A Word From Bob, May 2015

Time seems to fly by as we age, but it sure seems to sit still during tax season for accountants. The end of tax season is always a happy and exciting time around the office, and this year was certainly no different. Now that tax season is over, the financial planning department will shake things up. The rapid decline in oil prices beginning in June of 2014 has placed energy related investments in the front of investors’ minds.

Based on historical oil futures price data from investing.com, the recent high in oil futures occurred on June 25, 2014 at around $107.50 per barrel. The lowest intraday price occurred on March 18, 2015 at around $44.03 per barrel. The decline from June 2014 through the recent low in March of 2015 represents a roughly 59% selloff in oil prices.

Attempting to time markets is usually a futile exercise, but occasionally we will take positions in market sectors or asset classes that are offering what we perceive to be value. Consequently, I surprised many of my clients who have managed accounts with us when I purchased the United States Oil ETF (Ticker: USO) in a 10% portfolio allocation in early January of 2015.

I was not trying to time oil prices or pick a bottom, I was viewing the United States Oil ETF as an investment with a 12 to 18 month time horizon. My target to sell was a gross return of 10% based on my entry price. While the position was aggressive in terms of the selling pressure in oil at the time, the position size relative to the overall portfolio helped to limit our clients’ risk.

I viewed the holding period of the oil investment as being intermediate in nature, but I ended up being wrong about the time frame. The good ‘til cancelled sell orders were triggered on April 29, 2015 in all of our clients’ managed accounts. The sell orders locked in a gross gain of roughly 10% based on maximum risk undertaken for clients in our managed accounts.

I am not highlighting this trade to boast, instead I just wanted to point out that looking for value and having a long-term time horizon can enhance investment returns. Speaking of returns, we are continuing to see volatile price action in both directions in the U.S. stock market indexes.

According to CNN Money, the S&P 500 Index is up 2.40% year-to-date, the Dow Jones Industrial Average Index is up 1.13% year-to-date, and the Nasdaq NMS Composite Index is up 5.69% year-to-date. While the market indexes have all delivered positive returns year-to-date, analysts believe future volatility is likely. The financial marketplace is going to be dealing with uncertainty about forward company earnings growth, a possible interest rate increase by the Federal Reserve, and some of the worst economic data in the past 6 years based on the Bloomberg ECO US Surprise Index. The next few quarters should be interesting as always.

We are only one month away from the annual Just Because We Care Golf Tournament to benefit our special children in Honduras. The golf tournament is scheduled for June 8th at Bogey Hills Country Club. For details about supporting or participating in the event, please let us know and we will be happy to provide you with details. The warm weather and summer months are coming quickly, but in the meantime stay healthy, wealthy, and wise, and certainly . . . stay tuned.

Bob

http://www.theweek.co.uk/oil-price/60838/oil-price-reaches-four-month-high
http://www.investing.com/commodities/crude-oil-historical-data
http://money.cnn.com/data/markets/sandp/
http://money.cnn.com/data/markets/dow/
http://money.cnn.com/data/markets/nasdaq/
http://www.bloomberg.com/news/articles/2015-04-01/u-s-bull-run-losing-fans-as-traders-load-up-on-s-p-500-hedges