Quote of the Week

“Monetary tightening by central banks is like trying to pull a brick across a rough surface with elastic: nothing happens; still nothing happens; then it leaps up and hits you in the face.” – Ambrose Evans-Pritchard, The Telegraph

Technical Corner

I have been writing recently that we sit late in an economic expansion cycle. The global system is over leveraged, and the equity markets are overvalued by almost every meaningful measure. We received a long term sell signal in December, and we have positioned the portfolios to protect against a declining market. Unfortunately, in the last few weeks, we have experienced a short-term rally in what I and our software see as a long-term bear market. This rally may last for a while longer, but I don’t see it as a change in the trend.

We now have many factors trending downward. China is in a steep downward trend, Europe’s economy is going negative, and our economy is slowing. During the last quarterly earnings season, 69% of all of the companies in the S&P 500 came out with negative forward guidance. An i-gadget company, a darling of Wall Street, just came out with negative guidance based on slowing sales in China.

Here is the issue: corporate top line revenue is slowing; the cost of business is going up due to rising wages and rising interest rates. Under that scenario, corporate profits will decline which means stock prices will decline. With the Central Banks around the world stopping Quantitate Stimulus, meaning no longer pumping money into the system, there is nothing to support the economies and the trend is down. Plus, the trade war with China has already hurt global growth and even if a trade agreement is reached a lot of damage is already done that will take a long time to repair.

The hard part about investing is we feel the opportunity is best when risk is actually at its highest and opportunity is at its worst. The great investor Sir John Templeton said, “The secret of my success is I buy when everyone else is selling and sell when everyone else is buying” and he added, “It will be one of the most difficult things for you to do.”

The greatest opportunities come in crisis, and crises generally materialize in recessions. Fear reaches extreme; panic selling takes form; margin calls kick in and any remaining buyers back away. That’s when the best opportunities present themselves.

We are going to continue to maintain our current position expecting the markets to decline and not jump ship because of this short-term rally.

Last week the Dow was up 2.4%, The S&P 500 was up 2.5%, the Nasdaq was up 3.5%.

Stephanie’s Thoughts

What Will You Pay for Medicare in 2019?

Medicare premiums, deductibles, and coinsurance amounts change annually. Here’s a look at some of the costs that will apply in 2019 if you’re enrolled in Original Medicare (Part A and Part B).

Medicare Part B premiums

According to the Centers for Medicare & Medicaid Services (CMS), most people with Medicare who receive Social Security benefits will pay the standard monthly Part B premium of $135.50 in 2019. However, if your premiums are deducted from your Social Security benefits, and the increase in your benefit payments for 2019 will not be enough to cover the Medicare Part B increase, then you may pay less than the standard Part B premium.

People with higher incomes may pay more than the standard premium. If your modified adjusted gross income as reported on your federal income tax return from two years ago is above a certain amount, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA), which is an extra charge added to your premium, as shown in the following table.

You filed an individual income tax return for 2017 with income that was: You filed a joint income tax return for 2017 with income that was: You filed an income tax return for 2017 as married filing separately with income that was: Monthly premium in 2019 including any IRMAA is:
$85,000 or less $170,000 or less $85,000 or less $135.50
Above $85,000 up to $107,000 Above $170,000 up to $214,000 N/A $189.60
Above $107,000 up to $133,500 Above $214,000 up to $267,000 N/A $270.90
Above $133,500 up to $160,000 Above $267,000 up to $320,000 N/A $352.20
Above $160,000 and less than $500,000 Above $320,000 and less than $750,000 Above $85,000 and less than $415,000 $433.40
$500,000 and above $750,000 and above $415,000 and above $460.50
Other Medicare costs

Other Medicare Part A and Part B costs in 2019 include the following:

  • The annual Medicare Part B deductible for Original Medicare is $185.
  • The monthly Medicare Part A premium for those who need to buy coverage will cost up to $437. However, most people don’t pay a premium for Medicare Part A.
  • The Medicare Part A deductible for inpatient hospitalization is $1,364 per benefit period. An additional daily coinsurance amount of $341 will apply for days 61 through 90, and $682 for stays beyond 90 days.
  • Beneficiaries in skilled nursing facilities will pay a daily coinsurance amount of $170.50 for days 21 through 100 in a benefit period.

For more information on costs and benefits related to Social Security and Medicare, visit ssa.gov and medicare.gov.

Copyright 2019 Broadridge Investor Communication Solutions, Inc

By the Numbers

“MAJORITY OF THE TIME – Of the 10 bear markets for the S&P 500 index that have occurred since the end of WWII (i.e., declines of at least 20%), 7 took place concurrently with a recession (source: BTN Research).” – Michael A. Higley, BTN 01-14-2019

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

 

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