Giving Thanks to Those Who've Helped Me Build My Career!

We all learn a lot from others, and it's good to "give props".

Thanks to Soy Chu and Jeff Benjamin for giving me my first career-oriented job at New Year Tech.  I didn't know what I wanted to do or how to do anything in particular then, but they let me grow into some things and taught me a lot.  And Soy, the owner, kept me on even during the hard times.

Thanks to Rich Kotite and Todd Stayin for getting me into the corporate telecom world at Winstar.  That was a great ride and I learned a ton.  Todd got me in the door and took me under his wing when Rich hired me, and Rich made sure I had what I needed to learn the business and make contributions right off the bat.  And there is where I met Joe Thompson.  JT set me straight ("you're good, and we promoted you to Manager, but you gotta find something you love and do that; you like telecom okay and all, but find your passion and do it."), and that was huge.  It prompted me to consider taking a shot at what I always really wanted to do, which leads me to this...

Thanks to Bill Waggoner of Morgan Stanley in Menlo Park for giving me a shot ten years ago.

Thanks to Greg Davis of Morgan Stanley for letting me transfer my business to his MS office in Tysons Corner when I wanted to move back home; thanks, also, to Greg for helping me understand my strengths and weaknesses in various investment areas.

Thanks to Loren Evans of A.G Edwards & Sons (then Wachovia Securities, and now Wells Fargo Advisors) for opening my mind and practice to the idea of tactical adjustments within a long-term strategy (the genesis of my Flex portfolio methodology).

And thanks to Deana Arnett, Certified Financial Planner extraordinaire, for teaching me how to be a real financial advisor, not just an "asset gatherer" (can't help anyone if you don't "sell" and bring in the business, but then ya gotta make sure you're really helping people).

I have a few young go-getters who have thanked me recently for helping them get going in their careers, and that prompted me to reflect on those who've helped me.  Pay it forward, and don't forget to pay it back!

Flex Portfolio Performance Through August 2011

It has been a volatile time for the stock markets.  This is a quick blog entry to share the performance data for the three most commonly-used portfolios in my practice.

For August 2011:
S&P 500:     -5.4%
80 Fidelity:  -5.8%*

80 Flex III:  -2.0%

60 Flex III:  -1.7%

40 Flex III:  -1.4%

For 2011q3 (7/1 through 8/31):
S&P 500:     -7.4%
80 Fidelity:  -7.1%

80 Flex III:  -0.4%

60 Flex III:  -0.2%

40 Flex III:  -0.0%

For the 10-yr period ending 8/31/11**:
S&P 500:     2.6% per year
80 Fidelity:  4.7% per year

80 Flex II:  11.5% per year

60 Flex II:  10.9% per year

40 Flex II:  10.3% per year

*   80 Fidelity is a portfolio of very popular and widely-available index funds from Fidelity Investments allocated in a 80% stocks, 20% bonds strategy similar to that of the 80 Flex portfolios, and I want to compare the two; the 80 Fidelity portfolio uses a style-pure, buy-hold-rebalance method, while the 80 Flex portfolio allows for a great deal of tactical adjustments within the 80% stock long-term strategy.

** Not all Flex III funds were available for the full 10-year period, but all Flex II funds were.

An important aspect of my Flex portfolios is their ability to tactically shift allocation within the long-term strategy; why stay put if you are pretty sure it's going to be rough and you have a better idea at the moment?  Right now, the Stock-Bond-Alternatives-Cash allocation percentages are approximately:

80 Flex III:  48-9-17-26
60 Flex III:  36-17-14-33
40 Flex III:  24-24-12-40

For long-term investors, staying the course with a global/flexible portfolio is probably a lot better than trying to time the market.  Please contact me with your questions or thoughts.  Thank you!

--Gary

(FYI, my own retirement portfolio is mostly in 80 Flex III—I have a pretty strong risk tolerance and plan to be working and saving for the next 25 years.)

Garo Linck Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC
(703) 746-8195
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com

message to clients 8/9/11

Good morning.  As you probably know, yesterday the S&P 500 index was down -6.7%.  The Flex portfolios I use for most of my clients fared better.  For example:

80 Flex III:  -2.9%
60 Flex III:  -2.4%
40 Flex III:  -1.9%

Meanwhile, for the Quarter-to-Date (7/1 – 8/8), the S&P 500 is down –15.1%, and the Flex portfolios have again fared better:

80 Flex III:  -5.9%
60 Flex III:  -4.6%
40 Flex III:  -3.2%

Some clients have asked about going to cash or seeking shelter, and the Flex portfolios have already been doing quite a bit of that for us, as I reminded everyone in some recent messages.  Right now, the Stock-Bond-Alternatives-Cash allocation percentages are approximately:

80 Flex III:  50-10-15-25
60 Flex III:  35-15-15-35
40 Flex III:  25-25-10-40

(So, even the portfolio that normally aims to be 80% in stocks is only about 50% in stocks now, and the Flex portfolios are holding ~25% or more in net cash.  Each mutual fund in the Flex portfolios has its own range of investment discretion, so the cash on-hand in those funds is ready to be invested whenever their managers see fit.  When a market declines broadly like this, many stocks become significantly undervalued, so having cash on-hand for opportunistic investing is one of the great advantages delivered by the funds in our Flex portfolios.)

Anyway, the Flex portfolios are demonstrating superior performance compared to the stock market.  They did so also in the market's terrible 2008 through early-2009 period.  They also recovered impressively after that.  And the 3-, 5- and 10-year track records of the Flex portfolios are double or even triple the annualize performance of the stock market.

Thus for long-term investors, it is sensible to stay the course with a global/flexible portfolio instead of trying to time the market.  Having said that as your investment advisor, I recognize it is your decision if you wish to make any changes.  If you do, let’s discuss it and go forward.

In any case, please contact me with your questions or thoughts.  Thank you!

--Gary

(FYI, my own retirement portfolio is in 80 Flex III—I have a pretty strong risk tolerance and plan to be working and saving for the next 25 years.)

Garo Linck Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC
(703) 746-8195
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com

message to clients on 7/30/11

Good morning and happy Saturday.  Investors just had a rough week, but our Flex portfolios held-up much better than the stock market.

Here is a quick update on how the most popular of my Flex portfolios have performed in the past year compared to the S&P500.

Time (as of 7/29)              80 Flex III             60 Flex III             40 Flex III             S&P500
1-day                                     -.07                        -.02                        .04                          -.64
1-week                                 -1.45                      -1.01                      -.56                        -3.91
MTD                                      1.55                        1.46                        1.38                        -2.03
YTD                                        5.95                        5.68                        5.40                        3.87
1-year                                   19.37                     16.56                     13.80                     19.47

NOTES:  Data comes from Morningstar; I usually prefer to ignore short-term performance in favor of 3-, 5- and 10-yr track records (where the Flex portfolios have massively outperformed their benchmarks), but I want to keep you as up-to-date as possible.

Thank you, and make it a great weekend!

--Gary
              

Garo Linck Partoyan
Financial Advisor & Owner

Potomac Wealth Strategies, LLC
1800 Diagonal Rd., Suite 600
PMB 12
Alexandria, Virginia  22314
(703) 746-8195
(703) 347-9483 fax
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com
FINANCIAL BLOG:  http://potomacwealthstrategies.blogspot.com

message to clients on 8/5/11

Good morning.  The US stock markets fell more than 4% yesterday and have now reached the point of "correction", which is 10% down from recent highs.  A "bear market" is 20% down from recent highs.

Since 1962, there have been 25 corrections and nine of them have turned into bear markets.  That's not much different than a coin flip for those who are wondering if we should ride this out or seek shelter.

So, I am providing two items for you to read and consider.  One is attached, and the other is linked here:  http://latimesblogs.latimes.com/money_co/2011/08/stock-market-correction-bear-market-wall-street-birinyi.html

The linked article offers some perspective on market history, while the attached guest-blog by PIMCO's Mohamed El-Erian offers probably the best overview I've seen on the conditions that are fueling this market volatility.

MY ADVICE:  if you think the USA will go back into recession and a bear market will come with it, we should exit or put protections on our equity (stocks) positions; if you think this correction has more to do with the market being overbought, perhaps artificially-inflated by "quantitative easing" programs from the government, then it is okay to keep the equities allocation.

NOTE:  thanks to the nature of the Flex portfolios, most of my clients are holding much more net cash than would be normal; while we are "fully invested", the funds we're using are not, so the professional portfolio managers working for us have more "dry powder" than usual, either for safety if things keep going badly or for opportunities if the correction ends and markets stabilize or move up again.

As always, please let me know if you have any questions.  If you want to make a portfolio move, please call me or e-mail me.  If you do not hear from me within a few minutes, please don't hesitate to call Schwab's Signature Services Alliance team at (800) 515-2157.

Thank you.

--Gary


Garo Linck Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC
(703) 746-8195
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com

Bill Gross' Lets It All Hang Out--Radical Change of Approach Needed for USA

If you can get over the initial intellectual/emotional hurdle presented by this article--that college is, for many if not most, as it is currently working, not exactly part of the solution to our economic woes--you'll find a lot to chew on here.

Bill Gross is arguably the greatest money manager in modern history (he's "the bond king" and "the Warren Buffett of bonds"--and his PIMCO Total Return fund is the largest mutual fund on the planet and owns a tremendous market-beating track-record), and he has a global perspective that is almost uniquely astute and often pretty unconventional.  And he calls it like he sees it, whatever "it" is...

In short, he sees no way for private-sector market-based idealism--OR government-as-usual--to dig us out of this hole any time soon.  Time to think radically, perhaps.

We have created less than two-million jobs while the workforce has expanded by 15 million people in the past decade.  And while he doesn't say it here, there's a strong argument to be made that the 20mm+ jobs created in the previous decade were largely thanks to a largely false (over-leveraged, service-based instead of asset/manufacturing-based) economy...  think of the causes of the economic disaster that started in late-2007 and persists today.

Balancing the budget and re-jiggering the cost-curve of entitlements and healthcare programs are of course necessary, Gross says or implies, but will not be enough to close this employment gap, and neither will the education provided by Today's version of undergraduate college education.

Call to action, or crazy billionaire screaming?  Either way, I'm listening.

Tax Rate Cuts vs. Share of Tax Burden

Prior to Bush's income tax cuts, the top 20% paid 78% of the income taxes and the bottom 40% paid 2.8%.

After the cuts, it was 81% and 2.2%.

That is probably news to a lot of folks, and it goes along with what I calculated about whether or not tax cuts pay for themselves (see here for more info).