The Issachar Fund (LIONX) – Risk Managed BRI – is fully invested in Muni Bonds, International Bonds and Gold. I sold all stock positions as the stock market tested the 8/5/19 low and stops were triggered. Muni bonds and gold have been performing well as interest rates continue to decline and investors run for cover. Muni bonds were trending higher at about a 12% annualized rate from November to the end of July, but they are now trending at almost four times that rate. Consequently, I am a little concerned about the sustainability of the current muni bond trend, but I do not see the uptrend reversing any time soon. International bonds are trending up as well and I welcome and expect bonds to take a breather here and digest some of their recent gains. I would view a sideways movement in bond prices as very constructive and a possible opportunity to increase bond exposure. It would be hard for me to make a case for higher rates therefore I am comfortably positioned and seek to take advantage of stable to lower rates. Gold has been seeing a lot of investor demand since the beginning of August and the current annualized return of over 300% is not likely to sustain for too much longer without some sort of correcting back-and-fill action. If gold does see some corrective action in the short run, that might also be a good time to add some opportunistic gold buys if conditions are right. If I am wrong, I stand ready do what is necessary to avoid life-changing losses and keep shareholders in line with our objective “seeking moderate capital appreciation consistent with capital preservation”. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
I believe this is a “traders” market and not an “investors” market as sustainable up trends in stocks are hard to come by. The current stock market index of 500 large cap stocks is technically in a short-term down trend defined by its lower trending peaks. The index is hitting up against its down trend line as of Friday, and I am now expecting lower stock prices given the current weight of the evidence. I have a few stocks that look “buyable”, but I view the “risk” as high due to the down-trending indexes that many stocks follow. I will patiently wait for the market to give more clues as to direction and speed before taking any stock positions. I am a risk manager, so I try to control the risk I take and let the market determine the return it wants to give. I believe this market is more for swing-traders and day-traders who are good at taking advantage of very short-term swings in the market. This market is not your “grandfather’s market” now that algorithmic trading (algos) seems to be the dominating force in the market. I am of the current opinion that machines (algos) are the predominant market “movers and shakers” instead of institutions like in the old days. However, I remain “flexible and opportunistic” with a humble and teachable spirit.
The European Central Bank (ECB) adopted a negative interest rate policy over five years ago starting at -0.1% to address their economic weakness. The targeted short-term rate is now near -0.4% and they still are not seeing desirable economic growth. The ECB tried to force its banks to loan money to customers by charging the banks “negative rates” on their excess reserves as a way of punishing them into lending out money but it does not seem to be working. Negative rates can be seen as a “tax” on the banks and that certainly cannot help their profitability or balance sheets. QE (printing money out of thin air) in Europe does not appear to be having the desired effect therefore they resort to more and more QE maybe because they are out of economic “bullets”. If that is the case, this global QE experiment could end with life-changing consequences. Please try and wrap your head around “negative rates” and understand what is happening because I believe it could be worse than the near “financial collapse” that occurred in 2008 with sub-prime lending. Why would someone want to pay money to loan the ECB money is beyond my comprehension? It simply does not make sense to me but that is the world we live in today, so I am trying to digest it as a “new normal”. Keep in mind that negative interest rates are “man-made” and not something that happened organically through the normal forces of supply and demand. More importantly, I believe negative rates are a strong indication that QE did not work because if QE worked then negative rates would not be necessary. European policy makers seem to be near “panic mode” because Germany’s industrial production was down 5.2% in June verses a year ago which was the largest drop since 2009. Many now believe that Germany’s real GDP contracted in Q2! Italy’s economy has not grown in the past year and France has only grown 1.3% from a year ago. Smaller European countries like Poland and Hungary are doing well but they are too small to move Europe higher so what will the ECB do next? Maybe they should “man up” and acknowledge that their bad fiscal and regulatory policies may be the culprit for their economic morass. Maybe they should do like Trump by lowering taxes and cutting regulation in an effort to spur economic growth. Historically, Capitalism/Entrepreneurship has worked for the people and Socialism has worked for those in power.
The LORD has established His throne in the heavens, And His sovereignty rules over all. Psalms 103:19
Bottom line: Bonds are holding up well while stocks struggle in this low to lower interest rate environment. Just because short term rates are higher than longer term rates (inverted yield curve) that does not guarantee that we are headed into a recession anytime soon. I believe that the Fed will lower rates sooner rather than later. If rates are lowered, this should squash the “fake news” hopes of a recession to hurt Trump’s reelection chances. It is sad day when some people would rather see the economy suffer rather than Trump and America succeed. All major indexes are still trading below their 50-dma and I view that as higher risk. I remain focused on risk management in an effort to avoid life-changing losses for you and for me. If you know of someone who might benefit from my style of risk management, please help me spread the “good news”. I really appreciate your Trust and Business! Grace & Peace to Everyone!
Investors should carefully consider the investment objectives, risks, charges and expenses of the Issachar Fund. This and other important information about the Fund are contained in the prospectus, which can be obtained by calling 1-866-787-8355 or visiting https://www.LIONX.net. The prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., member FINRA/SIPC. Horizon Capital Management Inc, Inc is not affiliated with Northern Lights Distributors, LLC.
Important Risk Information
Mutual Funds involve risks including the possible loss of principal. The Fund may hold cash positions when the Adviser feels that the market is not producing returns greater than the short-term cash investments in which the Fund may invest. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the inability to collect revenue, for the project or from the assets. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. There is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly and the Fund will not be able to sell stocks quickly enough to avoid losses or reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. The Adviser’s judgment about the attractiveness, value and potential appreciation of particular asset classes and securities in which the Fund invests may prove to be incorrect and may not produce the desired results. Past performance is no guarantee of future results. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. Biblical Responsible Investing (BRI) is the term used to describe the activities of Christian investors who purposely align their investment choices to support their Christian beliefs. NLD Review Code: 3638-NLD-8/19/2019