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BCN Advantage - August 2016September 6, 2016
Jeff Bratzler, CFP
The markets experienced deep corrections in August 2015, January 2016 and again (very briefly) after the June 2016 Brexit vote. Yet we feel these corrections are not sufficient to move more aggressively into stocks.Corporate earnings continue to decline and global growth remains anemic - despite non-stop central bank interventions, not only here in the U.S. but also in China and Europe. EARNINGS: 2015 S&P 500 earnings were $86.47 compared to $86.95 for 2011, leaving actual reported earnings flat for four years. 2016 Q2 was the 6th consecutive quarter of year-over-year earnings declines. The last two such streaks were ominously the eight quarters from2007 Q4 to 2009 Q3 and the six quarters from 2001 Q1 to 2002 Q2, both accompanied by major bear markets. Six months ago, earnings forecasts for2016 Q3 were an optimistic +17%. Today, the consensus is -0.14% and falling.GDP: U.S. economic growth fell well short of expectations for the second quarter of this year. A paltry rate of 1.1% was reported (well below the 2.6% expected), and now the rate of growth for the first half of 2016 is just 1.0%. Over the past four quarters the non-consumer portion of the economy (most notably private-sector business), has grown at a rate of negative -0.2 percent. Only once since 1958 (in 2012) has the non-consumer part of the economy contracted without that period later being recognized as an official recession. FED POLICY: Minutes from their July meeting showed a split over when to raise rates. Fed policy - far more than fundamentals such as corporate earnings and economic growth - is driving the stock market. If January 2016 is any indication, the markets will react VERY NEGATIVELY when / if the Fed finally begins to raise interest rates. But the Fed is exactly the reason smart investors must hedge: The Fed has gone from projecting 4 hikes in 2016 (December) to 2 (January) to NONE so far in 2016 to none until LATE 2017 (after the Brexit vote) to possibly 2 again beginning next month! STRATEGY: It is not unusual for BCN to maintain a disciplined strategy over long periods of time. We spent all but 5 months from 2009 to 2013 FULLY invested in stocks. At one point we didn't change our fully invested allocation for 30 consecutive months (similar to the current period). Not changing our strategy doesn't mean we're not working hard for you. Patience is essential. It allows us to minimize losses. It gives us the financial ammunition (cash) to invest at much lower stock prices once the markets finally bottom. It allows us to be 100% fully invested once the risk / reward ratio turns in our favor. Our defensive strategy is not significantly underperforming the markets. Since late December 2014 (20 months), the S&P 500 has climbed less than 5%. As a point of reference, CalPERS earned 2.4% for FY 2015 and 0.6% for FY 2016. We will not remain defensive forever! We want to see another Fed rate hike and evaluate the resulting market reaction. We want to see a rally based on real economic growth and improved earnings - rather than more lip service and further dovish policy accommodation from the Fed. And we want that rally to come with higher trading volume - proof that true buying conviction has finally replaced short-term speculation.

State Appeals Court Rules on AirtimeJanuary 6, 2017
Bob EgelkoSource Address    SF Gate
A state appeals court has upheld a 2013 California law that eliminated a pension benefit for hundreds of thousands of state and local government employees in an effort to reduce the pension system’s mounting deficits. The lawmakers’ action in eliminating the right of public employees to buy additional ...

Effect of Corporate Tax CutDecember 16, 2016
Michael BrushSource Address    MarketWatch
Trump wants to reduce the corporate tax rate to 15% from 35%. He might not get that. Any reduction would more likely put the new rate at around 20%. That’s closer to the level often cited by Congressional Republican leaders. Even a reduction to 20% would bring substantial benefits to investors. Theoretically, ...

Fed Hikes - Sees 3 More in 2017December 15, 2016
Justine UnderhillSource Address    Yahoo - Finance
For the first time this year, the Federal Reserve raised interest rates, a widely expected move following strengthening economic reports and signals from Fed officials. After its two-day policy meeting, the Federal Open Market Committee unanimously voted to raise the range of the federal funds rate ...

Bond Carnage Spells Trouble for StocksDecember 8, 2016
Mark DeCambre
Stocks have stormed to record levels on the back of hope that President-elect Donald Trump can make not just America great again but the stock market, too. But a jarring selloff in bonds is a bad sign for Wall Street and could mean problems for equities. “I’m very confident that this rise in rates is ...