THE GARTENHAUS REPORT Volume 1008

2015: YEAR IN REVIEW

2016: A LOOK AHEAD

The most remarkable financial story of 2015 has to be the plunge in oil prices. In June of 2014, oil topped $108 per barrel. As I write this, oil is hovering around $33. How low will it go? Some analysts are talking $20 per barrel, while others expect oil to find a bottom soon and rise into year end. Bearish factors for oil are a slowing global economy (especially China, which is the second largest economy in the world) and the Saudi effort to pump like crazy in order to drive prices so low that US producers, especially the shale oil producers, are driven into bankruptcy, thus reducing longer-term supplies. Of course the Saudis are also punishing their enemies that depend on oil for economic growth like Iran and Russia.

The price of oil is strictly governed by supply and demand. It is my opinion that once oil finds a bottom and more and more supply comes off line, oil will rebound. This could start occurring during the latter part of 2016. And if Iran and Saudi Arabia start lobbing bombs at one another’s oilfields, all bets are off. In the meantime, feel the joy at the pump!

All commodities, in addition to oil, got crushed in 2015. We can also attribute this to the China slowdown and the surge in the value of the dollar. The dollar and commodities have an inverse relationship: strong dollar = weak commodities. The majority of analysts continue to be bullish on the dollar. The thinking is that the Fed is the only central bank raising rates, we are the strongest economy in a weak world and higher interest rates attract dollar denominated investments from overseas investors. In the meantime, that trip to Europe is looking much more attractive and the prices we pay for imported goods should generally be lower.

Experts have been warning of higher interest rates for years that have yet to materialize. Even the Fed rate rise in December to a fed funds rate between .25- .50% from zero did not make an appreciable difference. Rates on the 10 year US Government note started 2015 at 2.17% and closed out the year at 2.27%. And since the beginning of 2016, rates have been dropping amid increasing fears of more weakness in the global economy (especially China). As I write this, rates have dropped below the starting point of 2015!

In 2016, interest rates will be governed principally by how the US economy fares. If we are entering a period of weakness as some think, the Fed will be reticent to raise rates and bond yields could even move lower, which would go against the current sentiment which sees rates doing the opposite.

2015 was a tough year for US stock market investors and 2016 is experiencing the worst first week in market history! As of this writing, the average stock in the S&P 500 is down 20% from its highpoint in July; this while the actual index is down about 9.2% since that time. What gives? The strength in a handful of stocks masked the overall weakness in the markets. You may have heard of FANG? Facebook, Amazon, Netflix and Google were stellar performers in 2015 and skewed the index dramatically. You can see in the chart below, that only one out of nine US equity asset classes was in the black.*

There was literally nowhere to hide. Hedge fund managers, who are arguably among the smartest people in the business, saw only one category out of thirteen on the plus side and that was real estate.**

As mentioned above, stocks around the globe are showing extreme weakness across the board to start 2016. The relentless drop in the price of oil, an apparent slowdown in China the world’s second largest economy and a Fed that is no longer providing quantitative easing, or zero interest rates.

Last week, I watched a brutally honest assessment of the Fed’s past actions from former Dallas Fed Governor Richard Fisher. He is the first Fed official to admit that QE was designed to propel the stock market and create a “wealth effect.” It is his belief the market was artificially supported, the market is overvalued as a result and that stocks will have to go through a difficult period of “digestion” to regain normalcy.*** WOW!

Clients have asked us how the market fares in election years, especially those in which the incumbent is in his second year. Historically, the fourth year of the President’s term is the weakest year of the four.****  Markets dislike uncertainty and it is currently impossible to know who will be elected President later this year, but by all accounts it should be interesting. This could put a lid on upside progress until the outcome is determined.

Given this backdrop, the Investment Committee at Gartenhaus has made strides in reducing overall portfolio risk in our model client portfolios. Rest assured that we are prepared to “hunker down” even more, should market conditions warrant it. As always, we encourage clients to get in touch if there are any questions or concerns about your specific holdings.

*Source: Morningstar

**Source: Calamos Investments

*** Source: cnbc

****Source: Stock Market Almanac

In this edition of the Cura Corner, we are delighted to welcome Dr. Adam Pletter and a reprint of his article that recently appeared in the Washington Post. Dr. Pletter has been a client of Gartenhaus for many years and we are delighted to feature this timely advice for the benefit of clients with younger children who are engaged in the digital age.  Dr. Pletter is a practicing psychologist located in Bethesda, MD who specializes in counseling young children and teens.

PARENTING IN THE DIGITAL AGE: REAL TIPS TO HELP KIDS (AND PARENTS) TODAY

By Dr. Adam Pletter

Why is my 6-year-old twerking?
How do I limit what my 10-year-old can see on his phone?

These are common questions with complicated answers—but as a parent and child psychologist, I have some basics to help you and your children navigate the digital world safely (with a little help from the engineers at Apple). Many of my strategies are based in the built-in settings of your or your child’s device. The devices come with the basics to help us, the first generation of parents in the digital age. However, most of the product owners don’t know how to find and use these basic tools.

With both technical changes and some basic behavior modifications, you and your child will be more empowered to use technology safely.  I focus on Apple products simply because they are the most common devices about which I’m asked. However, nearly all of the following suggestions can be adapted to Android.

1. Write a Contract. Step one is to think about your expectations and rules for your children in the digital world. Out of the box, all of these devices are setup for adults, not children or teens, so some thinking and prep is necessary before handing it over. You would never drop them off in Times Square and say “Have fun! Don’t get in trouble.”

Make the list simple and start with the basics: in order to have access to this amazing device, this is what we (your parents) are responsible for and in return, this is what is expected of you. The written list of rules will evolve over time so don’t worry if it’s incomplete. Parents and kids sign it and date it.

Revisit the contract at least once a year to make sure it’s still on point. Communicate about your child’s experience online and adjust the contract to have limits while supporting their developing digital skills. Many examples of these contracts are found online. Find one but make it your own by editing it and adding in your family’s values and personal examples (e.g., parents should always know the passcode to their child’s device).

2. Enable Restrictions and have a conversation. Whenever possible, you should enable restrictions on the adult device before your child has ever used it. By using these built-in parental controls, found under Settings, then General and then Restrictions, you have the power to set limits and supervise what your child can see and do on the device.

Play around and get familiar with the controls. If the restrictions are initially set too high, even better. That way your child will come to you and you can have a great dialogue about what they want to do and then you can explain whether that’s okay, and why or why not. That conversation with your child, whether you grant permission or not, is the key. Consistent restrictions force the child to pause and then come find you to talk about their request. By doing so you are teaching him to think about his actions online—a necessary and invaluable skill for all digital users.

3. Turn off/ Delete YouTube. If you are concerned about the time spent or videos viewed, I suggest turning off (or temporarily deleting) the YouTube app and blocking YouTube in the web browser. Imagine the learning experiences possible when your child is motivated to behave appropriately in order to keep Youtube on his device. This type of learning is essential as he grows older in the digital world. I don’t promote ‘Just say no’, but rather ‘Yes, when…’ Such as: Yes you can have YouTube when you behave appropriately (e.g., no twerking at the dinner table).

4. Guided Access. IPhones are all-in-one devices, which is pretty incredible, but also incredibly problematic for our children. Want your kid to practice math facts but every time you leave the room, he switches from the educational app to Minecraft? After a brief set up, again under Settings, look for Guided Access.  There, you can lock the device on one app until you (the parents) put in a code or release it with your fingerprint. This is a powerful tool for parents as it allows for some flexibility. No longer is the device either off limits in a drawer or free access. She wants to listen to music? Okay. But not texting and watching videos at the same time. (By the way, off limits in a drawer is a fine and sometimes necessary strategy to limit their usage also, but that’s for a different article.)

5. Be a model for your child. Remember the Partnership for Drug Free America ad campaign? You know, the one where the father confronts his son after finding marijuana and the son looks up and replies, “I learned it by watching you!” Well, it’s true. Your children are learning about the world by watching you and that’s a good thing. You helped them learn to talk, walk, eat with a fork. Pretty much everything they now do, you directly influenced.

So, at a minimum, be mindful of how often the phone is in your hands. How often are you reading work e-mails or texting while your child is present? Be aware that they are learning and being shaped by what they perceive around them. Work toward being the good influence that you ideally want your child to be around. Your kids will quickly know more than you do. However, for now you are in charge, and therefore, you must use the tools available. Thankfully, we have the basic tools built in to the devices. It’s our obligation as parents to set reasonable limits and consistently follow through so our children learn how to safely navigate the digital world independently.

Just like any other family topic, if parents don’t lead, the children will learn elsewhere. New technology can be scary, but don’t let your fear of technology limit your ability to parent in the digital world.

We have no choice and your children are not afraid.

The opinions and forecasts expressed in this commentary are those of the author and may not necessarily reflect those held by NFP Advisor Services, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a guarantee of future results. It is not guaranteed by NFP Advisor Services, LLC for accuracy does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. The indices mentioned are unmanaged and cannot be directly invested into. Past performance is no guarantee of future results. NFP Advisor Services, LLC does not offer tax or legal advice. Securities and Investment Advisory Services offered through NFP Advisor Services, LLC, member FINRA/SIPC. NFP Advisor Services, LLC is not affiliated with Gartenhaus Financial.