Is Gold a Gleaming Investment?

by Scott Smith, CIMA®

Is Gold a Gleaming InvestmentA couple blog posts back, I mentioned the historic low interest rates occurring in synchrony around the globe and highlighted a few takeaways for investors. In light of this unusual environment where global central banks are following the same strategy of printing money, buying bonds, lowering interest rates, and devaluing their currency, I think it’s a good time to discuss gold and the role it should play in client portfolios. Is Gold a Gleaming Investment?

Our bias will always be owning reasonably-priced productive assets, like stocks, that have the capacity for earnings, dividends, and cash flow growth over the long-term versus a non-productive asset like gold, whose value is derived partially from jewelry demand where it is worn and partially from investment demand where it is stored. Since gold’s value is predominantly in the eyes of its beholder, there is an embedded amount of speculation that accentuates its price volatility.

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The Risk of Missing Temporary Financial Gains Versus the Risk of Permanent Losses

by Scott Smith, CIMA®

Financial GainsTwo weeks ago, I attended the Investment Management Consultants Association’s New York conference and will share some of the insights from that meeting in an upcoming blog post. Today, we will look back on the career of Jean-Marie Eveillard and use his experiences on the risk of missing temporary financial gains versus the risk of permanent losses.

Jean-Marie Eveillard is a distinguished investor who served more than 25 years as portfolio manager at First Eagle Funds. From the fund’s inception in 1986 through March 1997, First Eagle Global notably outperformed the MSCI World Index by nearly 100%.

From 1997 to 2000 as stock market valuations were high and the internet mania kicked into gear, Jean-Marie responded by selling some of his appreciated stocks and raising cash as well as gold instead of joining the internet bandwagon. During these three years, First Eagle performance trailed the market substantially and Jean-Marie went from looking like an astute value investor to an old, stubborn technophobe. He lost nearly half of his clients in the process and almost had to close down the funds. Around that time, Jean-Marie was quoted in saying: “I’d rather lose half of my clients, than lose half my clients’ money.”

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Use Caution When Investing in These Asset Classes

by Scott Smith, CIMA®

Asset ClassesWhat do Real Estate Investment Trusts (REIT’s), Utilities, and long-term bonds all have in common?  They are all income-oriented asset classes that are price sensitive to movements in interest rates.

As interest rates moved lower in 2014, prices on these three asset classes moved up by 30.36%, 26.99%, & 19.72%, respectively, in 2014.  In January 2015 alone, 10-year treasury rates dropped from 2.12% to 1.66%, which again helped REIT’s, utilities, and long-term bonds move higher by 6.85%, 2.18%, & 6.64%, respectively.

It’s easy to be enamored with investment returns, but we caution investors against chasing after these asset classes at this time due to the fact that 10-year & 30-year treasury yields are now approaching their all-time low.  These noteworthy performance gains illustrate how declining interest rates can move interest-sensitive asset prices well beyond their fair value.  If there is upward movement in interest rates as the U.S. economy continues its recovery, these asset classes will be vulnerable to a sizable price correction.  Investors seeking income should look elsewhere.

Football & Investing; Don’t Throw in the Towel Too Soon

Football & InvestingA couple weeks ago, I made the mistake of going to bed with five minutes remaining in the football game between Tennessee & South Carolina. With South Carolina having a two touchdown lead, I thought for sure the game was over. My 6 year old son excitedly awoke me the next morning and told me Tennessee won in overtime. As a Tennessee fan at heart, this is a good lesson not to throw in the towel while there is still time on the clock. It is also a great example of how quickly momentum can shift. These happen to be good lessons that can be applied to football and investing. Many investors pay too much attention to short-term investment returns and throw in the towel too early when their investments begin to underperform the index. Others may under-estimate the market’s ability to reverse its previous course on either on the upside or downside.

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Smart Investors Ignore the News

When describing my job to friends, I tell them that most of my day is spent reading.  To be more specific, it’s deciphering good information from the rest of the headlines that are simply media noise.  Enclosed below is a good blog post from Chuck Jaffe that talks about his observations of the headlines and his advice for investors to avoid knee-jerk reactions to media noise.  With so much information and so many opinions out there today, it’s our goal as an advisor firm to filter out the noise and provide clients with straight talk that conveys facts that are meaningful to our clients.

Scott Smith
C&J Wealth Advisors
Article credit: By Chuck Jaffe | MarketWatch | August 18, 2014

Smart investors ignore the news
You can read the headlines, just don’t trade on them

If the market is making your head swim, you may be able to solve the problem by Flying Colors Slots spins turning off, tuning out and dropping out of the 24-hour news cycle.

That’s an oSmart investors ignore the newsdd suggestion coming from someone who works in the media, but what makes it doubly strange is that it’s prompted in part by the website I trust like no other, MarketWatch.com. Beyond simply being my employer, I trust the site because I know personally the quality people and journalists my fellow staffers are

But, last month, MarketWatch set a site record for the number of unique visitors to its news pages, which set me to wondering what kind of messages we were sending to both new and increasingly active visitors at a time when they were presumably drawn in looking for some measure of market guidance to calm their nerves or keep them on top of the financial news.

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The Drawbacks to Investing with the Group

This blog post by Carl Richards highlights the dangers of “groupthink” as it relates to investing. Independent-minded investors that focus on facts and weigh those facts properly in context to long-term horizons are rare these days. Too many investors are looking over their shoulder to see what everyone else is doing, drawing conclusions from third party opinions versus facts, judging performance in relative terms versus absolute terms, and justifying an investment simply due to its recent performance while simultaneously ignoring risk. It’s sometimes hard to absolve oneself from the noise and “groupthink”, but it’s a prerequisite if investors are to achieve long-term success. As Warren Buffett said:  “The market is there to serve you, not to instruct you.”

Scott Smith
C&J Wealth Advisors
Article Credits: This article originally appeared at the New York Times | by: Carl Richards | June 16, 2014.

The Drawbacks to Investing with the GroupGroup of Investors

In February 2012, a group of experienced skiers headed into the backcountry near the Stevens Pass resort in Washington State to look for untracked powder. It was a beautiful day, and everyone expected to have a great time skiing the popular Tunnel Creek section.

Minutes after the first skiers began heading down the hill, the snow cracked, setting off an avalanche. Several skiers were caught in the wall of snow, and after it came to a stop, rescuers discovered that three had been killed.

In an article that one of the surviving skiers, Megan Michelson, wrote for Outside magazine, she noted that “all of the warning signs had been there, glaring and obvious: heaps of new snow, terrain that would funnel a slide into a gully, a large and confident group with a herd mentality, and a forecast that warned of dangerous avalanche conditions.”

So what happened?

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Retirement Strategies for 30-Year-Olds

C&J Wealth Advisors have numerous clients with 30-year-old children. This article gives good advice on saving/investing and retirement strategies that you can pass to your children and grandchildren. Society encourages us to consume, consume, consume.  We need to hear more voices that encourage younger generations to save, save, save.

Scott Smith
C&J Wealth Advisors
Article credits: MarketWatch |Wall Street Journal | May 19, 2014

Investing for 30-year-olds

Retirement Strategies for 30-Year-Olds

It’s never too early to start planning for retirement. With this in mind, we asked The Experts: What retirement money tip do you wish you’d given yourself when you were 30? Investment tips nobody told me…

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