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A Better Way…

Kirk SpanoAccording to Warren Buffett, the top 2 investing rules are…

Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.  

The most important aspect of financial planning is having an investment approach that protects you from large permanent losses and still gives you an opportunity to make money over the long-term.  I founded Bluemound Asset Management after seeing that most of the sales driven financial industry comes up lacking.

My name is Kirk Spano. I am visible and easy to follow in the media. Please take some time to read about the advice I have given. Then, if you are ready to find a better way to secure your lifestyle and create a legacy, contact me so that we can talk about what is important to you.

MarketWatch  Fox Business  WisBusiness.com  Seeking Alpha      Scutify

Avoiding the Next Crash & Investing in the Next Boom

In January 2012 I told people on MarketWatch not to miss the upside coming in American stocks, especially energy stocks, most of which doubled and tripled within two-and-a-half years. By June of 2014, again on MarketWatch, I told people to sell their oil and gas stocks, most of which were cut in half by December 2014.

Click for your Special Report

Today, I am telling people that the next few years are lining up for some very negative events in parts of the world that will effect your portfolio. In my special report “The Two Most Important Trades You’ll Ever Make — Avoiding the Next Crash & Investing in the Next Boom” I discuss how to protect yourself and how to preserve your lifestyle. 

Request your free report today.

2012 Another Year the World Won’t End

January 2012

2012: Another Year the World Won’t End

Throughout 2011 we heard proclamations of doom and gloom from market pundits to gold traders to vote seeking politicians to assorted snake oil salesmen to the converts of ancient Mayan religion.  Each has a version of a coming apocalypse, some including hyperinflation, 50% unemployment, widespread famine, world war or complete destruction of the globe due to galactic forces beyond our control.  In my estimation, each is about as likely as the other to occur, that is, not very likely at all.

If you will recall, on several occasions back in 2007 and 2008, I discussed the vast financial problems that the globe faced. Today and recently, those who missed the actual financial collapse are running around telling us about a coming new bigger and badder financial destruction to come. To put this as plainly as possible, they are very late to the party.

While it is possible, if not probable, that the global economy and financial markets will operate on very uneven paths for an extended period, the big financial debacle has already occurred.   Could we see another stock market drop of 30%?  Absolutely.  Is real estate likely to keep falling in the short term?  Probably.  Will governments continue to politic us into migraines and slow solutions?  What else is new.

But, and this is important to observe, there are forces out there that are creating balance as you read.  The slowing of developed economies is being offset by growth in developing economies.  The forces of deflation and the forces of inflation are nearly balanced on aggregate (though as any shopper can tell you are uneven from item to item).  The slow methodical approach of Germany and the European Union to gradually fix Europe is neutering quick clicker finger traders who are betting on financial turmoil in the hopes of making a fast get rich strike.

All in all, despite being unsure of things a year or so ago, I am quite confident that my newfound optimism is well placed.  

Why Europe Won’t Sink the World Economy

First and foremost, Europe is exceedingly rich.  The nations of Europe sit on so much accumulated wealth that while an unwinding of the Euro is possible, it would not be catastrophic to markets long term, in fact, for the United States it would probably be good.  Yes, there would be a great buying opportunity in stocks as markets trembled, but it would not last, as a rebound would be inevitable and probably as swift as America’s in 2009-10

The big threat to the global financial system was that Greece could outright default on its loans setting off a series of events that were uncontrollable.  The threat that Greece could default is still there.  However, the threat that it would be the first domino in a wider systematic death spiral is virtually gone.  Over the past few years, 2011 in particular, Europe has sufficiently isolated Greece, small to begin with, from being a threat to its neighbors and their banks.  

As the Germans and French have strung along European problems fixing things a bit at a time, much to the dismay of some financial market speculators and pundits, it has been the right prescription. 

One of the hurdles that the Europeans faced was adding capital to their banks, which has largely been done through actions of the European Central Bank, as well as, our Fed. Interestingly, another addition to European bank capital, though relatively small, has been the interest that speculators have paid to banks in margin interest as they bet against those same banks. 

Time is not on the side of speculators as they must pay to play.  The Germans seem to be fully aware of this and have been happy to patiently work through Europe’s problems forcing speculators to bow out or blow up. See MF Global which couldn’t hold things together waiting for their bets to pay off.  If this is not a global example of “don’t fight the Fed” I don’t know what is.

Europe will continue working through its problems and solving those problems a bit at a time.  They will not allow speculators to crash their economy outright, or their markets, even if their actions are questionable ethically in the eyes of some questionably ethical market speculators.

America is Slowly Ascending, not Descending

As I have written about at MarketWatch.com of the Wall Street Journal network, America is no longer on the slide down, we are on the ladder up.  I have a very simple premise.  The United States is slowly ramping up production of energy, metals and food throughout the country.  This is having multiple positive effects, slow to develop to the naked eye, but there nonetheless, including, increased employment, stabilizing prices for food, energy and goods, and increased high margin exports.  All of this adds up to a very powerful set of economic forces which will drive the American economy for decades.  

It is still necessary that the United States flattens its spending levels and corrects tax imbalances, despite the improving long term economy.  We still must balance the money coming in with the money being spent.  We have until about the end of the decade to adjust in order to avoid a crisis, as that is when our debts (bonds) truly start to come due.

There will be some hard choices to be sure, but we will make them one way or the other.  As long as people realize that the riches of America’s natural resources are here for all and not just a few, and recognize the environmental and financial issues that come with exploiting our resources, things will work out.  

 

 

Buying Last Year’s Losers

In 2011 I started buying certain assets that were down 30% or more.  Unfortunately, some of those assets continued to fall.  It is from this experience the saying “don’t catch a falling knife” comes from.  That saying is a generally false premise however.  It is almost inevitable that those who buy near market and asset price bottoms do the best long term.  

Already this year several of the things that we bought in 2011 are up far ahead of the markets.  While nobody knows how things will shake out the rest of the year it is becoming more possible by the day that last year’s losers might very well be this year’s winners.  Luckily for us, we have a few of those.

An important fact to know is that the total amount of stock available on American stock exchanges shrunk significantly last year as American corporations bought back more stock than they have issued in the past year.  This generally happens when companies feel their stock is cheap or at least they have the money to do it.  This is a powerful catalyst in waiting for stock prices as the supply has shrunk and at some point demand will again climb from various investors domestic and foreign.

Many international markets got crushed in 2011 pushing valuations to very low levels.  China was particularly hard hit as they came to the end of a five year plan.  Their new plan is starting now, and generally these new plans come with quite a bit of front end financial support.  As a creditor nation, China can afford to spend some money on growth.  The combination of markets reverting to the mean on valuations and a strengthening United States seems nothing but good for equities in the intermediate term, though, once again I’ll say, who knows what can happen in the short term.

 

 

 

 

For the readers who have been finding me online, as well as my clients, see my articles at MarketWatch.com and Motley Fool for some specific ideas and insight on what I am doing.  You can keep track of when my articles come out by “liking” my business page on Facebook, following me on Twitter.  Also coming soon for local readers, I will be doing a series of financial articles in the community “Now” papers beginning in February.  Finally, if you haven’t watched my Fox Business interview yet in which I discussed European stocks, take a peak.

Your feeling better by the day Advisor.

Kirk Spano

Update: Your Major Risk in 2012 is Missing the Upside at MarketWatch.com

 

This letter contains forward looking statements that may not come true.  Past performance does not guarantee future results.  This letter is intended for informational purposes only, and reflects only my thoughts and opinions in general, and do not constitute individual advice.  Opinions expressed may change without prior notice.

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Investment Programs

All of our investment programs provide a level of service and expertise rarely found within the retail financial industry. Our programs also are at the low-end of the fee scale relative to the financial industry. All of our investment management and consulting services have access to our founder and nationally recognized advisor Kirk Spano.

 Punch Card Stocks

Based on Warren Buffett’s idea that if there was a limit to how many companies we invest in, that our investments would be less risky and perform better. Learn more…

Retirement Income Options

A flexible income strategy designed to handle any interest rate environment and provide enough growth for a long life.  Learn more…

Resource Opportunity

Scarcity for resources and looming inflation require that any portfolio have exposure to hard assets and companies that provide resources for our lives. Read more…

Investment Coaching

A flat-fee program for self-directed investors who would like a well regarded professional to consult with and learn from. Very limited space.  Learn more…

Tactical ETF Allocator

A unique diversified low cost exchange traded fund (ETF) strategy for dealing with an uncertain global economy. Learn more…

Mutual Fund Allocator

A low cost flat-fee program for traditional investors who want a better way to manage a mutual fund portfolio without new commissions.  Learn more…

401(k) Monitor

Fund selection, contribution strategy and ongoing asset allocation recommendations for your at-work retirement plan.  Retire Sooner…

Annuity Rescue

A chance to reduce annuity expenses, increase net returns and avoid the nasty surprise awaiting most annuity owners.  Learn to get more

Kirk’s Recent Quarterly Letters

Dealing With Today’s Volatility

“I don’t really care about volatility.” Warren Buffett

Asset Returns vs InvestorsI put off publishing this letter for about two weeks, as over the past month, stock market volatility has increased quite a bit. While we are not seeing the wild swings of 2011, we are seeing a significant reaction to the overdue realization that the enduring slow global growth I have talked about multiple times and the end of quantitative easing by the Federal Reserve are both real. 

Buffett’s quote above is meant to convey a message that emotions should not be a part of our investing process. He goes onto discuss how volatility gives us opportunities to buy great companies at good prices.

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Freedom to Unite and Invest in Tomorrow

UpWhen I was a kid I dreamed about being an astronaut, a baseball player, a rock star and the President. As I hit my teen years and I hadn’t done much musically, I dropped the Mick Jagger aspirations and focused on baseball. By senior year of high school I knew that baseball was fun, but that I wasn’t an elite player so I had to drop the Robin Yount dream too. 

When I got to college, I focused on having a good time and taking courses that might help me when I grew up. For awhile I thought I’d be a lawyer, but a great uncle gave me some guidance…

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The Great Retrenching Continues…

Total DebtIn September of 2008 I had coffee with a group of executives from local manufacturers, it was just after the financial crash had started. One company president in the group — a particularly political sort — asked me how long the economic slowdown would last? I said “until the middle of the next decade sometime.” He laughed at me.

Fast forward to today. What we know now is that the economy still has not recovered in real terms and that it will be a few more years until it does. The United States is just about in the middle of a demographic depression that can not be fixed with legislation or easy money. We must wait until household formation and spending by the very large millennial/ echo boom generation ramps up. Last year was the first year since 2008 that we saw an uptick in the birth rate, so that is a positive, however, it is only a baby step.

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2014 Another Crossroads 

S&P 5002013 proved to be a profitable year for investors. The S&P 500 rose 29% and set new record highs. Global balanced indexes, more representative of most people’s portfolios, also did very well by returning about 20% despite a tough year in China which lost 9%.

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Volatility, Opportunity and the Next Crisis

Secular Bulls and BearsOver the past several years, I have discussed the monumental demographic changes that not only America is dealing with, but also that Europe, China and Japan are dealing with. The cumulative impact of national and personal debts, de-leveraging from the bubbles of the 2000s and the four largest economies in the world having aging populations has created global demand destruction that is not likely to end soon.  

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