Written by Keith Springer 6.13.13

Bill Gross, Pimco’s bond guru and Wall Street Bond King, shocked the investing world on April 29 when he announced that “The secular 30-yr bull market in bonds is over”. This statement was a catalyst for the biggest monthly loss in fixed-income securities since 2004. In May alone, all forms of bonds fell off a cliff and many treasury ETF’s and funds lost 7%, while corporates and high yield’s lost 15-20%. Even TIPS (Treasury Inflation Protected Securities) got hammered, and they are designed to go when rates rise.

This volatility is a warning sign to get out of bonds and I am taking this warning to heart and selling corporates at this time. It may be premature, but I’d rather be early than late. My concern at this point is only for corporate bonds, which will be hurt from a slowing economy. I continue to believe good opportunities still exist in other fixed income areas that can invest globally.

The primary culprit of the May bond sell-off were statements made by the Federal Reserve policy makers that they could slow the pace of the stimulus programs sometime soon through their $85 billion a month in debt purchases. A.k.a. Quantitative Easing (QE). It was Ben Bernanke’s comment, “If we see continued improvement and we have confidence that it is going to be sustained, then we could, in the next few meetings, take a step down in our pace of purchases,” that sent shivers through the spines of investors.

The Fed quitting it’s stimulus programs might be feasible if the economy were truly on a massive recovery and inflation were rising. However, tame inflation and lower global growth estimates from the International Monetary Fund indicate the world’s central banks won’t pull back anytime soon. Once investors start to feel more confident that the Fed will keep the bond buying programs, both the stock and the markets will stabilize. This is likely just the much needed correction and not the end of the rally just yet.

Granted, the U.S. economy has definitely shown signs of improvement, but we are a long way off from getting off the Fed’s life support. Clearly all of the global stimulus measures cannot overcome the massive demographic headwind of aging populations faced by the entire developed world, which I explain in Facing Goliath – How to Triumph in the Dangerous Market Ahead.

I do not fear the end of Quantitative Easing for the market quite yet, but we all must stand ready to act for not if, but when, this day comes. With U.S. and global demand waning, and deflation more likely than inflation, money will come back to risk assets. This will continue to be the most unloved rally in history, at least for a while. When we start to see increasing investor pessimism turn to optimism, that will be the signal to run for the hills.

The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900.

KFBK- Smart Money with Keith Springer – 6/2/2013

Written by Keith Springer 5.31.13

Investors have been cautious since last week’s comments by the Federal Reserve (FOMC) that the economy might be strong enough to stand on its own and further stimulus might begin to wane or even go away. Clearly this is a market addicted to Fed stimulus and QE programs, and any thought that the Fed would shut down the dollar’s printing press will most likely cause a big sell off on Wall Street.

In today’s world, good (economic) news is bad news, as it would mean that the stimulus would go away. On the other hand bad economic news is good news, because it implies that the economy needs further stimulus with the Fed leaving it in place.

With yesterday’s disappointing GDP release, which showed the economy growing at only a revised 2.4% last quarter, investors are likely to be relieved. Today’s report that consumer spending surprisingly declined last month will reinforce that notion. Perhaps most important of all is that inflation remains subdued. Today we learned that inflation has been running at only .7% for the last 12 months. Of course that’s the government inflation indicator, because we all know that our politicians do not eat, drive, turn on the heat, or buy milk.

Deflation aka “negative inflation” is a major concern because “deflation” is enemy #1, as I discuss in Facing Goliath, and all the Feds stimulus effort is not creating inflation as many feared. Japan has been in the doldrums for over 20 years with deflation, and they just started a massive stimulus program in an attempt to create inflation. It is my belief that with inflation below the Fed’s 2% target, the printing presses will continue working overtime.

That said, the market is overdue for a correction and although they hurt, they are necessary. Historically, June has been one of the poorer performing months of the year. Since 1949 it has advanced 33 times and fallen 30 times, close to equal. But the poor year’s performance outweighs the positive year’s gains, giving June an average -0.1% loss.

We have been living with lower than normal volatility, so expect that to rise along with your anxiety and nervousness. I naturally hate to say that, but that’s just what happens when the markets pull back, even if only for the short term. As of last week, the Dow had made it over 100 days without a 3 day losing streak. This is the longest streak of its kind ever!

All investors must prepare for the pullbacks and realize that they can come at anytime, and not to panic. Too many investors are underinvested, and with bond losses mounting, the appeal to move to equities remains powerful.

We are sure to see more volatility and painful pullbacks, so prepare your heart, mind, and most importantly your portfolio so that you are invested properly and positioned to get the best returns with the least risk possible, especially if you are retired or within 5 years of retiring.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy, which is designed to manage risk and deliver strong long term returns, and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call a free consultation today at (916) 925-8900.

Written by Keith Springer 5.23.13 

Ben Bernanke is the keeper of the coin that the Federal Reserve uses to flip when deciding policy. Since the crash, investors have been torn. On one hand, they know that the massive stimulus programs will do more harm than good for the economy in the long term. On the other hand, it has been the sugar in the cake fueling this market rally, and no one wants to give up sweets no matter how bad they are for you.

Just yesterday, Bernanke spoke to congress declaring that ending the QE programs prematurely would endanger the recovery, just as the economy remains hampered by high unemployment and government spending cuts. Naturally this was good news, causing the market to rally. However in the Fed minutes that followed, it was revealed that they could decide to scale back the pace of bond purchases at one of the “next few meetings” if the economic recovery looked set to maintain forward momentum. Is this a hint of things to come or just CYA? Only time will tell, but clearly the Fed operates on the Ralph Kramden “heads I win, tails you lose” platform.

So here we stand. If the Fed takes away the punch bowl, they will do so because they feel the economy is strong enough to stand on its own. This will obviously be good news on the whole. The concern comes from how the market, a market that has been addicted to stimulus, will react in the short term.

The longer term picture is easy to forecast however, as the demographic trends are crystal clear. As our 80 million baby boomers retire, they will be followed by only 65 million from generation “X” who earn half as much. When you add in the tax increases, along with spending cuts on top of these Baby Boomers aggressively saving for retirement and paying down their debts, you take huge swaths of money that might have been spent in America’s malls out of circulation. This forces businesses to have less reason to borrow to expand their operations in a period of lukewarm economic growth. These issues are well discussed in Facing Goliath – How to Triumph in the Dangerous Market Ahead, and it is critical that investors fully understand these concepts.

Investor Strategy

I have long believed that once the stimulus ends, so will the rally, and I have faith that Ben Bernanke and his financial puppeteers believe that too. This reason, along with the fact that inflation is below their target and deflation is the real enemy, the bond purchases will continue for the foreseeable future. With that in mind, any correction that comes from fear will likely prove to be a buying opportunity, but don’t bet the farm on it! Simply Invest for need, not for greed,

Bonds on the other hand should be avoided. The 30 year bond market rally is over. Bond and particularly bond mutual fund investors are about to be taught a very painful lesson. Naturally we must own some income or non-stock assets to lessen the risk of having just stocks for our clients, so we will be looking to funds that concentrate or have the flexibility to focus on global specialty, local currency, and emerging market bonds.

The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market. Learn how to get most of the upside of the market without nearly all of the downside.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900.

KTXL FOX 40 | 5.20.13 6:45 AM – Keith Springer, president of Springer Financial Advisors, appears on KTXL FOX40: Is there a possibility of a new housing bubble?
KTXL FOX 40 | 5.17.13 6:45 AM – Keith Springer, president of Springer Financial Advisors, appears on KTXL FOX40: Dell sales continue to drop as they try to take the company private; JCPenney to rebrand
KTXL FOX 40 | 5.16.13 6:45 AM – Keith Springer, president of Springer Financial Advisors, appears on KTXL FOX40: Tesla, electric car maker, to give back federal loans

Written by Keith Springer 5.16.13 

Stocks continue to inch higher as investors remain stumped. This is the most hated rally in my 29 years of managing money. Nothing in the economy supports these new highs, except of course one thing: Ben Bernanke is “making it rain” (and so are his good friends at the European Central Bank (ECB) and the Japanese central bank (JCB) ). As I said last week, Ben is afraid of being lonely, and “You don’t fight the Fed chairman.”

Most investors feel the Fed will eventually have to quit printing money because they are creating hyper-inflation. The reality is that we are in a negative inflationary, otherwise known as a deflationary environment. Yesterday’s economic reports were eye-opening for many on Wall Street, although certainly not for readers of this newsletter. Factory output, manufacturing production, and industrial capacity utilization, all dropped like a rock as global demand is waning.

The alarming report came from the  Producer Price Index (PPI) , that shows the inflation level, which came in a massively surprising negative .7%. This was the largest decline in wholesale prices in almost 4 years. Clearly all of the global stimulus measures can’t stand up to the massive demographic headwind faced by the entire developed world, which I explain in Facing Goliath – How to Triumph in the Dangerous Market Ahead.

Although this is harrowing news for the economy, as a whole, it is good news for investors. How can this be, you may ask? Well, said the blind man as he picked up his hammer and saw, this data gives the Federal Reserve incredible leeway to keep stimulating the economy with an easy monetary policy. Or in other words, the world’s central banks are making it rain.

My fear continues to be the end of Quantative easing, which does not appear in the cards anytime soon. With global demand waning, and deflation not inflation the fear, money will continue flow and stocks will benefit. This will continue to be the most unloved rally in history, at least for a while. However, when we start to see overwhelming investor pessimism turn to optimism, that will be the signal to run for the hills.

Investor Strategy

With the commitment by global banks to continue the money printing, and with cash and CD’s giving a negative return after inflation, investors have to be invested. The “sell in May and walk away” correction was far too expected this year, and has likely been pushed off until later in the summer. The market does not crash when everybody expects it to. Investors should be invested, but very selectively, looking to get decent returns based on your personal needs, and ignoring the averages. Invest for need and not for greed™ has never been more apropos. When this market corrects and/or the rally ends, it’s going to be very ugly and you do not want to be in the wrong place or doing it yourself.

The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900.