In unpredictable economic climates, just like in outdoor adventures, clear guidance is key to avoiding making decisions driven by fear. For business owners and professionals alike, having a robust business financial planning strategy can act as your North Star—providing direction when external factors become overwhelming.

As the world dealt with the uncertainties of 2020, many individuals and companies grappled with questions about the future. At LotusGroup Advisors, we encourage a steady approach to navigating volatile times by following a well-crafted financial plan, designed to mitigate risks and focus on long-term goals. Whether it’s the turbulence brought on by a global pandemic or political shifts, the answer remains consistent: a solid financial plan will be your guide through the storm.

In both hiking and sailing, it’s vital to know where you’re headed before the journey even begins. Without a clear sense of direction, uncertainty can lead to rash decisions. It’s no different in business financial planning. As conditions change, the businesses and individuals who fare best are those who have both a destination and a plan for how to reach it. But how do you build that financial compass?

The Core of Business Financial Planning

There are six essential components that form the backbone of a successful financial plan, ensuring that your business and personal financial goals are aligned, no matter the challenges ahead.

1. Budgeting and Annual Spending Knowledge

At the heart of business financial planning is a clear understanding of your budget and annual expenses. Without this, you can’t determine whether you’ve reached financial freedom or if it’s achievable at all. Establishing these numbers allows you to stay on track with your financial goals.

To gain a clearer picture of where your business stands, consider using advanced financial software that can quickly and accurately give insights into your expense tracking. Tools like QuickBooks or Xero help business owners maintain real-time oversight of their budgets and cash flow.

2. Insurance Planning

Insurance planning is essential for protecting your business from catastrophic risks. Whether it’s liability, property, life, or long-term care, having adequate coverage safeguards your business and personal finances from unforeseen disasters. Analyzing your current insurance policies will ensure you’re not overpaying for coverage while also filling any gaps that could leave you vulnerable. LotusGroup Advisors specialize in reviewing and optimizing insurance plans to minimize risk exposure.

3. Debt Management

Debt can be one of the largest inhibitors to achieving financial independence, particularly for businesses. Part of business financial planning is knowing when to prioritize debt reduction and when to invest in growth opportunities. LotusGroup assists clients in debt consolidation, refinancing options, and strategies to lower interest payments—helping you focus on building wealth.

4. Tax Planning

Effective tax strategies are critical to business financial success. Most business owners overlook available tax-saving vehicles that could save thousands annually. From maximizing contributions to retirement accounts to employing tax-efficient charitable giving methods, understanding the tax landscape allows businesses to retain more capital for future investments. At LotusGroup Advisors, we offer customized strategies tailored to your financial situation, enabling you to stay compliant while reducing your tax burden.

For more information on tax-efficient strategies, see Forbes’ guide on tax planning for small businesses.

5. Estate Planning

Estate planning is not just for personal finances; business owners need to ensure that their estate is well-organized to avoid complications for their heirs and stakeholders. Having updated wills, trusts, and business succession plans is a crucial aspect of business financial planning, and failing to plan properly can result in a loss of business continuity. With professional estate planning, your business can seamlessly transition in the event of your passing or retirement.

Discover the importance of estate planning.

6. Investment Strategy

A solid investment strategy rounds out your business financial planning by ensuring that your assets are working toward your long-term goals. Once your budget, insurance, and taxes are in place, LotusGroup can help you craft a portfolio that’s designed to meet the specific returns necessary to reach financial freedom. Rather than taking excessive risks, we believe in achieving consistent, long-term growth through balanced investments.

As you structure your investments, you might want to explore sustainable options or emerging industries that offer high growth potential. Staying informed about market trends and diversifying your investments ensures that your financial plan remains resilient even in volatile markets.

Navigating Uncertainty with Confidence

During uncertain times, the greatest asset you have is a well-constructed financial plan. The ability to focus on what you can control and let go of what you cannot is crucial in maintaining business continuity. By centering your focus on long-term goals, your business financial planning becomes the North Star guiding your decisions.

At LotusGroup Advisors, we understand that financial returns are important, but they are not the only factor in a successful business plan. When clients set clear goals and follow a detailed strategy, they can weather short-term market fluctuations without deviating from their ultimate destination—financial freedom.

If you’re interested in building or revisiting your business financial plan, give us a call. Our team of advisors is ready to help you navigate both the calm and the stormy waters ahead.

Explore more insights on business planning.

The post Finding Your North Star in Uncertain Times appeared first on Lotus Group.

Navigating the New Year  

We are two months into the New Year.  Do you set goals or make New Year’s Resolutions?  Is this an exciting year for you, with new possibilities, personal growth, or career advancement in your plans?

Or maybe this is a year of unknowns, with a mixture of fear and anxiety, possibly including a career move, changes in the family structure, or adjusting to the “new normal” of retirement or loss of a loved one.

Whatever circumstances you find yourself dealing with today or facing tomorrow, it helps to have a plan to guide you along the way.

Like driving in an unfamiliar area, having a GPS to guide the way can make the journey less stressful with more certainty you’ll end up where you want to go.

What makes a GPS so useful in finding your way through unfamiliar territory?

It simply takes you where you want to end up and provides the easiest route available to get there.

GPS can tell you how far and how long it will take; It will even provide step-by-step instructions for every turn, so all you need to know is the next step, the next turn.

This can make the overwhelming seem manageable!

The GPS even warns you if you make a wrong turn and how to get back on track.

Wouldn’t it be great to have a GPS for your 2019 goals?

Just plug in the end point, press “calculate best route” and your ideal navigational route appears with step-by-step instructions.

Since that technology doesn’t likely yet exist, maybe we can design our own GPS.

Designing Your GPS

G   =         Game Plan

P    =         Priorities

S    =         Singular Purpose

Our G.P.S. begins with the end in mind (our Game Plan to reach our goal).

The coordinates that set our course are determined according to our Personal Priorities.

This provides the filter for “calculating the best route” by avoiding areas where we shouldn’t spend our time and energy and directing our path by staying focused on what matters most.

This last statement is maybe the trickiest to nail down, “what matters most.”

It should become apparent when we focus on the “S” of our G.P.S. or our Singular Purpose.

A wonderful book I recently finished brings this issue of singular purpose into acute clarity (the book is The One Thing by Gary Keller).

I’ll paraphrase for the context of this discussion.  What is the ONE THING you could do this year, this month, starting now, that having done it will make other things easier or unnecessary?

1. If your singular purpose is FINANCIAL your response may include things like, “live within my means” or “save adequately for retirement” or “eliminate my debt” or “automate my bill pay.”
2. If you singular purpose is about CAREER your response may include things like, “make more money” or “achieve a promotion” or “make that career move” or “bet on myself this year.”
3. If your singular purpose is about RETIREMENT your response may include things like, “discover a plan for a ‘new normal’” or “establish new priorities and a renewed sense of purpose.”

Our lives are full of unknowns.  Some things we can control.  Some things we can’t control.

Knowing (and accepting) the difference can make all the difference in our level of stress and joy.

How Can We Help?

Lotus Group is committed to helping each individual maximize their human potential.

That could mean generating investment income to support your  lifestyle needs, while allowing you to bet on yourself in a new venture, career change or next opportunity.

It could also mean outsourcing a key responsibility of your life (finances), so that you may prioritize on yourself or your family.

Or it could be as simple as just wanting a quick chat “pick me up” chat.

Don’t hesitate to reach out and let us know how we can help make that happen.

We truly enjoy helping clients to setup their financial G.P.S. and helping to steer it towards long-term security and financial independence.

If you’re early in the game and need the encouragement to start – we can help you clarify the best moves now.

If you’re late in the game, maybe early into a life transition or retirement – we can help you navigate the unknown.

Setting and achieving your goals for the year ahead can be a daunting process.

Just as your GPS provides you with step-by-step instructions to your desired destination, your own internal G.P.S. can do the same.

As always, our Private Client Advisors can help you “calculate the best route” for 2019.

The 2019 Game Plan begins and ends with our company motto:

Make.Life.Count.

How can we help you?

Best,

Doug

The post Purpose & Priorities – What is your Game Plan in 2019? appeared first on Lotus Group.

Date & Time: Thursday, April 30th
From 4:30 – 6:30pm

Location: Upstairs Circus

[fusion_button link=”https://www.eventbrite.com/e/lotusgroups-client-happy-hour-tickets-16325333512″ color=”custom” size=”medium” type=”flat” shape=”round” target=”_blank” title=”” gradient_colors=”#999999|” gradient_hover_colors=”#ed9e36|” accent_color=”” accent_hover_color=”” bevel_color=”” border_width=”1px” shadow=”” icon=”” icon_divider=”yes” icon_position=”left” modal=”” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ alignment=”left” class=”” id=””]Registration Closed[/fusion_button][/fusion_text][/fusion_builder_column][fusion_builder_column type=”1_6″ last=”yes” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_text]Kelly and Matt Johannsen are the founders of Upstairs Circus and fellow LotusGroup Clients. We’d like to welcome you to a happy hour at their Lodo location. Meet, drink, and be merry.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container backgroundcolor=”” backgroundimage=”” backgroundrepeat=”no-repeat” backgroundposition=”left top” backgroundattachment=”scroll” video_webm=”” video_mp4=”” video_ogv=”” video_preview_image=”” overlay_color=”” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” bordersize=”0px” bordercolor=”” borderstyle=”” paddingtop=”20px” paddingbottom=”20px” paddingleft=”0px” paddingright=”0px” menu_anchor=”” equal_height_columns=”no” hundred_percent=”no” class=”” id=””][fusion_builder_row][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][fusion_imageframe lightbox=”no” style_type=”none” bordercolor=”” bordersize=”0px” borderradius=”0″ stylecolor=”” align=”left” link=”” linktarget=”_self” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ class=”” id=””] [/fusion_imageframe][/fusion_builder_column][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][fusion_separator style_type=”none” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””/][fusion_text]Event: Traveling Circus

Date & Time: Wednesday, June 17^th
From 6:00 – 9:00pm

Location: Thrive Ball Park

[fusion_button link=”https://www.eventbrite.com/e/lotusgroups-traveling-circus-tickets-16882191088″ color=”custom” size=”medium” type=”flat” shape=”round” target=”_blank” title=”” gradient_colors=”#999999|” gradient_hover_colors=”#ed9e36|” accent_color=”” accent_hover_color=”” bevel_color=”” border_width=”1px” shadow=”” icon=”” icon_divider=”yes” icon_position=”left” modal=”” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ alignment=”left” class=”” id=””]Registration Closed[/fusion_button][/fusion_text][/fusion_builder_column][fusion_builder_column type=”1_6″ last=”yes” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_text]Thrive Ball Park is the newest location for this co-working business and the investors all came from LotusGroup. We’d like welcome you to our newest 24,000 sq ft. space in Denver that will continue to cultivate the entrepreneurial ecosystem in Denver. And as a way to spark conversation and inspiration, we’re bringing Upstairs Circus to Thrive for the night in what’s called the “Traveling Circus”. Drinks and dinner will be served.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container backgroundcolor=”” backgroundimage=”” backgroundrepeat=”no-repeat” backgroundposition=”left top” backgroundattachment=”scroll” video_webm=”” video_mp4=”” video_ogv=”” video_preview_image=”” overlay_color=”” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” bordersize=”0px” bordercolor=”” borderstyle=”” paddingtop=”20px” paddingbottom=”20px” paddingleft=”0px” paddingright=”0px” menu_anchor=”” equal_height_columns=”no” hundred_percent=”no” class=”” id=””][fusion_builder_row][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”solid” padding=”” class=”” id=””][fusion_imageframe lightbox=”no” style_type=”none” bordercolor=”” bordersize=”0px” borderradius=”0″ stylecolor=”” align=”none” link=”” linktarget=”_self” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ class=”” id=””] [/fusion_imageframe][/fusion_builder_column][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][fusion_separator style_type=”none” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””/][fusion_text]Event: Survival Day

Date & Time: Friday, August 28^th
From 8:00am – 5:00pm

Location: Allenspark, CO

[fusion_button link=”https://www.eventbrite.com/e/lotusgroups-survival-day-tickets-17468454618″ color=”custom” size=”medium” type=”flat” shape=”round” target=”_blank” title=”” gradient_colors=”#ef8737|” gradient_hover_colors=”#ed9e36|” accent_color=”” accent_hover_color=”” bevel_color=”” border_width=”1px” shadow=”” icon=”” icon_divider=”yes” icon_position=”left” modal=”” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ alignment=”left” class=”” id=””]Click To Register[/fusion_button][/fusion_text][/fusion_builder_column][fusion_builder_column type=”1_6″ last=”yes” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_text]We support a non-profit called Cottonwood Institute which helps low-income students learn about the environment through service learning projects. Since we as Coloradans care deeply about the environment, we put together Survival Day where our fees pay to support the program and helping more of these kids. The leaders of Cottonwood will take us out into the wilderness to learn about surviving – find safe food, build a shelter in teams, and locate water you can drink! Afterwards, we’ll all head to Oskar Blues to grab a drink and enjoy each other’s company.

Note: Cottonwood limits this event to 24 people so if you are interested in attending, please RSVP quickly when the window opens.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container][fusion_builder_container backgroundcolor=”” backgroundimage=”” backgroundrepeat=”no-repeat” backgroundposition=”left top” backgroundattachment=”scroll” video_webm=”” video_mp4=”” video_ogv=”” video_preview_image=”” overlay_color=”” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” bordersize=”0px” bordercolor=”” borderstyle=”” paddingtop=”20px” paddingbottom=”20px” paddingleft=”0px” paddingright=”0px” menu_anchor=”” equal_height_columns=”no” hundred_percent=”no” class=”” id=””][fusion_builder_row][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][fusion_imageframe lightbox=”no” style_type=”none” bordercolor=”” bordersize=”0px” borderradius=”0″ stylecolor=”” align=”none” link=”” linktarget=”_self” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ class=”” id=””] [/fusion_imageframe][/fusion_builder_column][fusion_builder_column type=”2_5″ last=”no” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][fusion_separator style_type=”none” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””/][fusion_text]Event: Love Fest 2015

Date & Time: Wednesday, November 18^th
From 6:00 – 9:00pm

Location: Thrive Cherry Creek
201 Milwaukee Street #200, Denver, 80206

Registration: Will Be Announced[/fusion_text][/fusion_builder_column][fusion_builder_column type=”1_6″ last=”yes” spacing=”yes” background_color=”” background_image=”” background_repeat=”no-repeat” background_position=”left top” border_size=”0px” border_color=”” border_style=”” padding=”” class=”” id=””][/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_text]To close out the year, we’ll culminate in Love Fest 2015 and this year, it’ll be slightly different. You see, we heard client feedback and learned that you’d love to spend about 1/3 of the time learning and 2/3 of the time doing something – whether it’s talking or doing an activity. We’ll have drinks and dinner for you (with GF and veggie options), stimulating conversation, and an evening to remember. What a way to close out the year![/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

The post 2015 Client Event Series appeared first on Lotus Group.

We want to see clients “Make Life Count” so we’re sending you a sweet new shirt for 2015!

Want one? Then here’s what you gotta do:

1. Must be a Client
2. Complete this order form
3. Wear the shirt and do something that “makes life count”
4. Share the pic with us on Facebook or Instagram and tag it #MakeLifeCount (or email us)

The post Order Your “Make. Life. Count.” Shirt appeared first on Lotus Group.

The post Year In Review: Here’s What Clients Did In 2014 appeared first on Lotus Group.

Investment markets continued surging to ever higher levels of overvaluation during Q2/2014, despite real hiccups in the global economy (see Chart I below). First quarter U.S. GDP contracted by 2.9%, Europe continued to languish in a state of sub-par growth, and even China continued to slow.

Chart I: Q1/2014 Asset Class Returns

Investor’s seemingly blind love for markets, despite deteriorating fundamentals, appears to be the direct result of our Fed’s continued and unprecedented Quantitative Easing policy.  As is typically the case at market peaks, gain after gain continues to lure in cash from the sidelines at the same time  valuations become excessive and economic risks arise.  The current euphoria seems to have begun in early 2013, and continued through Q2/2014.

Stripping away the strong emotions of FOMO (Fear of Missing Out), we see that underlying valuation metrics are quite extended to the upside:

–          The S&P 500 is now overvalued by 35-64% as compared to the current and 10yr trailing P/E historical averages.

–          Market Cap to GDP is in its highest overvaluation zone, with only a 1% per year return expected over the coming 10 years.

–          The current bull market is 64 months vs a 42 months avg.

–          Crowd sentiment levels have been overextended for 320 days, versus the historical avg of 71 and the previous max of 121!

Patiently Waiting For Better Values Ahead

Looking Ahead to the Rest of 2014

US equities are badly in need of a corrective bear market to bring valuations back down to earth.  The only questions that remain are when exactly it will happen, and how far it will go down.

If we have a 15-20% correction, then we will have an improved investment landscape from the perspective of having lower investor sentiment levels (e.g. a better balance of buyers and sellers versus only buyers).  Remember that extremes of sentiment tend to mark turning points, so when we have excessive numbers of buyers, as is currently the case, there aren’t that many left to jump in, and risks rise for potential declines.  If we get such a decline, we will be inclined to put some of our client’s excess cash holdings back to work.  However, such a decline will still leave markets overvalued, and we may not want to jump back in too soon.

If we get a larger 30-40%+ bear market, we will not only have more attractive sentiment levels, but we will also have more reasonable valuations, and would be enticed to redeploy larger amounts of investor cash.  Nobody roots for these types of declines, as they tend to coincide with difficult economic times, but they are an inevitable part of our economic cycle and are a necessary cleansing of the froth that occurs during bull markets.

In the interim, we are seeing some better valuation opportunities overseas in the Asia-Pacific region, as well as in some commodities, especially gold.  Things can change quickly, so we will stay abreast of each investment opportunity, but we believe that select non-US opportunities have the chance to make a comeback sooner rather than later.   

Sign of the Times: On July 10^th, a story was posted about Cynk Technology Corp (Ticker: CYNK), an obscure social media company that had 1 solitary employee, a shaky business plan, no customers, no revenues, and no assets.  And yet, the euphoria of this peaking bull market has temporarily taken this unknown stock from $0 to a $6 billion valuation overnight!  This eerily reminds us of the Pets.com days of the dot-com boom and subsequent 90% bust.  History never exactly repeats itself, but it often rhymes.

As always, we encourage you to pursue life’s dreams with vigor, while we help take care of your growing nest egg.  Make life count!

The post The Very Late Innings appeared first on Lotus Group.

US and International developed market equities are setting marginal new highs, after short pauses during Q1/2014.  The bull market is now at 63 months duration versus an average of 42 months, valuations remain at extremes, and sentiment remains overbought.

For fear of sounding like a broken record, this rally has gone on farther than any historical precedent without a minimum of a 10% correction…and this peaking is even more remarkable after the decline during 2008-2009 that went far deeper than historical precedent would have suggested as well.  Seen through another measure, market volatility (the fear index) has gone from the highest measured level in history during the 2008-2009 decline, to a low today only seen twice previously in the past 10 years.

These high amplitude swings are not only unprecedented, but they are also causing the mania of greed and fear to push farther than normal as well.  Whereas index investing was all but dead in 2008-2009 in favor of absolute strategies, today, the exact opposite is proliferating in popular media.

However, while the bull market edges forward, the economy is not keeping up, corporate profits are peaking and set to decline, central bank manipulation has run its course, and the underlying strength of this rally appears to be waning.  Chart I below illustrates how fewer and fewer companies are propping up the new highs in equity markets, a key sign that has historically preceded market tops and subsequent downturns (see Chart I below).

The latest “good news” offered up by Wall Street includes the hope that we are now reaching what “experts” call “escape velocity” in our economy, after what they explained to be a weather-induced negative-growth first quarter.  At the same time, we are told that markets are in a goldilocks environment because the economy is not overheating, so the Fed can keep stimulating.

Understood correctly, the consensus bullish position is the following: We have such little growth that markets should continue to rally because we will not remove the Fed Reserve medicine that is propping it up.  That doesn’t seem to represent the typical characteristics of “escape velocity”.

If we have such little real economic growth when monetary policy is so accommodating, we are left to ponder what will happen when the Fed has to stop accommodating and removes its stimulus, which it has already begun doing.  The Fed is only gently starting to remove its unprecedented Quantitative Easing program…and already the economy is slowing down considerably.  It is concerning to consider what will happen when they also have to raise interest rates.  Where will the sustainable growth come from then?

Consider this: The US market rose 30% last year, while total corporate profits only advanced 3%.  There appears to be a preponderance of exuberant speculators that have pushed valuations to levels nearly 60% over historical levels (measured by trailing 10yr PE).  That leaves us with a reasonably low expectation for additional returns from current levels without a meaningful correction that brings investment valuations down to more attractive levels.

The current reward-to-risk dynamics are at low levels last seen at the 2000 and 2007 market peaks.  This is a time for caution, a time for conservative positioning, and a time for discipline and patience, just as it was during the previous market peaks.

As always, we encourage you to pursue life’s dreams while we focus intensely on making the most responsible decisions for you with your hard-earned savings.

The post The Aging of a Cyclical Bull Market appeared first on Lotus Group.

Market Overview & Commentary

Despite a rocky early start to 2014, most investments rallied back during the back half of Q1 to end flat or slightly up (see Chart I below).

Chart I: Q1/2014 Daily Price Chart for the S&P 500 

Across various investment asset classes, only real estate really stood out with a meaningful gain (see Chart II below).

Chart II: 2014 YTD Asset Class Returns

(US Equities = S&P 500, Dow was -0.72%, Nasdaq was +0.54%)

With valuations and sentiment levels highly stretched, the January declines may have been precursors to larger declines expected during the Q2-Q3 time period.  At this point, consider the following:

– The S&P 500 is overvalued by 29-57% as compared to the current and 10yr trailing P/E averages

– The current bull market is 61 months old and counting…

–  …as compared to the historical average of 42 months

– Bullish sentiment has been at or near peak levels for a record duration of time period as compared to the past 20 years.  We are in unchartered territory from this perspective.

– Corporate profits are at peak levels and have few levers left to pull for further growth

– Government stimulus is starting to wane, with the tapering of quantitative easing

There are no guarantees with investing, but the odds strongly favor a larger market correction occurring in the 2014-2015 timeframe.  As such, we are preparing tactical client portfolios for this scenario (see below).

Remaining Cautious

Portfolio Review (Q1/2014)

Heading into Q1, we were cautious on equities while becoming slightly more neutral to optimistic on fixed income.  Equity markets entered the quarter at excessively high bullish crowd sentiment levels, having hit a key level without a major correction for over 190 trading days, the longest measured time period at these levels in the last 20 years.  Fixed income took some hits in 2013, and while still somewhat overpriced, were looking slightly more attractive for at least a small pause in their decline or to inch higher.

Consequently, we underweighted equities in our tactical client portfolios, holding excess cash in expectation of a cooling off period.  We also remained underweight with our real estate holdings, while we began to nibble back on our commodity holdings, especially in gold.  Finally, in fixed income we slightly increased our allocations, but generally continued to hold alternative assets like merger arbitrage funds for our fixed income allocations.

In our trading models, we maintained a small hedge with our Volatility Timing Model.  Otherwise, we stayed cautious, awaiting a more attractive entry point.

Q: What worked?

Early in the quarter, equity markets declined rather sharply, with US equities falling 5-7% during January.  During this time period, our risk-off positioning helped tactical client portfolios to stay relatively flat, with only minor losses.

In addition, a couple of strong outperformers in New Zealand (ENZL) and gold miners (GDX) helped to offset any market declines, bucking the downdraft and generating positive returns for that time period.

Finally, our fixed income positions kicked in a modest return for the quarter.

Q: What didn’t work?

Following the steep January decline, markets rebounded sharply in late February and March.  During the rebound, our excess cash resulted in more muted returns.

Additionally, a number of our positions hit trailing stops during the January drop, were sold, and subsequently did not participate in the rebound.  These positions included Japan (EWJ), Hong Kong (EWH), Mexico (EWW), Oil Companies (XLE), and a short Yen position (YCS).

Net Results for Q1/2014

Despite intra-quarter turbulence, most investment markets ended the period with a flat to slightly positive return (see chart on Page 1).  Client portfolios had similar results, albeit with a lot less volatility during the selloff and subsequent rebound.

We are in the late innings of a bull market, and are positioned conservatively with our tactical client portfolios.  While remaining underinvested, we continue to deploy capital to investments that have good reward-to-risk characteristics.  However, we are making these choices sparingly, while focusing on preservation of capital.

We know that these periods can be trying as we wait for a more significant decline.  However, if January was a precursor of what will eventually come in a much larger dose, then we should be well positioned to weather the storm and then reinvest your cash at more attractive levels

What’s Left When Momentum Wanes?

Looking Ahead to the Rest of 2014 

Investment markets are comprised of many types of different players.  However, when it comes to the more sophisticated institutional investors, there are three main types to be aware of:

– Value Investors: Seeking low valuations to buy, high valuations to sell

– Momentum Investors: Chasing trends, either on the long or short side

– High-Frequency Traders: High volume arbitrage of small inefficiencies

High Frequency Trading (HFT) has been in the news lately given the new book released by influential writer Michael Lewis.  HFT has gone from a very small fraction of the market to by some estimates over 60% of market volume.  As a result, these players are getting extra scrutiny.  However, they tend to not move markets, acting more like parasites that clean out all the minor little inefficiencies.  There is more to HFT, but let’s focus more on value and momentum investors.

In the current market, value investors began selling as recently as late 2012 to early 2013, with the main reason being excessively high valuations.  As an example, there have been a number of media stories about how Warren Buffet, one of the most famous value investors of all time, has been said to have lost his touch because he has underperformed the market in 4 of the last 5 years.  His underperformance stems from excess cash that remains un-deployed.  He and other value investors are simply finding the markets too expensively priced.

So that leaves us with the last leg to hold up an aging bull market, the momentum players.  Momentum players usually pile into high-flying growth names, riding a trend, regardless of price levels (think dot com days).  These players have been in force since mid 2013, and have been the highest returning strategy.   However, growth favorites began to break down in Q1/2014, with double digit declines materializing in Wall Street darlings like Google, Amazon, Netflix, and Tesla.

Bottom line: When value investors think markets are too expensive, and momentum strategies start breaking down, there aren’t many institutional investors left to buy into an aging bull market.  Now is the time for caution, and our client portfolios reflect this point of view and positioning.

As always, we encourage you to pursue life’s dreams with vigor.  Make life count!

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In the US, 45% of people make New Year’s resolutions.  The third most common goal (behind losing weight and getting organized) is spending less and saving more.  Sadly, only 8% of people will achieve this goal because they don’t have an action plan to help them do it.  Although their intentions are the same as the 8% who achieve their goal, they do not get their desired results. (1)

Here is a 3 step plan to achieve your financial New Year’s Resolution:

1)      Find out where you are spending your money

2)      Plan how much you can save

3)      Automate

Find out where you are spending your money

In order to spend less and save more you must know where you are spending money. There is no shame is asking for help, either from friends and family, a professional consultant or a finance program/app. Technology has given us excellent means of tracking our spending, using the best personal finance tools for 2018 can help turn your finances in the right direction. Once you have a solid understanding of where your money is going, you can then make a thoughtful decision as to where you can cut out spending,  that will not affect your lifestyle or happiness but you still need to make sure to get personal guarantee insurance.

The best way to easily see where you are spending your money is a free program – mint.com.  Mint shows you where you are spending your money by category, merchant, or date,  it’s quite flexible.

The beauty of mint.com is that once you set up an account, which takes all of 7 minutes, it does 85% of the work for you.  It automatically categorizes your transactions for you, and then if you want to go in and spend some time cleaning up or re-categorizing you can.

For example, if you’re an everyday latte drinker, an easy place to save some cash would be to cut them out at $4/each, but if you in fact love lattes and they make you a happier and more productive person, then don’t cut them.  Another example might be if you look at your spending and see that you’re spending a lot every week on eating out for lunch with co-workers, but you don’t actually enjoy it (or don’t see at being the healthiest option), then  cut that out of your spending and bring your lunch to work.

Going at it using this detailed approach will help ensure that you’re able to reduce spending without cutting your happiness.

Once you see where you’re spending, decide where to cut and start a savings plan.

Plan a certain amount to save a month

Now that you know where you’re spending your money, you can develop a spending plan to figure out exactly how much to save every month.  Here is a link to the tool that we use with our clients (click on the link under the title): Template – Spending Plan

This spreadsheet can help you stay on track as well as identify where things are going well and how things are breaking down.

Automate

The next step is to automate as much of this as you can.  Instead of trying to save money by spending less then depositing what is left over at the end of the month, to increase your odds of success take out what you are saving every month at the beginning of the month.  That way you don’t have it in your account to spend through the month and the temptation is out of your hands.

Check out our video for a step by step guide on how to automate: Automate Your Finances

Automation can be set up with nearly every bank and investment account.  The best thing to do is to have the account you are saving into pull money from your account the day after you get paid.  So if you get paid the 1^st and 15^th, have your desired saving amount pulled the 2^nd and 16^th.  That way the money is cleared to transfer, but you will not have it long enough to spend.

Keep it up

The most important thing to keep in mind when going through this, is that savings and being disciplined about your spend is a marathon and not a sprint.  If you miss a month of saving it will not matter as long you pick it up again the next month – assuming of course that the pattern does not persist!

To make it easier to track your savings goal, set a monthly or quarterly savings amount and track against that, rather than a large yearly goal. This will make it more attainable optically as the numbers will be smaller as well as give you check-in periods periodically to see how you are doing against your goals.

1: http://www.statisticbrain.com/new-years-resolution-statistics/

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