fort knox investment management fall 2016 volume 10, issue ...fortknoxonline.com/files/newsletter -...

Securities and advisory services offered through National Planning Corporation (NPC), member FINRA/SIPC, a Registered

Investment Advisor. Fort Knox Investment Management and NPC are separate and unrelated.

In many ways, the 2016 national

elections will likely go down as

one of the most unusual cycles

in modern history. A giant field

of Republican candidates van-

quished by an outsider with no

political experience and virtually

no paid advertising. A female

former first lady candidate fa-

vored to win the White House,

but only after a surprisingly

fierce battle with a longshot

Democratic Socialist former

independent. The political in-

fighting gets uglier every elec-

tion cycle. To quote a recent

Kiplinger Letter, “This utter

contempt of each side for the

other is unprecedented…”

I’ll preface my election predic-

tions with the statement that

none of these predictions is ei-

ther an endorsement nor a con-

demnation of the candidates

referenced. My most trusted

newsletters operate on the prem-

ise that they attempt to give

accurate predictions, which

don’t necessarily match the de-

sired result of you the reader.

With that said, the presidential

race has recently turned into a

tossup, making it near impossi-

ble to make a prediction with

any level of certainty. Trump

himself breeds uncertainty and

unpredictability. As I write this

in mid-September, he has a lot

of momentum, but still has

ground to make up. Some ex-

perts think he must win Ohio,

Pennsylvania and Florida to

capture the White House. Penn-

sylvania at least, would appear

to be a very difficult win for

Trump, but a lot can still change

between now and early Novem-

ber.

What does this mean for your

investment portfolio? All I can

give you are educated guesses.

With Clinton being more of a

known commodity, the direction

of her policies would be a little

more predictable...an extension

of many Obama policies, but a

slightly more business-friendly

environment. Clinton is certainly

more connected to Wall Street

than Obama and if her husband’s

presidency is any sort of eco-

nomic model, she may govern in

much more of a centrist fashion

than she campaigned with while

trying to win over Bernie Sand-

ers’ supporters.

Trump would be a bit less pre-

dictable due to a lack of a track

record. As a businessman him-

self, one would expect his poli-

cies to be business (and market)-

friendly. At the same time,

watching his policy evolve on

subjects such as immigration

leads a person to believe that

he’s not entirely made up his

mind on various issues.

Much can change between now

and election day and in a year of

extreme uncertainty, it should be

interesting to revisit these pre-

dictions and thoughts in the year

-end newsletter...stay tuned.

The Politics of Investing

The Gold Standard

Odds & Ends By the time you get this (mid-

year turned fall) newsletter,

the 11th annual client apprecia-

tion cookout will have passed.

If you have never been to this

event, you should hear how

attendees rave each year. The

food is fantastic and it seems

everyone has a lot of fun. If you

missed it, make plans to join us

next September and be a part of

all the fun!

Regulatory changes are on

the horizon. I have a confer-

ence in mid-September and

some follow-up training in mid-

November ahead of the imple-

mentation of the Department

of Labor’s new fiduciary rules.

While there are more questions

than answers right now, we

expect additional paperwork,

but beyond that, a more con-

sumer-friendly investment and

financial planning environment.

With regrets, we say goodbye

to Jennifer Wagler. Jennifer

joined our staff last year and

has been a huge help in com-

pleting some projects while

she’s been here. Jennifer was

recently engaged to Tommy

Gearin and will be moving to

Warsaw Indiana. We wish you

the best, Jennifer!

Fall 2016

Volume 10, Issue 1

The Politics of Investing 1

Odds & Ends 1

Year-end Outlook 2

Personal Finance Corner 3

Numbers in the News 3

9/11 Remembered 4

Inside this issue:

Fort Knox Investment Management

Troy D. Stoll, CPA, CFP®

President, Fort Knox

Investment Management

Consider the ravens: They do

not sow or reap, they have

no storeroom or barn; yet

God feeds them. And how

much more valuable you are

than birds! 25 Who of you by

worrying can add a single

hour to your life? - Luke

12:24-25 (NIV)



As we head into the final two

months of the election cycle,

U.S. equity markets face a num-

ber of headwinds from the threat

of a fed rate hike, sluggish

global growth, election uncer-

tainties and rising geopolitical

risks. September is historically

a difficult month for U.S. equity

markets and my suspicion is that

this fall will be no different and

markets, as a result of the

threats faced, will be more and

more volatile. By most metrics,

U.S. stocks are somewhat over-

valued when compared to the

earnings of the related compa-

nies. U.S. economic growth

continues to expand at a rela-

tively slow pace holding down

growth prospects for U.S. com-

panies. Interestingly, while

consumer spending is at an all-

time high, these same consum-

ers continue to pay down debt.

In the aftermath of the 2007-

2009 recession, when 8.8 mil-

lion jobs were shed, in 74

months of job growth since

then, 15.1 million jobs have

been added and the percentage

of part-time jobs (as compared

to full-time jobs) continues to

slide. (The Plow Horse Econ-

omy—Strider Elass—9-15-16)

Oil prices continue to be rela-

tively cheap due to supply and

demand imbalances. Oil contin-

ues to hover just above $45/bar-

rel and consequently, retail

gasoline prices continue to leave

extra cash in consumer pockets

and drive sales of larger luxury

vehicles. Ongoing emphasis in

fuel efficiency in new vehicle

manufacture is a dampening

factor on demand, as are new

domestic oil and gas discoveries

and OPEC’s determination to

sustain production in an effort to

drive foreign (including U.S.)

competitors out of the market.

The U.S. trade balance with

OPEC is now POSITIVE

...amazing when you consider

where we were just a few years

ago with oil shortages.

Areas of strength in the U.S.

economy are single-family

same time, we must be careful

to avoid taking excessive risks

chasing yields.

Municipal bonds also remain

attractive when compared to

their taxable counterparts. De-

fault rates are much lower than

corporate bonds and yields are

competitive even before consid-

ering the tax advantages.

Europe remains problematic in

the wake of the surprise Brexit

vote, which likely results in

Great Britain exiting the EU in a

few years. Spain and Italy’s

sovereign debt remains worri-

some as does the prospect of

more countries leaving the Un-

ion. Growth in the Eurozone is

very stagnant and bond yields

for several EU countries are

virtually zero or in some cases

even negative, making them

very unattractive investment

vehicles. Many Eurozone com-

panies are attractively priced

relative to their earnings, but

when considering the obstacles

in front of the continent in gen-

eral, it doesn’t seem attractive to

add investments in this region.

Japan remains in a very slow

growth mode with a heavy gov-

ernment debt load and an aging

population. There are signs that

they are turning the corner, but

without robust growth, the Japa-

nese economy remains fragile.

In sectors, of our three favorites,

healthcare has finally cooled

off, although we still see signifi-

cant opportunities in the long

run. Technology has attractive

potential, but has gotten fairly

expensive, making it hard to be

excited about the near-term

prospects. Only infrastructure

remains fundamentally attrac-

tive and appears to be an attrac-

tive place to invest new dollars.

Looking forward, infrastructure

is due for a boom, considering

the age and condition of many

roads, power grids and pipelines

in this country and abroad.

2016 Year-End Outlook

The Gold Standard Volume 10, Issue 1

“...while consumer

spending is at an all-

time high, these same

consumers continue

to pay down debt.”

“In the aftermath of

the 2007-2009

recession, when 8.8

million jobs were

shed, in 74 months of

job growth since

then, 15.1 million jobs

have been added…”

Please see lower left corner of this

page for important disclosures.

home starts and new vehicle pur-

chases as consumers show renewed

confidence and appear to be taking

advantage of sustained low interest

rates. The 10-year U.S. Treasury

bond rate continues to hover just

over 1.5% (August 2016)...an amaz-

ing display of strength in govern-

ment bonds that I did not expect this

late in the recovery cycle.

The markets appear to expect at

least some level of gridlock regard-

less of who wins the White House

in November. Specifically, it is

expected that neither party will

possess a filibuster-proof majority

in the senate. Interestingly, U.S.

markets tend to perform signifi-

cantly better when there is at least

some level of gridlock, so al-though

it seems frustrating when Republi-

can and Democrats are able to

counter each other’s initiatives, it

may well be beneficial to your in-

vestment portfolio in the long run.

Emerging markets, such as Brazil,

Mexico, Greece (yes, Greece!),

Venezuela and Argentina appear

attractively valued, despite signifi-

cant economic challenges. China’s

transition from an export economy

to a consumer-driven economy ap-

pears on track as the Chinese econ-

omy registered a 6.7% gain in the

second quarter of 2016 (National

Bureau of Statistics of China—7-

15-2016), which is unchanged from

the first quarter number, indicating

stabilization of the growth rate after

a significant decline from almost

10% a few years back. India’s in-

flation rate appears to be stabilizing

between 5-6% (Ministry of Statis-

tics and Programme Implementation

(MOSPI) - August 2016) after ex-

ceeding 10% at the end of 2013.

Although we have long expected

interest rates to rise (and expect a

short-term rate increase in Decem-

ber), it now appears that this will

take a significant amount of time,

leaving rates very low for the fore-

seeable future, perhaps several

years. This will force investors to

be creative with their bond portfo-

lios, perhaps by investing in more

credit sensitive areas such as con-

vertible bonds, floating rate bonds

and even preferred stock. At the

The opinions voiced in this material are for

general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments

may be appropriate for you, consult me prior to investing. All performance referenced is historical

and is no guarantee of future results. This material contains forward-looking statements including, but not limited to, predictions or indications of future

events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and

unknown risks and uncertainties. Bond values will decline as interest rate rise. Interest income may

be subject to the alternative minimum tax. Feder-ally tax-free, but other state and local taxes may apply. Indexes are unmanaged and investors are

not able to invest directly into any index. Interna-tional investing entails special risk considerations, including currency fluctuations, lower liquidity,

economic and political risks, and differences in

accounting methods.

“The markets appear

to expect at least

some level of gridlock

regardless of who

wins the White

House in November.”



ade are in the health care industry, including occupational therapists, physical therapists, home health aides, audi-ologists and nurse prac-titioners (source: Depart-ment of Labor).

SKILLS SHORTAGE? - The 5.871 million job open-ings nationwide as of 7/31/16 were the largest number ever reported by the government for a statistic tracked since December 2000. Just 3 years ago (7/31/13) there were just 3.689 million job openings in the country (source: DOL).

BETTING ON LAST YEAR’S WORST - An equal in-vestment taken at the end of the trading day on 12/31/15 in the 10 worst performing indi-vidual stocks within the

S&P 500 from calendar year 2015 is up +40.2% YTD through 8/31/16 (source: BTN Research).

CHASING LAST YEAR’S WINNERS - An equal investment taken at the end of the trading day on 12/31/15 in the 10 best performing indi-vidual stocks within the S&P 500 from calendar year 2015 is down 2.3% YTD through 8/31/16 (source: BTN Research).

If you’re ever vacationing in an

unfamiliar city and a bus or

subway is not a good naviga-

tional option, consider Uber. The

Uber app can be downloaded

onto your smartphone and then

used to conveniently call for

rides as an alternative to more

costly cabs. My wife recently

used Uber to go to navigate San

Diego while I was in training and

I was able to use a link to follow

her travels. Uber is staffed by

private individuals who use their

own cars (often newer and

cleaner then cabs) and are rated

by passengers. When you call an

Uber ride, you get a picture of the

driver, the driver’s overall rating

and a description of their vehicle

on your phone. Cost for a 1-way

ride of about 3 miles: about $8.

Concerned over spiraling

health insurance costs? The

Affordable Health Care Act ex-

empted members of religious

health care sharing cooperatives

from having to purchase ACA

compliant policies. The primary

advantage is cost and generally

healthier pools of participants.

Samaritan Ministries monthly

family plan rate is currently

$495. Christian Care Medishare

runs $233-$730 monthly depend-

ing on the selected deductible.

Keep in mind, even though these

plans look and act like insurance,

they are NOT technically insur-

ance. They are large groups of

like-minded people who share

medical expenses through

monthly contributions that act

like medical insurance premiums.

The Indiana 529 college savings

plan is still a great deal for par-

ents and grandparents funding a

student’s college education. A

provision in the tax code allows-

for a 20% tax credit up to $1,000

off a donor’s state tax bill. Funds

in a college savings account can

be used to pay for a wide variety

of college costs, including room,

board, tuition, books, supplies

and even for the purchase of a

laptop computer for the student.

Funds don’t have to be held in

the plan for long terms so even

parents currently funding college

can use a 529 for tax benefits (as

always, consult with your tax

advisor before acting on this

advice as results may vary de-

pending upon your particular

income tax profile).

AFFORDABLE HEALTH CARE COVERAGE - 12.7 million Americans enrolled through their state health insurance marketplace or through the federal health insur-ance marketplace during the 2016 enrollment period, i.e., the 3 months of 11/01/15 through 1/31/16. As of 6/30/16, 11.1 million (of the 12.7 million) were current with their monthly health insur-ance premium pay-ments. Of the 11.1 mil-lion with active insur-ance coverage, 9.4 mil-lion are receiving a tax credit that averages $291 per month (source: Health and Human Ser-vices).

AGING POPULATION - 9 of the 12 fastest growing occupations expected in the upcoming dec-

Numbers in the News...

Personal Finance Corner

The Gold Standard Volume 10, Issue 1

“The 5.871 million job openings nationwide as of 7/31/16 were the largest number ever reported by the government…” (source: DOL)

The Standard & Poor’s 500 Index is a

capitalization-weighted index of 500

stocks designed to measure performance

of the broad domestic economy through

changes in the aggregate market value

of 500 stocks representing all major

industries. S&P 500 is an unmanaged

index which cannot be invested into

directly. Past performance is no guaran-

tee of future results. This information is

not intended to be a substitute for spe-

cific individualized legal advice. We

suggest that you discuss your specific

situation with a qualified legal advisor.

...and for those of you looking

for better interest rates on

liquid cash accounts, good luck!

All kidding aside, some online

banks, such as Capital One 360

and Discover Bank are currently

offering as much as 1% on liquid

savings accounts. Not a lot from

a historical standpoint, but gen-

erally higher than most liquid

alternatives. You need to under-

stand how to navigate the inter-

net to make these accounts work,

but with a little effort, you can

put at least a little more money

in your pocket. For longer term

investment alternatives, call us!

An investor should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. More information is available in the issuer’s official statement which can be obtained from

your financial professional. The official statement should be read carefully before investing.

The investments inside a 529 plan may fluctuate with changes in market conditions. When redeemed shares may be worth more or less than their original value. Nonqualified withdrawals do not enjoy tax-favored treatment. The earn-

ings part of a nonqualified withdrawal will be subject to federal income tax and 10 percent federal penalty. State penalties are also possible. Any tax considerations regarding 529 plans should be discussed with a qualified professional

before investing.



2015 State Street

Washington, IN 47501

enced in each last phone call

between a victim and a loved

one.

I am proud of the unity and

strength shown by this country

in the face of adversity. I am

proud of the single-mindedness

of our leaders and of the resolu-

tion for justice. I am proud of

the spirit of cooperation and

generosity I witnessed in the

aftermath of this American

tragedy.

Much like those old enough to

remember the assassination of

President Kennedy, I can tell

you exactly where I was when

the news first broke shortly

after 8:45 a.m. on Tuesday

morning, September 11th,

2001. I can also describe in

detail the shock I felt roughly

18 minutes later when the sec-

ond impact was known. The

dread I felt while wondering

where the next impact would be

15 years later I still get angry. I

still refuse to accept a false re-

ligion that teaches that it's OK to

kill people who don't agree with

you. I still get choked up at the

images and sounds of policemen

and firefighters rushing toward

the World Trade Center, at two

people holding hands as they

jumped to their death, at the

screams of terror as the second

tower was rammed and later, as

the same tower collapsed to the

ground, followed shortly after

by the first.

I imagine the fear and chaos on

each plane as they screamed

toward their final impacts. I get

emotional thinking of the brav-

ery of the folks on United 93 as

they sacrificed their lives for

countless others by forcing their

plane down in a rural Pennsyl-

vania field, far short of it's heav-

ily populated seat of power des-

tination. I imagine the sadness

and despair that was experi-

was unlike any I've felt before

or since. One of the clearest

thoughts I had that day...

This changes everything.

Indeed, much has changed in

the intervening 15 years. Eve-

rywhere I look, there are the

signs of increased security im-

plemented in reaction to the

9/11 tragedy. Even so, I doubt

Americans will ever feel as safe

and secure as they did prior to

September 11, 2001. I will al-

ways believe that America has

the capacity to respond to any

threat but I will never again

underestimate the capacity for

evil in this world. Saluting all

the heroes and victims of 9/11...

Never…

ever…

forget.

Tuesday, September 11, 2001

Phone: 812-254-3375

Fax: 941-803-2854

[email protected]

www.fortknoxonline.com

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Investment

Management

fort knox investment management fall 2016 volume 10, issue ...fortknoxonline.com/files/newsletter -...

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