1/30 Portfolio Update

No changes this week.

We are firmly entrenched in a strong cyclical bull stock market both techincally and fundamentally.  Earnings season has been good, the economy is getting stronger and cash flows continue out of bond funds and into equity funds.  Stocks relative to cash favors owning stocks.  Stocks vs. bonds favors stocks.  Stocks vs. commodities favors stocks.  Don't forget to check out the Cheat Sheet for my asset allocation and holdings.

However, Friday's negative market activity deserves mention and gives me an opportunity to discuss an important topic and one that will be a recurring theme in this blog.  The 24 hour news cycle and the injustice it does to anything truly relevant in the world today.  Well, that may be a bit harsh but just remember that the news channels compete for your attention the same way that MTV and TLC do.  They do not necessarily have your best interests in mind and they certainly do not care about your portfolio.  So, please don't let the chatter influence your financial decision making.

"The News" as it has come to be known over the years should really be called "The Noise" or to be generous "The Entertainment".  So if you were paying attention to the news on Friday, you might have heard something like, "The Dow fell sharply amid concerns of unrest in Egypt today as protesters lined the streets..." and so on.  Oh wait, did someone say there was political unrest in the middle east... stop the press!!  My God, Chicken Little, the sky IS falling... turn that TV back on.

While this may have some importance on a social and political level, it should in the short term, have very little influence over your portfolio decisions.  So don't get all worked up.  I'll keep an eye on the potential ripple effects this could have on the markets, the same way I kept an eye on the Greece and Portugal noise that slightly affected a strong bull market a few months back.  The fact of the matter is that the stock markets have closed higher for each of the previous NINE weeks.  We are, technically, in an over bought stage (78% over bought) of this bull market and are due for a pullback.  Hence, as I mentioned last week, I would not be buying anything here.  If I owned it, I would hold it but if had pile of cash and was looking to jump in today, well I might go skiing this week and see how things unfold.  It could just be that as soon as the "News" finds its next hot story we will have a nice entrance point to put some of your money back to work.

So here is the breakdown as of 1/30.  We beat the S and P in week 1 by 23 basis points.   You can always check out the portfolio's performance since 1/24/2011 relative to the S and P 500 at the Score Card tab.

Holdings
US Stock	Type	Ticker	Weight	Shares	Purchase Price	Total Starting Value	Current Price	Total Current Value	% Gain (Loss)
Cons. Disc.	Vanguard ETF	VCR	10%	165	$60.50	$9,983	$59.79	$9,865	-1.17%
Real Estate	Vanguard ETF	VNQ	10%	180	$55.50	$9,990	$56.42	$10,156	1.66%
Materials	Vanguard ETF	VAW	10%	123	$81.00	$9,963	$81.62	$10,039	0.77%
Technology	Vanguard ETF	VGT	10%	158	$63.25	$9,994	$63.52	$10,036	0.43%
Small Cap	Vanguard ETF	VB	20%	279	$72.25	$20,158	$72.59	$20,253	0.47%
Iternational Stock			30%
Emerging Markets	Vanguard ETF	VWO	30%	638	$47.00	$29,986	$46.01	$29,354	-2.11%
Commodities			10%
Gold	IShares ETF	GLD	5%	38	$130.00	$4,940	$130.28	$4,951	0.22%
Silver	IShares ETF	SLV	5%	188	$26.50	$4,982	$27.30	$5,132	3.02%
						$99,995		$99,786	-0.21%

Part One: Population

The 5 Major Forces Affecting Your Investment Performance

by: Ben Crowley

1.Population

2.Supply and Demand

3.Asset Allocation

4.Relative Strength

5.Timing 

Part 1: Population

Don’t worry, I am not going to throw it all at you at once.  This will be a five part series because each topic deserves, at the very least, its own article.  Today, my goal is to start  you thinking about the population and its possible effects on your investments.

I chose to lead off with population because understanding population trends is not only critical to your investing success but also critical to strategic decision making in any business venture.  Whether you are a student thinking about what field to enter, a business owner considering a launch of a new product or a corporate executive managing your organization, having at least a top level understanding of population trends helps make those decisions a little easier.  Do not fight the forces of population trends for it is a fight you cannot win.  It is best to get in front of that wave and ride it home.  You don’t have to be an expert but you should know the basics. I’ll keep it US centric for now but global and country by country trends are important to understand as well.  I will touch on some important ones in future posts.  

There are about 300 million people living in the United States right now.  About 80 million of them were born between 1946 and 1964.  That means as of 2011 the vast majority of people in the country are between the age of 45 and 64.  These people are known as the Baby Boomers and they own and spend most of the money in our financial system.  The world we live in today was shaped by this group of people.  From baby food to the suburbs, entire industries have been created to service this group of Americans.   Soon, if they haven’t already, they will be retiring and aging and spending the money they have that is locked up in retirement plans and capital will begin to flow back into the markets.  There will be much more to come on the boomers, but for the sake of this article, just know that they are out there and are THE major force behind the markets.  

It is also useful to know that there are about 70 million young adults who were born between 1985 and 1995.  That puts the next major demographic at 16 to 26 years of age.  They are the boomers’ kids and they are usually the beneficiary of the boomers’ money.  Toys, technology, education and food are on the menu for this age group.

“I’ve heard all of this before, Ben.  So what does it all mean for my investments?”  Well, if population is the major driver of demand for products then the demographics with the most people will use the most stuff.  As we age, we tend to need and enjoy different stuff.  I’ll let you deduce what industries will benefit most from the changing ages of population.  

I believe that the prolific stock bull market from 1980 to 2000 was a direct result of the boomers saving for their own retirement.  The creation of the 401K plan in the late 70‘s was the perfect vehicle for the working age boomers to automatically save for retirement.  What is also did was create an automatic, bi-weekly infusion of fresh capital directly into the US Stock Market.  The result was a 20 year and over 1000% gain in the S and P 500.  A rising tide was, indeed, raising all boats.

I also fundamentally believe that the massive swings in the market over the past 10 years are a direct result of the boomers moving their money around, investing in different asset classes like real estate, bonds, gold, commodities, kids' education etc., and I believe that this type of market will continue for at least another 15 years.  We have seen and will continue to see massive volatility and relatively rapid swings in prices of goods and investments on a much more frequent scale and shorter timeline.  

Why 15 years you might ask?  Here is why.  The other sad state of affairs is that if you are like me and are somewhere between 27 and 44, well, there are just not that many of us.  About half as many, actually.  In fact, the lowest birth rate on record since the great depression was 1977.  The year I was born.  “So What?” you might ask.  Well, the problem is that we are all supposed to be working and saving and contributing to the great financial engine, but we are not.  We are busy paying off student loans, our mortgages, our car payments and our ridiculous credit card bills.  We are NOT filling the coffers at the same rate the boomers did, simply because there are not as many of us.  The investment market as a whole is not getting the capital inflow it needs to continue to grow.  “Sounds like a Ponzi scheme to me, Ben”.  Shhhh... you said it not me.  

Anyway.  What you need to know is that we are smack dab in the middle of what I see as a 19-25 year long secular bear market that is being driven purely by the changes in population. The markets will be in a volatile “holding pattern” until the youngsters between the age of 16 and 26 start working and saving or until the boomers pass on their wealth to the next generation.  Or by my calculations, about 2024.

“If we are in a bear market, should I even be investing?”  You should absolutely invest.  Just no “buy and hold”.  A secular bear market is really just a very volatile, but long term “flat” market.  if you look at 2000 through 2011,  we have had two major down turns and two major upswings in the stock market.  If you bought and held the S and P 500 back in 2000, you would have about the same amount of money today as you did then.  But if you sold in 2000, bought in 2003, sold in 2007, and bought in 2009, you would be up about 2000%.  You just need a system that helps you discern what type of investing climate you are in.  It is that simple.  And we’ll get to it.  This lesson on population was just lesson one on your road to developing that system of investing.  

Lots more to come but for now just know that you need to be an active participant in your own investing success.  There will be and have been outstanding opportunities to make a fortune in the markets.  By reading this far in the article you are one step closer to having a long, successful investing life.  Stay tuned for the next 4 forces, but for now, begin to ponder the effects of population on businesses and prices of things.  Feel free to contact me with any questions or comments at info@investivusonline.com.  Don’t forget to check out my Cheat Sheet and Scorecard which will be updated weekly to track the portfolio’s progress.  Happy Investing!

Portfolio 1/23

Investivus will be posting a Portfolio Report each week.  The report will contain real time holdings in percentages and real time performance statistics, year to date performance and performance vs. benchmarks over time, etc.  These weekly reports will also contain portfolio and strategy commentary.

N.B.  If there is a major market development during the week, you will be notified by an emergency mid week posting.  This is and will be rare.  To be successful, you need to be patient.  If you missed your window to pull the trigger on an investment, it is always better to sit on the sidelines in cash than to go all in a few days or weeks too late.  But sometimes, it is better to be a few weeks late than a few months late.  This is usually more important advice when the investment is going down because things usually go down in a hurry.

As of today, pre market on 1/24/11 here is the breakdown:

Do not buy anything here.   If you own it, hold it but if you, like me, are in cash for whatever reason ( I just switched accounts from one brokerage to a different one) ... be patient.  The Bullish Percent levels according to Dorsey Wright are in the 80% range.  Way too high to feel comfortable making new purchases in the favored asset classes.  I'd like to see those come down to the 60% or even 50% range before I jump back in.  If you have no idea what I said, don't worry.  I will explain myself later.  For now just hang in there and feel free to email info@investivusonline.com with any questions.

Asset Classes
If I was to own a portfolio, I would be about 60% in US Stocks, 30% in International Stocks and 10% split between Gold and Silver.
I would not be holding any cash, other commodities or fixed income.  All of those asset classes are under performing relative to the others you can own.

*US stock exposure would be in Consumer Discretionary (10%), REITs (10%), Tech (10%), Materials (10%) and Small Cap Stocks (20%)
*International Stock Exposure would be in emerging markets only (30%)

Portfolio Would look like this:

VCR...10%
VGT...10%
VNQ...10%
VAW...10%
VB.... 20%
VWO... 30%
GLD... 5%
SLV...5%

I like Vanguard ETF's when I can get them.  Lots more to come on this and lots of room for debate, but for now, this is the idea.

We will call today, 1/24 "Day One" and the hypothetical account value will start at $100,000.  S and P 500 is at 1284 as of 9:47 AM EST.  This will be our benchmark for performance sake.

Investivus Mission Statement

Investivus: An Investment Blog for the rest of us.
   This blog is dedicated to and designed to help the 300 million working Americans who are NOT involved in the financial services industry.  Those of us who are tired of hoping that the market will bounce back from its latest 50% downturn.  Those of us who want to manage our own money.  Those of us who want to be responsible for our own financial futures.  Those of us who do not want to outsource our investment management decisions for a two to five percent of our assets under management.  It is a weekly blog intended to simplify and condense your investing life and provide you with the tools you need to make effective and timely investment decisions in any market cycle.
   The market downturns of 2001 and 2008 showed us that the buy and hold or "buy and hope" investing is dead.  The first 10 years of this century have left our investment portfolios flat at best and pushed our patience levels to the edge.  The 24 hour news cycles and endless chatter about the day's market activity have left us scratching our heads and incapable of making crucial decisions.  We need to be able to drown out the noise and follow a simple but effective methodology of investing that allows us to play aggressive defense in bear markets and capture as much upside as possible in strong bull markets.  We need to have an active strategy with a simple system of implementing that strategy.   The goal of this blog is to provide you with a real time, week to week look at the exact investment decisions and portfolio changes I am making.  In the mean time,  I am compiling a book with the background and crucial financial and economic topics that I use in my decision making process that enable me to cut through the clutter of misinformation and get on with my life.  The book will be entitled Investivus: The Guide for the Rest of Us, and I will keep you posted as to its progression.

For now, details about the investing process will be introduced in the blog and key topics will be discussed as time passes.  Each week I will leave you with the exact asset class breakdown and portfolio composition that I have and what ever changes I may be implementing or contemplating in the upcoming week.  This information is for you to do with as you please.  I am not a day trader and I am not a long term investor.  In short, I invest my money where, to the best of my analytical abilities, it should be invested TODAY.  If the overall situation changes and my preferred indicators change, then so will my investments.  Sometimes things change 10 times a year and sometimes they don't change dramatically for 6 or 7 years.

I am no longer a paid investment advisor.  I did not enjoy that business.  I liked the IDEA of it and am truly motivated by helping and educating people, but that industry is not where I wanted to be in the long run.  In October of 2010 I parted ways with one of the big wall street firms.   As of today, I am still a FINRA licensed financial advisor and securities broker licensed with the series 7, 66 and 31.  I also have and MBA with a concentration in Real Estate and Finance.  I have long been interested in business and the markets and even more so in the general idea of "finding a better way" to get things done.  My hope and desire is that I can help you find a better way when it comes to your own investing. Whether you are just getting started in investing or have been at it for a while... whether you are responsible for ten thousand bucks or ten million, the process and concepts I subscribe to are transferable.  I hope you find them useful.  Happy Investing!!