July 13, 2016

DJIA 18,359

S&P 500 2152

An update to our clients:

As I have mentioned in the past, we are only long term oriented investors. Our thesis is based on the assumption that for the majority of the companies we own, that their dividends are sustainable, and that they are still fairly priced.  Markets will fluctuate, and corrections will occur.  As our followers know we do not believe in timing of investments.  Utilities are ~20% of our portfolios. They showed a realized and unrealized gain of ~23% for the 6 months ended June 30, 2016. Power and Energy, which is ~27% of our portfolios, showed a realized and unrealized loss of ~ (1.00%) for the 6 months ended June 30, 2016.  I expect Utilities, Power and Energy, and Financial Services (~20% allocation) will remain a staple in our portfolios.  I continue to find the banks we own to be materially undervalued based on historical metrics.  A few of these metrics would be price to book value, and forward price earnings ratios.  I also think their dividend yields will continue to increase as the US Government gives them leeway to pay the dividends as their financial ratios continue to get stronger. Yet, the financials in our portfolios showed a realized and unrealized loss of ~ (12%) for the 6 months ended June 30, 2016.  The Government recently released their stress test results for the large banks.  All 3 or our large bank holdings (BAC, C and JPM) performed well in the tests, and both BAC and C, were allowed to increase their dividends and share buy-backs.  JPM was already previously allowed such.  Both, BAC and C, announced after the stress tests, that they have instituted a large buyback and material dividend increases.

Our performance so far this year (6 months) for our portfolios was up 1% (after all fees), as compared to the S&P500 being up 3.74%.  I made a terrible mistake buying Valeant (VRX) in our portfolios.  That position accounted for an approximate realized and unrealized loss of ~ (2.3%).  This position was obviously damaging to our portfolio results.  I apologize for such a mistake, yet in investing, mistakes will occur.

I do not feel anything broken in our thesis.  I am cognizant of clients being concerned that we are trailing the benchmarks, yet we do not chase returns, and as our followers know, I do my best for your portfolios.  Our interest is in the structure of our portfolios, and I will not alter that view in hopes of client satisfaction.  What I am trying to get across, is that I think our methods, research and deployment is one of competence and I am confident (but do not promise) that we will once again perform well for our clients.

The expected dividend yield for our portfolios is ~2.7%.  This yield is approximately 191% of the 10 year Treasury, which is currently 1.41%.  The yield on the 10 year Treasury at December 31, 2015 was 2.225%.  This continues to possibly be a classic sign of undervaluation.

As I have mentioned in the past, I am concerned with what I consider still low interest rates.  We are still not investing in any fixed income in our portfolios.  As our followers know, we have used the dividends of utilities as a fixed income alternative.  The current expected dividend of your utilities is ~3.1%.  The expected yield at December 31, 2015 was ~4.4%.  The reduction is due to the 6 month gain of 23% in the sector.  Of course one can’t compare utilities to the safety of quality fixed income.  I do not expect to increase our utility holdings unless the prices drop to what I consider a proper level for purchasing.

We are always mindful of our allocations, and if we think specific investments should be reduced we will do such. I do not anticipate any major changes.

I am mindful of our underperformance to the comparative indexes over the last several years. As we have mentioned previously, we cannot promise positive results, but we do promise dedication and doing the best we can for you.

Please let me know if you have any questions, comments or concerns. As always, I am available for a sit down or phone meeting. I would be happy to sit with you and discuss our investment philosophies, portfolio and our views on the world, as it pertains to your net worth. Please let me know if that interests you, and of course it is an always open offer.

If you have any concerns, please reach out to me. I would be happy to speak with those who are not clients or ours as well. As always, we welcome the opportunity to discuss our outlook and investments with you.

My email is rredfield@rbcpa.com

Please feel free to contact me with anything you would like to discuss. Feel free to ask general questions on our Facebook page as well.

You can also follow me on twitter http://www.twitter.com/rbco as well asyou can follow us on Facebook http://www.facebook.com/RedfieldBlonsky
Respectfully submitted,

Ron Redfield

Ronald R. Redfield cpa, pfs

Redfield, Blonsky & Starinsky, LLC

1024 South Avenue W.

PO Box 2069

Westfield, NJ 07091-2069

http://www.rbcpa.com

http://www.twitter.com/rbco

https://www.facebook.com/RedfieldBlonsky

908 276 7226 phone

908 264 7972 fax