The Issachar Fund (LIONX) holds about 52% Growth Stocks, 28% Short-Term Bonds and 20% Cash. I sold stocks that triggered my sell criteria in Friday’s decline. I stand ready to further reduce exposure as needed should the decline accelerate. I am concerned that this sell-off may be the start of a more serious decline, but I will let price and volume dictate my actions.
The Fed released (last Wednesday) that it expects ZERO rate hikes in 2019! The Fed also said that Quantitative Tightening (shrinking of its balance sheet as Treasury and mortgage securities mature) will conclude at the end of September. The market seemed to like these statements and proceeded to rally on Thursday. On Friday, the yield curve (3-month T-Bills – 10yr T-Bonds) inverted for the first time since 2007 and the market declined about 2%. The last 3 times this happened, we had a recession. That said, this does not guarantee a recession mainly due to the unprecedented levels of debt monetization or Quantitative Easing (QE) in the system. The yield curve slope has been flattening for quite a while. That tends to reduce the profit margin for banks because banks borrow funds at the short-end of the curve and lend at the long end of the curve. If a flat curve means there is little to no difference between the short and long rates, bank profit margin normally shrinks. If the curve inverts, lending can shut down as banks find it more profitable to simply invest in Treasury bills. If banks are reluctant to lend then it may become harder for companies to borrow money for expansion. If companies do not expand then it becomes harder for the economy to grow which could lead to a recession 6 to 12 months down the road. Stocks do not typically do well in a recession, but bonds tend to go up in price as yields decline. I do not believe that we are at risk of a recession 6 to 12 months from now, but I will let the charts tell the story.
I am now subscribing to a signal service. I have always been opposed to “black-box” signals that give mechanical buy and sell signals based on computer “code” because I believe they can eventually quit working without warning. However, I want to always remain open-minded with a humble heart and a teachable spirit, so I subscribed to one of the better-known signal providers in the industry. I plan to use this as a confirmation to what I am seeing in the charts. I hope to gain more trading conviction with this new signal service.
I have asked the Northern Lights Trust Board of Directors if I can make the Issachar Fund a BRI Fund. BRI stands for Biblically Responsible Investing. God put this on my heart while attending a recent Kingdom Advisor (KA) Conference. If approved, I will screen out (not buy) positions that do not line up with Biblical principles. Generally, companies that support abortion, pornography, human rights violations and the like will be excluded from the LIONX portfolio. There are now online screening tools (many of which are free) that allow anyone to type in a symbol and immediately see if the company is BRI compliant or not. I have always wanted to make LIONX a BRI Fund. However, I did not know how until I learned of these online screening tools at the KA Conference. God owns it all and it all belongs to him. My job is to be a good steward of the assets he is allowing me to shepherd while on this earth. If you have any comments, concerns or questions, please Email or call me.
Bottom line: The market took a hit on Friday and it has my full attention. It could be a way for the market to shake out the “weak hands” but it could be a major turning point. Possibly the market knew the Mueller report would be released or it could be an inverted yield curve that caused the market to decline on Friday. No one knows and no one rings a bell to say the bull market has ended so one must stay tuned to the clues that market gives. The next bear market could be the mother of all bears that wipes out retirements that lead to life-changing events. I will do my best to prevent this from happening to the shareholders in LIONX.
(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.)
Fasting is not usually healthy. People who fast tend to lose more muscle than fat.
You cannot be the same, think the same, and act the same if you hope to be successful in a world that does not remain the same. Change is Good!
Verse of the Day:
Do not conform to the pattern of this world but be transformed by the renewing of your mind. Then you will be able to test and approve what God’s will is—his good, pleasing and perfect will. Romans 12:2
The chart below shows the net return for the last 12-months of LIONX (red) verses S&P 500 (green). Note the Return and the Volatility (risk). I believe that managing risk is the key to long-term success. Past performance is no guarantee of future results.