Total Eclipse of Your Investments?

Unless you are living under a rock, literally, you probably know that there is an eclipse across a wide swath of the United States today. It’s a biggie. We haven’t had one so clearly visible in the United States in a while and it looks like it will be 2024 until we’ll see another one. Solar eclipses, along with lunar and planetary eclipses are actually fairly common across the planet, with an eclipse of some celestial body or a partial eclipse generally happening a couple of times every year.

So, cosmically speaking, we have a fair amount of astronomical obstruction and you need special glasses to see it. Similarly, there may be a total eclipse obscuring the fees in your investment portfolio and you may need the investing equivalent of eclipse glasses with a solar filter to see those high and onerous fees!

It shouldn’t be difficult to understand how much you are paying for investment management and financial advising services, but with many providers, it can be. If you feel confident that all of your fees are on your statement, you may be surprised to learn that in many cases, they aren’t.

Many fees do make it onto statements, but with some, such as deferred sales loads, you may not realize that you are paying them until after you’ve made a decision to sell. Or, you may not remember an unusually high sales load that you paid up front. On top of that, most fees in mutual funds and ETFs aren’t usually explicitly called out on statements. To understand what you are really paying, you have to go research the fees on a site like Morningstar and then add in those management fees to determine your full fee picture. You’ll also have to dig pretty deep to determine if your broker is getting any sort of kick-back or commission on the products that they invested in on your behalf.

To help you got to the bottom of your fees, here are 5 questions to ask the person or firm helping you with your investments:

1) Are you a fiduciary and do you have to act in my best interest when making investments? If not, why not?

2) When you make an investment in my account, do you receive a commission, compensation or kick-back of any kind, if so, how much and how does it work.

3) What are the management fees of the products that I’m invested in and how do those fees compare to index funds and ETF or other similar products?

4) Did I pay any up front sales loads and are there any back end sales charges if I sell something? (Ouch if they get you both coming and going...)

5) When you add all the fees that I pay (or have paid) to you and to any other investment company or product that I am invested in, are my total fees under 1%? If not, why not.

Working with a fee only advisor and a company that generally uses low cost products and individual securities, such as J. Bradford Investment Management, can help you achieve a more transparent fee structure into your portfolio.

If you’d like a free evaluation of the fees you are currently paying, we provide free portfolio reviews so everyone can understand and evaluate the fees paid to their advisor or manager. With your solar filter glasses and your portfolio review, you’ll be glad neither your retina nor your portfolio get burned.

PLEASE REMEMBER:

- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.

- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.

Your Retirement Budget is Going to be OK, Probably.

That doesn't sound like a very good answer, but it isn’t as bad of an answer as you might think.

Many couples and individuals preparing for retirement understand and appreciate that they have to build a budget for retirement. But with so many different variables, it can be hard to predict if your money will really last and if you will be able to afford the budget that you built for yourself. So even if the answer is “probably”, that can help establish some peace of mind.

The process of budgeting for retirement and planning how to spend down retirement savings can be daunting. So, here are a few suggestions to help you take control of the process, maintain the lifestyle that you’ll establish for yourself and enjoy financial security.

First, I strongly recommend to my clients that they spend a year “practicing” or “test driving” various budgets and lifestyles to ensure that they really know what they are signing up for. Many retirement planning tools use 70% or even 60% of pre-retirement income as the planned level of spending in retirement. That might be realistic for some, but maybe not. And while using such a low number in the planning process will help ensure your retirement assets last longer, it may not be sufficient to support other goals and ambitions you have for retirement. The longer you can sustain and feel comfortable with lower levels of spending, the more confident you can be using them in retirement planning tools.

Second, speaking of planning, as you sit down with an advisor or endeavor to plan out your retirement finances on your own, be sure that the tool you are using is enabled for Monte Carlo simulations. Rather than giving you a point estimate, Monte Carlo gives you a range of outcomes and will give you the probability that your retirement assets will last. Be sure the tool uses your level of spending and risk in your portfolio as inputs. No one knows exactly what’s going to happen in the investment markets. But what if today starts the worst 15-year stock market stretch in history? Will your assets last? Monte Carlo can help answer that question, and less dire scenarios too.

Third, once you have a comfortable level of spending and have found a great tool to analyze everything, take a big step back and make sure that those budget expectations are reasonable.

Two areas in particular: Many couples find that they have underestimated their medical expenses and medical insurance costs. Fidelity Investments estimates that a couple aged 65, retiring today will need $260,000 to cover health care costs in retirement. Is that what you’ve budgeted?

The other big area that is sometimes overlooked is inflation. The cost of everything you buy is going to go up over time and your income may not keep pace. It’s important to account for and factor in some level of increasing costs so you can maintain your lifestyle.

Fourth and lastly, consider the potential role of annuities in your portfolio. As a fee only, fiduciary advisor, we do not sell or promote any products on commission, including annuities. We always work in the best interests of our clients. Given the low assumed interest rate most annuity providers use and the ability to achieve similar results at a lower cost, we generally don’t recommend annuities. However, what happens if you go through all this planning and budgeting and build a fantastic plan that shows a high likelihood of your assets not running out based on the life expectancy of you and your spouse? Well, that’s a great start, but if you are given the gift of a long life? Don’t you want to make sure you have enough money to last as long as you live? If you plan for a normal life expectancy and live longer than expected, you may be exposed to some risk. A longevity annuity that kicks in after say age 85 is a good way to help protect your lifestyle in those very golden years.

Those four pre-retirement focus areas certainly aren’t comprehensive and every individual has circumstances that are unique to their situation that need to be planned around and accounted for. From Social Security claiming strategies to Long Term Care insurance, to Donor Advised Funds for charitable giving, there is a lot to consider. There are also so many different tools and calculators on-line out there that trying to sort it all out can be overwhelming. So take it slow and tackle on issue at and time.

If you have questions on any aspect of your retirement budget or pre-retirement financial planning or would like suggestions on the tools we use and recommend, just reach out, we’d be happy to help.

PLEASE REMEMBER:

- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.

- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.

What's Going on in the World, Economically.

Periodically, J. Bradford Investment Management publishes updated commentary, research, analysis and economic viewpoints. This work represents the views, insights and analysis of Jason Haviland, President and Chief Investment Officer at J. Bradford Investment Management.

We'll dig into all the details below, but here is a summary:

The disclosures at the bottom of this blog post are particularly relevant for this material. Let us know if you have any questions.

O.K. Let's jump in!

First, let's look at our domestic stock markets. The Dow Jones Industrial Average, the S&P 500 and the NASDAQ are all at or near record highs and have generally been on an upward trend for nearly eight years.

Assuming no major swings, March 9th 2017 will be the eighth year anniversary of this bull market. If you have a 401(k) and have been invested for the last decade, it’s been quite a ride. If you stayed the course, you saw your balance take quite a hit in 2008, but then it very likely came back rather nicely with the upswing in markets across the globe.

And if you're relatively young and started investing anytime after the Spring of 2009, you've only ever seen your balance climb steadily upward. Markets have been very positive for many years, but markets do not move forever upward.

So the big question on everyone’s mind is: Will the U.S. stock market climb higher yet? It might. And if it does, it will likely be driven by some combination of:

1.   The health of the U.S. economy

2.   A continued rise in corporate earnings

3.   Continued historically low interest rates

4.   The attractiveness of the U.S. market compared to other developed markets.

Let's look at how these factors may impact the market and the likelihood that their impact will be a positive one.

Let’s start with the first two factors, the U.S. economy as measured by GDP and corporate earnings. These two elements have been very impactful historically in driving stock market performance.

I can absolutely envision a scenario where the U.S. economy continues to grow and potentially even breaks out of the slow growth cycle that it has been in for many years. Some combination of the momentum already underway in the economy and pro growth policies in Washington could set the stage for this to happen.

But the other side of that coin, limits on growth (such as restrictions to selling in international markets) and weakness or very tepid growth in the U.S. economy, are not unrealistic outcomes either. There is some risk that the incoming administration may take an action with unintended consequences that negatively impacts growth and earnings in certain sectors or even across the board.

Investment markets are often driven by expectations of what will happen in the future, and so far, the stock market believes that the grass is greener and that a negative, economic contraction scenario won't happen, which is probably a good thing. We'll be watching this closely.

And it's also possible that we could see more of what we've seen for the last several years. That is, things are generally pretty good for most, but some sectors that don’t perform well, particularly those in political cross hairs. Overall, we may see conditions not really deteriorating, but not really improving either. Things are just good.

Whatever happens, we believe that it is important to assess if there is a commensurate and appropriate reaction and absorption of that information in the stock market, which gets reflected in pricing. If the market is priced as if we are on a high growth path (which you could argue that it is now), but we are actually on a slow growth, neutral or downward path, that could be problematic. We're watching that balance closely.

Next, item #3, our low interest rate environment. We have had low, very low, zero and in some parts of the world, negative interest rates for an extended period of time. Such a long period in this low interest rate environment is relatively unprecedented in financial history. So, when we look at historical valuation measures for insight, the interest rate regime at the time of the analysis is an important factor for comparison. One problem we have now is that we don't have many equivalent historicalperiods like the one we are in now to analyze for comparison.

So how might this low interest rate environment be distorting prices? One simple explanation of the increased inflow of capital to the stock market over the last several years is that because interest rates are so low it just doesn't make any sense to earn half or a quarter of a percent in a CD or 1% on a bond, so investors are investing in stocks instead. Instead of bonds, they are buying stocks that are perceived to be safer (such as utilities) and that generate income (such as dividend stocks). I believe that there is some truth to that assertation and that if interest rates remain abnormally low, the stock market will be seen as an alternative, even if it is a quite imperfect and much, much more risky one.

Lastly, #4, our relative position to the rest of the developed world. In some sense, all stock markets worldwide compete for investment dollars, with investors making determinations as to where they can achieve the best return. If the world economy remains generally stagnant or certain key areas such as Europe start to experience contraction or even just very slow growth without full-blown recessions, it might be the case that the U.S. benefits from simply being the most attractive choice against a backdrop of mediocre choices.

Similar to individual winners and losers in the U.S. markets, there will be individual winners and losers in international markets as well. Most immediately, we’ll face the implications of Brexit, OPEC price controls, the delicate Chinese economy and potential fall-out from the financially troubled members of the Eurozone. As those implications unfold, international investors may judge the U.S. markets to be a better option in the short to medium term.

I believe that all four of these factors have been contributors to our current sustained bull market and some combination of them may drive the market higher, but it's not entirely clear that they will all be pushing upwards as they have been recently, especially interest rates.

So let’s dive a little deeper into interest rates. The Federal Reserve has recently signaled a willingness to raise interest rates. In addition, economic conditions also support increasing rates. As such, interest rate increases from the Federal Reserve in the short to medium term seems very, very likely.

Since bond prices move inversely to bond rates, that means that the prices and values of all our bond holdings in mutual funds and ETFs will likely decrease.

We are likely entering a tough stretch for bonds. However, we should not lose sight of the strategic reasons we hold bonds in the first place – income, diversification, reduced volatility and over the long term -- better risk adjusted portfolio returns. In this environment, individual bonds and bullet maturity shares have some advantages. Here too, we will be monitoring the markets closely.

We would be remiss if we didn’t also consider the political implications of the recent election.

In this area we have a tempered and measured view. Until we get back into the full legislative session, the market is reacting to what it thinks the current administration will do. Ultimately the market will move based on what the administration actually does vs. what they’ve said they would do during the campaign.

Yes, they have a legislative plan, but legislation is complicated and special interests are as powerful as ever in DC, so we’ll know a lot more in the Spring once we see how all the competing interests line-up and after the early executive orders actually get issued. That is, we’ll see what actually happens.

Whew, that was a lot. Or maybe you just jumped here to the bottom line...fair enough. So what does all that mean for our investment portfolios?

Here are our five key takeaways:

• U.S. stock market performance and portfolio performance may be mixed and even diversified portfolios may see more volatility than usual. However, we still believe that it will be more important than ever to hold a diversified portfolio that is periodically rebalanced and potentially tilted towards investments that will perform well in the more likely scenarios.

• We believe that an increased cash holding is warranted. We believe that the market forces discussed here will push and pull against each other over the course of 2017, more so than in 2016, and when combined with potential for geo political instability and less ability to use bonds as a cushion, we’ll want higher cash holdings.

• Sector, smart beta and individual security selection will be important investment lenses for 2017, which we intend to use and pursue.

• We expect increased volatility for the short to medium term that may create opportunities for long-term value buys.

• Interest rates will likely rise in the short to medium term and inflation may follow. Investments that move inversely to rates will be under pressure in the short to medium term and investments that rise during periods of inflation may be warranted.

----------------------------------------------------

PLEASE REMEMBER:

- This material is provided as of December 2nd, 2016 and readers should bear in mind that investment and economic conditions can change very rapidly and that changes or developments subsequent to that date may drastically alter the validity of this analysis.

- There are forward looking statements in this analysis and these statements should not be construed as a prediction or guarantee of what will happen.

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial planning and investment management services provided by J. Bradford Investment Management, Nashua NH.

Is Alexander Hamilton the Lead Singer in a Boy Band?

No, Alexander Hamilton is still that Alexander Hamilton, the first Secretary of the Treasury and the father of the United States banking system. That guy on the $10 bill. The one and only, Alexander Hamilton.

But thanks to the run-away success of the Broadway musical “Hamilton”, my kids, who now have a full-blown outbreak of “Hamilton Fever”, know a shocking amount of history on a revolutionary era figure who wasn’t even president. I’d be surprised if they could even name two or three more people from that era period?!?

Yet, they know where and when he was born, his family history, his professions, all of his suitors, the sisters, their rivalry, Hamilton’s son, how he died and they can recount a number of the interactions he had with Aaron Burr, including their duel. In all honesty, I often forget who won that duel, so on that matter, they actually knew more than me...

Now, I am getting a little tired of the repeat lyrics, but, they’re learning and they don’t even know it. Sort of the modern day equivalent to Billy Joel’s “We Didn’t Start The Fire”. Those lyrics are a history lesson unto themselves.

I love that my kids are engaged and it’s great to see such interest in such an impactful historical figure.

Back to Hamilton briefly. Almost everything he did set the stage for American capitalism to become American capitalism. From his penning of many of the Federalist Papers and their advocacy for a strong central government, particularly in matters of finance, to his ideas around the federal government assuming the debt of the states after the Revolutionary war, to his recognition of the need to set up both a central bank and regional banks that would help build prosperity across the nation, he really deserves the praise he gets and I’m glad he was spared removal from the $10 bill.

There are many ways in which today's Treasury, Federal Reserve and the Federal Reserve System play a very important role in keeping the United States economy moving forward at a stable and steady pace. The business of money can at times become highly politicized, but Hamilton laid a solid bedrock.

As investment managers, we do watch and pay attention to what the Federal Reserve says and does and we try to manage the risks that some of their actions might trigger, but generally we take the long view and invest in a diversified and balanced way for whatever decisions the Fed makes.

For some in our industry, watching and predicting Fed moves is a sport, which I suspect Hamilton would approve of knowing that we no longer duel when we disagree about inflation, interest rates or the debt. Federal Reserve TV anyone?

PLEASE REMEMBER:

- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.

- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.

On This, We Can Actually Agree

There wasn't much agreement between or even within the political parties leading up to the election and I suspect that the deep disagreements will continue well past the election. I'll let the political pundits blog and pontificate on that.

Likewise, there is much disagreement in Financial Services and Investment Management, but there are also some broadly accepted principles and strategies.

One in particular.

J. Bradford Investment Management thinks it's a good idea

Forbes thinks it's a good idea

Morningstar thinks it's a good idea

NASDAQ thinks it's a good idea

CNBC thinks it's a good idea

In fact, just about every major financial institution and publication will espouse the virtues of this fundamental investment activity – rebalancing.

There aren't many universal truths in the investment management industry, and even rebalancing has some detractors, but the importance of periodically rebalancing your portfolio is probably one of the few things that the investment community is largely in agreement with. Sometimes you'll hear it referred to as a “free lunch”.

There has been a significant amount of institutional and academic research on the topic and generally speaking, over time, investment outcomes improve through periodic rebalancing. You'll find different opinions on how often to rebalance, the tax considerations of rebalancing and how wide to cast your asset allocation net, but there is broad and general consensus on the need to diversify and rebalance.

If you are working with an investment manger or financial planner, it is likely that rebalancing is one of the specific tasks that they are working on for you. They'll determine what is the right mix of asset classes and how often should they be rebalanced.

If you own a target date mutual fund or are part of a robo-advisor platform, there too, one of the key tasks of the portfolio manager undertakes is to ensure that the portfolio assets are closely aligned with the fund's objective and periodically rebalanced. That task is covered by the management fee you pay.

But what if you are in “do-it-yourself” financial planning mode? What are the steps to rebalancing?

Very generically the steps would be:

1) Determine an appropriate level of risk and your individual risk tolerance – your willingness and ability to take risk. This on-line tool from Vanguard can help you get started.

2) Build an asset allocation model that aligns with your level of risk – this on-line tool from investor junkie can help you work through some of the individual considerations

3) You can also inform your asset allocation by understanding how institutional managers allocate their portfolios and why.

4) Determine what your existing asset allocation is. Sometimes you can find this information on-
line or on a recent statement, but sometimes you'll have to ask the company you are doing business with for this info.

5) Then you can compare your existing asset allocation with your desired asset allocation, given your level of risk, and determine the magnitude of the gaps. The bigger the gaps, the more important it is to consider rebalancing. One strategy is to establish "bands" and when one asset class moves outside an established band, it triggers a rebalance.

This whole process can be confusing and overwhelming, so    J. Bradford Investment Management does offer very targeted services for investors who want an assessment of their portfolio positions and detailed insights that may help them bring their portfolios back into their desired alignment.

You can use the link below to schedule a free consultation.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Planning and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

Chin-up All You Parents Saving For College - Here are 3 Quick Tips

Back to school time is hectic. New routines, new teachers, new friends and trying to figure out how to get everyone were they need to be when they need to be there, without hiring a fleet of UBER drivers. I for one will be typing my blog posts from my daughter’s ballet studio for the foreseeable future...

We eventually settle in to a routine and then for many, the reality sets in – the kiddos are one year closer to college and those over-sized payments for tuition, room and board are one year closer too. Panic. Denial. Procrastination. How about we plan our next family vacation instead?!?!?

After some mindless web surfing to distract us, some article, blog post or research report snaps us back to reality. How on earth are we going to afford to pay for college?

It's a question I hear often and it's a real problem for almost every family in America.

It's estimated that only 50% of families are even saving for college and of those that are, the average balance is roughly $10,000.  And unfortunately, that won't go very far.

Tuition, room and board costs will vary wildly, but for an in-state school, tuition, room and board and basic expenses are likely to run $35,000 - $40,000 per year. It will be more for out of state and private schools, less for community college. So let's say it's $160,000 all in for four years.

It's going to be very hard to fully save that much. If you start saving the day your child is born, and can somehow figure out how to squeeze an extra $500 out of the monthly budget and put it towards college and then assume a 4.5% annual return, you have a realistic chance of saving enough for college. Have two kids? That'll be $1,000 per month. Decide to make it a 4-pack? $2000 per month. And if you don't start until they are 9? Then you'll need to save $1,200 per month to get comfortably close. That's just not realistic for most.

 So what do you do? Three simple things:

1) First, I recommend ignoring the big, ugly numbers from tools, calculators and blog posts like this until your kids get much closer to college. You don't have a money tree, so the most important thing you can do is start saving now (or save even more) and save in a low cost, tax advantaged 529 plan. Even if you only get 25% or 50% of the way there, it can make a big difference. Don't be discouraged by the fact that you won't fully make it. There are lots of options and things change. A financial advisor, financial planner or investment advisor can help you evaluate your specific and unique circumstances, but 529 plans make sense for many. Bonus Tip: If you choose a Fidelity Investments Plan, you can goose your savings with a 2% cash back credit card.

2) Next, spend some time with your kids on PayScale.com. Have a discussion. Evaluate the salary ranges for the degree they are thinking about and potentially more important, the skills those graduates will be expected to have. Do they have or are they willing to acquire those skills? Do they realistically need a graduate degree to get a job? They might not be as interested in a particular degree if it isn't a match for their personality or if they need to move to a different city for the best opportunities.

3) Finally, start researching and applying for scholarships. Many are available to High School students and even grade school students. It will help prepare them for college, help them feel invested in the process and maybe inspire them in a particular direction.

Then as you get to the college precipice, consider working with a college specialist, such as my colleague Jack Wang, who can help those that are closing in on college deadlines navigate the FAFSA form submission process and overall funding process. For some, financial aid may be available and for many, different types of student loans are available. It can be hard to sort out, and someone like Jack can help make a difference.

There are no easy answers to college funding, or other difficult conversations about the right approach to college and making choices in college that pay off in the long run.  We can help provide a strategy and a plan as a first step.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Planning and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

What the heck is a Brexit and why is it crushing our stock market today?

As my clients know, I don’t encourage anyone except investment professionals to follow the daily ups and downs of stock markets. In the long run, daily swings don’t matter.

That said, on days when the volatility is extremely high, like today, I think a little insight and an extra dose of reassurance can be warranted. So, here are some quick thoughts on what’s happening today in the markets:

Brexit is short hand for British exit, or more specifically, Britain exiting from their participation in the European Union. A nationwide vote was held yesterday in Britain and although it was close, to the surprise of many, the citizens voted to exit from the EU.

OK. So why is a vote in Britain sending shock waves through stock markets worldwide?

It’s complicated, but first, we have to remember that the economic reality is that we live in a highly interconnected, highly interdependent global economy. We can argue the merits of that connectedness, but it is the current reality. For many decades, the world has become more tightly integrated, not less, so the impact on one part of the overall system will impact the others.

The second issue is that investment markets don’t like uncertainty. We typically see downward spikes in the markets when global events “spook” the market and this vote to exit is no different. The outcome of the vote has led many to fear that undesirable events are now more likely to happen.

So what undesirable events could happen?

- Britain accounts for 3.9% of world output. That’s not a huge portion, but it is meaningful in context of the interconnectedness.

- Britain could fall into a recession and the U.S and Chinese economies that are somewhat precarious could also falter.

- Corporate investment and trade may decrease as firms worry about trade regulations.

- Consumer angst may increase and consumer spending may decrease and that may further hurt corporate profits.

- Then there is the possibility that other EU countries may also vote for independence further destabilizing the situation.

And then there are other uncertainties related to currency markets and corporate reactions that could also unfold in undesirable and unintended ways that the market would react negatively against.

It’s also possible that Britain quickly and efficiently addresses the trade and currency worries and perhaps juices their economy with some stimulus, and none of the doomsday scenarios come to pass. In that case, the reaction seems overblown.

But, that’s the nature of investing. It's unpredictable.

Should you be worried? Only if your portfolio isn’t aligned to your risk tolerance. Otherwise, relax and read stories about the thrilling conclusion of Dizzy the monkey’s escape story.

Markets like this can test investor risk profiles. At J. Bradford Investment Management, we are constantly monitoring the markets and the global macroeconomic environment, and many of our clients are in portfolios specifically designed to reduce the downside risk of markets like this.

If you would like to discuss the Brexit in more detail or discuss other aspects of your portfolio, please schedule a free consultation.

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.

Guess what asset has increased over 50% in the last month?

The teaser image may have given it away, but if you guessed Bitcoin, you are correct.

According to www.coindesk.com Bitcoin was trading at $454.82 on May 13th, closed at $675.35 on June 12th and has moved between $663 and $719 as of midday trading on June 13th.

What should we make of this?

Well, first, we must understand that Bitcoin regulation is still very nascent and emerging, second, that Bitcoin is used predominantly by those engaged in nefarious activities and third, that it has a history of extreme risk and volatility. So, generally Bitcoin is not suitable for investment purposes, but it’s still worthy of some attention and analysis.

Can we explain through economic analysis why such an increase is justified? The short answer is not really.

According to a recent press release covered by www.coindesk.com “The US Department of Homeland Security (DHS) has awarded as much as $600,000 in grants to six companies working on blockchain applications for the government” and there have been other recent stories and press releases related to increased interest in the underlying blockchain technology. So the increase certainly may be partially driven by media interest and more companies looking for innovative ways to use and leverage distributed database technology. Another factor may be the increased difficulty in mining bitcoins, thus increasing their scarcity. And technical factors such as volatility and sentiment that we typically use to measure other more traditional currencies also help explain the run-up.

But over 50% in one month? It may make sense to those who track and follow the hyper volatile bitcoin market and virtual currencies, but many of the rest of us still have trouble connecting the dots of increased prices in the currency to the economic rationale. That’s not to say good reasons don’t exist and aren’t justified, they are simply not as obvious and accepted as say the price increase of a stock based on their intention to merge with another company.

Making sense of this new currency and technology can be confusing, so if you would like to learn more about the basics of Bitcoin and Blockchain, please like our Facebook page and plan to attend our free virtual webinar on Facebook Live Streaming, tomorrow, Tuesday June 14th at 12:00 Eastern.

https://www.facebook.com/jbradfordinvestments/

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- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

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- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.