According to many market watchers, August notched a new milestone for the current bull market. It marked the longest bull market in terms of days in history as it eclipsed 3,453 days on August 22nd.
Of course, many would argue that this depends on your starting point. Some would argue that we had a bear market (defined as a correction of greater than 20%) in 2011 and so the end of that correction is the starting point of the current bull run which then greatly shortens this calculation.
From our perspective, who cares!
Let’s ride the bull market as long as it wants to keep moving up. The longer the better!
When the bull market does finally signal the end, our process will help us move aside or hedge our remaining positions to minimize those losses.
In the early days of my career, I tried to predict market tops and was wrong almost 100% of the time, but not anymore.
I have no idea!
Oh, I can tell you that we are probably much closer to the end statistically than the beginning! I would probably even warn you that you need to know where the exit sign is because the average bear market is no picnic!
Technically, I can probably warn you at the correct time that it appears the market is ready to move lower. However, I cannot guarantee you that that correction will turn into a bear market and that we have seen a top, except in retrospect. The last few words here are key here!
As trend followers, our models are not predictive. They are reactive. We will only know a turning point in retrospect and then we react.
So how much of a shine would the average bear market take off the average American’s portfolio? Is this even worth worrying about?
As you can see in First Trust/Morningstar chart above, the average bear market lasts 1.4 years and brings a cumulative loss of -41%.
Let that sink in a bit!
If your current portfolio value is now $425,000 at the end of the average bear market it will be worth just $250,750 at the bottom. That is quite a hit!
According to First Trust/Morningstar, the average bull market rises 9.1 years and 476%.
So how long then does it take to recover this 41% hit ? The answer is? It depends!
If we use an average of the annualized bull market returns from the First Trust/Morningstar chart, that would be approximately a 20% annual return, so roughly 2.8 to 3.0 years.
Quite honestly not as long as I had expected and certainly the bull market returns at almost 20% per annum are more than I would have guessed.
However, what if instead of losing 41%, your portfolio value, you only lost 10% (or maybe even made money as we believe we can do with a couple of our portfolio solutions)?
Well happy days! The recovery period at an annual return of 20% in a bull market assuming a 10% bear market loss is just .6 years.
In our case, I would be shocked if our clients lost 10%. We believe 5-6% is probably the maximum and that further shortens this recovery period to just .3 years or 3.6 months.
What this means is that our clients are in theory enjoying market profits much faster than the person who just buys and holds through entire market cycles.
The buy and hold investor must wait almost 3 years to get back to break even before they can start earning new returns.
If fact, this period to break even is usually even longer because the average investor does not usually do as well as the market averages.
According to the Investment Company Institute and Real Investment Advice.com, the average investor underperforms the S&P 500 index by almost 38%. Assuming that is correct, the recovery period for the average investor now grows to 4.5 years.
Let’s assume we investment just as badly (not likely) and our recovery period on a 10% loss grows from .6 to .96 years (almost 1 full year).
Which scenario would you rather have? A one-year recovery or a 4.5-year recovery?
The choice is yours, but if you are like most Americans, it may be time you focus more on that exit door and give us a call!
Written by: Jeff Diercks
It's back! Well maybe...I think. Is that decisive enough for you?
Of course, I am not talking about Jack Nicholson, Jaws or a new Star Wars sequel but Bitcoin.
Bitcoin you say?
Yes, Bitcoin! The darling of 2017 portfolios and cocktail party banter!
Maybe you remember Bob, the guy with the crowd gathered around him at the party who had the crowd memorized with his story of how he turned a $3,000 investment in Bitcoin into a new life as a millionaire. Maybe you hated Bob as much as I did! Darn Bob!
How did Bob do it?
He rode the trend upward to riches. Now Bob was fortunate to investment in Bitcoin before it took off on a parabolic upward move, but Bitcoin may still have a big move left in her. Just maybe!
Here is the deal, nothing moves straight up and Bitcoin took a pretty hard spill, but we are now seeing new life that could once again lift it to its former highs.
The decline was what we call in the business a Pennant Pattern. You can vaguely make out the Pennant between the two dotted lines in the top panel of the chart window.
As luck would have it, price this week moved above the top pennant pattern dotted line, which could be signaling a new price move in Bitcoin.
This move is also confirmed by the earlier trend line break of the RSI (bottom chart panel) and is close to confirming in the middle chart window with the MACD moving averages ready to cross and the blue histogram close to moving above the middle zero line.
Why Do I Tell You This?
This may be a great opportunity to make a pretty good return!
Hopefully, you then say to yourself, "self...what else can Jeff and InTrust Advisors do for me?"
That is why! Simple self interest!
Here is why I believe the opportunity bears watching!
If you measure the left side spread between the flag pattern lines (blue dashed) in the top chart window and then measure up that same distance from the point price broke above that top flag pattern line, it points to at least a retest of the highs.
A retest of the highs in bitcoin would be a 115%+ move from today's close. That would be nice wouldn't it?
How Do I Invest?
Don't call me on this opportunity, I cannot help you with it.
The best thing to do is open an account at one of the many bitcoin exchanges, such as San Francisco based Coinbase, and then make the trade yourself.
Just don't forget us when you have the talk with your future self on the information we provided you and the return you hopefully made on your investment.
Want to know more, download our free report entitled Currency Markets, Bitcoins and Perspective.
Now the disclaimers:
As always, investing does entail risk and this is a speculative trade. There is risk to your principal and our analysis could be wrong or market conditions could change.
Past performance may not be indicative of future performance. We would advise you to seek the advise of your own dedicated financial professional.
Written by: Jeff Diercks
It's here! Summer that is. What a great time to get out there and spent time with the family.
Did you know that according to an eZonomics online poll summer is the season in which Americans spend the most money. Winter is a close second due to the Thanksgiving and Christmas holidays.
No worries though!
I am here to arm you with a 5-Point Summer Financial Checklist that is guaranteed to help you through this expensive season.
1. Examine your budget
One of the easiest ways to save money during the summer is to revisit your budget, assuming you have one. Now I know that no one, except for weird people like me, like budgets but if you don't control where your money goes, it will control you.
So the first place to start is with your budget. If you don't have one there is no easier place to start than with your client website which allows you to set one up almost effortlessly. If you have one, it's time to dust it off.
Once you have your budget, here are the places to focus:
2. Look at Your retirement plan contributions
Have you been putting money aside each month for retirement? While saving any amount is better than saving nothing at all, now's the time to see if you can up those contributions.
Even a small increase can go a long way toward helping you meet your retirement goals. Imagine you're currently allocating $200 a month to your 401(k) and your present balance is $5,000. Assuming your investments generate an average annual return of 8% (which is feasible with a stock-heavy portfolio), after 30 years, you'll have an ending balance of $322,000, which is not bad at all.
But watch what happens when you increase that monthly contribution to $250. All other things being equal, that extra $50 a month will help you grow your balance to $390,000 -- a $68,000 difference.
3. Check up on your investments
Summer is a great time to have a mid-year review. This bull market is not getting any younger and maybe it's time to adjust your asset allocation to account for the added risk that cycle ends can bring.
Have there been any changes in your goals, family or circumstances? These changes should be reflected in your investment allocation so that you can hopefully meet these new goals or circumstances.
4. Adjust your tax withholding or estimated taxes if necessary
Summer is a great time to review where you are versus where you expected to be. If your income is higher or lower than expected, now might be a great time to adjust your salary or wage withholding or, if applicable, your quarterly estimated tax payment amount.
Wouldn't you agree that extra money could come in handy now vs. filing for a refund next year?
If you are pay too much, and you're essentially loaning the government a portion of your hard-earned money for free. If you are paying to little, you may find it hard to come up with the funds later in the year to pay the taxman what you owe. It is a lot easier to pay small increases over the balance of the year than a larger lump sum come January or April.
5. Consider an insurance review
I know that no one likes insurance, but it does deliver peace of mind. However, many times insurance policy premium increases are automatic and over time they become expensive relative to what a new provider might charge for the same policy.
A classic example is auto insurance. Every few years, you have to shop it!
When you do you will find out that the market is so competitive that you are bound to save money. Money that can help pay for that most expensive time of the year, which is why we are doing this in the first place.
Bundling auto, home and flood can also many times save you money.
So now it's up to you. I hope this brief 5-Point Summer Financial Checklist puts more money in your pocket in what is otherwise the most expensive time of the year!
Let us know your thoughts in the comments below!
Written by: Jeff Diercks