2015 Winter Newsletter: Happy New Year!

Happy New Year! Boy is it hard to believe it is 2015 already. Where does the time go?

The Economy

The economy appeared to improve nicely after a dismal first quarter, growing at the fastest rate since 2010. The steep drop in oil prices, while not good for energy companies, should prove to be a nice benefit at the pump and for those who use heating oil.

The Markets

The US stock market powered to new highs in 2014, but the gains were increasingly narrow with mostly large company stocks doing really well. Here is where you likely have a major concern and we have a slightly different one. Your concern might be that because of our broad diversification and our WealthProtect System we have significantly trailed US market returns. I understand the frustration of not keeping up with what “the news” calls “the market.” Our concern is that by the seven most accurate measures of market valuation all of them show a market that is significantly overvalued. In fact, most place the current market as the most expensive except for 1929 and 2000! If you measure all countries by what is known as the Cyclically Adjusted Price to Earnings Ratio, the US has the second most overvalued market in the world after Denmark. This doesn’t mean the US market has to crash; it does likely mean at the very least the market’s gains for the next 6-10 years will be very modest.

What’s my point? Our job is not to get you all the upside each and every year. To do that, we have to accept that we will also get all the downside. As a reminder, the 2008 crash was 57% from peak to trough, the 1929 crash was 89%, and the Japanese stock market is still down 55% from its peak set in 1989 (Yahoo Finance)! Our job is to help you create plans to prudently grow and protect your wealth. Therefore, we employ a three-pronged investment approach: 1) Set an appropriate investment objective to put up the “guardrails” on your stock exposure, 2) Diversify broadly between and within traditional stocks, real assets, fixed income, and alternative strategies in order to both broaden the opportunities and also to potentially reduce the risks, 3) Depending on the account type, use our WealthProtect System* to potentially limit deep market losses. Think of our approach as the tortoise, rather than the hare. It may appear slow at times, but by sticking to the course it has a greater chance of reaching the finish line than the emotional, bouncy hare.

In order to help you see what we track, starting with this edition of the newsletter you will now see year-to-date figures for the major markets.

The Firm

This has certainly been a busy year for our firm in personal areas. My daughter Jacqueline was married and is now expecting; my son Creighton earned his Eagle Scout rank; our marketing Consultant Crystal gave birth to a baby girl, Audrey; and our associates Matt and Emily decided to get engaged—to each other!

Finally, thank you for your continued trust.