July 13, 2017
A Peek Into The Future
The Investment View from Prescott, Arizona
I have scratched my head about what might be done about the growing numbers of failed shopping malls in this country caused by the massive shift of retail shopping moving to the Internet.
Repurposing these spaces is a real challenge due to the cavernous areas involved. They are too valuable to tear down, but what can they be used for? There is opportunity in those big failures, and I think there is finally a solution out there.
A Rhode Island developer has taken a bankrupt mall and turned it into a micro community. He arranged small apartments, which need window space, around the outside perimeter with the inside door opening onto walking paths that connect to grocery and other neighborhood stores, restaurants, garages and entertainment venues.
The apartments will probably need to be narrow and long to keep the density from being too limited by available window space, but with the growing trend towards minimalist living and tiny homes, the market may support it, especially among the young and single crowds.
The Rhode Island project appears to be a success, so stay tuned . . .
A Surprise in Congress, AZ
I like to report the culinary gems I find in my travels and imagine my surprise when I found one in the town of Congress.
Family run Nichols West Restaurant is just past the railroad crossing on Hwy 71, the road to LA in Congress, AZ. The menu will be a total surprise! Expecting small town greasy spoon? Not here!
Nichols West is open for breakfast, lunch & dinner and has a full bar. The broad menu includes a large seafood selection, oysters, steaks, stir fry, pad Thai and other Asian dishes as well as sandwiches, gyros and burgers.
It’s first class food in a casual setting. This is a busy place, but if you have to wait a few minutes it will be well worth your time.
Argentina's "Century" Bonds
Argentina Sells $2.75 Billion “Century” Bonds… These are bonds that mature in 100 years, and pay 7.9% interest.
What this means – Argentina has declared bankruptcy six times in 100 years, and they just finished settling with creditors last year. So why not sell bonds that mature in a century? What could possibly go wrong?
Big Data and Your Money
They say that any information ever offered put onto the Internet still exists. Marrying that cloud of Big Data to the concept of super-computers that can mine it for meaning is changing the world.
We first became aware of this trend when Watson – the IBM computer, beat Ken Jennings on Jeopardy. Now it can tell advertisers what you are interested in, diagnose disease faster than a live doctor, drive your car for you, teach manners to robots or warn your bank that spending patterns on your credit card suggest someone else might be using it.
Regarding investments, you might think that big data belongs only in the realms of hedge funds and private equity firms that can afford to spend millions of dollars on server farms and build expensive analysis infrastructures. That’s no longer the case.
Google, Amazon and Microsoft have made the raw computing tools available for rent by the hour. Smaller companies can now take advantage of this processing power that was once only available to the elite. Now, there are more options that ever for managing money.
Here’s how this impacts your money and your investments.
Massive increases in computing power allow me to be more precise in my investing decisions for you. A key tool that I have developed over the years, my quality of trend analysis, is used to select single investments from thousands of candidates and can be performed before I go to the office in the morning if need be.
This means I can better protect your investments by being more responsive to markets. Working with market signals, I can track when the stock market turns, and make portfolio adjustments quickly if necessary.
Big Data has moved from Wall Street to Main Street, and you can benefit from it at Hepburn Capital.
What the Markets Are Doing
There is a lot of “window dressing” clouding the investment picture in late June, driving the markets down a bit in the process.
The big funds have to prepare annual reports as of June 30th and want their portfolios to look just so. The first few weeks of July will show what they really want to own as they buy back in after the annual reports are done. The next market move will be insightful about the markets moving forward.
The tech-heavy Nasdaq** index has been hit the hardest by the window dressing, but is still the US index with the strongest YTD performance. Don’t give up on tech quite yet.
Both stock and bond prices have been flat since June 2nd. Very uninspiring. When you look at the risk and reward balance, there wasn’t much reward, but one month doesn’t make a market, either.
A number of unrelated indicators ranging from oil prices to Eurodollar activity to ocean temperatures are all pointing to strong stock markets over the next year. Let’s hope so. There are also signs the economy may be slowing, so as usual I’d suggest just taking it cautiously with investment decisions right now.
Bonds continue to struggle against the headwind of rising interest rates, courtesy of our Federal Reserve. The problem is that after several hikes in the overnight “Fed Funds” rate that the Fed can directly control, rates on long term bonds have fallen, bringing them closer to short term rates that are rising, not exactly what the Fed is after.
What this means is that the economy may be weaker than the Fed thought, so putting off further rate increases to keep from pushing us into a recession is a good probability.
Gold prices fell in June, but are still up for the year.
What's Going on in Your Portfolio?
HCM’s Shock Absorber Growth* portfolios and each of our blended portfolios, Adaptive Growth* (80% growth, 20% income) and Adaptive Balance* (50/50), outperformed the stock market during the second quarter, despite giving back some of our profits during the last two weeks of June. This is after deducting all fees and expenses.
The last few weeks have been affected by the big funds doing “Window Dressing” at the end of their fiscal years. I don’t think it will affect us going forward.
However, I have been raising cash steadily over the past few weeks as the US stock market topped out. If it turns back upward, which I do expect, I will use the cash to buy leading stocks. If not, I will use it to position the portfolio defensively. Investments that Adapt to Changing Markets®, as we say here at HCM.
Flexible Income* accounts were in line with the total bond market indexes, having a profitable second quarter.
Our Municipal Income* strategy accounts also had a good quarter.
Putting together good growth performance and good income performance means that all HCM clients are making money.
Please tell your friends.
Next classes are in September. Stay tuned...
Wonder Where the Jobs are Going?
Watch this. It’s 2 minutes long and pretty amazing.
What should you do if you’re cold?
Stand in the corner.
It’s 90 degrees.
Our Spotlight Strategy - Future Technologies
With our Flexible Income Strategy we strive to provide high total return consistent with Capital Preservation.
Your money will be invested in bond mutual funds and exchange traded funds (ETFs), including inverse and leveraged funds, currency funds, including precious metals that may be used as currencies and equity-income investments whose price trend is up. If the price cycles down, holdings are replaced with new investments that are going up, repeating as needed. Growth stocks are not used.
Click here to read more about Flexible Income.