Quote of the Week
“You Don’t Have To Be Great To Start, But You Have To Start To Be Great.” – Zig Ziglar
The markets are continuing to go up. Last week the Dow was up 2.01%, the S&P 500 was up 1.57%, and the NASDAQ was up 1.74%. The Year to Date change is starting on a steep climb that could be an indication of a “melt-up.” The signs are beginning to fall into place. The Dow is up 4.39%, the S&P 500 is up 4.21%, and the NASDAQ is up 5.18% since the beginning of the year.
The UPI is at 18 out of 100. The UPI is just one of the factors in the software we use, so I am not concerned. What excites me is that the “Advance/Decline” level is still very strong. This means that more stocks are advancing vs. stocks that are declining. All past market sell-offs have come when the Advance/Decline ratio turns negative. I think that there is a good possibility of “FOMO” taking over the markets. Just to explain, “FOMO” is a very technical indicator. It stands for Fear of Missing Out. If everyone thinks the train is leaving the station, investors who are on the sidelines will start to get on board.
Our allocation for most clients remains the same: 85% equities, 0% bonds, 10% alternatives, and 5% cash.
Tom’s Thoughts – Bitcoin
By now we have all heard of Bitcoin, the cryptocurrency. However, for many, the technology supporting Bitcoin and all of the other cryptocurrencies is an elusive concept. That technology is called Blockchain. Bitcoin merely is one application that Blockchain technology supports. Sally Davies, Technology Reporter for the Financial Times, put it this way. “(Blockchain) is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications.”
So what is Blockchain? Here’s my simple explanation.
Historically, when it comes to transacting money or anything of value, people and businesses have relied heavily on intermediaries like banks and governments to ensure trust and certainty. Middlemen perform a range of essential tasks like authentication & record keeping that help build confidence into the transactional process.
The need for intermediaries is especially acute when making a digital transaction. Because digital assets like money, stocks & intellectual property, are essentially files, they are incredibly easy to reproduce. This creates what’s known as the double spending problem (the act of spending the same unit of value more than once) which until now has prevented the peer to peer (person to person) transfer of digital assets without intermediaries.
Blockchain technology provides a way of conducting digital transactions with virtually total security without a third party intermediary. Think of what this means for present day processes – such as payment processing, real estate transactions, any banking transaction, financial services transactions, governmental processes, medical records processing, insurance, anything that flows through a database that can be hacked. Banks, insurance companies, GOVERNMENT AGENCIES, etc., etc, etc … have buildings full of people and computers dedicated to being information intermediaries. Transaction costs could be reduced dramatically, processing time could be reduced to seconds/minutes versus hours/days/weeks, and data security would not be an issue. And digital transactions would be available to anyone with a smartphone anywhere in the world.
Example: Kodak (the 129-year-old company that missed the digital photo transformation) has just announced that it will partner with a company that promotes paparazzi photos and use Blockchain technology to allow photographers get paid whenever their images are used.
For those of you who would like to learn more about how Blockchain works, please visit the following website for a simple, non-techy, fun explanation. Even I could understand it. Enjoy!
By the Numbers
HUGE IMPACT – 43% of the Fortune 500 companies in 2017 (i.e., the 500 largest US companies as measured by annual revenues last year) were founded or co-founded by either an immigrant to the United States or by the child of an immigrant (source: Center for American Entrepreneurship). Michael A. Higley, BTN 01-16-2018
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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.