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Markets in Minutes April 15, 2017

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Markets in Minutes April 15, 2017

S&P 500   10 Year Treasury   Gold   World Ex-US   US Dollar   Commodities

Markets in Minutes is intended to give our client partners and subscribers a quick and easy understanding of current market conditions. This update covers March 20 – April 14, 2017.

Investor Learning: “Good long-term performance results from beating the market in bad times. Caution should not be seasonal.” — Christopher Browne, co-founder, Tweedy Browne Value Fund.

Market Updates:
S&P 500: -1.9% since March 17, +3.2% year-to-date. The S&P has managed to hold most of the year’s gains to date as positive economic data and earnings, along with the prospect of corporate tax cuts, continue to support the market in the face of rising global and domestic political uncertainties. The primary up trend remains intact, with the intermediate uptrend still intact.

Bonds: The 10 year treasury yield closed down -1.2%% for the period, pushing bond principal up incrementally. The rate raise in March sparked a mild rally in bonds, probably supported by rising geopolitical tensions. If yields drop further due to a potential equity correction or in response to a geopolitical event, passive investments in bonds (especially those with durations more than 5 years) should be re-evaluated. As an aside, municipal bond yields are now approximately level with corporate bond yields in some classes. If you have significant corporate bond positions it might be a good time to compare with municipals.

Gold: Up +4.9% for the period, and still experiencing what appears to be a counter trend rally with a tailwind from a falling dollar this week and increasing geopolitical risks. Buying strengthened on nuclear rhetoric out of North Korea and may have positioned gold for a run to resistance at $1260. Buying interest is still not displaying exceptional strength and until that changes the durability of the rally should be questioned. Gold remains in a countertrend rally below unless it sustains a move above $1260, but a sudden rise in geopolitical uncertainties could cause an equally rapid spike in price.

World Ex-US: Down -0.5% for the period, +7.0% year-to-date and continuing to show speculative strength. My view on European/Asian/Emerging market stocks remains negative, perhaps incorrectly. Time will tell.

US Dollar: USD rose slightly for the period (+0.3%) but has shown a fair amount of volatility with moves in both directions. From a technical standpoint, the USD made a lower low at $98.86 but rallied off support, setting up a potential range between $98.75 and $102.25. Reminder – falling dollar is good for earnings.

Commodities: Oil rose about 7.4% since the last report but still within the range identified in the December 19, 2016 edition of MIM. Outages in North Sea production early in the month and increased military activity in the Middle East combined with a recent dollar weakness to support the move. As before, my view is that American producers will continue to produce supply above $40 a barrel, keeping oil within a projected range of $45 – $60/$65 a barrel for the intermediate term regardless of OPEC agreements on constraining production. Copper futures fell by 4.5% as uncertainty about the speed of the Trump infrastructure agenda surfaced in the markets, but continue to hold most of the post-election gains.

Economy: Consumer prices weakened somewhat unexpectedly in the period, mostly on the back of falling gas prices. This is a positive for consumer spending. Industrial production was unchanged since the last reporting period, while job gains slowed slightly but drove the unemployment rate down to 4.5%. Demand for qualified workers is rising, helping push salaries higher, also supporting consumer spending.

Earnings: We are on the cusp of 1st quarter earnings reporting, and should see growth vs. the same quarter in 2016. Expect earnings to fall from last quarter – the 1st quarter has been slower for years following a 4th quarter spending hangover in consumers.

Market Valuation: Valuations are still stretched, but with interest rates still in a range of historic lows, rising earnings, and the possibility of tax cuts before year end its unlikely valuations will drive a meaningful (or enduring) sell off. The market remains in a price zone that requires measurable earnings acceleration and tax cuts to sustain prices.

Recession Probability Indicator: The most recent reading on the RPI is 17 and indicates we are not currently in recession and the investment environment is stable.

S&P Technical Picture: The S&P has worked off the previous overbought condition by virtue of time passing. Conditions still support the idea of a near term top, but the underlying uptrend is not currently at risk. Fair Value is approximately $1800 – $1850, but I would not look for the index to fall that far should a correction ensue. Barring a nasty fiscal/policy surprise, the weight of data suggests that pullbacks more than 5% are likely buying opportunities, even in the face of geopolitical events. The intermediate term and primary trends are identified by the red arrows below. These can be reasonable entry points for index investing from a technical, if not fundamental, standpoint.
SPY Chart (S&P 500 Proxy)

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To Smarter Investing,

Dak Hartsock
Market Strategist
ACI Wealth Advisors, LLC
Process Portfolios, LLC

January 8 2017 Markets In Minutes

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Markets in Minutes  January 8, 2017

Markets in Minutes are short video updates that survey the 6 major asset classes US investors typically invest in. Each update features 3 asset classes to help investors understand what is happening in each market.

 

In this update:
S&P 500           0:57
10 Year Bond   3:44
Oil                      5:01
Copper              6:01

Times denote when in the video coverage of each asset begins.

The next update should have better resolution.

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Dak Hartsock
Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

Disclosures were accidentally cut off when the video was edited, so I had to post them below. Enjoy.

Disclosures

This article and the web site upon which it is posted reflects the opinion of Dak Hartsock and is not intended to offer personalized investment advice. Information regarding investment products, strategies, and services is provided solely for educational and informational purposes. Other information provided on the site, including updates on the Recession Probability Indicator (“RPI”) are presented for educational purposes and are not recommendations to buy or sell securities or solicitation for investment services.

Dak Hartsock does not provide personalized investment advice over the internet, nor should any information or materials presented here be construed as personalized investment or financial advice to any viewer. Mr. Hartsock is not a tax advisor and investors should obtain independent tax advice regarding investments. Neither Dak Hartsock, ACI Wealth Advisors, nor any affiliated persons or companies accept any liability in connection with your use of the information and materials provided on this site.

Dak Hartsock is a Series 65 licensed and registered Independent Advisor Representative with ACI Wealth Advisors, LLC (“ACI”). ACI is a Registered Investment Advisor (“RIA”), registered in the State of Florida and the State of California. ACI provides asset management and related services for clients in states where it is registered, or where it is exempt from registration through statute, exception, or exclusion from registration requirements. ACI is in no way responsible for the content of DakHartsock.com nor does ACI accept any responsibility for materials, articles, or links found on this site. A copy of ACI’s Form ADV Part 2 is available upon request.

Market data, articles, blogs and other content on this web site are based on generally-available information and are believed to be reliable. Dak Hartsock does not guarantee the accuracy of the information contained in this web site, nor is Mr. Hartsock under any obligation to update any information on the site. Information presented may not be current. Any information presented on this site should not be construed as investment advice or a solicitation to buy and sell securities under any circumstances.  Please see additional disclosures below.

Pre-Election Market Update

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    Pre-Election Market Update November 6, 2016

    First, here is a resource that may useful – www.vote411.org. This site will allow you to learn more about the issues and candidates not only on the national level but in your own community. I hope it helps everyone make a more informed vote on Tuesday.

    Given the uncertainty heading into this years election, I thought a look at the Recession Probability Indicator (“RPI”) might be appropriate given that a Trump win, while a long shot according to pollsters, seems likely to stir up some short term market volatility.

    A reminder – the RPI does not forecast recession – it is designed to indicate when we are already in it. Historically, it’s been accurate about 80% of the time and if you’ve visited the RPI page on DakHartsock.com you know even that limited accuracy could have a serious impact on your investments. CLICK HERE if you’d like to see the RPI in action. Make sure to scroll down to the tables.

    The RPI is steady as she goes. No changes in the last few months, and we are still motoring along comfortably at 12. This is subject to change at any time, but for now investment still appears to be a better bet than not investing.

    Given we do not currently appear to be in recession, any sell off following the election represents a buying opportunity for all but short term investors.

    If you are fully invested, there is no reason to let whatever short term reaction we get from the market post election to keep you up at night.

    Predictions are generally best left to fools and politicians, (wait, I could have just said politicians, right?) and so this isn’t a prediction, it’s an a simple educated guess: If Trump wins, my view is that the market will be taken a bit by surprise and we will see a sharp, Brexit style sell off.

    I also think that more clear minded buyers will step in before things get too scary. My guess at this point is that a Trump victory could spark a 6% – 12% sell off.

    There is another X factor out there that does have the potential to muddy the waters and make my guess look stupid. On December 4 Italy will decide whether to restructure it’s government. The current prime minister has said he will resign if the referendum fails. If the opposition takes power, a referendum on staying in the EU will likely occur shortly after. If Italy votes to exit, the markets are likely to sell first and ask questions later. The European Central Bank has helped Italy stabilize by purchasing it’s bonds. That could result in more than a little acrimony.

    Regardless, investing is about WHAT IS, not WHAT IF. All of these outcomes present opportunities for prepared investors, as long as the US stays out of recession.

    As always, feel free to use the contact page to reach out with any questions. Please share with one friend that can benefit from this information. Share buttons below.

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    Dak Hartsock
    Market Strategist
    ACI Wealth Advisors, LLC.
    Process Portfolios, LLC.

    6 Key Things Successful Investors Do Differently

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    What the Best Investors Do Differently to Manage, Invest, & Protect Their Money.  October 22, 2016

    A couple times a year I sponsor an educational seminar for investors. This morning I realized that everyone that reads these updates would benefit from the same information, so here is a recap of some of the core points I usually make when educating investors.

    6 Key Investment Lesson from the Wealthiest Investors
    1. The most successful investors don’t hire brokers or financial advisors to help them, nor do they go it alone — they work with fiduciary investment advisors. That difference has historically been worth about 3% a year according to Dalbar Associates, an independent research firm. That difference adds up quickly.

    CLICK HERE to learn more about the differences between advisors, and how to tell if your advisor is actually on your side or not.

    2. 87% of brokers and financial advisors do NOT have a fiduciary responsibility to their clients. Instead, they collect hidden commissions on YOUR money. If you think your advisor doesn’t, you are probably in for a surprise.

    3. The majority of companies in the industry base their business models on hidden commissions paid by mutual funds or proprietary products (Edward Jones, Merrill Lynch, AXA Advisors, Ameriprise, Morgan Stanley/etc..) This takes money out of your pocket, where it belongs. (Sometimes a LOT of money!)

    4. The wealthy invest like university endowments and big pensions–they don’t chase the market. Instead, they focus on managing risk. Many use reduced correlation or non-correlated investments to help protect their assets from difficult-to-predict markets.

    5. Diversification is NOT enough. In 2008 there was no real difference between the largest, most diversified global funds in the world and the S&P 500 – all fell hard and took years to recover.

    6. Wealthier investors understand what to expect out of their portfolios and have a plan – they know how much they have to save and by when to hit their goals, they take the least risk possible to get there, and they have a plan for dealing with the market when things go wrong.

    I hope this reminder is timely and helps you as we head into an unpredictable presidential election.

    If you don’t feel you have control over your portfolio or still don’t know how much you are losing to hidden fees, maybe it’s time to act.

    Time goes by fast. Will it be another year before you do something to improve your investments?

    CLICK HERE to get in touch. We’ll check your portfolio for hidden fees, and see if my firm and I can add value to your life and to your investments.

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    To Smarter Investing,

    Dak Hartsock

    Vice President & Market Strategist

    ACI Wealth Advisors, LLC.

    Process Portfolios, LLC.

    Recession Odds Dip – Consumers Spending More

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    Recession Odds Dip – Consumer Spending Still Rising 9/7/2016

    Before we get going, I was recently asked what the point is of understanding whether or not we are entering a recession. This person had been told by their broker that to “ride the rallies you have to ride out the valleys.” Catchy, right?

    The reason to understand when the economy is falling into recession is because around 80% of the time the stock market sells off hard when it does. The market usually takes a few months after the recession actually starts to figure it out, but once it starts selling most of the time it keeps going far longer than anyone other than a billionaire likes to see. The other reason- when the market itself starts into recessionary selling, 70% or more stocks follow the market down.

    Think of it this way. If you were getting into your car this morning and you received a credible message that there was nearly an 80% chance you would get in a car accident today, and that about 70% of the cars on the road were also going to be involved in a crash today, would you crank it up and head for the freeway or would you decide to preserve your car (and maybe more than that) and stay at home?

    Now that doesn’t mean that you should stay at home at all costs, but if those were my odds for the day, I’d sure like to know about them before I decided to take a drive.

    So, my firm and I use what’s called the Recession Probability Indicator (“RPI”) to identify whether or not we are in (or entering) a recession. Think of it as a lookout in the crow’s nest of an old school sailing ship – he’s keeping an eye out for storms or rocks so the ship gets where it’s heading safely.

    My firm and I use the RPI for the same reasons – to help steer client accounts away from storms and rocks so they can live their lives focused on what’s important to them rather than worrying about the next market crash. We aren’t going to see every single rock or approaching storm, but if we weren’t looking we wouldn’t see any of them. I think of it as Wealth Preservation 101. It’s basic.

    Absent a recession, it’s best to stay invested. If you’d like more information on this idea, follow this link —> CLICK HERE.

    So, if recession is what we need to pay attention to, are we in one yet?

    Nope.

    Consumer activity drives about 70% of the American economy and spending is still rising at +4.2% vs. last quarter. As a result, we are seeing a slightly reduced probability of recession vs. earlier in the year. This is subject to change, but for now the investment climate is stable and likely to stay that way for a while longer.

    If you don’t know how the Recession Probability Indicator works, CLICK HERE. Make sure to scroll down to take a look at the tables below the description.

    Below is an updated graph of the RPI. It runs on a 2 – 3 month lag.

    If you’d like to take a look at the American Institute of Economic Research business conditions update CLICK HERE.

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    To Smarter Investing,

    Dak Hartsock
    Chief Market Strategist
    ACI Wealth Advisors, LLC.
    Process Portfolios, LLC.

    aug-2016-rpi

    Is There a Correction Coming?

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    Correction Around the Corner? 9/1/2016

    Markets have witnessed two corrections so far this year and fears seem to be mounting that another is right around the corner. The first correction took hold following the Fed rate raise last December with the S&P 500 falling approximately -14% before markets began to stabilize. Despite the dark promises of pundits, the markets began to move higher from there and didn’t face another hiccup until the short-lived Brexit, when markets experiences a 2 day panic of -6% before reason prevailed.

    What’s important to realize is that normal markets typically experience a -10% or so correction about once per year, and two -5% or so corrections per year. There are numerous -3% pullbacks. Most times an acorn falling on your head is just an acorn falling on your head. It doesn’t mean the sky is falling.

    Corrections are not worth getting worked up about. They are basically short lived sales on the market, really no different than when your favorite store holds its Labor Day Clearance Sale except they aren’t scheduled a year in advance. Therefore, corrections represent significantly more opportunity than risk. A correction rarely slips into a bear market. It’s far safer to buy during corrections than sell, absent recession.

    At this point, my view is that we have a good probability of a near term correction, particularly if the Fed decides to raise rates in September or October. There are no guarantees that correction occurs, but if it does I’m anticipating something in the area of -6% at this point.

    If the Fed raises rates next month, it may be deeper. However, I see the Fed holding off until December as the highest probability, but they may raise in October. September is probably too early — I think the Fed wants to hold fire until there is greater visibility in how the Brexit will actually play out in Europe. That being said, I’m not convinced my crystal ball works better than anyone else’s.

    A rate hike doesn’t really matter, though. It may cause near term market gyrations, but the U.S. economy can withstand a raise and if the markets do tank it should be considered a buying opportunity unless we’ve moved into recession.

    Thanks to the media, investors often confuse vanilla corrections with damaging bear markets. Corrections and bear markets are materially different, and bear markets can be further differentiated into cyclical bear markets and recessionary bear markets. Recessionary bear markets BITE. Cyclical bear markets are generally simply nippy.

    A solid investment plan is all that is needed to endure standard corrections and even cyclical bear markets. Adjustments in investment plans should only be made when the economy moves into recession.

    bear market blues

    Questions? Please reach out through one of the contact forms on the site or email me directly.

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    Dak Hartsock
    Chief Market Strategist
    ACI Wealth Advisors, LLC.
    Process Portfolios, LLC.

    Process Portfolios 1st Half Summary & 2nd Half Outlook

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    ACI Process Portfolios: 1st Half 2016 Performance & 2nd Half Outlook

    The video below has the most important information in the first minutes including performance details. The video player has controls to allow you to fast forward, pause or repeat whatever section of the video is most relevant to you.

     
     
    Executive Summary

    • 3/6 portfolios beat their benchmarks
    • 2 portfolios beating the market
    • Strong performance in Market Income and Full Cycle Portfolios
    • Adjustments to Durable Opportunities in 2nd half of 2015 working
    • Core Equity still lagging due to biotech, pharma, healthcare, but showing it may overtake market quickly if election rhetoric on industry softens or market stabilizes for a few months
    • Recession Probability Indicator still suggesting stable investing environment
    • Performance details are minutes 2:19 – 5:50 in video
    • Color on portfolios occurs in minutes 5:51 – 10:40
    • 2nd Half Outlook is 10:41 – 14:32

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    To Smarter (and more transparent) Investing,

    Dak Hartsock
    Chief Market Strategist
    ACI Wealth Advisors, LLC
    Process Portfolios, LLC

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    Investment Management

    For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products.

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    Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

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    Market Income

    This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets.   while under-performs strong bull markets.

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    Core Equity

    Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while offering a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering greater risk efficiency than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we have a good idea what the returns over time will be at a given purchase price.

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    Durable Opportunities

    This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These companies allow ACI to build portfolios with minimum expected returns that can be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

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    Full Cycle

    This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

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    Equity Builder

    This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

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    Fixed Income

    Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

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    ACI Investment Team

     

    Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer, with substantially all personal net worth invested in ACI. He is a graduate of the University of Virginia.

    Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

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    I will not share your email address or contact information with unaffiliated third parties under any circumstances except as required by law or at my discretion if information is requested by law enforcement.

    DakHartsock.com protects the security and confidentiality of the personal information you supply to the site and makes efforts to ensure that such information is used for proper purposes in connection with your interest in the site or the published materials on www.dakhartsock.com I understand that you have entrusted us with your private information, and I do everything possible to maintain that trust. As part of protecting your privacy, subscribing to updates from dakhartsock.com requires you to opt-in twice: once when you complete the opt-in form on the site, and again via the email address you provided.

    This is not a contract, but a clear statement of good intent.

    Email dhartsock@aciwealth.com if you have additional questions or concerns regarding the site’s privacy policy or use the form provided on the contact page.

    This web site reflects the opinions of Dak Hartsock and is not intended to offer personalized investment advice. Information regarding investment products, strategies, and services is provided solely for educational and informational purposes. Other information provided on the site, including updates on the Recession Probability Indicator (“RPI”) are presented for educational purposes and are not recommendations to buy or sell securities or solicitation for investment services.

    Dak Hartsock does not provide personalized investment advice over the internet, nor should any information or materials presented here be construed as personalized investment or financial advice to any viewer. Mr. Hartsock is not a tax advisor and investors should obtain independent tax advice regarding investments. Neither Dak Hartsock, ACI Wealth Advisors, nor any affiliated persons or companies accept any liability in connection with your use of the information and materials provided on this site.

    Dak Hartsock is a Series 65 licensed and registered Independent Advisor Representative with ACI Wealth Advisors, LLC (“ACI”). ACI is a Registered Investment Advisor (“RIA”), registered in the State of Florida and the State of California. ACI provides asset management and related services for clients in states where it is registered, or where it is exempt from registration through statute, exception, or exclusion from registration requirements. ACI is in no way responsible for the content of DakHartsock.com nor does ACI accept any responsibility for materials, articles, or links found on this site. A copy of ACI’s Form ADV Part 2 is available upon request.

    Market data, articles, blogs and other content on this web site are based on generally-available information and are believed to be reliable. Dak Hartsock does not guarantee the accuracy of the information contained in this web site, nor is Mr. Hartsock under any obligation to update any information on the site. Information presented may not be current. Any information presented on this site should not be construed as investment advice or a solicitation to buy and sell securities under any circumstances.

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    Model & Performance Disclosures

    Disclosures Regarding Investment Performance Reporting in compliance with Rule 206(4)-1(a)(5).

    Visit http://www.dakhartsock.com/process-portfolios-historical-performance/ for historical performance of ACI’s Process Portfolios.

    Market Income Portfolio
    1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
    2. Listed Index models and graphs do NOT include transaction, fund or Advisor Management fees as the index model is not available for investment. Live portfolio results include all fees, including Advisor Management fees.
    3. Model results do NOT reflect reinvestment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
    4. Investing involves risk, including risk of loss and/or principle. While the Index model has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Market Income is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Income may differ from investment in an index fund such as an S&P 500 index fund.
    5. The model for Market Income is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Income does not exactly follow the BXM index model – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Income generally, but not always, waits until after expiration before transacting. Market Income will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally sold again within a week of the closure of the prior position, but not always, and often new position may be opened the same day the prior position is closed.
    Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are believed to be compared with market and the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
    6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Income differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Income generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Income a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity.
    7. The BXM model on which Market Income is based is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees.
    8. Market Income also differs from the BXM model in that Market Income seeks to reduce investment during recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. BXM model but is materially different than staying invested in all market conditions. This action may cause Market Income to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
    9. Advisor clients have experienced results that exceed the performance of the model to date. There is no guarantee Market Income will continue to outperform BXM in the future regardless of Advisor efforts to do so.

    Core Equity Portfolio
    1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
    2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees.
    Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below.
    3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings.
    4. Investing involves risk, including risk of loss and/or principle. While the back tested Core Equity model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Core Equity is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Core Equity may differ from investment in an index fund such as an S&P 500 index fund.
    5. The model for Core Equity is built of highly diversified, highly liquid sector and index securities, most frequently low cost ETFs. Core Equity live portfolios do not exactly follow the Core Equity model – variances in investor contributions, withdrawals, and risk tolerances result in measurable drift from the model. Over time, client accounts come closer in line with the Core Equity model.
    Core Equity live portfolios may differ from the Core Equity model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a sector position which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Core Equity may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio.
    These factors may result in greater or less than model performance over time.
    Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the
    Advisors believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
    6. Core Equity invests in diversified components of the financial markets and broad economy by targeting sectors or indices which demonstrate potential for a consistent range of multi-year returns, while seeking a risk adjusted investment profile equal to or lower than the broad markets. These sectors contain a range of equity stocks with an equally broad range of characteristics – some sectors are present in the Core Equity portfolio due to their historically defensive nature, some are present due to their historical growth characteristics, some are a blend of the spectrum between. The intent is to provide a balanced equity portfolio suitable for most investors as an S&P 500 index fund replacement but which seeks lower risk while experiencing, on average, a greater return than an S&P 500 index investment.
    7. The Core Equity model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2.
    8. Core Equity live portfolios also differ from the Core Equity model in that Core Equity seeks to reduce investment during recessionary economic periods while the Core Equity historical model stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause Core Equity live portfolios to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
    9. Advisor clients have experienced results that slightly lag the performance of the model to date. This lag is due to a number of factors, primarily the fact that different clients allocate different dollar amounts to Core Equity at different times. In general, the longer a client has been fully allocated to the Core Equity portfolio, the closer it is to model performance.
    The benchmark for Core Equity (The S&P 500) has historically displayed greater volatility (risk) than the Core Equity model or live Core Equity portfolios. This may or may not be the case in the future.

    Market Momentum Portfolio
    1. The performance of the broad market over the same time periods is included to help investors understand market conditions present during the period covered by live investment.
    2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees.
    3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
    4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Market Momentum has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that Market Momentum that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Momentum may differ from investment in an index fund such as an S&P 500 index fund.
    5. The closest benchmark for Market Momentum is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Momentum differs in key ways from BXM – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Momentum targets closing or rolling positions based on technical factors including trend support and resistance. Market Momemtum will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally not sold again until the underlying investment has moved into an area of resistance but not always; new position may be opened the same day the prior position is closed.
    Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. Market Momentum , like BXM, is an options writing strategy seeking to reduce investment volatility and improve risk adjusted returns for investors.
    6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Momentum differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Momentum generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Momentum a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity.
    7. The BXM model on which Market Momentum is compared is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees.
    8. Market Momentum also differs from the BXM model in that Market Momentum seeks to reduce investment during corrective or recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital in comparison to BXM but such action is materially different than staying invested in all market conditions. This action may cause Market Momentum to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
    9. Advisor clients have experienced results that exceed the performance of the benchmark to date. There is no guarantee Market Momentum will continue to outperform BXM in the future regardless of Advisor efforts to do so.

    Durable Opportunities Portfolio
    1. The performance of the broad market in the form of the Dow Jones Industrial Index over the same time periods is included for live portfolio comparison to help investors understand market conditions present during the period covered by live investment.
    2. The Index results do not include brokerage, transaction, or Advisor fees. Live portfolio results include all fees, including Advisor Management fees.
    3. Actual results reflect limited reinvestment of dividends and other earnings.
    4. Investing involves risk, including risk of loss and/or principle. Portfolios compromised of companies matching the profile of those selected for including in Durable Opportunities have historically displayed superior risk adjusted performance to the Index, but there is no guarantee that will continue into the future. Durable Opportunities is designed to provide investment in companies that firm believes meet a stringent set of criteria firm believes reduces the likelihood of permanent capital impairment while allowing investors to participate in investment in companies firm believes will stand the test of time and provide superior long term returns. While the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the Dow Jones are included to help the average investor understand how an investment in Durable Opportunities may differ from investment in a concentrated index fund such as a Dow Jones Industrials index fund. Durable Opportunities is not restricted to investment in industrial companies or in companies with a specific level of capitalization, unlike the Dow Jones.
    5. Durable Opportunities is primarily a value driven strategy; when valuations in holdings become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those holdings by either liquidation or hedging, and may re-allocate funds into a holding which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Durable Opportunities may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio.
    Benchmark comparisons are made on a best available basis – meaning that live performance is compared with the benchmarks the firm believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the Dow Jones Industrials although the firm invests with an eye on reduced volatility vs. the Dow Jones Industrials Index. 6. Durable Opportunties invests in companies firm believes to possess a Durable Competitive Advantage. Such companies are likely to be around for decades, easing the concern of principal return. DCA companies often suffer less in bear markets and usually lead recoveries. These companies allow ACI to build portfolios with minimum expected returns that may be in the mid-single digit range over any 3-5 year period which may provide long term stability partnered with long term growth in equity. There are no guarantees the strategy will be successful in this endeavor.
    6. The Durable Opportunities portfolios also differ from the benchmark comparison in that Durable Opportunities reduce investment by hedging or raising cash during recessionary economic periods while Dow Jones Industrial Index reflects 100% investment at all times regardless of economic or market conditions. Firm believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause the Durable Opportunities portfolio to experience reduced participation in markets that continue to move up despite Advisors reduction in investment.
    7. Advisor clients have experienced results that have lagged the performance of the benchmark to date. This lag is due to a number of factors, primarily the fact that the current high valuation investing environment has made it difficult to identify companies that fit the parameters of Durable Opportunities at a desirable valuation level. Different clients allocate different dollar amounts to Durable Opportunities at different times, which has also impacted the performance of the overall portfolio.

    Full Cycle Portfolio
    1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
    2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees.
    Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below.
    3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings.
    4. Investing involves risk, including risk of loss and/or principle. While the back tested Full Cycle Portfolio model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Full Cycle Portfolio is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis in all phases of the economic cycle by holding risk weighted non-correlated assets, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so in the future. Comparisons with the S&P 500 are included to help the average investor understand how an investment in the Full Cycle Portfolio may differ from investment in an index fund such as an S&P 500 index fund.
    5. The model for the Full Cycle Portfolio is built of diversified, liquid sector and index securities, most frequently low cost ETFs and low cost funds. The live Full Cycle portfolio does not follow the Full Cycle model exactly – variances in investor contributions & withdrawals result in measurable drift from the model. Over time, client accounts come closer in line with the Full Cycle model.
    Full Cycle live portfolios may differ from the Full Cycle model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a comparable position which is priced in a more reasonable range in comparison to it’s typical historical valuation.
    These factors may result in greater or less than model performance over time.
    Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the
    firm believes to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
    6. Full Cycle invests in diversified components of the global financial markets and broad economy by balancing risks with non-correlating or reduced correlation assets in opposition to one another each of which is designed to prosper in some phase of the economic cycle and intended to offset reduced or poor performance in other portfolio holdings.
    7. The Full Cycle model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2.
    8. Full Cycle live portfolios also differ from the Full Cycle model in that the live portfolio may be rebalanced more or less frequently depending on prevailing market conditions. While firm believes this difference positions portfolio for improved risk adjusted performance, it is not clear that this difference results in clear over or under performance versus the Full Cycle model.
    9. Advisor clients have experienced results that slightly outperform the performance of the model to date. This outperformance may or may not persist. In general, the longer a client has been fully allocated to the Full Cycle portfolio, the closer it is to model performance.

    Fixed Income Portfolio
    1. The performance of the broad bond markets over the same time periods is included to help investors understand market conditions present during the period covered by live investment.
    2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees.
    3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
    4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Fixed Income has historically shown reduced volatility and reasonable performance versus many classes of fixed income investments, there is no guarantee that Fixed Income that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with US Aggregate Bond Market and PIMCO Total Return are included to help the average investor understand how an investment in Fixed Income may differ from investment in an alternative index or fixed income fund.
    5. The closest benchmark for Fixed Income is the Pimco Total Return Fund. Fixed Income differs in key ways from BOND – including selection of underlying investments and reduced diversification. Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility and performance will be either less than, equal to, or greater than the volatility and performance experienced by the benchmark although the firm invests with an eye on out performance.
    6. The benchmark may include securities not contained in Fixed Income, and vice versa. Fixed Income currently holds significantly more cash than PIMCO Total Return Fund, a situation likely to continue in the near future. This action may cause Fixed Income to have reduced participation in markets that move up despite Advisors reduction in investment.
    7. Advisor clients have experienced results that lag the performance of the benchmarks to date. There is no guarantee Fixed Income will continue to outperform benchmarks in the future regardless of Advisor efforts to do so.

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