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Blue Ocean Blog

The Blue Ocean Portfolios blog covers various financial and investing topics such as retirement, investing, indexing, financial advising, and more.

September 2017 News and Announcements

TD Ameritrade and Scottrade logos
Scottrade Acquired by TD Ameritrade

This deal was announced last October and finally closed this week, September 18th. We do not anticipate any changes to your log in, account statements or other activity for the balance of 2017. Conversions to the TD Ameritrade platform from Scottrade will be in January or February of 2018. Please let us know if you have any questions. Meanwhile, we will keep you informed of any changes. Nothing to worry about!

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Eclipsing the Capital Markets

solar eclipse

The upcoming total eclipse on Monday, August 21st is gaining a lot of attention. My brother-in-law lives under the path of totality outside of Union, Missouri, and decided to use this as a reason to have an eclipse BBQ on Monday afternoon – it’s just like Memorial Day! I also heard of many businesses and schools changing their schedules to accommodate this rare natural regional phenomena. The Missouri Department of Transportation (MoDOT) is estimating that over 1 million visitors will be filing into Missouri for this event and already has posted temporary signs along the interstate highways warning about traffic slowdowns on Monday.

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Bitcoin, Amazon and Other Bubbles?

great fool theory comic
Amazon Stock Price Graph
Merck and Co Stock Price Graph
Bitcoin Stock Price Graph

Financial bubbles occur when enough people start irrationally paying over inflated prices for stocks, collectibles, wine, cars, real estate, commodities – even tulips! The greater fool theory drives many price bubbles - while it is foolish for me to pay the current inflated price, there is a good chance that someone even more foolish is willing to pay even a greater price in the future!

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The Quasi War - Memorial Day Weekend 2017

Memorial Day 2017
Memorial Day is This Weekend

A day that we pay tribute the soldiers who died fighting our wars.

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Why is the Stock Market Closed on Good Friday?

Why is the Stock Market Closed on Good Friday?

For Christians, Easter is the most important holiday of the year; the annual celebration of Christ’s resurrection after being crucified. The Edict of Milan in the year 313 officially ended Roman Empire’s persecution of Christians. Emperor Constantine was the first Christian Emperor. A few years later in 325, The First Council of Nicea took place to standardized Christian practices and holidays. To address and respect all religions across the Roman Empire, The Council composed of Bishops incorporated many beliefs, traditions and holidays into the calendar. Roman calendars have traditionally revolved solar cycles. Out of respect for the Jews in the Empire, the Council decreed that Easter would be a movable feast based on the lunar cycles of the Jewish calendar, where the Jewish Passover is the first full moon after the spring equinox. Therefor, Easter Sunday has always been the first Sunday after the first full moon after the Spring Equinox, also called the vernal equinox.

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Taxes - A Pain in the Neck!

Taxes Are a Pain in the Neck

Over the years, Congress has put more and more stress on all of us through the programs that we are expected to comply with; Medicare, Social Security, and especially taxes! And there is no doubt that we all are getting older and our parts are starting to wear out. Could all this stress and aging process lead to health problems?

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A Black Rolls Royce and a Martini: Is the Stock Market Too High?

Is the Stock Market Too High?

It seems like the world stock markets have been in high gear since the general election this past November. The S&P 500 has appreciated over 15% in just three months! We all know that the markets can move down just as easily as they move up. Over the years, there has been a remarkable amount of resources used in an attempt to predict the movements and direction of the markets. The problem with most of these predictive attempts is that they are mostly based on logic and mathematics.

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There Are No Angels Walking Around Down Here

No Angels When it Comes to the Fiduciary Standard
Charlie Brennan Talk Show with Jim Winkelmann

The Fiduciary Standard that was set to take effect in April is nothing less than an "Angel Law" whereby brokers and advisers would be required to always be Angels when dealing with the retirement accounts of their clients. Here is the problem with that: there are no Angels, and enforcement of this Fiduciary Standard would enable regulators to charge any advisor they wanted to go after. Why? Because no one is an Angel, and there will always be a way for an administrative enforcement agent to prove that any broker or advisor is no Angel. This bureaucrat would not need to prove that the advisor was a Devil, but that they were not the Angel that the law would require them to be! It’s impossible for the broker or advisor to mount a defense and thus to enable regulators to pick and choose any advisor they wanted to go after and most likely win. More importantly, the Fiduciary Standard would have a negative impact on the clients and the economy overall. Let’s take a closer look.

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You Only Live Once (YOLO)

Yolo the Wolf
asset classes table
Past Performance Not Indicative of Future Outcomes

It is hard to believe that January of 2017 has come and gone! And after watching the Supreme Court nomination announcement the other night, it is even more difficult to believe that Donald J. Trump is the President. This serves as a lesson to all of us of just how difficult the future is to predict. Just three months ago the prestigious New York Times gave a chance at Trump winning the election to be less than 15%. The consensus was wrong - dead wrong. While going with the consensus can be comforting, and some argue conservative, the odds are that you probably do not know what the odds are.

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Trump & the Markets

Value Index Graph
Indexes Table
Idexes Table 2

For better or worse, most of us felt the world change on the early morning of November 9th. Against all odds, Trump pulled off the biggest political upset in our life time.The world stock markets immediately dropped; in Europe the US Dow Jones Industrial Index lost over 900 points in two hours. This was a prime example of how the markets can behave and react to new information; not on anticipated information but on unanticipated and truly new information.

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Another Big Short?

The Big Short Book Cover
Monetary Base Chart
Wall Street Journal Article

Last night while browsing through our family’s Netflix account, I stumbled across a movie called “The Big Short,” the movie rendition of Michael Lewis’s bestselling book of the same name. As typical with our modern society, the film is laced with needless vulgarity but no nudity or violence. This movie is based on true events leading up to the collapse of the housing market, Bear Sterns and Lehman Brothers back in 2008, and how only a few investment managers had the foresight, guts and intelligence to figure out how to short (or to bet against) the housing market. For two years leading up to the 2008 financial crisis, these fund managers were wrong, dead wrong. Many of their clients and investors were bailing out on them because of their bet against the US housing market. This movie depicted how difficult it is for any fund manager to maintain their conviction when the market keeps moving to the contrary. It can be maddening!

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TD Ameritrade to Acquire Scottrade

Jim Signature

October 24, 2016

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The Smartest Investment Managers in The World?

Ivy League Schools
Yale Tops the Ivies

Many people believe that the smartest people in the world attend, teach and run the Ivy League Schools. The professionals running the mega endowments at Harvard, Princeton, Yale, etc. are some of the smartest and best investment managers. Unfortunately, for the fiscal year ending September 30th, the investment results are anything but remarkable.

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Inherited IRAs 101

Inherited IRAs 101

Unfortunately, this year we have seen more than our fair share of client’s pass on with sizeable IRA accounts in place. IRA accounts are different assets when it comes to estate and tax planning.

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The Wells Fargo Wagon Is a Comin’ Down The Street – Oh Please Let It Be for Me!

Wells Fargo Phantom Accounts Fraud

Yesterday, John Stumpf, Chairman and CEO of Wells Fargo, was in the hot seat in front of the Senate Banking Committee. Stumpf had been championing “cross selling” at Wells Fargo with a goal to have every Wells Fargo client and customer to each have 8 accounts. This includes: credit cards, home equity loans, overdraft protection, identify theft programs, etc. Enormous pressure was put on junior employees to open up additional accounts to meet Mr. Stumpf’s objectives. The result? Millions of additional phantom accounts were fraudulently opened. Huge bonuses inured to top level executives; one lady who headed their “Community Banking” made over $100 million! That’s right $100 million! Wells Fargo gets fined, and Mr. Stumpf blames the practice on the 5,300 junior employees and fires them. No senior managers get fired, fined or punished. What’s even more bizarre is that John Stumpf won Fortune’s Magazine Best CEO Award just this past January. One Senator said that this is the first time that the Banking Committee has been in agreement on any issue. It is not often that I agree with Liz Warren, however watch her take Mr. Stumpf to the much deserved proverbial woodshed!

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Will the 2016 Elections Impact Your Portfolio?

Trump vs. Clinton Portfolio Implications
Investor in Chief

About half the country will be scared and the other half elated come November 9th. However, there will be no reason to make any major changes to your investment policy. If anything, we should think about more ways to diversify.

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Asset Class Performance YTD 2016

YTD 2016 Asset Classes

So far, the world capital markets have been completely different than they were last year. The table below shows the YTD outcomes of the different asset classes and a historical perspective. The big news recently was the Brexit vote that initially sent the world stock markets plunging and the gold and US bond markets surging. The whole world reacted wrongly and the equity markets reversed and rallied. The world was incorrect about wrongly anticipating that the “remain” vote would prevail. As always, the world markets lurch around unpredictably as unanticipated news comes pouring in from all over.

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Brexit - The Aftermath

Brexit - The Aftermath

Late Thursday there was a buying frenzy and the stock market surged on the polling data that was showing the Brexit vote was leaning in favor of the UK staying a member of the European Union. That sentiment quickly changed Thursday evening as the actual voting outcomes were showing that the UK was indeed exiting the EU. Then early today, with the Brexit certain, the global equity markets tumbled. But for precious metals and US Treasury bond most other asset class dropped as the Brexit results have triggered short term economic uncertainty. Of course, for the financial press, this news ignited all types of gloom and doom comments. Capital markets lurch up or down as a result of unpredictable news. Yesterday, the world market participants were predicting a NO vote on the Brexit and today we all found out that this prediction was wrong. In the days to come, there will be more unpredictable news causing more swings both up and down in the global capital markets. The one thing we know for sure is that markets tend to over react, and looking back, these types of negative news events have long term buying opportunities.

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Brexit For Dummies

Brexit for Dummies

As part of a campaign promise, Prime Minister David Cameron is compelled to have an up or down vote. This Thursday, June 23rd, the citizens of Great Britain (aka United Kingdom or “UK”) will vote on whether or not to stay a part of the European Union (EU). The press has termed this vote Brexit (short for British Exit). The idea for the EU began shortly after World War II to incentivize trade and discourage future wars between European nations. Now this EU is a formal partnership involving 28 European countries. The EU has its own parliament in Brussels and sets the rules and laws on broad ranging topics such as: the environment, transportation, immigration, consumer rights and even little things like regulating cell phone charges. The EU has its own currency, but only 19 of the 28 members use the European Dollar or Euro; the UK still issues Pound Sterling as their currency.

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Index Weightings and Methodologies

Index Weightings and Methodologies
(a boring yet informative blog on investing)

The first stock index was published in 1896 when Charles Dow published the Dow Jones Industrial Average (DJIA). Mr. Dow was co-founder of Dow Jones and which began publishing the Wall Street Journal. The primary purpose of the DJIA was to sell more newspapers. Now with the newspaper industry in steep decline, the index industry has never been better. There are but a few nationally published newspapers while there are at least 476 various index funds available to the investing public. Index funds are like cookie recipes - they all have the same basic ingredients the difference being the varying ratios. You can have a cookie recipe with one cup of sugar or a half cup of sugar; the only thing for sure is the cookies will taste different, not necessarily better.

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