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FINANCE AND INVESTMENT   By Don Freeman
 

2014 Financial Market Review / 2015 Outlook

Looking back at 2014 the S&P 500 posted a solid year. The S&P +11.4%, Dow +7.5% and Russell 2000 +3.5%, see chart above , S&P500. The “buy the dip” mentality began to take hold as any small correction saw buyers step in and purchase equities. 2014 Summary:
• Soaring Treasury bond prices,
• Collapse in global commodity prices (oil)
• MH17 airline crash, Russia and Ukraine conflict
• The largest Ebola outbreak in history
• Utilities the best-performing U.S. sector and energy was the worst sector.

Source: Wall Street Journal
Small cap stocks certainly lagged large caps but at the end of 2014 small cap growth stocks began to break out to new highs. International stocks lagged U.S. equities as can be seen by the EFA ETF which tracks the international market and returned -6%. The United States Oil ETF fell 42% and the popular SPDR Gold Trust declined 2.2% for the full year.

The Shanghai Composite, above, is breaking the 6 year downtrend but continues to lag the stellar performance of US stocks, see top chart above.

My Outlook
• US economic growth will likely continue to improve in a very low interest and low inflation rate environment
• Labor markets are improving, strengthening of the US dollar and lower oil prices will boost the recovery
• Quantitative easing is ending and the US monetary and banking system (post 2008) is returning to a more normal healthy condition
• I am bullish long term for the US economy and stock market but short term continue to see volatility and corrections likely as the market has had a nice move up since Nov 2012 without much of a pullback.

US S&P 500 Long Term View (20 years)
I currently see the economic recovery continuing as we have not reached a point where the Federal Reserve has over tightened the money supply. Therefore the bull market will likely continue without a threat of a bear market / recession as we saw in 2000 or 2008. It will be important in the next 3-5 years to focus on individual stocks and leading Exchange Traded Fund sectors. Over the past 14 years while the US stock market digested the gains from 1982 to year 2000 we have had a technology bubble, housing bubble, gold bubble, banking crisis and now the latest oil bubble which has come back to normal levels (oil under $50). Cash has built up as a result of all this fear (wall of worry) and will eventually be redeployed back into equities and long term investments. The upward trend of the stock market remains positive (see chart above) despite all the fear built up over the past 12 years. My positive outlook could change at any point depending on the actions of the Federal Reserve, the economic numbers / earnings and sales reports.If you have any questions please email or call me. Don Freeman. Freeman Capital Management,LLC. : USA (503) 616-3850 I Fax: (503) 914-1954. Thailand: +66 (0)89 970-5795. Skype: Don.freeman1 www.freemancapital.net


This Investment Is Perfect For Retirees

The headlines for the past few weeks have not been pleasant. Stocks have been dropping, oil crashed, and if that wasn’t bad enough, we had the Ebola crisis. For some people, they want to run and hide. For me, I look at it as an opportunity to put money to work. I’m never 100% invested all the time. I like to have cash on the sidelines for when opportunity presents itself.
Most people don’t realize this, but the United States is the world’s largest energy producer. This year, the US eclipsed both Saudi Arabia and Russia as the top producer of both crude oil and natural gas. The US now produces over 11 million barrels of oil per day. This is one of the reasons why oil prices have dropped from over $100 to $80. The fact is that the world is awash in oil. With so much oil out there, there’s no need for high oil prices.
However, as oil prices drop, that’s bad news for oil companies. This means that they are now getting less money for every barrel of crude oil that they sell. That’s why I’m staying away from oil companies.
Instead, I’m focused on the energy infrastructure companies. These are the companies that run the toll-roads that connect the oil that’s pulled out of the ground to the refineries that refine it to the pipelines that transport the finished products.
Right now, my clients and I are buying the Alerian MLP ETF. This is being added to my long-term ETF portfolio. I see this ETF as the best way to capitalize on the energy boom in the United States.
The Alerian MLP ETF is composed of the companies that own these assets. As oil continues to be found in more formations, more pipelines, storage tanks, and processing centers are required to connect oil reserves to industrial regions. Over the next 25 years, an estimated $250 billion dollars will be spent on energy infrastructure.
The best part about energy infrastructure assets is that they are not dependent on the price of oil. Their business model is based on volume, not on the price of oil or natural gas. This is why the Alerian MLP ETF is so attractive.
The other thing that I like about energy infrastructure assets is that they are their own monopoly. In other words, once a pipeline gets built, there won’t be another pipeline built right beside it. As anyone from the US knows, getting approvals for pipelines is not easy. The largest pipeline planned, the Keystone XL which would bring crude from the oil sands of Canada to the Gulf of Mexico, remains bogged down in political wrangling between Republicans and Democrats.
For retirees, the Alerian MLP ETF is perfect because it provides inflation protection. There’s nothing better than owning real assets like pipelines, storage tanks, and processing centers. The income that investors get is driven by the stable cash flows that these assets generate. These assets don’t care what the stock or bond markets are doing. They make money regardless.
Since the Alerian MLP ETF was formed in August 2010, it has delivered a 12.71% annualized return to investors. Had you invested $10k at inception, you would have $16,338 today.
The Alerian MLP ETF has over $9 billion in assets. Its top holdings include the premier energy infrastructure companies in the US. By buying the Alerian MLP ETF, one holds interests in MLPs like Kinder Morgan Energy Partners, Enterprise Products Partners, and Energy Transfer Partners. One could buy these individually, but the Alerian MLP ETF does all of that for you and gives you much broader diversification. All together, the Alerian MLP ETF has 25 energy infrastructure MLPs in its portfolio.
For US investors, there are no K-1s or complicated tax reporting documents and there is no leverage. This is important and gives one piece of mind. That’s why in today’s market, with fear starting to perk its head up, I see the Alerian MLP ETF as a great place to park some money. It’s certainly a much better investment than gold and one which pays you a regular quarterly dividend. Now, that’s what I call sleeping better at night.
Don Freeman is president of Freeman Capital Management, an independent US Registered Investment Advisor. He has over 20 years experience and provides personal financial planning and wealth management to expatriates living in Phuket. Specializing in UK and US pension transfers. Call 089-970-5795 or email: [email protected]



 
HEADLINES [click on headline to view story]

2014 Financial Market Review / 2015 Outlook

This Investment Is Perfect For Retirees