Election Time

It is that time again, time to elect our new leader. I remember back when I was in fifth grade. One of the candidates for class president promised soda in the water fountain and no school on Friday. These promises sound great as a 10-year-old. Unfortunately neither of these could be accomplished. But here I am so many years later hearing adult versions of unattainable promises. Ah, yes, the election cycle.
In general, stocks have risen over time no matter who is in charge. Come November 8th, at least half of the country will be happy and half will be disappointed. And while each side may have their reasons for elation or gloom, they won’t have a good reason to go about adjusting their portfolios because a particular candidate won.
Many talking heads are advising investors to buy shares of clean-energy companies, defense contractors and multinationals in the event of a Clinton victory. On the other hand, a Trump victory, they say, would be a windfall for coal mines, small company stocks (most of their income is derived in the US) and construction companies (walls). Simple enough.
Before jumping onto the bandwagon, let’s look back to 2008 and see how the predictions of an Obama Presidency have worked out. The talking heads predicted that gun makers would be out of business, health care providers would be in trouble and it would be the beginning of a glorious time for clean energy stocks. Check out a chart of Smith and Wesson over the last 5 years. S&P 500 in green, SWHC in blue. Smith and Wesson clearly outpaced the S&P 500.




Consider this next chart focusing on clean energy stocks as represented by PBW Powershares WilderHill Clean Energy ETF. Not really a glorious time for those stocks. (S&P 500 in green and Clean Energy in blue)



The point is that most companies will adjust to the new President regardless of which party wins. The numbers below show that the results are mixed if you were to try to game the market during or after an election. During some years the markets looked great after the election and in others they did worse.


But when you look over time, markets tend to preform pretty well on average regardless of party.




The Oxford Dictionary has been adding to the lexicon. In additon to “fuhgeddaboutit” they also added; “YOLO” (you only live once), “bracketology” (during March Madness) and “yogalates” (yoga combined with Pilates).


We have also been adding to our Spinnaker Family. In last quarter’s newsletter we mentioned that we have added a new Portfolio Administrator, Vanessa Vigoren. We are very happy to have Vanessa on board. She has been spearheading our client portal program as well as keeping the gears running smoothly. Vanessa also moonlights at a local wine bar, make sure you ask her about the latest and greatest wine when you call in.


We have also added a new advisor, Andrew Krongold. Andrew is a graduate of the University of California, San Diego where he studied Economics. Andrew worked with us at our prior firm and continues to focus his practice on attorneys and retirement planning. We are pleased to have Andrew on board as he keeps us (me) in tune with the millennials.


Intelligent Portfolios


When we launched Spinnaker we wanted to have a platform to compete with some of the “robo” advisors you see advertising these days. We partnered with Schwab to develop our Spinnaker Intelligent Portfolios. These portfolios are great for clients that are looking to set up accounts for children or grandchildren. The accounts have a $5,000 minimum and are fully accessible with an app on your (or their) mobile phone.


Client portals


We are pleased that many of you have registered for your client portal. You may have received an email or call from Vanessa to assist in the activation. The website has up-to-date data on your accounts and we can deliver your quarterly report to the site. One issue we are currently dealing with is the inception-to-date returns. As of this printing the inception is when you linked the account with Spinnaker. We are working with our old firm to get all of the return data fed into the system. We will keep you posted.


Estate Planning


On August 4, 2016 the IRS proposed regulations that, if adopted, will result in some sweeping changes. These changes will effectively eliminate the valuation discount techniques that are routinely used by estate planning attorneys to reduce estate tax exposure. The current timetable is for this regulation to become final as early as January 1, 2017. Additionally, if Hilary Clinton is elected, she has promised to reduce the estate tax exemption to $3.5 Million (currently $5.45 Million). This is not political statement or prediction.


As Martin H. Fischer once said, “A conclusion is the place where you got tired thinking.” Well I think we all should conclude that trying to place bets before or after the election is not the greatest for our portfolios. Given the examples above, we are not willing to make investment decisions on speculation. Remember, not only do you need to correctly forecast the outcome of the vote, you have to correctly react to how the market will react. Markets will incorporate the news instantaneously and our belief is that the best protections is to have you well diversified across and within asset classes.


We won’t promise you soda in the drinking fountain or no school of Friday, but we will do our best to keep your portfolio balanced and you well informed.



* Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1−30 Years [Hedged to USD]). The S&P data are provided by Standard & Poor’s Index Services Group. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2016, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bond indices © 2016 by Citigroup.

The S&P 500 Index is a free-float market capitalization weighted index of 500 of the largest US companies. This index is calculated on a total return basis with dividends reinvested and is not available for direct investment. Charts from Dimensional Fund Advisors. Inflation is typically defined as the change in the non-seasonally adjusted, all-items Consumer Price Index (CPI) for all urban consumers. CPI data are available from the US Bureau of Labor Statistics. Stock is the capital raised by a corporation through the issue of shares entitling holders to an ownership interest of the corporation. Treasury securities are negotiable debt issued by the United States Department of the Treasury. They are backed by the government’s full faith and credit and are exempt from state and local taxes. The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Diversification neither assures a profit nor guarantees against loss in a declining market. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.

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