Everyone wants a lower price. For years American capitalism has relentlessly driven prices lower on just about everything.

First there was Kmart, then Walmart, and now Amazon. Each new giant retailer has based their growth on offering lower prices.

Have you noticed that with each new iteration of mass retailer, the level of service has seemed to decline? Service has “progressed” from a salesperson manning a product counter, to a few associates roaming store aisles, to an online environment almost devoid of humans in which the customers do the product research, ordering, and all of the paperwork.

Money management is no different. Over the years, the industry has moved from custom portfolios to “one size fits all,” from asset managers to signal providers, and now from financial advisors to robot managers. At each stage, the service side of the business has diminished.

The teams of customer service representatives have been replaced with websites and canned messages. Services have sprung up to write letters like this one, but they are impersonal and mass-produced. And even in this industry, robots make investment choices after the investors input all of the data themselves.

Making matters worse are the offerings—“modern” asset allocation with quarterly tweaks in the percentage of the assets owned. In reality, some of these “modern” methodologies were invented more than 65 years ago, and they essentially guarantee average performance to accompany the below-average service.

Here at Flexible Plan, we have held true to the model that we started more than 37 years ago: original research by teams of researchers, using computers for both the mundane trading tasks and the hard-to-come-by discipline that human decision-makers find hard to maintain due to their emotions and behavioral biases. And throughout that time, we have maintained a large number of financial advisor and client service professionals to provide a personal level of service.

Don’t worry. None of that is going to end! We will continue to make available strategies that are monitored and traded daily—strategies that are not the run-of-the-mill variety but rather seek to capitalize on the opportunities of today’s vibrant markets. We will continue to review the performance of these strategies weekly for improvement and relevance to current markets.

Our teams of service representatives (real people!) will continue to assist and inform. And we will continue to provide tools to help investors and advisors understand today’s markets, such as our Crash Test Analyzer, My Business Analyzer, and OnTarget Investing apps, to name a few.

All of this extra care and research is costly. Still, many times over the years we have lowered our fees as we have achieved economies of scale from our growth.

I want to bring to your attention yet another innovation from Flexible Plan, our Quantified Fee Credit (QFC) strategies. We use our subadvised Quantified Funds to deliver nine of our popular strategies at a net fee at least 25% lower than our standard fees.

The QFC strategies provide two levels of risk management:

  1. Dynamic, risk-managed strategies are used within the Quantified Funds.
  2. The QFC strategy portfolios are rebalanced and reallocated between the funds, as needed.

So, not only do we provide more service, but at a lower fee.

You can find out more about our QFC strategies and the necessity of dynamic, risk-managed, core strategies in your portfolios by tuning in to our webinar Wednesday, June 27, 2018, at 4 p.m. Sign up here.

Market update

Political upheaval and a budding trade war continue to take their toll on stocks. All of the major indexes, dominated by huge multi-nationals, declined last week while domestically small caps actually increased in value. Bonds, being a safe haven in time of war, gained a bit of ground.

Despite the falling big-cap indexes last week, the stock market “scoreboard” definitely showed that investors think the U.S. is winning the trade battle. While the U.S. indexes were still on positive ground for the year last week, the developed country index ETF (EFA) fell more than 1%, and the emerging-markets ETF (EEM) tumbled better than 6%.

The recent steel and aluminum tariffs were also generating some positive U.S. benefits, at least for the deficit hawks. So far, the government has collected more than $775 million from them, and the Department of Commerce expects that tariff collections will reach over $1 billion within the next six weeks.

Still, of the eight opening downside gaps in prices on the stock market this year, all but one has originated from tariff concerns. Today is no exception, as the market opened 200 points lower and has already doubled that loss on the Dow Jones Industrial Average as I write this message.

The problem is that, like a summer day that moves quickly from sunshine to thunder clouds, there are lots of storm signals on the financial horizon besides tariffs. Political insensitivities on both the right (border separations) and the left (attacks on people of diverse political views at home, on the street, and in public restaurants) have increased the partisan dialogue and separation, making projects like immigration reform and infrastructure improvements more difficult to occur and benefit people’s lives.

Economic reports have underwhelmed of late. Last week, eight out of 11 reports fell short of economists’ predictions. And the Citi Economic Surprise Indexes continued to plunge. While the U.S. version moved to its lowest level of 2018, it is at least still positive. International measures, on the other hand, are solidly negative.

Citi Economic Surprise Indices

One ray of sunshine still exists in the economic data: housing numbers continue to outperform. Since housing usually provides the foundation for economic growth here in the U.S., this is good news indeed.

The Index of Leading Indicators, however, did not positively surprise. It came in at half the expected rate of growth. When combined with the Index of Coincident Indicators, the ratio of the two gives warnings of recessions to come. Fortunately, today the ratio’s telltale decline, however, has not occurred as yet, which augurs well for the economy’s intermediate term.

Leading Coincident Indicator

Our short-term indicators, however, turned down last week. This suggests that the stormy weather for stocks may continue for a while—especially in light of the warning I gave two weeks ago about the final three weeks of June. Strong June beginnings usually result in a weak conclusion to the month. There could be relief on the way, however; the Fourth of July usually brings higher stock prices back.

This supports the positioning of our intermediate-term strategies. They continue to favor longer-term stock market holdings. This is also the case for our environmental monitors.

There has been no fundamental change in our view of stocks. They are still in a bull market, although overbought and showing weakness in the short term.

Treasury bonds have been rallying, but they are nearing resistance and may reverse direction when stocks rebound. Corporate bonds, on the other hand, have been declining with stocks and could benefit from a turnaround.

Gold has been very weak in the face of a rising dollar and its usual summer swoon tendencies. But it may be nearing a short-term bottom as the dollar dipped last week. What could also provide stimulus for a gold reversal is the continuing threat of rising inflation. The price of oil increased more than 6% last week, and the NY Federal Reserve’s measure of the full data set of inflation measures has now soared over 12%, while the popular prices-based measure has gained less than 2%.

New York Feds Inflation Conundrum

I guess elsewhere prices are not falling …

All the best,


Jerry C. Wagner is Founder and President of Flexible Plan Investments, Ltd. Formerly a tax and securities attorney, Mr. Wagner recognized early on that technology and hedge fund techniques could be applied to help individuals successfully invest, while managing their downside risk. After spending time pioneering new techniques in market analysis, designing quantitative methodologies, and managing investment portfolios, Mr. Wagner founded Flexible Plan Investments in February 1981.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.  Inherent in any investment is the potential for loss as well as profit.  A list of all recommendations made within the immediately preceding twelve months is available upon written request.  Please read Flexible Plan Investments’ Brochure Form ADV Part 2A carefully before investing. View full disclosures.