• Adams Financial Concepts,  Current Events,  Return on Investment,  The Investment Industry

    What Is Factor Investing?

    The latest fad in investing is “Factor Investing”, according to the August edition of Financial Adviser Magazine. Like a bad fad diet, these investment methods come around every few years (factor investing dates back to the 1970s[1]) and claim to have found a method for stock picking that will win every time. Factor investing relies on five genuine factors which are, according to academics, Value, Quality, Momentum, Size, and Volatility. When it comes to understanding investment methodologies, I find it helpful to imagine them along a line: I am an active investor. Does this top-down investment methodology work? I don’t think so; as an active investor with a bottoms-up approach,…

  • Adams Financial Concepts,  Return on Investment

    Indices

    Have you heard the story of the Baltimore Stockbroker? It goes… one day, you receive a letter in the mail from a stockbroker, personally addressed to you, predicting that next month a certain stock will go down. You keep an eye on that stock, and it does indeed go down. You receive another personal letter from the stockbroker, predicting that another stock will go up next month. Curious now, you watch that stock over the next month and lo and behold, it does indeed go up! And month after month for ten months, this same stockbroker sends you letters accurately predicting the ups and downs of stocks. At the end,…

  • Current Events,  Mile High View,  Trade War

    We Are at War

    The late Chuck Knox, the first coach to get the Seattle Seahawks into the NFL playoffs, had a saying: “You have to play the hand you are dealt”. In football, that is to say, you have a limited number of players, some of which might be injured, the weather may be working against you, the rival team may be more skilled, but regardless you must do your best with your team. This eletter is neither political commentary nor meant to be political in any way, but as investors, we must address the trade war between America and China. Understand too this is not an easy exercise or simple analysis; I…

  • Uncategorized

    Why Do Financial Plans Fail?

    You have likely heard of Financial Planning, and you may even be using it yourself to prepare for retirement. Although it has become a very popular way to create portfolios, I have come to believe that traditional Financial Planning has four specific flaws that may be fatal. Since realizing how risky Financial Planning was, I have begun creating portfolios which have a higher return and create a margin of safety (or a substantial windfall of extra savings above and beyond what is nominally necessary for comfortable retirement) to mitigate what I believe are significant risks as the market changes with new technology and industries. Our view is that traditional Financial…

  • Current Events,  Mile High View,  Trade War

    Predictions 2019: The Truth About China

    Recently, China has been causing no end of concern for the American investor. The Trade War that sprung up between the United States and China has caused fluctuations in the market as the talks have gone well or poorly, and, as of this writing, nothing has been resolved. Investors are wary of what could come next. I believe there is a historical model that we can use to understand China’s end goals and the means they may use to get there. At the same time, we have a window into China’s longer-term approach by looking at what China has done in steel production and the impact it has had on…

  • Current Events,  Mile High View

    Recession Indicator Flashing Red – Is it time to head to the exits?

    “Dow falls 460 as US Recession Indicator Flashing Red” reads a CNN Headline from last Friday. Is it time to head for the exits? Are we tumbling into a recession? The “bond vigilantes” are out in force waving the caution flags. But could there be another explanation? What is the red flag? The yield on 3-month treasuries is now higher than the yield on the 10 year treasury bond, a condition known as “inverted yield curve”. The yield curve is a graph of interest rates on the vertical axis and the length of time on the horizontal. In the past and inverted yield curve has correctly predicted 9 of the…

  • Current Events,  Mile High View

    Impeachment and Investing

    What happens to the markets if President Trump is impeached? It isn’t my intention to give a prediction on if he will or will not be impeached. I am writing this to analyze what would happen if he is impeached, so that you, and your investments, will be prepared in the event. I was an Eagle Scout and the motto is “Be Prepared” – Be prepared for the worst and hope for the best. That is not the purpose of this eletter; this is about the markets, not the merits (or lack-thereof) of impeachment. I do not believe history repeats but that it rhymes. There is no way to know…

  • Current Events,  Return on Investment

    What do WWII Planes and Investment Strategy have in Common?

    What do missing bullet holes in World War II aircraft and investing in today’s market have in common? Let’s begin by explaining the importance of the “missing” bullet holes. When telling stories of war like World War II it is only natural to think of the action, but there were silent thinkers who also contributed. The Statistical Research Group (SRG) was charged with determining how to armor the aircraft to reduce the number of planes shot down by the enemy. With too much armor, the planes were slower and could more easily be shot down, and with too little, the planes could not survive the bullet hits. The SRG began…

  • Current Events,  Mile High View

    2019 Predictions

    One of my favorite quotes is from Yogi Berra: “Predictions are difficult, especially about the future.” Most years I believe that applies. I believe 2019 may be the exception. 2018 started strongly and continued until the end of August, and then not only did the S&P 500 wipe out all the gains but ended down 4.39%. In my opinion nothing characterized that what happened more than December 24 and December 26. On December 24, the DOW Jones 30 plunged 653 points and the next trading day on December 26, the DOW charged upward 1,024 points. What changed in the 36 hours from December 24 to December 26? Nothing. Computer algorithms…

  • Current Events,  Mile High View

    The Impact of Fracking

    The stock market selloff Thanksgiving week 2018 was the worst Thanksgiving week since the 1930s, during Franklin D. Roosevelt’s administration. Why this sudden drop in a year of highs? And what impact will we see? In my opinion, the selloff stems from changes in the largest industry in the world. And few people recognize it. The Bush-era tax cuts, the largest ever passed, saved the average family $315 a year. The changes that are taking place now will save the average family $1,750 a year and will probably increase. Oil prices dropped from $76 a barrel to $51, and I expect oil will gradually drop even further. The energy industry…