Rest In Peace

John McCain who passed away this weekend often called himself an "Imperfect servant of a nation he loved deeply".  Imperfect McCain was.  Perfection is a trait denied to all humans.  But as a humble servant of his country and as a true gentleman there have been and likely will be very few his equal.  If our country was more perfect then more citizens with the qualities of John McCain would find higher public office.  Unfortunately we seem to live in a time where that is hard to impossible.  

But I have hope.  I believe there is a large swath of the American public centered mostly in the middle that is sick to death of our current politics.  It is my hope that this vacuum is eventually filled by citizens with some of the late Senator's qualities.

Rest in Peace John McCain.  You made your family and country proud while you served that nation you loved so deeply very well indeed. 

God bless and Godspeed!

The Last Rose of Summer

"'Tis the last rose of summer,

Left blooming alone;

All her lovely companions

Are faded and gone;

No flower of her kindred,

No rosebud is nigh,

To reflect back her blushes,

Or give sigh for sigh."

    -Thomas Moore

Next week will be the last official week of summer, ending as it always does with Labor Day.  It is ironic that we mark this time as summer's end because at least in Chicago, September can serve up some of our best weather.  The heat's usually gone, as is the humidity.  The days are still long enough that you can enjoy the outdoors after work or on the weekend and the autumn rains generally hold off until the end of the month.  

The end of August is for most of us usually languid and bittersweet.  Time seems to slow down a bit as we enjoy this final burst of summer.  Even if the kids are back in school, it never feels like it's officially started until after Labor Day.  We also have some time to remember what we did over the past few months or regret the things we said we'd accomplish but never seemed to get done while the weather was nice. 

It is the same with the markets.  Next week will be thinly traded and the investment community will concentrate on one final jaunt to whatever watering hole they use as a summer playground.  For one final part of 2018 the rest of the world will be shut away for a little while.  It is not as if the issues concerning the markets  will go away.  The President I'm sure will tweet something provocative.  The pundits will talk about his legal problems, the possibility of rising interest rates or our current trade spats with the rest of the world.  Others will take a peek at the coming elections in the fall or point to whatever crisis is likely to brew as the weather cools.  These events though will be shunted aside and put on the back burner until after Labor Day.  The world will slow down for a bit and that's a good thing.  In the meantime stocks trade near record highs, the economy is buzzing along and people have a bit more spending money in their pockets courtesy of last year's tax cuts.  

I too am going to take the coming week off.  We'll shut this down now until sometime the week after Labor Day.  First post here will probably be the 5th or 6th of September.  I have a car to drive home from Rhode Island over the holiday weekend and it's going to take some time for me to get organized when I'm back.

Shakespeare famously stated that "summer's lease hath all to short a date".  Those of us that live in parts of the country where we actually get cold weather for months at a time know true well the meaning of his words.  Summer goes by so quickly for most of us.  It seems like only yesterday when we were getting ready for Memorial Day.  Now September is upon us!  I'm a bit out in the country when I'm in Rhode Island.  The little place where we stay was once a farm and there's still a field out in back.  Perhaps because of that  you can feel summer waning away now.  I notice the day's aren't as long as they were a few weeks back.  The light looks a bit different later in the day.  Nights are a bit more crisp and they serve up a reminder that the principle season of the north is not the one you're currently in.  Crickets, the heralds of autumn, now chirp incessantly throughout the day.  It is time to take a break and enjoy these things one more time and smell those last roses of summer.  Whatever issues we have can wait till the clock rolls into September.  Well see you after the return trip from the east coast unless something warrants a break in from out this way.  

One last thing.  There's an important football game next weekend!  Notre Dame plays Michigan in a crucial opening week matchup.   Go Irish!

Did Anything Change?

I am breaking in today given the news that came out after the market's closed yesterday.  There is no doubt with the Paul Manafort convictions and the Michael Cohen plea deal that President Trump had a very bad day yesterday.  However, in the near term, the markets seemed to take this in stride.  All major indices were positive yesterday and all are near new highs.  The S&P 500 actually made a new intraday high.  Stocks are only slightly lower this am as I'm writing this and that's not that unusual when stocks have advanced nearly unchecked for the better part of two weeks.  Here are my thoughts.

First as to the markets, we will need to see how stocks take this news over the next few weeks.  I think in terms of impact much will hinge on what the news flow looks like in the coming days.  If the news looks like it's starting to impact the economy then there is a higher probability that markets will wobble.  If this morphs into a full blown political crisis, something similar to Watergate that takes months to play out, then there is a higher probability that stocks will be under pressure.  If there's not much else that comes forward, especially if we don't hear much out of Michael Cohen in the next few weeks,  then I think we'll see this fold into the background.  It won't go away but will likely be just one more data point investors factor in when valuing stocks and the markets.  Only time will tell on this.

Of the two stories it was the Cohen news that was seemingly the most damning for the President yesterday.  Cohen implicated the President in his guilty plea in terms of suppressing information that would have been harmful to the President's political prospects going into the 2016 elections.  Cohen's admissions in his guilty plea can be carried into court even if Cohen is never called as a witness. Never-the-less here in the United States we are all innocent until proven guilty in a court of law.  Also in terms of the Cohen court appearance we need to remember that in terms of the plea it is Cohen's word against Mr. Trump.  It will be up to the investigators to flush out what Cohen is alleging with other evidence.  Circumstantially it would seem that perhaps that evidence is out there  As such investors will at least start to look beyond a Trump Presidency.  If at some point the President either resigns or is impeached then Mike Pence will become President.  The tone in Washington under a President Pence would be a bit more polite but the economic policies that President Trump has ushered in, lower taxes and less regulation on business, will not go away.  Further economic policies might be put on hold but the overall pro-business environment of the current Administration will not go away.  There is a school of thought that certain policies favored by moderates on both sides of the aisle might have a better chance to see the light of day without the vitriol coming out of the President's twitter account each day.  Markets ultimately follow earnings and so far there seems to be nothing that a possible change in Administrations from Trump to Pence would do to impact either earnings or economic growth.

The one thing to watch now is the growing likelihood that the Democrats will regain control of the House of Representatives.  Evidence of a Democratic wave has been building for months.  It would seem that yesterday's news would add fuel to this fire.  Attention now may turn to whether or not the Democrats can flip the Senate.  Doing so could stifle further Republican economic initiatives until after the 2020 elections.  Markets might not take that news too well.  That, however, is something several months away at this point.

Finally, whatever one personally thinks about the President, I will say again please separate those feelings from the economy.  You do not have to approve of the President or his policies to take note  that the economy is doing well right now and the markets have enjoyed a substantial move higher since he was elected back in 2016.  The current Administration cannot take all the credit for this as many of President Obama's policies helped set the stage for this current advance.  But it has been this Administration's economic achievements that likely lit the flame for the monster mover we've seen since November, 2016.  Money goes where it is treated best.  If we are in the twilight of the Trump years but we stay in a Pro-business economic environment then nothing will have really changed and markets have the potential to trade higher over the course of the next few years as long as the economy keeps humming along.

I'll be back now on Friday.

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

Near New Highs

Readers of this blog will note that I have been short-term cautious on the markets for a while now.  Stocks however are near new highs, although as of this writing they have yet power past last winter's levels.  Regarding my comments versus the markets I'll say this.  First of all this my short-term view of things.  At the most and given what we know today, this is a viewpoint that right now only extends into the fall.  I think there's a possibility that we'll see more volatility as the election season comes around.  The economic news flow has helped stocks so far in August as it has for the most part been positive but that may not be enough to outweigh political concerns as we get closer to the November elections.  There is still time for us to be short-term cautious, even if those fears haven't yet played out or even if this year they do not work as one might historically suspect.

The 2nd thing is that I am not a short-term trader in client accounts.  When I point out near term market events it is simply to note the environment we are in.  Do not come here looking for trading advice.  That is not my skill set and nobody is paying me to act in that manner for their investment returns.  I have a longer term view of things and unless the economic view is changing I am often looking at volatility and the oversold conditions that come with it as an entry point for positions that I find attractive.

Finally I'd note that the markets get to vote irregardless of what any one of us who comments on stocks might think.  The market is also the final arbitrator of events.  Its opinions matter more than mine and always will.  To be cautious in a period where stocks have historically been volatile is simply part of mining the historical record.  Many years bad things have happened in the August-October period.  Just because that has been the case in the past doesn't mean it has to work this way this year or any given year.  This is similar to those of us who have navigated a river before in a boat or a canoe.  If around a certain bend in most years there is a sand bar then it pays to be cautious when you get to that point even if in some years it doesn't materialize.  

Markets move in fits and starts.  They ebb and flow just like a river, not only with the seasons but also with all the millions of data inputs that find their way into them each day.  We have seen a substantial move in stocks over the past 18 months. We may or may not hit a rough patch over the next few months but if we do, and based on what we currently can see on the economic horizon, it should be viewed within the normal patterns of a secular bull market and a potential buying opportunity.   Nothing so far is changing my view on that.

Back Thursday.  I will not be writing next week and my next post will be sometime after Labor Day.

Chart Talk {A Review}

I posted a chart at the beginning of the month detailing what the S&P 500's ETF SPY was telling us.  Basically I detailed back then a market that had rebounded nicely from its early 2018 sell-off and was now struggling as it had finally climbed back to near its previous highs.  Here's an updated and unannotated chart of the SPY.  The chart is from Tradingview.com. You can see that we basically touched those previous highs and then sold off.  The excuse du jour is money problems in Turkey.  I'd argue that we were so overbought that butterflies flapping their wings in Canada might have been used as the excuse for markets to for some period of time head lower.  

I've purposely waited until this morning's open to show you what's happened today as we've started trading.  You can see that at least for now markets have taken a stand and are trading higher, although so far the open looks like it's being sold.  We'll have to watch what happens now for clues to the days ahead.  Stocks might rally and attack those old highs again or they could head lower as the news right now gives them an excuse to do so.  We're in the high part of the summer lull season so anything is possible.  I'd note also that the last few days selling hasn't alleviated the longer term read by our work that we're still very overbought.

Again I want to stress that for how we try to explain what's going on in terms of our three period outlook {short, intermediate and longer-term} we have to consider the probability that we're in a period where the markets might struggle a bit.  So far our reading of this is more of a short-term orientation.  Our longer and intermediate more optimistic views  remain unchanged.

Back Thursday.

*Long ETFs related to the S&P 500 in client and personal accounts.  Short S&P 500 in a personal account as part of a separate individual strategy.  

Thoughts {08.08.18}

It is the dog days of summer now.  Out in Rhode Island where I am working this week it has been around 90 every day with high humidity and virtually no breeze.  Staying in a building that was built in probably the late 1800's means you are dealing with a stifling environment.  Fortunately the room we sleep in has AC.  The rest of the place though is sweltering.  People ask me when I'm out here if I really work.  The answer especially this week is a definite yes.  Not only am I extremely busy but the office I use while out here has air conditioning.  It's the only place to hide out during the day besides the beach!  With that being said I'll share a few observations that I've noted while sitting out here hiding from the sun.

Earnings estimates for the S&P 500 keep going up.  The forward four quarter estimate per this site is about 169.25.  You are starting to see numbers for the S&P 500 in the mid to high 170's for all of 2019.  If these numbers hold out then based on yesterdays close you see metrics something like this {Let's use a 176 number just for modeling purposes for all of 2019}.  Based on these numbers the forward PE on a rolling four quarters basis is about 16.90 and using that 176 number gives you a PE of about 16.25.  Now these numbers aren't cheap but they're also not stunningly overvalued.  I may be a bit cautious on stocks in the short term but it's hard for me to become overly bearish on a longer term basis when seeing earnings growth numbers like this.

Irrespective of my more cautious view in the near term the market keeps churning higher.  We're now approaching the highs set back in January and it will be interesting to see if we can burst through those levels and just keep climbing higher.  The market is very over bought right now so I'm wondering if there's enough gas in the tank to keep on chugging into new high realm. Markets will become more thinly traded the rest of this month as the August vacation season enters it's high season for the Wall Street crowd.  Stocks could be subject to hitting an air pocket or two based on the news and other events.  We'll see.  So far stocks are the world's fair as they just ground higher.  I'll detail next week a bit more of my shorter term concerns.

Horrific news out of Chicago this past weekend with over 70 shot in the city.  All anybody wants to ask me about home when I'm out here is how does it continue to happen and why don't we just pack up and leave.  It's hard to explain how so many of us that are from Chicago love it so much because the city has such well known problems. Maybe someday we'll be forced to move from the area if for no other reason than the city as well as the state of Illinois is broke.  I'm going to be unwilling at some point to foot the bill that I think may be coming down the pike.  With that being said, this recent editorial in the Chicago Tribune goes along way towards saying what many of us think about the city we call home.

*Long ETFs related to the S&P 500 in client and personal accounts.  Short S&P 500 in a personal account as part of a separate individual strategy.  

Back early next week.

The Top 4 Regrets In Retirement

What’s the first thing that comes to mind when you think about retirement? As we get into our 50’s or early 60’s, many of us have started to think about slowing down, changing pace, and finally having more time to pursue passions and invest in relationships. But there’s a lot more to retirement than just counting down the days until you turn 67. What if you get to this milestone and realize it’s not all it’s cracked up to be or you wonder if you should have done things differently? Have you considered the idea that you could regret your decision to retire? Retirement planning is different for everybody and can be complex.  With that in mind, I've teamed up with the folks over at Indigo Marketing Agency to cover some themes regarding retirement that I believe we all need to think about and discuss.  Today we're featuring four of the most common retirement regrets to keep in mind as you prepare to think about this next stage in your lives.

1. Retiring Too Early

Whether you were forced to retire earlier than planned or you made the decision on your own, retiring before you are ready can cause plenty of regret. In fact, 30% of retirees admitted they would gladly re-enter the workforce if a job became available.

If you decided to retire prior to turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.

Financially, the earlier you retire the fewer years you have to save and the longer you will have to live off of your money. If your finances are keeping you up at night or you are living at a lower quality of life than you are used to, you may regret retiring when you did.

Working even a few years longer can provide these valuable benefits:
• More time to accumulate savings More years to apply towards Social Security which could result in a larger benefit amount • Health insurance coverage through your employer • Purpose and identity • Stronger mental and physical health

2. Not Creating A Social Security Strategy

Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you choose to collect these benefits will impact the amount of benefit you receive.

Full retirement age (FRA) changes based on the year you were born. For those born in 1937 and earlier, FRA is 65. After 1937, two months is added each year until FRA becomes 66 for those born between 1943 and 1954. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later.

If you wait until you reach full retirement age to begin collecting your Social Security benefits, you will receive your full Primary Insurance Amount, which is the full benefit that you have earned, but if you choose or are forced into an early retirement, you will receive a reduced benefit. Your basic benefit is reduced a fraction of a percent for each month you begin receiving benefits prior to full retirement age, up to 30%.

3. Overspending In The First Years Of Retirement

Even if you have a solid nest egg saved to carry you through retirement, you still need to exercise financial discipline to ensure your money lasts. Dipping too deep into your savings as soon as you retire could make or break your retirement dreams.

Instead, create a realistic retirement budget, factoring in travel or hobbies, then work with your advisor to find a withdrawal rate that will stretch your money for as long as possible.

4. Not Having A Retirement Bucket List

Free time is a major perk of retirement, but when you go from working full-time to not working at all it can be a shock to your system. Saying goodbye to your career, your colleagues, and your routines can cause anxiety and depression. But if you plan ahead to fill your time with activities that will fulfill you, you can avoid the negative emotions that can come with this life transition.

Do you want to know what activities result in a fulfilling retirement? A BMO study on retirement planning reveals that retirees who stayed busy and active, pursued independence, and volunteered their time were satisfied with their life. One study of retirees even found that those who volunteered 200 hours a year were less likely to develop high blood pressure.

The takeaway here is to be intentional about your time in retirement. Make a list of things you want to do, places you want to go, and people you want to spend time with, then strategically map out the details so your goals become a reality. It’s easy to lose your identity when you say goodbye to your career, but filling your time and venturing out into new territory will help you build a new identity and give you something to look forward to.

Live With No Regrets

You probably don’t want to celebrate the incredible milestone of retirement and then wake up the next day wondering if you made the right decision. Deciding when and how to retire is one of the most difficult decisions you will make in life, but you don’t have to make the hard choices alone. At Lumen Capital Management, our goal is to find out what your ideal retirement looks like and work with you to make it a reality. If you want to avoid facing these common regrets when you retire, call my office call me at 312.953.8825 or email me at lumencapital@hotmail.com for a complimentary review.

About Chris

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, developing customized portfolios that reflect a client’s unique risk/reward parameters.   We also manage a private partnership currently closed to outside investors. Mr. English has over three decades of experience working with individuals, families, businesses, and foundations. Based in the greater Chicago area, he serves clients throughout Illinois, as well as Florida, Massachusetts, California, Indiana, and other states. To schedule a complimentary portfolio review, contact Chris today by calling 312.953.8825 or emailing him at lumencapital@hotmail.com.

Chart Talk {08.02.18}

Chart of the S&P 500's ETF SPY.  Chart is from Tradingview.com.  The annotations are mine.  You can double-click on the chart to make it larger.

Back early next week.

*Long ETFs related to the S&P 500 in client and personal accounts.  Short S&P 500 in a personal account as part of a separate individual strategy.  Also I forgot to mention yesterday that Facebook is a component of several ETFs we own for client and personal accounts.