With the first half of the year now behind us, this is a great
time to share a broad review of my performance.
Today I'll tell you how things have been performing over the
last six months. And I'll tell you what's been working and what
hasn't been working. Plus, I'll level with you about my
performance…good and bad.
I believe that the only way to do business with you is to be
open and honest about the work we do here at Wyatt Investment
Research. If you can't trust me, you'll never become a
As you may know, it's relatively easy to whitewash performance
(just look at the quarterly filings of any poorly run company -
you'd think they were doing great!).
But I believe this type of deception is THE problem with the
world of finance. It's part of the reason I founded my company
over a decade ago. And I believe it's the big reason why
individual investors rarely outperform the broad stock
Simply put, they are too many foxes guarding the henhouse. But
I believe I can make a good living by putting those foxes out of
So let's start with a brief recap of the stock market in
general. The short answer is that stocks are performing
remarkably well - just as I predicted 6 months ago.
In December, I told my readers "
I like how the market is setting up for 2013 thanks to a
lot of negativity swirling around right now. Once the fiscal
cliff is resolved - and it will be resolved at
some point - stocks will be free to march higher.
Remove the uncertainty and negativity that
permeates the market and stocks will roar higher.
That's why I'm buying equities
And stocks have marched higher in 2013. The S&P 500 index
is up 12.6%, even after pulling back a bit in recent weeks.
The flow of capital to equities has continued to grow, since
bonds remain unattractive.
Even after rising nearly 20% in the last year, S&P 500
stocks are attractively priced at 15x earnings and yield 2%.
While we would all love to see the good times continue, recent
comments from Fed Chairman Bernanke put ice on the bull
market. While his remarks sent stocks down in recent weeks,
his suggestion that QE3 may end soon did the most damage to the
That's because the yield on bonds is rising - quickly.
The yield on the 10-year Treasury rose 50% in the last two
months. Even after that gain, the 2.5% yield is pathetic.
The increase in yield is hurting bond prices. The
iShares Barclay's 20+ Treasury Bond (
- one of the biggest bond
- is down 11% this year. Corporate, muni, and high-yield bonds
are similarly suffering losses. And these declines will continue
when interest rates rise.
I've been telling my readers to steer clear of bonds since
last year. In fact December, I warned my reads with this
Total government debt has ballooned in recent years to nearly
100% of GDP. The Fed's monetary policies have produced a
nightmare situation for income investors: The 10-year Treasury
note yields 1.7%, a high-grade municipal bond yields 1.5%,
one-year certificates of deposit yields less than 1% and
pass-book savings and Treasury bills yield a few basis
points. None of these investments provide a positive real
rate of return when taking inflation into account…Many bond
investments are high-risk investments."
I've instead encouraged them build a diverse portfolio of
dividend stocks, including dividend giants like
, dividend growers like
, and tax advantaged dividend payers like
Medallion Financial (
This strategy has worked well thus far in 2013…allowing us to
capture superior yields and capital gains.
But not everything has worked exactly as planned…
My bullish outlook on gold has proven wrong. I've
continued to believe gold will rise as governments continue to
print more money to support economic growth. While that
long view holds true today, gold has been out of favor since last
fall, and is down 27% this year.
This investment hasn't been working, and I've been slow to
sell my gold position. Now, gold isn't a core position in my
portfolio. But losses of this magnitude are painful.
Looking forward, I'm favoring gold stocks over ETFs like the
SPDR Gold Shares (
. This is because there are some really attractive value
investments in the sector. In short, gold still has a place in my
investment account, but that allocation is shifting more toward
gold stocks and away from physical gold investments.
The pullback for the financial markets over the last five
weeks is a script change. You see, previous pullbacks for
stocks sent "safe" investments - like gold and U.S. Treasuries -
rising. But not this time…
This latest pullback impacted almost every investment. Stocks,
bonds, and commodities are all falling in unison. These
last few weeks, the only safe place to be has been cash.
My overall investment strategy will remain intact in the back
half of the year. I'll be overweighting stocks, and
underweighting bonds. My "bond" allocations have been replaced
with income generating dividend stocks, including high yield
stocks like REITs, MLPs, and BDCs.
Stocks rose considerably in the first half of 2013, and at a
rate that is unsustainable for the full year. Just as the Fed is
considering tempering QE3, investors should temper their
expectations for gains in the next six months.
Even so, the unattractive yields for bonds - and the real
possibility of rising rates - means that investors will be best
served sticking with stocks. And keeping a little cash on the
sidelines is a smart move, should this correction continue during
the summer doldrums.
If you've been invested in stocks, I'm sure you're portfolio
is posting healthy gains. Cheers to your continued prosperity in
the next six months,