DELIVERING FINANCIAL ADVICE WITH PASSION & INTEGRITY
Darby Simmons, CFP®
Very interesting times we live in!
The historic election results we are witnessing are truly eye opening. How much actual impact they have on investments, if any, only time will tell.
As the historic investor Benjamin Graham said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine”.
I have not been very vocal on this lately for two reasons:
1. Everything up until now was pure speculation (and ultimately wrong!)
2. I have spent most of my time lately trying prepare everyone’s portfolio to absorb whatever occurs.
At the end of the day, it all comes down to profits and interest rates, so this is what I concentrate on. I do my best to filter out as much daily noise as possible to try and glean pieces of useful information that I believe will give you an investing advantage over the longer term.
Remember, the stock and bond markets are complex, adaptive, systems with participants making decisions for all sorts of reasons. That makes it especially hard for any single narrative to come to fruition.
My hope is that this change results in better economic growth, but we’ll just have to watch and see.
One thing won’t change however, my responsibility to you. I will continue to do as much research as possible as conditions change and use that knowledge to construct the most perfectly balanced portfolio of risk and return I can.
Thank you for your continued trust and confidence.
This is a great article on a phenomenon which I’ve been subconsciously aware of for a long time, but never put much thought into.
I think we are all susceptible to this as there is no shortage of, “prognosticators” out there trying to sell books/newsletter subscriptions. It is very important to remember however, that very few of these prognosticators have any responsibility to clients, nor do they manage real money. It is also very rare that anyone keeps track of their previous cries.
Darby Simmons, CFP®
Finding a comprehensive list of college expenses that qualify for tax-free distribution treatment from a 529 Plan has always been frustrating to me. All I could ever find was general IRS language that offered very little confidence.
Although, I would still prefer one that is more specific, it appears we’re getting closer.
Darby Simmons, CFP®
What’s been, “working” this year in the markets appears to be one large Fear trade. The search for yield with a leveraged bet that rates aren’t going up anytime soon. Based on this graph put together by JPMorgan, anything with yield that could be construed as, “safe”, has prospered.
Long Bonds, Utilities, REITs, and Consumer Staples stocks round out the top performers.
Very odd, very distorted markets. Could be part of late stage, bull-market activity or just a pause while we wait for global growth to resume.
Darby Simmons, CFP®
As you will see, the UK voted to leave the European Union and markets are down around the world. Europe was down 6-10% at 3:30a but has recovered a bit to down 5-8% currently. The US markets look to open down about 3-4%. US bonds, the dollar, and gold are rising as the knee-jerk reaction is to sell risk first and buy what is considered safe.
You may or may not have noticed, but lately I have been tilting portfolios quite heavily to the conservative-side. This should serve to limit downside and set us up for the opportunity to do some buying. The trick, as it always is, will be what to buy and when.
I have been reading quite a lot on the potential implications of this decision. It largely amounts to uncertainty. The markets hate uncertainty and will sell first and ask questions later. This will certainly be an adjustment and I will do my best to make adjustments that create profits for you. Rest assured, no one knows exactly how things will play out but it won’t be nearly as bad as some commentators may imply, nor will it change the long-term rates of return that investments generate.
One interesting fact is that the markets had risen for most of the week as many were obviously betting that the UK would remain. Therefore, some of the drop today is simply the reversal of this rise and not a further drop from already low levels.
Don’t forget that today will be filled with lots of cross-currents in the market as many traders are forced to unravel bets on market direction both positive and negative. This will result in quite a bit of volatility today but should settle down into next week. The good news is that this has happened on a Friday so the media can dwell on it all weekend and just in time for June statements to be printed.
I will stay on top of this for you and get you more useful information as I get it.
Darby Simmons, CFP®
As human beings, we are naturally, “wired” to seek pleasure and avoid pain. It’s very painful to watch investments decrease in value and therefore very understandable when people react emotionally. However, this can lead individual investors to make very costly mistakes which professional investors actually use to their advantage. As much as we care about people and their money, we act as that very important voice of reason and perspective during emotional times. We believe that the phrase, “No one cares about your money more than you do” is absolutely true but very incorrectly suggests that this emotional attachment yields more careful and thus better decisions. History shows that this is patently misleading and very likely destructive to wealth creation.
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