Category Archives: Performance Report Cover Letter

Third Quarter 2017 Cover Letter Review

There are times when capital markets are sensitive to a whiff of any disturbances, with the least seeming un-important event causing dramatic sentiment and then of course capital movement.  

We are not in those times currently! 

Over the latest quarter, we have seen Mother Nature flex her muscles in some of the most terrible disastrous Hurricanes in a century. Participants and markets mostly relieved after the conclusion of multiple landings, took the damage in stride and continued to move forward.  

On a regular occurrence, over the last 90 days, international countries have fired powerful test fired weapons, garnering much headline banter from neighboring countries, United Nation members and multiple leaders of countries. Participants and markets yawned and moved forward again. 

An old foe of times past, debt ceiling concerns and debate, even arose during the latest quarter. Upon an extension capital markets had a relief moment but nothing near the size of just a few years ago, when even a whiff of debt ceiling talk sent participants running for cover and capital markets into a tailspin.  

Our friends at the FOMC (Federal Open Market Committee) have set a plan to lower the balance sheet, over an extended period of time, slowly and diligently. Market participants and capital markets once again looked past the news and forward with very little disruption. 

Today, capital market are acting like the Eveready Bunny; they just keep going, which is fine by us, but there will be a day when that changes as this has been one of the longest runs in market history with not even a 5% correction.  

Happy Participants and Capital Markets have created a problem finding valuations that look inexpensive to reasonable as their ascent has pulled most domestic assets to high levels. Good news comes from our friend across the pond. It appears our international friends are getting their acts together in a big way and with a less rising Unites States dollar, the stars may be finally aligned for tailwinds from abroad. 

Our core article in the coming Newsletter discusses from a high level several valuation metrics, world capitalizations and even the US currency, its long-term average and recent movement. 

Historically we are entering a favorable time for market participants and capital markets as they frequently embrace in a positive way, the Holiday seasons. We will see if they do the same this year, and if not, we will be ready. 

Have a good fall season and we hope to see you at our Holiday Party at the Dallas Arboretum the Saturday before Thanksgiving weekend.

John A. Kvale CFA, CFP




Rates Rise and No One Blinked, Report Cover Letter

The once dreaded and feared interest rate raise seems to have run its course from a fear standpoint. Just a few quarters ago when Ben Bernanke was the Federal Open Market Committee (FOMC) chairperson, the whisper of a long-awaited rate hike lead to market calamity and many to believe rates would be permanently artificially low.

Near the end of this most recent quarter, current FOMC chair Janet Yellen raised rates to the 1% level, a level not seen in almost a decade and without much capital market trepidation. Longer term the short-term interest rate controlled by the FOMC may not go all the way back to the higher levels once seen historically, however a 2-3% rate would still be stimulating from our perch. It is possible the gradual move higher will extend this current economic expansion.

Speaking of rates, in our Q3 2017 Quarterly Newsletter we do a complete deep dive on interest rates, among many other items, that may have changed Residential Housing Prices movement for the foreseeable future. While so many argue of reasons for Housing volatility, the answers are less vivid than many may think.

Continued optimism from company executives seems to have given them confidence to expand their businesses dropping the unemployment rate to levels many thought not possible via hiring’s of workers. It is possible an employed consumer is a happy consumer who is also a consumer who spends more. With consumer spending making up over two thirds of Gross Domestic Production (GDP) this bodes well for domestic and world growth, as long as it continues.

Given low but rising interest rates (finally) a happy higher price valued Home Owner (again full details in the Newsletter), a happily employed consumer, it is no wonder many assets and most capital assets, especially the US markets are priced to perfection (high compared to historical values). The fantastic news is that our overseas counterpart capital markets are not priced as high and it looks like investors are finally beginning to warm to their markets. Our good friend diversification keeps us exposed to these markets as the possibly reawakening occurs. Look for more on this on our blog.

Summer doldrums?

Maybe, but we always keep our guards up as risk can happen fast, even if the less tenured folks are at the wheel of the capital markets.

Have a Great Summer!

John A. Kvale CFA, CFP

Q 2 2017 Cover Letter

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.


Everybody is Happy! Q 1 Cover Letter

Everybody is Happy!

From Bloomberg Consumer Sentiment to Gallup Polls to the Conference Board and to our University Of Michigan Survey of Consumers (Multiple Polls reviewed in detail in our most recent Newsletter-coming to you soon) all are pointing higher, with some even pointing to all time highs.

A more pro-growth tone seems to have put wind in the sails of those polled as well as capital market participants. Heck, the most recent quarter even garnered an interest rate increase of a small .25% in the shorter term Federal Funds rate. Looking back just over a quarter and including December of 2016, there are now two interest rate increases under the FOMC’s (Federal Open Market Committee’s) belt. The first rate increase in this economic cycle, post 07-09 Great Recession started in December of 2015. According to many, created the “record breaking” rocky start a year ago. Fast forwarding to today, market participants and the economy for that matter, seem to welcome a normalization of short term rate increases.

Speaking of rate increases, under normal circumstances all other items being held equal, which then never are, interest rate increases are a muzzle on the economy and in many cases are the cause of a larger slowdown or recession. The problem with this comparison is rarely have short term rates been zero, which they were held at for over five years in this economic cycle. It is possible that an increase of rates from such a low level to a more normal level may actually be energizing rather than resistance as past comparisons may show.

Is there a downside?

Capital markets look forward, usually 6-12 months. All this positive sentiment has led to stretched valuations from a historical point. The current Price/Earnings ratio, again shown in our latest newsletter, finds itself at 26, with a long term average of 15. Just as economic cycles do not die of old age, capital markets do not go down just because their valuations may be stretched. Higher valuations can lead to less room for errors, not a time to let our guards down and also not a time to be swinging for the fences, however valuations can return to normal simply with all this positive sentiment translating into higher world capital market earnings. Said another way, “Growing into the current Valuation.” Time will tell, and we will be watching closely.

Spring seems to finally have sprung, enjoy !


John A. Kvale CFA, CFP

Enclosure (Q 1 Report)

Q 4 2016 Report, Private Policy Statement 

They did it again; Pollsters zero, people two!

In the last quarter of the year, the pollsters completely missed the mark on the US Presidential election, just as our relatives across the pond did earlier in the year on the British vote to leave the Euro, also known as Brexit.

Very similar to the Brexit reaction, as the surprise became a reality, capital markets swooned with the old faithful Dow Jones average dropping over 800 points in the thinly traded futures markets around the world near the middle of the night USA time.

With even faster speed than the Brexit reaction, market participants came to their senses and began making fascinating bets, moves, and adjustments to take into consideration what the surprise nomination may mean in the future. As mentioned in our Q1 2017 Newsletter, interest rates began moving up in dramatic fashion, this time without concern by capital market participants.

Did we mention the FOMC raised rates?

In December of 2015 the Federal Open Market Committee (FOMC) raised rates .25%, leading many to find cause and effect for the terrible beginning to 2016. See our 2016 review again in our Q1 2017 Newsletter with a terrific chart of the start of the year, along with descriptive highlights of the year.

In the most recent quarter, specifically December of 2016, Janet Yellen and crew at the FOMC once again raised rates from .25 to .50% on the very short time frame feds funds rate. They also spoke of multiple rate increases to come in 2017. This time, unlike the beginning of 2016, market participants yawned at the move, with the afore mentioned market participants not only expecting the rate increase, but welcoming future increases. The FOMC has moved from the lead story to almost unfindable as market participants seem to be less concerned with deflation and looking ahead to a possible bout of healthy but subdued inflation.


While there are MANY items on the table for tax reform, we prefer waiting until laws are passed before making too many actual planning adjustments. There are major reforms being spoken of from Estate to Personal Income taxes that may have planning implications if enacted. Rest assured we are on top of these and will monitor and happily adjust as clarity occurs.

In Closing

Your Fourth Quarter 2016 summary is enclosed on the front page of this report we have included our most recent investment allocation from your Investment Policy Statement. This is also the time we attach our Private Policy Statement for the year along with our opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Have a Fantastic start to 2017!


John A. Kvale CFA, CFP

Enclosure (Q4 2016 Report)
Private Policy Statement

Our Promise to You

As a client of J.K. Financial, Inc., you share both personal and financial information with us. Your privacy is important to us, and we are dedicated to safeguarding your personal and financial information.

Information Provided by Clients

In the normal course of doing business, we typically obtain the following non-public personal information about our clients:

Personal information regarding our clients’ identity such as name, address and social security number;

Information regarding securities transactions effected by us; and

Client financial information such as net-worth, assets, income, bank account information and account balances.

How We Manage and Protect Your Personal Information

We do not sell information about current or former clients to third parties, nor is it our practice to disclose such information to third parties unless requested to do so by a client or client representative or, if necessary, in order to process a transaction, service an account or as permitted by law.

In order to protect your personal information, we maintain physical, electronic and procedural safeguards to protect your personal information. Our Privacy Policy restricts the use of client information and requires that it be held in strict confidence.

Client Notifications

We are required by law to annually provide a notice describing our privacy policy. In addition, we will inform you promptly if there are changes to our policy.


Q 3 2016 Quarterly Report Cover Letter (Clients)

Dear Investor,

An old Wall-Street saying goes something like this:

“Stocks frequently Climb a Wall of Worry!”

History shows the time to worry most is when NO ONE else is worrying. Said another way, when everyone is confident that everything is great, there is no one left to buy, and the unimaginable drop (at least at the moment) occurs without warning.

With a US election that has caused even the most calm a higher than normal heart beat and blood pressure, no matter the political persuasion, a worry is born.

A Brexit, or the exit of the British from the European Union which was a complete surprise to any who were following the almost certain stay polls, were surprised, another worry.

The historically worst start to the year (earlier this year) in terms of world capital market negative movement and calls for a world slowdown, another worry.

Prolonged lower than normal interest rates, many (present party included) think higher rates will be good longer term, after the initial adjustment in capital markets occur, but too low for too long, another worry.

Those wanting a stronger US Dollar, got what they wanted, but created another worry from a competitive standpoint.

All in all, plenty to worry about!

Funny thing is, capital markets have a way of happily ignoring the concerns and looking forward to what may occur over the next hill. It is true, markets can, and do, worry about items that should not be of a concern at times; a point for another market mood time.

Given the consumer has suddenly gained greater confidence than had in nine years, judging by the most recent consumer confidence related reports, Europe is not falling apart after the Brexit, and some type of possible stabilization from our Asian friends, capital markets are smartly treading water and patiently waiting further signals.

Enclosed is your 2016 Q3 Quarterly summary which reviews the most recent 90 days. Looking forward, October “Historically” can be a dicey month, BUT the final QUARTER tends to be the best of the year.

The most recent Newsletter is stuffed with information concerning the awesome “New Personal Total Vault” and the fantastic uses and features. If you are receiving this report via paper, you may like to know that this complete report, along with prior reports is also available in “Your Own Personal Total Vault”. If you are on the fence about changing to electronic reporting, with Newsletter in hand, now is the time to give it a try. If you do not like it, a paper delivery can resume at your request.

Have a Super Fall as we head towards the fun Holiday Season!

John A. Kvale CFA, CFP

Q 2 2016 Quarterly Cover Letter

Dear Investor,

It has been a very interesting year thus far.

First out of the starting gate, we had a headline making, “Record Breaking” bear claw dropping start to the year. Just when many called for a terrible year and gave up hope, footing was found in February and a smart, confidence building Bull market rebound occurred, bringing us back from the alleged brink, to about where we started the year. Just one more reminder to just stay calm, allocated and look longer term.

The fireworks appeared over, and as promised in our last report, the coming Newsletter has a very interesting review of the frequency of Federal Open Market Committee (FOMC) rate increases during an election year – (Oh it’s an election year as well) Normal consensus is higher rates slow the economy. Anyone involved in the presidential race, would most likely NOT like a slowing economy, therefore no rate increases either. We take issue with the common thought that higher rates will slow the economy due to the fact that they are so low currently. We were delighted to find just how many times rates have been raised DURING AN ELECTION YEAR over the past 45 years!

Then came Brexit (British-exit) – The British vote to exit the European Union. While we again stand with few others that longer term, the Brexit may be a good thing for the global economy and Britain, the vote throws cold water on our above mentioned rate increase. We think rates will likely not be raised soon, which will be a positive for capital markets in the near term.

For the record, after two down days in the markets, investors who were most likely positioned wrong due to overconfidence in a stay/non-Brexit vote turned confident and bid markets right back up again. Our June video review on discusses this in greater detail.

Commodity related sectors continue to rebound, with oil rising from the $20’s to the $50’s/ barrel mark. While it may be more expensive to travel this summer, the widening positives for the US economic situation may turn out to be much greater than many estimated.

In closing, the errors of the Brexit polls may make for an interesting presidential election later in the year. We remain happily diversified and sure footed as any knee jerk reaction seems to be wrong after the passing of time!



John A. Kvale CFA, CFP

Enclosure (Q 2 2016 Performance Report)

Q 1 2016 Quarter Performance Report Cover Letter (Clients)

Dear Investor:

After stumbling out of the starting gate, and breaking many “Never Before Seen Negative Starts!” to the year, capital markets smartly rebounded near the mid-point of the quarter, once again throwing cold water on obscure statistics that tend to make their way to the top of the headlines when such events occur.

As noted in greater detail in our Q 2 Newsletter, we wonder if this “Record Breaking” start was a dress rehearsal or the real thing. If it was a dress rehearsal, we would expect further choppiness, which is nerve racking at the time, but presents the best/last possible buying opportunity of this decade (hard to believe, but very possibly true.) If it was the real thing we would look for capital markets to climb back to new highs, a feat not seen since mid-2015.

Near the end of the quarter, Janet Yellen, Federal Reserve chair put extra wind in the equity market sails by all but saying there will only be two rate hikes this year, rather than four, which she had said at her first ever rate hike as president chair, in December of 2015.

Curious to IF, or how many times a Federal Reserve chair has raised rates during a presidential election year, we dug deep into the past 60 years of elections, only to find a very surprising answer. We will have full details to come on and our mid-year Newsletter as we wanted to be closer to the actual election.

OUR BIGGEST CONCERN continues to be the aging business cycle. Thank goodness business cycles do not die of old age (or this one would already be dead) but the longer they go, the greater the possibility they do end.

THE GOOD NEWS is that just as business cycles do end, they start again. If we rhyme with history in any way, the slowdown lasts about 18 months and the expansion 5-7 years, odds we really like. As mentioned earlier, capital markets have not seen new highs in almost a year, making a possible slowdown already well under way.

THE BEST NEWS is we are allocated well to take advantage of opportunities as they present themselves, both domestically, internationally (which has been a laggard for some time, but may be changing) and from big and small capitalization companies.

Have a Great Spring!



John A. Kvale CFA, CFP

Enclosure (Q1 2016 Performance Report)