Blog / Events

South Haven After Hours

We hosted the South Haven, MI Chamber After Business Ours (ABO) Last week on February 15th 2017.
It is always nice to have the community over to share ideas, connect, and take a minute to relax.
We love the fact that our headquarters is located in such a friendly town.
After a long day/days of travel, it always nice to come back to the people and the peace that is abundant throughout South Haven, MI.
A special shout out to the staff over at the South Haven Chamber of commerce.
Their continued effort to keep the South Haven Business leaders and community members engaged in the town’s activities does is much appreciated.

4th Quarter Update

Whiteford Wealth Management, Inc.
404 Broadway Street, South Haven, MI 49090
Tel: (269) 637-4400 Fax: (269) 637-4407

January 3, 2017
Market Update
Welcome to Whiteford Wealth Management’s Fourth Quarter 2016 Update! This past quarter was a particularly eventful one so we will spend a great deal of our time today discussing our thoughts on what has happened and where we think the markets are going to be heading; however, let’s first begin by talking Year-End numbers.
Name of Index Dec. 31, 2015 (close) Jan. 3, 2017 (close) Percentage Change
Dow Jones Ind. Avg. 17,425.03 19,881.76 14.10%
NASDAQ (IXIC) 5,007.41 5,429.08 8.42%
S&P 500 2,043.94 2,257.44 10.45%
CBOE 10-Yr (^TNX) 2.269% 2.45% 7.98%

Like always, please be advised that the percentage change in yields do not necessarily represent a similar decline in value, it only serves to show you that a substantial change in interest rates has occurred—although it does in fact affect the values of outstanding bonds. Also, many stocks of the DJIA and the S&P500 have dividends which are not included in the NAV’s percentage change on the associated index.
As illustrated in the next chart, we had a great year when considering YTD lows.
Name of Index Feb. 11, 2016 (close) Jan. 3, 2016 (close) Percentage Change
DJIA 15,660.18 19,881.76 26.96%
NASDAQ 4,266.84 5,429.08 27.24%
S&P 500 1,829.08 2,257.44 23.42%
10-Year T-Bond 1.644% 2.45% 49.03%

Lastly, let’s compare these figures to our foreign counterparts around the globe. We’ll do so by comparing the major indexes of Germany, China, UK, & Japan.
Name of Index Dec. 31, 2015 (close) Jan. 3, 2016 (close) Percentage Change
DAX (Germany) 10,743.01 11,598.33 (Jan. 2) 7.96%
SSE Comp. (China) 3,539.18 3,135.92 -11.39%
FTSE 100 (UK) 6,242.32 7,177.89 14.99%
Nikkei 225 (Japan) 19,033.71 19,594.16 (Jan. 4) 2.94%
German Bund (DE10Y:DE) 0.635% 0.31% -51.18%

Like before, the percentage change in Bund value is not necessarily reflective of a similar change in value, but, currently, if you loan the German government $100,000 for 10 years, they are still charging you to hold onto your money. We still think that the European landscape is economically too risky for a very large apportionment of any of our clients’ savings because of what these rates imply.
Source: Google Finance
Please also look to the following website for MCSI data on all countries listed (click the country tab about 1/3-way down). Look at the YTD and the rolling 1, 5, and 10 year periods.
https://www.msci.com/end-of-day-data-search
Throughout the past year, we routinely discussed the fact that there was really only one place to invest in the world when it came to regional investing. Now, not only has our answer not changed, but for reasons that we will discuss later, we feel even more confident about this decision. When it comes to investing—especially pertaining to equities—one economic region in the world has made sense and outperformed the rest: North America. The absolute best performing region YTD has been the Pacific Region (excluding Japan) but we have only advocated small amounts of exposure to that region, as we feel that there has been quite a bit of unnecessary risk associated with investing there and we feel that this risk has been elevated because of the value growth that has been sustained over the past year.
Because we seek to mitigate risk on behalf of our clients to the greatest extent without ignoring the need for appreciation, we have felt and continue to feel that the US is the most prudent place to store our wealth for the near-term future.
The U.S. Presidential Election
We will be taking a different approach in this quarterly update. Instead of having several key areas of discussion that function more independently of one another, we will be taking each area and placing it against the backdrop of President-Elect Donald J. Trump. In this way, we can attempt to convey our thoughts about what the next four years will hold for each facet of the American economy and the global economy. These facets will be:
1. Large-Cap Dividend Paying Stocks
2. International Markets
3. Real Estate Investment Trusts and the Real Estate Markets
4. Bond Markets, Both Domestic and International
5. Taxes, Both Corporate and Individual
6. Overall Macroeconomic Trends

First, let’s begin by first quoting our last quarterly update as it pertains to the his election.
“Donald Trump’s potential win must be compared logically to that of last quarter’s Brexit vote over in the United Kingdom. “Wall Street” heavily favored a “stay” vote and even forecast it up until the night of the vote. It wanted more certainty in the post-election world and a “stay” vote would have done just that. However, the opposite occurred. Despite a 15% drop in the Pound Sterling/USD and freefall in the US market in the immediate aftermath of the unexpected vote, there was a near total breakeven, at least in the US, after only about 48 hours. Just 72 hours after the vote, the US market was once again in the green from the highly publicized political event. We tend to think that the same would happen in this country. Historically speaking, there are very few political trends that aid the large caps of domestic enterprise more than the trend of nationalism. Notice the YTD FTSE 100 Index returns for this year. We are seeing it in the UK and we might very well see it here in this country in about a month’s time.”

Well we all know that it did not take a month for the markets to rejoice in Trump’s election. In fact, while the DOW Futures were down nearly 800 points the night of the election, within just one hour after the next day’s opening the market was in the black. Since that point, there has been a gradual ascension in the Index’s price to the levels that we now see today. We predicted the overall movements and we will never complain if our conservative estimates are blown away.

1. Large-Cap Dividend Paying Stocks
Since 2013 we have been pundits of this type of asset. In fact, the majority of our clients’ money has been in this asset category since that time. Under the overregulated demagoguery of the previous administration, we had little choice once the mid and small caps recovered from 2008-9 lows and struggled to fend off these regulations. The risk/return just hasn’t seemed as enticing as it had in years past. Well, we are keeping a watchful eye on these companies more than ever now; however, because of the next few subtopics below, we feel strongly that the large-caps will be the greatest beneficiaries in the next two years from what we hope that our next president will bring: deregulation and alleviations of the current tax rates.

Read the transcript of the speech given at the New York Economic Forum in Sept. of 2016: https://www.donaldjtrump.com/press-releases/trump-delivers-speech-on-jobs-at-new-york-economic-club

2. International Markets
There is over $2.5 Trillion currently held by US companies overseas. Source: http://www.cnbc.com/2016/09/20/us-companies-are-hoarding-2-and-a-half-trillion-dollars-in-cash-overseas.html . This number is current as of September of 2016. We will likely see an uptick from there when the new calculations come out in the coming weeks. This money has been doing a plethora of things but more so than any other in our opinion, it has been spurring an international economy that still hasn’t recovered much since 2011. Sure, there have been pockets that we have attempted—and many times successfully—to take advantage of, but the fact remains that this money is at risk of coming back to the US markets under potential changes to the repatriation tax, which is explained further below. Should this nearly $3 Trillion leave the international markets, even in part, there could be drastic shockwaves created throughout the entire globe. This is issue number one with the foreign markets going forward.

Number two is a struggling European economic landscape. This is held self-evident by the interest rates that are being held at less than or slightly above 0% by the European Central Bank, or ECB. Source: https://www.ecb.europa.eu/stats/monetary/rates/html/index.en.html .
As you can see, the interest rates have actually come down even further during the past several years. We feel that this is the ECB’s last ditch effort, per se, to spur a relatively weak European economy. Imagine, what would you do if you can build a factory with someone else’s money and pay 0% interest? It seems as if most readers would build that factory given the fact that there is a market for what that factory produced, right? Well, in Europe, there is still very little going on in the way of investment because people are so uncertain about the entire continent’s future. Even extraordinarily low interest rates have to constantly be slashed in an effort to find “the sweet spot” for investors to actually invest into the economy. There is one group of companies, however, that are taking advantage of these rates: large-cap dividend paying stocks. Again, much of the European investment that is going on is financed by American companies’ money and it is their shareholders that are reaping the benefits. The EURO is trading near parity for the first time ever—parity is when $1USD = 1 EURO—and the GBP (Great Britain Pound) is not fairing too much better against the USD with a rate of around $1.25/GBP. Not only are US companies borrowing money at about 0%, but they are also purchasing those assets for what they could have only dreamed of in years past.

Thirdly, China and the Pacific Region are the last issue that we would like to discuss in lieu of this topic. For the most part, we are fairly confident that the economy in this region of the world will continue to do well. But, there is one large, glaring problem that many news outlets simply don’t cover, though. That problem is that with the rise of geopolitical tensions, especially in the South China Sea, the risk of governmental seizure—or in the very least freezing—of assets controlled by foreign interests is supremely miscalculated. In our opinion, why chase a slightly better return when the risk of complete loss of investment (even if it is a wildly successful business) is there? We just don’t think that it is worth risking our clients’ hard-earned money in this manner.

3. Real Estate Investment Trusts (REITs) and the Real Estate Market
We have been a fan of the real estate market and have supported having client exposure to this crucial market for years. First though, let’s discuss the primary issue facing this industry going forward.
If interest rates rise too quickly, many REITs would have some serious issues going forward. For the most part, REITs, being private companies, typically borrow money utilizing floating rate debt. This is nearly always not by choice, but simply what many businesses must utilize in their search for appropriate ways in which they can borrow money and finance their purchases. Well, this interest expense could potentially rise too fast if the Federal Reserve chooses to raise the Fed Funds rate in such a manner, causing sizable regressions to the industry’s bottom line, possibly spelling lower-than-expected returns.

That being said, we do not see a steep increase in the Fed Funds rate occurring anytime soon. Any gradual changes to this pivotal rate will of course affect the great profits that this industry has seen since 2008, but a return to 2000 levels will surely still be very beneficial to our clients’ portfolios in our opinion. Remember, the historic prime interest rate average since 1913 has been roughly 5-6%. With prime rates still comfortably below 4% levels, we are simply not worried about this market but have certainly discontinued placing client money into it since the beginning of the year until we find out more about the course that the Fed Funds rate will take going forward.
Lastly in this subtopic, we want to talk about inflation. This is the metric that most analysts, in our opinion, have been improperly projecting going forward. However, we take solace in the fact that, should interest rates rise, inflation rates shall likely follow suit like they almost always have. We have been forecasting inflation rates to rise in the coming years, especially if amending the repatriation tax allows some of the $2.5-3 Trillion back into the country. This inflation undoubtedly will raise the cost of all hard assets that are in finite supply. Rest assured, if the interest rates will affect the interest expense of the real estate market, we feel that there will be subsequent price inflation of its underlying assets as well.

Source (Good example of what public REITs are doing with regard to interest rate risk): http://investor.fiveoaksinvestment.com/mobile.view?c=251672&v=202&d=3&id=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTExMDgyNTI0JkRTRVE9MSZTRVE9NzcmU1FERVNDPVNFQ1RJT05fUEFHRSZleHA9JnN1YnNpZD01Nw%3D%3D

4. Bond Markets—Domestic & International
We have discussed the discrepancy between domestic and international interest rates many times in the past and have even done so in this quarterly update; so, we will only touch on its key points here.
Domestically, we feel that our bond market has been artificially propped up by foreign investment because why in the world would someone feel better about purchasing, say Spanish debt, if the coupon payments on the Spanish bond are less than the US Treasury’s and unemployment in that country is well into the double digits? What about a much more secure German Bund? Why then, would a prudent investor choose to take a 0.2% return instead of a 2.5% return by simply purchasing an allied country’s debt instead of his/her own country’s? Well, we have already begun to see the flow of international money begin to slow.

Also domestically, the Federal Reserve has clearly indicated that it will work to move the prime rate north from where it is today. That being said, the price of a, say 2%, bond will surely be worth less if the current going rate is 2.5%. Well if the Treasury 10-Yr notes go to 5% in the next ten years or so, what will the value of a 2.5% bond be? We most certainly feel that it will be adversely affected by such a rate movement, so because of the artificially propped up bond prices because of international pressures and those pressures by our own domestic sources, we simply feel that, in the interest of our clients’ financial longevity, betting on bond prices going higher seems rather foolish. This is especially evident by the fact that current large-cap dividend paying stocks are still issuing income in the form of dividends at roughly 2-2.5% so our choice seems even clearer.
Source: http://www.simplysafedividends.com/dividend-aristocrats/

5. Individual & Corporate Tax Rates
While many of us would love to see individual tax rates either (1) go down, (2) get simplified, or both, we simply do not see a great chance of drastic changes happening in the next couple of years. The highest individual tax rates as recent as the 1980s were nearly double today’s so our country’s recent history since WWII does not look favorably on their reduction. However, what we do see is a minor simplification of the individual tax code—not much is changing for most of our clients—and a reduction in corporate tax rates with a reduction in the repatriation tax. Both of the latter should spell great news for us and our clients.

First, let’s talk about what the repatriation tax is by giving a mock example. Company XYZ is a US-based company that makes tractors. This company chooses to open up a new factory in Mexico with $100M. Every year XYZ pays income taxes in Mexico and these payments are honored by the US Gov’t since a tax treaty exists between our two countries—we do the same for Mexican corporations. Well, after about ten years or so, the $100M investment has, with reinvestment, turned into a $500M investment and XYZ wants to bring some of the profits back to the US. Remember, the $500M is *all after-tax money*. However, they then discover that any money that XYZ chooses to bring onto US land from its foreign factory will be taxed, again, at a 35% rate. So, XYZ chooses to not bring any of the money into the US and instead continually invest in the Mexican economy because XYZ feels that it is better to achieve a 5% ROI (return on investment) in Mexico than it is to pay 35% in taxes and then achieve a 10% ROI on what’s left in the US. In fact, it would take five years for a 15% return—three times the Mexican factory’s return—for the move to make sense. Well, this also involves a serious amount of variables so most companies simply refuse to repatriate.

So who stands to benefit most from reducing the repatriation tax? The shareholders of US companies that have been operating overseas for many years—not just a few years—and have accumulated large sums of after-tax money that has been trapped outside of the country since the late 1980s when the tax was first created. These are the large-cap dividend paying companies that we are heavily invested in.
Secondly, the corporate tax rate of the UK was just lowered from 20% to 17%. Corporations operating in the UK now pay less than half—less than half!—of what their American counterparts pay in taxes. Here is a link to some of the corporate tax rates around the world to see exactly how the US stacks up: http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2016 . There is only one independent country in the world that has a higher corporate income tax rate than the US: the UAE (United Arab Emirates). Whether or not we feel that this rate is too high or too low, it is apparent that the President-Elect wishes to lower it drastically. Should he choose a target rate closer to that of the UK, US corporations would surely stand to benefit, and we feel that the largest ones will benefit first.

6. Overall Macroeconomic Trends
We have touched on a number of topics in this update. However, there are some issues that are less tangible. We covered one issue briefly during the last update and we would like to draw more attention to it here.
Arguably, for the last several decades this country and many of the US’s international counterparts have been moving towards a more globalized world. The breaking down of trade barriers and protectionist policy have brought international poverty rates to new all-time lows as of 2015 (2016 still not yet available but we look to be surpassing forecasts). Source: https://www.weforum.org/agenda/2016/01/has-the-world-overlooked-a-major-achievement/ .

There is one glaring drawback that many in the developed world are seeing with this trend, however. The fact is that with the trend of outsourcing to cheaper labor markets, many are left by the wayside in those countries which formerly produced the labor force for those industries. This is notwithstanding the many “pros” that come with cheaper goods, such as a higher quality of life for more people in those countries. Because some choose not to innovate, whether by their own choices or because of governmental and/or societal incentives, or are simply not able to do so, a perceived divide occurs between certain groups of people. This perception is covered more thoroughly in prior quarterly updates, but the prevailing point is not whether or not this divide actually exists—we neither support nor deny this claim here, it’s irrelevant—but, that many members of our society believe that it exists.

Well, these perceptions ultimately culminate in geopolitical strife between nations. This begins with protectionist policy-making, then transforms into policies which ally member states together forming several “teams” of trade partners, and ultimately goes into unfortunate conclusions. We are seeing elements of the first two quite frequently in recent years and luckily only minor physical disputes have occurred; however, it is something that we must all acknowledge is occurring. Trump’s win here in the US, the UK’s Brexit vote, the rise of Le Pen in France, Putin’s virtually unchecked power in Russia, Communist China strengthening controls over economic and social freedom in the region, Hungary’s Orban, Poland’s “Civic Platform”, Italy’s “Lega Nord”, Turkey’s Erdogan, the list continues into all corners of the developed world. Just like what was occurring at the beginning of the 20th Century, nationalism and populism are back in style.
Despite what the rise of nationalism and populism means for everything outside of financial matters is, while extraordinarily important to us, not the subject of our bringing attention to it in this update and you can draw your own conclusions. More importantly—when it comes to doing our job here at Whiteford Wealth Management, Inc.—is that history has seen this trend many times before. With the rise of these two ideologies, the largest corporations of the world—for whatever given point in time—were some of the largest beneficiaries of the resulting policies from supporting governmental bodies. This is what we feel compelled to draw attention to: regardless of our personal feelings about international politics, we are entrusted with our clients’ life’s savings so we will continue to advocate investing accordingly. Nationalism and populism are, objectively speaking, simply political trends that rise and fall throughout history and we will utilize that history to invest to the best of our abilities. Well, right now that means that we will continue to invest in assets that we feel have the most beneficial tailwinds and most amount of risk-mitigation given what we think: large-cap, dividend paying US stocks and a handful of their European counterparts.

Conclusion
The last quarter was quite an interesting time for us as investors. Regardless of your political opinions, take solace in the fact that the investment horizon looks quite promising during the President-Elect’s upcoming term. We recommend very little changes to our model portfolios at this time, but we are keeping a close eye on US small/mid-caps in the near future.
Our unofficial motto still stands: we don’t sell anything to our clients that we wouldn’t buy ourselves if we were in your financial/life situation. Much of the time that means that we own many of the same exact assets— usually in different allocations— as our clients. We eat what we cook. We attempt to find fund managers that have similar ideologies as us because nobody can correctly predict the market year after year. What we can do is attempt to analyze past trends and make the best possible decision out of those choices ahead of us. This update should appropriately convey our reasoning in those decisions.
Should this brief synopsis of our opinions—and these are purely opinions based on our own analysis of the data—stir any questions about the markets, about our service, or anything else for that matter, please feel free to reach out to us. It takes a great deal of trust to allow someone to manage your life’s savings. The fiduciary duty that we voluntarily assume because of our relationship is nothing compared to the ethical duty that we have to you and your family. It’s not something that we take lightly; so, until the next time we speak, we will be in the boat with you.
Thank you for your continued trust.

/SIGNED
Kevin S. Whiteford
President
Whiteford Wealth Management, Inc.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, Inc., a Registered Investment Advisor. Whiteford Wealth Management, Inc. and Cambridge are not affiliated.
This letter is not meant to solicit the purchasing of any equities, bonds, mutual funds, or any investment of any kind. Any direct mention of any investment is meant purely as a reference point in the analysis of the issues discussed in this letter.
These are the opinions of Kevin S. Whiteford and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.

Millennials and Debt

“Consider the total cost of life,” he said, which means it might make sense to look at other cities where the cost of living is lower and the salaries are, too, he added.
“Think about where you are going to get the highest return,” he said.
Like all things, consider your life choices as you would an investment! Hopefully many of our kids will heed this advice.
http://finance.yahoo.com/news/crippled-student-debt-millennials-flock-141231392.html

3th Quarter Update

Whiteford Wealth Management, Inc.
404 Broadway Street, South Haven, MI 49090
Tel: (269) 637-4400 Fax: (269) 637-4407

October 3, 2016
Market Update
Hello and welcome to Whiteford Wealth Management’s Third Quarter 2016 Update! We all know that there has been quite a bit of political rhetoric floating around next month’s election, so we will cover that later in this update; however, let’s begin by talking numbers.
Name of Index Dec. 31, 2015 (close) Oct. 3, 2016 (close) Percentage Change
Dow Jones Ind. Avg. 17,425.03 18,253.85 4.76%
NASDAQ (IXIC) 5,007.41 5,300.87 5.86%
S&P 500 2,043.94 2,161.20 5.74%
CBOE 10-Yr (^TNX) 2.269 1.622 -28.51%

Please be advised that the percentage change in yields do not necessarily represent a similar decline in value, it only serves to show you that a substantial change in interest rates has occurred—although it does in fact affect the values of outstanding bonds. Also, many stocks of the DJIA and the S&P500 have dividends which are not included in the NAV on the associated index.
As illustrated in the next chart, we are have recovered nicely from YTD lows.
Name of Index Feb. 11, 2016 (close) Oct. 3, 2016 (close) Percentage Change
DJIA 15,660.18 18,253.85 16.56%
NASDAQ 4,266.84 5,300.87 24.23%
S&P 500 1,829.08 2,161.20 18.16%
10-Year T-Bond 1.644% 1.622% -1.34%

Now let’s compare these figures to our foreign counterparts around the globe. We’ll do so by comparing the major indexes of Germany, China, UK, & Japan.
Name of Index Dec. 31, 2015 (close) Oct. 3, 2016 (close) Percentage Change
DAX (Germany) 10,743.01 10,619.61 (Oct. 4) -1.15%
SSE Comp. (China) 3,539.18 3,048.14 (Oct. 10) -13.87%
FTSE 100 (UK) 6,242.32 6,953.82 11.40%
Nikkei 225 (Japan) 19,033.71 16,598.67 -12.79%
German Bund (DE10Y:DE) 0.635% 0.030% -95.28%

Like before, the percentage change in Bund value is not necessarily reflective of a similar change in value, but, currently, if you loan the German government $100,000 for 10 years, are still charging you to hold onto your money. We still think that the European landscape is economically too risky for a very large apportionment of any of our clients’ savings because of what these rates imply.
Source: Google Finance
Please also look to the following website for MCSI data on all countries listed (click the country tab about 1/3-way down). Look at the YTD and the rolling 1, 5, and 10 year periods.
https://www.msci.com/end-of-day-data-search

Over the past year, we have brought up the fact that there was really only one place to invest in the world when it came to regional investing. Again, our answer has not changed. When it comes to investing—especially pertaining to equities—there has really only been one economic region in the world that has made sense and outperformed the rest: North America. The absolute best performing region YTD has been the Pacific Region (excluding Japan) but we have only advocated small amounts of exposure to that region, as we feel that there has been quite a bit of unnecessary risk associated with investing there.
Since we manage the assets of our clients in a way that mitigates risk to the greatest extent while not ignoring the need for appreciation, we have felt and continue to feel that the US is the most prudent place to store our wealth for the near-term future.
The Large-Cap Dividend

We have no significant changes to our model portfolios in this regard. We still feel overwhelmingly that, in the upcoming political and economic environments, that the safest place to be in the market is having the benchmark of our clients’ portfolios in assets that are in line with the largest US companies that pay a dividend.

First, we will reiterate what is and has been going on in the bond market. For the most part, we feel that the overall bond market is the weakest point of the American economy. Bond prices, which we felt were already overvalued because they didn’t accurately price the risk of inflation and/or interest rate hikes by the Federal Reserve. Now, since the international markets have generally been at near-zero interest rates as far as governmental debt is concerned for quite some time now, foreign debt investors, especially those from the Eurozone, have been flooding our markets and driving the bond prices even higher than they were just a few years ago. This has led to T-Bond prices that sometimes go for 50% premiums or more. That means that the purchaser, in attempting to purchase a stream of coupon payments (based on interest rate of note), is sometimes paying over $1,500 for a note that, when due, will receive $1,000 back (face value). This is simply not sustainable in our opinion. The scary part is that roughly 40% of American’s assets are based upon this system. The typical coupon rate is roughly 2-4% for high quality debt.

US Large Cap Stock funds typically yield around 2% in current income in the form of dividend payments, so it is quite comparable to what one would yield in a high quality debt instrument. However, we feel strongly about this market. Many of these companies have, we feel, balance sheets that are attractive—even more attractive—than they were just one year ago. When comparing these balance sheets to those of the same types of companies in 2008 before the market crash, we feel that there is no fair comparison, as we see most Large-Cap US Stocks as having become much more lean as far as their employees and business operations go. Plus, even though many of these corporations have much more cash on hand than they used to, they have also taken advantage of the cheap debt that they can access. Like we stated in a prior quarterly update, many of us have taken advantage of the current market interest rates to refinance our homes, purchase cars, or what have you. Just imagine if you could do that with billions of dollars instead of thousands!
Now, looking back to prior analyses of the trends of US Large Caps (ask us for prior quarterly updates if you need a reference!), we simply feel that it is financially prudent for us to advise our clients to take a similar current income (dividend income vs. interest income) in the form of ownership of a Large Cap Dividend Paying Stock Fund when comparing it to ownership in a high quality bond fund.

Small-Caps and International Investments
While we advocate for the bulk of our clients’ savings to be invested in Large Cap Dividend Paying Stock Funds, we do advocate, based upon a client’s age and investment suitability to be paramount in diversifying over the long-term horizon. Up until recently, there really wasn’t a good risk/reward mix available to us in our opinion. Soon, though, we do see things changing overseas. We simply want to put this into our readers’ minds: soon enough we will advocate spreading more, albeit not that much more, of our model portfolio into what are traditionally riskier markets. This is because the reward is nearing the point when it will render the risk to be an adequate tradeoff. That is all we would like to cover in this section.

Oil Prices
The price of oil has finally made some headway in the form of higher prices as of late. This is neither a good nor a bad thing for our clients, as we feel that we have correctly hedged this development. Many of our clients’ assets love cheap oil, as the vast majority of them are the beneficiary of cheap transportation and manufacturing costs, but the assets that we have really seen receive the benefit of higher oil prices are the oil companies themselves so long as they have retained direct access to drilling activities. Fortunately, we saw this development coming and it is evident in the top holdings of many mutual funds that we have advocated to have a place in our clients’ portfolios.
Where this trend will take us, we can only make educated guesses upon. However, we feel that the price of oil is still historically cheap when taken into account inflation-adjusted pricing. There are still many circumstances in which the price of oil could come clambering back down in the short-term, but we will always plan on being in the right place down the line. This being said, we advocate for no change to our holdings in this regard.

Real Estate Market
This is a relatively new topic for our quarterly update. That being said, if we have talked in the last few years you may already know our stance on this segment of the overall market. We still feel that prices are relatively cheap when price-adjusted for inflation. We will keep is simple and only talk about the single-family residential market, as all other real estate markets tend to be tied to this vital part of the industry.
Historically, it costs about $100/sq. ft. to build a single family home when adjusting for inflation. So let’s compare it to 2005-2006 prices. Usually what we ended up seeing is the purchase price of a single family home well above the $100/sq. ft. benchmark. We feel that this was one of the indicators that the housing market was overpriced at that time. Today, home prices, nationally, are still below this important benchmark. This is why we are seeing considerable growth in many areas of the country when it comes to residential real estate construction and sales. With new construction comes vibrant growth in an industry that has been relatively stagnant for almost a decade. We feel that this filters back into many areas of our economy and part of the reason why the US economy is stronger than it has been in a long time.
US warehousing has entered a new age, in our opinion, in recent years. I know that many people advocated, albeit sometimes jokingly, that purchasing a “Forever Stamp” from the United States Postal Service was a favorable investment with interest rates as low as they have been. Well the USPS has lowered the price of a postage stamp for the first time in a very long time recently! This is because internet retailers have been relying on the USPS for many of their shipping needs. We feel that this is one of the key indicators that US warehousing is a great way to take advantage of this trend. Online retailers have a much higher propensity to have larger warehouses than many of the traditional retailers out there. We feel that this segment of the larger real estate industry, coupled with great residential growth, and strategic commercial holdings, are key drivers of building wealth for our clients.
The real estate market, we feel as a whole, looks like a great strength of the US economy. We have already begun to see the impacts that this market is having on the overall US market.

The US Presidential Election
With only about a month to go, this is the topic on everyone’s minds as of late. Well, many of you might already know our own political leanings, but for the purpose of this update, we will keep it as short, sweet, and objective as possible: we feel that our clients’ portfolios will win either way.
Hillary Clinton certainly has the backing of many Wall Street donors, especially when comparing the metaphorical “war chest” (donation pool) that she has at her disposal to that of Donald Trump’s. This is indicative of a relatively straight-forward concept. She is generally outspoken when it comes to “staying the course” of our prior President and many commentators have labeled her campaign as “business as usual”. Well, if she stays the course and continues to keep the now current status quo, there really is not much uncertainty as far as the markets go. Because there is less uncertainty, there is less perceived risk in the eyes of corporate America. Because there is less perceived risk, the stock market will probably not have as much price volatility if she wins the election. Because the fundamentals of the US economy are quite strong in our opinion, this will lead to more on-track growth in line with the past several years over the course of her tenancy as President.
Donald Trump’s potential win must be compared logically to that of last quarter’s Brexit vote over in the United Kingdom. “Wall Street” heavily favored a “stay” vote and even forecast it up until the night of the vote. It wanted more certainty in the post-election world and a “stay” vote would have done just that. However, the opposite occurred. Despite a 15% drop in the Pound Sterling/USD and freefall in the US market in the immediate aftermath of the unexpected vote, there was a near total breakeven, at least in the US, after only about 48 hours. Just 72 hours after the vote, the US market was once again in the green from the highly publicized political event. We tend to think that the same would happen in this country. Historically speaking, there are very few political trends that aid the large caps of domestic enterprise more than the trend of nationalism. Notice the YTD FTSE 100 Index returns for this year. We are seeing it in the UK and we might very well see it here in this country in about a month’s time.
When placed into this light, objectively-speaking, it seems like a great time to go long on the US market. This is why we are not worried, at least when it comes to our clients’ investments, whether the outcome of the upcoming election is Red or Blue.

Conclusion.
The last quarterly update was longer than this quarter’s and many of you might appreciate this fact! However, we really don’t want to advocate changing very many aspects of our model portfolio at this time. When we purchase an asset, we choose to go long. We will very rarely purchase an asset on behalf of a client if our determined holding period will be less than two years. Plus, who wants to pay short-term capital gains rates on their taxes when they could pay long-term rates?
Our unofficial motto still stands: we don’t sell anything to our clients that we wouldn’t buy ourselves if we were in your financial/life situation. Much of the time that means that we own many of the same exact assets— usually in different allocations— as our clients. We eat what we cook. We attempt to find fund managers that have similar ideologies as us because nobody can correctly predict the market year after year. What we can do is attempt to analyze past trends and make the best possible decision out of those choices ahead of us. This update should correctly convey our reasoning in those decisions.
Should this brief synopsis of our opinions—and these are purely opinions based on our own analysis of the data—stir any questions about the markets, about our service, or anything else for that matter, please feel free to reach out to us. It takes a great deal of trust to allow someone to manage your life’s savings. The fiduciary duty that we voluntarily assume because of our relationship is nothing compared to the ethical duty that we have to you and your families. It’s not something that we take lightly; so, until the next time we speak, we will be in the boat with you.
/SIGNED
Kevin S. Whiteford
President
Whiteford Wealth Management, Inc.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, Inc., a Registered Investment Advisor. Whiteford Wealth Management, Inc. and Cambridge are not affiliated.
This letter is not meant to solicit the purchasing of any equities, bonds, mutual funds, or any investment of any kind. Any direct mention of any investment is meant purely as a reference point in the analysis of the issues discussed in this letter.
These are the opinions of Kevin S. Whiteford and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.

Universal Basic Income (UBI) What is it? What does the world think?

In case you have been following the Swiss political arena lately, you might have not known that socialism is on the rise in many countries other than the USA.

Please see the link for reference.
http://finance.yahoo.com/news/universal-basic-free-monthly-income-utopian-switzerland-silicon-valley-finland-canada-122210548.html

Bond update article

0% of our managed assets are in “bond funds” for too many reasons to list here. However, it is extraordinarily important to understand more about the global market that is roughly twice the size of the global equity markets (even though the latter gets all of the attention).

See link for reference.
http://finance.yahoo.com/news/there-are-now–10-4-trillion-in-bonds-worldwide-that-are-guaranteed-to-lose-you-money-125824188.html

Start Saving Early

Best stat in here: you can choose to save 6.4% of your income while you are young (25) or nearly 20% when you are 45. Either way, it still has to be done!
See article for reference

http://finance.yahoo.com/news/recipe-building-wealth-hasnt-changed-150856063.html

July Update 2016

Whiteford Wealth Management, Inc.
404 Broadway Street, South Haven, MI 49090
Tel: (269) 637-4400 Fax: (269) 637-4407

July 1, 2016
Market Update
Hello and welcome to the post-Brexit world! It is especially important during these times to remember that since 2008, we have been near all-time lows when it comes to volatility, even with the recent surprise across the Atlantic. Let’s talk numbers.
Name of Index Dec. 31, 2015 (close) July 1, 2016 (close) Percentage Change
Dow Jones Ind. Avg. 17,425.03 17,949.37 3.01%
NASDAQ (IXIC) 5,007.41 4,862.67 -2.89%
S&P 500 2,043.94 2,102.95 2.89%
CBOE 10-Yr (^TNX) 2.269 1.456 -35.83%

Please be advised that the percentage change in yields do not necessarily represent a similar decline in value, it only serves to show you that a substantial change in interest rates has occurred—although it does in fact affect the values of outstanding bonds.
As illustrated in the next chart, we are still well above YTD lows, even though it is not much of a change since the last quarterly update.
Name of Index Feb. 11, 2016 (close) July 1, 2016 (close) Percentage Change
DJIA 15,660.18 17,949.37 14.62%
NASDAQ 4,266.84 4,862.67 13.96%
S&P 500 1,829.08 2,102.95 14.97%
10-Year T-Bond 1.644 1.456 -11.44%

Now let’s compare these figures to our foreign counterparts around the globe. We’ll do so by comparing the major indexes of Germany, China, UK, & Japan.
Name of Index Dec. 31, 2015 (close) July 1, 2016 (close) Percentage Change
DAX (Germany) 10,743.01 9,776.12 -9.00%
SSE Comp. (China) 3,539.18 2,932.48 -17.14%
FTSE 100 (UK) 6,242.32 6,577.83 5.37%
Nikkei 225 (Japan) 19,033.71 15,682.48 -17.61%
German Bund (DE10Y:DE) 0.635 -0.129 N/A%

Like before, the percentage change in Bund value is not necessarily reflective of a similar change in value, but, currently, if you loan the German government $100,000 for 10 years, they will actually charge you to hold on to it. That is how crazy it is in Europe right now.
Source: Google Finance
Please also look to the following website for MCSI data on all countries listed (click the country tab about 1/3-way down). Look at the YTD and the rolling 1, 5, and 10 year periods.
https://www.msci.com/end-of-day-data-search
Last quarter, we brought up the fact that there was really only one place to invest in the world when it came to regional investing. Without sounding redundant, our answer has not changed. When it comes to investing—especially pertaining to equities—there has really only been one economic region in the world that has made sense and outperformed the rest: the United States. The second-best performing MSCI index YTD made about 2.66% as of market close June 23rd. The North American region did 3.88% in the same period. Plus, that 2.66% *included* the US, which obviously pulled that average up.
Fixed-Income Producing Assets and the Age of the US Large Cap Dividend.
The title sums up our views quite succinctly. The US Large Cap Dividend-paying stock is our prevailing income strategy for our clients. It provides current income and we feel a much better chance of appreciation than its counterpart, the bond strategy.
First, let’s begin by talking about the bond market. Ultimately, we feel that the bond market is the weakest part of the US economy. Nearly all financial planners recommend a well-diversified portfolio, so why do we not utilize what has been a staple since our grandparents began investing? Well the Fed Funds rate is, even after being raised by 25 basis points (bps), still very near to all-time lows. This means that banks can essentially borrow money from the Federal Reserve (Fed) and barely pay a dime to do so. Sure, there are stringent regulations that banking institutions have that pegs the total amount of debt that they can acquire in relation to their deposits/assets and the Fed has been talking about and instituting plans to raise those requirements, but the fact still remains: they are borrowing money for basically free. They, in-turn, loan that money out to their customers/borrowers at varying rates based upon varying risk levels that they feel are inherent in their borrowers’ usage of those funds. The 10 year Treasury Bond, or 10 year T-Bond, is currently hovering at a yield of 1.6%. This is usually the rate which affects most borrowers in the market, as it is easier to peg their risk levels to the risk levels that the overall market feels is inherent in the US Federal Government’s usage of the funds. Presumably, the US Gov’t has no risk—although some may scoff at that statement, so they pay the lowest rate in the US market. Loaning $1B for 10 years to, say a large company that has $150B in cash and cash equivalents (you might know which company I am referring to) is not very risky so that rate will be slightly above the T-Bond rate because it is still technically more risky than loaning it to the US Gov’t.

You might say, “Why then, is the German Gov’t charging people to loan it money while the US Gov’t is still paying creditors? Isn’t the US Gov’t more solvent (less risky) than the German Gov’t?” You would be spot on in your reasoning and global investors tend to agree with you. In recent years, as the governments of the world artificially lower their interest rates to spur national investment into their economies—you can invest in the economy or the gov’t will charge you interest to hold onto your money—their debt investors are fleeing to the US debt markets. This flight, we feel, is by and large the number one reason that there hasn’t been a crash in the US debt markets yet. However, that money will eventually dry up—there are only so many international investors willing to place their money into a foreign debt market. When that happens, our debt markets could very well be in a world of hurt, especially if interest rates rise accordingly. It seems like there is too much risk in doing so in order to go after a measly 1.6% return, even if there are plenty that yield slightly higher.

What we really feel is that the US economy, namely large-cap, dividend-paying stocks (LCDPs) are how we would like to invest at this time unless you have a larger time horizon in which to invest or have a larger asset base in which you can take advantage of smaller, riskier opportunities. Assuming that neither exception applies to you, the LCPD is the way to achieve income from dividends and realize some upside potential as well. Right now it is simple to find a company that pays a 2%+ dividend that easily covers their quarterlies. So if there is a large amount of volatility in bond AND equity valuations coming in the future, why would you not go for the asset with a, we feel, much greater chance of an increase in valuation over time—rather than a relatively certain decrease—if both supply the same amount of income? More talk on this asset class is coming in the next section.
Let’s remember, the average return for the S&P 500 since inception is roughly 7.5%. Of that total return, approximately 1/3 of it is due to the dividends paid by its underlying asset portfolio.
http://us.spindices.com/documents/research/research-dividend-investing-and-a-look-inside-the-sp-dow-jones-dividend-indices.pdf

The United States Equity Market.
Again, this is pretty straight-forward. Let’s start with a few solid numbers. As of YE 2014, nearly 90% of the US GDP came from domestic sources. This is the most recent official number, but we feel confident in assuming that, with sliding economies internationally, this number is even higher today.
http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS
We are actually the only major economy that scores even close to this figure. This makes it self-evident that even if the rest of the world goes down the tubes—which it arguably has and continues to do so—the US economy will be doing just fine. Any large changes in the US market’s valuation due to foreign events seem to err on the side of superficial changes and not fundamental ones. Last year’s Greece and this year’s Brexit are prime examples of this. Business in the US goes on, which can easily be found in the numbers.

Many argue that due to artificially low interest rates, the US economy is thriving and without them it would collapse. There is some merit to these pundits’ claims. However, we do not see any major rate changes occurring in the near future (<5 years). What we do see that nobody in the media seems to be talking about is the fact that US companies are taking advantage of their strong cash positions and cheap debt in an effort to become truly monopolistic global powerhouses with relatively cheap international asset prices. These prices are driven lower by the fact that #1: their economies truly are struggling and #2: the strong USD. Our global companies are purchasing assets around the world knowing full-well that one day, whenever that day is, the rest of the world will in fact climb out of economic recession. When that day occurs, we feel that our multinational corporations will have succeeded in acquiring large swaths of market shares and will pass those benefits for their shareholders. Not enough emphasis can be placed on the preceding paragraph. *As soon as the world begins to recover, whenever that might be, we feel that LCDP shareholders will reap the massive benefits.* Until then, let’s just chase the easily-covered dividends. Let us give you an example: there was a recent acquisition that many people have heard about. http://www.bloomberg.com/news/articles/2015-11-11/ab-inbev-to-buy-sabmiller-for-107-billion-as-u-s-deal-agreed Basically, InBev didn’t really mind selling the assets that MC held in the US market in order to fulfill its obligations to US anti-trust laws. That wasn’t the point of the deal. The deal was an effort to take over more of the entire world’s beer market. Most countries simply don’t have or don’t enforce laws that prevent monopolies from occurring. This especially isn’t an endorsement of the security in any way. It simply serves as a great example of what is happening around the world with LCDPs. Lastly concerning this topic, I would like to address one area of our economy that is not traditionally encompassed by LCDPs but we do feel quite strongly about. The US is a service economy. Sure, manufacturing is coming back, but our technology markets are booming faster than our manufacturing and with good reason: we have many competitive advantages such as a solid, well-compensated labor force and fantastic cash positions. Many might think that Japan, Korea, China, or some other Asian country is leading the world with advancements in the technology markets and there is actually a bit of truth in that. However, what they don’t have is something that we are remarkably well-positioned to take advantage of. We like to purchase technology companies that hold large amounts of cash. Many of these said companies are based out of the US. One notable company has approximately $200B in cash/cash equivalents. Another international player has about $150B and these two examples are not alone. One thing that has been occurring lately and we feel is bound to continue are the acquisitions occurring within the tech space. As soon as a new, admittedly brilliant technology comes out, one of the big players snatches it up and places it soundly within its own portfolio, thereby passing added value on to its shareholders. Just as with selling beer, most markets around the world simply don’t enforce anti-trust laws. These tech-savvy companies love this fact and are utilizing their competitive advantages extraordinarily wisely. For younger clients and those with a larger time-frame or larger asset base, the biotechnology industry, with its recently-induced massive setbacks, takes this principle and runs with it. Volatility is extraordinary in this market and not as many players issue large enough dividends, if any, so it is widely dismissed as a viable investment strategy for most of our clients, but it is available. Biotechnology companies are straddled with more regulations than most industries can even imagine; so, then, we feel that those operating outside of US borders can opportunistically operate in low-regulation environments thereby increasing the chances of shareholder earnings over the long-term. Now we do want to clarify: nobody reading this quarterly update is in a position to stop monopolies from forming or to prevent any sort of unethical behavior—at least we don’t think so—but the fact of the matter is that trends like this are occurring whether we like it or not. Why not secure a safer retirement by acknowledging the trend’s existence? Oil and the Markets. The oil market has recovered quite a bit, but we are still well below $100 barrels, so we are going to reiterate what we stated in the last quarterly update: “Now, to shift into a different topic, many people, especially those in the media, love harking on the fact that because oil prices are down, it looks bad for the rest of the economy. While this is true in many places in the world, as their chief source of income, on the governmental level, is some sort of commodity—many times it’s oil. However, as one of the largest consumers of oil in the world, US companies *love* cheap oil. A good way to think about it is thusly: 90% of the S&P 500 are now paying transportation costs that mimic those they had 20 or 30 years ago when it comes to refueling their trucks, shipping their widgets, or purchasing raw materials from across the country (and the world). With the advent of newer technology that comes out every year—transportation/logistics is perhaps the largest industry in the world so it attracts the largest tech contracts—the only companies in this country that are unhappy about cheap oil are those that pull it out of the ground. Some of the biggest companies in the industry haven’t even been producing it for the last 18 months, as their refining, shipping, and storage arms more than pay the bills on time. These types of companies are still making billions every year even with the price of oil at $[50] because of the vertical integrations across their industry.” We see a good chance of another crash in oil, but we feel that we saw the bottom when it hit into the lower $20s. However, the long-term goals are still the same: receive the dividends and reap the long-term benefits, as LCDPs within this industry are doing exactly what the rest of the US market is doing overseas. Another truth about this segment of the industry: many have shifted operations from drilling oil to processing/shipping oil. This leads to more modest profits, but profit amongst a shattered industry is, we feel, a great indication of what will occur down the road. Volatility. We would like to touch on this point very briefly but firmly. As it was stated earlier, volatility during these past 7 years has been at near all-time lows. Source: “Guide to the Markets U.S. 4Q 2015” by JP Morgan Asset Management There are not too many things that are as fairly certain in our minds as the increased volatility that we will be going through in the coming years. This should realistically affect all asset classes in varying degrees. What we will attempt to do is lessen this volatility to the greatest extent while still making sound investment choices for our clients. Remember, cash isn’t very volatile at all unless you are currently residing in Venezuela, but it was also the #1 worst asset class to have been in during the time period of 1999-2013 which was one of the worst economic times since the Great Depression. We don’t advocate getting into cash now. There is no way to achieve our clients’ desired retirement goals without taking on risk. This risk is inseparable from volatility. With an adequate appetite for volatility, the risk/return will hopefully be in our clients’ favor. This isn’t done haphazardly, of course, but each time we make an investment decision, we heavily weigh the risk/return tradeoff. This is why we prefer to advocate LCDPs as the core of every client’s portfolio. Remember, 1/3 of the S&P 500’s total return was attributed to fixed dividend payments. Brexit. This was big news this quarter and many people are talking about it. We have kept a close eye on the matter and tried our best to sift through the political rhetoric to decipher as many facts as we could surmise. Firstly, we usually go to the horse’s mouth in order to decipher as much of the true intent of a movement as possible. That being said, Farage, the spokesperson for the “leave” movement summarized his views pretty succinctly when asked about whether or not the UK was going to abandon the free market approach that had led it to joining the EU. Farage quickly dismissed these thoughts as he stated numerous times that the UK had no intention of shrinking its free market activities. Instead, he utilized a great example: the United States sells more goods to the EU than the UK and it will likely never be a member (naturally) of the EU. So why should it be any different for the UK? Why can’t the UK leave the EU and simply continue trading with its European counterparts? The only difference, he stated, was that there would simply be less regulators looking over the shoulder of the UK when doing so. His view was that, if anything, leaving the EU would in fact lower costs and boost trade! We tend to agree with his thoughts. https://www.youtube.com/watch?v=7oB0SHTh08E With the net increase in trade, it is tough to ignore the obvious question then, why is Brussels telling the UK how to conduct its trade relations with other sovereign nations? Why is the sovereignty of any country incapacitated by another’s? There is the argument that the UK’s voice is heard in the larger EU, but our opinion of that is understood by a simple analogy: how much say does Scotland have in the UK? How much say does Indiana have in the US Congress? Sure their voices are heard, but are they really? How much weight is given to their opinions? Ultimately, we feel that the best judge of whether or not the UK should do something is the UK, especially if they boost trade and commerce by doing so. Switching gears, there is an obvious short-term benefit to American companies as far as this Brexit is concerned. The price of Sterling (UK Pound) plummeted to just $1.35. This constitutes a drop of approximately 32.5% since 2007, meaning that our companies are going over to the UK and purchasing the same exact assets for roughly 67 cents on what those same assets cost 9 years ago! It also constitutes a drop of roughly 15% from the average price since then. This is great news for US companies. They get to buy into the UK consumer markets for a fraction of what it cost just a few months ago. Once everything normalizes, we feel that US company shareholders, once again, will reap the benefits. http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y Systemic risk is the biggest fear resulting from the Brexit. Let’s begin by analyzing some facts: 1. Germany’s exports as a percentage of GDP: ~46% 2. UK’s #: ~28.5% 3. France’s #: ~29% 4. Italy’s #: ~30% 5. Spain’s #: ~32.5% 6. Poland’s #: ~47.5% 7. Most smaller countries have even higher reliance on the EU http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS Although the UK had a similar reliance on trade as do the other major EU players, the UK was the only major member, aside from Poland, that retained usage of its own currency. This fact allows for a much more seamless “break-up” from the EU for obvious reasons. Poland will have a very tough time leaving because they essentially just joined 10 years ago. They have poured countless resources into becoming compliant with the EU and most citizens there know it. They will be much less likely to cut their losses after such major investments. We feel that Germany cannot and will not leave the EU. As the primary economy of the organization and, by EURO quantifications, the largest exporter by far, Germany has reaped massive benefits from the EU. It essentially does whatever it wants and helps create many of the EU’s rules. It also owns much of the debt of the European Central Bank. This is one of the largest points we’d like to cover and not enough emphasis can be placed here: Germany loans money to the ECB which in turn loans it to member countries which finally purchase German products. Germany is probably not leaving such a beneficial relationship! We also feel that Spain, France, and Italy are on track to become democratic socialist republics for the most part. The work weeks are being cut each and every year while benefits keep escalating. This is not a sustainable model and, without getting into it very much here, creating a reliance on ECB loans. Anyone that understands a debtor-creditor relationship can understand that once you go into debt, you lose much of your sovereignty to your creditor. The creditor gets to create new rules in which you must abide by and so on. This is a natural side effect of these types of relationships. Spain, France, and Italy are becoming debtor states to Germany and they know it; however, they really cannot do anything about it. US/Global Inequality and the Welfare State/Nationalism Anytime anyone turns on the news one of the buzzwords that broadcasters love to use is “inequality”. Wealth inequality, income inequality, and the list goes on. As most of our clients know, inequality is bred from success. Capitalistic success has created great wealth inequality in this country, but is that a bad thing? Warren Buffett, in a recent interview, stated the following: “Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.” http://www.businessinsider.com/warren-buffett-on-secular-stagnation-2016-2 We tend to agree with Buffett. A great parable begins with two carpenters making $500/week. One decides to start his own business with a hefty loan from the bank. He leverages his home, his car, and just about everything he owns to do so. Well he is successful in his business with so much at stake so he is now making $2,000/week. With that, he decides to hire his old associate and pay him $750/week to take on the added responsibilities of working in a small business (we all know that you must do *everything*!). Well, the “GDP” of this two-man group skyrocketed 100% and each and every member of the group is better off than they were just a short time ago. However, income inequality rose from $0 to $500 so that is what gets reported in the news! Well this example has occurred many times over, not just in this country, but around the world. Some risk-takers end up bankrupt and going back to their $500/week jobs while some go on to be wildly successful because of a great new product or a brand new way of performing an age-old business. However, many people are left behind because of any one of the countless reasons behind it. This is not a new dilemma; it is not a new trend; it has happened many times before. Nearly 100 years ago, in the wake of the Industrial Revolution, many people felt that they were taken advantage of by the system. They felt as if they were placed by the wayside and left unable to fend for themselves. Whether or not their feelings were well-founded, their feelings were important enough to change national and international dialogues. This same trend is occurring again and we all see it around us each and every day because of the technological revolution. We see it in the news and we see it in the grocery stores, the malls, and even our own business relationships. So what does this have to do with the economic markets? Well lower-income investors have almost entirely dried up because of fear. The markets have never before been so accessible to the common person around the world—anyone with a cellphone can invest!—and so cheap to do so, yet the 50-100th percentiles of the US population own less than 1% of the total US stock market. The global population is even worse. We all know that those with savings make money from that savings so long as it is properly invested—and we feel that the stock market has, over the long haul, been a solid way to preserve and grow that savings. The great news is this: more and more lower-income people are able to access the markets at reduced costs. A brokerage account, formally associated with only upper-middle-class savers, is now readily available to more people every year. But, it is not compulsory. Those who spend rather than save/invest blame a broken system for their inequality. Eventually, history has proven, these swaths of people do end up better off, but in the short-term they call for more welfare, more gov’t spending, and more social security. This is where we are today. Gov’t welfare is and has been increasing in recent times as most of the world’s lower-income populations feel left by the wayside. Again, whether these feelings are well-founded or not is irrelevant, as it changes the national and international dialogue. The resulting increases in socialistic policies have historically led to more nationalism, which has led to more geopolitical conflicts. Because of the increased geopolitical conflicts, certain asset classes outperform the broader market. These asset classes are typically associated with companies that are large enough to bid for gov’t contracts. Those are the companies that we are looking to invest our clients’ savings into today and going forward for the foreseeable short-term future. Conclusion. This quarterly update is intentionally longer than its predecessors as we want to convey to you, our clients and our readers, our take on not only the US market, but the international markets as well. There are many changes occurring around the world, but we have seen these trends before. These trends are not new; they simply have a change in rhetoric. Our unofficial motto still stands: we don’t sell anything that we wouldn’t buy ourselves if we were in your financial/life situation. Much of the time that means that we own many of the same exact assets— usually in different allocations— as our clients. We eat what we cook. We attempt to find fund managers that have similar ideologies as us because nobody can correctly predict the market year after year. What we can do is attempt to analyze past trends and make the best possible decision out of those choices ahead of us. This update should correctly convey our reasoning in those decisions. Should this brief synopsis of our opinions—and these are purely opinions based on our own analysis of the data—stir any questions about the markets, about our service, or anything else for that matter, please feel free to reach out to us. It takes a great deal of trust to allow someone to manage your life’s savings. The fiduciary duty that we voluntarily assume because of our relationship is nothing compared to the ethical duty that we have to you and your families. It’s not something that we take lightly; so, until the next time we speak, we will be in the boat with you. /SIGNED Kevin S. Whiteford President Whiteford Wealth Management, Inc. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, Inc., a Registered Investment Advisor. Whiteford Wealth Management, Inc. and Cambridge are not affiliated. This letter is not meant to solicit the purchasing of any equities, bonds, mutual funds, or any investment of any kind. Any direct mention of any investment is meant purely as a reference point in the analysis of the issues discussed in this letter. These are the opinions of Kevin S. Whiteford and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.

We were please to be once again invited to join the industry leaders!

News for Immediate Release
Kevin S. Whiteford Joins Industry Leaders at Cambridge Signature Club
Independent Financial Advisor Attends Signature Club 2016 in Amelia Island, FL

{Amelia Island, Florida} – May 04, 2016 – Kevin S. Whiteford an independent financial advisor with Whiteford Wealth Management, Inc. attended Cambridge Signature Club 2016. Signature Club honors a financial advisor’s independent business accomplishments in delivering some of the highest levels of client service while reflecting Cambridge’s core values of integrity, commitment, flexibility, and kindness. Distinction as a member of Cambridge Signature Club 2016 included a special invitation to Amelia Island, Florida, May 4 – May 7, 2016.

“Achieving Signature Club status is an excellent accomplishment and we were pleased to host Kevin S. Whiteford in Amelia Island for Signature Club 2016,” said President Amy Webber. “It was energizing to meet with qualifying advisors because it gave us the opportunity to share our mutual passion for serving clients and celebrate the goals they met for supporting clients with service excellence.”

The conference focused on renewing a commitment to excellence in serving clients, unwavering dedication to independence, and the ability to deliver objective advice to clients. In addition to celebrating this achievement with industry speakers and information sessions, Signature Club members engaged in various networking lunches and dinners. Cambridge’s senior executives served as hosts for Signature Club.

In Kevin S. Whiteford’s words …
“I want to thank my clients for choosing me as their financial professional. I sincerely appreciate their trust in me and their confidence that I will provide them with unbiased recommendations and impartial guidance based on their needs and goals. I appreciate being named to Cambridge’s Signature Club, especially as a reflection of our shared values and dedication to serving clients, and I enjoy the opportunities to share experiences with my peers who are also independent financial professionals.”

About Whiteford Wealth Management, Inc.
My team and myself provide ideal service while assisting individuals and small businesses to create a financial plan for life’s changes. We can assist individuals with the finances behind college planning, newborn planning, unfortunate loss planning; and we specialize in assisting businesses and individuals approach retirement and maintain that plan throughout their retirement years.
Contact: Kevin@whitefordwealth.com 269-637-4400. 404 Broadway st. South Haven, MI 49090.

Registered Representative, securities offered through Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge and Whiteford Wealth Management, Inc. are not affiliated.

About Cambridge
Cambridge Investment Group, Inc. is a privately-controlled firm with a national reach across the financial services industry consisting of multiple broker-dealers and RIAs, including: Cambridge Investment Research Advisors, Inc. – a large corporate RIA; and Continuity Partners Group, LLC – a special purpose broker-dealer and investment advisor; and Cambridge Investment Research, Inc. – an independent broker-dealer, member FINRA/SIPC, that is among the largest privately owned independent broker-dealers in the country supporting approximately 2,900 independent financial professionals nationwide who serve their clients as registered representatives and investment advisor representatives, choosing to use either Cambridge’s firm Registered Investment Advisor or their own. For more information visit www.joincambridge.com

Article of Interest

“This is the first recovery in decades when small business jobs are actually shrinking. All the expansion is coming from the closed loop economy between the Fed, the bureaucracies and the big banks.”
An interesting contrarian viewpoint on today’s global economy. We agree with some points and disagree on others; nonetheless, ask us what we are doing about these factual trends.

http://finance.yahoo.com/news/fed-god-failed-george-gilder-130625700.html

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