Tag Archives: Quarterly Cover Letter

Fourth Quarter 2022 Review, Bill(s), Rates, Bills and Sunshine – Private Policy, Annual Offerings

Dear Investor:

Bill(s)

On December 20th, 2019 the Secure Act was singed into law. On December 27th , 2022 the Secure Act 2.0, a bill long in the works and a mere 4200 pages long was signed into law. The most important item in the financial world (there were a multitude of areas addressed) as the second upping of RMD’s to age 73. Look for more information soon from us.

Rates

In December the FOMC (Federal Open Market Committee) led by Jerome Powell raised rates to over 4% after starting the year at zero.  As mentioned in our Q1 2023 Newsletter article (Maybe a Tiger can change Stripes0, on a percentage basis this would be a possible once in a lifetime speedy move.  This may also be a return to a normal interest rate policy (hopefully) with no intention of going to the zero boundary again.  See Next point.

Bills

Not getting too wordie, but US citizens “bills” or the increase in them in the form of food, travel, energy, housing just to name a few are what is creating the opportunity of the afore mentioned speed of rates or rate increases. The CPI (Consumer Price Index) measurements continue to hold at much loftier levels than anyone thought possible (somewhat due to lagging indicators) and are allowing rates to rise and likely stay higher for longer.  This is a good thing for our safe assets aka Fixed Income/Bonds thankfully as most of the headwinds are likely behind us, again see Q1 2023 Newsletter lead article and associate graphs.

Sunshine

Last year at this time we were reviewing items such as “Anatomy of a Slowdown” and “The R” Word – Recession.

Today, from our unique “Personal Reflections” portion of our Q1 2023 Newsletter :

“Future is better

Just as we pointed out over a year ago what a slowdown looks like and that it might occur, we are now ready to point out later on this year it’s very likely the clouds of higher interest rates and two feet on the economic brakes by Powell are likely to clear.”

This is also the time we attach our Private Policy Statement for the year, along with our opportunity to offer our latest ADV filings and Client Relationship Summary (Form CRS); Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Happy Turn of the Calendar, and Best Wishes for the Start of a New Year!

Sincerely,

John A. Kvale CFA, CFP

Enclosure (2022 Report)

J.K. Financial, Inc.

PRIVACY POLICY NOTICE

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. 

Please do not hesitate to contact us with questions about this notice.

Third Quarter 2022 Review, Patience as we look back and forward

In this review, we have chosen not only to look back over the prior 90 days, like we usually do, but we also wanted to look forward as we go up to the end of 2022!

Patience is a Virtue

Jerome Powell (Chair of FOMC) and his fellow FOMC board members have continued to raise rates, much faster and much greater than many, including ourselves thought possible. Rewind back just to the beginning of the year and the federal reserve were actually pushing rates down, in a quick about face by the end of the first quarter, rates were on their way up an asset purchases by midyear had reversed and become asset runoffs. Their purpose is of course to slow inflation a.k.a. CPI (consumer price index), while with great intentions many of the inputs in the CPI index are very lagging and have likely already rolled over but have yet to feed into the actual report due to their delayed nature.

Patience is needed as mentioned in the bullet before this commentary and also greatly outlined in our Q4 2022 newsletter. In that newsletter, which you should already have in your possession, we outline the normal lengths of time that a slowdown occurs and what to expect from almost all angles. The main reason that we did this is to remind ourselves, and everyone else as well, as the last decade has garnered an unusually fast and short slowdowns and commensurate recoveries. With the FOMC on a continued rate increase, this slowdown is likely to be much more similar to prior slowdowns in both time and fatigue of the economy. Patience, we will get there.

Looking Forward but no Predictions

Using history as our guide, the fourth quarter is indeed usually one of the best. However, as mentioned above, the macro economy pulled down by the federal reserve and continued right increases may overwhelm seasonal historical blossoms and weigh down a normally sunny period on the calendar.

Contra moves in both Equity/Stock and Fixed Income/Bond

In slow downs, equity markets have an unusual tendency to slowly drip in reverse and then all the sudden make a jump forward only to slowly start dripping in reverse again.

In this economic cycle, we have a new asset class that is also participating, the Fixed Income Market. As mentioned earlier with the federal reserve and Powell on a continued increase goal interest rates on the longer end of the yield curve i.e., the 10 year (versus the very short one or two) have smartly slowly gone down only to jump backwards up again and then slowly begin their decrees again. Patience is again a virtue, a slowdown leads to lower rates eventually, even with the FOMC raising rates.  Patience really is a virtue, we will be there with you, thanks for your time and your patience

Sincerely,

John A. Kvale CFA, CFP

Enclosure (2022 Report)

Second Quarter 2022 Review, Half Way Point, All about the Fed

The Halfway Point 

While we have just reached the halfway point of 2022, for what it’s worth in seemingly much faster fashion than prior several years, likely due to the various lockdowns that we endured, even with such seemingly speed of time, there has been a tremendous amount of interesting events that have occurred so far this year! 

All about the FED, once again 

After multiple years of Federal Reserve stimulus both through lowering of interest rates and large asset purchases, as the calendar turned the federal reserve, FOMC, led by Jerome Powell pivoted and moved their foot from the accelerator to the brake. Not only has the FOMC pivoted to the brakes, but they have put both feet firmly on said pedal. First talking aggressively about rate increases leading up to the fastest interest rate increases on a percentage basis that have ever occurred, putting headwinds in safe assets also known as bonds or fixed income, but the other foot on the pedal included reversing asset purchases through balance sheet runoff. 

The first glimmer of easing of the brakes by the Federal Reserve occurred several weeks ago in a public testimony by Jerome Powell in which he stated the federal reserve cannot control oil and food prices. Capital Markets participants read that to be not as aggressive in posture, maybe one foot easing off the brake. 

Literally the last week of the quarter, the second major event occurred oddly enough from the research partner at the Atlanta Federal Reserve. The Atlanta Federal Reserve research department has a forward looking predictive model that attempts to predict GDP (gross domestic production), the most blunt instrument of economic activity. Just days ago, they updated their model from an expectation of 1% growth in Q2 2022 to -2.1% growth or an actual contraction. While seemingly unimportant, this estimate if true would mark the official R word for the economy – Recession. This second event was even more impactful as market participants began pricing in an even less firm brake pedal fed.

 

Persistent hot CPI Consumer Price Index reports present challenges 

Back to the Jerome Powell lead FOMC, one of their favorite inflation measuring sticks, the CPI or Consumer Price Index a very blunt measuring instrument of price increases and inflation measures, looks to remain high, mostly due to the severe lag effects of some of the input data. This puts the FOMC in a pickle, with the aforementioned possible R word and a slowing economy, but lagging blunt measurement showing high blood pressure in the economy a.k.a. the CPI . Not a fun time to be a member of the FOMC! 

How about some positives? 

In our latest newsletter, hopefully already on your reading table, we point out in multiple graph format tons of positives. While some may say were looking through rose colored glasses, we prefer to say the glass half full. Of course, these can change, but the pictures we pointed out at the time, were positives. 

Time is our friend on all of these matters, be sure to avoid the ugly headlines which most certainly will continue likely throughout the remainder of this year, we have your back and will talk to you at the end of the next quarter! 

Sincerely,

John A. Kvale CFA, CFP

Enclosure (2022 Report)

First Quarter 2022 Review, Fast Quarter

Remember when we were kids and it seem like the birthday would never come? Now they seem to come on almost a quarterly basis!

Speaking of a quarter, as we look back over the first quarter of this year, 2022, Wow, we had a lot of things occur.

Interest Rates

As the calendar turned, the FOMC, led by chair Jerome Powell, reading very rearview mirror inflation data points, began verbally discussing aggressive rate hikes.  Right on cue fixed income participants front ran the Fed and raised interest rate across the board.

Mortgage rates, specifically 30 year fixed mortgage rates have risen in percentage terms faster than any time in history.  This is likely a product of the stopping of monthly FOMC purchases of mortgage back securities. It would not be unreasonable to think that current levels could be an overshoot from the artificial downward pressure the federal reserve had been creating.

As of late, several Federal Reserve Presidents have publicly doubled down on even more aggressive rate increases, pushing rates even higher.

Longer-term, recall increasing interest rates are headwinds to fixed income instruments initially, but higher interest rates mean greater income longer term.

Fiscal Stimulus Comparables

As we exit this quarter, and enter the next, we begin a journey over one of the most interesting comparable times in history. As noted in our Q1 and Q2 newsletter, tough comparables will likely make for a natural slowing of the economy. Recall last year at this time over $1 trillion of stimulus was pushed into the economy. As mentioned once again in our newsletter, this is a natural slowing and will be a tail wind to the federal reserve as they raise short term interest rates in an attempt to slow the economy.

And did we mention there was major Geopolitical conflict?

There is a saying that conflict is the great geography educator. Certainly it was a surprise to see the amount of resources that come from the two countries in conflict. The lack of resources on the natural market may be a headwind to lower prices of certain commodities..

In closing, the really good news is that much of what we have experienced in this past quarter, and the coming next quarter, in birthday like format may likely come and pass much faster than previously experienced.

Sincerely,

John A. Kvale CFA, CFP

Enclosure (2022 Report)

Fourth Quarter 2021 Review, Looking Ahead, Private Policy

As the year ended, we cannot help but look back, especially over the last two years, and maybe even farther, to the ups and downs that have occurred, and we are delighted to be on this journey with you!

Thank you for the Collaborative Journey; but “What Have We Done Lately?”

In true “What have we done lately!” form, as we look forward to 2022 and are always very careful to stray from a definitely forecast (burns from prior years attempts) we want to call your attention to the main article in our Newsletter called “The Anatomy of a Slowdown/Recession”.

We are not predicting a slowdown, nor do we want one, but we also know they do come, eventually!

The last decade has given us unique experiences that are somewhat muted from the normal slowdowns. A dramatic drop in 2020, followed by a dramatic and extremely fast recovery.  In similar fashion, two drops in 2018, one early in the year and one late. Collectively, all very short in time!

If we really show our age (mostly present party speaking here) and look back to 2007-2009, that experience was the opposite of a normal slowdown and the absolute antithesis of the prior mentioned slowdowns, long deep and very frightening. Only to follow a 1999 to 2002 similar dramatic slowdown (really showing our age now, but we were there!)

So back to What Have We Done Lately, as we turn the page on the new year many of our allocations may need to be trimmed back “lower our risk“ and this may cause us to incur taxes depending on the situation.

We are always cognizant of taxes, heck we hate taxes and try to minimize them at all cost,  but we don’t want the tax tail wagging the investment risk dog, and as such allocations and reallocations causing taxes but for the benefit of the portfolio safety may occur early this year.

Thanks again for enjoying the journey together, please make sure you are receiving automatic emails from our blog at www.street-cents.com as we post every MWF at 10:30 am CDT

Your Fourth Quarter 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 and Client Relationship Summary (Form CRS); Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Sincerely,

John A. Kvale CFA, CFP

Enclosure (2021Report, Private Policy)

J.K. Financial, Inc.

PRIVACY POLICY NOTICE

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.

Please do not hesitate to contact us with questions about this notice.

.

Q 1 2021 Review – Three V’s: Vaccine, Volume of Money, Valuation

Vaccines, Volume of Money, Valuations 

With the continued increase of the number of people getting the vaccine a much-welcomed sigh of relief is being felt across the country and most of the globe. Thankfully thus far the variance seems not to pose a terrible threat and most continue even post vaccine to take the appropriate precautions. This is leading to a slow Opening of the country and a light at the end of the tunnel heading back to some type of normalcy. 

Volume of Money 

The Federal Reserve (FOMC) led by Chairman Jerome Powell continue to buy assets at the rate of $120 billion a month. With a main goal of lowering the Unemployment rate, these funds of course are giving a boost to Capital Markets and providing massive volume liquidity. 

Additionally, the Fed has short term rates at zero and has stated they intend to keep them there for some time. This is also a stimulus for certain parts of the economy, but also a boosting effect on Asset Prices. 

With Fed controlled short interest rates being held low, longer term rates, notably on the 10-year US Treasury have been moving up in minor protest by bond vigilantes that economic stimulus may be too much, fortunately at this time there seems to be no effect. 

With the FED on record saying that short term rates are deemed to stay low, their first move back to normalcy maybe to pair back the purchases.  Our interest will be, when, and if this occurs, and more importantly, capital market participants reactions.  

Valuations 

As mentioned, multiple times in our blog at www.street-cents.com and again our Q2 2021 Newsletter, valuations by almost any metric are stretched. 

While valuations may be a more somber note, the re-opening and vaccine completion rates should dribble into corporate earnings, the ultimate driver of capital markets and possibly provide a wonderful “Grow into our Valuation” affect. 

If you asked us for our candid opinion, we would like capital markets to trend sideways while we grow into our valuations. Continued rise in capital markets could lead to a bumpier ride once the Fed adjust their policy. 

We of course will be watching carefully!  �

Sincerely,

John A. Kvale CFA, CFP

Q 4 2020 Review and Annual Private Policy

It’s hard to believe the final quarter of the year included an Election, multiple vaccines, the commencement of vaccine shots and near the end of the quarter, a second stimulus package for the year 2020. Wow!

Three Major Acts in a Little Over Twelve Months

If we look back just a little over twelve months, three major bills, The Secure Act, passed in late 2019, but left in the shadows by lasty years events. Then the Cares Act late first quarter 2020, followed by the Appropriations Act of 2021, which was an extension of the Cares Act. If you are not confused yet (or do not even remember some of these), congratulate yourself, most are! Not to worry, we will be reviewing all of these over the year as the much forgotten, Secure Act will have multiple planning techniques and mandates that once again may have been forgotten.

Who let the dogs out? Or Maybe Better Said, The Dogs Continued to Cheer!

Capital markets bullied by federal reserve purchases and anticipations of good news coming from a vaccine, in true Capital Market form did cheer much of the news, but not as much as many had thought, mostly because it had already been anticipated.

As we had mentioned multiple times, Capital Markets are likely well ahead of themselves currently which may make for tougher rowing in the near term, but just as clothes purchased a little too large for that growing teenager, Capital Markets with an expected economic recovery, should be able to grow into their overzealous clothes. However, with current stretched valuations, negative surprises may be met with more volatility due to the priced-to-perfection levels currently, once again making us happy we are conservative and diversified investors.

Interest Rate Watch

One thing we will be watching closely are interest rates, and their levels, as the economy begins to come back on line. The Federal Reserve is squarely focused on keeping interest rates down through their purchases. Should interest rates begin to rise or should the FED ease off (or even give speak of ease) of the pedal and interest rates rise on their own, especially quickly, this could be a headwind to Capital Markets and other assets. Not to worry, we will be watching and letting you know what we see and taking appropriate actions as needed.

In Closing

Your Fourth Quarter 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 and Client Relationship Summary (Form CRS); Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Sincerely,

John A. Kvale CFA, CFP

J.K. Financial, Inc.

PRIVACY POLICY NOTICE

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.

Please do not hesitate to contact us with questions about this notice.

Fourth Quarter 2017 Cover Letter Review – Private Policy

Do you recall the last time you went to a movie, maybe even begrudgingly, because expectations were low, but the movie turned out good, making for a wonderful surprise? Starting out the new year of 2017, most, including us had minimal expectations for the year 2017; A bad movie.

What If We Already had a Bear Market?

In our “What if we already had a Bear Market?” article in the coming Q1 2018 Newsletter the early 2016 drops across most asset classes except the more popular ones were 20% to over 30%. While markets don’t usually repeat, they often rhyme, again setting low expectations for the 2017 movie.

Sleepy VIX

Not only did we not start out bad, (Good Movie) but we may have just experienced a generational “Fear-Less” year. In our record breaking low “VIX Fear” article again in our coming Newsletter, a reading less than 10 on the VIX (Volatility/Fear Index) had occurred just 9 times over the last 26 years. Our surprisingly good movie year recorded 53 end of day VIX closings below 10, five times as many as ever recorded. Good movie.

Interest Rates

Post great recession of 2007-2009 most expected the FOMC (Federal Open Market Committee) controlled rates ascent to begin moving back up as they always did through history. Thanks to a stubborn, data watching, Janet Yellen (FOMC Chair) rates have been correctly moved up gradually. The current Federal Funds rate was increased 3 times in 2017, once in December to the targeted level of 1.25-1.5%. Officials are on record for another 3 moves or .75% in the next year, gradually pushing rates nearer their more normal historical levels.

Janet Yellen will be leaving her post next year and we look for her replacement to continue on the transparent, methodical, data watching, path of rate increases that keep market participants personal VIX/Fears in check.

Next Year’s Movie?

Looking into next year’s movie, we think it is healthy to have a conservative view again. We are not predicting or welcoming a bad movie, but just staying vigilant! Good movie or bad, we will be prepared.

In Closing

Your Fourth Quarter 2017 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.

John A. Kvale CFA, CFP

PRIVACY POLICY NOTICE

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.

Please do not hesitate to contact us with questions about this notice.

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