**Monthly Newsletter – January 2016**

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Firm Update[/x_custom_headline]

As we start the New Year and look back over the last year we want to thank all the individual investors and families that came on-board as clients in 2015. With the equity and fixed income markets performing sluggishly in 2015 more investors than expected came to us seeking tailored investment guidance as well as a new approach in 2016. Even though the broad markets struggled last year, we were still able to find pockets of performance in certain equity industry groups. We have also identified a few segments of the bond market where we could find yield without sacrificing credit quality.

As we start 2016, the firm looks forward to continuing providing unbiased investment advice and planning for our clients. As an independent RIA firm we are not limited in our investment product selection.We are free from the pressure to make recommendations based on the influence of a brokerage firm, bank and or institution. We work with only the most tax efficient, liquid, transparent and low cost investment products available and on the industry’s leading technology platform Every investor should have access to institutional quality products, fee only advice and have their assets on an industry’s leading custody platform.

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Market Commentary[/x_custom_headline]

Dave Falicia

I hope and trust everyone had a great holiday season.

Looking back at 2015, I’d have to say that we should be happy it’s over. No single asset class or sector outperformed relative to historical averages. The S&P 500 finished the year up only1% due to its dividend yield. The Bond markets struggled on fears of the Federal Reserve raising interest rates (which we continue to believe will be a good thing over time). Real Estate values through most of the country were stagnant in all but a few major metropolitan areas. Oil Markets continued to lay witness to a freefall in prices as OPEC decided to flood the markets in order to maintain sovereign cash flows. Other commodities lost value as China’s economy finally started to come back to earth. Hedge funds, often considered the “Smart Money”, which historically have done well in flat and down markets returned on average a meager 1.4%. Even cash, considered the safest part of the market (money markets and short treasuries) saw near negative performance relative to inflation.

Where does that leave us for 2016? We remain cautiously optimistic on several fronts. As far as the economy goes, U.S GDP is projected to grow in a way that still exceeds what economists consider sustainable. We expect employment data to continue on a positive trajectory. On the fixed income front, the bond markets should begin to produce attractive returns once the Federal Reserve coaches us through the next few rate increases. Historically, bond markets have shown they can absorb gradual changes in rates quite well, and we expect this will be the case again in 2016 and 2017.
Within equities the most stability will be experienced with value stocks, active funds run by exceptional portfolio managers with long track records of performance and low expense ratios. In 2016 investors have a great opportunity to add sector specific ETF’s to one’s portfolio to improve performance. With emerging markets we need to keep in mind that the markets may continue to show volatility due to numerous factors. This includes geopolitical events,currency fluctuations and interest rate concerns. However, this volatility can be an opportunity to invest on market dips into the sector. It can also be a reason to proceed cautiously which is dependent on each individual investors goals and risk profile.
In summary, we feel that staying prudently invested and well diversified through 2016 will continue to produce returns for our clients. 2016 should reward those who focus on the fundamentals in their portfolios and stick to a well laid out investment plan.Click here for a more in depth look at our outlook for 2016.[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Product Commentary[/x_custom_headline]

Jim Etten


At CRA we continue to focus on building individual custom portfolios based on a client’s age, risk profile and liquidity needs. One critical component of every portfolio and each client experience is the custodian. While we are open to working with a client’s custodian of choosing (State Street, Fidelity, Merrill, TD Ameritrade etc) we have come to rely on and have found a great partner in Schwab. Charles Schwab serves millions of individual investors who invest on their own, through a workplace retirement plan, or in the case of Copper River Advisors those investors who work with an independent financial advisor or RIA. Here are a few facts on Schwab.

Charles Schwab
–Headquartered in San Francisco with large operation in Denver
–More than 325 branches in 45 U.S. states and London. 4000 plus employees
–Charles Schwab is traded publicly on the New York Stock Exchange ticker symbol SCHW
Assets- Charles Schwab  
–$2.40 trillion in total client assets
–9.3 million active investment accounts
–1.3 million retirement plan participants
–950,000 banking accounts

–20th Largest U.S Bank

Independent Advisor Services-Provides trading, custody, technology, practice management and other support services to nearly 7,000 independent investment advisors whose assets represent 1.4 Trillion at Schwab.

CEO Walt Bettinger’s recent post on the RIA business and Schwabs relationship to the industry.


ETF Flows in 2015
ETfs continued to grow in assets in 2015 and the numbers speak for themselves. In 2015 ETFs took in $238 billion in new assets, which was just short of the record of $243 billion set in 2014. No other structured investment product came even close. In 2015 ETFs brought in more assets than mutual funds and hedge funds combined.Here are a few insights into the flows of 2015.

International ETFs took in nearly half of all assets. Of that half a large percentage was allocated to currency hedged products that are structured to minimize currency volatility.Three of the largest gainers being DBEF, HEZU, HEDJ.

Low cost and smart beta ETFs picked up considerable assets.We will discuss the smart beta ETF space in an upcoming monthly newsletter.

iShares beat Vanguard to take in the most cash.It is good to see them on top in terms of assets gathered in 2015 as they have continually driven innovation in the industry over the past decade.
529 and 401k Plans

In our next newsletter, we will look to cover the best strategies in regards to the two largest investment programs that the IRS allows investors to participate on a tax advantaged basis.These two programs being the 401k and 529 plans. Individuals and families have no greater need than to fund retirement and assist in college tuition.

One final note. Our goal for this newsletter is to keep it short in length and keep you informed on some of the ideas, products, knowledge and market experience that is the basis of the firm. Please provide any feedback you may have on this newsletter, and please feel free to contact us at any time.

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Copper River Advisors – 2016 Market Outlook


Thank you for your interest in our 2016 Global Outlook. This should cover economic, geopolitical, and market topics in a more in-depth manner that what we would normally post in a newsletter, but we want to keep it interesting enough that we will get to the point without going overly verbose. I hope it is worthwhile reading.

Anyhow, here are some thoughts regarding where we have been and where we think we are headed in 2016…

2015 Highlights and Lowlights:

2015 was certainly difficult for investors as few, if any, asset classes produced significantly positive returns. Equities, Bonds, Emerging Markets, Energy, Commodities, Alternatives and Real Estate all struggled during the year, as fears of slowing growth in China, combined with OPEC flooding the market with oil and the Fed deciding to finally normalize interest rates, all created headwinds. Some of these events will have short lived impact on the markets and US economy, while others may take some time to work their way out.

Looking to 2016:

Economy and Federal Reserve
We still think the US economy is in recovery, as GDP, employment, and housing data are trending positive. With this in mind, the Federal Reserve should have no problem continuing its course of raising rates over the next few years to what would be considered a normalized rate environment. Note that since the economy is not to be considered robust, the Fed will move at a gradual pace, possibly with several pauses along its path.

US Stocks
Coming off a forgettable 2015, the US Equity market should face fits and starts over 2016. There will be opportunities, but generally, one should expect very modest returns over the year. Although the economy is in recovery, we still feel that equity markets may face headwinds from external forces, like emerging markets, commodities, etc. Nevertheless, stocks that are fundamentally sound with good earnings and dividend prospects should provide relatively stable, positive returns for investors. Extra diligence will be required while investing outside this space.

EU Stocks
Stocks in the EU are still stuck in an economy that is lagging behind that of the United States. The ECB still finds plenty of reasons to continue its accommodative policies. Nevertheless, European stocks have always put an emphasis on maintaining solid dividends. With this in mind, US investors can potentially benefit by utilizing currency hedged investment products.

With the Fed now in a tightening posture, we feel that bonds, bond funds, and bond ETFs will become more attractive over 2016. The caveat will be that we need to be attentive to duration (interest rate sensitivity) as well as credit risk. As rates increase, high yield products will see the highest pricing risk, as there will be pressure on these credits to yield more. Also, 20-30 year bonds of higher credit quality should underperform as they tend to be more interest rate sensitive. As mentioned before in this outlook, the pace of the Fed will be gradual, and that should allow many investment grade, intermediate term fixed income portfolios to perform well, as they will have time to adjust to Fed moves. And finally, preferred stocks, which behave like perpetual bonds, may be acceptable as long as the Fed moves slowly, as is expected.

With respect to China, I keep hearing – and agreeing with – the concept that the economy is struggling as it matures from a manufacturing focused economy to one that is more consumer oriented. It is fair to say that the US had faced similar issues in the 70’s and 80’s as it began to look for cheaper products from overseas. Expect to see continued economic and market volatility from this country. We will remain vigilant in assessing any sustained contagion risk for our clients. Looking at the rest of the emerging market space (Brazil, India, etc.), we think that although there is a lot of obvious downside risk (recession, inflation, political risk), there are still opportunities for growth in countries that effectively manage their respective economic situations.

At this point, it is difficult to be positive on the outlook for commodities, given the slowdown in manufacturing countries like China. There may be weather related plays available, but those will be trading opportunities, not well suited for the long term investor. Commodities typically are inversely correlated to equities and bonds, and therefore may provide further diversification for a given portfolio. We remain cognizant of this and will implement commodity strategies as appropriate.

I find this a very interesting asset class. OPEC decided to remove any production limits in order to drive prices down and force shale producers to the sidelines. Dominated by the Saudis, there are also reports that they are doing this to keep Iran from enjoying the fruits of a lifted trade embargo. As far as our clients are concerned, we are looking for a bottom in oil prices. At the time of this writing, WTI Crude is in the mid $30/Barrel range. There are opportunities here, but we do need to be patient. We wont be able to time the market but we do keep this asset class on the radar. We will also be monitoring complementary stocks, like airlines, which are quite sensitive to shifts in oil prices.

Real Estate
Domestic real estate valuations should continue to be relatively stable over 2016, given that the economy is doing the same, and bank lending standards have been stringent enough as to limit leverage to speculators. We have been witnessing some investment products take pricing hits in recent months as fears of rising rates have put downward pressure on valuations. These products tend to be interest rate sensitive and may be best watched from the sideline until the volatility calms down.

It appears that many alternative investment strategies have seen better days. Hedge fund returns have not generated returns worthy of the illiquidity and fees associated with them. But there are some areas we are looking at, such as peer to peer lending, which provide solid returns, diversification, and insulation from market noise. We are currently exploring this as an option for our clients, and are keeping an eye out for similar opportunities for our investors.

When you click on our website’s homepage, you see a headline that says “Lots of Rough Water Ahead.” That pretty much says what we have in front of us this year. 2016 will not be an easy year, but with a good, well thought out strategy, we can plot a course to navigate a path for our clients with a positive outcome.

We hope 2016 brings good results for all our clients.

Jim Etten
Dave Falicia