Market Opinion

Monday 3/29 Dagnino article on Bond Markets

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On Monday Dagnino wrote an article on the Bond Market.  He is right.  His takeaways in his own words:
  • The markets have been tightening by raising the cost of long-term money. The Fed cannot do anything about it. They cannot lower interest rates because they are at zero percent.
  • More debt (stimulus) cannot overcome the tightening caused by rising bond yields.
  • The business cycle is much closer to the end of Phase 2 (strong growth phase) than the beginning of Phase 1 (beginning of the expansion phase). 
The most important point is that third bullet:  when we hit end of Phase 2 the economy will overheat and begin to top off.  The market generally leads the economy by 6 months.  So it is important to keep careful watch on things.  Individual stocks and individual sectors will lead and roll over earlier than others.  In the meantime inflation should continue to climb.

 

 

https://seekingalpha.com/article/4416604-bond-market-is-tightening-fed-is-in-box-economy-will-pay?mail_subject=george-dagnino-the-bond-market-is-tightening-the-fed-is-in-a-box-the-economy-will-pay&utm_campaign=rta-author-article&utm_content=link-0&utm_medium=email&utm_source=seeking_alpha read more

Commentary for this week

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The Senate has passed the 1.9 Trillion-dollar bill.   I cannot fathom how a married couple making $150,000 per year is “struggling”.  And if they have 2 children, they will be getting $5,600!  As Margaret Thatcher said: “The problem with socialism is that you eventually run out of other peoples’ money.”  I believe that will be extraordinarily inflationary.

So, how should this affect the affect the “Miley Growth Fund” and the “Miley Income Fund”?

As for the “Growth Fund”, be prepared for more volatility and the fund may turn negative for a period.  But the fund is intended for medium to long term investors, so I believe that the fund will still outperform the S&P for 5-10 years.  And if you have been lucky enough to buy VIP Shop Holdings (VIPS), I would recommend that you take some profits, since the stock has exceeded my expectations by growing at over 50% in the short period since I picked it.

On the “Income Fund”, it has outperformed the “Growth Fund”, mainly because of the presence of several financial stocks like Jefferies Financial Group (JEF).  Financials have been going up lately because of the rise in interest rates.   As for the poor performers like Pfizer and Merck, I am disappointed, but the stocks pay a healthy dividend, so sit back and collect your dividends and don’t worry.

As for asset allocation today, the traditional 60-40 mix of stocks-bonds is in trouble since interest rates are on the rise.  If you are using aggregate bond fund like AGG, I would recommend investigating some actively managed bond funds or perhaps a real estate investment trust like Reality Income Corp (O).  Another alternative would be to lighten your bond index fund allocation to 30% and move the remaining 10% into Treasury Inflation Protected Securities (TIPS) and/or into mortgage-backed securities with a fund like GNMA.  Moves like this should smooth out your returns.  And if you have a 401k, I recommend that you utilize a Stable Value Fund for the 10% allocation – these funds are backed by insurance companies and pay a much higher return than money market funds.

So there you have my current commentary, please feel free to comment or write to me directly.

Dan

My Current Thoughts

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      I am pleased with the performance of both the Growth Fund and the Income Fund.  Note that there is no need for me to post weekly gains or losses as the performance of the funds is tracked on a separate page.  But I will say that I was actually surprised by the performance of VIPS being as good as it is.  They announce earnings on February 25th, so it may be case of “buy on the rumor, sell on the news”, so don’t be upset if the stock underperforms on that day.  I would still hold on the stock as well as all of the others in the portfolio.  As for the Income Fund, several of the stocks have underperformed, but remember that the primary purpose of this fund in income via dividends, so again, just sit back and enjoy receiving dividend payouts in excess of the S&P average.   read more

V54 Released – Added Breadth Analysis to Model

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I have added a check on Breadth to the base algorithm.  This is looking at the number of stocks reaching new highs versus new lows, the number of stocks advancing versus declining, and the number of stocks above or below their 21dma.  It looks at this data across the S&P100 (very large caps), S&P500, S&P400 (midcaps), and S&P600 (small caps).  Version 54 performs with a higher RAR and higher Win Percentage than V53.  read more

15%+15%+15%-15% = 6%

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One of the most eye-opening aspects of investing is the impact of market declines on your total return.  If you make 15% in year 1, another 15% in year 2, another 15% in year 3, and then you lose 15% in year 4, you earn….6% annual return.  That one year of 15% loss cuts your four year annualized return to just 6%. read more