Let's Talk About the Market Numbers…
Note that this report pertains most directly to portfolios operated under the guidelines, rules, and disciplines of Market Cycle Investment Management (MCIM). MCIM produces disciplined “High Quality Growth & income Portfolios”, designed to maintain and/or to grow income regardless of the direction taken by markets or interest rates.
Both markets have been good to MCIMers this year: Investment Grade Value Stock Index (IGVSI) equities produced plenty of profits and dividend income, while the income Closed End Funds (CEFs) produced much higher yields than many “experts” would admit even exist… and occasional profits.
On the negative side, new equity investment opportunities were scarce, and many income CEFs reduced their payouts slightly, reflecting more than six years of historically low interest rates. I suspect that both conditions will be reversed soon.
A recent (unaudited) review of known MCIM “Working Capital” produced some interesting numbers, even without including year end dividends:
• Roughly 35% of total realized income was disbursed
• Nearly 25% of growth purpose capital remained in “smart cash” reserves for scheduled disbursements… and anticipated lower prices on equities. (Smart cash comes from income and profits)
• Roughly 65% of total earnings was reinvested in new and old securities
• New “Working Capital” was produced at a rate somewhere between 9% and 10%
• Less than 20% of investors made additions to investment programs, eschewing income yields in excess of 6%
• None ot selected MCIM portfolios lost Working Capital… even after culling “poorest performers” throughout the year.
“Working Capital” (total cost basis of securities + cash) is a realistic performance evaluation number…. it doesn't shrink either during corrections or as a result of spikes in interest rates. It continues to grow so long as dividends, interest, profits and deposits exceed realized losses and disbursements.
