Vomund Investment Management

Videos

noreply@blogger.com (David Vomund) — Tue, 01 Dec 2009 21:55:00 +0000

Here are two short videos on our managed account programs. They were filmed in mid-November:

http://www.etfportfolios.net/videos11/index.html

David Vomund

Economic Outlook Part II

noreply@blogger.com (David Vomund) — Fri, 30 Oct 2009 17:34:00 +0000

In our August 17 blog we boldly predicted the economy would grow by at least 3% in the third quarter. Thursday's report showed growth at 3.5%. We also said when that happens stocks would be far higher. Back then the Dow was at 9135. Now it stands at 9700. I expect slower growth in the fourth quarter, but still growth nontheless.

Those who invest in the market based on today's news will once again be on the wrong side. Notice the Dow's crossing of 10,000 was not a new buy signal. It was a time of profit taking. The positive GDP number was not a new buy signal. It will likely be a time to reduce market exposure. We moved client portfolios away from fully invested on October 15.

Video Series

noreply@blogger.com (David Vomund) — Sun, 27 Sep 2009 23:55:00 +0000

Here are three short videos on the market and our managed account programs:

http://www.etfportfolios.net/videos9/index.html

David Vomund

Bullish S&P 500 Chart

noreply@blogger.com (David Vomund) — Mon, 24 Aug 2009 15:09:00 +0000

Browsing financial websites it seemed nearly everyone fell into two camps …. the market would test the lows or the market would fall 5 to 10 percent. It was hard to find anyone that thought the market would hit new highs. The public’s skepticism and negative sentiment are hallmarks of a new bull market.

With the S&P 500’s move to a new high, an inverse head-and-shoulders bottoming pattern is complete. This pattern developed over a ten month period and is a further sign of bull market. I’m expecting a great fourth quarter.

David Vomund

www.etfportfolios.net

Economic Outlook

noreply@blogger.com (David Vomund) — Mon, 17 Aug 2009 17:02:00 +0000

It would be easy to be gloomy on a day like this. The market’s down big and the news headlines site the majority of economists point to a slow recovery (click here).

It is easy to be gloomy until you ask how many of these economists called the Great Recession. They were wrong then and I suggest they are wrong now. The pace of the recovery will be stronger that what most expect (with the exception of job growth).

The economy will bounce back quickly. The market may predict a “W” shaped recovery but it will be in the shape of a “V.” I expect this quarter’s GDP growth to exceed 3 percent (that’s not a misprint). It may even exceed 4 percent.

Never underestimate American’s appetite for spending. The worse recession since the 1930s is creating “pent up” demand. We can see this from the popularity of the Clunker program. Many of the clunkers being traded in could be sold for around $2000 on the open market, so consumers are only saving $2000. They want new cars.

We’ll find out if I’m right around the end of the year. If I’m right, stocks will be far higher.

The Current Investment Climate

noreply@blogger.com (David Vomund) — Mon, 27 Jul 2009 15:43:00 +0000

Here is a short video on today's investment climate:
http://www.etfportfolios.net/video/

This video refers to a series of videos created in March. To revisit these videos please visit:
http://www.etfportfolios.net/firesidechat/

David Vomund
http://www.etfportfolios.net/

Summer Doldrums

noreply@blogger.com (David Vomund) — Fri, 10 Jul 2009 16:19:00 +0000

The New York Times is full of stories of lost fortunes. They wrote, “if general insolvency is ahead of us, existing prices cannot be too low…they ought to be even lower.”

Times added, “Indicators of the U.S. economy flashed some of their gloomiest ever…depression in the housing industry…doubt among investors about the Administration’s ability to control the economy has sent the stock market in to a frightening slump…and the high cost of borrowing and the impossibility of selling new stock issues in a collapsing market make it difficult for companies to raise the money needed to expand or in some cases even to stay alive, thus intensifying the threat of recession, or worse.”

The quote from the New York Times is from 1932, just weeks before the Great Depression bear market ended. The quotes from Time Magazine are from the fall of 1974, just days before the bear market bottom was reached. So, don’t count on the media to tell you when things are improving.

The stock market had an exceptionally strong second quarter and is due for a rest or a retracement. As it gives back some of its gains, the media will be especially gloomy with talk about markets hitting new lows. All of this is normal activity.

David Vomund

News Headlines & the Market Video

noreply@blogger.com (David Vomund) — Tue, 02 Jun 2009 16:56:00 +0000

http://www.etfportfolios.net/videos/bvideo.html

Why Stocks Have Rallied

noreply@blogger.com (David Vomund) — Tue, 26 May 2009 16:51:00 +0000

Investing is part art and part science. Psychology also plays a role and that’s where investors get in trouble. People generally love the stock market when it is high and hate it when it is low. It’s backwards.

Most people remain bearish on stocks. That’s why money market assets are at an unheard-of 43 percent of market cap. Instead of seeing opportunity, they focus on the bad economic news and rationalize that stocks can’t (or shouldn’t) go higher. After all, we are in recession. Unfortunately, it doesn’t work that way.

Going back to 1926 there have been fourteen recessions. Looking at duration, stocks typically hit their low point about mid-way through the recession (after 17 months in our current recession, surely we have hit the mid-point!). That means that most of the time new bull markets start during, not after, a recession.

What about the dismal unemployment figures? Unemployment is bad and unfortunately it will get worse, but that headline-grabbing figure doesn’t mean stocks will fall. On average the market has bottomed and begun to rally seven months before the peak in unemployment.

We’ve seen a lot of bad stories that say “this hasn’t happened since xxxx,” usually pointing to the 1930s, 1974, or 1982. While the stories are negative, one should note that the year they point to was typically a great time to buy stocks.

When the market factors in the worst case scenario (it did), the news doesn’t need to be good for stocks to rally. It just needs to be less bad. That’s what is happening now, especially in emerging market securities, where they are hitting new seven month highs. Opportunistic investors are looking past the current headlines and are anticipating better days ahead.

Magazine Cover Stories

noreply@blogger.com (David Vomund) — Fri, 24 Apr 2009 16:04:00 +0000

Magazine covers have been used as a contrary indicator. It’s not that the magazine editor’s have poor timing. Instead, the editors choose a cover that reflects public sentiment and will sell well.

One of the most well known magazine covers is from an August 1979 issue of Business Week. The headline: “The Death of Equities.” Well, not quite.

Coinciding with the 2002 stock market low, the July 29 issue of Business Week ran the headline, “The Angry Market.” That marked the beginning of a five-year bull market.

How about the March 2009 low? Business Week ran “When Will the Bull Be Back? Most signs point to more stock market pain. But opportunities are emerging for very, very long-term investors.”

It is a bit unfair to point to magazine covers at important market lows because it ignores some other covers that didn’t coincide with the low. Nevertheless, the magazine covers reveal the public mindset at important lows.

David Vomund

www.etfportfolios.net

Mark to Market

noreply@blogger.com (David Vomund) — Wed, 08 Apr 2009 20:13:00 +0000

No single policy or event ever destroyed as much wealth so quickly as the mark-to-market accounting rules that depleted capital and destroyed earnings.

The infamous mark-to-market rules that were activated in the fall of 2007 (coincidentally as the market topped) are being relaxed to give banks and insurance companies leeway to use common sense and cash flow estimates to value mortgages and other loans, not merely a price set months before by a distressed seller in an illiquid market. Now banks are allowed to value assets as they would in an “orderly” market.

When a House committee held hearings March 5 on the impact of mark to market, members were aghast by the needless chaos and wealth destruction the rules were creating. Finally, politicians have gotten something right. The Financial Accounting Standards Board (FASB) heard them loud and clear. On March 9 the FASB said they would soon have changes to announce. As investors knew any change could only be positive for banks, stocks began to rally, and rally.

On April 2 the FASB released their new rules for valuing some assets. Banks and insurance companies have a lot more discretion now to be realistic, not reactionary. That will help earnings and boost capital, effective April 1. Now that mark-to-market rules have been relaxed, banks can spread losses over several years as they occur, not take them immediately in anticipation of losses that may or may not appear. This is progress.

Equities and Recessions

noreply@blogger.com (David Vomund) — Thu, 02 Apr 2009 04:08:00 +0000

During the second half of March I made many phone calls to those that had previously expressed an interest in our managed account program. After making these calls I overwhelmingly found that people did not want to get back into the stock market (a contrary indicator ???). As for reason, they cited the poor economy and bad news.

At this late stage in the bear market it is a mistake to be gloomy on stocks because of the bad economy. To see why, let’s look at equity price behavior during the past recessions dating back to 1926.

Going back to 1926 there have been fourteen recessions. Looking at duration, stocks hit their low point about mid-way through the recession (after 16 months in our current recession, surely we have hit the mid-point!). That means that most of the time new bull markets start during, not after, a recession.

On average stocks increase in value during the second half of a recession. That’s right, in the second half of a recession stocks typically increase in value despite the bad news headlines. That’s because stocks get cheap during bear markets and they are forward looking.

I am much more optimistic on equities and firmly believe that investors will look back at this time and wonder why they were sellers instead of buyers.

David Vomund

As always, past performance does not guarantee future results.

Fireside Chat Video Series

noreply@blogger.com (David Vomund) — Mon, 23 Mar 2009 17:40:00 +0000

One key to investing is to be more aggressively invested on the way up compared to on the way down. Unfortunately people do just the opposite. People loved stocks when they were high, but now that stocks have lost half of their value few have interest in placing new money in the stock market. That’s human nature, and it’s devastating to stock portfolios.

In order to help potential clients realize that this bear market should represent an opportunity, I’ve created a short video series highlighting the economic problems, what is being done about these problems, and how it relates to the stock market. Enjoy:

http://www.etfportfolios.net/firesidechat/

Please call me if you have any questions on the video or would like to receive a PowerPoint file showing the slides.

David Vomund
775-832-8555

Best ETFs for 2009

noreply@blogger.com (David Vomund) — Tue, 06 Jan 2009 16:25:00 +0000

The investing website, TheStreet.com, asked me late last year to give my picks for the best performing ETFs in 2009. Of course this is guesswork as things can change fast (remember 2008?), and when the road turns we have to turn with it. Nevertheless, predicting the winners is a fun exercise and I'm comfortable holding my selections. Here is the article:

http://www.thestreet.com/story/10455806/1/money-managers-top-picks-for-2009.html

David Vomund

Diversification Balderdash

noreply@blogger.com (David Vomund) — Wed, 17 Dec 2008 00:57:00 +0000

I recently read the December’s Investment Advisor magazine and found most investment advisors were touting their use of diversification to reduce the risk of their client accounts. Do people really buy into this rhetoric?

The issue was filled with articles and pretty pie charts explaining the benefits of diversification until the very last page where the article, “The Failure of Asset Allocation” appears. This article reveals the truth: Having a diversified portfolio has not protected investors from this bear market.

With the exception of U.S. Treasury Bonds, all major asset classes have lost value in 2008. Equity REITs and REIT mortgages were supposed to be a diversifier, but they are down 37% plus. Foreign stocks and emerging markets were supposed to diversify away some of the equity market risk exposure, but they are down 46-56% respectively. TIPs and high yield bonds were supposed to help “diversify” fixed income allocations, yet relative to plain garden variety intermediate government bonds they have underperformed by 18-27% respectively. Commodities were another “asset class” tossed into the theoretical diversification bucket, but they are down 26%.

Holding all of these asset classes was supposed to protect client assets by lowering portfolio risk. It didn’t, and it won’t. As the market recovers, the securities will become uncorrelated once again placing a drag on portfolios.

I prefer to place bigger bets on individual areas and as I perform research for a follow-up on ETF trading, I’m finding it pays to run our rotation model on the asset classes, making sure to include both long and short choices, to see where portfolios should be concentrated. By including securities such as long dollar and short dollar, we can be sure that there truly is “always a bull market somewhere.”

David Vomund
http://www.etfportfolios.net/

Radio Intervew

noreply@blogger.com (David Vomund) — Mon, 03 Nov 2008 19:56:00 +0000

Here is a 15 minute interview with the Big Money Show in Denver, Colorado. The recording took place November 3:

www.etftradingstrategies.com/interview.mp3

David Vomund
www.etfportfolios.net

Comparing Recessions

noreply@blogger.com (David Vomund) — Wed, 29 Oct 2008 22:30:00 +0000

Here is an article I wrote for Lake Tahoe's Bonanza newspaper:

http://www.tahoebonanza.com/article/20081029/NEWS/810289966&SearchID=73334455900429&parentprofile=search

David Vomund

Emotions of Investing

noreply@blogger.com (David Vomund) — Thu, 16 Oct 2008 04:29:00 +0000

In case you think individual investors suffer the emotional roller coaster of investing more than professional managers, think again. The same “thrill of victory and agony of defeat” forces are at work with everyone.

We believe active market timing is a tough and losing game. If we start day-trading performance will suffer. The Style Index portfolios program is designed to be almost always invested, unless there is an unusually difficult market environment. This is an unusually difficult environment.

We moved our Style Index clients to 100% cash on September 8. That doesn’t mean the stress stops there as being left behind in a rising market is one of the biggest mistakes retail investors make.

On Monday the 13th, while the rest of America celebrated a record breaking 936 point advance, we stressfully stared at quotes wondering if we should get invested. We stood with our conviction and stayed in cash. Overnight futures were up more that night (translation….another sleepless night!). The next day the market opened three hundred points higher. It didn’t help that my wife wondered why I hadn’t started buying yet!

That was the high and the market plunged back down to its lows shortly thereafter. Clients appreciated remaining in cash and they likely figured we had it figured out all along. Fortunately they didn’t see our nail biting as the market advanced!

We’ve handled trading differently with the Tactical Allocation program. Instead of moving to all cash, we’ve temporarily been running a long/short program. We are long some of the outperforming sectors, such as regional banks and health, while maintaining an equivalent position in a short S&P 500 ETF.

Eventually the market will become less erratic and we’ll return to investing for growth, but for now safety is prudent. Still, that doesn’t mean it’s easy….

David Vomund
www.etfportfolios.net

Sell Your ETNs

noreply@blogger.com (David Vomund) — Tue, 30 Sep 2008 00:06:00 +0000

Last February Lehman introduced several exchange-traded notes (ETNs) under the “Opta” brand name. Unlike exchange-traded funds (ETFs), which represent actual share holdings, ETNs are backed by the credit of the issuing bank. That didn’t seem like a big deal a few months ago, but it does today. The Lehman ETNs no longer exist.

Morgan Stanley has four currency ETNs. This firm moved to traditional banking status allowing them to more easily borrow from the Fed in an emergency, but the risk of default remains.

Barclay’s is a big player in ETNs and they are the most financially strong, but in today’s climate that can change fast. AIG was considered in good standing just two weeks before their failure.
The ETN market is much smaller than the ETF market. With today’s credit crunch, the ETN market may get smaller still. I see no reason to subject portfolios to the credit risk of ETNs.

David Vomund
http://www.etfportfolios.net/

noreply@blogger.com (David Vomund) — Wed, 17 Sep 2008 18:33:00 +0000

Investing is akin to driving. You start and point A and want to get to point B, but you don’t go there in a straight line. When the road turns, you turn with it.

The same goes with the market. Earlier this year TheStreet.com interviewed me asking for my favorite ETFs. At the time commodities were rising so I chose an inverse bond fund and an energy fund. The inflation road turned as commodities plunged. Inflation is less worrisome so an inverse bond fund is no longer appropriate.

Commodities have sold off but so have equities. So much for the theory of diversification helping an investor avoid draw-downs. The panic of the 2008 credit crisis is underway and people are re-evaluating their portfolios. Unfortunately the time to make portfolio decisions is not during a crisis. More on that in an upcoming blog. In the meantime, here is a short interview in today’s Tahoe Bonanza:

http://www.tahoebonanza.com/article/20080917/NEWS/809169965/1050&ParentProfile=

David Vomund

Bears

noreply@blogger.com (David Vomund) — Mon, 18 Aug 2008 19:42:00 +0000

The bears are attacking. No, I’m not talking about the stock market. Instead I’m referring to life in the mountains at Lake Tahoe. While watching the Olympics, a bear began to rip open our dining room’s screen door. Fortunately my daughter was in the kitchen and alerted us. It is bad enough for bears to be in control during market hours, but now they are making their presence known on weekends as well!

On another note, we were quoted in Investor’s Business Daily:

http://www.investors.com/etf/etfarch04.asp

David Vomund

Investing in the Energy Solution

noreply@blogger.com (David Vomund) — Wed, 06 Aug 2008 17:30:00 +0000

The price of oil has fallen these last few weeks but energy costs remain high, and some (including myself) believe the downtrend is temporary. Before discussing how an investor can profit in alternative energy, it is important to understand the energy problem. People blame high prices on speculators, OPEC, oil companies, the weak dollar and taxes. These may all play a role but when you step back to view the forest instead of the trees it’s all about supply and demand.

The demand story is well told. For all the attention paid to China and India (and rightly so), rising demand in Saudi Arabia and across the middle east is nearly as important. Since 2004, Saudi oil consumption has increased nearly 23%. Saudi Arabia and other oil exporters will meet their own demand before they attempt to meet the world’s demand.

The supply story is seldom told, but is the crux of the problem. The bottom line: The world’s big oil fields are producing less, sometimes alarmingly so. The most striking is in Mexico where output from the country’s once-mighty Cantarell field has plunged by a third in less than a year. The depletion rate of the world’s biggest oil fields is estimated as around 4.5% to 8% per year.

Despite the potential for profit in today’s high prices, crude oil production (just crude, not natural gas liquids) topped out in May, 2005, and that may stand as the peak that Matthew Simmons, author of Twilight in the Desert, and other “peak oil” experts have predicted was imminent.

High energy prices have turned the focus to alternative energy solutions. The success of the Toyota Prius, which still can’t be produced fast enough to meet demand, demonstrates the profit potential in energy solutions. Texas oilman T. Boone Pickens is turning his focus to wind power, funding the world’s largest wind energy plant. Innovation has never been greater in wind, solar, hydrogen, and other alternative energy methods. This is the upside to high energy prices.

Investors can participate and profit in the booming alternative energy market, but picking individual companies to buy is scary. If you purchased Pets.com in the 1990s because you believed in the power of the internet, then your investment was a bust. It’s disappointing to be right on the sector and wrong on the stock.

With exchange-traded funds (ETFs), investors can buy a security that holds a basket of stocks within a particular sector. For example, if you want to invest in solar energy, you can purchase the Claymore Solar Energy ETF (ticker TAN). This ETF holds the largest publicly traded solar companies in the U.S., China, Germany, and other countries. If you want to invest in wind energy companies, you can purchase the newly traded First Trust Wind Energy ETF (ticker FAN).

A more diversified choice is the popular PowerShares Clean Energy ETF (ticker PBW). This ETF holds the leading companies involved in renewable energy and technologies that facilitate cleaner energy.

These exchange-traded funds can be bought or sold just like a stock. They allow investors to participate in the alternative energy sector, a sector that is becoming increasingly important as our country becomes more energy independent.

David Vomund
http://www.etfportfolios.net/

Independence versus Hedge Funds

noreply@blogger.com (David Vomund) — Mon, 23 Jun 2008 18:04:00 +0000

My last blog covered the advantage of independent advisors over those associated with the big-name firms. With the recent news on hedge funds and the sub-prime mess, it is a good time to explain the advantage of independent advisors over hedge funds.

Hedge funds pool client funds. For that reason, clients rely on the hedge funds to provide them information on what their investments are worth. This information is provided either monthly or quarterly, and you trust the fund for its accuracy. There are many cases where portfolio values were fudged, making clients believe their portfolio values were higher than reality. This deception can only go so long.

In my small town of Incline Village a fund gathered millions and failed to report to investors its portfolio losses. Eventually the managers and sales team fled town, and investors lost their money.

Last Thursday the FBI arrested Bear Stearns hedge fund managers for fraud. In an email one manager wrote, “Believe it or not … I’ve been able to convince people to add more money …”

With independent advisors, the brokerage account is yours. You simply give the advisor authority to place trades on the account. I trade through Fidelity Investments so clients can monitor performance daily at Fidelity.com. There is no pooling of assets.

Independence Versus the Big Firms

noreply@blogger.com (David Vomund) — Thu, 05 Jun 2008 17:35:00 +0000

I have several friends that are brokers with large firms. Although we are all investment advisors, my friends work very differently. While they are with large firms, I’m a registered investment advisor (RIA) with my own firm. From my perspective, clients are far better off with independent RIAs like myself.

There is a commercial from a major brokerage outfit that says, “Our clients always come first.” Unfortunately that isn’t the case. Large public companies are responsible to their shareholders. As a result, decisions are made to maximize profits to keep shareholders happy. Revenue generation is the top priority so there can be a conflict of interest between placing client money in the best area versus placing client money into areas that generate the most income for the broker and the firm.

For independent fee-only RIAs, there is no conflict between serving the shareholders or the client. There isn’t the lure of receiving extra compensation when placing client funds in certain investment vehicles. We receive no commission from trading and there are no production quotas. We are only paid based on the value of client portfolios. It is in our interest to do what is best for the client.

Remembering David Martin

noreply@blogger.com (David Vomund) — Sun, 04 May 2008 06:05:00 +0000

A subscriber to my weekly VIS Alert.com newsletter, David Martin, unfortunately passed away last week from a freak shark attack.

http://today.msnbc.msn.com/id/24325640/

I met David Martin at AIQ’s fall seminars. He was a fan of my ETF rotation approach and used it in his own portfolio. At his last seminar we agreed that the following year we would go mountain biking after the seminar. Unfortunately that ride never happened. He seemed 20 years younger than his real age, always saw the glass as half full, and will be missed. Our prayers are for his family during this difficult time.