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BAM MARKET WRAP
JULY 29, 2016
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SUN, SEA, AND SURGING MARKETS
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WHERE WE HAVE BEEN 
 
The markets have had an impressive 4 weeks.  After the 2 day Brexit sell-off where many were calling for a near catastrophe, the markets have surged to new highs on the backs of continued government intervention from all over the world.  The EU, Japan, US and others have continued to reassure the markets that they will do whatever it takes to flood the financial markets with easy money to ensure that the markets stay up.  It will continue to work until it doesn't and with no history to tell us the likely outcome, we are left to wonder.  We have been saying for some time that we don't think it will end well but, for now, the markets are responding with vigor and enthusiasm.  It just doesn't seem to us that negative interest rates are a financial policy that will work for long and without negative consequences.  That said, the markets are up and market participants are happy.  

 
WHERE WE ARE HEADED 
 
Over the last couple of weeks, the markets have moved sideways.  The question now is whether or not this is a pause before a renewed push higher or an exhaustion that will set the stage for a healthy pullback or correction.  There is a case to be made for both though with the dog days of August and September approaching it seems more likely than not that at least a pullback is in the offing.  Earnings season, to this point, has been good - not great - but good enough.  The lowered expectations have mostly been met and forward guidance has satisfied.  This morning's 2nd quarter GDP numbers were a huge disappointment as annualized second quarter growth came in at 1.2% (2.6% was the expectation).  As has been the norm, the markets largely shrugged off the weak numbers and continue to look to the Fed to keep this party going.  With the unsustainable rally over the last 4 weeks and the historically weak August and September on the horizon, investors should continue to exercise caution.    

HOW WE ARE DOING

Our portfolios also enjoyed a good July as our mix of low volatility funds has performed as expected.  Our position in gold has also been a very good one as it returned 12% for the month.  We continue to be satisfied with the slow and steady results of our current portfolio.  Should the market turn down, our portfolio should weather the storm well.  We are constantly evaluating our portfolio so things can change quickly.  For now, slow and steady is not a bad thing.  

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Tidbits
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IN AND OUT - After 9 months of fiscal year 2016 (i.e., the 9 months ending 6/30/16), Uncle Sam has collected $1 of tax receipts for every $1.16 of outlays, creating a deficit to date of $401 billion (source: Treasury Department).  
 
MORE AND MORE OF THE PIE - Social Security and Medicare together accounted for 39% of Federal outlays during the first 9 months of fiscal year 2016, i.e., the 9 months ending 6/30/16.  Social Security and Medicare together accounted for 33% of Federal outlays during fiscal year 2006, i.e., the 12 months ending 9/30/2006 (source: Treasury Department).  
 
DOWNGRADE - There are 8 countries in the world that have been downgraded in 2016 by each of the 3 major credit rating agencies (S&P's, Moody's and Fitch Ratings), including Saudi Arabia and Brazil (Financial Times).  
 
BIGGER AND BIGGER HOMES - The medium square footage of new single family homes built in the United States in 2015 was 2,467 square feet, an increase of 547 square feet over the last 20 years.  That's equivalent to a 23' x 23' addition to new homes today when compared to 1995 home construction (source: Joint Center for Housing Studies of Harvard University).  

NO WONDER THEY BUY AMERICAN DEBT - 80% of the sovereign debt of Germany and Japan has negative yields today (source: Citigroup).  
 

      
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This week marks our family's 17th year in a row at Pawleys Island, SC.  We have been going to the beach as a family for as long as I can remember but found ourselves without a house big enough on Pawleys for several years in the 1990's.  For those years, we substituted Edisto and Litchfield beaches.  Pawleys, however, is truly a magical place for our family and our kids feel like they have grown up here - in fact, they have!  This year we had 20 at one point but are down to 19 as we end the week.  Last year, we had 23 here as family members juggle their work schedule, nieces and nephews have children, and boyfriends and girlfriends come and go.   Sam and Nancy are troopers for leading us all in this family togetherness and we are truly blessed to all get along so well and to have so much fun together.   It is sad to have another year go by but we have built many more new memories.  
 
 



 Sam and Bo

 


 
 
 
Your financial partner for twenty years and counting because managing your money never gets old.
 

 

       
We continue to make posts to our blog throughout the week so check it regularly if you want to see our thoughts.  You can access it by following the link below.  


 

THE GREATEST COMPLIMENT

In these uncertain times, a trusted financial adviser is more important than ever.  Whatever comes over the upcoming months and quarters, the markets are certain to have lots of volatility and wild swings.  Europe, the US economy and dysfunction in Washington, and continued trouble in Iran and the Middle East to name just a few.  If you have family, friends and neighbors that may benefit from our services, would you please forward this email and/or provide our contact information to them.  We purposefully do not spend time marketing our services so that we can devote all of our resources to managing your assets.  Thank you to all who have provided us referrals - it truly is the greatest compliment you can give us.      



 
BAM MARKET WRAP EXTENDED
EDITION
 
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Remember to visit our blog for market comments and observations in between newsletters.  We try to provide a few comments in between newsletters and certainly when there is a particularly interesting market day.  You can access it by clicking here. 

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Knoxville Office

Sam Bills - (865) 525-1329

Nashville Office
Bo Bills - (615) 371-5928

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Published by Sam C. Bills, Jr.  Copyright © 2008 Bills Asset Management.  All rights reserved.

BAM Market Wrap is produced and distributed regularly via email by Sam C. Bills, Jr. of Bills Asset Management  3001 Flagstone Drive, Franklin, TN 37069 Phone (615) 371-5928 Fax (615) 250-4903 - www.Billsasset.com

Bills Asset Management  is an independent registered investment advisor (RIA) not associated with any financial institution.  Data used in this publication is gathered from reliable sources, although completeness and accuracy cannot be guaranteed.  Performance results do not take into account any tax consequences and are not predictive of future results.  This publication does not give any specific investment advice, does not provide financial planning services, or consider any individual's financial situation, needs or goals.  This publication may not be reproduced or retransmitted in whole or in part without the consent of the author, Sam C. Bills, Jr.

 

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Bills Asset Management ("BAM") composite performance results represent time-weighted actual performance results for continuously managed BAM accounts, which individual accounts BAM believes to be representative of its investment management process (i.e. mutual funds and exchange traded funds) for each specific strategy during the corresponding time period.  The composite performance results reflect the reinvestment of dividends and other account earnings, and are net of applicable account transaction and custodial charges, and the separate fees assessed directly by each unaffiliated mutual fund and exchange traded fund holding that comprised each account, and the maximum investment advisory fee that the accounts would have incurred (by applying BAM's current investment advisory fee as set forth in its current written disclosure statement) during the corresponding time periods.

 

Please Note:  Past performance may not be indicative of future results.  Therefore, no current or prospective client should assume that future performance will be profitable, equal the performance results reflected, or equal any corresponding historical benchmark index.  The historical index performance results for all historical benchmark indices do not reflect the deduction of transaction and custodial charges, or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results.  The historical performance results for all indices are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual client or prospective client in determining whether the performance of BAM program meets, or continues to meet, his/her investment objective(s).  A corresponding description of each index is available from BAM upon request.  It should not be assumed that BAM account holdings will correspond directly to any such comparative benchmark index.  The BAM performance results do not reflect the impact of taxes.

 

For reasons including variances in the investment management fee incurred, market fluctuation, the date on which a client engaged BAM's investment management services, and any account contributions or withdrawals, the performance of a specific BAM client's account may have varied substantially from the indicated portfolio performance results.

 

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Information pertaining to BAM's advisory operations, services, and fees is set forth in BAM's current disclosure statement, a copy of which is available from BAM upon request.  Performance results have been compiled solely by BAM, are unaudited, and have not been independently verified.  BAM maintains all information supporting the performance results in accordance with regulatory requirements.