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November 2014 Newsletter

Posted on Monday, 03 November 2014 12:23:00 November 2014 Newsletter

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” -Albert Einstein   In June, I wrote about compounding interest on debts, and how it is best to pay off your highest interest debts (factoring taxes) first.  Today, I am going to discuss the much more fun side of the coin, and that is compounding returns on investments.  The easiest way to look at compounding income is to use the rule of 72, which is that you take…


My Investing Manifesto

Posted on Tuesday, 23 September 2014 19:49:12 My Investing Manifesto

One of the most important questions that you should ask your investment advisor, and get him or her to state in writing, is what is his or her investment philosophy?  For me, out of the hundreds of different strategies that are out there, there are only three that I believe are legitimate.  Before I list the strategies, I want to briefly summarize some research that has guided my beliefs over the past few years. The first is an article is by Eugene Fama, who shared the most recent…


Which Debt Should You Pay Off First?

Posted on Tuesday, 23 September 2014 19:21:29 Which Debt Should You Pay Off First?

    For this article I want to perform an experiment on the subject of choosing which debt to pay off first, since this topic has some up quite a bit recently.  Let’s assume that the hypothetical client has three debts: 1) student loans of $100,000 at 4.5% interest, payable over 20 years; 2) mortgage of $300,000 at 5% interest, payable over 30 years; and 3) car loan of $40,000 at 2% interest, payable over 5 years.  The hypothetical client’s effective tax rate is 25%, but he makes…


Momentum Investing and What I have Learned from Warren Buffett

Posted on Thursday, 27 March 2014 19:43:50 Momentum Investing and What I have Learned from Warren Buffett

In an effort to maximize my time, I intend to stop posting to the blog separate from the quarterly newsletters/updates that I send to my clients.  That said, I reserve the right to change my mind, especially if I am told that people are actually reading what I write. As part of this change, I do not intend to continue the monthly momentum investing updates.  Please trust that I am still performing them and still believe in that investing methodology.  In fact, I have changed the methodology…


POSCO Steel--Value Stock or Value Trap?

Posted on Tuesday, 21 January 2014 18:48:26 POSCO Steel--Value Stock or Value Trap?

With the U.S. stock market somewhere between fairly valued and expensive, it is important to be willing to look outside the U.S. for value opportunities.   When I look for value stocks for my “deep value” portfolio, I require a greater margin of safety than in my dividend growth stock portfolio.  Currently, I am looking for stocks that I believe are undervalued by 50% or more.  To determine whether that margin of safety exists, I perform a relative value analysis and a discounted cash…


GTAA January 2014 Update

Posted on Monday, 06 January 2014 17:52:00 GTAA January 2014 Update

GTAA January 2014 Update For my clients that are applying Global Tactical Asset Allocation, there are two changes this month.   Specifically, emerging market stocks, as represented by VWO, and foreign REITs, as represented by RWX, both moved to cash from being owned.  As I mentioned in my New Year’s post, I want to write more about investing philosophy this year, and I will do so by starting with a 30,000 foot view.  At the broadest level, there are traders and there are investors. …


2013 Year in Review and a Look Ahead

Posted on Wednesday, 01 January 2014 22:35:01 2013 Year in Review and a Look Ahead

2013 Year in Review and a Look Ahead I hope that everyone enjoyed the Holiday season and some extra time with their families.  Looking back to the beginning of 2013, I focused my expectations on larger economic factors much more than specific stocks.  I had concerns regarding U.S. government shutdowns, significant inflation in the U.S. and the weakness of the US recovery.  I expected a U.S. stock market correction in 2013, and not a significant return overall.  I expected interest…


Recent Articles on Buy and Hold versus Value Investing and the Value of Dividends

Posted on Sunday, 15 December 2013 20:56:24 Recent Articles on Buy and Hold versus Value Investing and the Value of Dividends

In a recent series of articles, Morningstar has touched on two topics that are of great interest to me: buy and hold investing versus value investing, and the role of dividends in investment returns over long time horizons.  The first article looked back at the history of two groups of academics: those who believed in the efficient market hypothesis and those who believed that behavioral tendencies created market inefficiencies.  Both sides feature Nobel Prize winners.  The article…


Global Tactical Asset Allocation December 2013 Update

Posted on Saturday, 07 December 2013 19:24:00 Global Tactical Asset Allocation December 2013 Update

The buy/sell signals for the various asset classes that I track are unchanged from November and October.  I view this as further support of using a ten-month lookback (and only evaluating monthly) in determining momentum signals, in that some of the minor fluctuations in the market have not created sell signal that would be later reversed as the stock market continues its upward trajectory.  As a result, the buy/hold signals are U.S. large, mid and small cap stocks, foreign large and…


Global Tactical Asset Allocation November 2013 Update

Posted on Monday, 11 November 2013 21:04:28 Global Tactical Asset Allocation November 2013 Update

There are no changes to the hold/sell categorization of the various market segments compared to last month.  As a result, please review last month's article for a quick list of the signals.  As someone that is enjoying momentum investing methodologies while being keenly aware of their risks, it is reassuring that there are some months that do not suggest any changes, which bodes well for keeping costs and taxes low. I want to use this opportunity to discuss two different topics.  The…