Proposed Trade

John Dutemple will place, for a family account, a Stop Market order to sell Amgen, Inc (AMGN) before market open Monday, February 2, 2015.

Completed Trades

John Dutemple sold, for a family account:

200 shrs. Market Vectors Gold Miners ETF (GDX) with a limit order
100 shrs. Pro Shares Ultra Short Gold ETF (GLL) with a limit order

Advisors' Roundup - January 30, 2015

Here's what I've been looking at this week:

Retreat on 529 plans means not much hope for tax reform with this Congress:
FiveThirtyEight.com

Why temperament is more important than analysis:
The Reformed Broker

The master of indexing on indexing:
Institutional Investor

Proposed Trades

John Dutemple will make, for a family account, the following trades after noon Central Friday, January 30:

Sell Market Vectors Gold Miners ETF (GDX)

Sell Pro Shares UltraShort Gold ETF (GLL)

Completed Trade

John Dutemple sold, from a family account, 625 shr. Harmony Gold Mining Co., LTD (HMY) with a limit order.

Proposed Trade

John Dutemple will sell, from a family account, Harmony Gold (HMY) after market open Thursday, January 22.

Sinquefield to Speak at the St. Louis Club Thursday, February 26

St. Louis investor, philanthropist, political backer, and author Rex Sinquefield will be speaking before the CFA Society of St. Louis next month.

I will be attending. There are a limited number of guest tickets available. If you would like to go as my guest please let me know at john@comptonadvisors.com. The cost is $35 - free for our current clients. Gentlemen, note the dress code below. Please let me know by February 16 if you are interested.


Date: Thursday, February 26, 2015   

Topic:  An Inquiry into the Nature and Causes of the Wealth of States      
 
Guest Speaker: Rex Sinquefield 

About the talk: 

Rex Sinquefield will discuss the impact of state taxes on capital flight. Over $2 trillion of interstate wealth has migrated from high-tax to low-tax areas.

Time: Networking/Registration 11:30am, Lunch/Program 12-1:15pm 

Location: Saint Louis Club         

7701 Forsyth Blvd., Clayton, MO, 63105
16th Floor
Men are required to wear a sport coat.  

  

Garage Parking is Complimentary  

Cost: Members free, Guests $35

Advisors' Roundup - January 23, 2015

Here's what's on my mind this week:

Forcasting is hard - even for the Great and Powerful OZ Fed:
Compton Advisors: If These Guys Can't Get Predictions Right . . .

So maybe you should stay diversified:
Basson Asset

Even a little basic diversification works well in the long run:
The Reformed Broker

Tax Season Means Tax Scams

Heading up the list are callers claiming to be from the IRS and demanding immediate payment. Stereotypes about the IRS aside, this is not something they are going to do.

Here's the IRS's video from their YouTube channel:

If These Guys Can't Get Predictions Right - What Chance Do You Have?

"The best way to predict the future is to create it"

- Peter Drucker

The Fed.

Think of the brain-power, the computing muscle, the insight, the sheer vested interest the Federal Reserve, as guardians of the monetary policy of the richest country in the world, must have at its disposal to make economic forecasts . . .

Now consider how wrong those forecasts have been.

Dr. James Bullard, President of the St. Louis Federal Reserve Bank, spoke Friday before the CFA Society of Chicago. Central to his presentation, Ghosts & Forecasts, was an explaination of how FMOC forecasts are made, and how (in)accurate they have been in the last few years. The Fed's mandate focuses on two measures - employment and inflation. Consider inflation:




 The FMOC has undershot inflation for the last two years - after overshooting it in 2011. Even using its broadest predictor, the Fed was right only twice in the last six years.

Bullard's caveat is that, like Ebeneezer Scrooge and The Ghost of Christmas Present (The Ghost in the presentation's title), their mandate is to predict that which will come to past if the present course is unaltered. The Fed's job is to do that altering if call for, but consider that the Fed's inflation policy target was higher than their highest prediction even. Scary to think how off they would have been if they hadn't been driving policy at the same time.

Unemployment predictions were a little better, only missing half the time and only about as dismal as private forecasts (small comfort). GDP forecasts have been more accurate the last two years.

Click here for the entire presentation

All financial decisions involve prediction, explicit or implicit, yours or someone else's. Because they are part & parcel of portfolio allocation, it's important to recognize their limitations and to temper your reliance on them coming true. This is why you save as much as you can. This is why it is wise to avoid 'sure things' - they don't exist. This is why diversification is prudent move. Because if the Fed can't get economic predictions right, if 'Blue Chip' economists can't forecast employment, are you going to bet your future on your or your broker's guess?

Completed Transaction

John Dutemple sold from a family account 125 shr. of AbbVie Inc. (ABBV) at market.

Advisors' Roundup - January 16, 2015

What I see this week:

Patient investors make better investors . . .
Business Insider

. . . so Keep Calm and Carry On
The Telegraph

With a new year, it's time to review your 529 plans
Savingforcollege.com

Advisors' Roundup - January 9, 2015

Here's what has my attention this week:

Try to avoid being the Perfect Investor
Abnormal Returns

On the other hand, stock-picking can pay off quite handsomely (where's my sarcasm font?)
Quartz

Finally, this is how you write a headline
The Telegraph

The Problem with Analysis

Oil's down. Now what?

In last quarter's Advisors' Outlook I highlighted the recent resurgence of domestic energy production as a long-term trend with unknown ramifications as far as the U.S. economy was concerned. OPEC responded by attempting to force U.S. production into unprofitable territory by maintaining the status quo on production levels in the face of lagging demand. The result has been oil prices below $50/bbl and gas prices that start with a '1'.

I would have thought this would be a good thing for the economy and markets. Except for the oil producers and support services, oil is in input cost for everyone else. A decline in the cost of production should result in higher profits or pass-through savings to the ultimate consumer. Good things, right?

And lower fuel costs should free up a piece of the consumer's budget to stimulate the economy elsewhere. People may use low cost gas to shift to bigger vehicles eventually, but in the short run demand is fairly inelastic - I'm not going to change my commute weekly as gas prices change. (This argues against lower oil prices being disinflationary as well. Though technically correct, the big worry of disinflation is that consumption slows while consumers wait for prices to fall further. I don't know about you, but I pretty much pay what the pump says when I'm on 'E' - up or down).

So why did the market fall nearly 2% on Monday with 'dropping oil prices' pegged as the culprit?

The mixed picture is confounding investors. The Standard & Poor’s 500 Index of U.S. equities fell 1.9 percent on Jan. 5, the biggest decline since October, as oil brought down energy shares and stoked concerns that global growth is slowing. - Bloomberg

I have no idea. Honestly, I still think benefit accrues to the consumer short term and long-term production trends favor the U.S., but the markets think otherwise. Or at least they did on Monday. Incidentally, an Oxford Economics, Ltd. analysis in the same article, agrees with my favorable assessment, at least about U.S. GDP.

As an investor, this leaves me in a bit of a pickle. Either:

1. My analysis (on this point at least) is wrong -or-
2. Conflicting analyses make it hard to figure out who is right

In either case, I'm better off with a strategy of a targeted asset allocation, letting the markets tell me when to buy or sell through rebalancing. The alternative is to identify someone who is a crack analyst, but for that to work, you have to identify analysts skilled in all aspects of the economy and know to balance their respective inputs. Not easy (or cheap if it truly exists) either. 

For timing to work you have to have accurate predictions, accurate analysis, and the market has to eventually agree with you. Best to avoid timing at all.

For the full Bloomberg article, click here.

Advisors' Roundup - January 2, 2015

Here's what's on my mind as we move into 2015:

The Missouri Secretary of State's Office weighs in on protecting the elderly
Compton Advisiors: Preventing Financial Elder Abuse

Financial advisors are a source of help for college planning
savingforcollege.com

Why you should avoid performance-based fees
The Big Picture

Oh Boy! Tax season opens in three weeks!
IRS