With the election behind us, many are wondering what’s next in a year that has proven to be a very volatile market. As such, I thought it would be helpful to review what we own and some recent performance. In our last letter I mentioned that we were in a stock market bubble. Why weren’t we reducing our exposure to stocks then? Recall I described a Jekyll and Hyde type scenario where large tech-oriented companies were approaching record over valuation, while other industries and broad asset classes were very reasonably valued.
Crisis Investing Playbook
We Came Prepared
2020 Volatility
Recession: Should We Be Worried?
As the year unfolds, evidence is mounting that the economy is slowing, with multiple factors at play. The Federal Reserve reversed course quite suddenly at the end of December from raising rates to a more neutral, and even accommodative, stance. Some have begun to question whether we may see recession in 2020.
Don't Fear It: Volatility is Our Best Friend
I have previously discussed the biggest risk in today’s markets is that investors will be unable to achieve their goals. In terms of retirement planning, either investors will have to work longer or save more, and current retirees will risk outliving their funds. High valuations, and thereby low expected returns, are the culprits. We have been positioning our clients to weather this environment and fortunately, the significant increase in volatility recently seen is here to help.
Proceed With Caution...Don't Try to Pick The Top
As the current bull market continues, more investors are starting to predict the day it all comes to an end. Instead of trying to predict a market top, according to Mark Hulbert (of Marketwatch), investors should view market tops as a “gradual process in which equity exposure is slowly and deliberately reduced over time.” Predicting tops is not only unproductive, but it is also impossible to be accurate. Trying to pinpoint the precise date of a market top cannot be done because markets all reach their tops at different times.
Buy Low, Sell High: Super Catastrophe Insurance
Avoiding The Lowest Expected Investment Returns In 100 Years
If you are like most people, you have 75% or more of your stock market investment in US equities[1]. The truth is, it’s not just the lay investors that are subject to this “home country bias.” Most financial advisors and money managers are equally prone to this bias. With the US accounting for only around 50% of global output and at historically high prices, a diversified portfolio should consist of a much greater allocation to foreign stocks.
Chart of the Week: Sideways Markets
To Attend the Party Or Not
We just finished hosting a few open houses for friends of the firm, and whether it was one too many glasses of wine or the volatility we saw in the first quarter, I think we stumbled on an interesting topic. Truth be told, we are a little late publishing this newsletter. In spite of some volatility in the first two months of the year, not much has changed. Thus, at the risk of sounding like a broken record, we wanted to revisit a discussion (reference the earlier newsletter) regarding the emotion investors experience during market volatility.
We Already Wrote This Commentary
As of this writing at the end of January 2016, the markets have been quite volatile. We have had a few conversations over the last couple years with clients wondering why we were so conservative. A few actually pointed to other investors who were earning a more substantial return, while their returns were more subdued. It is amazing how quickly the narrative in the market has changed from momentum-based risk taking to capital preservation.
Getting Out of Our Own Way
What Galloping Gertie Can Teach Us About Investing
For those that have grown up in the Pacific Northwest, the story of the most famous suspension bridge to be built, and subsequently destroyed, in our own backyard is well known. For the rest of the world the Tacoma Narrows Bridge, more commonly known as Galloping Gertie, is no more than a footnote on a study of failure analysis for a university level structural engineering class.
Along with the sinking of the Titanic, the Tacoma Narrows bridge collapse was a sobering reminder of the devastating cost of hubris.
Riding the Rollercoaster Without Losing Your Mind: How to Prepare for the Next Market Downturn
If you have been following the financial headlines of late you may have noticed a consistent theme around the ills of over stimulated markets. Every day we go deeper into this historic market run up the warnings become more pronounced. Even to the seasoned investor, the current state defies conventional logic.
The End of QE: Energy Markets and Changing Volatility
Chart of the Week: Rock, Paper, Scissors and Investor Behavior
If you recall the childhood game of Rock, Paper & Scissors, then you likely know as much about investing as many in the markets. To come out ahead however, it requires developing a strategy rather than leaving it to chance as those that are disciplined will undoubtedly be better off in the long run. Listen to this latest installment of the Chart of the Week and hear Nick and Rick's take on how applying a strategy to either activity will benefit you in the long run.
Chart of the Week: Oil Part Two - It's All Connected
Chart of the Week: The Mastery Gap
Taking the discussion further from two weeks ago on the Conscious Competence Learning Model, Rick explains where many leaders fail to leverage the learning from the model to apply it to their leadership and organizations. Listen to this week's Chart of the Week to learn where the Mastery Gap is and understand how you can challenge yourself in your leadership.
Chart of the Week: The Price of Oil - Winners and Losers
Almost everyone is feeling good about the prices at the gas pump these days, reflective of the price of oil that has dropped precipitously over the last few months. Who wins and who loses, however, is worthy of discussion and in this weeks' installment of the Chart of the Week, Nick walks us through who is on which side of the equation.