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Welcome to the July edition of The Wealth Chronicle.  
The State Of The Economy
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There is no summer slowdown with things going on in the global markets. Most of the economic events we are hearing about are taking place outside of the US. The Greek drama in Europe is sticking around and figuring out what is going on in China is a challenge. Gold, which is usually a safe haven has had a challenging year.

Energy has been one of the laggards in the market. The strong dollar is one of the reasons. The price of oil is trading around $54/barrel which is almost half of what it was in June 2014. The reason for the drop is supply and demand. US production has doubled over the last six years. Canada, Russia, Iraq continue to pump. Europe is becoming more energy efficient which is lowering demand

Gold is in a coma. It slipped below $1,100 an ounce and is sitting at a 5-year low. The primary reason for the latest downdraft is that China said that it purchased a lot less gold then was expected. Throw in the lack of inflation, the strong dollar, and expectations of an eventual Fed rate hike

The Greek drama goes on hold for now. Greece and the European Union agreed on a bailout and there banks reopened. It may just push the inevitable (Greece leaving the Euro) down the road. A lot of economists think the 86 billion euro bailout was two small. Outside of Germany a lot of Europeans want to see some type of debt write-down.

In the United States we are in the middle of earning seasons and most companies have been topping profit expectations, but coming in a little light on revenues. A strong dollar has put a crimp on profits for some companies who do a lot of business overseas.

Overall most of the economic news coming out of the US has been positive. Most likely the next event to come will be when The Fed increases interest rates in September

Ladders, Barbells, and Bullets


What possibly could those three items have in common? They are all strategies for managing a bond portfolio. With talk of the Fed raising interest rates, the structure of the once boring fixed income portion of your portfolio has come to the forefront.

Let's take a look at each of the three techniques

Ladder
Bond investments are staggered over time with different dates of maturity. For example let's say an investor took $100,000 and invested in $10,000 in 10 bonds that mature incrementally from one to ten years. As each bond matures, the investor could invest the money into new bonds that may offer more attractive returns.

Barbell
In a barbell strategy half of the portfolio is made of up long term bonds and the other half comprises very short-term bonds. The term barbell is derived from the fact that the portfolio is heavily weighted at both ends of the maturity duration with nothing in between. The short term bonds give an investor the liquidity to adjust potential investments every few months or years. The long-term bonds give an investor a steady flow of higher-yield income over the term of the bond.

Bullet
With this strategy an investor would stagger the purchase dates of bonds that all mature at the same time. By staggering the purchase of the bonds, the investor can more efficiently seek out securities that have more attractive interest rates. This is a great strategy to use if you know you will need a certain amount of money at a certain time.

What Strategy is Best
In a recent study, laddered bond portfolios outperformed the barbell and bullet strategies across all time periods with the exception of July 2004 - June 2007. The laddered portfolios' ability to benefit from reinvestment opportunities in an increasing-interest-rate environment, mitigating interest-rate risk, led to outperformance. The strategy was able to generate robust annualized positive returns during each time period. Thus, bonds can produce absolute positive returns even during periods of increasing interest rates. Investors can still hold bonds for their traditional asset allocation role as ballast for an overall portfolio and a counterbalance to riskier assets, and yet not suffer the feared drawdown in a typical rising-rate scenario.

What Is In Donald Trump's Portfolio?
Presidential candidate Donald Trump released a 92 page report offering a window into his financial affairs. Because the disclosed report provides broad ranges of asset values and debts it is impossible to tell if he is worth the $10 billion that he claims to be worth. Bloomberg recently dissected each asset and calculated his net worth to be a lot less than that.

Some highlights from the Trump disclosure

Investments
Trump has a mishmash of investments in his portfolio, but appears to keep a good majority in blue-chip stocks, a good amount in hedge funds and relatively little in traditional bonds.
His favorite brand of mutual fund are those from Baron Capital Group. He disclosed owning 11 of the firm's products worth at least $7.6 million.

Income
Like Jeb Bush and Hillary Clinton, Donald also thrived on the speaking circuit. His biggest fee was three $450,000 appearances in less than a year for CAN, a multilevel marketing company.

What hasn't been so great for Trump are his book sales. His 2004 book, "Think Like a Billionaire," generated less than $201 in royalties since the beginning of 2014. His 1987 book, "The Art of the Deal," fared better with $50,000 in royalties

You can read the full report at http://images.businessweek.com/cms/2015-07-22/7-22-15-Report.pdf
The Watercooler
There are 7 US tech companies founded after 1970 that are each worth over $100 billion. Can you name them?

Here are a couple of hints

Their current market caps are:
$703 billion, $443 billion, $368 billion, $269 billion, $247 billion, $246 billion, $171 billion, and $144 billion.

The youngest founder among these companies was 19 and the oldest was 36 when they started

These are the years they were founded (listed in order of market cap)
1976, 1998, 1975, 2004, 1994, 1977, 1984

One more hint: These are the first letters of the company's names:
A, G, M, F, A, O, C

Answer Below

I've discussed Greece potentially leaving the Eurozone in the last two newsletters. What would that actually mean if Greece left?


Population - There would be 3.2% fewer people, but they would be younger on average. The mean age in the Eurozone would be 39.6 years. With Greece in it is 42.3

Economy - The Eurozone would lose only 1.8% of its economic output. GDP per capita would actually rise 1.5%. The Eurozone would lose 24.5% of its olive oil production

Religion - The Eurozone would lose 84% of its Orthodox Christians

Coastline - The Eurozone would be 4.6% smaller but have 31.3% less coastline, in part because Greece has about 2,000 islands

Smokers - The eurozone would have 4.8% fewer smokers. Only Austria has a higher percentage of smokers 15 or older

Where do you get your Social Security Information From?
It's not easy to find information on how to maximize your Social Security benefits.  Most people rely on the Social Security website or printed materials and thus can easily leave tens of thousands of dollars on the table.   I offer a free consultation on Social Security benefits and can help you decide the right time to start collecting.



Answer to the quiz question:
Apple, Google, Microsoft, Facebook, Amazon, Oracle, and Cisco
Please contact me regarding any of the articles above, or if you would like to discuss your personal or business finances

Sincerely, 

 





Marc Bautis
Bautis Financial
201-842-7655