April 15, 2015 Newsletter – Market Index and Crowd Funding

2Q2015 Market Index and Crowd Funding

The first quarter ended with the broad Morningstar US Index up 1.77%. The Mid Cap sector leading the way with +4.50% followed by the Small Cap +4.38% with Large Caps up but only by +.78%. A good question to ask is how the total market can be up 1.77% when 2/3’s of the sub-indexes were up over 4%? The answer is the large caps (number of shares X price per share) represent a much larger percent of the total, so how they go, so goes the total market. I mentioned this phenomenon in our year-end letter. If you were diversified (like we are) our returns compared to the index lagged last year because of the mid and small exposure. This quarter is an example of where we outperformed the broad index because of the small and mid-cap exposure. We continue to set records on both stock and real estate prices. Never has a recovery been so slow, the total dollars earned by Americans last year finally passed what we earned in 2008. Our wealth has increased but our earnings were lagging. Our earnings are now growing the way we need them to. I believe this will push the markets even higher. It will be a rough ride because of world events; the dollar has risen and risen against other currencies and it may go higher making it harder for US companies to sell overseas, the Federal Reserve raising interest rates, and the Greek situation just to mention a few.

I think the SEC just created the latest path to the next penny stock like ventures. It is called Crowd Funding. Last year Crowd Funding raised about 2.7 billion and is expected to raise 5 billion this year. The SEC just opened it up to non-accredited investors. Accredited investors must have 1 million net worth excluding their home and $200K of income. Colorado is passing the law as we speak. It will not be long before you will be pitched some new thing which is a no lose and make a lot money investment. Please call us before investing. There will be great
opportunities and a lot of not so good and more than a fair share of “run for the door”. So what is it? Let me start by giving you an example, Pebble Time is one that just raised $20,000,000.00 from 78,000 investors. They are making a watch to compete with the Apple Watch. The idea is to use social networks get you to invest and you can be in on the ground floor as an equity partner. You start with an idea put together a business plan and see how much you can raise. If you invest you will become an equity owner under the new rules. It is a great idea and will allow a few great ideas to go from an idea to a useful product. There will be lots of oops along the way but watch and see where it leads. It should be really interesting.


Willis Ashby, CFP

References: Morningstar, Diamandis.com, WSJ, Bls.gov

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