The Struggle

James Pope |

DIS and DAT - The Struggle - Spring, March 2015

Our periodic communication that reminds you to ask, “Should I react to those headlines?”

“In less than a hundred years, we have found a new way to think of ourselves. From sitting at the center of the universe, we now find ourselves orbiting an average-sized sun, which is just one of millions of stars in our own Milky Way Galaxy.”

-Stephen Hawking


Dear Friends,

Investing requires many personal qualities that run counter to our natural born instincts. The ability to have humility is one. As Stephen Hawking states above, the belief that we as humans sat at the center of the universe was once natural. With the thought of humility in mind, we have decided to make changes to our DIS and DAT page. Firstly, we changed its point of view. We originally hoped to explain our investment process, philosophy, and people. After several years of writing on those topics, we believe we have that base covered. Now, we write from an investor or economic mindset as opposed to a “teacher” mindset. We will share economic and investment perspectives on timely topics, meaning that we plan to write more often in an effort to better ourselves and refocus on our core principals. Hopefully, it will bring some joy and some knowledge to our readers.



In this section, we will cover some general news items. Our reminder is that the topics of today will at some point not be the focus of the news. Whether that takes days, months, or years, we cannot know.

The rate of increase of the U.S. Dollar since July 2014 has been impressive. Some of the reported causes have been turmoil in Europe over the Greece debt problems. According to Bank of America Merrill Lynch Global Investment Strategy,, Greece has spent 90 of the past 192 years in either default or restructuring, meaning this could happen again in the future. Of interest to us is to realize that if this rate of increase continues, the United States could “take over the world” in currency and wealth. Since we know other humans will have difficulty with that thought and if it did occur we would have no one to trade with, our conclusion is that at some point this rate of increase for the U.S. dollar slows at a minimum. Warren Buffett, for one, was extremely excited about his purchase of his first German company.

Speaking of rates, the Federal Reserve is reportedly moving ever closer to raising rates on U.S. debt. Whether or not this is a good idea at this time is anyone’s guess, and it appears that most do offer their opinions. We like to consider portfolio management when thinking in terms of these rising interest rates. Due to a long period of extremely low yields, some portfolios have stretched for yield in the bond side of their portfolio. Making the bond side of their portfolios more stock-like with emerging debt and high yield (junk bonds). On the flip side, they have turned toward high dividend stocks making their equity portion more like bonds. Unsuspecting investors could have a tough time understanding why both sides of their portfolios drop if interest rates rise.

And truly, “unsuspecting” is the word! Saudi Arabia abruptly and decisively moved to increase supply of cheap oil. That is GREAT for our drives to the gas pump, but devastating for individuals whose job entails searching for and extracting expensive oil. Again, many guesses are out thrown about as to when, if and how oil prices will move in the future. My best laughs come from predictions of some future price yet forgot (I assume) to warn us about this extremely large move in price.


Innovation Nation

Under this rhyming title, we hope to point out a few recent innovations and speculate about their effect on business, economics, and investments. Innovations have the power to both create and destroy investment value, and there lies our interest in the topic.

Driver assisted packages and electric vehicles are changing investments. Technology companies new and old have upstaged long-term car companies. It comes as no surprise, then, to see that General Motors wants to hire more software developers. The competition is heating up with Tesla, and Apple, especially with Google entering the fray.

We found it interesting to read that Portland is now relying on water pipe energy. The CEO of Lucid Energy was recently interviewed by “Fast Company Magazine” on this topic. He said, “It’s pretty rare to find a new source of energy where there’s no environmental impact.” Without arguing with his use of the word “No,” we can pick up on his excitement about getting the Portland contract.

The Internet is expanding. ICANN, the governing body for domains, decided a few years ago to allow more top level domains. In other words, the extension to right of the dot. In addition to the very familiar dot com, hundreds of new words will appear right of the dot, and one in our territory is dot investments. Here is a nice looking graphic that shows the change: 

We will share more later about our actions, but we have jumped on this change and have built a website on Check it out and let us know any thoughts or difficulties you have with the process. Our main points of contacts have not changed, nor has our main website: this site is in addition only, not in substitution of any contacts. The largest price paid to have the rights to one of these gTLD’s so far has been Google’s purchase of .app for $25 million. Another notable transaction was Amazon’s purchase of .buy for $5 million. Daily, we read about companies of old (especially retail businesses) struggling to move from bricks and mortar over to this digital move. There appear no signs of the digital age slowing down.


Lets get Political, Political

Our preemptive apologies to those of you old enough to remember the Olivia Newton John song…and who now have it stuck in your head. No matter, we’ll distract you from the catchy tune now. In this section, we aim not to become the next Rush Limbaugh or James Carville. Our aim is similar to that of the innovation section. Regardless of our opinions on certain issues, political issues and laws both create and destroy investment value.

The much-talked-about Keystone Pipeline was approved by congress, and then vetoed by the President as promised. The root of this issue remains the topic of our earlier mentioned fact that Saudi Arabia and others have an enormous impact on the price of our much needed energy resources. Many people are attempting alternative solutions to this situation, privately and politically.

A large issue not yet solved is the multitude of promises made to aging populations for their retirement benefits. The president made news by promoting the option of making Roth IRA’s taxable. On the private side, Kimberly Clark joined other corporations by transferring their pension risk to Prudential. Slowly but steadily, the promises are changing.


Popular Culture

Here, we find interesting economics and a show of what interests most Americans.

The wildly successful series of books, “50 Shades of Grey,” turned that fame into an impressive showing for the movie.

We read that viewers for the Oscars decreased and viewers of the Super Bowl increased. Now, we don’t know how to predict what will be hot or not, but there is a trend toward “cutting the cord,” or rather, entertainment moving toward cable-less devices. Recently, changes to the Nielsen ratings have been called for to reflect this migration toward new delivery methods of entertainment content.


DIS Book Shelf

Here we like to share some books we at DIS have recently been reading.

The Rational Optimist by Matt Ridley

The Better Angels of Our Nature, why violence has declined, by Steven Pinker

Education of a Wandering Man by Louis L’Amour


Tax Corner

From time to time, we may have interesting investment-related tax updates. We will continue with the tax corner and other communications for more in-depth information.


In July 2014, IRS created a way to reduce a retiree’s Required Minimum Distribution. The Required Minimum Distribution is triggered when one turns 70.5 years old and has an IRA. For now, we will just share a few tidbits. The law allows an individual to purchase a “QLAC” to reduce a portion of the IRA balance and therefore the required distribution by purchasing an annuity. If interested, please let us know personally so we can help you most efficiently.

A picture is worth a thousand words

Source: Investors Intelligence.


Markets review

A look at some of the performance numbers for 2015 through the end of February as well as 1 year

A look at inflation and the credit markets as of February 28th 2015.

Headline Inflation – (0.1)%

Core inflation – 1.6%

10 yr yield – 2.00%

30 yr yield – 2.60%

We hope that you found this valuable. With each DIS and DAT, we hope to share different items that will help in the struggle against some of our natural born tendencies, which can hurt long-term investment performance.

See you next time.

James Pope

Please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Diversified Investment Strategies, LLC DBA Advisor.Investments to effect any specific transactions for your account.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Diversified Investment Strategies, LLC dba Advisor.Investments), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Diversified Investment Strategies, LLC dba Advisor.Investments.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Diversified Investment Strategies, LLC DBA Advisor.Investments is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  If you are a Diversified Investment Strategies, LLC dba Advisor. Investments client, please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Diversified Investment Strategies, LLC dba Advisor.Investments current written disclosure statement discussing our advisory services and fees is available upon request.

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Performance Disclosures

All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. (JPM: Market Insights)

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index (JPM: Market Insights)

The Russell 2000 Growth Index® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. (JPM: Market Insights)

The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. (JPM: Market Insights)

The MSCI®EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. (JPM: Market Insights)

The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis. (JPM: Market Insights)

The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities and represents 22 separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc. (JPM: Market Insights)

The spot price for gold bullion is determined by market forces in the 24-hour global over-the-counter (OTC) market for gold. The OTC market accounts for most global gold trading, and prices quoted reflect the information available to the market at any given time. (Ishares) 

XOM is the common stock symbol of ExxonMobil Corporation that trades on the exchange