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Archive by author: Frederick F. Kramer IV, J.D.Return

Frederick F. Kramer IV, J.D. is Co-Chief Investment Officer and a founder of our firm. Rick was an early advocate of the Scientific Factoring methodology of investing and is passionate about our Investment Philosophy. He brings over thirty-five years of wealth management experience to designing and monitoring our on-going portfolio structure.  Rick is the author of our Quarterly Newsletter which has become a must read as it provides amazing insight, education and always a touch of humor.  Rick is a cum laude graduate of Bucknell University and Dickenson School of Law - Pennsylvania State University. 

Happiness is a warm puppy  Many people would agree with the above statement.  A little, fuzzy, snuggly puppy keeping your lap warm would indeed make most people happy.  But what if the warmth was coming from the puppy urinating on you?  Would you feel the same?  Would your feelings about  a “warm puppy” be different in that scenario?  We have purposely used this tasteless example to underline the fact that a person’s expectation has a lot to do with their feelings.  If someone’s expectations are met, or exceeded, then most people are happy about that occurrence.  If something doesn’t meet expectations, then typically there is an unhappy or disappointed result.You may be asking what any of this have to do with your investment portfolio?  Quite a lot. With financial markets, there are known expectations.  Some basic, some more complex.  An example of a basic financial expectation is that stocks...
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The Incredible Shrinking Market  Over the last 20 years there has been an interesting phenomenon in the US stock market.   Simply stated, the number of listed stocks on US stock exchanges has decreased dramatically.  See Exhibit 1 below:Source: DFA Inc.Note that the number of listed stocks peaked in 1997 and has continued to decrease almost every year since.  Also notice that the number of foreign listed stocks has increased or remained stable during that time. To view this in another way, see Exhibit 2 below:Each year there are new stock listings and delistings. Note that in most years since 1996, there are a greater number of Delists than New Lists.  This continuing trend is happening for three basic reasons:   Public mergers and acquisitions   Private mergers and acquisitions (private equity)   Many new companies are staying longer in the private sector  Public mergers, such as Amazon buying Whole Foods or AT...
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Finally, Finally  After months and months of experiencing an extraordinary period of muted volatility, we finally encountered stock market fluctuations that have grabbed investors’ attention.  Below is a weekly bar chart of the S&P 500 Index:Each bar represents the high and low for one week, starting with the first week of January 2017 and ending with the last week of March 2018.  In case you have been glued to the Winter Olympics and March Madness and have not surfaced long enough to appreciate what has happened, this chart shows the incredible differences between the first 13 and the last 2 months of that period.  Not only was the difference between the weekly highs and lows dramatically tamer during the first 13 months, but the direction of the bars was primarily up or sideways, with no meaningful down periods. During February and March 2018 those trends changed.  There were meaningful differences between the highs and lows, and the direc...
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Days of Wine and Roses 2017 was a beautifully sweet, heady year for global stock markets.  Proof of this can be seen in the consistency of the performance of returns.  For the first time in the history of the world (literally), global stocks had 12 straight months of gains (as measured by the MSCI All Country Equity Index).  That means the last day of each month was higher than the first day of that month, for all 12 months -- the first time this has occurred since tracking began.* In addition, the S&P 500 set an all-time record for the number of days the index endured less than a 3% drawdown (over 300 days and counting).**  (*MarketWatch.com 12/27/2017 “Global stocks just made history by rising in every month of 2017”)  (**BusinessInsider.com 10/23/17 “The stock market just made history”)We will discuss the individual asset classes later in the report, but it suffices to say that things couldn’t get much better....
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W.O.W.Global stock markets have continued their seemingly indefatigable upward trends during the third quarter, even showing strength during some historically negative US events.  For instance, Hurricane Irma ravaged many portions of Florida over a weekend.  The following Monday, US stock markets made new, all-time highs. Wow.  On Sunday October 1, a lone gunman in Las Vegas committed the largest mass shooting in our country’s history.  The next day, even with this atrocity, US stock markets made another new high.  Wow, again.   But those are not the “wows” we’re talking about in the title.  All great bull markets climb a wall of worry (WOW), or fear.  If there was no fear, all investors would be fully invested and there would be no one left to buy stocks.  The current bull market is no different than past ones, although it appears that the market’s chutzpah, its boldness and temerity, have been at all-time...
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Look Out Below!!Did that get your attention?  Sorry, we just couldn’t help ourselves.  The clever title is supposed to scare you into thinking we were talking about the market going down.  If you read or listen to just about any news source, you have undoubtedly heard some expert warn about stocks going down.  They have been doing this for several years.  After all, we are in our ninth year of a bull market.  It makes sense that we should get a meaningful downturn sooner than later.  Doesn’t it? The fact is that we will indeed have a meaningful market correction – sometime.  Whether it is next month, or next quarter, next year or a few from now, we will indeed have a bear market, defined as a correction of at least 20% from a recent high.  And when it comes, it will take many people by surprise.  Most likely it will start innocently, with a pullback much like others we have experienced over the last few years.&nbs...
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Old, Bloated, Slow and ScaryNo, we’re not talking about some of your in-laws.  Rather, we are discussing the US economy and its stock markets.  Let’s take them one at a time.OldThe current bull market started in March of 2009.  After the worst bear market in most people’s lifetimes, the bull started its upturn and hasn’t stopped since.  The older this bull market gets, the closer it moves to its eventual top, right?  Well, all things must end, but just when the ending occurs is really tough to determine.  See Chart 1 below:Chart 1As you can see, this is the second longest bull market in the last 60 years.  But what does that mean?  There is no reason why it cannot continue, and to make matters more difficult, often the last year or two of a bull market offers excellent returns.  Bailing out early might insure a lower average annual return for a long-term investor.  Clearly, time alone is not a meaningful determin...
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Prognostication2016 may go down in history as the poster child for the axiom that it is impossible to magically predict how the stock market will perform.  Of course, that makes much of the print you read, or gurus you watch or listen to, meaningless.  But don’t take our word for it.  At a presentation at the University of California on April 15, 2003, Steve Forbes, publisher of Forbes Magazine said:             “You make more money selling advice than following it. It’s one of the things we count on in the magazine business—along with the short memory of our readers.”Forbes is basically saying most investors would be better off if they covered their eyes and ears when any predictive information on the stock market appears on a screen or in written communication. Contrary to this meaningless daily dribble, our advisors consistently share with clients the empirically proven investment truths backed with fina...
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Trumping the MarketHow will the market react if Donald Trump wins the election?  That is the most popular question our advisors have been hearing over the past few months, especially as more states appear as “toss-ups” and their Electoral College votes going in either candidates’ direction.  Some investors think the market would tank were Trump to be elected.  Some think the opposite.  Most have no idea what will happen.  All are concerned.    Here is a partial list of items that could affect the economy and/or the stock market’s direction if Trump wins with a Republican-controlled Congress. Taxes – Trump’s desired lowering of individual and corporate income and federal estate taxes would put more money in people’s pockets.  This could result in a high degree of productivity gains, or leave the country with a multi-trillion dollar increase in the US deficit.   Either of those results would ...
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It’s Been Two Years and I’m Still Not Rich(er)!?Perhaps you’ve noticed that your portfolio’s value hasn’t been doing anything special for several quarters.  And if you are paying attention to the Dow or S&P 500, you may be wondering why your portfolio hasn’t kept up.  To get some idea of what is happening, review Chart 1 below, which shows some cumulative asset class returns over the last two years.  (All charts courtesy of Yahoo! Finance.)Chart 1The blue line represents US Large Cap stocks, the red line shows US Small Cap stocks, and the green line shows all Global stocks not in the US (Global ex US).  In fact, from their high in 2014, Global stocks ex-US have been down over 25%, which of course means they have experienced a bear market (defined as at least a 20% pullback) over that time period.  It helps to look at the bigger picture to fully understand what is happening.  See Chart 2 below.Chart 2Again, the b...
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