gold in 2009. All high risk/reward. |
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We have begun a new strategy for our growth accounts. Now, we are trading some positions more actively. These are not long term investments.
Because our firm is so small, we can quickly get into and out of stocks while other firms can’t because of their size. For example, a mutual fund that manages billions of dollars can't easily trade a stock without affecting the price of the stock. However, we can because of our smaller size.
Another example is a trade that we made a few weeks ago buying Freeport McMoran. Freeport is one of the largest gold and copper miners in the world. Management decided to buy two energy producers. The market was unsure of this news and the stock dropped from $38 to $31 in just a few days.
As the stock was rising, we bought shares. Our clients made up to 7% profit in just a short amount of time. Don’t get me wrong, we could have lost money in this investment just like any other stock. However, we would have sold to mitigate losses.
Another short term trade is Alcatel-Lucent. I’m sure that you have heard of Lucent, formerly Bell Labs. This is one of the many companies that so many people lost fortunes during the internet boom of the 1990s. Now, the stock trades at $1.60.
Although Lucent has been bleeding cash, it still has assets around the world. Such a low price should mitigate much of the risk. Of course if we’re wrong, we won’t stay with this investment. Our accounts have stop-losses which order a stock to be sold after a certain point. |
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It’s been nine years since I put out my shingle. We’ve survived a market crash and outlasted many erstwhile blue chip investment companies including Merrill Lynch, Lehman Brothers, and Bear Stearns. When I say that we’ve outlasted these companies, they still exist but under completely different ownership and management.
What’s our secret? We don’t follow the crowd. We are not always fully invested nor are we afraid to sell out of an investment that is losing us money. Had the other investment houses done this, they’d still be in business.
What does the future hold? We don’t know. However, we will continue with our strategy as it has
worked in the past.
I can tell that the American stock market and real estate markets have seen their best days. There will be slower growth ahead. We will hunt and peck around for ways to make our clients greater returns on their money while taking less risk than Wall Street. |
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We decided to sell our Altria and Berkshire Hathaway. Altria’s cash flows have flattened out over the last few years and the company has had to borrow to keep up its dividend. This is not a place that a corporation wants to be in. When we bought Altria, it had a 6% yield. Counting the dividend, we made about 42%. Not bad.
We sold our Berkshire Hathaway in part because we are concerned that the American stock market may take a substantial drop because it has more than doubled over the last four years. Though Berkshire is one of the best companies in the world, it would be affected by the overall market.
We made about a 27% rate of return in the stock. I’ve considered attending the Annual Shareholders’ Meeting this spring in Omaha. |
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It always amazes me the number of people whom I’ve met who have not done a will or trust. Do you have any idea what happens to your assets if you die without a will? They go to probate court. Then, your heirs must petition the court. All of this takes time and incurs attorney fees. And what happens in court, doesn’t stay in court. It becomes public information.
When was the last time that you updated your will? Have your assets changed? What about arrangements with heirs?
The new estate tax rate is $5.12 million per spouse. So a couple can exclude up to $10.24 million before the estate tax kicks in at 40%. Qualified money such as IRAs, 401Ks, and the gains in annuities is taxed at the
heirs’ tax rate. As the Bible says, render unto Caesar what belongs to Caesar. |
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If a couple makes over $250,000, they will pay an additional 3.8% for the Affordable Health Care Act plus 0.9% on Medicare wages. Couples making $450,000 will see the old 39.6% rate and incur capital gains of 20%, up from 15%. The 3.8% is also added to capital gains. The 15% capital gains rate stays the same for couples under $450K.
Exemption amounts on the Alternative Min. Tax have been raised to $78,750. The payroll tax for FICA will go back to 6.2%. Let’s hope that our country can get to a point
where it takes in more taxes than it pays out in expenditures! |
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