Are you ready for some surprises and wild finishes? That’s what March Madness brings each and every year! It’s also an opportunity to take a high level view of the current investment environment with what lies ahead.

Six years ago we became the first Registered Investment Advisor to use the NCAA basketball tournament as a way to show our readers a forward-looking view on the stock market. We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

This year we will dive right into our investing bracket looks and how we think the remainder of 2016 will play out.

Click here to see the entire bracket.

To set the table let’s take a quick moment to recall last year and the undefeated Kentucky team. They came into the Final Four 38-0 and were a virtual lock to win it all but as you may remember the Wisconsin Badgers shocked everyone and provided the surprise millions of fans tune in for every year! This type of “upset” is exactly how we think 2016 will pan out in the Large Cap asset class.

Large Cap

Five years from now people will look back at 2015 as a year that the stock market extended its bull market run for one more year. Investors will exhibit a short-term memory lapse and forget that it actually was a very rough year with heightened volatility, the first correction, and a market that actually turned in negative numbers if you looked “under the hood”. The problem is…most people will not remember this and only look to see the S&P 500 finished positive +1.38%.

Without the “FANG” stock phenomena, however, 2015 would have been very negative. In other words, the index was falsely propped up by some mega cap names like Facebook, Amazon, Netflix, and Google (ergo the acronym “FANG”). Without the massive performance that these companies returned, the average breadth of the market was negative and dismal.

Key Match-up:

#1 Amazon (AMZN) vs. #6 Lockheed Martin (LMT)

As you’ll note in the above bracket we have Amazon (AMZN) continuing to outperform the vast majority of the market until it runs into Lockheed Martin (LMT). Simply think of Amazon as last year’s Kentucky and Lockheed Martin as Wisconsin…



If you’re smart…does it imply that you’re always right? In many instances that may often be the case, but when it comes to investing, some of the most brilliant people on the planet are reduced to buffoons by irrational and unpredictable markets. When you add in a 24/7 media cycle and the fact that human beings are emotionally driven creatures…your IQ (or stubbornness) can actually work against you.

As huge fans of behavioral finance we also want to once again remind you that your own brain (whether it be “smart” or pedestrian) is wired to connect certain dots even if the conclusion is wrong or completely random. One famous adage will serve as the theme for this entire article:

“Even a broken clock is right twice a day.”

Take a brief moment to read the following article that surfaced last week:

First and foremost the article opens with two paragraphs that reek of “rear view mirror” methodology. This mindset sounds intelligent at face value but when it comes to a dynamic investing environment there is zero predictive power in looking at what has happened as a measure of what will happen.

Secondly, the article then alludes to John Hussman, who…like the author and many other pundits, believe we are on the brink of a -50% or more “crash”. Allow us to be blunt since very few are… This type of financial journalism is complete hogwash and a total waste of your time!

Before you spend one more minute reading articles and viewing well presented charts from “smart” analysts and forecasters…take a hard look at their track record. We’re not questioning whether a guy like John Hussman is intelligent; he undoubtedly is but why are we led to chug his (or anyone’s) Kool-Aid simply because they got one market call right? Once you’ve read our broken clock quote again, a quick peak under the hood of John Hussman’s performance and track record will change your mind.



The stock market has been rather nasty as of late so let us switch gears and touch on a topic that most investors avoid yet need to pay more attention to. After all, what exactly happens to your investments when you’re gone? Do you actually need a living trust or would a will suffice? We reached out to Mindy Baldwin, an estate planner in Rancho Santa Margarita for expertise on this topic:

The terms “will” and “trust” come up often when doing estate planning. Many people assume that these terms mean the same thing and use them interchangeably. However, wills and trusts are different documents that are used in different circumstances.  



Normally…we write about the stock market… its events, reactions, and implications. At the end of the day…none of it matters if you’re not alive or breathing. As real as that last sentence is… it prompts us to analyze how the world is changing and what we need to do in order to survive.

As an investor, your job (at least how we have defined it) is to design a plan and adjust it accordingly to outside circumstances and your personal needs/goals. What gets complicated…is successfully investing while adhering to these three things:

  1. Be human (by reading this article…YOU are human and with that simple fact we know you have emotions. Everyone who has emotions will make investing mistakes.)
  1. Not to be an ambulance chaser (we all want to “win” or gain…but the aim isn’t against a greater cause or necessarily gaining off of someone’s loss). We’ll expand on this point later in the article but the idea here is to think ahead instead of chase what’s hot.
  1. Have a crystal ball. Neither you nor anyone has one, so why pretend? The best perceived “financial advisors” (or at least those that claim to be)…”predict” the future or prognosticate it and they’re almost always wrong.

Investing can be complex enough but when you then introduce a dramatically changing world, most people don’t know how to adjust. Over the past month our world has seen acts of terror force people into a state of fear and shake our faith in the future. On November 13, 2015 the city of Paris was changed forever. Two weeks earlier a commercial airplane was downed in Egypt and just the day before the Paris attacks there were two suicide bombings in Beirut that killed 43 people. On our own soil we are just now understanding the details and motives behind the shootings in San Bernardino that took 14 innocent lives.

What is happening and is it safe to invest the way we used to?

Without question, acts of terror


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