I was asked to be a speaker for Markets Group Private Wealth Forum up in Denver this month. It’s a great opportunity to hand out with great thinkers and you always end up meeting some interesting characters. I like that I am enough of an in-demand speaker that they pay my way and feed me. Plus, I can sneak out at night and hit some of my favorite Denver dinning spots like City O’ City.

These events are planned months in advance and we never quite know if the topic we agree on will be what we talk about. So, I don’t do much work on the talk until a week before – then I go into full speaker mode.

In three parts, I will share with you my speaker notes. Below you will get a feel for what I’m thinking, and how we manage our assets. The three main categories are volatility (or lack of), how to handle rising interest rates, and what we are doing differently this year. Let me know if you have any comments or feedback at Lee@PortfolioLLC.com.


Part 1: Volatility - Where Did It Go?

Background: This is a professional crowd and I just got asked about the very low level of volatility since January. We have been discussing the historical lows on the VIX, an index that tracks stock volatility, and the audience wants to know what I think.

“Look up the statistics and notice one big thing – the lowest levels on record are from an early back test! Meaning, we are currently experiencing the lowest levels since the VIX was actually tradable, not just a back tested formula. We are very far from a 30-40 VIX, for real people. What is the VIX, really? The willingness to pay for insurance. Pros buy puts on markets. Pros are all out to lunch until the tax cuts in the fall.  Nobody thinks insurance is worth the price, so the price drops.

Early this year some trader they call ‘50 Cent’ for his strategy of buying 80million in VIX puts priced at 50 cents a contract. They ALL expired worthless. Don't go against a low volatility market. Or, just don't do much. [here is a link, the trader was unmasked recently]

Focus on making money right here right now and buy every rip in volatility until it’s solidly in the 20s. Like S&P 500 at 2180, no question, invest cash if you have it, and rebalance at anything resembling DJIA 19,999. Because we still go higher and see 2500 S&P 500 by year-end, that's the place it's headed. But know ahead of time the places you want then be open to 'feeling your level of confidence.'

You can always add to SPY [S&P 500 tracking ETF], but why? There's a whole world of garbage out there - I love those nether-regions." [I’m being facetious and the audience gets it. But the joke is about how everyone these days just buys the S&P 500 and it’s an issue everyone is aware of]