Blog / Events

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

March Update

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

March 17, 2016
Market Update
Anyone that knows us at Whiteford Wealth Management, Inc. is already familiar with our brevity. We feel that it’s always important to be honest with ourselves and the markets that we have become so intertwined with. So far this year has been detrimental to the overall market and our clients’ savings. Let’s talk numbers.
Name of Index Dec. 31, 2015 (close) Mar. 16, 2016 (close) Percentage Change
Dow Jones Ind. Avg. 17,425.03 17,329.91 -0.55%
NASDAQ (IXIC) 5,007.41 4,764.78 -4.85%
S&P 500 2,043.94 2,027.22 -0.82%

As you can see, these numbers have been continually increasing from their previous lows, as illustrated in the next chart.
Name of Index Feb. 11, 2016 (close) Mar. 16, 2016 (close) Percentage Change
DJIA 15,660.18 17,329.91 10.66%
NASDAQ 4,266.84 4,764.78 11.67%
S&P 500 1,829.08 2,027.22 10.83%

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) Mar. 16, 2016 (close) Percentage Change
DAX (Germany) 10,743.01 9,983.41 -7.07%
SSE Comp. (China) 3,539.18 2,870.43 -18.90%
FTSE 100 (UK) 6,242.32 6,175.49 -1.07%
Nikkei 225 (Japan) 19,033.71 16,974.45 -10.82%

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 rolling 1, 5, and 10 year periods.
https://www.msci.com/end-of-day-data-search
You might notice that one country is doing far better than every other country—aside from small players such as Denmark & Belgium—that is on that list. Several years ago, we felt the same way. Despite fielding calls on a weekly basis about how JPMorgan, Fidelity, or whatever other big player was trying to convince us to “diversify across the markets”, it really did not make sense to us. We kept the course. We stayed, when it comes to the vast majority of client assets, invested in US Equities. Well things don’t seem to have changed much, and the last 10 weeks seem to agree with us.
Fixed-Income Producing Assets and a Return to the US Large Cap Dividend.
Well, there must be other ways of diversifying one’s investments to include fixed-income alternatives, one might say. We agree when it comes to larger net-worth clients. However, even in those cases we are required by law to refrain from placing certain percentages of client assets in such vehicles. For our smaller clients, we simply cannot ethically make those same allocations. This is because there have been only two types of fixed-income strategies that have been economically viable, in our eyes, in recent years. These two types of assets are (1) Fixed Index Annuity and (2) Private Real Estate Investment Trusts. While we agree that purchasing bonds are historically a great approach to realizing this prong of one’s investment strategy, the rest of the world has flooded our fixed-income markets and driven the prices to where these types of investments simply don’t make sense for the great majority of our clients. A yield-to-maturity of under 2% is, stated simply, rarely a suitable investment. Let me create another chart to help explain why US dividend paying equities are better long-term investments when compared to today’s bond market.
Aggregate Fixed Income Portfolio Individual Bond (10-years) US Equity Portfolio Oil & Gas Industry
Income (Coupon or Dividend Rate) ~2-3% ~2-3% ~2-3% ~4%
Value Change (Interest Rate Decrease) Increase Increase (But we would not advocate selling) Increase (Cheaper Debt=More Expansion) Increase (Same as US Equity)
Value Change (Interest Rate Stagnant) No Change No Change No Change (Other than Market-Related) No Change (Same as US Equity)
Value Change (Interest Rate Increase) Decrease Decrease (But we would not advocate selling) Slight Tightening of Debt = Current Expansion Stays Same as US Equity
Likely Value at end of 10-Years (Historic Avg.) Decrease No Change (Return of Principal) Increase Same as US Equity

Source: http://news.morningstar.com/index/indexReturn.html
The primary difference between the first two columns is this: one’s a portfolio of bonds, so there is constant buying and selling as new money comes in/leaves the portfolio, bonds mature prompting reinvestment, etc. This drives the point that the bond portfolio will, very closely, follow the path of the Federal Reserve’s Fed Funds Rate. The individual bond, which we help purchase for some clients in some cases, is bought for the pure intention of receiving 2% income for 10 years and reinvesting the bond into a newer (hopefully higher rate in 10 years) bond once it matures. We DO NOT advocate buying/selling bonds at this point in time.
Row #4 deals with several different aspects. First, it assumes that stock prices during large rolling periods increase over time. Second, it assumes that interest rates will increase at some point in the next ten years which would lead to their devaluations. This leads us to our decision as to what type of asset class we recommend our clients purchase.
As most of our clients’ investment timeframes are longer (usually much longer) than 10 years, the choice should be relatively clear amongst these asset classes, as they all provide the same amount of income. For unlimited downside exposure, as interest rates can theoretically go higher than their historic norms within the next 10 years—which would already be a 250% increase from current levels—bond portfolios do not seem like wise investment decisions for most of our clients. Now, this is not a part of the “by-the-book” investment approach, we know. But, we will NEVER buy something just because everyone else in the industry is doing it.
Equity positions, as described earlier, tend to increase over large spans of time. For instance, we have only had four ten-year rolling periods—which is defined in terms of average annual return for the ten years prior the then current year—in which this trend is untrue (late 1930s & late 2000s)—it quickly reversed—so we feel comfortable in our clients’ assets earning similar rates as bond portfolios with much higher upsides over the long-term investment horizon.
Source: http://www.crestmontresearch.com/docs/Stock-Rolling-Components.pdf
So which type of equity portfolio should we buy?
The industry of oil & gas, in column four, is meant to give you an example of a large holding within many US Equity Portfolios. This industry segment, like much of the large-caps in the US economy, is much more streamlined than it was just a few years ago. Most of US market critics look to the price of the DJIA in 2007-2008 and compare it to today’s prices. This is simply not fair. Our reasoning that we have is that after the most major market crash that this country, the big guys have learned many lessons. They have fewer employees than they did eight years ago. They have less debt. They are more critical of growth opportunities. Plus, they are paying historic lows on their interest payments. Just think of what many of you have done in the past eight years. You have probably refinanced your home, saving thousands every year. You might have bought a new car with 1% or even 0.5% interest on the outstanding balance. You have consolidated credit card debt into rates that you yourself would have scoffed at in the late 1980s. Now imagine: what if you were a $300 Billion company and you were able to do all of those things and more? Sounds great, doesn’t it?
That is what is driving the numbers higher. It might be artificial so long as interest rates stay as low as they are now; however, the fact remains: US Large Caps are making more and doing so costs less than they ever have in the history of this country’s stock market.
Basically, if the Fed Funds Rate (and of course LIBOR) go up, bond portfolios will likely get killed and the growth prospects of US companies will get slightly deterred. This dilemma is rectified by the simple fact of deciphering *to what degree* these two asset classes would be impacted by such decisions by the Federal Reserve. Because most of the debt that has financed massive growth operations by US companies has already been locked in at current rates and only a small percentage is affected by interest rate changes, we feel confident in the decision that we have made: Dividend-Paying Large Caps are the way to go.
Oil and the Markets.
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 $25 because of the vertical integrations across their industry.
Like what was stated earlier, though, is that cheap oil and the corresponding cheap commodities markets are not exactly helping the rest of the world. International business has indeed slowed because of it. The impact on our bottom line, however, might shock you. Less than 1% of the US GDP in 2015 was comprised of exports to other countries. This is one fact that you will never see in the news. When reports arise stating that exports to China are down 3-5%, it really sounds bad. But, really, the impact on our GDP is rather trivial. This is another reason why we are long on US domestics.

Stock Buybacks.
A little knowledge for you as far as definitions go: when a company owns stock in itself, it is commonly called “capital stock”. Well this sort of stock has been increasing at pretty exponential rates in the past few years. There’s really two key indicators as to why this is happening in our opinion.
First, interest rates are low! The average growth of the S&P 500 since it’s been around has been about 8%/year annualized if one accounts for dividend reinvestment. Well if you can get a corporate loan of 5% or maybe even 3-4%, then this seems like a great long-term investment for American companies.
Second, the managers of these companies see long-term growth within the companies themselves when taking current stock prices into account. This is the most important facet of the recent capital stock activity, as no matter how much technical analysis one does from the public data that is required to be published by these public companies, *nobody knows a company better than that company’s management*. If the managers are not only purchasing stock through the corporation, which is technically not insider trading, but also waiting until key public disclosures occur to buy these stocks with their personal funds, it seems to us to be a great indication of where the future of the US company is going. This is not something that we wholly rely on, of course, but it definitely doesn’t hurt the cause.
Conclusion.
Anyone that has been a client for a long time knows our unofficial motto: we don’t sell anything that we wouldn’t buy ourselves if we were in your financial/life situation. Well over 90% of the time, that means that we own the same exact assets—usually in different allocations—as our clients. We like to be in the boat with you. This is why we were one of the only firms that left the market midway through 2008. We did so personally. In 2009, we saw the market hit bottom. We got back in and advised our clients to do the same. We left the international markets in 2011; so did our clients. Those that stayed did based upon their own inclinations, which we will always respect their decisions as final. Well we really haven’t gotten back into the international arena save for about 5% of total client assets. While there are bound to be times ahead when we feel that the time is right, it just isn’t now.
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 arises out 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.

Friendly Reminder

Take a look at some great uses of your tax return.
Always feel free to call us with questions 269-637-4400, and have a great day!
http://www.forbes.com/sites/financialfinesse/2013/02/20/7-ways-to-make-the-best-use-of-your-tax-refund/#2bb8143425e4

January Outlook

“US Automakers Ford & GM seem to be receiving a lot of negative attention from investors recently. This pales in comparison, however, to many of the fundamental changes that these two companies, Ford especially, have been undergoing and plan on bringing about in the coming years. Ford, for example, has partnered with Google in the application of a new “Smart Car”. It also wants to get directly involved in the “Car Sharing” programs that have been garnering nationwide (and worldwide) support lately. They want to have lots in larger cities–filled with Ford cars of course–that customers are able to utilize their credit cards to rent cars for however long a time period they choose.

On top of these fundamental shifts in US Automakers’ business models, their stocks have been relatively stagnant for quite some time and have in fact taken dips in 2015-6. They are now yielding twice the dividends of their average S&P 500 counterpart.

Ford sales are up. GM sales are up. Fiat Chrysler has actually had its best year in 90 years! The companies creating the consumer product that has so eloquently epitomized the American way of life, we feel, is a great analogy to the overall domestic stock market: at current prices, it’s trading at a bargain.

Like always, feel free to contact us to learn more about our viewpoints about the markets and how we can help you attain (or retain) your retirement through their use.

http://finance.yahoo.com/news/a-great-year-for-car-sales%E2%80%94but-a-lousy-one-for-gm-and-ford-stock-183828882.html”

HABITAT FOR HUMANITY

In September 2015, Kevin and Tom alongside with the Holland Young Professionals, assisted in constructing two homes in Holland Michigan.

The homes are constructed through Habitat for Humanity, and their mission is a valued one here at Whiteford Wealth Management, Inc.

An afternoon of sweat laughter and some aches, it always feels good doing something to make a difference in the community.

http://www.lakeshorehabitat.org/

Habitat for Humanity has locations all over the world, and most likely there is one in your backyard!
Habitat constructs homes for low-income families who have a steady income, but cannot afford safe, decent, and affordable housing on their own yet. However, by lowering the costs of construction through volunteer assistance, this goal is obtainable.

This is a major support system for families that would like to move themselves and their children away from a negative environment, but do not have quite enough funds to do this independently.

Each home has a monthly mortgage, and incentives to move the families towards financial Independence.
Habitat for Humanity has always been a strong proponent of ‘a hand up rather than a hand out.’ Houses are sold to qualified Homeowner Partners without profit, using affordable mortgages.

Homeowners also complete sweat equity hours as part of the partnership. Our homeowner partners are able to re-pay their mortgages over the course of 20-25 years.

These payments, together with donations, grants, and sales from our ReStore create a sustainable revenue model that supports the construction of more homes for future Habitat partners.

When Habitat families move from poverty housing into their own homes, they report better health, increased stability in the family, and children who do better in school.

Thank you for reading our post, and pass the message along; it takes a community to build a community.
-Whiteford Wealth Management, Inc.
HABITAT DAY PIC 1

HABITAT DAY PIC 2

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