Market and Relationship Updates for My Clients and Prospective Clients....
The markets are unfortunately off to a disappointing start in 2022 much like I warned about in my autumn update and various conversations with you. Even though economic growth is strong and the latest Covid variant seems to be less “potent” (but much more contagious) there are many reasons for this:
By “every” valuation metric that I know of the U.S. stock market is grossly “overvalued” (trailing P/E, forward PE, cash flow, market cap to GDP, etc). While that was “fine” when there was “no alternative” to stocks (besides illiquid real estate), interest rates were at 0% (and the Fed was creating “trillions” of dollars monthly out of “thin air”) there has been and are “dark clouds” on the horizon.
Rising interest rates, historically high inflation, increasing taxes, regulations, international tensions (think Russia/Ukraine and China/Taiwan), and this “profoundly unsettling labor/supply chain shortages” and historically “high government spending” it does not take a PhD in Finance to understand that there is now “more risk than reward” in the U.S. stock markets.
While it is normally “foolish” to time the markets, there are times (and this is the 3rd time in my 22 year career) when the risk/reward ratio is so “skewed” that it makes sense to “reposition” your portfolio for downside risk and other opportunities going forward. This is “especially true” for the “darlings” of the past decade (Large cap growth/tech). An “even bigger” bubble is in “bonds” with “negative real rates of return with the average yield at 2% and inflation at 7–9%”.
“Especially” for those of you that are “at or near to retirement” it is “incredibly important” to reposition your portfolios and hedge your risk. There are “numerous Alternative Strategies” that can and should grow strongly even as the U.S. stock market “stalls” for the next 12-18 months (my estimate). You can contact me to schedule a review or consultation (virtually or over the phone until this latest Covid strain passes).
Remember Warren Buffets #1 rule of investing: “Don’t lose money”. What is Buffets rule #2??? “Don’t forget rule #1”! There are unique ways that I can “hedge your equity and bond risk” that the vast majority of Advisors and Firms “don’t utilize”. Why? You might ask? Well...#1. these Alternatives pay “me” (and the firms significantly less) and involve “dramatically more paperwork, time, and bureaucracy” for the Advisor and firms. Secondly, they tend to be complicated and most advisors (and business today) are “obsessed” with “scaling, repeating, and profits” much more than “craftmanship or customization”. And lastly...”some clients” have become so “irritable” and so “impatient” these days, that most businesspeople just won’t risk the “headache” (or the time to educate themselves, you, or their team on Alternative Investments and the dramatically more work and admin involved). But, for those of you that can be “nice and patient” I “will” help you.
I cannot “fathom” why anyone that has an adjustable rate/short term mortgage did not refinance or “why” you would want to hold “bond funds” and “balanced funds” at this point in the cycle. BUT...there is still some time to “hedge” those risks as well if you contact me.
As many of you know, I own and operate several residential and vacation rental properties and they have performed exceedingly well (after sometimes months and years of initial losses). But speculating on real estate here (especially residential) can easily “blow up” in your face if you are not careful with your analyses and specific market. For example: Some of you keep “trading up” to bigger and better homes not realizing that if it were not for immigration (for well over a decade now) the U.S. population would be shrinking. These “McMansions” will become “obsolete” as the millennials (and people like me for that matter) have absolutely “no desire” for the “biggest, most expensive, house on the block” (especially with 1.2 kids per household and shrinking fast in the developed world).
2021 was personally the worst year of my adult life, but I am optimistic about the future (for those of us willing to embrace “change”, fortitude, and yes...the occasional “failure”). Be loyal to your loved ones, be good to those who try to do good by you (and don’t always succeed), and remember...that life is precious, short, and tenuous. Be kind to others (even if they are not perfect or agree with you) as life passes by so quickly...statistically speaking, even I have more days behind me than ahead (although I will easily ‘beat that statistic 😉).
I have attached some articles that shed further light on where we are now and how to be successful in the future. Enjoy!
A final note, for my “top tier” clients (and soon to be new clients) I have offered you “complimentary stays” at my Panoramic Lake View cabin in Lake Tahoe. Although it is NOT luxurious (at all) the views and location (and the jacuzzi) are to “die for”. Feel free to utilize (although not in July).
