Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
BREAK IN – Save the date for the Holiday Party
November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm
In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.
Here is the key graph
Higher Rates, a Short Term Headwind, Eventually a Tailwind
With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.
Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.
Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
Too High of Rates Can Create Trouble
Too high of rates or an overshoot CAN create trouble … or a recession…
Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –
We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-
Current at two percent, we have a long way to go before getting too antsy
Inverted Yield Curve Update
So far to good- no inversion yet!
Financial Planning
This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-
App of the Quarter – Hardware
Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings
Great Savings compared to just full service in many cases
Does not take as much internet speed as we thought
After over a decade of not only lowering of rates, but SUPER low, interest rates, it is no wonder we have forgotten the short term relationship of bonds and interest rates.
Inverse Buddies
Over the short term, when rates are going down bonds go up and just the opposite as rates are increased. Pair that with extremely low – zero – rates and the gradual increase in rates, which causes a natural headwind has caught many by surprise, especially after over a decade of lowered and low rates.
Ok, so it is a little busy – but it directly shows our point – as rates go down, bonds go up and then as rates go up bonds down. This is a short term phenomenon as once rates stabilize, bonds do as well.
We are happily welcoming higher rates as we think they are much needed – even though they present headwinds for a much needed safe asset class, Bonds – in the SHORT term!
Welcome to our monthly review, which includes a video for further clarity and a lighter touch to the world of finance. At the beginning of this year we also added a special financial planning monthly tip to break up the monotony. Let’s get started.
BREAK IN: THIS VIDEO COMMENCES WITH AN ALL NEW AUDIO SYSTEM, SUCH THE DELAY, WE ENCOURAGE YOU TO TAKE A MOMENT TO WATCH/LISTEN AT YOUR CONVENIENCE !
Cell Phone Pricing Wars Means Money In Your Pocket
This months financial planning tip came by accident from our own personal experience. Earlier this year the big two cell phone carriers commenced in a pricing war. Our discovery, originally from an investor standpoint, soon turned consumer. After multiple confirmations other than just ourselves, we feel certain we are on to something.
The trick of this discovery is you must log into your carrier and review your current plan. So far by pointing this out we have helped with several thousand dollars of savings. Next time you pay your bill, take 30 extra seconds and click on your current plan, you may find significant saving are available.
Taxes – The Toughest Season in A Decade
This years taxes are the perfect storm for the following reasons.
Tax payer relief act has sunset, diminishing many relief items.
Phase Outs (restrictions of tax write-offs) are making for higher taxes due.
AMT (alternative minimum tax) is making it’s presence known.
Basis reconciliation is still troubling.
This year, do not feel bad if your taxes are greater than years past and it is taking longer. The entire financial community has been slowed by this year’s tax season.
Market and Economic update
As mentioned in our cover letter and Q 2 2014 Newsletter, both on the presses and cyber ramp currently, the capital markets have gone no where so far this year. Bonds, the lumbering giants of safety have been the real winner in March as well as through the first quarter of the year.
It’s about the bottom of the second inning of the 90 day treadmill we call earnings season, and so far it looks pretty good. Managers are executing well, given the continued slow growth economy that continues.
Earnings Update, Bonds not Listening
While earnings as mentioned above in our opening are doing ok, bonds are telling a more conservative story. Lower interest rates, higher bond prices infer a slowing. With a very weak recent non-farm payroll number (75k actual versus 175k expected) and a few weaker China economic numbers, the bond guys are … at least at this point (pretty short-term, so maybe just a glitch, but we are watching) leaning towards a slower future. The good news is time will let us know who is correct.
Travels Ahead
Looking into the next several weeks, the weekend’s look rather full as the calendar shows travels ahead. This weekend in fact, is packed full of fun with sports, several meetings, and some rest time with the family before the travels ensue.
Over the most recent weekend during several family, client, and friend gatherings, I had the opportunity to visit several times about investing….a recurring theme kept happening, such the article.
Bonds Can Lose Money
Multiple times over the weekend the subject of bonds not losing money arose. While there are few certainties in investing, if you hold a long-term bond AND interest rates rise, YOU WILL LOSE MONEY IF YOU SELL EARLY….Who really wants to lock in a 30 year bond at 3% today ?
These topics come up as everyone is beginning to search/stretch/reach for yield. DO NOT DO IT! It does not end well.
We have no idea when exactly rates will rise or even if they will. If rates rise, and as an investor you are stretching for yield, you will very likely be hurt. When the music stops there may be a fight for the exits.
Safer Investing in Bonds Today
Here are a few keys to help keep losses to a minimum if rates rise. Even in this scenario, losses may occur, although they should be minimal.
Stay in shorter terms (1-5 years, 7-10 MAX)
Favor higher quality over lower
Diversify (Corporate, Muni, Foreign)
On the Road Again
With a flight out tonight, I find myself out of the state and happily, lightly tethered via electronics. I will be back in the saddle in full force next Monday!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
Q 4 2018 Newsletter Video Audio Podcast Review By John Kvale
Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm
Let’s get going!
Q 4 2018 Newsletter
And here is your review!
Capital Market Talk
Earnings and Markets Eventually Converge
In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.
Here is the key graph
Higher Rates, a Short Term Headwind, Eventually a Tailwind
With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.
Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.
Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
Too High of Rates Can Create Trouble
Too high of rates or an overshoot CAN create trouble … or a recession…
Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –
We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-
Current at two percent, we have a long way to go before getting too antsy
Inverted Yield Curve Update
So far to good- no inversion yet!
Financial Planning
This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-
App of the Quarter – Hardware
Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings
Enjoy the fall –
See Ya next Year – Wow 2019 here we come!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
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Tagged Bonds, Earnings, Firestick, HIgh Deductible, Inverted Yield Curve, Plup, Rates, Roku, S