Reviewing January – a Good Month for Us

As crazy as the month of Janaury was for the overall markets we managed to escape with some decent profits. 

Continuing to stay away from MLP’s, including their preferred stocks, has again helped to remove some volatility and miss some rather large downdrafts. Sticking with REIT’s, even though they are rapidly moving to the point where they are overbought, helped give a little lift to the various portfolios. Preferred stocks and exchange traded debt performed well as interest rates continued to fall.

Unfortunately, common stocks have hurt and BDC’s have underperformed once again. But in the end have a diversified portfolio helped keep accounts positive for the month.

The older 2014 Model Portfolio – Blended Income ended the month of January up 1.34%. About 1/2% was due to receipt of dividends and interest leaving around .84% due to capital gains. The portfolio has a rather high cash balance of 15.61% which means we left some potential money on the table, but for now we are content to run with this higher level of cash as we await opportunities.

The newer 2015 Model Portfolio – Blended Income ended the month with a loss of .03%. While this may appear to be not very good we fully expected this lag as we ‘charge’ the portfolio a brokerage fee when buying the issues and since it was launched on 1/4/2015 all issuse were charged a $8 fee.  Additionally because the securities were not owned in December when most went ex-dividend so we had to forgo most dividends and interest for January. It should be back to normal in February.

Most surprising is that the 2014/2015 Short/Medium Income Model was up 1% for the month. This conservative model is not intended to move this much–but it did as interest rates continue their fall. We are certain this gain will not continue like this for very long.

We continue to operate the ‘Static Investment Grade Model’ and the ‘Static Junk Grade Models’. Both are never traded and have performed exactly as designed as we enter the models 3rd year. We formed these models in 2013 and they have only had changes if an issue is redeemed. All income is ‘paid out’. In the last 6 months the Investment Grade Model has moved to a capital gain position while garnering a 6% income stream and the Junk Model has moved to a $38,000 loss as low grade energy issues took there toll. This models tosses off a 7.64% current yield.

We can be certain that next week will bring more market excitement and we hope to maintain our gains–but it will not be easy.