| The Issachar Fund (LIONX) is 80% invested in various Equity ETFs as of 2/16/18. The Fund owns 8 ETFs (10% each) across several themes that seem to be under investor accumulation. These ETF themes include: USA Momentum, USA Quality, US Banks, US Growth, Internet, Aerospace & Defense, Emerging Markets and Dividend Appreciation. I sold the 30% ETF position recently purchased as it rolled over with the general market correction. One advantage of a small mutual fund like LIONX is its ability to move in an out of the market without making big waves. A pirogue can tack and turn faster than a cruise ship if you know what I mean. I believe that the 10% Index correction is over, and I am actively seeking to purchase new ETF leaders as they emerge. I also believe that it will be harder to make money in any type of bond or income producing investments now that rates are rising. The Floating Rate position was sold because the cost of leverage increased to a level that did not justify the return LIONX was receiving. Now would be a good time to reflect on how your investments faired in this recent scare. As you may have figured out, I do not plan to buy and hold anything because trends change, and I hate losing money. I am diligently seeking to stay in-tune with the major up-trends and avoid the major down-trends in order to have a chance at succeeding in the long-run. (Portfolio holdings are subject to change at any time and should not be considered investment advice. There is no guarantee that any investment will achieve its objectives, generate positive returns or avoid losses.)
In just 9 days, the Dow Jones Industrial Average dropped 10% which is one of the fastest corrections in history. This follows a period of over 500 days of not having a 10% correction. I believe that the recent 10% correction was mainly due to the unwinding of highly leveraged derivative products designed to track the volatility of an index. Volatility had been abnormally low for a long period, so investors would short volatility and go long stocks. Well, they were making a killing on this low-risk trade until … an external event (wage inflation possibly) spoked investors and they all headed for the exits. When too many investors (short-term traders, hedge funds and pensions) get on the same side of a trade with huge amounts of leverage (estimated at $1.5 – $3 trillion) and the trade goes bad (in the opposite direction) it is easy for panic selling to set in as investors scramble to unwind their positions. I believe this highly leveraged trade has been settled (for the most part) and the market is poised to resume the up-trend that started in January. If I am wrong, I plan to potentially hedge or sell my positions in an effort to stay in sync with the major trends of the market. By prospectus, LIONX can be fully invested during a perceived low-risk environment and seeking to be 100% in Cash or potentially short during a perceived high-risk environment. Bottom line, it is not about being right or wrong, it is about seeking to protect profits during down-trends and seeking to make money in up-trends.
The Consumer Price Index (CPI) came out this week indicating that inflation was picking up and the 10-Year Treasury yield climbed to a five-year high! I would have expected the dollar to rise but it continues to slide amidst an ever-increasing deficit. With the prospect of higher inflation, Gold rallied higher, but Oil continues to struggle with over supply issues. The Atlanta Fed recently revised its Q1 GDP growth estimate for the US economy from 4.2% to a whopping 5.4%! We have not seen this kind of economic growth in a very long time! I attribute this kind of growth to the Trump Agenda (lower taxes and de-regulation) in an effort to Make America Great Again (MAGA). I also find hard to believe that the newly Trump appointed Fed chair, Jerome Powell, would do anything stupid (raise rates too fast) to undermine what Trump is trying to accomplish. Jerome was a partner in a private equity firm and just two years ago he had a net worth of $55 million which makes him probably the wealthiest Fed chair in history. I would assume that a man worth $55 million would have more practical knowledge and experience of how real-world business works verses an academic with class-room knowledge. Bottom line, I am very bullish on America and the stock market in the short and intermediate term but not so bullish on the long-term. The enormous amounts of debt we are amassing will eventually have to be dealt with and I do not see it ending in a nice manner. I am dancing but I always dance with an eye on the exit.
It is still not too late make annual IRA contributions for 2017 & 2018 and enjoy tax-deferred growth until you retire.
Mission: Actively managing risk since 1990 to achieve your investment goals.
Vision: Seeking to avoid painful declines and remain invested in up-trends.
Values: Christ-Centered, Dedicated, Honest and Hard-Working.
Incentive: I am the largest shareholder, so I have incentive to succeed.
Verse: Be on your guard; stand firm in the faith; be courageous; be strong.
(1 Corinthians 16:13)
There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Investors should carefully consider the investment objectives, risks, charges and expenses of the Issachar Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-866-787-8355 or visiting www.LIONX.net. The prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Horizon Capital Management Inc., National Association of Active Investment Managers, and Kingdom Advisors is not affiliated with Northern Lights Distributors, LLC.
Mutual Funds involve risks including the possible loss of principal.
The Fund may engage in frequent trading, leading to increased portfolio turnover, higher transaction costs, and the possibility of increased net capital gains, including net short-term capital gains that will be taxable to shareholders as ordinary income when distributed. The Fund may hold cash positions and there is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly and the Fund will not be able to sell stocks quickly enough to avoid losses, or reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions. The Fund’s investments in large capitalization stocks may underperform Funds that invest primarily in the stocks of lower quality, smaller capitalization companies during periods when the stocks of such companies are in favor. Investments in small-capitalization and mid-capitalization companies involve greater risks and volatility than investing in larger capitalization companies. Small and medium-size companies often have narrower markets for their goods and/or services and more limited managerial and financial resources than larger, more established companies. The Fund is non-diversified, which means it invests a high percentage of its assets in a limited number of securities. A non-diversified fund’s NAVs and total returns may fluctuate more or fall greater in times of weaker markets than a diversified mutual fund.
The Fund invests in debt instruments which have varying levels of sensitivity to changes in interest rates, credit risk and other factors. Many debt instruments are subject to prepayment risk, which is the risk that the issuer of the security will repay principal prior to the maturity date. The Fund could lose money if the issuer or guarantor of a debt security goes bankrupt or is unable or unwilling to make interest payments and/or repay principal. Changes in an issuer’s financial strength or credit rating also may affect a security’s value and have an impact on Fund performance. The value of the Fund’s investment in fixed income securities will fall when interest rates rise and the effect of increased interest rates is more pronounced for intermediate-term or longer-term fixed income obligations owned by the Fund. The Fund will invest a significant portion of its assets in securities that are rated below investment grade or “junk bonds.” Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company. These securities generally involve greater risk of default or price changes than other types of fixed-income securities and the Fund’s performance may vary significantly as a result. The floating rate loans in which the Fund invests are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities and may be less liquid than higher rated debt securities.
The value of the Fund’s asset-backed securities may be affected by changes in interest rates, the availability of information concerning the interests in and structure of the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the credit worthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements. The Fund’s investment in municipal securities carries additional risk including changes in federal, state or local laws that may make a municipal issuer unable to make interest payments when due. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the inability to collect revenue, for the project or from the assets. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. In addition to the risks typically associated with fixed income securities, loan participations carry other risks, including the risk of insolvency of the lending bank or other intermediary. Loan participations may be unsecured or not fully collateralized, may be subject to restrictions on resale and sometimes trade infrequently on the secondary market.
The Fund uses investment techniques, including investments in futures contracts, forward contracts, options and swaps, which may be considered to be an aggressive investment technique. Investments in such derivatives may general be subject to market risks that may cause their prices to fluctuate over time and may increase the volatility of the Fund. The use of derivatives may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives, such as counter party risk and the risk that the derivatives may become illiquid. The use of derivatives may result in larger losses or smaller gains than investing in the underlying securities directly. Interest rate swaps are subject to interest rate and credit risk. Total return swaps are subject to counter party risk, which relate to credit risk of the counter party and liquidity risk of the swaps themselves. There may be an imperfect correlation between the prices of options, futures, and/or forward contract and movements in the price of the securities (or indices) hedged or used for cover which may cause a given hedge not to achieve its objective. There may not be a liquid secondary market for futures contracts and Forward currency transactions include the risks associated with fluctuations in currency. If the Fund uses a hedging instrument at the wrong time or judges the market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. Use of leverage can magnify the effects of changes in the value of the Fund and makes them more volatile and increases the risk for loss in adverse environments. Short positions are designed to profit from a decline in the price of particular securities, baskets of securities or indices. The Fund will lose value if the instrument’s price rises – a result that is the opposite from traditional mutual funds.
Investments in foreign securities and securities that provide exposure to foreign securities involve greater risks than investing in domestic securities. As a result, the Fund’s returns and NAVs may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The Fund also may invest in depositary receipts, including ADRs, which are traded on exchanges and provide an alternative to investing directly in foreign securities. Investments in ADRs are subject to many of the risks associated with investing directly in foreign securities. The laws and accounting, auditing, and financial reporting standards in foreign countries typically are not as strict as they are in the U.S., and there may be less public information available about foreign companies. Investments in emerging markets instruments involve greater risks than investing in foreign instruments in general. Risks of investing in emerging market countries include political or social upheaval, nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets and risks from an economy’s dependence on revenues from particular commodities or industries among others. No-Load mutual funds are sold without a sales charge, however other fees and expenses do apply to an investment in the Fund.
NLD Review Code: 4228-NLD-2/16/2018