NetWorth Radio Advance Report - June 10, 2019

In this NetWorth Radio Advance Report, Spencer McGowan, President of McGowanGroup Asset Management, delivers financial news and intelligence with insights you can act on for June 10, 2019.

Advance Report

Radio Show

Our last client update was January and pardon me for leaving it up so long. I just wanted to remind you of what we were doing through last year’s mini panic. We bought high cash flow bargains with our excess cash flow.
Range Bound Equity Markets Rebound!
In early 2018, Alex and I covered on the program that equity appeared to enter an extended trading range instead of the raging bull of 2016 and 2017. That range appears to be about 27,000 on the Dow to the 22,000 set at last Christmas.
What’s the strategy?
Near the upper end of the range, we have harvest points established and, near the lower end, we have bargains picked out to redeploy cash in a potentially gain enhancing strategy.
Energy Infrastructure 2019, based upon EIA data, appears to be the year that the United States reaches overall energy independence including natural gas production. 7% is better than 2%. The dividends available in the pipelines and other Energy Infrastructure companies, in many cases provide near 7%. A very attractive proposition compared to the near 2% yield on 10 year U.S. Treasuries that leaves room for capital gains on top of the yield. Controlling value at risk of loss through a harvesting and redeployment strategy is our intention consistent with the past 18 months.
Safety and Income!
The 30 year U.S.Treasury yield has fallen from the highs last year to just over 2.5% at this writing. The world appears flat at 2% or less for higher quality global government bonds. The premise that risk free rate should be the rate of inflation or lower appears to be repeating the 2012 forecast for rates: “Lower for Longer.” Remember 2013? The Taper Tantrum rate spike reversed the Bond markets and reintroduced Duration Risk as the 30 year U.S. Treasury spiked to 4%.
For the Safety and Income allocations we are gradually removing premium priced Duration Risk and building dry gun powder at 2% or better in Money Markets or short term reserves.
High Cash Flow!
Global High Yield Bonds – 7% is better than 2%. Many portfolios run by established global bond managers with diversification are still trading at a discount to the estimated par value of the underlying bonds. Further, yields near or above 7% from interest are worth more by the measure of aggregate future cash flows versus the government bond alternatives underscoring appreciation potential with this week’s Federal Reserve discussion of potentially cutting cash rates.
With regard to the trade negotiations we offer a recent Wall Street Journal commentary:
“There’s a simple solution to the Huawei issue: It is welcome to do business in the U.S. as long as it forms a joint venture with an American company that will hold a 51% interest in the entity as well as unrestricted access to its technology.” – Michael Choquette, WSJ June 1st, 2019.

 

Dow Jones Industrial Average Index (2 Years)

– Courtesy of Bloomberg

Standard & Poor’s 500 Index (Approx. 30 Years)

– Courtesy of Bloomberg

Dow Jones Industrial Average Index (2 Years)

– Courtesy of Bloomberg

EIA – U.S. primary energy supply and disposition (1950-2018) & U.S. primary energy production by source (1950-2018)

EIA 1of2 05312019
– U.S. Energy Information Administration

Standard & Poor’s 500 Index (Approx. 30 Years)

– Courtesy of Bloomberg

Dow Jones Industrial Average Index (2 Years)

– Courtesy of Bloomberg

Headline Round Up!

*Dow Rallies Big! Why was the latest tariff threat ignored (hint: 18 months of trade war headlines)?
*Trade Wars Lead to Lower for Longer Interest Rates? What happened under this scenario in 2012 and who benefited?
*Jobs?!
*Q2 2019 Growth? Slowdown Yet?
*G20 Summit: Will XI and TRUMP Make Nice?
*Putin Panda-Monium! Take that Orange Man!
*Cannabis Wants to be Health Care? CBD Gains Traction.
*Texas So Progressive: Beer and Wine Delivery to Your House Now Legal?

Texas Black Gold Rush!


*Oil Smack Down to $51!
*Experts Predict $100 if Iran Pops Off?
*Barron’s Loves Energy Infrastructure!
*Oil and Gas Pipelines Buy Canadian Solar!

 

Profit Report!

Your Estate plan and what happens after you’re gone?
Ronnie’s retirement reserves plan!

2025 and 2030! Summer Planning Season Arrives

To bring substantial importance to examining this week’s market activity, we begin by discussing setting 5 year and 10 year objectives.
Too often investors are sidetracked with current events instead of the foundations of clear objectives.
This week’s Profit Report answers a key question, from one of our valued clients, where the key variable actually resides in Tax Planning.
After the pouring the concrete of clear objectives, the maze of decisions can more easily be answered:
  • What is most important over the next 5 years? 10 years?
  • Set the CPA appointment for the summer while your tax planner has time to brainstorm!
  • Set the appointment to review your Estate plan and update the Financial plan.
  • Once the key outcomes are clear, this week’s batch of important headlines and money flows can be examined with purpose!

 

Research Round Up!

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*U.S. China Trade War: Understanding the New Long March!
*Energy Infrastructure Discounts!

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