Tag Archives: Quarterly Performance Cover Letter

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.

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 Street-cents.com 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!

Sincerely,

 

John A. Kvale CFA, CFP

Enclosure (Q1 2016 Performance Report)

Q 3 2015 Quarter Performance Report Cover Letter (Clients)

Dear Investor:

In “Lucy like” pulling of the football to Charlie Brown, Janet Yellen, head of the Federal Open Market Committee (FOMC) choose not to raise rates by an even tiny .25% at their most recent meeting in September. In defense of not raising, Yellen painted a gloomy picture of the domestic and global economies. Global markets, in a seasonally weak period, acted gloomy, dropping double digits as a whole for the quarter. We do think rates will eventually be raised, but possibly not until next year.

Frothy markets only need an excuse, not a reason. While we are not sure if the reaction was a cause and effect, or just the excuse, weak capital market results were the same. Additionally, domestic corporate earnings on average are flat to negative, driven heavily by the Energy sectors sharp losses. We discuss this in greater detail in our current Newsletter.

Speaking of excuses, fears of China’s economic slowing have gained traction in headlines recently, especially affecting commodity dependent emerging markets who have received the double punch of lower commodity prices and a slightly slower exporting partner in China. With so many levers to pull and such a huge population, it may be only a matter of time before these Asian fears subside and turn from negative to positive, putting the wind at the back of an underperforming asset class and especially emerging markets – one of our favorites.

The Good news for us as investors is cheaper prices make for better long-term gains in the future. There may be headwinds, but capital markets according legendary investor Warren Buffet “Generally go up, three out of four years.”   This compounded with historically a positive time of the year, may lead to a better end of the year.

Enclosed is your Q 3, 2015 performance report which outlines the last ninety days, a very small period of time in our long-term journal to financial success.

Have a Great start to Fall !

Sincerely,

 

John A. Kvale CFA, CFP

Enclosure (Q3 2015 Performance Report)

Q 2 2015 Quarter Performance Report Cover Letter (Clients)

Dear Investor:

Very near the end of the quarter, a triple threat of events occurred that put investors into a more conservative mode. The long awaited possible Greece removal from the Euro nations, China’s overheated market hiccupped, and a Puerto Rican default hit the headlines. We were actually pleasantly surprised market participants were not more restless.

Earnings

As mentioned in greater detail in our Q 3 Newsletter, which is hot off the presses now, USA earnings, the “Mother’s Milk” of higher stock prices are expected to be very meager, if any, for 2015. With a pause in earnings growth, frothy valuations and the afore mentioned headlines, markets may continue to have a more conservative tone.

Interest Rates

We continue to believe the Federal Open Market Committee (FOMC) will raise rates later this year. While not making headlines at the moment, this may turn out to be the bigger story for the year 2015. It has been nine years since the FOMC has raised rates, and we think the near zero rate environment has overstayed its welcome, and is doing little to help our economy at this time.

Higher rates, MAY be a headwind initially to both equity markets and fixed income, however longer term higher rates may produce a better economic environment.

Summer Doldrums and the Election

Smack in the middle of summer doldrums, many “Wall Streeters” have already headed to their favorite summer retreat, leaving greener hands in control. Combine a heavier than normal summer doldrums, along with Election headlines, we may have a few bumps over the summer. Not to worry, diversification is especially our friend during times such as these.

Have a great rest of your Summer!

Sincerely,

 

John A. Kvale CFA, CFP

Enclosure (Q2 2015 Performance Report)

Q 1 2015 Quarter Performance Report Cover Letter (Clients)

Dear Investor:

To Raise or Not To Raise, that is the question

As the year commenced we felt very comfortable that short term interest rates (think checking accounts), currently near zero would begin normalizing back towards their longer term average of 5% (maybe not all the way, but at least begin moving from zero). Recent economic data has been weak enough to put doubt Federal Reserve officials, as well as in most market participants timing of an expectation of mid-year, to later in the year.

We have been proponents of higher rates sooner, as we think the usefulness has run its course and may now be doing more harm than good. We still believe rates will rise, but maybe at a slower pace.

US Markets

US Capital markets ended the quarter right near where they started. This is not surprising as earnings are the ultimate driver of higher prices (most of the time) and earnings are actually expected to be down significantly this quarter and about flat for the year 2015.

In this quarters Newsletter, we dig deep into multiple charts for a straight forward view of the current US Capital market valuations. In short they are at least frothy as we compare the current market “feel” to 1998 or 1999.

International Markets

International market, which we have been “leaning” towards for some time took off like a rocket, however, the strength of the US dollar against the rest of the world essentially negated the gains. The sudden strength of the dollar against the rest of the world is and was not unprecedented, but the speed at which is happened did break tons of records. The good news on currency movements is they work themselves out over time.

Commodities

Also a subject of our current Newsletter we discuss black Gold, oil, as well as the shiny material, gold. While we never go “all in” in any investment, our commodity holdings may be a terrific value. Due to their extreme volatility, we are always cautious with our exposure.

IN CLOSING we wish you a happy spring here in the USA and look forward to the changing of season across the country and the world for those across the various ponds!

Sincerely,

 

John A. Kvale CFA, CFP

Enclosure (Q1 2015 Performance Report)

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.

Sincerely,

John A. Kvale CFA, CFP

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

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)    

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

Dear Investor,

Enclosed you will find your Fourth Quarter 2013 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.

Despite continued slower US economic growth than normal at this point in a recovery, US equity markets ascended dramatically throughout the year, in some cases extending valuations greatly. Over the last quarter, and year for that matter, US markets, in Goldilocks fashion ignored ANY negative news and embraced all events as positive.  It is likely this will not be the case this time next year.

While further US equity appreciation is possible, several years of economic recovery are likely already reflected in current valuations. International, emerging market, commodity, currency, and other global assets likely offer a better risk reward in the future.

Bonds, facing short term headwinds as rates rise, still remain a very important part of a diversified portfolio for stability and safety. As rates rise income from bond portfolios will begin to reflect the new higher rates, finally giving relief from the artificially lowered rates orchestrated by the FOMC asset purchases over the last several years.

Coming soon to your mailbox (still enjoy the novelty of paper) is the Q1 2014 Newsletter which is also extended as we dig deep into our best estimates of what will happen in 2014, and reflect on the good and bad of 2013. We ask you may take a few extra minutes to read this forthcoming newsletter as we have included detailed graphs to help clarify our thoughts.

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.

Sincerely,

John A. Kvale CFA, CFP

Enclosures (Fourth Quarter 2013 Performance Report, Private Policy Statement)

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)