Broker Check

October Newsletter

October 3, 2019 

“…Success is Being in the Right Place at the Right Time”

With three quarters of 2019 now behind us, we should take a moment to celebrate the US equity markets’ biggest year-to-date gains in more than two decades, as the longest bull market on record steadies itself for what is starting out to be another volatile October.  On a year-to-date basis as of September 30, 2019, our globally diversified equity portfolio has surged by 19.24 percent.  The surge was led by the alternative equity category returning 24.38 percent; the domestic equity category returned 22.56 percent; the international equity category returned 15.48 percent; and the global allocation category returned 14.73 percent.  Not to be outdone by equities, the alternative income category returned 17.34 percent as interest rates continued to fall.  Rounding out the aggregate portfolio, the bond/CD ladder returned 7.34 percent; also, as a direct result of lower interest rates.  When aggregated and reduced by management fees, the net total return (growth and income) of the aggregate portfolio was 13.87 percent for the nine-month period.  The current indicated yield for dividends and interest is 4.5 percent.  The current yield has dropped from the June 30th indicated rate of 4.8 percent as a result of loftier equity valuations and lower interest rates available on new bond/CD ladder investments.  Despite falling interest rates worldwide (10-year US Treasury rates are now at 1.5%), the current yield on the bond/CD ladder is at 3.2 percent.  Note that the decline in rates on US Treasury borrowing is clearly an indication that investors are uncertain about the global economy, the up-and-down trade talks with China and the Federal Reserves’ current path of monetary easing. 

We are very pleased to report our favorable results for the two longer (and more meaningful) time periods: 

As of September 30, 2019


 For the one-year period, the equity stalwart was the alternative equity category at 13.35 percent; and the income leader was the alternative income category at 11.12 percent.  Just as a point of reference, the S&P 500 index returned 2.15 percent for the same one-year period.  Note that the one-year returns came primarily from the tactical allocation changes we made over the last year to take gains from the high-flying domestic equity allocations and moving the proceeds into the alternative

equity and alternative income allocations. The defensive moves were made to protect the principal base in the aggregate portfolio; think “Buy Low, Sell High and Diversify”.  You should note that the alternative income positions are primarily preferred stock and utility stock securities that are reported on your monthly TD Ameritrade statements as equities.  For the ten-year period, the domestic equity category leads the way with a 212.34 percent return; and the alternative inco

me category returned 106.90 percent.  Again, for reference, the S&P 500 index returned 181.60 percent. 

It appears that the markets are once again staring at a “Red October” as the first trading days of the fourth quarter produced dramatic valuation declines as investors worried over reports of slowing US manufacturing activity and slowing rates of new job creation.   If there is any good economic news, it is that our economy’s growth is just slowing down and not falling into negative territory.  Nevertheless, without some positive earnings reports and forecasts for future growth, our markets will struggle to hold onto the year-to-date gains.  We believe that the tactical portfolio re-allocations into alternative equities and alternative income positions will keep our managed portfolio ahead of the broad equity market indices; primarily as a direct result of the strong cash flows projected.  In the meantime, all portfolios with planned for distributions have “money in the bank” to meet all distribution requirements without the need to sell into a down market. 

Our primary brokerage firm, TD Ameritrade announced this week that its U.S. brokerage firm will eliminate commissions for its online exchange-listed stock trades, moving from $6.95 to $0, effective Thursday October 3, 2019.  The elimination of the discount commissions will have a nominal positive effect on future performance results.

As always please contact us if you have any questions.

Stephen Wheeldon, CFP®