Update on Market Conditions and Medicare Cost Increase
CONCLUSION—Still Bullish, But Some Divergences Growing
Let’s keep it simple. Several stock indexes, including the S&P 500, S&P 400 Mid-Cap Index and the NY Composite, have made new all-time highs in the past few days. This has been confirmed by various Advance/Decline lines, as shown in the chart below, courtesy of www.stockcharts.com.
As noted previously, when internal strength confirms price, the ultimate price top is usually several months away. This does not imply, though, that all is well. There is growing selectivity in other internal data, such as the number of stocks making new 52-week highs. Look at the difference below:
NY Composite 10-31-2014 10,845 # of highs 358
NY Composite 05-21-2015 11,293 # of highs 86
This is typical of a late-stage, mature advance with fewer companies participating. In addition, last week, the Dow Jones Transportation Index made a new 6-month low at the same time the Dow Jones Industrial Average was flirting with a new high. This type of behavior is typically negative for the market, and eventually will matter.
Costs to Increase for Upper Income Medicare Beneficiaries
This hasn’t received much attention, but a new bill recently signed into law by President Obama will increase costs for upper-income Medicare recipients in a few years. It’s known as the Medicare Access and CHIP Reauthorization Act of 2015. This is boring stuff, but buried in the law are some provisions that will dramatically change the scale for setting Medicare B and D IRMAAs (income related monthly adjustment amount).
This will result in some high income individuals being pushed into different brackets, resulting in higher premiums, but with no change in benefits (does that sound familiar?). The expected income brackets and tiers are shown below:
Portfolio Allocations
The only change in the past month has been within our bond strategies. Tactical equity allocations have been fluctuating between 50% and 70%, and our high yield corporate bond model continues in positive mode, with high yield funds and indexes making nominal new highs. In bonds, PIMCO GNMA remains positive, while our model for Loomis Sayles Bond finally turned positive after several months in negative mode.
As a result, capital was moved from Loomis Sayles Limited Duration and from cash to Loomis Sayles Bond. This fund (LSBDX and LSBRX) has a very good long term record, but has lagged the high yield market in recent months. Elsewhere, our real estate model continues positive, and we may be adding to this position should there be future weakness.
Material of a Less Serious Nature
I could not stop laughing when I came across this—it may be particularly funny for those of you who are outdoor enthusiasts. . .
The Blind Cashier at the Bass Pro Shop…
A woman goes into the Bass Pro Shop to buy a rod and reel for her grandson’s birthday.
She doesn’t know which one to get so she just grabs one and goes over to the counter.
A Bass Pro Shop associate is standing there wearing dark.
Shades. She says, “Excuse me, sir, can you tell me anything about this rod and reel?”
He says, “Ma’am, I’m completely blind; but if you’ll drop it on the counter, I can tell you everything from the sound it makes.”
She doesn’t believe him but drops it on the counter anyway.
He says, “That’s a six-foot Shakespeare graphite rod with a Zebco 404 reel and 10-LB. test line.
It’s a good all around combination and it’s on sale this week for only $20.00.”
She says, “It’s amazing that you can tell all that just by the sound of it dropping on the counter. I’ll take it!”
As she opens her purse, her credit card drops on the floor.
Oh, that sounds like a Master Card,” he says.
She bends down to pick it up, and accidentally farts.
At first she is really embarrassed, but then realizes there is no way the blind clerk could tell it was she who tooted.
Being blind, he wouldn’t know that she was the only person around.
The man rings up the sale and says, “That’ll be $34.50
The woman is totally confused by this and asks, “Didn’t you tell me the rod and reel were on sale for $20.00? How did you get $34.50?”
He replies, “Yes, Ma’am.
The rod and reel is $20.00, but the Duck Call is $11.00 and the Bear Repellent is $3.50.”
A little Daddy/Daughter time
Thought you’d enjoy this recent photo of our Duchess Caroline, who will be finishing the fourth grade in a couple of weeks.
Here’s hoping you had an enjoyable Memorial Day weekend.
Sincerely,
Bob Kargenian, CMT
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