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September 6, 2016

Updates

 

“Progress is impossible without change, and those who cannot change their minds cannot change anything.” George Bernard Shaw

 

As the financial markets and industry continues its massive transformation to a more technological and global platform we have been working hard for over a year to transform our services.  In the coming weeks we will be rolling out several enhancements including upgraded technology, low-cost smart beta portfolios, algorithmic strategies, new branding and more.  Please look for these announcements soon and always contact us with any questions.  We will discuss this with our clients individually at an upcoming review meeting.  It is with excitement and pleasure to have these announcements coming to enhance our client’s success.

The Markets

 

“We can never know about the days to come, but we think about them anyway…”

--Carly Simon

 

Economists and market analysts have been thinking a lot about the Federal Reserve and the actions it may take before the end of 2016. Friday’s employment numbers helped fan the speculative fire. The U.S. Labor Department reported the unemployment rate remained at 4.9 percent with 151,000 jobs added during August.

 

The broad market consensus was 180,000 jobs would be created, according to MarketWatch. The publication cited a source as saying the report, “…wasn’t strong enough to force the Fed to raise rates in September, but it also wasn’t weak enough to raise concern about the U.S. economy or dampen the outlook for corporate earnings. As such it’s a mildly dovish report…”

 

Economists and political leaders also are thinking a lot about the impending British exit from the European Union (EU). At the G20 Summit – a forum for government and central bank leaders from 20 countries – British Prime Minister Theresa May confirmed, “Brexit means Brexit.” However, the BBC reported there remains a general lack of agreement within the British government about exactly what the country’s relationship with the EU should be after Brexit.

 

The potential effects of Brexit gained some clarity at the G20. The Guardian reported, “…the U.S. wanted to focus on trade negotiations with the EU and a bloc of pacific nations before considering a deal with the U.K.” In addition, it reported Japan threatened, “…a string of corporate exits from the U.K. unless some of the privileges that come with access to the single market are maintained.”

 

U.S. stock markets remained sanguine. The Dow Jones Industrial and Standard & Poor’s 500 Indices finished the month almost flat. Most stock markets across Europe finished the month higher.

 

OUR INVESTMENT STRATEGIES are similar to the markets – unchanged recently.  We continue to use alternative strategies to combat the high valuation of stocks and the low interest environment bonds are dealing with.  We have several strategies in the due-diligence period that we feel could add value to portfolios in the coming months.  We continue to employ low-cost ETF’s, active stock and bond managers we feel have an edge over their respective benchmarks and alternative strategies to customize portfolios.  September has been historically difficult for the market and we have our eye on a few things that could add volatility to the markets:

 

  1. 3rd quarter earnings are looking like they will decelerate for the 4th quarter in a row. With the market priced for decent earnings, if they are considered disappointing the market could see some volatility
  2. While we do not feel the Federal Reserve will raise interest rates in September, Goldman Sachs puts it a 45% chance they will. If they were to raise rates that could spook the markets
  3. The China effect. As we have written before, China has some structural issues and if those develop negatively the markets could be spooked
  4. Global debt and government debts are at all-time highs with over 40% of global government debt at negative interest rates. We do not think this is sustainable though the headwinds of this issue could be down the road

 

On the other hand, the economy is grinding along and not overheated which could keep the Fed from rising rates and more of the same could continue where stocks grind higher in the near-term.  The bottom line is with no crystal ball we continue to monitor and adjust portfolios as necessary while continually looking for opportunities as well as avoiding areas we feel the risk/reward ratio is too high.

 

We’re devils and black sheep, and really bad eggs… The movie, Pirates of the Caribbean, made light of piracy but maritime crime has a significant economic impact.

 

About 50 percent of the goods that trade globally travel by sea, according to the United Nations Conference on Trade and Development (UNCTAD)’s 2014 report, Maritime Piracy. It estimated the economic costs of piracy – including ransoms, insurance, re-routing ships, security equipment and guards, naval forces and military operations, counter-piracy organizations, and other factors – at $7-12 billion in 2010.

 

During the first half of 2016, however, the cost hit a two-decade low. The Economist reported:

 

“The recent decline in global piracy can be attributed in part to better security on ships. For years, the UN’s International Maritime Organization discouraged boat owners from arming their crews. Ships tried in vain to defend against heavily-armed pirates using little more than diligent watch-keeping and water cannons. In the mid-2000s, facing rising insurance and ransom costs, shipping companies began employing private security contractors. These firms are increasingly supplied by “floating armories” to help evade laws that bar crews from bringing weapons into territorial waters…Better policing of the high seas has also played a part.”

 

In 2010, governments and marine insurers identified high-risk shipping areas. Not long after, floating armories were established and became a type of temporary agency for armed guards on the high seas. The Economist reported, “At the peak of Somali piracy in 2012, ship owners would pay about $45,000 per trip for armed guards.” When they weren’t on a client’s ship, guards returned to the floating armory until employed by another merchant ship.

 

Floating armories are experiencing some growing pains, as have many fledgling industries before them. Piracy is down, and so is demand for their services.

 

Weekly Focus – Think About It

 

The Federal Election Commission (FEC) recently sent letters to individuals who have filed to be Presidential contenders, who may not really be qualified to run. The list of suspect candidates includes Darth Vader, Jean-Luc Picard, God, Captain Crunch, and Queen Elsa. A letter sent to H. Majesty Satan Lord of Underworld Prince of Darkness said:

 

“It has come to the attention of the Federal Election Commission that you may have failed to include an accurate candidate name and an accurate principal campaign committee under 52 U.S.C. § 30102(e) when you filed FEC Form 2…Furthermore, the Commission requires the filing to be true, correct, and complete…Additionally, knowingly and willfully making any materially false, fictitious, or fraudulent statement or representation to a federal government agency, including the Federal Election Commission, is punishable under the provisions of 18 U.S.C. § 1001.”

 

Best regards,

 

The Jim Goodland Team

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.azlyrics.com/lyrics/carlysimon/anticipation.html

https://www.dol.gov/newsroom/releases/opa/opa20160902

http://www.marketwatch.com/story/wall-street-poised-for-small-gains-with-key-jobs-report-ahead-2016-09-02

http://www.bbc.com/news/uk-politics-37269916

https://www.theguardian.com/world/2016/sep/04/g20-theresa-may-warns-of-tough-times-for-uk-economy-after-brexit

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on “U.S. and Intl Recaps,” “U.S. rate expectations drive markets,” then scroll down to the “Global Stock Market Recap” chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/09-06-16_Barrons-Global_Stock_Market_Recap-Footnote_6.pdf)

http://pirates.wikia.com/wiki/Quote:Jack_Sparrow

http://www.safety4sea.com/images/media/pdf/UNCTAD-Maritime-Piracy-Part1.pdf

http://www.economist.com/blogs/graphicdetail/2016/09/daily-chart-1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/09-06-16_TheEconomist-High-Seas_Piracy_Hits_a_Two-Decade_Low-Footnote_9.pdf)

http://www.economist.com/news/middle-east-and-africa/21688900-brisk-business-safeguarding-guns-cruisin-guns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/09-06-16_TheEconomist-Cruisin_with_Guns-Footnote_10.pdf)

https://www.marketplace.org/2016/09/01/elections/final-note/satan-wont-run-president-fecs-watch

http://docquery.fec.gov/pdf/439/201608310300097439/201608310300097439.pdf

 

 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Spire Wealth Management, LLC), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Spire Wealth Management, LLC.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Spire Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice.  A copy of the Spire Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request.