Category: Blog

Everyone seems to be excited about Dow 20,000, but we’re evaluating which overvalued stocks we should sell in anticipation of the HIGH wearing off. It never fails that human nature will run its course and around the next corner sits a financial controversy that will surely help the market SOBER UP. But before we get to that, let’s look at how we got here…

From the worst start for the stock market of any year in history – down 10% in just the first few weeks – to the best quarter in three years! What a ride! The news that precipitated the early drop was China’s slow down, but then we shifted our focus to the UK’s BREXIT vote, and now we have the unending election news and a new administration to concentrate on.

As entertaining as this year has been – especially lately – it hasn’t had much impact on the decisions we’ve made. We tried to follow the investing legend Warren Buffet’s advice again this year – Be greedy when others are fearful and fearful when others are greedy. Once again it was sound advice.

2016 was a good year for the portfolios we manage. Most fully invested accounts racked up greater than a 10%+ return (contact us for your specific return). We are pleased with this and hope you are as well.

However, as we look to 2017 we’d like to have a few bucks in cash that can be used to buy good companies that are down in price when the market gives us an opportunity. A few stocks we’ve discussed selling based on Morningstar’s fair value estimate: Paychex PAYX which is 35% overvalued, Fastenal FAST is 20% overvalued, and Discover DFS at 30%.

We’ll leave the bold predictions to people smarter than us, but here’s a few things we expect in 2017:

• Buckle up – 2017 will be anything but a smooth road for Donald Trump and his policies. We expect this to be reflected in the stock market and in our accounts.

• Trumponomics not magic – We don’t expect a surge in economic growth that the stock market is predicting. It could happen – as the Chicago Cubs proved this year – but our economy still has an aging population, high debt, and higher interest rates that will act as headwinds.

• Henry will love golf – This is just wishful thinking on my part, but I’m hoping my 5 year-old son will love the new set of golf clubs I bought him and give me an excuse to play more this next year. Fingers crossed!

Once again, thank you for reading and also trusting us with your investments in 2016. We appreciate the great relationships we have with our clients and will continue to work hard to produce another prosperous year for you in 2017.

 

Please contact us with any questions,

Tim Porter, CFP®

After a wild ride overnight in the stock market (down -5% at one point), I was ready at the market open to take advantage of the pull back, only to see the stock market bounce back to where it ended the day before. Now things have turned positive and the market ended today up 1+%.

Here’s how we’re feeling in our office today:

1. Not that bad – While the market was signaling chaos last night, we woke up to calm this morning. The contested election investors were nervous about seemed to evaporate this morning as we hear speeches of unity and a smooth transition of power.

Regardless of the emotional swings in the stock market, our country has a track record of changing power 45 times over the last 240 years, and we believe we’ll successfully navigate this change once again.

Trump’s policies may be a benefit to the economy through: a revision of the tax code, business investment, and infrastructure spending. However, we’re curious to know where the cuts in government spending will come to pay for this.

2. Not that great – The stock market ended today close to all time highs and we think that’s too optimistic given we don’t have many details of how this administration will lead.

The areas driving today’s rally were banks and health care stocks because of possible deregulation.

Whether you think the Trump agenda will be for the better or worse, any major changes coming our way will likely be tempered by a political process that’s meant to slow down any sweeping change.

Trump’s policies could disrupt the economy by: swinging to protectionism, removing Janet Yellen as Fed Chair, and implementing the aggressive immigration policies he’s talked about. Many are hopeful he will moderate his positions in these areas.

You should know our investment process still remains intact. We buy what Morningstar believes are solid companies not based on the ever-changing political landscape, but on the strength of the dividend and/or the balance sheet of the company.

As we learn about this new administration and the market reacts to the details, we will continue to look to purchase these companies at a discount to fair value in each of our accounts.

Thanks for reading and please contact us if you have any questions,

-Tim Porter, CFP^®

The hottest stocks of the first half of the year – utilities, telecom, and real estate – have gotten cold and wet along with the rest of us in Portland recently. This has sent our income accounts down approximately -3% since the halfway point in the year, but still retain an approximate 10% return since the beginning of the year. Growth accounts have held up better since July, returning approximately 0.3%, but have lagged the income portfolio year-to-date by about 2% (returns depend on specific portfolio).

This move down in the income accounts is not unforeseen and we don’t view this as a reason to be depressed. In fact, as we’ve written in past letters, we’re celebrating in our office and welcome the pullback as SIGNS of opportunity:

SIGN #1: It’s given us some great opportunities to purchase some stocks and look to become fully
invested once again. We purchased Pfizer PFE in all income focused accounts and Facebook FB for the growth portfolios last week. Both have been recommendations from the smart people at Morningstar.

 

SIGN #2: Whatever drama’s left to play out before the election has only a few weeks left. This may present uncertainty that could result in lower stock prices. We stand ready to fire off more buys if this theory proves true.

 

SIGN #3: The last sign of opportunity is the… opportunity to buy SIGNS. More specifically we’re looking to invest in the dominant sign company in the country, a billboard company (structured as real estate) called Lamar Advertising LAMR.

Josh Peters, CFA from Morningstar says that while older forms of media advertising (think newspaper, magazine, and radio) have lost a huge amount of market share to online marketing, billboard’s market share has actually increased modestly. Furthermore, webs of state and local regulation keep the supply of new billboards low, which constrains supply and restrains competition. This will help to protect Lamar’s profit going forward.

The company pays a 4.8% dividend currently and projects a 10% growth of that dividend each of the next two years. We find this very attractive especially at a price of $65/share when Peters thinks it’s worth $72/share. We expect to pick this up at the next pullback for the income accounts.

Next month Brian and I will be out of the office during the week of Thanksgiving as we lead an event called THX16 (outwardchurch.com/thx). This event will provide a meal, Christmas tree, and presents to 200 families (1,000 people) from four elementary schools in the Salem area that have asked for help. If we’re drowning in gravy this time next month we may not have a chance to get a blog posted, but we’ll post one as soon as possible the following week.

Thanks again for reading and please let us know if we can do anything for you.

-Tim Porter, CFP^®

Finally, some volatility! Although it appears to have been short-lived, the stock market had a few days of excitement since the -2.5% pullback on Friday September 9^th. We were sharpening our pencils in anticipation the pessimism (and buying opportunity) would continue, but the concern about interest rates didn’t materialize and the accounts are close to where they were at the beginning of the month.

“this company is finally boring enough to own.”

However, the long awaited volatility gave us a good reason to choose our next buy, a well-known pharmaceutical company called Continue reading “Measure Twice, Buy Once”

The Wall Street Journal reports the last 30-day period has been the least volatile for the stock market in the last two decades. Only 5 days in the last 30 saw the market move in either direction by greater than 0.5%, the lowest since the fall of 1995.

A couple of reasons for this calm is that a number of large firms abandoned their aggressive positions after the BREXIT vote and have yet to make any large bets this summer. Another is the summer is a slow time while investors are vacationing, so there’s less trading going on, and lastly, central banks (including ours) are helping stabilize the global economy by Continue reading “Paid to Wait”

 

My flight to Orcas Island started in beautiful, cloudless weather. The weather reports for Orcas were clear. While flying at 10,000 feet with the 7,900 foot mountain tops of the Olympic Mountains just to my west, and with Seattle to my east, a solid cloud-bank had developed below me visible in the facebook video.

As I began flying over clouds I was relying on my flight instruments to navigate. One after another my avionics began dimming, and then failing. The voltage indicator showed a zero charge now, I was losing my electronics! Continue reading “Keep Calm and Carry On”

The post-BREXIT surge has taken the accounts we manage to all-time highs. The last month in particular has added a few more percent to the already good returns we’ve seen this year (actual return depends on portfolio).

Rather than celebrate this fact we’re viewing this increase with skepticism. Stock prices are high, corporate profits are falling, and the world seems to be tearing apart at the seams. Meanwhile the S&P 500 powers higher in a relentless Continue reading “Time for TINA”

“Boeing can afford to make costly investment mistakes, but the average retiring investor cannot.”

Major investing mistakes cost Boeing big-time last November. Although Boeing admitted no fault, they settled a lawsuit alleging they used high-priced investment options and had poor management of those funds in their 401(k). That cost them the second largest settlement of all time in 401(k) disputes of $57 Million. Only IBM has settled a 401(k) dispute for a larger amount.

Here’s the thing, Boeing can afford to make costly investing mistakes, but the average retiring investor cannot.

In working with retiring Boeing employees we found that the mistakes Boeing made are not uncommon among investors. In fact, we have too many people come to see us who have either paid too much in fees or received terrible investment advice and it ends up negatively affecting their retirement. This article will briefly talk about how to avoid these mistakes and find a better strategy.

Boeing’s 1st mistake

The first thing any retiring Boeing employee should do before they roll their 401(k) anywhere is to ask about the price, fees, commissions, and anything else that will be paid. Make the advisor squirm a little by asking them to compare their product or strategy with a cheaper alternative and explain the pros and cons.

Some products (index or variable annuities and mutual funds) make it difficult to find the total fees (we even have trouble finding them all!). But, they can be high. Variable annuities may cost upwards of 3% per year and can have surrender charges that lock up your money for 7-10 years. They need these high fees and long lock up periods because the advisors can make 5-10% commission to sell these. That can be a $25,000 – $50,000 payday on a $500,000 account for a few hours of paperwork. Does that sound appropriate? We don’t think so either.

There are many reasons not to buy annuities. Please do yourself a favor and stay away from any investment that pays the advisor commissions. Contact us for more information on this.

It’s far better to select a Certified Financial Planner (CFP®) who will work with you on a fee basis. This means the planner will take a smaller amount of your investment (closer to 1% of assets under management instead of 3%) every year. A fee-based CFP® also has no way to generate commissions on your investments, and typically has no surrender charges in this situation. The beauty of this is if you become dissatisfied, you can move to a different advisor at any time. This is a much more reasonable approach, and it just happens to be how we do business… big shock, I know.

Boeing’s 2nd mistake

The other mistake Boeing made was not getting great advice on the quality of investments being offered within the 401(k). As an investor it’s imperative to know where the investment advice is originating from. Getting advice from a random advisor can be scary. It’s important to learn where he or she is getting their information from. If they say they “figured it out on their own” that’s not a good sign and you should move on.

After a dozen years now we’ve found a great resource in Morningstar, a Chicago based company specializing in investment analysis for planners like us. They have a great reputation and rock-solid advice backed up with a great track record that we implement for our own portfolios as well as our clients.

One of their portfolios is income focused and invests in individual stocks of well known companies (Johnson & Johnson, Kraft, Chevron, Clorox…) with growing dividends. This is what most of our retired clients are invested in and it has provided a great source of income of approximately 4-5% per year from dividends and growth as well.

There are also other resources we follow to help with investing and financial planning including Motley Fool, TD Ameritrade, Bob Doll, CFA society, CFP board… We never claim to be the smartest minds in this business, but over the years we believe we’ve found the best and the brightest and we pay for their advice to help us benefit our clients.

A better strategy

It’s imperative a retiring investor use a proven strategy. I won’t go into annuities again, but Boeing employees who have the guaranteed monthly pension most likely do not need more guarantees that come with annuities (depends on risk tolerance). Also, banks are not a great source of return either with rates on CD’s and money markets at historical lows.

Given the limited options for getting a decent return on investments outside the stock market, retirees have been forced to consider stocks. But how should they invest? Mutual funds or individual stocks? Growth or income? Day trade or buy and hold? Our answer is to keep it simple and use the illustration of the goose and the golden egg.

With many retirees now living three decades after retirement, spending down the total investment (a common strategy) robs the future by killing the goose.  Instead, retirees should live off monthly payments the investment produces called dividends (interest from bonds). We specialize in helping retirees implement this strategy. We do this with research from experts with decades of experience.

If you’d like to talk any of this over with us please feel free to Contact Us or you can visit Our Offer page to learn how you can test drive our services free of charge. We’re happy to spend time with prospective clients reviewing their situation and doing some planning to help them determine if we’re a good fit.

Thanks for taking the time to read,
-Tim Porter, CFP®
(503) 387-3222
Tim@JoinRIA.com

June 23, 2016

About 10pm last night we got the news that Britain voted to leave the European Union (EU). A relationship that’s been in place since 1973. It appeared this was going to be a wild day in the stock market with indications of a -5% pullback overnight, but as we watched the market open that was reduced to -3% as of the time of this writing (10am).

One reason tensions have eased somewhat is perspective. Mohammed El Erian with Allianz investments, said very succinctly, “…at least it’s not Lehman Brothers.” This quickly puts in perspective the magnitude of this change in comparison to one of the major events of the financial crisis in 2008. No, this event is more like an orderly divorce.

Continue reading “BREXIT – An Orderly Divorce”

June 20, 2016

The Value of an Income Stream

As I sit in our office there remains 2 days 5 hrs and 30 minutes until the British exit (BREXIT) vote from the European Union (EU). This vote will decide if Britain will remain as part of the EU or if they will strike out on their own without the financial support of the remaining member countries. 

Leaving the EU will have a negative impact on the UK’s credit rating as seen from this chart.

However, the BREXIT movement appears to be focused less on credit risk and more on gaining independence from a group that some feel is expensive to be apart of, and not real helpful.

Regardless, we have no way to know which way the vote will go.  Polls suggest the risk of Britain leaving is subsiding which is helping reduce uncertainty, this is why stocks are up today.  Most of the impact of this vote will be felt in Europe, but there will undoubtedly be ripple effects felt here in our country as currency valuations and bank stability are now global concerns. Continue reading “The Value of an Income Stream”