Last month, Boyer & Corporon Wealth Management was honored as one of the top 25 companies in Kansas City with fewer than 25 employees. We were recognized at an award banquet and as we went up to receive the award, they played a video of Mindy and me… a 60-second video which was edited and compiled from a 6-7 minute interview.

It was reported that Osama Bin Laden was killed Sunday night by a U.S. military operation. Almost ten years after the terrorist attacks on 9/11, our military succeeded in eliminating the mastermind behind the attacks. Although his death is not likely to ebb terrorist activity, this successful operation brings a small (maybe large) degree of satisfaction to Americans who still feel violated after 9/11… and will probably boost President Obama’s popularity just as he is heading back into campaign mode. Most impressive was the ability of the military to descend upon Bin Laden’s compound/mansion in what was essentially a suburb of Islamabad, the capital of Pakistan. The “you can hide… but you can’t hide forever” message is one this country needed to deliver to its enemies. The elements who seek to terrorize us need to know that, even if military retribution is slow, it is still certain.

I am traveling to Edinburgh, Scotland this week for the 64th CFA Institute Annual Conference (Chartered Financial Analysts). I look forward to listening to some of the brightest investment minds in the world. Three years ago at the conference held in Vancouver, Nissam Nicholas Taleb (author of The Black Swan) was a keynote speaker. He warned us of the impending banking credit crisis and implied that Wall Street bankers were ALL playing a game of financial Russian Roulette. Bear Stearns, which had just become virtually bankrupt, had been unlucky enough to be holding the gun when it went off. Taleb reminded us that, just because the gun doesn’t fire when it’s your turn, it doesn’t mean you aren’t stupid for playing Russian Roulette. Realizing that many other Wall Street banks were playing the same game that Bear Stearns was playing was extremely useful information to have in May, 2008. One of the keynote speakers this year is Meir Statman whose audience I have had the pleasure of being in. Mr. Statman always provides an insightful look at “behavioral finance.” Behavioral finance puts a magnifying glass to all the stupid things investors do when they make investment decisions… like not selling a stock just because it is trading below what you paid for it… or owning a large stock position in a company just because you work for that company. I expect that he will present new information next week but if he only repeated the same information every year, it would still be worth hearing. Look for my June Investment Commentary to provide a synopsis of what I learned at this year’s conference.

Trying to position your investments based upon what you expect to occur in the economy or in a particular industry can be humbling. Your assumptions and projections can be correct and you still might not realize much of a return on your investment for a long time. You see something, you notice a trend, you pick it apart, you analyze it and you figure out how it will lead to an investment conclusion… then the hard part: you have to try to predict WHEN? Below is a table showing the total number of new car and truck sales each year for the past decade (in millions).

Prior to the “Great Recession,” there were approximately 17 million new vehicles sold each year. In 2008 and 2009, that declined to 13.5 million and 10.6 million respectively. Meanwhile, global population has increased every year and demand for transportation continues to grow. Existing automobiles continue to be driven and wear out a little bit each and every day. Although cars last longer than they used to (mine has 169,000 miles and runs like it is brand new), they have a finite life. You eventually have to replace them. It’s not a stretch to assume that if there were ten million fewer cars sold than normally would have been sold over that two year period, at some point we will experience an unusual increase in demand. We don’t know WHEN that demand will kick in and we don’t know WHERE the demand will be the greatest. Will it be Ford? Toyota? Will it be trucks? Hybrids? Electric cars? We don’t know. However, we don’t necessarily need to know in order to have a successful investment theme. We don’t have to guess which brand will sell the most nor do we have to figure out which type of car will be in greatest demand. All of the brands and types have a few things in common. They all have seats, windows, air bags, and all sorts of other accessories. At BCWM, we are gradually beginning to pick up shares of companies that manufacture just those sorts of products. We have no idea when this potential slingshot of car sales might occur. It could be several years from now. It could be soon… although the increased cost of food and energy might make it difficult for consumers to spring for a new car any time soon. If we are early and the stocks we like get cheaper, we will be tempted to add to our investments. When an inevitable wave of demand will eventually occur, you have to put yourself in the right position… and then wait.

On April 18th, Standard & Poors affirmed its AAA sovereign credit rating for debt issued by the United States. However, S&P revised its long-term outlook on U.S. debt from “stable” to “negative.” S&P’s abysmal record of mis-rating billions of dollars of sub-prime mortgage backed securities notwithstanding, this was a very loud statement… a statement that says, “you guys are starting to look like you might be headed toward financial trouble”. Citing large budget deficits and increasing government debt, S&P implied the U.S. is starting to look a little shaky relative to its AAA-rated peers. We hope this serves as a wake-up call to the political powers that be. You might think that the change in the S&P outlook would weaken investor confidence in U.S. Treasuries. You might think that if investor confidence in U.S. Treasuries weakened, interest rates would increase. If the Obama Administration is running record budget deficits and the majority of U.S. investors are positive we are going to experience significant inflation, if not hyper-inflation, interest rates MUST surely rise. Contrary to what you might think, yields on U.S. Treasury Bonds declined in April. The 10-year bond began April with a yield of 3.7% and ended April with a yield of 3.43%. How can interest rates decline? How is that possible? Several things you need to remember. The U.S. dollar is STILL the world’s reserve currency. That doesn’t change easily. It may change someday but it won’t change easily or quickly. In addition, inflation is not likely to become an institution when nine out of ten people are expecting it (take your own poll around your office and see if it doesn’t come out 90/10). Thirdly, we are still very much a de-leveraging economy. Inflation is not as likely when consumers are using their income to reduce debt. Yes, we have higher energy prices and higher food prices. “Higher prices” is not inflation. Higher prices which beget higher wages which beget higher prices which beget… THAT’S inflation. Unemployment is still almost 9%! Workers aren’t demanding higher wages. The average person thought we were experiencing inflation three years ago (but has conveniently forgotten that he/she thought that). Remember the summer of 2008? Oil was trading at $147 per barrel. There were all sorts of reasons bandied about but the most popular one was that China was growing so fast it was causing permanent, everlasting inflation. A few months later, oil was trading at $33 per barrel. That wasn’t inflation. That was higher prices which then became lower prices. Don’t get me wrong. We may still experience inflation. Certainly if the Federal Reserve has anything to say about it, inflation is on its way. While other nations are raising interest rates, Bernanke is making sure interest rates in the U.S. remain low which is driving the value of the dollar down relative to other currencies. To the extent the dollar declines, we are importing inflation… goods from other countries become more expensive as the dollar falls. But this also is not a permanent situation as the Fed can raise interest rates and prop up the dollar (they just don’t want to yet). Foreign goods then become less expensive. The U.S. stock market (S&P 500) increased 2.96% in April and is up 9.05% YTD. QE2 is scheduled to end soon so don’t be surprised if the stock market rally takes a summer break. We won’t be. At Boyer & Corporon Wealth Management, we are more heavily weighted toward multi-national companies, international companies and municipal bonds… particularly zero coupon municipal bonds… particularly those from municipalities in California. Talk about contrarian.

This information is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

Last month, Boyer & Corporon Wealth Management was honored as one of the top 25 companies in Kansas City with fewer than 25 employees. We were recognized at an award banquet and as we went up to receive the award, they played a video of Mindy and me… a 60-second video which was edited and compiled from a 6-7 minute interview.

It was reported that Osama Bin Laden was killed Sunday night by a U.S. military operation. Almost ten years after the terrorist attacks on 9/11, our military succeeded in eliminating the mastermind behind the attacks. Although his death is not likely to ebb terrorist activity, this successful operation brings a small (maybe large) degree of satisfaction to Americans who still feel violated after 9/11… and will probably boost President Obama’s popularity just as he is heading back into campaign mode. Most impressive was the ability of the military to descend upon Bin Laden’s compound/mansion in what was essentially a suburb of Islamabad, the capital of Pakistan. The “you can hide… but you can’t hide forever” message is one this country needed to deliver to its enemies. The elements who seek to terrorize us need to know that, even if military retribution is slow, it is still certain.

I am traveling to Edinburgh, Scotland this week for the 64th CFA Institute Annual Conference (Chartered Financial Analysts). I look forward to listening to some of the brightest investment minds in the world. Three years ago at the conference held in Vancouver, Nissam Nicholas Taleb (author of The Black Swan) was a keynote speaker. He warned us of the impending banking credit crisis and implied that Wall Street bankers were ALL playing a game of financial Russian Roulette. Bear Stearns, which had just become virtually bankrupt, had been unlucky enough to be holding the gun when it went off. Taleb reminded us that, just because the gun doesn’t fire when it’s your turn, it doesn’t mean you aren’t stupid for playing Russian Roulette. Realizing that many other Wall Street banks were playing the same game that Bear Stearns was playing was extremely useful information to have in May, 2008. One of the keynote speakers this year is Meir Statman whose audience I have had the pleasure of being in. Mr. Statman always provides an insightful look at “behavioral finance.” Behavioral finance puts a magnifying glass to all the stupid things investors do when they make investment decisions… like not selling a stock just because it is trading below what you paid for it… or owning a large stock position in a company just because you work for that company. I expect that he will present new information next week but if he only repeated the same information every year, it would still be worth hearing. Look for my June Investment Commentary to provide a synopsis of what I learned at this year’s conference.

Trying to position your investments based upon what you expect to occur in the economy or in a particular industry can be humbling. Your assumptions and projections can be correct and you still might not realize much of a return on your investment for a long time. You see something, you notice a trend, you pick it apart, you analyze it and you figure out how it will lead to an investment conclusion… then the hard part: you have to try to predict WHEN? Below is a table showing the total number of new car and truck sales each year for the past decade (in millions).

Prior to the “Great Recession,” there were approximately 17 million new vehicles sold each year. In 2008 and 2009, that declined to 13.5 million and 10.6 million respectively. Meanwhile, global population has increased every year and demand for transportation continues to grow. Existing automobiles continue to be driven and wear out a little bit each and every day. Although cars last longer than they used to (mine has 169,000 miles and runs like it is brand new), they have a finite life. You eventually have to replace them. It’s not a stretch to assume that if there were ten million fewer cars sold than normally would have been sold over that two year period, at some point we will experience an unusual increase in demand. We don’t know WHEN that demand will kick in and we don’t know WHERE the demand will be the greatest. Will it be Ford? Toyota? Will it be trucks? Hybrids? Electric cars? We don’t know. However, we don’t necessarily need to know in order to have a successful investment theme. We don’t have to guess which brand will sell the most nor do we have to figure out which type of car will be in greatest demand. All of the brands and types have a few things in common. They all have seats, windows, air bags, and all sorts of other accessories. At BCWM, we are gradually beginning to pick up shares of companies that manufacture just those sorts of products. We have no idea when this potential slingshot of car sales might occur. It could be several years from now. It could be soon… although the increased cost of food and energy might make it difficult for consumers to spring for a new car any time soon. If we are early and the stocks we like get cheaper, we will be tempted to add to our investments. When an inevitable wave of demand will eventually occur, you have to put yourself in the right position… and then wait.

On April 18th, Standard & Poors affirmed its AAA sovereign credit rating for debt issued by the United States. However, S&P revised its long-term outlook on U.S. debt from “stable” to “negative.” S&P’s abysmal record of mis-rating billions of dollars of sub-prime mortgage backed securities notwithstanding, this was a very loud statement… a statement that says, “you guys are starting to look like you might be headed toward financial trouble”. Citing large budget deficits and increasing government debt, S&P implied the U.S. is starting to look a little shaky relative to its AAA-rated peers. We hope this serves as a wake-up call to the political powers that be. You might think that the change in the S&P outlook would weaken investor confidence in U.S. Treasuries. You might think that if investor confidence in U.S. Treasuries weakened, interest rates would increase. If the Obama Administration is running record budget deficits and the majority of U.S. investors are positive we are going to experience significant inflation, if not hyper-inflation, interest rates MUST surely rise. Contrary to what you might think, yields on U.S. Treasury Bonds declined in April. The 10-year bond began April with a yield of 3.7% and ended April with a yield of 3.43%. How can interest rates decline? How is that possible? Several things you need to remember. The U.S. dollar is STILL the world’s reserve currency. That doesn’t change easily. It may change someday but it won’t change easily or quickly. In addition, inflation is not likely to become an institution when nine out of ten people are expecting it (take your own poll around your office and see if it doesn’t come out 90/10). Thirdly, we are still very much a de-leveraging economy. Inflation is not as likely when consumers are using their income to reduce debt. Yes, we have higher energy prices and higher food prices. “Higher prices” is not inflation. Higher prices which beget higher wages which beget higher prices which beget… THAT’S inflation. Unemployment is still almost 9%! Workers aren’t demanding higher wages. The average person thought we were experiencing inflation three years ago (but has conveniently forgotten that he/she thought that). Remember the summer of 2008? Oil was trading at $147 per barrel. There were all sorts of reasons bandied about but the most popular one was that China was growing so fast it was causing permanent, everlasting inflation. A few months later, oil was trading at $33 per barrel. That wasn’t inflation. That was higher prices which then became lower prices. Don’t get me wrong. We may still experience inflation. Certainly if the Federal Reserve has anything to say about it, inflation is on its way. While other nations are raising interest rates, Bernanke is making sure interest rates in the U.S. remain low which is driving the value of the dollar down relative to other currencies. To the extent the dollar declines, we are importing inflation… goods from other countries become more expensive as the dollar falls. But this also is not a permanent situation as the Fed can raise interest rates and prop up the dollar (they just don’t want to yet). Foreign goods then become less expensive. The U.S. stock market (S&P 500) increased 2.96% in April and is up 9.05% YTD. QE2 is scheduled to end soon so don’t be surprised if the stock market rally takes a summer break. We won’t be. At Boyer & Corporon Wealth Management, we are more heavily weighted toward multi-national companies, international companies and municipal bonds… particularly zero coupon municipal bonds… particularly those from municipalities in California. Talk about contrarian.

This information is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.