Financial Commentary – Public

What due Red China, the Cities of San Francisco, New York and Las Vegas, to name a few, have in common? They ban Uber the quintessential free market innovation, most likely due to pressure from unions and the politicians who collect fees and limit access to transportation for citizens.

"China bans private drivers in taxi app clampdown"
Reuters | SHANGHAI Thu Jan 8, 2015 9:29pm EST
(Reuters) - China's transport ministry has banned taxi hailing apps such as Uber Technologies Inc and local rivals Kuaidi Dache and Didi Dache from using cars and drivers without taxi licenses in a bid to regulate the rapidly growing sector. The nationwide ban comes after authorities in the Chinese city of Chongqing began investigating Uber in December over concerns that its drivers were not properly licensed. Read More

The author of this article has a diplomatic (or elliptical) way of expressing that, because European politicians have failed to change policies that make it very expensive to start new businesses or hire (or fire) workers, economic activity is stuck in neutral there. Most European nations are socialist, taxing businesses, especially small businesses in the form of high benefits, short work weeks, long mandated vacations and severe penalties for laying people off during difficult times. This discourages creative entrepreneurs from bothering to take the risk of starting new ventures.

"Implications of the SNB decision extend far beyond Switzerland"
By Mohamed El-Erian January 15, 2015 5:57 pm
You need only look at the immediate reaction of the foreign exchange markets to the Swiss National Bank’s announcement on Thursday that it was dismantling its one-sided currency peg against the euro to get a sense of the momentous and surprising nature of the decision. Read More

Does anyone remember Elaine Garzarelli? Henry Kaufman? Martin Zwieg? These were widely quoted market gurus of the '70's and '80's who got one or two predictions right, then became media darlings. None were successful actually handling real money for real people. Consistency is an under appreciated virtue in my business. Trusted Financial Advisors values this virtue.

"Whitney's Fund Said to Drop 11% as Office Put on Market"
By Max Abelson Dec 21, 2014 6:36 PM PT
Dec. 22 (Bloomberg) –- Meredith Whitney, who started a hedge fund after becoming one of Wall Street’s most famous analysts, is facing tough times. Bloomberg’s Max Abelson reports on “In The Loop.” (Source: Bloomberg)
Read More

This energy transportation company was the financial headline du jour on Monday August 11. The company is really a “family” of companies all under the oversight of Richard Kinder who once was CFO at Enron, which became a House of Fraud after his departure. Over the past 18 years he has overseen the growth of his company from a handful of natural gas pipelines to what is now the third largest energy company in the world. We have invested our clients capital in one or more of the Kinder Morgan entities since early 2004, enjoying average annual returns in the double digits with steadily rising dividends all along the way.

This was one of the best quarters and is one of he best half-years for our Balanced-Value style of investing that I can recall in our 13+ year history. Most client accounts will see a half year cash flow adjusted increase in the range of 7% to 10%, topping the performance of broad stock and bond indices. Our superior performance was driven by a relatively heavy weighting to the energy industry which had been under market suspicion until things began to unravel in Iraq in June. An ocean of new oil is being produced in North America with more to come, and as with natural gas, there is worry that oil prices may become depressed for a time by surplus. However, the unexpected sweep by extremist Muslims into Northern Iraq seems to have driven investors to buy energy companies, despite little movement in the benchmark Brent Crude price. Since our approach to energy is dominated by ownership of pipelines, and because these stocks are in high demand for their dividends, our clients enjoyed a double barreled lift to their portfolios as both energy and utilities were among the strongest performing sectors in the past quarter.

The quarter’s performance was aided by new price highs for a number of our holdings.

The Fixed Income Story

Meanwhile, surprising the consensus, including me, was the strong showing of bonds as interest rates stubbornly refuse to rise, even after five years of economic recovery. I reduced bond holdings a year or so ago in the face of the first significant correction in bond prices in five years. At the time it appeared the long predicted turn for interest rates was upon us. Not so. Rates have backed off...

It was about five years ago that the current equities bull market began, although you would have had to search far and wide to find any investor, professional or retail, who properly called that bottom at that time.  At Trusted Financial, suspecting we were in a bottoming pattern, we were continuing our program of selective buying of stocks and bonds at what were bargain prices. Please take a few minutes to read the words I wrote for our Trusted Advisor Client Newsletter - April, 2009.

For Quarter ending March 31 2014, client accounts saw a modest gain of 2% to 3%. This topped most domestic stock indices. New price highs were experienced in cyclical holdings and in non-cyclicals such as Utilities. In other words, it was a pretty satisfying quarter.

Fixed Income Strategy
I share a widely held belief that we are in the trough of interest rates and that the next move will be higher. However, this change appears likely to manifest itself only gradually. I’m not one who believes that the massive money creation by monetary authorities across the planet will lead to runaway inflation or to interest rates rocketing upward to contain it. That was the scenario between 1972 and 1981, but that was forty years ago and something has changed: productivity. We are still in the early-to-mid innings of an electronic (i.e. silicon based) productivity revolution. Fewer employees can accomplish more tasks at lower costs than at any time in the past fifty years and this trend continues apace. Labor costs, on a unit of production basis are falling. Further, the North American energy bonanza will, for decades, dampen the cost of energy, a key input to inflation.

As we approach the half-way point for the current quarter (was New Year’s Day that long ago?), I wanted to briefly summarize financial market news and our response thereto. Hope was surging along with the market as the books were closed on 2013. As indicated at our client Holiday Luncheon in December and in private conversations with some clients, value investors such as ourselves have been uncomfortable with the dramatic lift off in share prices that manifested itself so widely during the last three months of 2013....

Finally, after thirteen years, the broad U.S. stock indices achieved inflation-adjusted records in 2013. Responsible investors with a functioning memory were unlikely to have participated in the 30% rise of U.S. Equities, because no one in their right mind committed their entire liquid net worth to such a volatile vehicle. For those of us who had a substantial amount in stocks, along with other vehicles, the overall results have been decent, pretty much in line with Trusted Financial’s long-term rate of return.

 The truth about stock ownership is that it has been only a marginally productive endeavor over the past 13 years, once performance is adjusted down for the effects of lost buying power (aka “inflation.”) ...

We think this article posted in the Wall Street Journal will most definitely be of interest for our clients and those thinking about hiring us. 

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