Financial Advice

Listening to the Masters of Wall Street

Recently I stumbled on Bloomberg’s new podcast series, “Masters of Business”, hosted by Barry Ritholz. I usually write these posts to pass along some financial tips, explain my view on the market, or tools to manage your retirement savings. But this podcast series is surprisingly easy to understand, and is great for n00bs to finance, or finance geeks. I highly recommend giving each of these a 30 minute listen. I’ve put my highlights/valuable lessons below each. If  there was one over-arching theme, it’s that some of the most successful Wall Streeters didn’t know even know what a stock or bond was, until their late 20’s. Then with a little discipline and willingness to learn, they were able to become multi-millionaires/billionaires.

Jack Brennan (CEO of Vanguard)

Professionals win with ease, amateurs win by reaking havoc

Active investing (most mutual funds) vs. Passive investing (ETFs) – Wall Street always “hopes” that hedge funds will beat the market, but that’s turning out to be very difficult, even with hedge funds have the “smartest men in the room”. All pointing to very little reason to invest in mutual funds/hedge funds, especially with fees.

Single biggest change in finance/Wall Street over the last 35 years – passive investing options (ETFs). Today, there are  ETFs available for people to implement low-cost and outstanding investment strategies/programs

Decent financial advisors are worth 2-3% of fees a year, but if you knew nothing else about funds and picked the lowest cost funds, your odds of outperforming (net of fees) are radically in your favor

Mike Mauboussin

Active fund managers are necessary for the market, but that doesn’t necessarily translate into beating the market consistently.

The three things to learn from successful investors:

1.) Have a very defined investing process and stick to the rules (never breaking them). Focus on process, not outcome

2.) Think long-term (trade less frequently)

3.) Believe that they have an edge (for example, investing in the least loved asset classes every year)

 Jeff Gundlach (More advanced, for the finance geeks)

Tesla’s reinvention of the battery space could radically change how we live. The battery that powers Tesla, could end up powering your home, removing the dependency on public utilities.

Sentiment is a very powerful trading tool


Stock Market Update: Locating the Nearest Exit

I had a post two months back that highlighted how I was worried about the health of the market. Well, that view continues and my assumptions have been correct so far. The one addition I would add to that post, in which I discussed how few stocks are participating in these new highs, is that there are fewer stocks participating in the all-time highs. On top of that, most of the names that are holding up are large caps, whereas small/mid-caps were leading up until the end of 2013. This is usually a tall tale sign that the market has gotten too risky to be in “speculative” names and participants are “hiding” their money in “safe” large caps. To top this all off, volatility has been extremely low, and I’m sorry to say, but historically, these long/low volatility periods don’t last for long. Just like the small/mid-caps have gotten crushed in the past few months, I’m expecting large caps to do the same. To dig further into why this divergence in large caps and small/mid-caps is disheartening, read this brilliant post. To highlight, an old client and good friend of mine, Craig Johnson, does a great dissection of why what we’ve seen over the last few months, historically bodes to a large pullback, usually 15-20%. You’ve been warned!

My prediction was a choppy/poor performance through the end of September, then Q4 the market would finish with a rally. At this point, I still stand by that prediction. To position myself to take advantage of that prediction, I’ve increased my positions in TLT, XLU, XLP, GLD, UUP, and SH.

I haven’t left the building, but I’ve identified where the nearest exits are.

“The continued divergence between the Russell2000 index and the popular large-cap indices (DJIA and SPX) is a clear indication of weakening breadth and slowing momentum, and suggests investors are making an attempt to reduce portfolio risk by rotating assets toward the traditionally defensive area of the market.

To gauge the size of a possible decline we have identified years where the DJIA outperformed the RUT (a strong possibility for 2014), and measure the size of the market pullbacks that occurred in these years…..Thus, should the median pullback unfold this year, it would suggest a deeper correction in the broader market back towards 1,600-1,650 on the S&P500 Index.”

My Latest Stock Picks…..Q1 Update

With Q1 coming to a close, it’s time to figure out what’s going on in the markets and where might be some good places to be over the next 6 months.

The markets have been choppy year-to-date, but have managed to hit new all-time highs in the last week or two. The particularly discouraging part of the new all-time highs was that not very many stocks made their own new highs. Meaning this all-time high is weak and only a few stocks pushed it to these new highs. That’s NOT good.

And there are some bubbles that are forming (man do I hate that word, “bubble”). In particular, IBB (a Biotech ETF) has been pushing the NASDAQ to all-time highs. Volume in penny stocks (stocks under $5) have hit a high since the tech bubble in ’99/2000. Below is a checklist that I saw in the Wall Street Journal a while back. I’ve been updating it as this bull market gets older. Hopefully by my holdings you’ll notice I’ve been getting more defensive, out of high-growth tech and in broader ETFs and more defensive names. My latest moves have been into TLT, XLP, and EGPT. For me, I’m starting to get defensive for 2014, hopefully by 2015 we’ll be back to 2013 returns. My price target on the S&P 500 for the end of the year is 1,925. Assuming a pull back over the next 6 months with strength returning the end of the year. Momentum is starting to turn negative, leading to the pullback in the near-term.

2014-03-25 20_37_32-Scott (kohl_in_one) on Twitter

Current Holdings:

Ticker Price Bought
BRK/B $76.22
XLB $42.03
XLK $33.14
WDAY $106.71
AAPL $460.88
JCI $37.50
V $183.12
TCPC $15.12
EBAY $54.46
DDD $54.55
SPY $182.05
XOM $95.47
SH $25.10
XLP $42.05
TLT $108.02
EGPT $70.01

Move out of these positions over the last few months:

– Sold GDXJ – Junior Gold Miners ETF – Liked this play in the fall, and starting to like it again.  If markets stall and/or tank in the next few months (which I think is possible), I might be in this again.

– Sold DTYS – Inverse 10+ Yr. Yield – I like this play over the next 15 years, but in the short term, not going much of anywhere.

– Sold YHOO – Yahoo! – Took my nice gain and cashed it in. Also, all of Yahoo! acquisitions seem to be fruitless thus far.


My Latest Stock Picks

Following up yesterday’s article on where I think the market is headed. Here are my current positions, followed by positions changed as of late.

Current Holdings:

– YHOO (@18.94/share on 11/28/2012) – Jumped on the Marissa Meyer bandwagon early – Price as of Friday 11/15 – $35.47

– HTGC (@10.58/share on 11/28/2012) – which has an +8% dividend yield – Price as of Friday 11/15 – $16.85

– TCPC (@14.95/share on 11/28/2012) – which has an +8% dividend yield – Price as of Friday 11/15 – $17.30

– DDD (@48.45/share on 8/23/2013) – Price as of Friday 11/15 – $80.17 – more on this one late

– JCI (@37.30/share on 5/17/2013) – Price as of Friday 11/15 – $49.45

– V (@182.00/share on 5/17/2013) – Price as of Friday 11/15 – $202.00

– GDXJ (@33.75/share on 6/27/2013) – Price as of Friday 11/15 – $35.98

– DTYS (@31.30/share on 5/17/2013) – Price as of Friday 11/15 – $29.41

Moves over the last few months

– Sold YUM on 10/10 for a 9% loss, and since then it is back up to my original purchase price of $74

– Sold LUV for a loss on 9/17, but up 28% since then (DOH!, but put that to work in DDD, which as been far more lucrative)

– Sold FB at $25 in June, now it’s at $50. Good news is I took the proceeds from that sale and put it in FB options, which I made 10x my money on. So this sounds like a poor sale, but if you’re bullish short-term, not long-term, buy options

– Sold ADT at $41.47, slight loss in June, and has hovered around $43 as of late

Biggest Industry I’m Bullish on 3D Printers. Here’s why:

Wall Street doesn’t fully understand this industry. And when they don’t understand and see the opportunity, that’s a huge opportunity for you as an investor. I think the message on Wall Street was “3D printers will never be able to replace manufacturers.” This is a true statement for the foreseeable future. But the opportunities that the industry is capitalizing on aren’t the mass production industries. They are things like organ regeneration using stem cells or easily replacing household items (focusing on having a 3D printer in every home, as evidenced by Windows 8.1 3D Builder). I think this is a long-term buy, with DDD, SSYS, and there are few health care focused companies as well. Health care is a focus of DDD, but not their only focus.




Where’s the Stock Market Headed…..Quarterly Update #2

Let me start by saying, this is NOT a cyclical bull market, this is definitely a secular bull, which means there is plenty of life left in this market. I believe the reason you’ve seen such a large number of negative pundits from the financial media declare this a top is because this would be the “typical” end of a cyclical bull market. (Small rant: The fear that the financial media drives into the public is disgusting. Listen to price and volume, that will be your confirmation and real voice of reasoning. The returns that main street has missed out on is shameful and if you’re a financial advisor, I hope you haven’t let your clients get caught up in the noise).

Not to toot my own horn, but I’ve been extremely bullish on this rally since the end of 2011, after the minor correction. If I would have been in the Wall Street Consensus year-end price target, I would have been the most bullish, but also the most correct. BOOM! (Note, my past performance is not an indicator of future performance.)

All back-padding aside, we’ve past my original target at the beginning of 2013 of a year-end finish for the S&P of 1,700. Then in August I raised my target to 1,775 due to some near-term consolidation with the belief that the “Santa Claus” rally (November to December, with historically good returns, on average a 3-4% return) would be intact this year following the near-term consolidation/pullback.

As of Friday, the S&P closed 1,798, which is over my year-end target, but is also close to the “evil” psychological number of 1,800. During this rally, we’ve seen anywhere between a 4-10% pullback before each new “round” number was closed above. (Courtesy of Ukarlewitz). I largely believe this will be the case this time around too, even with the market getting overheated the last few weeks (it’s on a seven week winning streak). Although, the scary thing to think about is fund managers are chasing returns to better performance and tend to make one last attempt to meet or beat the market. This could cause this further “parabolic” movement of the market and could lead to a near-term irrational exuberance, only to translate to a poor start to next year.

So, I’m sticking with my year-end target of 1,775. I really believe that we will finish above that, which is always a good thing.

To wrap things up, I’ll list out my reasons/risks for my 1,775 price target at the end of 2013, and my 2,000 price target for year-end 2014. Bottom line, don’t be afraid to put your money to work! Tomorrow I’m sharing my latest positions

Reasons for 1,775 at year-end 2013 (neutral to bearish view, look elsewhere to get same or better returns for the risk being taken):

– Investors are close to being at a historic high of bullishness (approaching 70%, 70% and above has been associated with tops like in 2000 and 2008)

– Also, investors cash on the sidelines is low. So what money are they going to put to work to continue this rally through the year end?

– The put/call ratio is at a typical short-term sell-off level

– The “evil” psychological round number 1,800 and the market’s ability to close above it

Risks  (reasons to finish above 1,775)

– Santa Claus rally historically strong, indicating a possible end of 1820-1830, assuming a 4% increase from 1,760 at the beginning of November

– Breadth is confirming (with 8 of 9 sectors reaching new highs recently). Indicating this is a strong broad-based rally

Reasons to finish at 2,000 for year-end 2014

– Secular bull market with strong, confirming breadth. Remember the last secular bull ran from 1982 to 2000 and consists of multiple cyclical bull markets, each lasting roughly two years. This one started in 2009….

– Favorable rates with QE-infinity. Also a hike in rates usually signals a strong economy, with the stock market usually peaking anywhere between 8 and 41 months after the first rate hike


– The second year of an election year is usually the weakest of the four year cycle

– On a valuation basis, most measures are at the top-end of their range, which usually indicates a top (TTM PE, margins contracting slightly with no organic growth in sight, trailing and forward PE, 10-year PE (PACE), Tobin’s Q, price to sales…… name a few 🙂  )

Where’s the Stock Market Headed…..Update

Well, if any of you read my last take on the market, you might have recognized that the S&P already crossed my year-end target of 1,700, most recently closing at ~1,707. Sooooo, what now? Well, I still stick to my forecast that it will be a bumpy ride through the end of the year, but am raising my price target to 1,775 by end of year 2013, with the S&P still at 2,000 by the end of 2014.

The skeptics are coming out in droves as of late, with stable earnings beats, but slightly lower revenue beats. This just means that companies’ sales aren’t growing as quickly as analysts think, but are keeping costs under control.

So what are the negatives I see in the market:

– Small caps are leading (typically the sign the end of a rally is near)

– +20% gain in the market over the first seven months (also, signalling one last strong push usually seen at end of rallies)

– Fund managers are very heavily weighted in equities (bearish contrarian indicator)

– SPX EPS growth of just 1.7% for 2013, and -3.4% ex-financials. With overall fundamentals and valuation being rather negative

This would typically be a “run for the hills situation”, but this point in time in our economy isn’t like many others we’ve ever been through. And being in rather “unfamiliar” territory, you can usually throw out some of the correlations/causations we’ve seen in the market in the past.

The only story that is positive for the SPX, {besides GDP growing at 2% (sluggish, but growth is growth!!)}, and is a complete wild-card, is Europe. Albeit things are still bleak, but are showing signs of life.

So the negative  pundits are out there (some saying S&P 1,385 by the end of the year!!), but I’d expect some pullback and volatility, with the S&P rallying the last few months of the year to 1,775.

Let me know what you think!


7 Must-Know’s For Your Retirement Savings

So I figured people like lists (Buzzfeed) and somewhat “dramatic” headlines. I’ll try to deliver on this one so it meets/exceeds expectations.

Below is a list of seven things that everyone should know when saving for their retirement:

1.) You must have a Roth account, IRA or 401k

– There are “traditional” accounts and “Roth” accounts. For starters, “traditional” accounts are pre-tax and you get taxed when you exit a position (or take out money in retirement). To think about this in another way, if you think tax rates will be lower when you retire in 40 years (yuck) than now, traditional IRA/401k’s are a good way to “bet” on that fact. “Roth” accounts, your money is put in post-tax, so your money is taxed at today’s rates, and you’re not taxed when you withdraw money at retirement. So if you think tax rates will be higher when you retire than today, a Roth account is a way to “bet” on that fact. Also, you’re not taxed for short-term and long-term capital gains in a Roth, since it was already taxed money. If you have a Roth, feel free to do more trading that you would in a traditional account. These last two points are why you should have a Roth IRA or 401k.

–  I could go on and on about these two, but for me, what I’ve highlighted above are great pieces of knowledge to chew on. Click here, here, or here if you want educate yourself more on the differences.

Sidenote……. If you have  a pension, well, consider yourself one of the lucky ones left to have one. Pension plans have been dying hard over the last few years.

2. Your Financial Advisor Has a Conflict of Interest Managing Your Money

– So this is a little known fact, which ends up costing you tens of thousands of dollars over the life you saving for your retirement. Your Financial Advisor (“FA”) has certain funds pitched to them by institutions like State Street, Rydex, Vanguard, etc. These funds give them options to help them manage your money. My tip here is whatever fund your FA suggests you put your money in, ask for a list of similar options. The funds that are pitched or sold to them, they usually get a nice payout from these institutions like State Street, etc to sell these funds. So they are essentially getting paid twice when selling these institutions’ ideas, since they already get paid on trades.

3.) Know How Your Advisor Gets Paid

 – As long as we’re talking about it, there are about 6 ways an FA can get paid. Most get paid a few of these ways, and knowing them can help you determine where their conflicts of interests could come into play when selecting your investments.

– FA charges you a percentage of the assets held by them (could range from .5% to 2%, typically)

– Commissions from selling certain products

– A combination of the two above, typically labelled as a “fee-based” advisor

– Hourly rates for financial advice (not as common anymore from what I understand)

– Flat fees for a specific project (such as an initial retirement plan)

– Quarterly or Annual retainer fee for ongoing advice (typically for more “complex” retirement plans and special individuals)

Ask your FA a few questions, doing some investigative work will pay off in the long run.

4.) Know Your Investments and Know Your Options

– As I mentioned in a previous post, there are emerging tools that help you check the investments that you are currently invested in. SigFig will run tests on your investments, and let’s you know 1.) how much you’re losing out on fees charged with your current investments 2.) the amount of returns you missed out on being in a certain fund compared to a better, cheaper fund.

2013-06-30 21_33_19-My Portfolio - SigFig

5.) Stay Up-To-Date on Your Investments

– Along with SigFig are multiple other tools to help you manage not only your investments but all of your finances. Personal Capital is a great tool that monitors your investments, as well as integrates your personal finances, like mortgages, credit cards, bank accounts, etc. is another great tool, but is more focused around your personal day-to-day finances.

6.) The Buy and Hold Strategy is Dead

– Ok, so it’s not dead, but you’re severely limiting your returns if you don’t change your investments the entire length of your working career. This is where the FA is helpful. Each year, or every few years, sit down with them to see where you can put new money, or relocate old money. Opportunities are missed for healthier returns if you put your money in and never look at it again  (which I bet is half of America).

7.) Don’t Be Afraid to Switch Financial Advisors, Or Ditch Them Completely

– Bold statement, I know, but two companies Betterment and Wealthfront are looking to make that happen. Each of these sites mimic the process you go through with an FA. To begin each, you answer a handful of questions so you they can assess your risk profile and your current financial situation (if you need regular income, or lots of liquidity in the near-term for a wedding, or whatever). Based on these they give you suggestions and a pre-defined portfolio for you. Wealthfront is gaining tons of traction and currently has +$250 million in assets, which is a fair amount. The best part of Wealthfront is they try and offer you the best funds, in terms of returns and low fees.

Where’s the Stock Market Headed From Here? – My Attempt to Be Like Jim Cramer (BOOYAH!)


It’s the age old question, and if your stock market predictions are right 11 out of 20 times, you’re probably a millionaire. Now, everyone has their opinions and everything I state below is my opinion. So what are my predictions and how do I have my portfolio positioned to capitalize on my views?

To get right to the point, the S&P 500 I believe will be 1,700 by the end of 2013, and 2,000 by the end of 2014. As I write this, that translates to a 3.5% gain over the next 6 months, and a 21.8% gain over the next 18 months. The numbers themselves tell one thing, LOTS of volatility over the next 6 months, followed by renewed conviction over the following 12 months (aka lower volatility). Now would be a great time to trade options, if you can do that kind of thing.

Why do I believe in those price targets? Well for one, I’d be lying if I said I constructed them completely on my own. But with proper research on my side, I like these levels for a few reasons:

– The S&P 500 has been up 11 out of the last 12 months. A very powerful trend (in an already strong secular bull) that will take much more to break than bulls in the past. And with that point, this chart hasn’t failed for some time.

– Even the much talked about Hindenberg Omen indicator may not be able to fault this bull market. It hasn’t yet, even though people have said it would with the debt ceiling, sequester, or Fed tapering talks. For the record, I’m no a fan of this indicator as its rules  seem to differ and you can “make it work” for lots of scenarios. People mention its accuracy, but they fail to include the countless times it missed when it probably should have worked.

– The number of shares available on the stock exchanges are relatively low still. This is due to share buybacks, M&A activity, coupled with a less than stellar IPO market. As we all learned in Economics class, when demand outpaces supply, prices go up. Figure 5 in this article .

– As a side point, IPO’s are losing their luster in Silicon Valley, as well as other sectors. Marc Andreessen (aka The Man) explains.

– So I like the technicals of this market, the fundamentals are my only reservation and need to be monitored. But, as this secular bull has shown us, most trading strategies or stock patterns that have worked before, have been thrown out the window. (Also, where else are you going to invest, or better yet, whose central bank do you trust the most?)

So how am I capitalizing on my view above? As I write this, my portfolio is positioned heavily towards tech. Why? It’s a risky contrarian trade that has treated me well so far and I think will continue to do so. The reason it’s contrarian is because most funds have been underweight tech for a few quarters now, and tech stocks got beat up pretty good. Much like a swinging pendulum, these stocks will be bought again. So I’m making sure I’m on the train before it leaves the station.

It’s almost a reverse sector rotation strategy. Saving you from more boring technicalities, which tech companies am I positioned in?

– YHOO (@18.94/share on 11/28/2012) – Jumped on the Marissa Meyer bandwagon early

– HTGC (@10.58/share on 11/28/2012) – which has an +8% dividend yield

– TCPC (@14.95/share on 11/28/2012) – which has an +8% dividend yield

– AAPL (@398.91/shares on 4/22/2012) – By the way, it looks like it is finishing off an inverted head and shoulders pattern. What does that mean? Probabilities say it’s a really good time to buy if you’ve been waiting to get in. Read the link for more context than I care to bore you with here.

– FB (@38/shares on IPO) – Yeah, holding onto this one for some time I think. Stop laughing.

So if you’re looking to play around with some money (not your retirement money ya dummy!), beware that you’ll see some wild swings over the next few months. But the calendar year of 2014 could be smooth sailing.

Next post I’ll dig into the ETF/MF’s and your retirement.

Stocks and Blondes

large       Two of the greatest things known to man. Both can bring you pleasure as well as pain if you let your emotions get the best of you. I’ll be the first to tell you that I don’t know much about women, but I do know a thing or two about stocks. And one thing we can all relate on is saving for retirement.

Now, I have some good friends who are financial advisors. They can serve a pivotal role in helping you retire on a yacht instead of a box. But just like any business, they need to make money. Some people like the security that a financial advisor brings them, knowing that someone is carefully watching their money. And hence are willing to pay for that security blanket. But why did so many Americans’ nest eggs disappear during the last stock market crash if a “qualified professional” was watching their money? If I’m paying someone to manage my money, I better not see my wealth get cut in half, regardless of what the market did. Put me all in cash if you think the stock market is going to crash, or if growth prospects are weak. How many financial advisors did this? My guess would be just a few, and the ones who did were late to the game and then sacrificed considerable upside for their clients after the bottom in March 2009.

But let’s all take a step back and think about investing for a second, and not worry about our financial advisor. We’re all told to diversify across asset classes (stocks, bonds, alternatives, etc.), and then diversify within those asset classes. Then there’s a rule where you take 110 minus your age, and that should be your portfolio allocation to stocks (in my case 85% in “stocks”). Both are pretty simple rules that even your financial advisor follows (for the most part).

What am I getting at with this mini lecture? Do yourself a favor and don’t be afraid to start taking control of your own financial future. The tools are becoming more abundant and more user-friendly in order for you to do so without have a finance degree or knowing what a stock is. Two great websites that I personally use to track all of my investments are: and . Think of each as a for your investments. Below is a screenshot of the types of advice they give you. Turns out the mutual funds that my financial advisor put me in not only suck compared to other similar ones, but also cost me more in fees. I’ll either be putting my money in stocks (where he will only make a commission from my trade) or into low-cost ETF’s that do the same thing. More on mutual funds and ETF’s later. Click on the pictures to enlarge.

2013-06-03 21_24_47-My Portfolio - SigFig

2013-06-04 08_11_45-Personal Capital - 401k Fee Analyzer

So cruise to those sites and start getting some free help on your finances. Speaking of free help, below is a list of stocks that I currently own. Some I’ve held for less than a month, others I’ve held since 2006. As we all should know, individual stocks are much riskier than mutual funds/ETFs. And these are only my opinions.

The ones with the asterisks are the ones I hold in my Roth IRA and/or IRA accounts. This means I’m invested in these companies for the long haul. If you notice, not many of the stocks I own are in my IRA accounts (even though I just said roughly 85% of my portfolio should be stocks). We’ll talk about this in a later post and that’s where low-cost mutual funds and ETF’s come in. Also by having your account setup on either of these two sites just mention,  my next post make more sense.

– BRK.B – Berkshire Hathaway*

– YHOO – Yahoo!

– FDS – FactSet Inc.

– HTGC – Hercules Technology Growth Capital

– TCPC – TCP Capital

– JCI – Johnson Controls

– AAPL – Apple*

– V – Visa

– LUV – Southwest Airlines

– ADT – ADT Corp.

– YUM – Yum Brands

– DXM – Dex Media

– FB – Facebook (long story, don’t ask)

In a later post I’ll talk about the mutual funds/ETF’s and the differences in retirement accounts (Traditional/Roth 401k/IRA), but I’ll wait until you set up an account at one of those two sites.

If you’re truly interested in buying stocks, another cool tool that just came out is called TipRanks ( This tool brings you all of the analyst opinions on the stock you are interested in, if you care what the “experts” have to say. If you go to the site, you’ll be able to download a plug-in (I use a Chrome browser). Then go to a site like Google Finance, type in your ticker, and if you’ve installed it properly, a link should appear to these expert opinions.

2013-06-04 08_14_42-NASDAQ_FB_ 23.95 0.10 (0