September Musings

"Blue Moon in August"

September 3, 2013

The SPX - S&P 500 lost 3.1% in August as Treasuries fell for the fourth straight month. The index has gained 14.5% year to date with 67% of that gain taking place in the first quarter. Corporate earnings growth was 5% in the first half while revenue growth was below 2%. 

Investors are suffering from negative bond market returns in 2013. We note that Jeff Gundlach's DBLTX - Doubleline Total Return fund is down 0.88% year to date having averaged 7% gains the past three years. This year he has outperformed 86 percent of his peers. The well known PTTRX - Pimco Total Return Fund managed by Bill Gross is down 3.6% for the year. U.S. government securities lost 0.7% in August declining 3.5% in the prior 3 months. 

Municipal bonds a $3.7 trillion dollar market segment have lost more than 6% year to date, measured by iShares National Muni ETF - MUB which closed the month at 101.91 down 11% from it's all time peak last November. Fears of rising rates and looming defaults abound in spite of municipal bonds excellent credit history. 

While the US dollar was flat in August gold and oil rallied. Emerging markets and EM currencies dropped once again. 

Syrian concerns surfaced late in the month as President Obama announced a retaliatory attack for the use of chemical weapons by the Assad regime. Over the Labor Day weekend Mr. Obama hesitated and decided to seek Congressional approval for a military strike. This uncertainty will hang over the markets until a conclusion is reached. 

Many of the world's stock markets are down year to date, with Brazil and India losing about 25%, Western European markets have recently turned positive as the Eurozone emerged from its long recession. 

US GDP was revised to +2.5% for the second quarter. The Federal Reserve looks for +3% growth in the second half of this year but some remain skeptical. 

Global markets are facing the following uncertainties going into the balance of the year: 
1- An imminent attack on Syria. 
2- The reduction and eventual withdrawal QE stimulus by the FED. 
3- The appointment of a new Fed Chairman. 
4- The effect of higher rates on consumer spending. 
5- The outcome of the September 22 national elections in Germany. 
6- The outcome of debt ceiling and budget negotiations in October. 

Ten year governments have climbed from 1.40% last summer to 2.90% without a negative impact on US or Euro stock markets. Past experience shows that if rates climb due to a strong economy, equity markets move higher. 

There is currently no sign of wage inflation with workers having scant bargaining power. Since 2009 non-government hourly pay is down from $8.85 to $8.77. 

On the positive side of the ledger we have diminishing unemployment, lower budget deficits, a stronger dollar and improving current account deficits. We are moving towards energy independence. We are the largest world economy and the US dollar is the reserve currency. 

While we are stuck in a 2% growth economy and for now headwinds must diminish to achieve 3% growth. Europe and Asia improvement will help.

The SPX closed August at 1633 up 4.3% from the 2007 peak of 1565. With the 2013 consensus SPX estimate of $107.85, earnings are up 23% from the 2006 peak. This implies downside cushion for stock prices. 

Selling at 15 times consensus numbers, equities are not unreasonably priced. Further gains should come if we have improving GDP and better earnings. It is unlikely we benefit from additional multiple expansion which has floated the market higher thus far. 

Money has continued to flow out of bond funds into money market funds. If confidence rises, stock allocations will likely increase. 

In the coming months we shall see how events unfold. Fed moves remain "data dependent". 

Our goal to guide your funds with diligence, preserve your capital, and achieve acceptable returns over the long run. 

Doug Coppola

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

Second Quarter Earnings and Outlook

With 90% of S&P 500 companies having reported, earnings are up 2.4% according to Fact Set. The Financial sector led the way up 28% without which composite earnings would be down 3%.

Mining profits are down 60% squeezed by lower commodity prices and higher costs. Other major sector profits like Technology were down 8%, Energy down 9% and Materials down 10%.

2nd Quarter sales were up 1.6% with 55% of companies exceeding reduced expectations.

Next Quarter's sales are anticipated to be up 3% with earnings up 4% lower forecasts than 3 months ago.

At 1688.98 the S& P sells at 15.4 times 2013 earnings estimates and 14.3 times 2014’s expected number.

While P/E ratios have been rising for the past few years interest rates seem to have reached their low point for this cycle. This suggests better earnings growth is needed to propel share prices higher. The market's rise has exceeded its earnings rise particularly since late 2012.

Europe seems to be moving out of recession but a key German election looms in September and recovery in the Southern tier will be a long process.

China and Japan are both undergoing transitions in their policies affecting the economy of each country and Asia in particular. The jury is out on the results as big structural adjustments are required to be implemented which take time and determination. The under performing Emerging markets as well as commodity driven developed countries are mainly affected.

In the U.S. very soon we face intractable budget issues and the full roll out of Obamacare both problematical. The ongoing uncertainty keeps business spending and new hiring in check. As consumer spending slows as it has this past month so too may the economy.

It will be an interesting period ahead setting the course for a stronger recovery or a stall as the Fed begins to unwind its QE program.

With the turn in the calendar year we will see a change in Fed leadership as well. I anticipate increased market volatility as 2013 enters the final 4 months.

Doug Coppola 

August 12, 2013

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

August Musings

“The Beat Goes On!” 

August 5, 2013 

Stocks outperformed bonds in the month of July with the S&P 500 finishing up 5% at 1685.73. 10-year Treasuries closed with a 2.58% yield after the Fed said it will continue the QE program. Bonds recovered by +0.14% but were down 2.31% in aggregate for the year. 

GDP rose 1.7% for the second quarter which was better than expected but moderate growth for a post Depression recovery. The Federal Reserve forecasts 3% GDP growth in the second half as it anticipates 6.5% unemployment and 2% inflation before ending the bond purchase program. 

It seems we are in a secular bull market in US shares as measured by the SPX index. Levels are 9% above the high of 1565 reached in 2007. Many participants do not trust stocks as after 13 sideways years and 2 bear markets. The last bull run was 1982-1999. Pension funds are underweight equities and cannot meet 7 percent targets by owning bonds. 

Conversely a bear market in bonds began July 2012 with a 1.4% nadir in the 10-year note. Since May's 10-year yield of 1.60% longer term bond prices dropped dramatically. Other high yield instruments including Utilities, REIT’s, and MLP's have under performed the broad stock market averages. We have begun to price in an end to financial repression which has kept bond yields artificially low. 

Current concerns include China's 7% and slowing GDP along with Japan’s economic experiment and the upcoming the German election. Any surprise could tilt investors back toward a more cautionary stance but most forecasters see better economic times ahead. 

Recently a perceptible change has occurred whereby most bonds no longer provide positive returns. We are focusing our investments on low or no duration bond funds which have held up relatively well but are not gaining like stocks. Any investments less than 100% SPX has been relatively disappointing. Investors who formerly avoided risk now want performance that only equity exposure can provide. 

Global markets are smarting from severe drops in commodity prices caused by China's slowdown and recession in Europe. Most Emerging markets have negative returns year to date. European stocks are just beginning to perform while America's rebound has given greater confidence to a system that held together after a period of great stress. SPX earnings have increased from 2010’s $83.66 to $102.47 last year + 22.5% yet the market has rallied about 36 % because stock market multiples are rising. 

Investors know that slow earnings growth trumps rising yields. Except for the irrational P/E peak in 1999-2000 investors have been willing to pay between 7 and 22 times earnings for the past 8 decades. According to Yardini Research SPX operating earnings are expected to be $111.00 in 2013 and $123.58 next year. The market sells at a 15.18 multiple for 2013 and 13.63 times next year's estimate. We are above the midpoint of the historic range but not overvalued. 

If the economy and corporate earnings do not hit a wall stocks become the asset of choice. With earnings rising and bonds no longer a safe bet, the stage is set for more gains. Having made the case for stocks, we recall that corrections frequently come in the Fall as Congress gets back into session. Since 1964 we have had 17 autumn declines of more than 10 % with much of the damage done in October. 

Our job is to cope with changing circumstances as best we can. We therefore adjust portfolios in a deliberate manner. It has been a challenging task to adjust rapidly enough in this slow growth and government policy driven cycle. In a rising market the only winning strategy is to move into better performing securities. Trends have changed and we are acting accordingly. As always your questions and comments are welcome. 

Doug Coppola

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

Second Quarter Review

“Diversification Hurts”
July 2, 2013

Interest rates spiked suddenly in the second quarter as the Federal Reserve Chairman outlined a path to normalcy in a post QE world. Market participants got the much anticipated correction in stock and bond prices. Holders of long maturity bonds and precious metals suffered double digit declines and are now questioning the safety of those assets.

Gold suffered its biggest quarterly loss ever declining 23% since March 28, 2013. Commodities such as copper dropped 16%. China suffered a bout of financial indigestion with a liquidity crunch. 
These events coincided with sharply higher US interest rates and caused Emerging market stocks and bonds to suffer losses of 14.5% and 11%.

In spite of this caustic climate U.S. equities advanced 13% year to date but only 2.9% in this past quarter. June was the first down month all year.

As the Federal Reserve Chairman explained, continued QE will now be "data dependent" not a given fact of life. On June 19th Mr. Bernanke’s words threw fixed income markets into a selling frenzy. The 10-year Treasury note reached a 2.65% yield, a full percentage point higher than mid May’s 1.63%. Some corporate and municipal bond ETF's dropped 9% from their highs while the Standard and Poor’s 500 dropped 5.8% in short order.

Investors are learning that bonds are now as risky and volatile as stocks in an era of Government repressed interest rates. We learned governments cannot hold back huge sellers when they want out. Bond funds experienced record redemptions exceeding 60 billion in June, after inflows of more than 1 trillion over the past 5 years. The Fed was clearly surprised by the severe reaction and has since sent out spokesmen to dial back on Mr. Bernanke's remarks.

It appears that low duration bonds and floating rate notes are a good place to whether the interest rate storm. The latter asset class dropped less than half of one percent during the selloff. US stock markets performed extremely well considering the carnage that went on in other world equity markets.

Japan +14.2% year to date had strong equity gains due to their QE announcements early in the year. Major markets in Europe showed little gain, while China, Russia, Brazil, and South Africa each lost about 20%. Australia, Canada, India, and Mexico were down between 8% and 11%. Diversification hurt rather than helped returns.

Consensus expectations for S&P 500 earnings is $108 in 2013 and $114 for next year. Selling at a P/E multiple of 15 times earnings, stocks are priced below historical norms. If interest rates rise rapidly to 3% on the 10-year Treasury, markets may swoon again. However the Fed has often stated they will remain a buyer of bonds until the unemployment rate reaches 6.5%. That level of unemployment can occur only if the economy improves which brings higher earnings for most companies.

If continued bond redemptions result in money moving into stocks, all will be well for long term investors who go with the flow. If however, rates climb for reasons other than solid economic growth, it will be hard for corporations to continue to grow earnings as margins are at record highs. It becomes unlikely that P/E's will revalue higher in a rising interest rate environment.

Neither economists nor Central Bankers worldwide have a crystal ball but the fact remains that governments will try to keep rates low while economies recover. Governments in Europe, Japan and the US can ill afford higher rates given the level of sovereign debts and deficits.

US companies with transparency, large cash balances, increasing dividends and share repurchases should do well relative to the competition. While P/E ratios abroad are lower than those at home, money moving from cash or bonds will seek safety and liquidity over higher return but riskier possibilities.

I expect numerous economic clouds will remain on the horizon in Europe and China. Higher US interest rates will not drastically slow domestic economic growth. The United States is increasingly energy self - sufficient, thanks to fracking technology and vast natural resources. Low energy prices are giving domestic companies another competitive advantage.

Corporate revenues are expected to be up 1.8% while earnings should climb 3.0% according to new estimates in Barron’s. In a 2% GDP growth economy with 1% inflation, it is unlikely we see another interest spike soon. Bond rates will eventually climb as the Federal Reserve scales back on QE and consumers gain more confidence. US shares are likely continue to do well in this environment.

Douglas Coppola 

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

June Musings

Some interesting trend changes appear to have occurred in May. The most important were yields on 10-year US Treasury Notes went from 1.67% to 2.16%. The end of the 30 plus year bull market in bonds was declared by Bill Gross of Pimco. Utility stocks lost 9.1% of their value in May while Telecoms , REIT's MLP's and the majority of bond categories all had losses.

Investors pushed up stocks for the seventh month in a row as the S&P 500 finished at 1630.74, up 14.3% year to date. Speculation as to when the FED will begin tapering it's bond buying binge is a hot topic which seems to cause stocks to sell off.

Valuation levels in slow growth/ high yielding stocks had reached levels not seen in some time relative to the market averages hence the sudden run for exits in this most successful investment category for the past year.

"Once everyone knows how to play the game they change all the rules" is a common Wall Street adage.

One of my fellow market observers Steve Reynolds of Craig Drill Capital L.P. has drawn attention to a recent Vanguard Group survey citing 86 years of market data which concludes the major predictor of stock market performance is valuation not GDP growth, dividend levels, earnings or interest rates. Economists and Wall Street forecasters focus on all these other issues but most recommend staying fully invested regardless of valuation.

Rational people buy when things are cheap and sell when things are dear. Warren Buffet is the richest example of such an investor who buys low and when he does sell, it is normally for high prices. Human psychology seemingly keeps rational people from doing the same as we move from phases of fear to greed and back again often overlooking valuation.

At 1630 the S&P 500 is trading at 15 times the $108 consensus estimate for this market index whose yield rivals that of the 10-year Treasury note. Stocks while not dirt cheap are cheap relative to bonds and their own historical averages.

Common sense indicates that bonds are far from cheap and likely very dear as rates have finally begun to rise as the global economy remains in growth mode. Stocks in the middle of their historic PE range of 7x - 22x are well off their March 2009 panic lows but have not approached valuations at previous market peaks.

In the short run numerous factors affect market prices around the world today: including timing the next Fed move, Japanese monetary policy, and global unrest.  

We will continue to focus on generating returns given our assessment of where value lies.

Douglas Coppola 

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

May Musings

Sell in May and Go Away?

The S&P 500 index gained 1.9 % in April versus its 1.5 % historical average return since 1950. Health Care stocks, Utilities and Consumer Staples led the year to date performance parade with returns of 19%, 18 % and 17 %. Defensive stocks rule and high dividend payers reign supreme in this yield starved environment; 175 companies have raised their dividends while only 9 have lowered them.

First quarter GDP was + 2.5 % with an unemployment rate of 7.6% and the lowest labor participation rate of 63.3 % since 1979. At that time we had double digit inflation and Jimmy Carter as President.

On the earnings front, 57% of reporting companies have posted lower than expected revenues but 70% have exceeded consensus earnings estimates. Managements are keeping costs down and margins up in this slow growth economy while facing the headwinds of strengthening dollar. In some spots earnings are beginning to sputter, with misses by CAT, GE, IBM and MMM .Despite these negatives the S&P has had the highest quarterly earnings ever of $26.44 annualizing at $105.76 for a 15 times forward P/E ratio.

Ten year US treasury yields closed at 1.67 % while German Bunds yield 1.22%. Spanish sovereign debt for 10 years now pays 4.14 %. Euro austerity measures and deleveraging on the continent have caused 27% unemployment in Spain and 12.1 % across the Euro zone.

Gold saw a 13.6 % drop in 2 days during the month or the biggest drop in 30 years .We seem to have abandoned the fear of hyper inflation? What happened to too much money chasing too few goods? We are witnessing easy money finding its way into financial assets rather than the real economy.

Japan has begun a massive asset buying binge that has rallied their long dormant stock market. They aim to jump start their economy and rescue an increasingly less competitive manufacturing base. As Japanese stocks soar the Yen plunges to multi year lows versus the dollar and Euro.

Europe ,China , Russia and the developing countries all feel pressure to stay competitive and will likely lower interest rates sooner rather than later. Austerity policies will shortly come to an end in the Euro zone as German elections near and unrest in the streets will likely create a need to stimulate GDP and job growth rather than curb deficits.

As we begin the "worst six months of the year" for stock market returns with the S&P 500 index at new all time highs one wonders if this rotation into high yielding equities can continue. History argues for a pause in this rally as the past 3 years saw declines beginning in May.

So far in 2013 U.S. stocks have outperformed non U.S. stocks as well as bonds and commodities. Can we continue this uptrend is the big question?

While bonds are unlikely to appreciate much from here without a global recession both domestic and non US equities are likely to benefit from easy monetary measures and Europe takes a holiday from austerity.

Gather Ye Rosebuds while Ye May!

Douglas Coppola

April 30, 2013

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.

April Musings

New Highs Reached….Are April Showers Next?

The first quarter of 2013 was full of surprises. Florida Gulf Coast University, a Cinderella team, made it to the Sweet 16 level in the NCAA Tournament. A budget sequester in Washington and a brief trip over the dreaded Fiscal Cliff came then went with little effect. The nation's economy survived a sizeable tax increase and continues its slow rate of growth. Both the S&P 500 Index and Dow Jones Industrial Average reached new levels.

On the last day of the quarter the S&P 500 index reached an all time high by 3 points surpassing the 1565.15 peak of 2007. In 2000 at 1527.46 index earnings were $67, P/E ratios were 22.8 times. Earnings were $100 in 2012 with companies having half the debt they had 13 years ago. We seem to have broken out into a new uptrend.

Seventeen Wall Street analysts predict a year end close of 1583, with forecast earnings of $110.51. Today’s price level is a still modest Price/Earnings ratio of 14.1 times forward earnings. The dividend yield is over 2% with an earnings yield E/P of 7%. Index return on equity is 21%.

For the month and YTD, S&P 500 was +3.3% and +10% respectively. Except for bank loans at +2.11%, every bond index was down marginally. The aggregate bond index -0.20%, T-bills returned 0%. Commodities returned -1.1%.

Japan's Prime Minister Shinzo Abe declared an end to the era of deflation and embraced aggressive monetary easing policy similar to our own Ben Bernanke. The Nikkei 225 index in Tokyo managed an 11.7 % gain in dollar terms and 21.5 % in Yen terms. This was the best in the developed world.

Emerging stock markets were down 2.2 %, led by Brazil at -7.5%. Losses came about despite negative cash inflows, lower P/E ratios and higher earnings growth expectations than US shares.

The US dollar index has rallied 5.5% from its September 2012 low despite numerous predictions of the currency's demise. This may account for a similar percentage decline in gold prices this quarter.

Europe is still reeling from concerns over their currency union and overleveraged banks. Spain and Italy suffer from very high unemployment and recession while Greece and Cyprus are in Depression with no release valve from currency devaluation. Necessary and traditional currency devaluations are not in the lexicon of the elite Eurocrats.

An ever tightening noose is slowly asphyxiating already weak economies.

It is logical to assume that the sick men of the south will likely die from the prescribed cure called fiscal austerity. Alternatively and ultimately the strong countries like Germany will be forced to guarantee the debt of their weaker brethren or suffer a Euro break up.

Bank deposit confiscations, above 100,000 insured Euros in Cypress are likely to cause every Euro bank depositor to question the safety of their money.

Institutional and individual investors alike are anxious for a return on their savings. With much of the average of the S&P 500 index paying dividend yields exceeding the 10 year US Treasury’s 1.85% many find stocks a reasonable alternative to bonds. In addition, dividend and capital gains are taxed at 20% or less while income is taxed at the higher federal rate of 39.6%.

With the Central Bank’s ultra easy policy assured for 2 more years, uncertain new leadership in China and a weak Euro zone investment choices have narrowed. Our solution is to continue to seek higher yields from lower credit bonds with short durations. Credit defaults remaining low in the US make high yield corporate debt relatively attractive.

Mortgage Backed Securities still look good with housing prices on the rise. Additionally, Master Limited Partnerships provide high yields, tax deferral and a way to participate in essential infrastructure build out.

It is important to note that despite record debt levels the US is moving toward energy independence. With “fracking technology” we are unlocking our domestic shale reserves.

This gradual but steady move away from foreign energy imports improves our current account and budget deficits. Low energy costs due to domestic sourcing will encourage an industrial renaissance in this country.

With gridlock in Washington, a solid housing recovery, historically low interest rates plus emerging energy independence the stage appears set for further share price gains.

Increasingly the US is seen as a haven for foreign assets. It is interesting to note that both the Chinese and Russians are buying our real estate and energy assets.

Consumer confidence may be low but the world's confidence in our financial system appears to be rising.

Douglas Coppola 

April 1, 2013

Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.