Market Scorecard
Figures provided above are estimate and for illustration purposes only
Monthly Commentary
Before we begin, let me start off by sending my thoughts and prayers to everyone affected by the attack in Las Vegas, the hurricane in Puerto Rico and earthquakes in Mexico. This is the 3rd time out of the my last 4 monthly updates that I’ve sent my thoughts and prayers (Hurricane Harvey, London attack victims) to victims of attacks and weather related disasters. Is this the new normal? Between natural disasters, horrible attacks and the potential for war with North Korea, it certainly feels like volatile times. It’s odd that the measure of stock market volatility (the VIX index) doesn’t seem to be budging at all and the markets keep going higher. There appear to be a level of complacency that’s setting in in the markets and society. Are disaster becoming societal norms? I certainly hope not.
The US and international developed markets continued higher with both registering over 2% gains for September. Emerging markets, which are up over 20% YTD took a pause along with most bonds. Yields increased globally and in the US when Yellen suggested they’ll starting trimming their bond buying via reinvestment starting in October and that another rate increase before year end is likely. She indicated that she doesn’t want to wait and prefers to act, which I strongly disagree with. Bets for a 3rd interest rate increase rose rapidly following her remarks as you can see from the chart below.
Here is an excerpt from a recent Steve Blumenthal update:
President Trump has unveiled a tax plan to decrease the number of tax brackets to 3, decrease taxes for corporations and flow through entities such as S Corps and LLCs, remove the death tax and several other points. It’s unclear at this stage what will pass since it appears to increase the budget deficit when it’s already high and growing. According to a recent Bloomberg article, the tax cuts appear to be in the hands of a few GOP Senators (The Fate of Trump’s Tax Cut Is in the Hands of These Six Key GOP Senators)
According to Larry Summer’s blog, logic points to a larger government in the future and tax cuts at this time would aggrevate the problem. His points are:
- First, the population is ageing and the federal government disproportionately takes responsibility for the aged.
- Second, inequality has increased substantially. If one of the functions of the federal government is ameliorate inequality, it will experience pressure to expand to even partially offset rising inequality.
- Third, the relative price of what the government buys has soared (…) with health and education costs rising faster than GDP.
- Fourth, presumably our defence spending needs to be calibrated to some extent to the defence spending of our potential adversaries.
Bridgewater, the world’s largest hedge fund, thinks raising rates is not a good policy move. Bob Prince, Co-CIO, goes on to state:
- “There is not nearly enough inflation and overheating risk to make concerns about inflation and overheating of paramount importance.”
- “Risks are asymmetric on the downside (i.e., it’s tougher to reverse an economic and market decline with an easing than it is to reverse an economic or market acceleration with a tightening because of the proximity of interest rates to 0% and because easing with QE is now less effective.)”
- “Tightening at rates that are faster than are built into the yield curve is likely to trigger negative wealth effects because the effective durations of assets are now very long.”
- “Economic sensitivities to interest rate changes are greater than normal because the level of global indebtedness and non-debt obligations (especially pensions and healthcare) in dollars and other currencies is high …”
- “A downturn in the economy would be intolerable to those with lower incomes and wealth, and would make social and political tensions dangerous.”
Source: https://finance.yahoo.com/news/worlds-largest-hedge-fund-told-164654161.html
My 2 Cents:
During a client meeting, they asked if I could add a personal spin to news/events and markets. I cannot make specific recommendations to everyone without a deeper understanding of their unique circumstances, but will attempt to provide some high level thoughts. My indicators for stocks are still showing buy signals, although you need to be nimble and imperative to have a risk management process. Our main strategy for clients is called DMAPS (Dynamic Moving Average Portfolio Strategy) and uses certain indicators to determine what we should own or not own. Currently, those indicators are saying to be fully invested in the 7 asset classes it tracks (S&P 500, Large Value, Mid Value, International, Emerging Markets, Gold and REITS). Regarding bonds, owning long term treasury bonds comes with high risk if interest rates rise. If the 30 year bond yield increases 1%, prices will drop around 18%. If they currently yield 3%, it would take 6 years worth of coupons to break-even. Not a great risk/reward in my opinion. I still like municipal bonds for high income earners since there are still bonds available with a 3.75-4% tax free yield (5.75%-6.5% taxable equivalent yield). Alternative investments seem to be grabbing a larger share of client portfolios, particularly private debt, distressed debt, hedge funds and real estate. Private equity from top tier sponsors should do well, but prices are high and they’ve raised record amounts of money. I wouldn’t be allocating a lot of buyout/growth PE firms due to this. Instead, I think it makes sense to focus on certain niches which aren’t overly exploited. Overall, the economy is in the late stages of the business cycle and I don’t believe it’s prudent to be taking an usual amount of risk. I’ve included some charts towards the bottom which illustrates this point. Stay careful my friends.
The above chart shows the impact to a variety of fixed income securities from a 1% increase in interest rates. As you can see, 30 year UST is the hardest hit.
Equally important is the duration when looking at bond investments. The higher the duration, the larger the price swings from movements in interest rates. The barclays US aggregate bond index is one of the most widely followed and benchmarked bond indices and the duration has been increasing steadily leaving investors running for cover if interest rates jump.
Noteworthy Research
- This was sent to me by a client and is worth the time, even though its a long video. Tony Seba, explains how quickly we’re going to see disruption via clean energy and how it will impact us
Charts, Charts & More Charts
These charts are rapid fire and in no particular order.
the chart below is blurry. click on it to open into a new window












The largest company in the world seems very tethered to their iPhone sales. A weakness in sales of new phones would hit Apple very hard.








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Jared Toren
CEO & Founder
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Author: Jared Toren
Jared Toren is CEO and Founder at Proper Wealth Management. Proper was born out of frustration with the inherent conflicts of interest at big brokerage firms influencing advisors to sell products that were not suitable for clients but profitable to the firm along with a consistently mixed message of who’s interest was supposed to be put first; the clients’, the firms’, shareholders or advisors.
At Proper, our clients interests come first. We are compensated the same regardless of which investments we utilize so there’s no incentive for us to sell high commission products. Since we focus on a small number of clients, we are able to truly tailor our advice to each person’s unique circumstances.