Lifeplan Advisors, Inc.

2/12/12

Volatility Chart

Volatility has spiked in recent days as demonstrated by the four indices I track on a daily basis. First of course is the CBOE index, symbol VIX. (Click chart to enlarge) illustrating the move from 17 to 20.79 currently.

 Below is Friday’s performance of a few selected securities/indices related to this return of volatility.

             Symbols                              Gain 2/10/12

• IWM 3/30 82 Puts                +20.55% Put options Russell index
• UVXY                                    +17.10% ProShares volatility ETF
• TVIX                                      +17.04% Velocity Shares ETN
• VIX                                         + 8.58% CBOE volatility index
• INDZ                                     + 4.99% Direxion India Bear ETF

(The above securities are extremely volatile and should only be used with great caution and a well developed trading plan)

I recently bought the two in bold and although both performed very well in hindsight my choices could have been better. My thinking on INDZ was based on its history in both up and down markets. I expected it to be up big in this ‘mini’ correction. It performed well Friday but was outperformed by a few other leveraged ETF’s. Oh well, ‘best laid plans of mice and men’ well, you know the rest. Read the rest of this entry »

1/23/12

We’re off to a rousing start this year, the so called ‘January Effect’ in full bloom. This run has been nearly uninterrupted as illustrated by the major indices, S&P 500, Dow 30, and NASDAQ all up since mid December 7% or more. But if 2012 is anything like last year with it’s many corrections, then now may be a good time to consider shorting the market. Read the rest of this entry »

1/5/12

As January goes, so goes the year, or so market history tells us. I know it’s early but by that metric we’re off to a solid start for the month. The S&P 500 and Dow 30 are up nearly 2% as I write, and the NASDAQ has gained over 2%. Ah but lest we become complacent remember volatility lurks beneath the surface, ready to upset the apple cart at any time. Read the rest of this entry »

12/18/11

The ‘bear’ is stalking the markets and the ‘bull’ is nowhere to be found. We’ve been in a ‘noisy’ (volatile) bear market since the first of May and the outlook does not look promising.

The financial crisis in Europe continues, gridlock rules the day in Washington, true unemployment is assuredly higher than government tells us, sentiment is negative, the list goes on.

The question is, how do we navigate our way forward from here? My answer, Read the rest of this entry »

12/2/11

Is Santa on the way with a year end market rally? Many signs point to just that. And we’ll need a year end rally to get most market indicators in the black for the year.

As of this writing the S&P 500 is barely showing life, up just 0.89% YTD. NASDAQ is still down -1.01% YTD, and the Russell Small Company index is off more than 5%. One of the few domestic indexes in the black this year is the venerable Dow Jones index, up nearly 6.5%.  (Performance numbers courtesy of morningstar.com)

And the foreign markets? Fuget about it. There’s a sea of red wherever you look, from Asia to Europe, red numbers in double digits.

I’m continuing to build our value oriented portfolios by loading up on high quality dividend paying stocks as these sell offs play out. I’m like a kid in a candy store when these sales occur, and they’re happening with greater frequency and severity. Read the rest of this entry »

11/14/11

Another speed bump last week on the way to positive returns for the year. About the time markets were beginning to look past Greece another problem appeared, namely Italy. Wednesday was quite volatile and erased 400 points from the Dow Industrials average.

The reality is Italy and a number of other nations, including the U.S., have faced and continue to face very difficult problems. The accumulation of debt over the last three decades at all levels, government and individual, threatens to overwhelm the feeble efforts employed so far to put the financial house in order.

We have fared relatively well to this point. Read the rest of this entry »

11/3/11

In spite of continuing financial problems in Europe, the moribund world economy, a stubbornly high U.S. unemployment rate, deadlocked Congress, stock markets of the world for the most part had a banner October.

(Click chart to enlarge). The 10 month simple moving average (SMA) line has flattened a bit but still indicates bear market territory, in spite of the October rally. Historically the 200 SMA turning down has indicated the onset of a bear market. (10 month SMA and 200 SMA are used interchangeably).  Read the rest of this entry »

10/14/11

We’ve had a nice run for two weeks or so, gaining over 10% on the S&P 500. Have we bottomed and now moving to higher levels? Only the market spirits and self appointed gurus know for certain. (Well, not really)

Our accounts have just been muddling along, no great gains, no great losses. We’re heavily in bond mutual funds for our most conservative accounts but that idea will need to be revisited soon. Interest rates have reached historical lows and bond prices are correspondingly high so the path of least resistance in the near future is likely higher rates and declining bond values. I won’t jump the gun and anticipate but await market technical indicators to point the way. Read the rest of this entry »

10/4/11

We indeed live in dangerous times, at least financially speaking. Again today the markets went on a roller coaster ride, down at one point 200 points on the Dow only to finish up 153 points for the day.

As measured at the intraday lows today the markets had corrected 21% from the April highs. The volatility, and the risk, is greater today than even 2008. Read the rest of this entry »

9/21/11

Yes the roller coaster markets remain with us. Just today the Fed released its latest salvo, or should I say mini salvo of solutions to bolster the economy. Here’s an excerpt from a ‘Fed’ press release today:

…………..To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. (My underlining)

This, coupled with the latest Obama jobs package is supposed to get the economy back on track. I’m afraid it’s far too little, and awfully late. More serious steps should have been taken long ago. But it is what it is.

So, in light of what the markets are throwing our way I’ve taken steps in recent days to put ourselves in a stronger position going forward. Read the rest of this entry »

8/30/11

And here we go! The roller coaster stock market went on a sickening free fall once again, causing us to nearly reach for the upchuck bag. It then bottomed, paused, and now screams to the top of the next dizzying height. Whatever you do hold on to that bag with all your might because this ride ain’t over yet!

Check out the chart below, (S&P 500), and imagine being in one of those little roller coaster cars careening along the tracks, slowly inching higher and higher, pausing, then plummeting downward, downward, until you think the little car will fly right off the track.

But no, just when you think the worst is yet to come, there’s a pause, and the little car  begins hurtling back to the heights yet again.

So what have I been doing on this wild ride? Read the rest of this entry »

8/22/11

The time to exit the stock market may be drawing near. I’m not basing that comment on all the negative news out there, or the insane volatility that sees 400 and 500 point moves in the Dow Jones average on a daily basis. Well, it is that, to a degree. 

But it’s much more than that. I’m not a predictor of future events but I don’t have to be. My potential exit decision is based on what the market indicators are telling me, telling the world, if only the world will stop and listen.  Read the rest of this entry »

8/16/11

That shot heard round the world in recent weeks was in a very real way another ‘flash crash’. The major indices gave back all the years gains and more in a matter of a few days. From late July to August 10th the S&P 500, Dow Jones and NASDAQ were all crushed, each down over 16%! The small company index, Russell 2000, fared even worse, off 21%. All this in a few short weeks! Overseas markets were not spared either as they fell in unison with our own domestic markets.

What are we, as modest investors trying to maintain our financial security, to do? My title ‘Stay in to Win’ tells only part of the story. The rest of my plan, the plan I maintain for family and clients, goes something like this. Read the rest of this entry »

8/10/11

Don’t let this market meltdown panic you into making rash decisions and taking hasty actions, but, be certain you have an exit strategy should it become necessary.

While I don’ advocate short term trading for most investors, I do stress the need to protect one’s financial security. And if that means getting entirely out of the stock market, then that’s what we should do. Read the rest of this entry »

8/6/11

Another market correction, the beginning stages of panic, will this be 2008 revisited? It’s too early to tell, although many signs are pointing to more trouble ahead.

Standard & Poors, one of the major credit rating agencies, just downgraded federal government bonds from the ‘gold plated’ AAA rating to AA+. This is the first time in history U.S. treasury bonds have ever been hit with a downgrade. What does this portend for the future? Read the rest of this entry »

8/2/11

We don’t need a theme park to take a dizzying ride. The 2011 stock market roller coaster has provided all the thrills and chills anyone could ever want. 

But wait! Haven’t our fearless leaders conquered the budget deficit, found the holy grail, and discovered the meaning of life? So how is it the markets had such a violent response today? Read the rest of this entry »

7/26/11

Gold and silver soaring to record levels, higher commodity prices spilling over to higher prices at the grocery store, the value of the dollar lurching its’ way to the graveyard of long forgotten paper currencies. All the preceding portends higher inflation ahead, right? Well, maybe not.

Yes there’s been much wringing of hands and gnashing of teeth over the spector of inflation awakening from its 25 year resting place. Maybe even hyperinflation. But I just don’t think it’s in the cards, at least not anytime in the near future.  Read the rest of this entry »

7/11/11

Do we feel lucky? The date posted above certainly brings luck and Las Vegas to mind. But, we’re investors, serious investors, so we don’t rely on luck. Instead we use logic and research to make the most informed decisions we can.

The markets are back to the upside from the recent lows of late June. Since 6/24 the S&P 500 is up nearly 6%, with most other market indicators following suit.

In keeping with my philosophy of buying on dips during Bull Markets I added CVX, CAT, LO, and MAPIX to our portfolios, all in late June. Why am I confident we remain in a Bull Market, even in these difficult times? Read the rest of this entry »

7/3/11

What a difference a few days make! My June 21 post talked about the stock market correction we were mired in and how it affected our accounts. Well, turns out we had already seen the bottom and since then we’ve had liftoff.

By mid June the S&P 500 had declined just over 7% since its late April high. It’s now recovered to the point where its just 2% lower than the prior high. Read the rest of this entry »

6/21/11

Stocks went on sale, and we became buyers. Yes it’s true there are many reasons to be cautious. QEII is drawing to a close, financial trouble continues to brew in Europe, Greece is on the brink, and our own government(s) is/are drowning in deficits.

But, stocks are on sale. And when sales appear, value buyers load up. I jettisoned our weakest holdings, Read the rest of this entry »

6/12/11

The current market correction is well into its second month and value investors are salivating. Many stocks are retrenching to yearly lows and a buffet of bargains is beginning to grace our tables.

Here’s a few of the Dow 30 stocks bouncing around 52 week lows. Bank of America (BAC) trailing Price Earnings Ratio (PE) -32, forward PE 6, Cisco Systems (CSCO) 11 and 8 respectively, Hewlett Packard, 8 and 6, JP Morgan (JPM) 8 and 7, Microsoft (MSFT) 9 and 8, Chevron (CVX) 9 and 7, and the list goes on. Read the rest of this entry »

6/7/11

It’s sometimes difficult to stay focused living next door to the the ‘Most Famous Beach in the World’. Bikinis and ocean surf can be very distracting but I try to stay locked in because you know, someone has to, right? And the focus this week is clearly directed toward the ongoing correction in stock markets across the world.

Since hitting highs on the major indexes in late April there has been steady erosion across the board. Domestically the SP 500 is down just over 6%  since the aforementioned highs, Dow Jones Industrials off over 6%, Nasdaq has slipped more than 6% and the Russell Small Company index (RUT) has fallen over 8% as of 6/6 markets close . Read the rest of this entry »

5/25/11

I’m buying oil today. Why, because Goldman Sachs said we should! And when Goldman Sachs speaks, people listen, right? Click Goldman Sachs

Well, my comments are a bit tongue in cheek but it’s true, GS is a major influence in the investment world, to put it mildly. They, JP Morgan, Barclays and others, along with hedge and sovereign funds control a mountain of assets, and when they swing their weight behind any asset class, that asset class usually does very well.

I did not buy any stocks however. I bought oil company options instead. I’m sticking to my game plan of owning ‘Value’ oriented stocks for the majority of our ‘Value Plus’ portfolio. At the same time I’m using a smaller portion of the portfolio to buy options and ETF’s. Read the rest of this entry »

5/19/11

The Bulls and the Bears are duking it out, as illustrated by the chart on the left. (Click to enlarge) It depicts the S&P 500 over the trailing 6 months. Note the mid April closing high of 1,370 which was barely higher than the mid February high
of 1,350.

The stock market is facing many headwinds, including the Sell in May idea that grips so many this time of year. Additional negatives include most markets being overbought, the end of QE II on the near horizon, and, well frankly the economy remains on shaky ground.

I’ve taken some cautionary steps the last few days, pruning laggards and those falling through our stop loss prices. One of those pruned was Seagate Technology, symbol STX. It rewarded us with substantial gains since purchase but was jettisoned due to it’s rapid price decline, falling 10% from its mid April high.

I also sold our silver holding, First Majestic, symbol AG. I was certain a snap back rally from the huge silver decline would happen but even though a rally did take place it was too weak to overcome negative sentiment in the silver markets. So AG was quickly sold before significant losses occurred. Read the rest of this entry »

5/13/11

The stock market is making me nervous. It’s gone up so far, so fast, nearly a double over the last two years.

The old traders mantra of ‘Sell in May and Go Away’ keeps playing in my head. This of course based on the market being more generous historically in the first and last quarters of the year, while often running into trouble through the summer doldrums.

Let’s see, what can I do to protect my clients gains? We continue to hold our ‘All Weather’ funds that have weathered past storms so very well. We hold significant amounts of cash, both for a buffer and fresh powder to buy future bargains.

I’ve got it. I’ll take a page from the book of heavyweights, successful hedge funds. I’ll buy some cheap insurance in the form of long, out of the money put options. For an explanation of options, click here

I recently purchased August SPY put options for our highest risk accounts, Value Plus. As the ETF SPY declines in price the put option increases in value. For an excellent explanation see the Mad Hedge Fund Trader, italicized below. Read the rest of this entry »

5/12/11

Sounds like an oxymoron I know but here’s how it worked. I sold Merck, symbol (MRK), the drug company for a modest gain. I added Teva Pharma (TEVA) to take it’s place. On the surface this seems to be a wash, or so one would think.

But I see it as a major plus and here’s why. At a $36.63 close Merck has nearly reached it’s 52 week high of $37.68. It’s PE of 71 tells me it’s expensive based on trailing earnings, and its’ prognosis for the next 12 months is moderate at best. Read the rest of this entry »

5/10/11

The great flash crash took silver to the woodshed, ripping 28% from it’s price in a matter of days. (Click chart on left to enlarge). A sign of things to come for the stock market? No one can know but it’s just another indicator of the risk inherent in todays markets.

These type of events also spell opportunity. Each time a corner of the market corrects violently, in this case silver and other commodities, we are given an opportunity to buy at lower price levels. And buy is just what I did.

I bought silver stocks yesterday for our Value Plus accounts. (Value Plus is the highest risk of our three portfolios.) I relish opportunities like this. The whole premise of Value Plus is to buy assets at discounted prices and we were handed this one on a silver platter, pun intended.

How long we’ll stay in silver no one can know. The markets remain treacherous and the political and economic landscape littered with landmines. Itchy trigger fingers controlling vast amounts of money hover over buy and sell computer keys all over the world.

As always I’ll rely on sell stops and common sense to protect ourselves from serious harm.

Disclaimer: The foregoing is not a recommendation to buy or sell securities. The securities markets entail risk.

5/5/11

Silver, gold and oil all took it on the chin the last few days. Note the chart on the left depicting the price of silver as illustrated by the ETF, symbol SLV.

(Click chart to enlarge) Also note the volume numbers in red at the bottom. Far above average volume indicates this is the probable meltdown of the silver ‘bubble’.

In just a few short days the price has fallen 28%! If nothing else this rout in the commodities  markets illustrates the value of a stop loss strategy.

For something as volatile as this silver ETF I use a 12% stop loss price, 12% below its prior high of $48.35. What this means is if we had owned the fund we would have sold at the $42.55 level. This would have protected most of our accrued gains and at the same time prevented a free fall in our equity. (We did own a silver/gold fund but sold a bit early on March 15th) Read the rest of this entry »

5/2/11

Looks like the stock market is getting an energy boost. News of the death of Osama bin Laden has rocketed across the globe with predictable effect.

The stock futures markets are pointing up, gold and oil down, and there is joy across the world, at least in democratic societies. The same cannot be said for some of the Muslim world. Contrast the comments below to see what I mean. Read the rest of this entry »

4/16/11

The stock market is looking a little tired right now. It’s not been able to breach its mid February high of 1,342 on the S&P 500.

The approaching week could be telling because earnings season will be front and center. Big bank names including Citigroup and Wells Fargo will be reporting. Also economy bellweathers including Apple, Intel, GE and AT&T.

In addition there will be reports on the economy, home starts, home sales, initial jobless claims and others. Each bears watching closely for clues on the direction of the economy and markets.

My best idea for today is if you qualify be certain to make an IRA contibution by Monday, final day for on time tax filing and 2010 IRA contributions. Use the tax calculators at Dinkytown click link here or ask your accountant to estimate the amount of tax savings you will enjoy. Once those tax dollars are in government coffers they are forever lost to you.

For a more detailed analysis you can start the Turbo Tax online software for Free click here until you complete the online return. You only pay when and if you actually choose to print or electronically file the return.

You may file an extension if you need more time but remember you must make your IRA contribution by April 18 to be effective for tax year 2010.

Disclaimer: Be certain to seek advice from a tax qualified source for clarification or any questions you may have.

4/5/11

Due to a number of responses and comments it seems there is some misunderstanding about the use of stop loss techniques used in managing investment portfolios. I thought it was time to explain in more detail how I use them in managing our portfolios.

The use of stop loss strategies is all about Risk Management. It’s about protecting gains in each security we own, overall portfolio values, and most of all protecting our lifetime financial security.

You don’t have to go back very far in time to see the devastation visited upon not just the stock market, but the real estate market as well. The fallout has been substantial, causing far reaching financial hardship for so many people and institutions. Read the rest of this entry »

3/20/11

Our expected ‘mini’ correction has arrived! These corrections are to be expected even during Bull Markets. In fact they should be welcomed. It’s an opportunity to buy at discounts and continue building and improving our portfolios. (Click chart to enlarge)

From February 18 through March 16 the S&P 500 declined 6.5%, NASDAQ down just over 7%, Dow Industrials, ditto by nearly 6%, and the Russell 2000 index gave up over 6.5%. Time to buy, no? Read the rest of this entry »

3/15/11

A catastrophic earthquake in Japan, followed by the devastating tsunami, and now nuclear plant explosions and radioactive fallout. These are the disasters being experienced on day 5 of the worst calamity faced by the Japanese people since World War II. 

Even though these events are taking place thousands of miles from our shores they will have consequences for those of us across the world. Read the rest of this entry »

3/7/11

The markets are running into resistance and some seem to think the end is near. Quoting from Anthony Mirhaydari’s article on Money Central, “After a massive, uninterrupted rally investors are panicked on a scale not seen since the end of the last bull market…………. Wall Street traders, for their part, are frantically preparing for more losses”.

Click link for complete article) Investors Scramble As Historic Uptrend Ends

His article talks about the massive move by traders on Wall St preparing for a major decline, and the steps they’re taking to avoid losses in their accounts. 

I for one do not fall into this camp, at least not yet. The current correction, beginning a few days ago, has caused barely a hiccup on the major exchanges.  

Note the chart to the right. It’s the S&P 500 index. It has barely budged, down just 2.5% over the last
few days. (Click chart to enlarge)

The NASDAQ is down 3.3% over the same period, and the Russell 2000, the small stock index, is down an anemic 3.1%. Hardly the kind of decline to inspire panic on anyone’s part.

However, events unfolding in the Middle East, rising oil and commodity prices, gridlock in D.C., all bear watching closely. Any of the foregoing, as well as unforeseen events, could cause the wheels to come off this two year market advance.

Our holdings are weathering this modest storm nicely. Oil, precious metals, diversified “All Weather” mutual funds, all in the black over the trailing week. The only holdings leaking red are two newer purchases, Bank of America and NRG Energy. We’ll watch them closely and sell at our stops if it comes to that.

As always feel free to comment or question.