Enduring Financial Wisdom
January 2016
Silversage Advisors ®
Happy New Year! The Great Transition, our words for the present period following the
2009-13 rally, gives investors varying shades of grey, much like an upstate New York winter.
Jeff’s artistically-inclined, color-loving sister actually found some November-March beauty in
greys while pursuing a masters at RIT. She made it work, survived, even grew. We don’t
know where or when this ‘transition’ period will end, but it’s clearly going sideways, which
you know from the news and your accounts. Be patient. You have a model for each account,
consistently monitored, that should treat you well over time.
Registered Investment Advisor
19200 Von Karman Avenue
Suite 370
Irvine, California 92612
949-223-5175
888-969-7500
Fax: 949-223-5183
Tel:
Jeffrey M. Garell, CFP®, CLU
CA Insurance License #0A28462
Daniel D. Sands, CFP®
CA Insurance License #0D95725
In 2015, we made more changes to accounts than normal, adding more Exchange Traded
Funds (ETF) to accounts for efficiency and low cost; carefully pruning funds for the current
conditions; and taking tax losses on taxable accounts where prudent. For the first time in 4
years, we held a cash position, which ranged between 14 – 20% in most models by early fall
and through year end. As intermediate-to-long-term investors, we don’t generally see much
utility in holding cash, preferring the model to do the heaviest lifting for clients over time. But
the combination of market conditions and our clear need to rotate several positions
suggested that holding the cash makes sense.
Using a football analogy, you are the owner and Silversage is your coaching team. It’s
halftime, we’re down by 4, and think we should be ahead by 7. That’s about how you feel
right now, right? Would we scrap the entire playbook we’ve been practicing and bench the
starters? Heck no! But we’d certainly make some adjustments to address game conditions.
That’s what we did in your portfolios in 2015, and continue to do so. You have an appropriate
model (or “game plan”) for each account, and most of the holdings (“players”) are doing just
fine. Let them do their work, even through frustrating games during the season. It’s not all
grey.
Will 2016 see the U.S. economy pulled into recession by the rest of the global weakness, or
remain in a low-growth mode? Some call this period a “growth recession,” a rebound so
weak, it feels like a recession. Grey Poupon, anyone? China’s slowing growth, and certainly
its sudden currency devaluation last summer, triggered the summer stock selloff. Expect
more dislocation with China. Oil has yet to find a bottom. While cheaper energy provides
consumers with more wallet dollars, a severely depressed oil sector clearly is negative for
stocks and the economy. Expect the dollar to continue to gain strength, and thus slowing
corporate revenue for US-based companies whose goods become more expensive to
foreign buyers. Positively, the US has produced the best back-to-back years of labor growth
in ‘14-15 since the late 1990’s. Household balance sheets are far stronger now, greatly
reducing recession fears.
We will write more on the economy and markets in our February Perspective.
Finally, we remind you that brokerage 1099s will be sent to you around the end of February.
We suggest you make your appointments with your tax preparers in March, and we further
suggest that you don’t file completed returns until early April, just in case you receive a
corrected 1099 in early April.
As always, questions and comments are welcome, especially during these ‘grey’ times. We
thank you for the opportunity to serve you and your family.
Warmly,
Jeffrey M. Garell, CFP®
Founding Principal
Securities offered through Geneos Wealth Management, Inc., Member FINRA/SIPC
Advisory services offered through Silversage Advisors®, Registered Investment Advisor
Daniel D. Sands, CFP®
Managing Principal