Warren Buffet's Hedge Fund Bet

Warren Buffett was out with his annual letter to clients of Berkshire Hathaway this weekend and as always there are some wonderful investment insights to be garnered from either reading the whole thing or the highlights which you can find from any number of sources on the internet.  For example the website "Zero Hedge.com" highlighted the other day Buffett's skepticism of hedge funds, a view I have come to appreciate over time.  Below,  and almost verbatim I've shown Buffett's comments  regarding hedge funds and the bet he made on these ten years ago from his latest annual Berkshire report.  The highlights in it are mine.

On Passive vs Active investing, and why Buffett is not a fan of Hedge Funds

"In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. "

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers – who could include their own fund as one of the five – to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line? 

What followed was the sound of silence. Though there are thousands of professional investment managers who have amassed staggering fortunes by touting their stock-selecting prowess, only one man – Ted Seides –stepped up to my challenge. Ted was a co-manager of Protégé Partners, an asset manager that had raised money from limited partners to form a fund-of-funds – in other words, a fund that invests in multiple hedge funds. I hadn’t known Ted before our wager, but I like him and admire his willingness to put his money where his mouth was. He has been both straight-forward with me and meticulous in supplying all the data that both he and I have needed to monitor the bet. 

Ted picked five funds-of-funds whose results were to be averaged and compared against my Vanguard S&P index fund. The five he selected had invested their money in more than 100 hedge funds, which meant that the overall performance of the funds-of-funds would not be distorted by the good or poor results of a single manager. Each fund-of-funds, of course, operated with a layer of fees that sat above the fees charged by the hedge funds in which it had invested. In this doubling-up arrangement, the larger fees were levied by the underlying hedge funds; each of the fund-of-funds imposed an additional fee for its presumed skills in selecting hedge-fund managers.

The results aren't pretty for active managers. The S&P 500 index fund has climbed 85.4% to date. Only one hedge fund of hedge funds came remotely close with a 62.8% return. The others are well below with gains of 8.7% 28.3% 2.9% 7.5%.  In annualized returns, the S&P 500 index fund returned 7.1%, while the five hedge fund of funds delivered through 2016 an average of just 2.2%."

The compounded annual increase to date for the index fund is 7.1%, which is a return that could easily prove typical for the stock market over time. That’s an important fact: A particularly weak nine years for the market over the lifetime of this bet would have probably helped the relative performance of the hedge funds, because many hold large “short” positions. Conversely, nine years of exceptionally high returns from stocks would have provided a tailwind for index funds.

Instead we operated in what I would call a “neutral” environment. In it, the five funds-of-funds

delivered, through 2016, an average of only 2.2%, compounded annually. That means $1 million invested in those funds would have gained $220,000. The index fund would meanwhile have gained $854,000.

Bear in mind that every one of the 100-plus managers of the underlying hedge funds had a huge

financial incentive to do his or her best. Moreover, the five funds-of-funds managers that Ted selected were similarly incentivized to select the best hedge-fund managers possible because the five were entitled to performance fees based on the results of the underlying funds.

I’m certain that in almost all cases the managers at both levels were honest and intelligent people. But the results for their investors were dismal – really dismal. And, alas, the huge fixed fees charged by all of the funds and funds-of-funds involved – fees that were totally unwarranted by performance – were such that their managers were showered with compensation over the nine years that have passed. As Gordon Gekko might have put it: “Fees never sleep.”

The underlying hedge-fund managers in our bet received payments from their limited partners that

likely averaged a bit under the prevailing hedge-fund standard of “2 and 20,” meaning a 2% annual fixed fee, payable even when losses are huge, and 20% of profits with no clawback (if good years were followed by bad ones). Under this lopsided arrangement, a hedge fund operator’s ability to simply pile up assets under management has made many of these managers extraordinarily rich, even as their investments have performed poorly.

Still, we’re not through with fees. Remember, there were the fund-of-funds managers to be fed as well. These managers received an additional fixed amount that was usually set at 1% of assets. Then, despite the terrible overall record of the five funds-of-funds, some experienced a few good years and collected “performance” fees. Consequently, I estimate that over the nine-year period roughly 60% – gulp! – of all gains achieved by the five funds-of-funds were diverted to the two levels of managers. That was their misbegotten reward for accomplishing something far short of what their many hundreds of limited partners could have effortlessly – and with virtually no cost – achieved on their own.

In my opinion, the disappointing results for hedge-fund investors that this bet exposed are almost certain to recur in the future. I laid out my reasons for that belief in a statement that was posted on the Long Bets website when the bet commenced (and that is still posted there). Here is what I asserted:

'Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.  A lot of very smart people set out to do better than average in securities markets. Call them active investors.  Their opposites, passive investors, will by definition do about average. In aggregate their positions will more or less approximate those of an index fund. Therefore, the balance of the universe—the active investors—must do about average as well. However, these investors will incur far greater costs. So, on balance, their aggregate results after these costs will be worse than those of the passive investors.

Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to the active investor’s equation. Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested.

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.'

*Berkshire Hathaway is a component of several ETFs that we hold in client and personal accounts.  We also invest in ETFs related to the S&P 500 in client and personal accounts although these positions can change without dissemination on this blog or on any other form of electronic media.  

Seriously?

"Merrill Lynch has lowered its top charge on fee-based accounts to 2.2% from 2.7%, a move that could save smaller investors as much as $5,000 a year, The Wall Street Journal reports.

The reduction affects clients with under $1 million in assets at the firm. Those clients with $1 million to $4.9 million in assets will continue to pay a maximum of 2.2%, while investors with $5 million or more in assets will continue to pay a top rate of 2%.

Last year, Merrill began a process of changing its brokerage accounts, making its fee structure more transparent and, in some cases, less expensive, the Journal story said."

Seriously folks if you are paying 2% to a brokerage firm for investment management you are paying way too much.  The average RIA charges about 1%.   Those returns from your broker better be really stellar to merit that kind of fee.  You can like your broker but you shouldn't have to pay him over a hundred basis points more than the RIA average for him to be your friend.

Link:  Merrill Lynch Cuts its Top Rate on Fee Accounts.

Chart Talk {02.23.17}

Above is the current chart of the S&P 500 ETF, SPY.  The chart is from Tradingview.com and you can double-click on it to make it larger if you would like a better view.   Today I would like to point out is what might have happened if you had listened to many of the investment or political pundits over the last nine months and let their advice determine the direction of your portfolio.  There's a trend here and I want you to pay attention.  What you hear on the news, read in the papers or see online is largely today reflecting a view that so far has been at odds with the market's behavior. First let's go back a bit in time.

Last summer as the vote over whether Great Britain would vote to stay in the European Union heated up, the media both here and over seas nearly all came out and stated what a disaster it would be if Great Britain left the Union.  Well they did vote to leave and globally it was a disaster....for about three trading days.  Both here and abroad markets rallied after the vote was cast.  Here from high to low over a two month stretch in the summer stocks rallied over 10%.  They weren't supposed to do that according to most of the experts.  Even if they did those same folks thought it was a sucker's bet and stocks would decline once investors realized the economic consequences of their decision.  Those folks are still waiting to be proven right.

Most of the same commentators felt the same way about our presidential elections back in November.  First off, most dismissed the possibility that candidate Trump could ever become President Trump.  Then they were sure it was going to be a disaster after Trump was elected President.  Instead the market has rallied almost 14% since then.  Stocks are also currently up now better than 4% since President Trump's inauguration.   

Now understand something.  Markets aren't up because investors necessarily love the President, voted for him or even agree with his policies.  The markets care about how his policies impact the economy.  In that regard, so far, the market's like what they are seeing.  They believe that an administration that advocates tax reform, repatriation of US assets abroad, less stifling regulation and a potential infrastructure spend are all positive for the economy.  As long as market's believe these things then stocks will stay on firmer footing.   Understand that markets are not making a judgement on some of Trump's social policies.  Markets for example don't care about transgendered bathroom issues, although individual investors likely have personal opinions about these things.  Rightly or wrongly, they care about economic returns and making money.  Folks who equate such things to the economy are missing the bigger picture as far as money and the markets.

Firmer footing does not mean we'll never see a correction or that stocks will continue on this kind of run.  Indeed right now markets are overbought and there is the hint of giddiness hitting investors that I haven't seen in ages.  That means stocks are vulnerable to and likely will have a correction at some point.  However, as long as investors believe the administration will continue to follow and be able to implement positive economic policies then corrections will likely be met with buyers at lower levels.  Investors will "buy the dips" on any pullback as long as their confidence in the administration's policies remains in place.

You will see little of this thought from most of American journalism or the opposition.  Our industrial media complex hates President Trump in a way that you have to go back to President Nixon to recall and the left hates him for many reasons.  One thing both fear is that his economic policies work ass that would be a repudiation of much of what each believes.  As a result they want him to fail.  As such they will portray nearly everything he does as evil and wrong.

I am not trying to endorse anyone's political position or critic what other people believe and I try to keep politics out of what I post here.  Indeed, there are aspects of the Trump Administration's policies I like and others that concern me.  I am a neutral in most aspects except those that can put our economy on a positive note.  Those kinds of policies I am for regardless of political affiliation.  The reason I have spent some time on the media is not to defend the President but to point out to readers here the disconnect between what's happening in the markets and what you may read in the press or see on the news.  Both increasingly try to portray the Trump Administration as a failure or an Administration that doesn't reflect American values.  Both ignore the market's performance and the millions who voted for the President.

Listening to the news since last summer would have cost you money.  It's as simple as that.

Back Monday.

*Long ETFs related to SPY in client and personal accounts although positions can change at any time without notice or dissemination on any other form of electronic media.

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Expense Ratios

I know I published this awhile back but I'm putting this up again because I still run into a belief amongst some folks that somehow mutual funds offer better value than ETFs in terms of costs.  Costs should not be one of the reasons to own mutual funds.  The chart above shows that the average mutual fund has costs that dwarf those of ETFs.  

Take for example US Equity ETFs vs their mutual fund counterparts.  It is the top line in each asset class.  For ETFs the average cost is about 40 basis points but the weighted average is just 16 basis points.  We'll use the weighted average because the ETF industry is dominated by a few major players with much lower costs than the whole universe.  In that example those 16 basis points run up against an average expense ratio for actively managed open-ended mutual funds of 130 basis points.  Folks that's over 8x the cost for a product that usually doesn't do as well as the ETF.

There may be reasons to own mutual funds but cost isn't one of them.

Back early next week.

What's A College Degree Worth

Student loans represent an incredible burden on young people but at least the debt if applied wisely has a purpose.  It is what I call investment debt.  It is debt a person invests in themselves that hopefully earns a return over their lives.  Above you can see expected lifetime earnings for each degree that a person earns.  Somebody with a masters or doctoral degree earns over three times what somebody that leaves high school without a degree can expect to earn over their lifetimes.  

In that instance, and for example, a student completing a graduate degree could finish with $200,000 in student loan debt.  Assuming they possibly taking 30 years to pay off the loan and even with amassing perhaps $400,000 in total costs after the interest is paid would still see a return on their investment of many times over their cost.  

Back Friday.

Student Loans {Some Resources}

Here are some  resources to get more information on student loans and their repayment.

New York Times: "A Beginner's Guide to Repaying Student Loans.

Here's again the link to the New York Time's student loan calculator.

Learnvest.com:  "Seven Federal Student Loan Payback Plans:  What You Need To Know."

Nerdwallet.com:  "Find the Best Student Loan Repayment Plan for You."

Email me if you find other and better resources and I'll put these up on the blog.

Chart Talk {02.10.17}

Above is the current chart of the S&P 500 ETF, SPY.  The chart is from Tradingview.com and you can double-click on it to make it larger if you would like a better view.  There are a couple of things to note here.  The last time we looked at the index was about a month ago and SPY had been consolidating in a trading range shown since then.  You can see that in the chart between those two red horizontal lines near the north-east corner.   We broke out of that range a few week ago and have since traded in an even narrower range defined by that smaller green line above.  We're testing the top end of that range as I'm writing this. 

Similarly to our thoughts last month, we'll have to see whether this action represents some sort of topping pattern to the major indices or is simply a pause from which we again break  forward to new highs.  Only time and more economic data is going to give us the answer to that question.  We are also currently overbought by our work but not to the extent we were last month before we broke to new highs.

Also as I'm writing this they're saying on the TV that the S&P 500 is now up six out of the last seven days.

Back next Tuesday.  I'm in and out seeing clients next week so posting will be a bit light.

*Long ETFs related to SPY in client and personal accounts although positions can change at any time without notice or dissemination on any other form of electronic media.

Chart Talk: Student Loans.

From Zero Hedge.com regarding the rise of student loan debt:

"But while US consumers may have stepped back from a credit-card funded splurge in the last month of 2016, the far more troubling trend in student and auto loans remains, and as the following chart shows, as of Q4, both car and student debt hit all time highs of $1.407 trillion and $1.11 trillion, respectively."

I don't want to discuss car loans but that $1.407 trillion in student loan debt is a number we all need to bring into focus.  On one hand you can argue that student loans pay for themselves down the road in higher wages for a young person graduating from college.  I agree with that.  The average student loan I think is something like $30-35,000.  {I didn't have time today to go find the most commonly accepted number.  For this posting let's just accept this is close to the mark.}  Basically at that level you have a degree that hopefully pays for itself throughout a person's lifetime for the price of a decent new car.  

But those basic numbers  may not true for the kid who finances his way through four years of a private college.  That person may be looking at over $100,000 in debt.  A student financing their way through graduate school is shouldering even more of a debt burden.  I've talked to young people leaving graduate school with $200-300,000 in debt.  Taking a 30 year period to pay off that load means hundreds of thousands of dollars paid out in interest and all of that money being paid back to banks that isn't being spent out in the economy.

In fact take a look at that $1.4 trillion dollar number.  All of that is money that is either being paid back or will be paid back over the next 30 years or so.  Now you can argue that banks simply recycle a large part of those payments back into the economy and you would be correct.  But that number also represents money that isn't being spent on everything else....cars, homes, vacations, you name it. 

You want to get our economy back on track, then figure out three things.  Figure out how to lower the cost of a college education for most kids.  Figure out a better way to pay for it than we have today and then figure out a way to reduce the debt burden of this current generation of students either going through the system or who have recently passed through it.

Link:  Zero Hedge.com:  At over $2.5 Trillion, US Student and Auto Loans Hit New All Time High.

Out Today

I will be out today attending several meetings and then I get to go in for the old annual physical.

Back tomorrow!  Hopefully in a better mood after being poked and prodded by the medical world!

The Winter’s Tale

"A sad tale's best for winter: I have one of sprites and goblins.”

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{"The Winter’s Tale” by William Shakespear, Act 2, scene 1, lines 25-26}

I have always thought of the end of January as the rump of winter.  Now I find out that in the vast realm of fake science {right up there I guess with fake news} is the concept of “Blue Monday”, a day supposedly calculated to be the third Monday of January as the worst day of the year.  Whether we define this time as a set period or a single day, there is no doubt by mid-January; winter can certainly weigh on the soul.  That is especially true for those of us who reside in the northern half of the United States as we are usually beset by our worst winter weather by now.  Chicago usually finds this time with sub-zero temperatures and often snow.  This year we have been largely spared the artic blasts and tundra but the sun seems to have gone south on vacation and I think we’ve seen sunshine about three days in the past three weeks.  Instead, the days have been dark and damp, perhaps reflecting the nation’s mood as Donald Trump is sworn in as our 45^th President.  For the millions who did not vote for him, his ascendancy to the nation’s top office has been viewed in almost apocalyptic terms.  For many of his supporters, it is not hard to imagine some anxiety as even they might wonder what they purchased with their vote.  Yet whatever our individual views on the election we must now deal with the new reality.  My mandate is to view the new administration through the investment matrix and that is what I intend to do in a question and answer format.

Why did the stock market rally after the election?

Markets rallied after the election in a way that was opposite of the nearly 10% decline that occurred at the beginning of 2016.  Then investors decided that the economic projections were too optimistic. Stocks rallied in November because political uncertainty had been removed from the system.  Whether investors supported President Trump or not, you then had an idea of the general direction of economic policy over the next few years.  Benjamin Graham, the famous value investor once said of the markets in the short run it is a voting machine but in the long run it is a weighing machine.  In this instance it seems to me the market both voted and weighed in favor of what it perceives as strategies likely to be employed by the new administration that favors domestic growth and pro-business policies.  After our results came in investors assumed their views on the future had been too negative given the new reality and markets rallied.

How did the markets do last year?

The S&P 500 returned 9.5% plus dividends and the Nasdaq Composite returned 7.5%.* Overseas, developed markets returned 1.5% and emerging markets rebounded from a disastrous 2015 with a return in excess of 11%. A diversified portfolio of assets returned 8.3% last year.**    It is easy now to forget how volatile markets were at the beginning of 2016.  Last year’s 10% market decline in January was the worst start to a year since 1930.  US markets advanced in the spring on better economic numbers and an uptick in the price of oil.  Globally, markets surprised investors by rallying after Great Britain voted to leave the European Union despite an initial sell-off after the results were announced.  The same pattern repeated itself after Mr. Trump was elected President in November.  Markets were initially down by better than 3% on news of the Trump victory but quickly righted themselves to post a substantial rally by year-end.  The S&P 500 gained nearly 5% after the election, almost half of its return came between November 9^th and December 13^th. Last year is a wonderful argument for staying the course in one’s investment plan.  There were plenty of times last year when pundits and commentators offered well thought out reasons to get out of the markets.  Investors that listened to that advice were likely regretting it by year-end. 

So what comes next?

Stocks have rallied on what is believed to be the new economic environment.  Now comes the hard part for the new Administration of actually making policy into law.  Investors will want progress from President Trump on economic policy, job growth, immigration reform, tax reform, and cutting government red tape.  Progress on those fronts could mean the optimism we have seen in the past few months could continue.  On the other hand an early stumble in implementing these policies or a wavering from these goals could lead to market turmoil at some point.  Early on, the new Administration seems the most vulnerable to a major foreign policy crisis.  We will have to watch how President Trump deals with Russia, China, Mexico and the Middle East as well as our nervous allies.  Assuming we avoid foreign policy mistakes and also see some progression on the economic front then stocks have the potential for positive performance in 2017. 

We are currently using an earnings range of $130-133 with a mid-point of $131.50 on the S&P 500 for 2017. The index currently trades with a price to earnings ratio between 17.50 and 18 by that analysis.  At these levels the earnings yield on the S&P 500 is still north of 5.5% and the dividend yield of the S&P 500 carries a yield slightly better than 2%.  Valuations may seem elevated by historical standards but seem more reasonable with longer term interest rates such as the US government 10-year treasury bond still below 3%.  I use a system called the Cone of Probability {COP} when calculating a possible range for the S&P 500 in a given period.  Current inputs give us a COP between 1,950 and 2,500 with a midpoint of 2,400.  That is approximately a 6% price appreciation potential to the midpoint from current writing.  Add on a 2% dividend and domestic US equities have the potential to see a total return for 2017 between 6-9%.  For sake of comparison, last year I used an initial COP of 1,700 to 2,150 on the S&P 500.  The index traded as low as 1,807 in February, put in a year high of 2278 on December 13^th and closed the year at 2,239.

The Cone of Probability is our current probabilistic assessment of the trading range within which we think stocks have the potential to trade during a described time period.  Our analysis is based on many factors.  Some of these include: Earnings estimates and whether those estimates are rising or falling, dividend yield, earnings yield and the current yield on the US 10-year Treasury bond. The COP is used solely for analytical purposes.  It will fluctuate with market conditions and changes to our data inputs.  Equity prices can and have traded outside of these ranges.  The data supplied here is for informational use only.  There should be no expectation that this price range will be accurate and there are no guarantees that this information is correct.

What worries you?

Here are some of the areas where I think investors should be paying attention.  First, while I believe stocks have the potential for appreciation, valuations are not cheap.  An event that causes investor into risk off mode could leave stocks with more of a decline than many have become accustomed to.  I understand investors hate volatility.  However, it is the price investors pay for liquidity.  It is the reset mechanism that often caps the financial excesses that sometimes can lead to larger market declines. Investors should expect some volatility and should accept that sometimes prices will correct.   Last year we began the year with nearly a 10% correction in the markets.  Historical volatility suggests that correction usually fall between 10-20% with the historical average around 14% decline.  It’s been awhile since we’ve seen a decline of that magnitude.  There was about a 14% decline in 2015 but then you have to go all the way back to 2011 to find a similar event.  A 15% decline from current prices would take us to around 1,900 on the S&P.

The first event that I think could lead to that higher volatility would be a faster increase in interest rates versus investors expectations.  Paradoxically this could also be a positive as it could make fixed income investments more attractive for portfolios, but it would also be competition for stocks.  The 2^nd would be a foreign crisis or some other unexpected event. The 3^rd could be a stumbling of the Trump economic agenda. 

Regarding the 2^nd issue if somebody asked me to look for an unforeseen event that could be a problem over the next few years I would keep a watch on Mexico.  Mexico relies heavily on four sources of income as it struggles for economic growth and each is in trouble.  One of its major resources is oil.  But Mexico’s oil production has fallen precipitously in the past few years due to declining reserves and inadequate infrastructure investment.  Lower prices for oil also haven’t helped. Another source of revenue coming into Mexico has been from the sale of illegal drugs into the rest of North America.   While the majority of these profits go to the cartels some of that money gets dispersed into Mexico’s economy.  However, the other side of that is that the Mexican Government has waged war against the cartels since 2006 to staggering costs.  Through 2013 it is estimated that Mexico has spent over $172 billion dollars in combating the trade and an estimated 100,000 Mexicans have lost their lives to the violence.  It is anybody’s guess what happens to these cartels as drugs, especially marijuana are decriminalized in the United States.

Another major source of revenue for Mexico is tourism.  Unsurprisingly the fear of violence has seen the number of tourists and their desired foreign cash reserves into the country decline.  Finally, perhaps the major source of foreign cash coming into the country comes from the Mexican immigrant communities in the United States and to a lesser extent in Canada.  Not only has this been a major source of money but immigration has also been a pressure relief valve on the Mexican economy.  Mexico simply cannot create enough jobs for its population.  Now, demand for immigrant labor in the United States is declining and has been doing so for years.  Illegal immigration into the US is therefore down as well.  All of that is before President Trump builds his wall.  Now maybe Mexico will make it through these problems but it is the one foreign area I think bears watching that perhaps others are not regarding at this time. 

Finally markets may become more volatile if investors become concerned whether President Trump can get a large portion of his economic agenda passed.  It is early in the new Administration so this will likely be months in the making.  For those wanting a truer picture of the Trump Administration’s plans as it goes along I would caution you to pay less attention to the regular press or pundits.  Trump spent nearly two years making them look bad and they have a vested interest in seeing his presidency fail.  Business oriented media like the Wall Street Journal, Investors, Business Daily or the Economist may be a better judge of his economic policies than even CNBC, the New York Times or the Washington Post.  However, the best arbiter of his policies will likely be the markets.

A Few Final Thoughts

There are always worries when investing and often it’s the event that nobody pays attention to that harms us the most.  That being said the current weight of the evidence seems to suggest that the underlying foundations for a positive market environment are in place.  There will be volatility this year as there always is but we have an administration that at its onset has a pro-growth agenda.  If they can execute the majority of that plan then it has the potential to be good for our economy and ultimately good for the markets.  As such I think a major change has occurred where buyers will be found when volatility returns.  In that scenario investors will likely be rewarded for picking good solid ETFs that have appreciation potential as well as pay dividends and using cash reserves to pick at bargains.

Very truly yours,

Christopher R. English

Enclosures.

Christopher R. English is the President and founder of Lumen Capital Management, LLC.-a Registered Investment Advisor regulated by the State of Illinois. A copy of our ADV Part II is available upon request. We manage portfolios for investors and also manage a private investment partnership. The information contained here is taken from sources deemed reliable but cannot be guaranteed. Mr. English may, from time to time, write about stocks or other assets in which he or other family members has an investment. In such cases appropriate discloser is made. Lumen Capital Management, LLC provides investment advice or recommendations only for its clients. As such the information contained herein is designed solely for the clients or contacts of Lumen Capital Management, LLC and is not meant to be considered general investment advice.  Mr. English may be reached at Lumencapital@hotmail.com.

Long ETFs related to the S&P 500 in client and personal accounts.

Footnotes:

*Forbes.Com.  "Markets End Last Trading Day of 2016 in Red But Post Gains For The Year."  12.30.2016

**Asset class returns taken for this report can be found at JP Morgan  “Guide to the Markets”, published quarterly J.P. Morgan Asset Management.com.

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Go here if you want to see some of the astounding statistics for Mexico’s war on drugs and the narcotics trade into the United States..