BARRINGTON FINANCIAL ADVISORS, INC.
a Registered Investment Advisor
(Celebrating 42 years of Professional Service)
August 2014 Rebound
EQUITIES, MLPs and REITS:
We just experienced the best August in 14 years as the S&P 500 gained 3.8%. One indicator of why this happened is the S&P 500 Volatility index (VIX), which fell from 17.03% at the beginning of August 2014 to 12.09% at the end of August 2014. As you may know, this Index is a measure of fear in the market where many consider below a 20.0% index generally corresponds to less stressful, even complacent, times in the markets. Our Equity, MLP and REIT portfolios returned from a 4.2% to a high of 5.2% performance for August 2014 with the average of 4.65% thus beating the S&P 500 while having a lower risk rating.
During the month I put more of our money to work using the larger cash position to purchase MU, HCLP,HES,WLK,DOW,CPE,AMZN,UA,LNKD,FISI,REX,BITA,PLNR,CMI,Z,SWIR,EPD,TWTR and HMES. I also sold SINA. This was a lot of activity but many of the purchases were to buy back stocks that I sold at the end of July before the large drop in the market on July 31, 2014. These buybacks are now performing for us. A few examples are BITA up 9.48%, CPE up 5.99%, FB up 21.27%, FISI up 4.30%, HCLP up 12.82%, PLNR up 14.30% and WLK up 9.39%. Some have not yet began to perform such as SWIR down 1.96%, UA down 1.71% and EMES down 0.50% since these were purchased towards the end of August 2014 and have not had time to move.
In summary of the Equity, MPL and REIT holdings, I am well-pleased with our August 2014 performance and hope September is a good month as well.
FIXED INCOME:
We experience little change in the Fixed Income portion of our portfolios while keeping the percent of the total portfolio very low in relation to the overall Total.
ECONOMY
This is not the way things are supposed to be five years into an economic expansion, yet it’s the conclusion of yet another report probing chronic economic gloom. The new survey, by the Heldrich Center at Rutgers University, found 71% of Americans feel the recent recession changed the nation permanently and only 16% feel the next generation will end up better off. In 1999, 56% felt life would be better for future Americans.
It’s axiomatic that something is wrong with the U.S. economy — but gloom itself may be part of the problem. Americans are so dour by some measures, they seem to be looking past opportunities as if programmed to see only pitfalls. Prosperity doesn’t come from the places many people seem to be seeking it, and if the middle class is, in fact, in decline, a large part of the reason may be a lost instinct for how to get ahead.
To be sure, there are well-known problems with the economy that aren't easily solved. Wages are stagnant for many workers, household wealth remains depressed and many families are falling behind. Adding to the gloom, policymakers in Washington seem incapable of finding solutions, and they even make some problems worse.
It’s also true, however, that the economy is growing at a decent pace, companies are hiring, and consumer spending, on the whole, is pretty good. In reality, we don’t have one U.S. economy, we have two: one that looks like the old one, in which people work hard and get ahead, and another filled with those glum, underemployed laborers living on the edge. There has always been an American underclass, but it seems to be growing, fed by a continual drip of downwardly-mobile people departing the middle class.
The recession officially ended more than five years ago and ought to be a distant memory. These should be boom times with widespread optimism and robust spending. Yet, consumers are gloomy and the economy is limping along at subpar levels of growth.
It’s becoming clear why: While jobs have returned, incomes have not. The latest evidence is a study by the U.S. Conference of Mayors that highlights stark disparities between the jobs lost during the recession and jobs gained since. The types of jobs lost paid nearly $62,000 per year, on average. The jobs gained during the past six years pay only about $47,000. That 23% shortfall adds up to about $93 billion in lost wages per year — money not being spent because it vanished from the economy.
That startling wage gap reflects the demise of well-paying jobs that don’t require a college degree, which may be the single-biggest challenge facing families trying to uphold a middle-class lifestyle. The two sectors that lost the most jobs during the recession are manufacturing, with average pay of about $63,000, and construction, at about $58,000. Employment in those two fields is still about 3 million workers short of where it was at the start of 2008.
It is my prayer that America wakes up to the reality of how poor the country’s leaders are doing in managing our economy and we make a drastic change in the elections that are coming up soon. We need elected people who understand how to solve the economic problems facing our nation. A recent poll of American voters revealed that many people think that Global Warming is a greater threat to America than the threat from Terrorists. We need to support Israel and build our defenses before we have another attack on American soil. May America return to God and receive His continued blessings. AMEN.
Have a Blessed Day,
William C. Heath, CFP®
Chairman & CEO
(713) 785-7100

I'm reading the 18th to decide the price and the 19th for go live.
http://www.cnbc.com/id/101997655
However, that seems to go against the Chinese thing with numbers. The 18th makes more sense since the number 8 is a very good number for the Chinese.

Whatever you do, don't buy the Class C shares. Those poor folks obviously don't know what they are getting into. See below:

Hmmm......I think I'll buy a fixed income fund with an annual expense ratio of 2.87%.
Sounds like a great idea.
Oops, forgot, they temporarily lowered the expense for the Class C shares from 2.87% to 2.16%. Much better deal.
These people should be arrested. For crimes committed against Class C shareholders. And they are not very nice to their Class A shareholders either.

https://www.virtus.com/individual-investors/mutual-fund-details?id=8564#tab_performance
The dreaded LOAD word.....

2.12% annual expense ratio for an income fund? Is that acceptable, when the yield on the 10-year Treasury is only 2.6%?
OK, it got lowered to 1.41%, but for how long? Is that just a temporary expense waiver that brought it from 2.12% to 1.41%, or something else?

re. VASBX
FEL= a mere 3.75%
Contingent deferred sales charge= 0.50%, 18 frigin' months?(uh, I don't think so)
e.r.= 1.41% ["gross" expenses of 2.12%... indeed]
It's The Aston Way, writ large.
No thank you very much.... I'll pass.
@Old_Skeet What has happened to your standards? Deplorable! :)

HCP having tough time lately.
Down 5-6 percent this week.
But I bought it back in March when it was under $36.
Closed Friday @$40.55. Still couple % above 200d average.

Robert, you are right in that junk munis are a different animal than junk corporates. The average junk muni fund has over 50% of their assets in investment grade while the average junk corporate has only around 10%. Morningstar I believe counts the "not rated" sector as junk so EIHYX and the other junk munis who all have unrated bonds will have a higher % there than just adding up BB to below B.

Thanks for your helpful comments, Junkster. I'd just assumed VWALX was in the High Yield category because of its name and e.g. YTD return, and although I know it's not at the top of the High Yield category, I thought that was because it's more conservative. .

Not an asset class I know anything about, but it seems that even the Hi Yield Muni Funds/"Junk" Muni Funds have the bulk of their assets in investment grade bonds.
Take for example a junk muni fund that has been mentioned on MFO many times, Eaton Vance High-Yield Municipal Inc I EIHYX, which is in Morningstar's Hi Yield Muni category.
Only 16% of the bonds are rated below investment grade. Interesting.

Two big market events coincede on Thursday of next week (9/18):
Alibaba will grab $23 billion from different parts of the market.
Scotland will vote on their independence.
Some see a "yes" vote for Scotland's independence as a black swan for the market.
The Scottish Referendum May Already Be A Black Swan (may require free registration)
seekingalpha.com/article/2484385-the-scottish-referendum-may-already-be-a-black-swan

I can't think of a single asset class that's not overpriced - with the exception of cash.

I added (new)/added to a couple of things a couple of days ago, but I haven't strained so hard to figure out what to do/investment ideas in quite some time. Finding little that's appealing.

Hi Jim0445,
The US Dollar "Cash" is currently the high dollar against many others. I am linking the futures where the dollar can be viewed against many others. See Curriencies and move your cursor over the currency, or asset, you'd like to view its price action.
http://finviz.com/futures.ashx
Now ... How about the metals (gold & silver) down better than fifteen percent form their fifty two week highs and then there are the commodities, in general, as they seem to be down better then ten percent from their fifty two week highs? But, other than that I am not finding much. And, I am not saying they are now oversold as for I feel they had gotten extremely overbought a while back ... but, they might be of a good value type play when the dollar starts to weaken.

Junkster, I'm trying to understand your successful methodology. You are looking to sell funds that are at their highs, I'm guessing on the 'prospect' that they could fall with other income funds. Isn't that contrary to your success? I thought that you watch when a fund falls out of a tight channel or some percentage from it's high.
I'm watching your winning process so that I can structure my own with a small % of my own portfolio. I've found that it isn't only the vehicle that dictates success, but the driver of that vehicle. Trying to figure out if I can be a good driver.

Warning: Mike, the below will sound clear as mud.
I like old-skeet's answer. You are well aware that I believe trading is more art than science. I trade my equity curve. I want my equity curve to be in the same mode of the type of funds I trade, i.e. a tight, rising channel. At this point in my financial and personal life, I don't want to see even a 1% drawdown in my equity curve. So if things look a bit dicey, I will begin selling off a small portion before my 1% or 1.50% threshold. So hopefully if the decline continues I will eventually be mostly all off before that threshold is hit. I did that in July when I was all in NHMRX as junk munis got a small hit from being overbought and resurfaced worries over Puerto Rico. I was all out before it hit 1% and as it went down below 1% felt good because I had protected my equity curve from any more of a drawdown. However, the junk muni market turned around *quickly* and by the time I was able to get all back in, I would have been something like $8000 for the better had I just sat tight. That was the same situation many times with the tech funds in the 90s and early 2000, but at some point the market will breakdown and not come back. So giving up some monies here and there is worth it if that what it takes to avoid the big decline.
The junk munis are the last ones standing now. Two in that sector are right at their YTD highs - ABTYX and LMHIX. The others are down up to around .50% from their YTD highs. I haven't sold any ABTYX which is in my small taxable account but have sold around 21% of EIHYX which is in my much larger IRA and thus would have more of an impact of my equity curve. It's down a tad less than .50% from YTD highs. If I have to sell more based on adverse price action and if like July this is much ado about nothing, I will go back in but with whichever junk muni fund with the most YTD momentum had the least drawdown in September. So far this is looking like ABTYX.

Thanks for the more complete writeups, LLJB. From the WSJ piece, it does sound like the index reconfiguration (and piles of investor $ going into FM funds?) was the catalyst for the warning. The quote from the spokesperson, though, was about the attractive "yields" of FM funds, not capital gains, which is a hard argument to make when the 3 FM funds I see mentioned most often yield a whopping 0.16, 0.10, and 0.35%.
The piece also had a short 'graph about other recent FINRA warnings:
"With the alert, frontier funds are joining a list of products Finra warned investors about, namely Bitcoin, promissory notes, and high-yield certificate of deposits. Last month, Finra warned about stocks in companies that claim to provide products that protect against the spread of viruses or other harmful diseases like Ebola."
I was curious so googled FINRA + mortgage-backed to see if I could find an equivalent warning about subprime MBS in ~ '06-'07, but there were so many hits I didn't go through them all. It was FINRA, though, that brought the actions against Schwab for its essentially fraudulent YieldPlus fund and some of the big banks for breaking disclosure rules related to MBS after the crisis.
FWIW, AJ

Q:
"I think you're also looking at a smaller pool of retail investors as a % of the broad population than you had 5-10 years ago."
A:
That might be a good thing, suggesting that the smaller pool is perhaps a little more seasoned, and maybe a little less inclined to cut and run. But, who really knows?
Are you hearing about more of the general public investing in the markets? Before the tech crash of 2000, it seemed like everyone was into stocks. After that event a lot of those swore off the markets and I didn't see many return or even talk about it. Perhaps the last couple of years have been different?

https://finra.org/Investors/ProtectYourself/InvestorAlerts/MutualFunds/P597385
And here's the actual alert itself.

In a similar vein
http://cache2.allpostersimages.com/p/LRG/60/6056/599D100Z/posters/charles-barsotti-there-there-it-is-again-the-invisible-hand-of-the-marketplace-giving-us.jpg

@jlev
I'm only parroting what I read several years ago: 10-15% bonds in a portfolio will not produce significant protection, since the percentage is too small. Made sense to me then, and now. (This begs the question whether a 29 y.o. needs portfolio protection.) If you have ongoing contributions, you are averaging in when the market is down as well as when it is up. You might be better advised at your age to park some money in cash and watch for the decline (like when ARIVX is fully invested, you'll only be a little bit late.)
With 20 years to go before I'd start buying bonds or bond funds (if I were your age), presuming 35 - 40 years until retirement, and presuming that new money would go into bonds at that time, the stock funds, stock ETFs, or stocks you buy now would have had a run of 30 to 40 years when you retire, if you can keep your hands off the trading icon (except for the individual stocks - I'd watch [or avoid] those). Since few managements are stable over that period of time, index funds are appropriate.
You are paying a significant portion of bond fund gains in ER currently. Looking at my bond fund purchases (all recommended at MFO, which include some of your choices) in the past 2 years, I find minimal gain and some losses, aside from the River Park funds, where I am paying about 20-25% of my gains in ER. (I regard those as geezer funds, btw.)
Since I doubt most currently successful bond funds will have the same management in 20 or 30 years, I have no recommendations. The big companies, such as Fido and Vanguard, can buy brains; smaller funds are a crap shoot. If you want shorter term recommendations, you have many above.
I assume you have read William Bernstein. If not, check him out. I
don't anticipate participating further in this topic.

@scott I watched SKX for about six weeks after buying 4 pairs of their sneakers. Loved them so much started watching the stock. Watched it go up 15%, held my nose and plunged in with a small order. Felt like a Peter Lynch groupie. Started buying WWAV when I tried Silk Almond Milk and saw my market was always running out. Same thing, but I bought that one a few months ago.

I've switched out of WAFMX to MFMPX.
http://performance.morningstar.com/fund/performance-return.action?t=MFMPX&region=usa&culture=en-US
From MFMPX Manager's 2nd Quarter Commentary
The Middle East and North Africa continue to present political
risk for the region, although conflicts in countries including
Egypt and Syria have created opportunities for markets like
such as the U.A.E. as locals look for safety and stability. The
classification of the U.A.E. to Emerging Markets status was
largely an additional tailwind for the market. In Saudi Arabia,
where roughly 50% of the population is under the age of 30,
the monarchy’s development programs appeared to be
constructive including “Saudization,” the program focused on
integrating local Saudis into the workforce. We believe higher
Saudi employment will benefit the economy particularly in
consumer discretionary spending and financials. We are more
constructive on Kuwait following a recent visit as we think there
is potential for the non-oil GDP growth to turn positive, we see
more stability in the political environment of the economy and
the Non-Performing Loan (NPL) cycle appears to have passed
its peak.
We see positive implications for equity markets in countries
new leaders have come to office within previously troubled
countries, particularly Pakistan, where Nawaz Sharif became
Prime Minister in June of 2013. He has pledged to change the
reputation of the country known for extremism and poverty to
one known for good governance and prosperity. So far, he has
shown to be effective and investors are responding in kind
More on manager's background.
http://citywireglobal.com/news/former-aa-rated-drinkall-leaves-gustavia/a288116
Morgan Stanley Home Page (a little hoop jumping !)
http://www.morganstanley.com/msim/portal/site/US/template.PAGE/?msimPageTitle=productdetail&u=86bb14f4dc87daf33d3afb1051a9e009&fund=34211&src=vap

Weekly ETF Gainers / Losers
Sep 12 2014, 16:13 ET | By: Jignesh Mehta, SA News Editor
Brazil largest weekly loser.(Commodities?)
Gainers: VXX +4.23%. GAZ +1.26%. UNG +1.01%. UUP +0.58%. TAN +0.12%.
Losers: EWZ -10.12%. BRF -8.96%. ILF -7.29%. REMX -5.31%. VNQ -5.21%.
Overbought market slips as Fed fears set the tone
Sep 12 2014, 16:20 ET | By: Carl Surran, SA News Editor
Investors also may have been unnerved by the prospect of next week’s Fed rate meeting, with speculation the Fed may signal the arrival of interest rate increases sooner than expected.
Much of the damage again came from the energy sector (-1.5%), which tumbled out of the gate and pulled the broader market down with it; Nymex crude slid 1% for the week, and has fallen for 10 of the past 12 weeks.
Today's session saw better than usual participation with 675M-plus shares changing hands at the NYSE floor.
The yield on the 10-year Treasury note jumped to 2.61% after beginning the week at 2.42%.
http://seekingalpha.com/news/1981165-overbought-market-slips-as-fed-fears-set-the-tone
No Rebound In Sight For Sliding Oil Prices
By Nick Cunningham | Thu, 11 September 2014 21:33
U.S. oil production also continues to rise. In June, the U.S. produced 8.5 million bpd, an increase of 500,000 bpd since the beginning of the year. Higher production continues to cut into imports, leaving greater supplies on the global market.
Perhaps most importantly, global demand has been surprisingly lackluster. The latest data from the U.S. Energy Information Agency (EIA) shows that refined product (gasoline, for example) inventories are increasing – an indication that production is overwhelming consumption.
A slowing Chinese economy is also putting a damper on crude oil prices. Weak economic data published by the Chinese government showed that China’s import growth slowed for a second straight month, suggesting the economy continues to cool.
http://oilprice.com/Energy/Oil-Prices/No-Rebound-In-Sight-For-Sliding-Oil-Prices.html
US Picks up Pace in LNG Race
This week in energy, the prospect of liquefied natural gas (LNG) exports gains momentum in Washington with final federal approval for two more projects in Louisiana and Florida thanks to a tweaking of legislation.
The pressure on Washington is indeed growing because the race to the finish for LNG exports is a tight one and will have a major impact on long-term contracts.
Australian projects in particular are warily eyeing the two new LNG export approvals in the US and Russian progress towards the same, because it may force them to renegotiate long-term contracts already in play due to a future LNG glut.
This week we also look at Canada’s LNG prospects, and what Keith Schaefer depicts as the countdown to get massive projects off the ground.
There are at least 14 proposals to export LNG off Canada's west coast, and another one to export Canadian gas down to Oregon and ship it to Asia from there.
In this heated race, the general consensus is that Washington will have to speed things up a bit more. But the good news is that the ranks of the Democrats are growing with those who believe in US LNG exports, and the general consensus is that we will see an up-tick in the momentum to approve these languishing projects—soon.
http://oilprice.com/newsletters/free/opintel120914