Download the July Review - Blue Water Capital Advisors

Bi-Monthly Market Review
“How to Beat Inflation”
(Proven Allocations That Work Against Inflation)
July 17th, 2014
Kevin M. Wilson, PhD
Chairman/CEO
1405 Medical Arts Building
324 W. Superior Street
Duluth, MN 55802
Ted A. Pavlovich, WMS
President/Wealth Mgmt.
Advisor
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Office: 218-464-4399
Toll Free: 877-327-5062
Fax: 218-464-4397
Email: [email protected]
www.bluewatercapitaladvisors.com
INTRODUCTION
(-82%)
TED A. PAVLOVICH
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RECENT ECONOMIC DATA
SUGGEST INFLATION’S ON THE
WAY
KEVIN M. WILSON
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Cost-Push Inflation With Wages Leading in 1970’s
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Commodity and Land
Prices Rising
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Add Heathcare and Other Factors
And You Get Higher Inflation
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Middle Class Getting Squeezed
$4326
(3x)
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Wage Pressures Rising
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Fed Has Created Dangerous
Situation That Will Be Hard
To Manage
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JUDGING THE RISK POSED BY
INFLATION
TED A. PAVLOVICH
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High Inflation Causes Big
Problems For The Economy
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Example: Bonds Lose Value
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Example: Stocks Don’t
Do Very Well
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Even Diversified Moderate Portfolios
Under-Performed Under High Inflation
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THREE FACTORS IN INFLATION
HEDGING
TED A. PAVLOVICH
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The 1970’s Demonstrated The Limits of
A Standard Portfolio Approach
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Factor 1: Sensitivity of
Inflation Hedges
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Factor 2: Reliability of Inflation Hedges
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Factor 3: Volatility of Inflation Hedges
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MIXING REAL ASSETS TO
COMBAT INFLATION
KEVIN M. WILSON
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Diversification Has Variable
Utility As Circumstances Change
bonds
all stocks
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How Much Equity To Allocate
Depends on the Inflation Rate
(If Indexing)
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A Wide Array of Assets Should Be Used
In Combination, Depending on Rates
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Oil vs. Money Supply
Sector Allocations Are Critical
To Hedging Against Inflation
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Real Assets Like Land,
Real Estate and Timber
Are Also Effective Hedges
houses
stocks
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Gold and Other Real Assets
Have Complex Utility
As Hedges
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Hedging Involves a Time Factor
(Must Have Active Mgmt.)
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Allocation Weights Change As
Inflation Rate Increases
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SUMMARY
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Inflation may be on the way
Risks to investors are high
Inflation risk can be hedged
Asset allocations will need to vary
with inflation intensity
KEVIN M. WILSON
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Q&A
KEVIN M. WILSON
TED A. PAVLOVICH
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Disclaimer
This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any
security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine
which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed
herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for
its accuracy and interpretation are not guaranteed.
Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication
of guarantee of future performance and no representation, express or implied, is made regarding future performance.
The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax
matters.
“BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital
Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National
Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.”
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