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Investment Management

Seven Dangers for Investors

  • Facing and managing investment danger
    The dangers facing today’s investor have never been more deeply felt. The bloody lessons of the Great Crash of 2008 left no investor untouched, but some weathered the storm far better than others, and instead of facing financial desolation, are looking forward to continued prosperity now, and in the years to come. If you stuck to your guns and avoided the temptation to sell into the bear market or flee for the imagined safety of bonds, annuities, or bank cash, I salute you.

    Which camp are you in? For as painful as the Great Crash of 2008 was, it will not be the last one. And as the market has rebounded sharply from the March 2009 lows, it was only natural to have forgotten the lessons of the Great Crash, to have become comfortable as the post-2008 rising market – one of the longest bull markets ever in the US – continued to soar, and maybe to let our guard down a little as we went with the flow. A lot of people felt that way in the months before 2008 changed everything for modern investors.

    We be racing toward another such inflection point, as “US large caps” – the kind of stuff that’s in the S&P 500 and dominates many index funds and investors’ accounts, maybe yours – had floated from deeply undervalued to fairly valued to probably overvalued and primed for a correction or bear market.

    As we face an ever-uncertain future, knowing how to control investment danger can make all the difference between staying on the path to prosperity, and facing a bleak and impoverished retirement.

    During the mid twenty teems, we feel one of the greatest dangers is an overconcentration to US large cap stocks, which may be due for a correction or bear market sooner than many investors may want to believe. On the other hand, other asset classes with significant profit potential may be underweighted or totally absent from investors’ portfolios, sharply increasing risk and reducing profit potential. Later in this report you will have the opportunity to request a no-obligation portfolio review to help you assess these risks for yourself.

    Some of the material in this Wealth Matters section summarizes basic measures that each investor would be wise to consider to evaluate and guide their investment planning. It can also be extremely useful in flagging danger signs before catastrophic losses become, perhaps, unavoidable. As such, it is intended as a diagnostic tool, to guide the practiced eye toward those indicators which may warn you that something may be amiss, and help you take corrective action while it may still be relatively painless to do so. While helpful, these guidelines are by no means foolproof. Still, they can uncover danger signs you really should address, which could make a very real difference in your financial health.

    This material can be used on two levels. The first is your application of the basic understanding that you will gain from the insights you read here to your own investment situation. This alone is certain to raise many questions, and even a bit of probing on your own can help you a lot. The second level is through the free offers of professional service you will learn about as you go through our websitet. You will have the opportunity – at no cost or obligation – to have some of the tests described here actually conducted on your portfolio, by a trained and licensed investments practitioner, using professional analytic evaluation techniques. We call this a Portfolio Stress Test™. This level can give you very detailed information with very little effort on your part, and in the wake of the massive selloff of 2008, and near-certain stormy markets ahead, could make a huge difference in protecting your retirement and your family’s financial security.

Stick to your investment strategy guns for the long term

  • Sticking with a specific investment strategy, instead of jumping ship after disappointing cycles, tends to pay off in the end, even though it can be irritating and frustrating and scary and seem pointless at times. Hard as it may be to believe, this would have been true even in the aftermath of the Great Crash of 2008, which is shown a little to the right of the middle of the little S&P 500 chart below (see post-crash market bottom at blue arrow). Even those who invested at the peak in 2000 – or in 2008 – but stuck to their guns and soldiered on through the heartache would be strongly profitably by now, as the chart shows. Those that bailed during the plunge and fled to the “safety” of bonds, annuities, or other “smarter” investment paths likely never recovered, let alone soared, though they may know it not. Not every year is cause for celebration, but in the end, sticking with a sound strategy tends to pay off, and patient money tends to turn out to be smart money.

    For instance, 2014 and 2015 seemed like unusual years for investors. Portfolios focused on US large cap stocks did relatively well, while asset allocation/”pie chart” styles, like much of the mainstream investing world’s offerings, really underperformed, since the latter diversify into many different asset classes and hence have only a small portion in US large caps at any point in time. In fact, this has been more or less the case for the post-Great Crash period, as the US large cap market has screamed upward (see above) from the March 2009 low. Situations like this, though, rarely persist, and investors should in times like this expect that the performance leadership baton will shift to non-US large cap asset classes like foreign markets, in the periods which follow. Over time, many observers expect the asset classes that predominate diversified asset allocation styles – non-US stocks, and non-large- cap US stocks, and more – to outperform transitory hot asset classes.

Why Camarda offers free portfolio stress tests

  • Many readers ask why it is that Camarda is willing to conduct these portfolio stress tests without cost or obligation. Often, such strategies and services are shared only with investment advisors’ paid clients. So why would Camarda give you these ideas at no cost or obligation? Because we’ve found that educating private investors to protect themselves from financial heartbreak is good for our firm, whether or not any particular investor decides to become a Camarda client. Some people whom we help with this stress test will find that our extensive training, fee-based objectivity, and committed client service system is attractive to them, and will choose to learn more about having us advise them. Others will take our analysis and use it to enlighten their own decisions, or those they make with existing advisors. But even these investors who choose not to become our clients will often tell their friends and families about Camarda, and some of them will be ready for a change or prefer to have ongoing investment management taken care of for them. So we have found that helping investors to protect themselves with these free stress tests is not only good for them, but good for our firm, as well. That’s a real win-win!

Can active investors beat indexing?

  • Over the past several years, much hay has been made about the superiority of indexing versus active investing, to the point where many investors, with the encouragement of the media, believe that even good advisors or portfolio managers can’t consistently pick stocks that beat the market, and that indexing is the way to go. Indexing, of course, is betting on an entire “market” like the S&P 500, instead of trying to find the best stocks within that market; you’ll get some stars and some dogs, but on average you’ll do as well as the market, and that’s as good as it gets for most folks, so stop trying to “win,” and just accept it. Of course, this is easier to live with in good markets than bad.

    Certainly, market performance in the years since the 2008 crash has lent credence to this notion, with the swiftly-rising tide of a surging US market bounceback from incredible lows lifting stocks of nearly every stripe and color to repeated records. However, the tide is wont to change – as we think it has now – and investors who rely on recent trends to chart future paths are often disappointed. Indexing is currently in raging fashion, but the world seems to change as soon as everybody “knows” something, like all stocks are created equal.

    Camarda, as a firm, has always held that careful analysis can uncover superior opportunities – similar shares for cheaper prices, better companies for similar prices, shares which are rising faster due to institutional demand, and so on – which can translate into better investment returns. A good analogy is rental real estate, where it is not unusual to find virtually identical rental houses – same area, size, construction, rent rate – for 40% less than others. Fallible sellers – ignorant, desperate or hopelessly optimistic – misprice wares for sale all the time. We firmly believe that hard work and research can pay off – in shopping for real estate, cars or stocks – and Camarda endeavors to do this in the portfolios it manages for clients.

    From this perspective – that it seems obvious that some transactions are more attractive than others – the current fashion of indexing may seem unusual. When one considers the academic underpinnings, it seems quite bizarre, and most contrary to common sense.

    The Rational Expectations Hypothesis – on which the Efficient Market Hypothesis, and, by extension, indexing is at least partially based – holds that markets, comprised pretty exclusively of smart, logical, informed, intensely interested human beings – quickly and accurately process all available information to properly price current and future prices. In other words, the price is always right, and trying to get a better deal or expecting one company’s stock price to offer more value than another is not really possible. Hence, investing in the entire market – rather than trying to pick individual winners – is the surest, simplest path. In a nutshell, the theory presumes all people have the same intelligence, information, interest in spending their limited time pondering investments, and the actual time to do it if they really care. Working together, the market unfailingly finds the right price for all things, and market disruptions or opportunities are impossible.

    Newsflash? Perhaps some people make stupid decisions, that others can profit from?

    To some folks, this premise has always seemed crazy. Market players are as different as athletes – the ones that make professional teams, and the ones who play in back yards – and sometimes so emotional as to lose all reason. Sometimes even the entire world gets it wrong, and bubbles and crashes happen. 2008 brought pause to even the most diehard of the Rational Expectations crew, and the academic world is slowly reframing its theoretical outlook. The indexing approach seems to be largely a hangover of a tattered and limping theory but one – like other fashions – that may continue on sheer momentum long past the time when the world should learn and move on. It is somewhat ironic that indexing continues, in the wake of ’08, to increase in popularity and “correctness.” Just because the average investor’s market returns must by definition be some function of average market returns does not mean that there will not be scads of winners and losers who do better or worse than the averages, or that it is unreasonable or improbable to shoot for the winners’ circle.

    Not only does Camarda believe that active management – doing research and analysis to try to uncover superior profit opportunities – over time should prove to be more profitable, but that the current market cycle will especially favor exceptional stock-picking. Camarda uses a variety of methods to target exceptional opportunities, from technical (chart) analysis to pouring through companies’ books to look for cheap, mispriced stocks that have strong profits, businesses, and asset structures. We’d love to tell you more about it, and are confident that the months and years ahead will prove very gratifying for active investors like Camarda clients, but quite disappointing for those holding to the passive indexing past.

Facing and managing investment danger

  • The dangers facing today’s investor have never been more deeply felt.

    The bloody lessons of the Great Crash of 2008 left no investor untouched, but some weathered the storm far better than others, and instead of facing financial desolation, are looking forward to continued prosperity now, and in the years to come. If you stuck to your guns and avoided the temptation to sell into the bear market or flee for the imagined safety of bonds, annuities, or bank cash, I salute you.

    Which camp are you in? For as painful as the Great Crash of 2008 was, it will not be the last one. And as the market has rebounded sharply from the March 2009 lows, it was only natural to have forgotten the lessons of the Great Crash, to have become comfortable as the post-2008 rising market – one of the longest bull markets ever in the US – continued to soar, and maybe to let our guard down a little as we went with the flow.

    A lot of people felt that way in the months before 2008 changed everything for modern investors.

    We be racing toward another such inflection point, as “US large caps” – the kind of stuff that’s in the S&P 500 and dominates many index funds and investors’ accounts, maybe yours – had floated from deeply undervalued to fairly valued to probably overvalued and primed for a correction or bear market.

    As we face an ever-uncertain future, knowing how to control investment danger can make all the difference between staying on the path to prosperity, and facing a bleak and impoverished retirement.

    During the mid twenty teens, we feel one of the greatest dangers is an overconcentration to US large cap stocks, which may be due for a correction or bear market sooner than many investors may want to believe. On the other hand, other asset classes with significant profit potential may be underweighted or totally absent from investors’ portfolios, sharply increasing risk and reducing profit potential. Later in this report you will have the opportunity to request a no-obligation portfolio review to help you assess these risks for yourself.

    Some of the material in this Wealth Matters section summarizes basic measures that each investor would be wise to consider to evaluate and guide their investment planning. It can also be extremely useful in flagging danger signs before catastrophic losses become, perhaps, unavoidable. As such, it is intended as a diagnostic tool, to guide the practiced eye toward those indicators which may warn you that something may be amiss, and help you take corrective action while it may still be relatively painless to do so. While helpful, these guidelines are by no means foolproof. Still, they can uncover danger signs you really should address, which could make a very real difference in your financial health.

    This material can be used on two levels. The first is your application of the basic understanding that you will gain from the insights you read here to your own investment situation. This alone is certain to raise many questions, and even a bit of probing on your own can help you a lot. The second level is through the free offers of professional service you will learn about as you go through our websitet. You will have the opportunity – at no cost or obligation – to have some of the tests described here actually conducted on your portfolio, by a trained and licensed investments practitioner, using professional analytic evaluation techniques. We call this a Portfolio Stress Test™. This level can give you very detailed information with very little effort on your part, and in the wake of the massive selloff of 2008, and near-certain stormy markets ahead, could make a huge difference in protecting your retirement and your family’s financial security.

Get Camarda’s free portfolio stress test

  • Here’s more about the free Portfolio Stress Test you can obtain by calling us at 800-262- 1083. After that are some tools you may use to try to evaluate your existing advisor or a new one you are considering. Part of our Portfolio Stress Test involves helping you to assess your advisor. If you choose to do this yourself, may I suggest that you re-read this report several times and do some outside research to be sure to be well-grounded in the material before expecting to draw reliable conclusions and action plans on your own. You should feel confident that you are well steeped in the concepts, can apply them effectively, and have found the many tools you’ll need. In writing this report, I’ve tried to simplify the process for you, but you’ll still need to understand what needs to be done, where to find the data you’ll need, and then actually remember to make yourself do it thoroughly and on an ongoing basis. And remember, getting the feedback of even the most well-intentioned of your existing advisors may draw you into a “leave well enough alone” myopia that may salve all egos but leave your cupboards barer than they might otherwise be—especially if they make a lot of money on your relationship and perhaps would prefer you not dig too deep. Even if they don’t have things they’d rather you’d not know, and even if they might be tempted to spin answers in fear of losing your business.

    Of course, there is an even easier way, and I encourage you to try it. Our free analysis, if nothing else, can serve as a valuable independent benchmark against which to judge your existing advisor, and a basis for potential improvements.

    Camarda’s FREE Portfolio Stress Test™ is conducted by a licensed, credentialed professional without cost or obligation, and can help you to get a detailed “bead” on some of the important factors, as applicable to your personal situation, regarding your current strategy:

    1. How likely are you to run out of money?
    2. Is your advisor a “fiduciary” required to put you first? (odds are they’re not).
    3. How well trained is your advisor? Do they have the education to be experts in the areas you think they are and need to be?
    4. Could unseen risks be setting you up for the next market crash?
    5. Are concealed costs in your portfolio cutting your returns?
    6. Is your portfolio age and needs appropriate?
    7. How has your portfolio really performed?
    8. And many other important items as discussed in this report.

    The results of this discussion—which our licensed investment practitioners will conduct free and entirely without effort on your part—can yield valuable pointers on “trouble spots” in your planning and portfolio that you can use in any way you see fit, even if you want to stay where you are or choose to go it alone. Knowledge is power, and this test will likely give you plenty that you can put to use right away. To schedule this important test, call us at 1-800- 262-1083 (or 1-888- CAMARDA), fax us at 904-278- 1070, or email me, Jeff Camarda, personally at j@camarda.com, and tell us you want the FREE Portfolio Stress Test™. Be sure we get your phone numbers and email address so we can easily and quickly set this up for you. Once again, you may ask why Camarda is willing to give so much valuable, professional service away for free. There are two simple reasons. One, and most importantly, we feel a profound obligation to “do good” by helping the investing public maximize their financial opportunity. In a dark and stormy sea of misinformation, it is very important to us to serve as a beacon of sorts, to “light the way” and truly help people get where they want to go. This obligation goes beyond corporate cliché, and is a deeply driven and felt company value.

    Expanding financial education, to help people lead richer and better lives, is very important to us, and to me, personally, as firm founder and leader. The other reason is more practical: some of you may come to believe that Camarda represents a better way, and choose to use us to manage some of your financial affairs, or to refer us to others who may. But that part, if it comes, will be for later. For now, we are more than happy to only deliver this important, customized advice to you (at no cost and without pressure), simply to serve you and those you love. What happens after that is entirely your call.

    Our beliefs in this regard are well stated by this quote from George Merck. Merck has throughout its long history been one of the most visionary and altruistic of pharmaceutical firms. In all of my extensive reading and study of business, I have yet to find a corporate philosophy that better reflects Camarda’s “corporate DNA,” to borrow a phrase from Jack Welch, GE’s legendary CEO. In 1950, George Merck said:

    “I want to . . . express the principles which we in our company have endeavored to live up to . . . Here is how it sums up . . . We try to remember that medicine is for the patient.> We try never to forget that (the excellence we strive for) is for the (clients). It is not for profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we remembered it, the larger they have been.”

    Many people do not feel that “Wall Street” firms live up to this principal, and you may not as well. Still, this theme and many, many others from leaders of visionary companies that have driven great social good, pretty well sum up how we feel at Camarda. Profits are important, but not most important; they spring naturally from first doing what is right. Put the people first, those that choose to become clients, and those who, as is their right, do not. Do what is right and best for people, not what may seem best (at least in the short term) for us. Do that, and we cannot help but do well, because of the good we do, first, for them. It has always amazed me, in modern corporate America, how many firms seem to ignore this simple truth, that companies must first and continuously serve well, and that lasting prosperity is a function of the good delivered. This attitude allows us to feel passionately good about what we do each day. We have been very fortunate to enjoy robust growth and to endure strongly, even through the Great Crash of 2008, but I have always felt that this is merely a by-product of our core values. Perhaps because of this, we have been quite fortunate to welcome a great many new clients over the years, many of which have first “met” us by reading reports such as this one.

    It has been my pleasure to write this report for you, and I hope that you will act on the information to brighten the financial future for you, and those you care about, while it is still fresh on your mind, before the torrent of life drives this opportunity for enhanced financial security from your grasp. So seize the day! I’m looking forward to helping you to join the happy ranks of those investors who truly feel they’re better getting where they want to go.

    Again the Portfolio Stress Test™ is FREE, without cost, obligation. Use it in any way you see fit: as a discussion platform to optimize your holdings at your current advisor, as the basis of the investment management you decide to do on your own, or as an introduction to the portfolio management services that Camarda provides to hundreds of investors just like you. However you use it, we believe you’ll find uncommon insights to help guide your financial decisions, and better target the investment results you really want. To schedule this important test, call us at 1-800- 262-1083 (or 1-888- CAMARDA), fax us at 904-278- 1070, or email me, Jeff Camarda, personally at j@camarda.com, and tell us you want the FREE Portfolio Stress Test™. Be sure we get your phone numbers and email address so we can easily and quickly set this up for you.

Rich Rewards for the Patient Investor? Timeless Tips from 2015

  • As we have noted many times in this space over the past several years, the US markets have been on a tear since the 2008 meltdown, easily eclipsing most of the rest of the world’s stock markets since the market bottom in March of 2009. There have been many reasons for this, but probably none as important as the Bernanke Fed’s wise monetary policy, pumping easy money into a stone-cold economy, not only firing it up but helping the US stock market to soar like a hydrogen balloon as well, by both kindling economic hope and leaving return-hungry investors few alternatives. It worked swimmingly, restoring the economy to where higher, more-normal interest rates seem tolerable – and necessary – but also bringing the US stock market much closer to fair valuation, or even overvaluation. US stocks are now feeling the first buffeting of headwinds, with borrowing costs sure to go up, a high dollar hurting exporters and raising many raw materials’ prices, and the likelihood that many companies will face flat – or even declining – profits for the first in a long time.

    And, again, as we have oft-noted here recently, we are not predicting a bear market in the US anytime before 2017 at the soonest. While we think the easy money’s long gone and that things will get a good bit bumpier going forward, we do expect the long, long US bull market to continue to bounce higher, with many more record highs ahead. No dead cat bounce yet – but it will be an old bull bouncing!

    But the go-go baton’s clearly been tossed overseas, as we have been suggesting for awhile. And that should be very good news for asset allocation investment strategies, like Camarda’s AIMS™ portfolios.

    Consider: As I write this just before Tax Day, 2015 – and after a good week in the US markets – the DJII’s up 1.3%. For the year. The S&P 500’s up 2.1%, the 400’s (mid-caps) up 5.7%, and the 600’s (small caps) up 4%. Now this illustrates the good point that any sound asset allocation strategy should include asset classes besides US large caps (what’s in the DJII and SP 500, and which too many investors seem to have too much of). But look at what’s going on overseas! Europe is up some 20% (Germany over 25%), China’s nearly 25%, and long-sleepy Japan’s over 14%. Even stress-laden Russia’s up over 26%. Of course, not every non-US country is up so much, and prudence demands we diversify not only into many countries, but into many asset classes besides non-US stocks as well. But you get the point.

    This is where sticking to a long term strategy like the asset allocation in Camarda’s AIMS™ can really pay off. While exceptional strategies can have many “market-beating” years, last year – 2014 – was not a good one for allocations that mix in healthy dollops of non-US stocks, like Camarda’s AIMS™. And it is where patience in “staying the course” – uncomfortable as it may feel as short term waves rock and roll us – can produce major rewards and significant wealth growth. Over the decades we have been doing this, one observation seems to have been repeatedly confirmed: investors who stick with a sound strategy – whatever it may be – over several market cycles seem to do quite well. Those that “chase” performance – cashing in a temporarily-underperforming strategy (which may be about to take off) for last year’s hot one (which may be about to underperform or even tank) often hurt themselves, perpetually selling at the worst time, and condemning themselves to not becoming as wealthy as they might have been.

    Asset allocators, I strongly sense this could be your time to shine once again. If the first quarter’s trends are any indication (and I surely think they are), this year could be a blockbuster one for those with non-US components to their overall portfolio strategy. Stay the course, the harbor lights should be coming up soon. This time next year, your ship may really have come in!