Tag Archives: Performance Report

Q 1 2019 Report Cover


No one really knows for sure!

Just like we weren’t certain what caused a hissy fit the last quarter of 2018, no one really knows for sure why everyone became so happy this quarter. Needless to say, we think this is a more normal reaction and possibly a reversion to the mean from the hissy fit.

As mentioned in our Q2 2019 Newsletter, capital markets could have been protesting higher interest rates – or as mentioned in one of our most read posts at Street-cents.com, it could have just been that it was amateur hour and movement during a Gentleman’s agreement no movement time was exaggerated. No matter the reason, capital markets have a happier face.

Inverted yield curve

Just as we pushed the Q2 Newsletter off to the presses, the yield curve did officially invert – as a reminder, yield curve inversion is when short term interest rates are higher than long term rates, which occurred in the last five days of the quarter. The reason we, as well as many other in the industry crow about this unique situation, is it has been a precursor to recessions with great accuracy.  Before taking shelter and hiding under the covers, this precursor has no accuracy on the depth, and very little accuracy on the timing of a recession.  In some instances a recession occurred two years after the inversion.

Recession Definition

As mentioned again in our Q2 Newsletter, the definition of a recession is two consecutive negative gross domestic production – GDP prints – yes that could be – .01% and -.01% making for a mini-mi recession, but still a recession. No matter, just as you can’t be partially sick or partially have an accident the inverted yield curve did occur. As such we will be monitoring the situation very carefully and remembering that now, is not the time to be taking extra risk.

Interest Rates

Given the yield curve inverted, no steep inflation signals are occurring, and the economy is growing, but not red hot, it is likely we have seen the highest short term rates for a while. Fed officials seem very comfortable at the current level. As more data is recorded, things can change.

We will talk to you again in the summer, have a great day!

John A. Kvale CFA, CFP


Second Quarter 2018 Cover Letter Review

On the road to nowhere? Or are we?

While capital markets around the globe may seem subdued, especially compared to last year’s movements, looking beneath the surface there is much going on.

Increased Company Earnings

With the corporate tax cuts, earnings are increasing. Public companies are enjoying terrific earnings growth and logging excellent earnings reports as the year continues. With little movement in capital markets and increased earnings, valuations by most any measure, are becoming less expensive. Also, worth notice in our Q3 Newsletter is a detailed article concerning lowered numbers of public traded companies, a possible source of different valuations moving forward.

Financially Happy Consumer

Broadly, the consumer from a financial standpoint is doing well. A happy consumer, leading to a more freely spending consumer, is an important point for the United States since the Gross Domestic Economy is made up of over two thirds consumer spending. Much of this financial happiness comes before a lower tax burden, likely to be felt by consumers next tax season – again in our Q3 Newsletter there are multiple family scenarios detailing the tax savings due next year.

Interest Rates

Market participants have digested multiple rate increases in stride, unlike times before. With gradual rate increases already occurring in the year, and more expected, normalization of interest rates is occurring without the fears of past. Being the first time in almost a decade to have rate increases, we are on Inverted Yield Curve watch (detailed article again in our Q3 Newsletter) as a possible predictor that rates have moved too far, and a signal of a possible recession. So far this has not occurred.

In closing, our patience theme from the beginning of the year seems to be still best suited.

Have a Great Summer!

John A. Kvale CFA, CFP

First Quarter 2018 Cover Letter Review

In true Groundhog like fashion, Capital Markets, after getting way ahead of themselves early in the quarter, saw their shadow only to turn, run and hide.

Included in the newsletter, which we sent early to give everyone a chance to view and remind of the tax strategies, is an article about the VIX and its reverse brother the XIV. These funny products along with the more recently noted tariff talk has been the recent excuse for capital markets to act like a bashful Groundhog.

The reality is capital markets got way ahead of themselves and needed time to rest. From our perch we would much rather them rest go sideways or even down a little bit, rather than getting WAY ahead of themselves like they did early in the quarter, only to quickly revert and likely overshoot to the downside.

Interest Rate Increase

In this most recent quarter we did just digest another small interest rate increase. Our new Federal Reserve Chairman Powell, looks to continue the gradual increase rates, slowly normalizing short term interest rates, and continuing on the path left by his predecessor Janet Yellen.

Capital Markets have a very unique way of signaling Interest rates have been raised too far called an inverted yield curve. Look for rhetoric about an inverted yield curve soon, as the historic importance and accuracy of this effect are in our crosshairs at this time.

Consumer and Earnings

With an economy that is two thirds driven by the consumer, a happy and spending consumer along with company earnings, which are beginning to digest the new tax reform, lead to a good backdrop.

As we mentioned in our Newsletters and repeatedly at street-cents, this is likely a year we will need patience, we see no change in that view at this time.

Have a great spring, talk to you in the summer!


John A. Kvale CFA, CFP

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

Fourth Quarter 2014 J.K. Financial, Inc. Performance Cover Letter (Clients)

Enclosed you will find your Fourth Quarter 2014 Performance Report. As a reminder this report is a summary of your monthly statements and transactions you receive directly from our outside custodian along with the IRS tax basis for each of your investments. This report summarizes the last 90 days investment activities and consolidates multiple accounts (if applicable) into one total comprehensive view that focuses on asset allocation and portfolio diversification.

In this annual report you will find 5 years of Historical Account Value quarterly bar chart to go along with our YTD Cash deposit and Withdrawals ledger report, and greater return details than in our normal quarterly reports.

While our favorite US equity index, the S&P 500, ascended over the year, virtually all other equity markets struggled, especially overseas. We continue to believe US equity markets are frothy at best and longer term, greater value may be found outside of US borders. We never go “All In” on any capital allocation, but we will “lean” and continue to hold well diversified portfolios.

Bonds/Fixed Income were where the action was in 2014, with long term (10 yr) rates tumbling ever lower in part helping to stabilize returns. We believe longer term rates carry great risk and are investing accordingly. Looking forward to 2015, we feel the Federal Reserve Members have a VERY strong desire to increase short rates. In our Q1 2015 Newsletter, we discuss in great detail the average short term fed funds rate of 5.10%. Barring a major outside event, a raise from the rock bottom .15% current short term level will occur. We are prepared in our fixed allocations for this, and look forward to the added safer portfolio income as rates normalize.

We will be sending a separate tax report mid February that will summarize taxable items and help in your government tax filing requirements should you have a taxable account. IT IS VERY IMPORTANT YOU WATCH FOR THIS REPORT AS IRS RULES HAVE MANDATED CUSTODIAL REPORTING, WHICH WILL NOT BE 100% ACCURATE DURING THE TRANSITION PHASE. OUR REPORT WILL BE THE MOST ACCURATE.

We have included our latest private policy statement for your review. Also, we want to take this opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.


John A. Kvale CFA, CFP

Enclosures (Fourth Quarter 2014 Performance Report, Private Policy Statement)

Third Quarter 2014 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor:

In this Quarter’s Newsletter, the lead investing article is about entering a period of “Black Ice” investing. The possible mistake is the tense as we stumbled into the end of this quarter in rather wobbly fashion, dragging almost all assets to a loss for the quarter and leading us to think we may already be in a period of “Black Ice” investing. This being the case, “historically” the final quarter is the best if history continues to rhyme.

Last quarter we mentioned possibly “leaning” towards international markets. While the Ukraine situation is disturbing, it has so far, been much less disruptive than many initially expected. Global sanctions have greatly inhibited their fledgling economic recovery. Our possible “lean” has been delayed as of yet. No one rings a bell when it’s time to move, but with a comfortable position currently we can afford to wait.

Even with “guarantee” being a four letter word of investing, we decided to use it anyway. We do “guarantee” that economic cycles will occur, over and over again. We “guarantee” there will be another recession, and this very weak recovery cycle is also long in the tooth. We look for continued economic recovery, but a slowdown is a possibility, and increasing in probability as time continues.

Interest rates have behaved better than we could have imagined this year. We have had no spikes upward and little disruption in the fixed income markets. We believe higher rates are in the cards sooner rather than later, and continue to protect against major downside in this area of the capital markets.

Getting back to our “Black Ice” investing theme:

A “Black Ice” situation for driving rhymes with our current investment backdrop. We are not sure if it is dangerous our not, or even if we will hit any. A few highlights of our “Black Ice” investment parity from the Newsletter:

  • Do not hit the Brakes
  • Can we pull over and wait it out?
  • Enter “Black Ice” at the correct speed for your safety
  • I am skidding, so counter steer!
  • There will be back seat drivers (Cassandra and Pollyanna’s)

Enclosed is your Q 3 2014 Quarterly Performance report. With only a smidgen of gains in larger US company equity asset classes, most other asset classes retreated. While we want to always make money, given our belief of a frothy environment, and entering “Black Ice” we are fine with minor moves at this time. Working off the excesses in a sideways fashion is better than the alternative.


John A. Kvale CFA, CFP

Enclosure (Q3 2014 Performance Report)

Second Quarter 2014 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor:

When a capital market is 10-20% overvalued it is tough to give it the benefit of the doubt, but stepping aside completely or going “all out”, has never been our mantra or a good idea for that matter either. US capital markets crawled higher later in the quarter as interest rates, a worry of ours, rose. Higher rates may signal better growth in the future. US equity markets continue to be well larger than their shoe size at the current time.

Given markets tend to be manic, a 10% overvalued market can become a 10% undervalued market with a simple, but rough, 20% move down. Our hope is we begin to grow into capital market valuations and the froth subsides with more sideways movement of markets. We are prepared through diversification for either, and would become more positive/aggressive if valuations near fair value.

In our coming Newsletter we discuss international market diversification and their relative value, which appear on the surface to be slightly more reasonable. We may lean more towards international markets if their growth persists and valuations remain.

The US Economy is growing

We are very happy to see continued US Economic progress. The huge unemployment hole created by the 07-09 crisis was completely filled last month as the US total workforce rose to a new high watermark, albeit one of the longer times to fill the hole.

Consumer Prices are beginning to move upward, giving us another green light for further growth. This may also lend to a faster rate rising Fed and higher rates for savers, all positives in the long run.

Calm v Complacent

Starting in the middle of May, trading volumes and professional investors appeared to take to the hills or Hamptons. While not unique to this time of the year, the magnitude has been greater this summer than in past. Our concern is complacency, not by us but by others. When the tide goes out we see who has been swimming without clothes. While it will not be us, the current is sometimes strong for all.

Have a Great Summer and rest assured we have our investment trunks on tightly, and diversified.

Best Wishes,

John A. Kvale CFA, CFP

Enclosure (Q2 2014 Performance Report)    

First Quarter 2014 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor:

In the 1986 movie Top Gun, the main character Maverick was an all-star studded pilot with a terrific future and skill. Unfortunately for his co-pilot Goose, the all-star Maverick left his wingman to go “all in” alone and ultimately caught jet wash spinning out of control, leading to a terrible accident for Goose.

As an investor, our wingman is diversification. The current market environment, partially controlled by the Federal Reserve/FOMC through Quantitative Easing or QE (the purchase of debt securities to lower rates and spur the economy) is in somewhat uncharted territory as the reduction of QE has commenced.

Over the last quarter, which is a VERY short time for any investor (for us five years is a short time frame), fixed income investments were broadly the best asset class for return as equity investments made little headway. It is highly likely so many other investors left their wingman, changing their diversification at the end of last year, and the beginning this year. Almost every professional investor, including ourselves felt there would be tough sledding for fixed income investments. It is possible the masses were wrong and headed back to their wingman of diversification. Don’t worry we will never leave or wingman, will always stay diversified, and of course will never go “all in” in one area.

Looking forward, we still feel the general consensus is correct and that there will be tougher times ahead for our fixed income portfolios and for equity asset classes as well. Suffice it to say, we continue to hold fixed income investments in a conservative diversified wingman way. If and when rates do rise we will feel a bit of a pinch, but longer term higher rates will be our friend and the move from shorter term to longer term structure will reward our patience.

The Polar Vortex of cold appears to be finally leaving but has left a trail of wonder behind. The main concern is if the economy will accelerate and grow into the tall valuations that were created last year with capital market increases, or if capital markets will drop to more reasonable valuations. We hope for the former but are prepared for the latter.

It would not disappoint us terribly to tread water for some time while fundamentals, economic growth, and valuations return to more reasonable levels. We still believe it is highly likely a soggy year of investing lie ahead, however as mentioned before, one year is a very short time frame.

Have a Good spring!


John A. Kvale CFA, CFP

Enclosure (Q1 2014 Performance Report)

Second Quarter 2013 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor,

Feeling rather silly after being cautious as of late, capital markets stumbled to the end of the Q2 2013, wiping out most gains for the quarter, but legitimizing our concerns.

Just as someone tells the kids repeatedly “You have to get out of the pool” Ben Bernanke’s latest FOMC meeting which concluded with a regularly scheduled press conference that said nothing terribly different, but left traders and investors feeling as if “I really have to finally get out of the pool.” Traders being traders, knee jerk reacted and interest rates began to fluctuate in a more dramatic form than normal, tugging down equity markets and lowering bond prices.

The US economy continues to heal in our opinion, and with equity and now bonds becoming less expensive we feel more confident as values are less rich, maybe still frothy, but more reasonable. In the coming months we expect a tug of war between rates, corporate profits, and economic confidence to ensue which will result in higher fluctuations in all areas of the capital markets than has been experienced as of late. We think it is highly likely that the economy will win, however we will watch closely for clues as we go through this transition period.

World economies continue to struggle and are showing only modest improvements in certain areas with the exception of China, as the jury is still out on their leveling off economically. Capital market participants will sniff the positive economic turn out before it becomes evident, often resulting in a quick upward move. We continue to diversify globally even as it has had the prior mentioned headwind. The world is global and diversification remains important even when all countries are not firing on all cylinders. Reallocation to softer economies is very similar to buying low and we will continue to do so.

Speaking of global economies, Axel Merk the founder of the Merk funds (A Global Currencies Fund Family) was our guest in a Private Client Roundtable and we look forward to bringing you his thoughts, ideas, and answers to questions in our coming Q 3 2013 Newsletter and our $treet-Ȼents blog.

Have a Great Summer!

John A. Kvale CFA CFP

Enclosure (Q2 2013 Quarterly performance review)

First Quarter 2013 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor,

Enclosed you will find your Q 1, 2013 Performance report for your perusal. As a review this report summarizes your transactions for the latest 90 days and also contains tax basis for all investments.

We are happy to be wrong so far as the capital markets made new highs in the face of declining earnings growth. While we are skeptical of this climb we are happy for the ride. As a reminder the last three years have seen similar starts to the year only to have a few more bumps for much of the remainder. We expect this to be the case this year as well.

Given our conservative view, we continue to feel a good defense is the best offense.  The upside will take care of itself and we will closely monitor our allocations and trim in the face of overweight growth areas in order to hold portfolios at the appropriate risk level. In preparation, if we have a pullback in capital markets we will take a more offensive view as long as the economy continues to heal and no obvious road blocks are on the horizon.

The Economy is getting better as housing continues to heal and the FED continues to suppress interest rates. Housing, which makes up a large portion of our US economy, especially when including the jobs that this sector employs is healing, and more importantly gaining consumer confidence. Also the FED is purchasing large amounts of mortgage related bonds keeping interest rates low for consumer financing. While there is much debate on when this rate suppression will stop, rates have behaved in a positive manner so far this year.  

The newsletter is on the presses and soon to hit your mailbox. With a longer term, more planning, and less statistical feel this quarter we hope you enjoy the articles.  Many of our subjects this quarter were a direct result of repeated experiences in the quarter and hopefully timely.

Have a Super Spring!


John A. Kvale CFA, CFP

Enclosures (First Quarter 2013 Performance Report)