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P.O. Box 2049
Wimberley, TX 78676
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Arrowhead Asset Management Money & Investment Update (2-26-17)

Notice: In our brokerages and IRA accounts, last week we sold all our shares of Tesla (TSLA) after a big price surge of almost 40% since early December. Tesla stock is down 10% since we sold it. We will buy back the stock if we get a chance at a lower and much better price, which I believe we will see shortly. 

Still waiting for a 5% plus correction - which would be good for the markets

I am still in the bullish camp for the broader stock market. But we need a healthy stock market correction to take the frothy risk out of currently overpriced equity valuations. 

As I mentioned in the last Update, the stock market surge that began anew last November is long on rhetoric and short on real economic action. The Trump effect is now being intelligently questioned by investors, as we see more and more that the Trump Administration's only economic stimulus is to trash big business pollution and financial malfeasance regulations and to give the elites more tax breaks.

Reality is beginning to set in as we are seeing more and more the damage being done by Trump's bully pulpit governance. We are witnessing mass Town Hall confrontations at Republican strongholds, which have many of the Party's politicians cowering in their offices. Citizens, both Republicans and Democrats, know the Republicans have no constructive alternative to the Affordable Care Act (ObamaCare) and are letting the mindless anti-ACA Republican ideologues know how they feel.

Additionally, agricultural products are going rotten from not having undocumented immigrants to pick the produce. Many of the Nation's farm workers are being held in private prison internment facilities, being deported, are in hiding, or just plain not leaving their homes until some of this xenophobic intensity subsides. Not surprisingly, this is causing market produce prices to rise and will probably keep rising as there are simply very few Anglos who are willing to do this type of agricultural work. 

At the state and local level, some State governors and big city mayors are refusing to cooperate with Trump's harsh and disruptive immigration police action. It is causing normal state and local law enforcement to neglect their normal policing duties, wasting limited manpower, depleting budgets, and worst of all, separating non-adult children from their immigrant parents - putting major stress on local law enforcement and social service agencies. In fact, some major city police chiefs are directly refusing to cooperate with the Trump's ICE raiders, causing growing riffs with Trump and his Department of Justice.   

Corporations, especially those depending on educated immigrants, are seeing their operations disrupted due to poorly communicated and executed immigrant travel restrictions. This is creating more and more dissension from business leaders who are not part of Trump's favored crony sectors (the Wall Street bankers and the fossil fuel industry}.  

Many corporate executives are slowly starting to rebel over Trump's vision, given his militaristic nationalist ideology and his isolationist global trade rhetoric. Regardless of the statements coming out of the Trump Administraion, we are still in a volatile governance crisis situation that needs to be monitored closely.

To make matters even more weird, Trump and his surrogates lie constantly, and seem to continue lying even though he and his staff get blatantly caught in their lies over and over again. Clearly Trump believes his follower don't think the lies are lies. In a best case scenario, Trump is "pandering" to his base voters, who were generally very susceptible to conspiracy theories and true "Fake News" stories anyway.

Now, however, it is almost as if Donald Trump has his own "religious congregation", somewhat like L. Ron Hubbard, who founded Scientology. Hubbard relentlessly preached to his followers that he came from outer space to save them, and they dutifully worshipped him without question. Trump's believers have assigned him this kind of "do-no-wrong" Jesus savior like quality (even more so than many gullible liberals gave Barack Obama).

Trump's "political congregation" is hoping that he is the ONE who can save America from the elitist multicultural liberal hordes who turned our nation away from what can now be called the 21st century "Alt-Right" promised land. As a result, our country itself has become one big conspiracy theory. America is now in its own "alternative facts" Twilight Zone. I wonder how Rod Serling would write the ending to this episode about our currently insane American politics and our "hit the bottom" national divisiveness?

Yet in spite of all the dysfunctional political drama playing out in our nation, we will continue to invest our growing money as long as the current stock market continues in its bullish manner, irrespective of its impetus.  

Still Anticipating a Much Needed Small Correction

Timing or predicting a pullback within a bigger uptrend is tricky business because the uptrend is the current dominant force. Ideally, we should to wait for pullbacks and use these as opportunities to partake in the bigger uptrend - as long as it lasts.

To repeat comments from our last Update. we can expect 2 to 4 decent “correct” pullbacks of 5-10% in any given year. But just because the market is due for a pullback, however, does not mean it will happen. We will get a pullback at some point, just nobody know when. 

The last 5% + pullback, on a closing basis, was in June. The August-November pullback was just short of 5%, but still a decent correction. Thus, it has not been that long since a correction. Should we get a 5% pullback from current levels, the S&P 500 would correct to the 2185 area. This is the area to watch if/when we do get a pullback. 

We will be watching closely for the next buying opportunity.

Fidelity IRA / Brokerage portfolio holdings (for our larger accounts):

Nasdaq 100 Stocks (QQQ) 10%
Industrials (XLI) 10%
S&P 500 Growth (IVW) 10%
S&P 500 Equal Weight (RSP)  5%
(Home Construction (ITB) 5%)
Europe Hedged Equity (HEDJ) 5%
Japan Hedged Equity (DXJ) 5%
Short L/T
US Treasuries (TLB) 5%
Convertible Bonds (CWB) 5%
High Yield
Bond (HYG) 5%
S-T Corporate High Yield Bond (SJNK) 5%
Apple (AAPL) 3%
Whole Foods Market (WFM) 3%
Money Market cash (35%)  
 

Smaller Fidelity IRA / Brokerage portfolios (under 50K): 

Nasdaq 100 Stock Index (QQQ) 25%
S&P 500 Growth (IWV) 25%
S&P 500 Equal Weight (RSP) 25%
Money Market cash 25%

Fidelity ORP / 403b Portfolios (for most accounts):

S&P 500 Spartan Index fund 20%
MId-Cap 400 Spartan Index fund 15% 
Select Environmental Services fund 10%
Select Multimedia fund 10%
Select Software fund 10%
Contra Fund 10%
Convertible Bonds 10%
Goverment Money Market fund 15%

*All Fidelity account holdings listed above are current as of today

Disclaimer: The investments listed above are for information and illustrative purposes only and does not show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only and are subject to change without notice.

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